Professor Clive Thomas stimulated much discussion last week when he proposed the idea of a US$5000 per year cash transfer to Guyanese families. The fact that the proposal is open ended stimulated a lot of heated discussions on social media. Several claims were made: these payments will stimulate the money supply and therefore engender inflation; many would become welfare “parasites” and so on. I am sure Professor Thomas is well aware of the vast literature on conditional cash payments that exists in the field of development economics. The old sage is also cognizant of the acute income and wealth inequality in Guyana. He sees these transfers as perhaps the only direct mechanism through which the most vulnerable people will share in the oil revenues that will go directly to central government. There will not be broad-based employment in the oil and gas sector any time soon.
Guyana’s present per capita GDP (a proxy for average income) is just around US$4500. After 2020 the per capita GDP will see a level shift as the average will rise to a new higher steady-state by virtue of the fact the economy has the new oil and gas sector. However, the volatility of the price of oil will cause much fluctuations in economic growth around the higher average income. This means there will still not be an abundance of financial resources. The amount of US$5000 per year seems reasonable, but what is most important is the number of families who will receive the cash transfer.
