Clive Thomas’ Cash Payments

Every Man, Woman and Child Must Become Oil-Minded  Part 55

Introduction

Recall that Column # 54 published in this column last week cited two Emancipation Day speeches, one from President Granger which was discussed at some length in the same column. The other was by Professor Clive Thomas, an economic adviser to the President and co-leader of the WPA, which is a member of the APNU+ AFC Coalition. The press reported that the Professor called on his Party to lobby and support cash payments to every single household as their share of the benefits of oil and gas in terms of cash or cheque received in their accounts.

Events this past week have served to confuse Thomas’ remarks and whether the only figure reported from his speech of “US$5,000 per year or whatever it works out at” was loose, careless or worse yet, reckless, given his standing as an economist of considerable repute. Known for his rather conservative style when speaking as an economist, the audience appears to have reacted most positively to his suggestion. Surprisingly, much of the criticism came from his colleagues in the APNU and the AFC with former Chairman of the AFC Mr. Nigel Hughes immediately challenging the Professor.

Also joining in the criticism were Mr. Hamilton Green, former Prime Minister and leading member of the PNCR, and Mr. Jaipaul Sharma whose criticism on television and in the print media provoked a strong response from Thomas’ colleague in the WPA Mr. Tacuma Ogunseye. President Granger was a bit more restrained, preferring not to make any comment on the cash payment proposal since no paper had come to his desk. The politics aside, Ogunseye’s defence of the proposal was to avoid any comment on the US$5,000 number and to state that Thomas’ proposal would “amount to a very small portion of the expected oil money since it represents between 2 to 5 % of gross revenue”.

What seems clear is that Thomas’ departure from his usual cautious and careful approach has necessitated far too many clarifications, thus detracting from what is a valuable idea but one which requires proper studies and preparation as Finance Minister Winston Jordan pointed out when asked to offer a comment. No doubt at some later date, Professor Thomas will revisit and restructure his proposal supported by empirical data and projections of what Ogunseye calls gross revenue.

Remembering Norway

Apart from the lack of data to support his proposal, the matter that strikes me most was that Thomas seemed more interested in slicing the pie at the expense of enlarging the pie. I recall that when then President Jagdeo entered into a Memorandum of Understanding between Guyana and Norway for that country to provide money to Guyana in exchange for our commitment to manage our forest resources, Professor Thomas used some of the strongest language in his column to attack the Agreement and the Norwegians.

It was, he wrote, about “pristine forests and the national patrimony of Guyana”, cautioning that “it would be extremely naïve and dangerous for Guyana to rely on Norway’s ‘munificence’ and promise of good faith behaviour, untrammeled by any legal compulsions and sanctions.” Ironically, Thomas attacked Norway’s environmental profile as one of the world’s worst culprits contributing to dangerous CO2 emissions.

Noting that Norway was being enabled to get away with ‘huffing” our “pristine forests” for a bargain basement price”, Thomas called on us to be continually on our guard. His articles carried headlines like “Norway and Guyana’s rainforest: Santa Claus or Old Higue”, “Norway’s deception: Partnership or capture of Guyana’s rainforest”, “Norway’s forests deal will continue beyond 2015” and “Norway’s disingenuousness once more”.

There ought to be no ambiguity or hesitation in the choice between a Scandinavian country and an international oil company with a less than stellar record on some of the very issues on which Thomas had such strong animus only a few years ago. But that is the nature of politics so let us return to the more recent issue of cash payments raised by Thomas.

Cash payments

Let us begin by noting that such payments are not unusual. They come under the general heading of social safety nets (SSN), a term with some resonance to what prevailed under the Economy Recovery Programme (ERP) introduced under Hoyte/Greenidge. It seems safe to say that every country – capitalist and socialist –has SSN’s in some form for their less fortunate citizens. Their purpose and operation may differ from country to country. A striking example is Saudi Arabia which has a per capita nominal GDP of over US$21,000 and a purchasing power parity GDP of over US$55,000. Last December, that country, which has the second largest oil reserves in the world, announced a cash transfer programme to compensate low- and middle-income families hurt by austerity measures. The payment was means tested and based on family income and numbers.

Another useful, interesting and instructive example is Kenya which has had a fairly long history of implementation of non-cash transfer programmes, such as food relief in the drought stricken areas; emergency and special programmes; and school bursaries for needy children. On the other hand, Kenya’s experience with cash transfers has been in place for less than two decades.  Despite extensive poverty in that country, its cash transfer programmes initially targeted members in three programmes, viz the Orphans and Vulnerable Children (OVC), the Elderly and the Hunger Safety Net programme.

The Broader picture

And here is a broader picture across regions taken from the World Bank Group publication The State of Social Safety Nets in which the programmes of scores of countries are featured. Unfortunately, Guyana is not among these.

According to the publication, developing and transition countries spend an average of 1.5 percent of GDP on SSN programmes but there is a wide disparity in spending across countries and regions. Some of the data are counterintuitive with Europe and Central Asia region spending the most (2.2% of GDP) on such programmes; Sub-Saharan Africa and Latin America and the Caribbean regions in the middle of the spending range; and the Middle East and North Africa and South Asia regions spending the least, at 1.0 percent and 0.9 percent, respectively.

Understandably, increased spending permits the introduction of new programmes and the expansion of existing programmes. For example, in Tanzania, the Productive Safety Net Programme expanded from covering 2 percent to 10 percent of the population between 2014 and 2016 while in Senegal, the National Cash Transfer Program expanded from 3 percent to 16 percent of the population in four years. In the Philippines, a conditional cash transfer programme has expanded from 5 percent to 20 percent of the population since 2010.

Conclusion

Even with these increases however, the per capita spending on such programmes is not huge, and certainly not at the kind of levels which excited Thomas’ audience. For example, Sub-Saharan African countries spend an average of US$16 per citizen annually on SSN programmes, while countries in the Latin America and Caribbean region spend an average of US$158 per citizen annually.

Still, while Thomas’ idea was neither outlandish nor novel, its usefulness at this stage lies in drawing to the policy makers one of the options for poverty reduction. 

Next week: Exploring some numbers

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