Dear Editor,
The novel coronavirus pandemic will be blamed for much of the imminent disruptions, many of a violent nature. Recently, the United Nations issued a report which warned of “… enhanced instability, enhanced unrest, and enhanced conflict” from the virus and its Secretary General, Antonio Guterres, added that it could bring a recession “that probably has no parallel in the recent past.” But the virus is not the problem of the looming economic apocalypse but the pin that pricks the bubble brought on by our indulgence for debt.
The world is drowning in debt. By the third quarter of 2018, debt was US$244 trillion and 318% of world GDP. And this does not include unfunded liabilities such as pensions. This is akin to a bank lending a client three times its annual income. Since debt is the consumption of future income, when the future arrives, debtors will have to commit larger portions of their income towards the servicing/repayment of this debt. But households are living paycheck-to-paycheck, and corporations’ stock prices are increasing not from growth but higher leveraging from stock repurchases. This debt will not and cannot be repaid.
But copious amounts of debt happen because of fiat money, which emerged after the American President Richard Nixon abandoned the Gold Standard in 1971. Fiat money, also referred to as paper money, replaced currencies backed by gold. It has no intrinsic value but the cost of paper and ink it’s made of. So, a GYD$1,000 note has the same intrinsic value as a GYD$5,000 note. Countries could print their currencies, and they have, with detrimental consequences as seen in Venezuela recently, and with more countries to follow.
As the downturn takes effect and workers are unemployed, hungry and in many cases, homeless, conflicts, to which the UN Report refers, will take over. The wealthy countries, with their safety nets and emergency relief programmes (incidentally all funded by debt), will be able to buy time before the carnage. But what about countries like Guyana? This is the future, and no one is giving it any mind.
There are measures that Guyana needs to start implementing now to mitigate the effects of the pending catastrophe. The first, of a longer-term duration, is to back its currency with its resources, especially gold and oil. This could be done in like manner to Venezuela, which, as a way around American sanctions, created a digital currency, the Petro, backed by oil. This would strengthen the Guyanese dollar and minimise the threat of inflation.
Second, and more immediate, are measures that support local employment. I’ll briefly summarise some of these below as I’ve elaborated on them in other forums. The following would require legislative approval for:
1. A “Buy Guyanese Act” which mandates government procurement of local content along the lines of the US’ “Buy American Act of 1933.”
2. The “Local Content Act” to be expanded beyond the oil and gas industry and applicable to all foreign companies and their contractors exploiting the country resources, as is being done in the gold, diamonds, manganese, bauxite, and timber industries.
3. A “Multi-National Distribution Act” requiring large distributors throughout the Caribbean, such as Massey, AMCO, VENCO, and Grace, to carry Caribbean-manufactured products in all Caribbean countries they operate in. So, consumers in Trinidad and Jamaica would have exposure to Guyanese-made products and likewise, Guyanese to products manufactured in other Caribbean countries.
4. A “Retail Display Act” requiring local retailers to offer Guyanese-made products no less display space and prominence than their foreign competition.
5. A “Local Raw Materials Tax Incen-tive Act” providing income tax incentives to corporations for use and substitution of local raw materials in the manufacture of end-products here in Guyana.
In addition to these legislative initiatives, local employment can benefit from government programmes to educate consumers on the benefits to them from the use of local products, and from the better utilisation of the country’s diplomatic missions in the promotion of locally manufactured goods in the countries they are established.
The coronavirus has bared our vulnerability to the deception of wellbeing by the printing of money and the consequences, according to the United Nations, will be of a catastrophe not seen in recent times. It warns of enhanced conflicts. The wealthy countries can defer these consequences with their printing presses. Guyana cannot! It must take measures to protect jobs and do so immediately. But instead, as the pitchforks approach, we dither.
Yours faithfully,
Louis Holder
