Having considered the five economic links in the eight-link decision chain that it was recommended must be implemented if Guyana is to avoid the Dutch disease and achieve transformative and sustainable development, I came to the conclusion that Guyana is not in a good place, and now come to the critical political links (Reversing the Resource Curse: How to Harness Natural Resource Wealth for Accelerated Development. http://www.lse.ac.uk/lse-player?id=1803). As stated before, Professor Paul Collier argued that the five economic links will have to be implemented in an effective manner repeatedly over many years. The political framework for getting this done is, therefore, crucial. Collier argued that the resource curse is not inevitable if we are prepared to learn from history and identified Germany as the best run economy in Europe because in the last half of the 1940s it had been the worst and had learnt from that experience.
Very briefly, by the time it entered the First World War in 1914, Germany had overtaken Britain as world’s second largest industrial economy, behind the United States of America. But all this was to change as its engagement in that war ended in defeat and the imposition of the punishing Treaty of Versailles with terms that the noted economist John Maynard Keynes predicted were too difficult and would not result in a lasting peace. That war ended in 1918 and by the early 1920s, political and social conditions in Germany were extremely difficult. The national currency, collapsed from 8.9 per US$1 in 1918 to 4.2 trillion per US$1 by November 1923. All ‘non-essential’ imports, foodstuffs that could be replaced by local substitutes and raw materials for the consumer-oriented industries were banned. On the back of this rising dissatisfaction, Adolf Hitler (1933–45) came to government with some expansionist ideas, threw the country again into another war and lost, leaving it even more ruined.
Germany has a tradition that the state should play an important role in the economy, is cautious toward investment and risk-taking, is directed toward growth and the above political and economic experience provided a lesson about the need for fiscal balance that cannot be easily unlearnt. After the Second World War a social market economy focusing upon economic and social development came into being and many new institutions were established. A new currency, the Deutsche Mark, was established and just over a decade later a new central bank, with substantially more authority over monetary policy was established. A Federal Cartel Office to prevent the formation of monopolies and cartels and a Council of Economic Experts to provide objective evaluations on which economic policy were to be based were formed. In 1967, the Bundestag passed the Law for Promoting Stability and Growth, known as the Magna Carta of economic management, that set a number of targets for the four basic standards by which the German economic success is to be measured: currency stability, economic growth, employment levels, and trade balance, and those standards became popularly known as the ‘magic rectangle’.
Though not identical to what is taking place in Africa and other resource-rich underdeveloped countries today, the German experience taught that consistent economic decisions, for example about fiscal balance, will have to be repeatedly made over decades, so there must be laws, rules and guidelines that must be followed. But having rules is not enough: the Euro, the currency of the European Union, has only two rules that need to be followed, and over an eleven-year period only one country, Finland, consistently followed those rules. That is no surprise to us: we have a constitutional rule about dual citizens not being members of parliament that has never been implemented!
What the above German experience also suggests is that rules, fiscal or otherwise, must be supplemented by properly designed and effective institutions staffed by extremely skilled people to implement those rules. The European Central Bank is considered to be staffed by high quality people, but still only one country kept the rules about the Euro. Therefore, it is quite clear that having proper rules and competent institutions in place is not enough. Indeed, in Guyana the situation is even worse for as we speak, just as there was a great debate about the skills of those chosen by the regime to manage the oil and gas sector, now we have the questioning of the quality of the appointment that has been made in the foreign ministry at this important juncture when 2/3 of Guyana literally rests in the hands of the International Court of Justice!
Professor Collier argued that the final link in the decision chain the ‘magic ingredient’ – ‘the real power that defends the rules’ – is the existence of a critical mass of citizens who understand that the rules must be kept and is willing to utilise what authority they have to ensure that they are kept. The Natural Resource Charter, that presents a more comprehensive plan than is contained in these articles states the matter thus: ‘Because the extraction process can last many generations, decisions made in the present must be robust to the cycles of governments. This calls for building understanding and consensus from a critical mass of informed citizens. Actors outside the executive, including legislators, journalists, and civil society groups are guardians of the strategy, playing a scrutinizing role by holding decision-makers to account (https://resourcegovernance. org/approach/ natural-resource-charter). The Charter also recognises that the broad range of decisions that must be made ‘requires governments to consider complex options and trade-offs and devise strategies to implement these policy choices.’
Herein again is the main problem for Guyana. Can anyone sensibly argue that Guyana has such a critical mass of people that can compel the government to do what it does not want to do? Indeed, even more importantly, is it possible to conceive that such a mass of people could develop in the present political context? If this national consensus is indeed the critical ingredient of a properly managed resource sector, I believe that it is more likely than not that Guyana is destined for the resource curse. Consider how ethnically divided the public responses are to the petroleum agreement with ExxonMobil, the secret US$18 million signing bonus, the leasing of the drug bond, the no-confidence motion, the matter of 34 being the absolute majority of 65, etc. and then conclude whether Guyana has and is likely to ever have, in a timely manner, such a critical mass of people.
Opinions are equally divided in Guyana on most important political issues, and if we are to be assured that the great fortune that is soon to come our way is not jeopardized, the most important agenda item today must be to create a political mechanism that will give rise to the ‘magic ingredient’ – similar to what I like to call ‘a united public opinion’ with which to hold government accountable!
