Some historical notes for understanding PNCR and WPA economic policy since 2015

In my reading of Guyanese history and political economy, the issue of land distribution has psychic and perceived economic value for all Guyanese. Land distribution bears a special place in the intellectual authorship of those associated with the PNCR and the WPA. I already noted in a previous column that at the core of Minister Greenidge’s thesis is the notion that differences in land allocation between African and Indian Guyanese during the colonial period determines variation in contemporary income distribution. Indeed, the independent anthropologist and sociologist, Leo Despres, in a 1969 journal paper confirms this historical conflict when he observed that competition between the two main groups was mainly over village lands. The competition for places in the civil service intensified by 1960 but it was brewing since the 1930s. The independent historian, Roy Glasgow, also made a similar argument while focusing more on cultural factors. However, in my own academic research I have rejected cultural factors as explanation for differences in economic outcomes. In a sense, the whole literature coming out of New Institutional Economics has an underlying core that there is one best culture.

Unfortunately, no Guyanese or foreign scholar has ever settled this assertion that historical differences in land distribution accounts for contemporary variations in income and assets at the inter-group and intra-group levels. Therefore, these days we have misrepresentations by bloggers, politicians and a newspaper columnist that Indians control 95% of the economy. I concede that the boors in the Jagdeo PPP helped along this perception. We also have to go back into history to get a feel for the rationale given for the re-marginalisation and re-discrimination as at the level of October 5, 1992. We have to change the rules of the game and systems of government instead of re-marginalising and re-discriminating.

The competition over land is understandable since a sizable chunk of the abandoned plantation lands on the coastal plain was bought by Africans after emancipation. It was a remarkable historical event in which newly liberated people bought lands individually (proprietary land as the example of Cudjoe McPherson) and as a group by pooling savings (communal land).  The purchases would leave little capital afterward for land development. The incomes for land purchase came from small-scale farming prior to 1833 and from meagre pay during apprenticeship. One aspect of this extraordinary period was the high savings propensity of Africans of around 0.21 to 0.41 out of modest incomes. That means, on average, 21 cents to 41 cents of every dollar earned was saved to buy land.

Absentee European owners abandoned plantations after emancipation for four main reasons related to the international price of sugar. First, the end of slavery meant that labour cost was going to be higher and, therefore, many estates closed. Second, the emergence of European beet sugar would further depress sugar price in Britain. Third, the 1846 Sugar Duties Act in Britain opened the UK market to free trade, making British Guiana sugar (which was of better quality) uncompetitive in terms of price. Fourth, the United States congress introduced sugar tariffs to protect its nascent refining industry in 1872. Yes, in spite what you might have heard about valiant capitalists operating in free markets, the United States used tariffs after the Civil War to protect nascent industries.

These four factors not only caused the failure of numerous plantations, but also the withdrawal of finance capital from London. There were some finance houses in London which would have funded the newly freed sugar growers but did not given the trade liberalization in Britain after 1846. Unlike the Congress of the United States, the sugar oligarchy that ran British Guiana at that time was not going to subsidize the new owners. The European plantations that survived after emancipation did so by keeping wages low through indentured contracts and mergers to benefit from economies of scale. Indians who did not return to India were eventually sold lands under the explicit understanding that they will remain supplying their labour to the sugar industry while also participating in subsistence farming.

There is, however, one crucial advantage from which Indians benefitted. Those who were able to buy lands by surrendering their return passage to India did so on better prepared lands under official land settlement schemes. The most important factor – consistent with my thesis that the polder system in a tropical environment makes long-term growth slower – is the drainage problem was better managed by the evolving colonial government. Rural Africans just after emancipation did not get this benefit, which in my opinion, is one of the two pivotal constraints on their communal and proprietary farms. Nevertheless, the majority of Indians did not for various reasons obtain land in the official schemes. Hence, they themselves moved to poorly drained areas throughout the coastal plain, often in village lands that were no longer occupied by Africans who moved to the urban centres. This is the origin of the squatting problem Greenidge notes. Despres’ 1969 paper (as well as his 1967 book) notes there was no precise data for the period 1881 to 1955 to determine what proportion of the former African village lands was sold or abandoned to East Indians. The Roman-Dutch law of the time made matters worse and caused land fragmentation. Many of the Africans who moved to the urban occupations did not have individual title given the legal system of the time.

In spite of the movement toward the urban areas, many Africans also continued farming ground provisions, which had a local market. They also comprised the skilled labour force in the sugar factories since planters were reluctant to train Indians in these areas believing they would eventually return to India. However, international events that previously conspired to engender wage suppression after 1838, would decisively benefit a few Indian families by creating the external demand for rice. World War I resulted in a major expansion in overseas demand for rice, thus enabling a few to overcome the small domestic-demand constraint. The colonial government, as part of the war effort, supported the rice industry by streamlining marketing and organizing the decentralized rice peasantry. There would be a slump in international demand after the first war, but global demand again picked up during World War II. Therefore, by 1945 a few wealthy rice millers emerged. Many would remain small-scale peasants, however. Hence, the intra-group income and asset variation among Indians.

The relative success Indians gained in rice farming is often associated with several factors such as cultural differences and favourable treatment from the colonial government. These explanations, however, trivialize the demand determinant which I am sure Keynesians will appreciate. Demand is one of the fundamental determinants of long-term growth in small open economies as structuralist economists will tell you. Therefore, the small and dispersed internal market is my second pivotal factor for the relative underdevelopment of Guyana as a whole. This factor interacts with the high cost associated with the polder system and dispersed hinterland settlements.

These historical notes are not meant for ascribing blame, but for isolating cause and effect so that we can propose optimal systems necessary for moving forward. Free and fair elections in Guyana are yet to result in the consolidation of democracy as we observe from the experiences of 1992 and 2015. I cautioned a few weeks after the government won the election that re-marginalisation and re-discrimination of people perceived to be PPP supporters will occur at the middle levels. The PNCR leadership has now legitimized this middle-level insecurity. The distributional problems over land and other economic resources have to be solved by setting up lasting institutions, not by electoral politics for its own sake. The land distribution problem has to be addressed. But make no mistake: if the two constraints I have given are not addressed, land will fulfil psychic value, but not necessarily economic value. My core argument is follow the land if you want to understand the PNCR’s economic agenda since 2015.

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