Business Page – May 27th, 2001

Did Business Page Say That?            

Introduction 

Mr. Ravi Dev, MP and Leader of ROAR in yesterday’s Stabroek News took exception to Business Page of last Sunday titled: Prioritising poverty reduction national imperative.  I welcome Mr. Dev’s criticisms as well as his kind comments on the column.  Most of all I am thankful to him for providing me with a topic for today’s article when there is so little taking place in business and the economy that one can write about.  The principal criticism Mr. Dev makes is that I implied (emphasis mine) “that the government must solve the problem of poverty through job creation’, that I endorsed President Jagdeo’s “socialist proclivities” and that I “seek to have the government generate temporary relief at the expense of the long term future of the nation”.

I do not question the sincerity of these criticisms and am prepared to accept them while offering some kind of explanation and clarification of the article.  First of all, let me say that a friend sent me a copy of the Interim Poverty Reduction Strategy Paper and asked whether I would address the matter in Business Page.  The focus therefore was on the Paper, which I understand is currently being discussed by civil society, and not on the wider issue of job creation.  I did not think it would have been helpful for me to dismiss the Paper and say that the government should concentrate on policies only while leaving to the private sector the sole responsibility for providing jobs.  I also linked to the Paper the ongoing talks between President Jagdeo and Mr. Hoyte which has as a focus the provision for jobs for the army of unemployed among all ethnic groups and across all regions of the country.  

Sustainable jobs and socialist proclivities

I have naturally re-read the article to identify exactly what was written that could imply that the government must the problem of poverty through job creation.  I argued that the solution to the poverty lies in sustainable job creation and the firing up of the entrepreneurial spirit.  I said that it was a pity that the committee looking at the needs of depressed communities did not have in its mandate “options for job-creation and profit centered-activities.”  Clearly, or so I thought, I could not be speaking of jobs provided by the government only.  In the context of the dialogue, the article noted that the challenge of creating jobs is the responsibility of not only the government but the main opposition party as well.  In the concluding paragraph, the article suggested that the ministries should be scrapped, the PNC-R should help to promote at least half of the hundred of thousand jobs promised in its elections manifesto, and that the country needs “a ministry that takes unemployment seriously and that can call on the other ministers to create policies and programmes that create and sustain jobs.”

I find it a little difficult to under what is socialist about a call for job creation in the wider context of the article.

There is a distinction between job creation and policies and nowhere did the article say that it is the sole responsibility of the government to provide the badly needed jobs.  If this impression was conveyed then I must apologise and state clearly that I do not believe that this would be either sensible or possible.

President Jagdeo and Keynes

The final point of criticism on Business Page in Mr. Dev’s letter is that unfortunately, both Mr. Jagdeo and I “seek to have the government generate temporary relief at the expense of the long term future of the nation”.  I have no authority to speak on President’s Jagdeo’s behalf but again have to confess to some difficulty in understanding how Mr. Dev could have arrived at this conclusion.  While we would like to see all the country’s problems solved immediately, that is clearly impossible and it is necessary to set them out, analyse and prioritise them and move immediately to addressing solutions.  That does not amount in my view to addressing one at the expense of the other.  Indeed at the risk of over-repetition, the article referred on more that one occasion to sustainable job creation.

I seem to recall that a few weeks ago, in a letter in this newspaper, Mr. Dev quoted from economist John Maynard Keynes’ famous statement in “A Tract on Monetary Reform”: In the long run, we all dead.’  Mr. Keynes is better known for his pioneering work, which has influenced not only an entire school of economic thought but government action as well.  Before Keynes, classical economists had argued that in the market economy the economic system would spontaneously tend to produce full employment of resources, through the invisible hand of the market.

Fiscal versus monetary policies

In the General Theory of Employment, Interest and Money published in 1936, Mr. Keynes recommended a more interventionist policy by the government and placed emphasis on fiscal policy.  There is no doubt that Keynes was the most influential contributor to economic thought in the twentieth century although his is certainly not the last word.  As the structure of economies and economic activities change so too will theory.  Most noticeably since President Reagan and Prime Minister Thatcher, there has been a shift of monetary policies whereby the attainment of government objectives are pursued through adjustment to the levels of money supply and interest rates.  In the final analysis, both sets of theory still have their relevance depending on the prevailing circumstances and the nature of the economy.

In the case, they are not mutually exclusive though at any given time one may be more pronounced than the other.  As we discuss policies there will always be a lag between the adoption of the policies and their desired impact.  The issue facing this country is how to deal with the problem of unemployment in the interim while the policy measures take time to show results.

The unemployed person cannot await the effective operation of fiscal and monetary policies or the kind of appraisal, which promoters of investment projects necessarily undertake prior to their investment.

The ERP (European Recovery Programme)  

The Economies of all countries in the world in the twentieth century post – World War 2 Europe, Japan, South Korea and more recently, the former socialist countries – did not begin their recovery by the application of classical theories of economics but with specific programmes to enable them to reach a stage where market concepts would work.  Perhaps the most famous of these efforts is the Marshall Plan or the European Recovery Programme, the USA-sponsored programme designed to rehabilitate the economies of post-World War 2 western and southern European nations in order to create state conditions in which democratic institution would survive. To say that government intervention will corrupt the market pre-supposes that government intervention is necessarily bad and that there is a functioning market in Guyana.  Many people would be surprised to learn the extent to which many of those in the private sector are guilty of not only corrupting the market but the country as well.

We simply cannot ignore the importance of government in the task of both creating the environment for, as well as providing directly, some of the tens of thousands of jobs needed to make the unemployed consider that they have a stake in the society.

Significance of Governments

There is another point that is often missed by those who talk about the private sector being the engine of growth.  Even in the most fanatically market-oriented economy, the government is a significant employer and consumer of other resources.

If a country is to provide security for its citizens and visitors, police its borders, protect the environment, regulate the extractive industries, collect taxes monitor compliance with labour and social legislation among others it will need committed, trained, motivated and well paid staff.

Even if we believe that some of these functions can be outsourced it is still the government that is the creator of these jobs. As a major consumer of resources, it has the potential, working in corporation with the private sector, to create opportunities for business and jobs.

We recall not too long ago, that there were attempts by the forces within the private sector to import stone form Canada. This is perhaps the Guyanese equivalent of taking coals to Newcastle.  And only this week we read of the contract being awarded to some foreign entity to consolidate the laws of Guyana.  Surely here was another opportunity to afford meaningful employment for the legal/information technology sector in Guyana.  Ram & McRae has consolidated all the tax and several of the legislation of Guyana. Indeed it has donated a number of these to the administering government departments. But now that a lucrative contract is available, who gets it?  There are jobs involved and importantly, the income will be taxable at high rates and money put into the system.

Conclusion

Mr. Dev has raised several other issues particularly relating to the private sector.  Without any doubt they have a lead role to play in job creation. But they have other functions and duties as well.  Should they be consuming non-renewable resources and pay no taxes?  Should some of them benefit form concessions not available to competitors.

Where is the justification for one cell phone venture to get a five-year tax holiday while its competitors gets none?  This reminds me of my inability to explain to my three year old Christelle why one piggy got roast beef while the other got none. And just incidentally, since when does the Chief Executive Officer of Go Invest have the authority to grant tax holidays?