In Part I of this editorial yesterday, we reviewed the elusive quest by our governments from independence to 1989 for economic growth, which is a prerequisite for any form of development. At that time, in order to qualify for loans from the multilateral lending institutions, the PNC government under President Desmond Hoyte engaged in negotiations with the International Monetary Fund (IMF) to deal with the US.1 billion debt that hung around the Guyana economy like an albatross.
The IMF “conditionalities” introduced the neo-liberal Washington Consensus doctrines of ‘stabilisation, privatisation and liberalisation’ before we could secure debt relief. Ironically, the IMF had supported the previous strategy “import substitution strategy” of the PNC in their effort to generate capital surplus for investment and diversification. That offered an avenue for banks in the developed economies to intermediate the new oil wealth generated by OPEC. Guyana’s debt was due to both strategic and structural factors.
While the APNU/AFC government has obviously not crafted a coherent framework for development, by merely copying the PPP/C’s initiatives, they are seemingly oblivious to the implications of the model in which they are operating.
Under the rubric of “stabilisation” for instance, inflation targets have become a fetish since there is no empirical data to support the insistence that any rate above 5 per cent will retard growth in economies at our level of development. The stricture is more to assure owners of FDI that their returns will not be diluted.
But more germane, the new dispensation threw out the baby with the bathwater when it insisted that the previous practice of governments working on five-year development plans be abandoned. The market was supposed to replace planning: the “invisible hand” would address all challenges, even though the hand was now “invisible” because it was simply not there.While there were evident success from the “free market” policies, it all came crashing down in 2008, when the entire developed world entered a recessions in which they are still enmeshed.
But the implications of the lack of planning for the lag in our growth did not go unnoticed from one of the institutions that had led the struggle for Latin America and the Caribbean to break the lock of “underdevelopment” occasioned by our subaltern position in the world system that had been ushered in under the latest round of globalisation.
Antonio Prado of the Economic Commission for Latin America and the Caribbean (ECLAC) insisted a few years ago: “The State must be capable of providing strategic management for the long run, looking ahead, and being involved in the design of strategies for guiding national development.”
But by then it was evident that there was a third way in economic development that led to more sustainable growth: it was exemplified by Japan and the Far Eastern Tigers. In this “third way” there was also the identification of strategic industries and their facilitation but the governments very soon, turned them over to private interests. South Korea’s Samsung is an example of such a company. China, which interestingly moved into a government controlled but privately-driven industrial policy mode of development at the same time, “market fundamental” was sweeping the rest of the world – and was also successful.
The difference between the Chinese and Russian models of industrial policy development was that while the Chinese government was integrally involved, the companies and enterprises were subject to market forces. In Guyana, total governmental control of productive enterprises quickly develop fatal inefficiencies. In the Chinese model, their authoritarian government acts to eliminate such inefficiencies but such a government cannot and should not be tolerated here.
We suggest therefore the government should catalyse our industrialisation through its direct intervention within a five-year plan. It must see itself as an initiator and catalyst since most of our private sector has still not developed an appetite for risk taking.
We need an entrepreneurial state.