The crisis facing the world economy is leading to a fundamental rethink of the role of ideology and the place of the ‘market’ in economic development. Some twenty years ago there was triumphalism in the West following the fall of the Berlin Wall and the demise of the Soviet Union. With the announcement and celebration of communism’s death mainly by those in the West, the practitioners, politicians and academics who had at one time extolled the virtues of socialism and the egalitarian society and equal opportunities which it would bring to all individuals all went into retreat.
Now it seems that capitalism as practised by those who were the celebrants at the death of communism are experiencing their own travails which offer a rare moment of satisfaction to the tiny minority which is still skeptical of the claims made by capitalism’s chief sponsors. Among this group is Joseph Stiglitz, known for his Nobel Prize in Economics and former Senior Vice President and Chief Economist of the World Bank. In his book Globalization and Its Discontents (2002) in which he not only critiqued globalisation but also argued that developing economies are, in fact, not developing at all, Stiglitz was particularly harsh on the IMF for imposing on those economies and countries, in exchange for loans and other assistance, economic policies “that conform to textbook economics but which do not make sense for those countries.”
In praise of deficits
Suddenly in demand for speaking engagements, Stiglitz, writing in the UK Guardian a few days ago, could barely contain his enthusiasm while speaking for that minority who never ceased having some connection to the Keynesian tradition. Lord Keynes who coincidentally was born the same year that Marx died, was the British economist who published in 1936, during the depths of the Great Depression, the tome The General Theory of Employment, Interest and Money in which his theory was that when the economy is slowing and businesses are reluctant to invest, the government should take up the slack, even if this means higher deficits.
Stiglitz in the Guardian noted that the acceptance of Keynesian theory even by the right in the US offered to those who were not captivated by the power of the market and capitalism, “a moment of triumph, after having been left in the wilderness, almost shunned, for more than three decades.” He posited that what the world was now experiencing was “a triumph of reason and evidence over ideology and interests,” and that some would see this as the end of market fundamentalism, comparable to the fall of the Berlin Wall.
Where have all our socialists gone?
But what happened to our socialists, or rather all of us, when at one time we all seemed to be socialists and the UF of Peter d’Aguiar a mere anomalous nuisance? If we are to take our constitution seriously – and why should we not given that is “the supreme law of Guyana” – Guyana is a state in transition to socialism. The constitution of the ruling Peoples’ Progressive Party, which I could not find on the party’s website, is even more emphatic about the party’s ideology – it is a Marxist party. In his seminal autobiographical work, The West on Trial, the late President and founder of the party, Dr. Cheddi Jagan wore proudly his allegiance to socialism, while blaming the British-US axis of all forms of plots and misdeeds. In fact Dr. Jagan, in the Wynn-Parry Commission into the Black Friday (February 16, 1962) disturbances said he was a communist.
Burnham, who initially came to power on an anti-socialist platform which he shared with D’Aguiar, went on a nationalisation campaign that at one time saw the state controlling some 80% of the economy.
While Burnham surrounded himself with some of the most doctrinaire left-wingers in Guyana including Ranji Chandisingh, Vincent Teekah, Elvin McDavid and Henry Jeffrey, his own commitment and that of his party, the PNC, to the socialist ideology appeared to be based on political control and nothing else. He had hardly been buried when his successor Desmond Hoyte reversed most of the socialist policies and embarked on the wholesale disposal of the country’s assets and resources for which the country received little in return.
The grand retreat
When Jagan returned to power in 1992, entirely out of character he continued those policies lock, stock and barrel, maintaining with the IMF a relationship of obsequiousness while embracing an amorphous and undefined New International Economic Order that had first been raised in 1948 in Cuba. Jagan never explained to his constituents or the country his about-turn on socialism, the IMF and the West, leaving it to others to speculate whether it was due to political expediency or his own conversion.
Whatever it was, his government pursued the same free market economics and model prescribed by the IMF and accepted by Hoyte.
Even before the death of Dr Jagan, economic policy and management of the PPP government was controlled by now President Bharrat Jagdeo who had been a member of the government from its first day in office in 1992. Jagdeo’s policies, on VAT, privatisation, price controls, food production and wages, have been entirely pro-IMF and he never for one moment betrayed his own Russian training. In effect then the policies of successive governments from 1988 to the present have been a renunciation of socialism.
The WPA too had been wedded to the socialist ideal and openly supported the Bishop regime in Grenada and the Cuban revolution. A major influence on the economic philosophy of that party was no doubt its one-time leader, economist Clive Thomas, arguably the best economist this country has ever produced. The TUF remains on paper a capitalist party but its leader sees no contradiction in being often placed in the role of spokesperson for the PPP.
Joining the clubs
For the political parties that were in government, the retreat from their ideological roots was no doubt shaped by developments in a world in which not to have the IMF stamp of approval or to be excluded from the WTO was like being an outcast. Market fundamentals reigned supreme and quietly everyone ceased being a socialist. Indeed, it would be difficult to find any leading member of the PPP – and here I distinguish it from the government – who would publicly describe themselves as a socialist. The PNC under Robert Corbin has lost not only its ideology but direction too, the WPA is peripheral as a force in politics in Guyana while the AFC is, so far as it can be labelled, very pro-market.
Cost and benefits
This column is not setting out as a value judgment on the economic model or policies which we followed at the behest of the IMF.
Nor does it suggest that there were not pluses and benefits from that relationship, however imbalanced. Perhaps both the post-Burnham PNC and the PPP needed an external force to bring investments and financial discipline to the country.
Many of the concessions and debt write-offs the country enjoyed were made possible by our allegiance to the IMF.
If the rules of accounting applied to the government, those write-offs would have been brought into its accounts as revenue, and it is partly those concessions that have made possible the substantial increases in expenditure on social services.
What is often not recognised or admitted, however, is that some of the debt write-off we have received had nothing to do with the IMF or the government, but rather stemmed from the fact that we were among a group of poor countries identified for such concessions.
Those policies have also had their cost. The resources of the country are now under external control and ownership. These foreign companies receive generous tax and other concessions under agreements which in many cases have not been subject to parliamentary approval or made available to the public. And in this regard the Asian wood giant Barama is an instructive example.
That company has reported losses for every one of twenty years while having enjoyed some of the most generous tax and other concessions imaginable. It is not only that those concessions have been costly to the revenue of the country, but they have made our domestic producers uncompetitive. With the various bauxite deals with RUSAL and BOSAI not available to the public, where is the political or public pressure to ensure that the deals are equitable and in the national interest?
One of the criticisms that can be made of the IMF-led policies is that while the national statistics may appear impressive and some Guyanese have seen marked improvements in their standards of living and a few have even reaped immense benefits, a large number of Guyanese still prefer to take their chances elsewhere. The figures show that tens of thousands of Guyanese have chosen to migrate legally or otherwise to seek jobs in just about any country they can enter. In the process, remittances have become one of our largest foreign currency earners and a major factor in any economic analysis. Public sector wages, and indeed wages in segments of the private sector as well, are cruelly low, made worse by a tax system that favours the self-employed and the shareholder over the wage earner.
Time to rethink
The crisis facing the market-oriented economies is causing a major rethink of some of the most sacred tenets of free markets and financial liberalisation. Primed as we are on the daily feed on US television we are aware of the embarrassing manner in which leaders of the US private sector trek to Congress begging for help. Make no mistake, the position in Europe and Asia is no different. When the turmoil is over and the dust has settled, the financial system, the housing and mortgage industry and the auto industry which have been responsible for much of the growth in many of the countries will have ended up in state ownership. While we privatise, they nationalise. That is not only a reversal over what took place for the greater part of the last twenty years, but a total contradiction of the free market. During all of this, the IMF seems to have gone into self-imposed silence.
Even after Guyana ceased being an IMF supervised country some two years ago, the government continued to follow the policies which the IMF imposed on us for so long that we seemed not to know there was an alternative or option. We are fortunate that we are not as vulnerable as some of the other Caricom countries, which because of a higher level of financial integration and tourism in particular, are already feeling the effects of the global storm. But make no mistake – we are not immune. Trinidad and Antigua are cutting back on construction and that will affect us directly. How do we reabsorb those Guyanese workers who may be forced to return home? For us the effects may be less immediate and also less harsh. But affect us it will.
Next week, we will look to see if there is anyone ‘left’ to help shape our response to the new reality brought about by the turbulence.