For most of our history, we were ruled by Imperial powers that organised the economies of their colonies so that most of our wealth was directed to develop their economies to heights that are still unmatched. Walter Rodney described this process very well in his groundbreaking “How Europe underdeveloped Africa”, and we can simply substitute “Guyana” for “Africa” to appreciate the systemic conditions, some of which stubbornly persist. Within Guyana, one of the effects of colonial rule was a tremendous income inequality, that began when slaves received absolutely no income for their labour and the ruling elite replicated the living standards of their “mother countries”. This was continued during the Indentureship period and afterwards.
With Independence in 1966, there were attempts to rectify this skewed income distribution, but those failed ignominiously during the co-operative socialist experiment of the PNC and its denouement between 1964-1992. After 1992, the PPP attempted to rebuild the shattered economy, and while it succeeded in alleviating extreme poverty and moving us from a Highly Indebted Poor Country to a Middle-Income Developing Country status, our inequality level remained high. One 2017 study showed that our Gini coefficient – which measures inequality – improved “marginally” by 2010, but this was only because the “middle class” had benefited from the 1989 IMF programmes.
In 2013, however, the French economist Thomas Picketty created quite a stir when his book, “Capital in the 21st Century”, became a NY Times best seller. Using painstakingly-collected data for the past 250 years – which included our colonial period – he showed that the rate of return on capital usually exceeded the rate of economic growth. This meant that owners of wealth – who were mostly in the colonial countries, including the US – would become steadily richer than ordinary income-earners – unless extraordinary shocks or high taxes destroyed their wealth. As such, during the 20th century, in which we became independent, the income disparity was very severe in Europe and the US, and it was only the disruptions of two World Wars and a Great Depression and high taxes that evened out matters somewhat. With the rise of neo-liberal economic principles deployed by Reagan in the US and Thatcher in the UK in 1980, the historic income disparity once more manifested itself. By 2011, the top 20% of Americans owned 86% of the country’s wealth, and the bottom 80% of the population owned 14%.
What all of this means is that wealth disparity and high inequalities are an inevitable consequence of economic growth based on purely capitalist principles. We are thus stuck with a dilemma: all other non-capitalist modes of economic growth (eg socialism) have either failed abysmally (as in USSR) or succeeded marginally (eg Cuba) but pure capitalist growth ineluctably leads to severe inequalities because of Picketty’s seminal equation. By the time Picketty’s book came out, the contradictions in the neo-liberal model had already led to an economic crisis in 2008, from which the economies of the West still have not recovered. Some say that the wars since then may be the classic response to engender growth and increase equality. What was to be done? Picketty proposed that the rising inequality can only be reduced or possibly reversed through state intervention. These would include improving the education system (to create the diffusion of knowledge, diffusion of skills, diffusion of the idea of productivity) and progressive taxation as the main mechanisms that would lead to lower inequality.
In his new book released in 2020, “Capital and Ideology”, Picketty further emphasises the role of radical progressive taxation, but recognises that there is a need to educate the populace on these measures. He points to the example of Sweden, which moved from being one of the most unequal societies in the world to one of the most egalitarian today.
With at long last Guyana being faced with the prospect of acquiring great wealth, we should initiate conversations on how it would be distributed to create the least inequality consistent with growth.