Dear Editor,
Owing to space constraints, I left dangling a few issues in my letter on the development prospects of Guyana (SN, August18). I now propose to address some of these issues.
First, doubling time: So what if it requires 60 years or so for Guyana to double its GDP? Do countries achieve this feat faster? Yes, if they grow rapidly enough over a sustained period of time. In this case, the tide of swift progress, especially if the fruits are shared relatively equally, raises all boats. China doubled its GDP (in constant 2005 US$) almost every 10 years between 1962 and 2013. Relative to 1960, China’s GDP was enormous in 2014 – an incredible 65.2 times as big. Between 1960 and 1984, Japan doubled its GDP twice. Korea doubled its GDP almost every 9 years between 1960 and 2006; its GDP in 2014 was 44.8 times what it was in 1960. Thailand doubled its GDP 3 times between 1965 and 1994 and its GDP in the latter year was 16.7 as large as in the former. At a tepid rate of growth of less than 2 per cent per annum since 2000, Guyana cannot even come close to the feat East Asia accomplished. Apparently, Guyanese are destined to languish in abominable living conditions.
Second, oil: Now that a large reserve of ‘black gold’ has been discovered, should this not impart a robust positive momentum to economic growth? Perhaps. It seems reasonable that oil wells will not be pumping until the border controversy with Venezuela is settled. It is hardly likely that investors will sink money in the context of such a claim.
Then there is the problem of the Dutch disease, known more popularly as the ‘resource curse.’ It has been known for some decades now that the possession of oil, natural gas, other valuable mineral deposits or other natural wealth does not automatically lead to human development. For example, many African countries such as Angola, Nigeria, Sudan, and the Congo are rich in oil, diamonds, or other minerals, but yet their peoples continue to experience low per capita income and a miserable life. Meanwhile, the East Asian economies of Japan, Korea, Taiwan, Singapore and Hong Kong have achieved Western-level standards of living despite being rocky islands (or peninsulas) with virtually no exportable natural resources. Apparently, Richard Auty (1993, 2001) is the one who coined the phrase “natural resource curse” to describe this puzzling phenomenon.
How could an abundance of hydrocarbon deposits, or other mineral and agricultural products, be a curse? What would be the mechanism for this counter-intuitive relationship? Broadly speaking, there are at least five lines of argument. First, prices of such commodities could be subject to a secular decline on world markets. Second, the high volatility of world prices of energy and other mineral and agricultural commodities could exert a very depressive effect on the domestic economy. Swings in commodity prices could engender excessive macroeconomic instability, via the real exchange rate and government spending, imposing unnecessary costs, all of which undermine growth. Third, natural resources could be dead-end sectors; they may crowd out manufacturing, and the latter sector might be the one to offer dynamic benefits and spillovers that are good for growth. Fourth, the physical command of oil deposits or other resources by the government or a hereditary elite which automatically confers wealth on the holders may be bad for growth. Why? Because these countries are less likely to develop the institutions, such as rule of law and decentralization of decision-making, that are conducive to growth than countries where moderate taxation of a thriving market economy is the only way to finance the government. Fifth, such countries could have a proclivity for armed conflict, which is inimical to growth.
That said, oil wealth and other natural resources do not necessarily lead to inferior economic or political development through any of these channels. In the case of oil, it is best to view its abundance as a double-edged sword, with both benefits and dangers. The net outcome can be ill or good, and that is entirely dependent upon the politicians.
Third, drastic climate change, which will likely happen by 2050 or even earlier: Guyana’s low-lying coastal plain is very vulnerable to global warming. It is now beyond question that climate change will cause the sea level to rise and extensively flood coastal areas, which will impact ecosystems, human health, agriculture, tourism, water resources and, of course, the poor who will be saddled with the major burden. Guyana will need to invest heavily in physical infrastructure, including ‘grey’ infrastructure (drainage, roads, sea defence, dikes, barrages and diversions, raising the elevation of buildings and flood-proofing structures); ‘green’ infrastructure (robust coastal ecosystems, such as salt marches, mangroves and seagrass beds and beaches); and power supply, water supply, and sewage disposal. Another kind of investment should be livelihood diversification; moving away from activities such as fishing and agriculture and towards manufacturing and services.
Many major infectious diseases, including cholera and diarrhoeal diseases, as well as diseases carried by vectors, are very climate-sensitive to temperature and rainfall. Of these vector-borne diseases, malaria, dengue and chikungunya are of the greatest public health concern for Guyana. The public health consequences of this possibility are obvious and complex, but will certainly require heavy investment in health.
The Economic Commission for Latin America and the Caribbean (ECLAC 2011:44) estimated the effect of climate change on four diseases in Guyana: malaria, dengue, gastroenteritis and leptospirosis. Using monthly data from March 2008 to June 2010, it concludes that “… there are an additional 11 cases of malaria associated with a 1-millimeter increase in rainfall (this period and up to two prior periods) coupled with a 1-degree increase in the monthly maximum temperature (this period and one lag). Further, a one unit increase in HDI [Human Development Index] for Guyana reduces the number of malaria cases by 1,398.” The major implications of this modelling effort are the need to speed up economic growth and share its fruits more evenly and justly among all citizens regardless of race or class or other markers, strengthen health facilities, and invest in education to equip young people with the skills demanded by the labour market. Now is also an opportune time to start thinking about relocating the country’s capital to higher ground.
Unless Guyana is adequately prepared for the deeply disturbing effects of climate change during this century, its development prospects remain dim.
Where remittances are concerned, suffice it to say for now that Guyana and Guyanese would have been poorer – and more miserable – if there were no remittances. Perhaps, too, there would have been a change in government earlier than 2015.
Yours faithfully,
Ramesh Gampat
