In the continual celebration of the life and work of Cheddi Jagan, I would like to write about a period of time when Dr. Nicholas Kaldor was invited to visit the then British Guiana by the Jagan government. His mission was to assist the Jagan government in bringing greater fairness to the tax system. I would also like to compare the lessons learned from that time to today.
For the record, Dr. Kaldor was born in Hungary in 1908 and died in the UK in 1986 as the Baron of Newham in the City of Cambridge. He was a consummate intellectual and a master economist.
Why British Guiana in 1961?
Dr. Jagan recognized that the global companies operating in the then British Guiana, including Bookers, were actively involved in tax avoidance through transfer pricing. His ambition as the elected Head of State was to increase tax revenue and distribute the tax burden more equitably across all classes of the society. He sourced Dr. Kaldor to conduct a comprehensive review of the tax system with the goal of conducting tax reforms. Dr. Kaldor did not disappoint.
According to Marjorie Turner in her book on Dr. Kaldor, he arrived in British Guiana only to find “there had been a flight of capital over the previous 18 months and the civil service has been almost in a state of revolt from having no pay increases during the past 8 years of rising prices”. But the truth of the matter was that Dr. Kaldor arrived in British Guiana in the middle of a global cold war power play. President Kennedy was determined that Dr. Jagan would never be the Head of State in independent Guyana under his watch. Therefore the decision was made by the Kennedy administration to remove the Jagan government before British Guiana can secure independence.
I might say the PPP at that time was naïve into thinking they could have outmaneuvered the American like Castro. As history revealed, CIA operatives struggled to penetrate Cuba but were already well embedded all over Guyana especially in the Trade Union movements. Irrespective of what policies Dr. Jagan’s government had put forward, they were destined to be destabilized. When it took 8 weeks for the Trade Unions of Ghana to work up a strike against their Kaldor Budget, it took 3 days in British Guiana.
So while Dr. Kaldor did an excellent job in 19 days to help craft a budget that was progressive in its recommendations by proposing temporary exchange controls (to stem capital flight), an increase in duties on luxury imports and alcoholic beverages (did not affect the poor), detailed changes in the PAYE (placed more money into the pockets of the workers) and new taxes on capital gains and property; it all came to naught. Although the workers were the biggest beneficiaries of Dr. Kaldor’s work, they were the most vociferous against the budget measures. It just did not add up. Only afterward by way of the CIA papers we found out that there was wholesale bribery of the union leaders and Burnham who were being paid to stir up trouble in subservience to their CIA paymasters although their constituents were the biggest beneficiaries of the Kaldor Budget.
The Budget was such a trendsetter that both the New York Times and Times of London praised the proposed budget. The Times of London was quoted as saying that Jagan’s proposals were “courageous and certainly not far from what British Guiana must have”. But by that time, the British were unable to alter the decisions of the world’s superpower – the United States.
The lesson to be learned!
History has proven that the measures in the Kaldor Budget were moderate and reasonable and certainly were not socialist in any shape or form. There were textbook tax reforms that are vital in economic conditions of capital flight and massive tax avoidance by the owners of capital.
History has also proved that Guyana experienced its greatest human development when the PPP worked closely with the Americans. Guyana could never have transformed from a highly indebted low-income country to middle-income status without the support of the Americans. The onus is on Bharat Jagdeo to strengthen that relationship between the PPP and the Americans. As leader of the largest political force in Guyana in 2018, he must be seen to be on good terms with the Americans.
That is why I was extremely pleased with his position on the EXXON investment. He called out the incompetent Granger government for their corrupt actions but he was emphatic in his position that a PPP government will respect all fully executed contracts with investors. Such stable signals from the PPP are vital if the Americans are to use their vast powers to influence free and fair elections in Guyana in 2020.
