Finally, we have some independence to fund our development goals through our oil revenues. But will we rely only on ad hoc measures? Without shackling ourselves to some “ideology”, shouldn’t we pragmatically integrate our plans with the extant macroeconomic structures to deal with our challenges and opportunities?
Nowadays, the neoliberal paradigm informs us that all decisions – including moral ones – are to be made by “markets”. But since the 2008 crash, we discovered there are no pure “free markets” running any economy. In every country, production and productivity are functions of a mix of three institutions – the market, the state, and the community. We have to discover ours.
Markets function through competition, using prices as the mechanism to coordinate our production and consumption. But based on self-interest, they can get out of control – like in 2008. It is very efficient mechanism from a production point of view – profits motivate. But are there enough persons (entrepreneurs) willing to take the risks etc to make that buck in Guyana? What do we do when there aren’t? Hold our breath?
The state also coordinates our activities – through command and coercion – putatively for the “common good”. It enacts laws and makes regulations that affect our economic (and other) activity: as with taxes it imposes on imports or our incomes. In the modern world, we can’t wish the Government away. Finally, our communities also structure our activities – through voluntary cooperation engendered by close personal ties and relationships. They work through trust. Can we make co-operatives work, unlike the past under the PNC?
The task of Governments is not to stand on dogmas, but to tailor the right mix of these three institutions to suit their concrete conditions. The Western countries developed through a high level of dependence on markets, but their Governments and communities played, and continue to play, critical roles. They took two hundred years to get where they are. Japan, on the other hand, because of its unique societal values, depended much more on the role of the community, and trust. This allowed their State to play a much greater role in guiding and fostering development through their state-supported corporations. They caught up with the West in one century. After WWII, Taiwan, South Korea and Singapore took only half a century to catch up – but again, not relying totally on market mechanisms and determining their unique institutional mix of markets, state and community to coordinate their economic activities. China has done even better since 1978 with its combination of “free” markets and (authoritarian) governmental control of finance and some corporations.
Pragmatically, we must concede that the cause of our underdevelopment is to some extent strategic, rather than structural. Korea and Singapore were right where we were, if not behind, sixty years ago, not only statistically, but structurally. Look where they are today. Their Governments, as catalysts, set strategic goals, and then did what was necessary for them to be achieved. Take, for instance, one reason why Burnham’s “import substitution strategy” model of development failed. They nationalised and protected domestic industries and financial institutions that became inefficient and non-innovative, since the market forces fostering competition were destroyed. We had companies with a small captive market that had no reason to improve. The consumer suffered, because they had to buy inferior products at inflated prices. The only persons who benefited were the Government bureaucrats who had to be bribed to keep the goods, credits and licences coming.
Korea and Singapore, however, followed the Japanese example, and explicitly tied governmental assistance to selected industries based on the private corporations’ commitment and ability to export. This strategic decision had two significant and faithful results that differed from the “import substitution strategy”. Firstly, the assisted firms were subjected to the market discipline of the competition of international trade. This was the most intense competition, and ensured that efficiencies and productivities had to be raised to the highest levels. These firms not only couldn’t afford to be fat and lazy like the protected ones in Guyana: they had to become world class – and they’ve remained world class. The second benefit, of course, was that the exports brought in foreign exchange, and there was no need to ban anything to save foreign exchange.
Will our Government back some companies in strategically identified areas to catalyse our growth and development? The Wales Development Zone offers an opportunity, but critically, the companies must also be subject to the discipline of world markets.
