3
Life after Burnham: Economic revival and the obstacles to sustainable development

Investigating the factors that have led to significant underdevelopment in Guyana, what practical solutions can be suggested to help improve the economic and political performance of this state?

Burnham’s death whilst undergoing throat surgery in 1985 brought a natural end to the PNC’s cooperative socialist regime; a regime that caused two decades of extreme terror and suffering to all in Guyana, as explored in chapter two. The need for change was undeniable and such an event provided Desmond Hoyte ‘with the opportunity to break with some old PNC practices’. The recognition of the need for free enterprise in order to re-stimulate the optimism of a whole population formed the basis of Hoyte’s, and subsequent presidents’, prevailing actions. This chapter sets out to explore the extent to which Guyana has since broken free from the shackles of socialism as a result of various government and international institution-led initiatives, and explores the impact on Guyanese development as a result. By analysing the initial success of the IMF-World Bank backed austerity and recovery program implemented in 1988; CARICOM’s aim to break down the divide between the ‘core’ states and the Caribbean as a ‘peripheral’ region; and the effect of regular financial aid as a result of Guyana’s status as a heavily indebted poor country (HIPC), one quickly realises the apparent commitment of Guyanese governments to the cause of market liberalization and the desire to maximise the theoretical benefits.

However, the stagnation of economic growth in the mid 1990’s suggests that despite good intentions, Guyana has failed to prosper under the conditions of re-privatisation and improved access to open international markets as a result of IMF and World Bank support. The neo-liberal nature of these new conditions and Guyana’s subsequent apparent failure are no coincidence. The economic parameters set out under IMF instruction and the reduced role of the state resembles similar conditions present prior to Burnham’s presidency. The continued prevalence of mercantilism will be explored in the context of core-periphery relations in order to determine whether neo-liberalism is applicable to all developing nations, or whether those states that have thrived under the liberalisation possess certain internal and external conditions that effectively support this concept. The result of such analysis will allow the thesis to conclude with a suggested development framework that would be appropriate for Guyana’s economic, political and geographic conditions.

In 1988 the Guyanese government launched an IMF-World Bank Economic Recovery Programme (ERP), which is still in place today. Such action demonstrates Hoyte’s realisation that the reason previous IMF loans had failed to stimulate the Guyanese economy was due to the existence of a production crisis, not a temporary financial crisis, which the loans were designed to fill. This economic plan allowed for new loans in exchange for free-market reforms and reversed the nationalisation policies that became infamous under Burnham. The ERP set a target of 4% growth in GDP between 1988 and 1991; the achievement of which the IMF estimated would require a strong performance by the agrarian sector, including forestry and fishing. Accounting for 25% of GDP and 50% of exports in 1988, agriculture was central to the ERP, as demonstrated in a 1990 government report: ‘achievement of rapid growth in agriculture is a key element of the government's strategy of promoting export-oriented economic growth, employment, and the country's potential in food production’.

With this transition from a socialist-inward looking economic model to a market oriented one in the early 1990s, growth in Guyana took off sharply with the country enjoying one of the fastest rates of growth among low income countries. The reforms under the ERP entailed significant privatisation, which led to more than 80 percent of government assets being privatised or liquidated between 1990 and 1994; only the production of sugar, public utilities, and one commercial bank remained under state control. This adoption of neo-liberal based reform in tandem with improved economic performance, demonstrated by Guyana’s average economic growth rate of 7 per cent between 1991 and 1997, suggests that the IMF’s view of weakness in the public sector, over-regulation of the economy and the denial of a full role to the private sector as the key constraints to supply growth, was accurate.

However, Guyana’s sudden stagnation of growth to 0.6 percent between 1998 and 2004 indicates that there were other factors underlying the country’s initial improved economic performance. Chapter one’s explanation of a country’s productive capacity, represented by the PPF, becomes a relevant tool of analysis when assessing the conditions that Guyana was experiencing at this time. The effects of extensive nationalisation under the PNC have been clearly outlined in terms of the reduced production in key industries such as sugar and rice, due to the existence of unemployed resources and the inefficient utilisation of such resources as a result of government control. Such a situation can be illustrated by a country’s position at a point below the PPF boundary. The initial effect of privatisation and improvement in the supply side of the economy under the ERP is undoubtedly economic growth. However, one can suggest that the improved economic performance of Guyana in the 1990s is largely due to the re-utilisation of the spare capacity that developed under Burnham. The sudden stagnation of economic growth in 1998 simply marks Guyana’s return to its full productive capacity, otherwise shown by operation on the PPF boundary. The key issue for Guyana is establishing suitable methods to consistently shift the productive capacity of the economy outwards, otherwise known as economic growth and therefore stimulating development.

Although sugar and rice were the dominant crops and export commodity for Guyana, the ERP insisted that there was enormous potential for the further development of non-traditional crops, forestry and fishing, all of which would contribute to export production. Such a suggestion typically lies within the neoliberal development framework as trade as a result of free market conditions sees foreign aggregate demand rise - especially if the country holds a comparative advantage and is therefore an efficient producer - which in turn drives economic growth. The extent to which developing countries such as the Caribbean have succumbed to this framework is reflected by organisations such as CARIFTA and the subsequent formation of CARICOM. Originally formed in 1968 by twelve states including Guyana, the Caribbean Free Trade Area (CARIFTA) is the most evident solution to the Caribbean challenge of small, individual markets and the tendency of individual countries to produce similar agricultural and industrial products. The result of limited inter-island trade ensured CARIFTA’s main objective was to create a market large enough for specialisation. The promotion of the expansion and diversification of trade in the Caribbean, under conditions of fair competition as a result of the removal of barriers to trade, was seen as an effective method to encourage the balanced and progressive development of the Caribbean economies and, ensure that all benefits of free trade were equally distributed to member nations.

The CARIFTA agreement was deepened into the Caribbean Community and Common Market (CARICOM) in 1973 through the Treaty of Chaguaramas. This further integration, allowing the free movement of labour and capital and the coordination of agricultural, industrial and foreign policies, reflects the key objectives of the community: the need for accelerated, coordinated and sustained economic development; expansion of trade and economic relations with third States; and enhanced levels of international competitiveness. The underlying cause of such integration lies within the belief that a larger regional area is better positioned on the world stage than a series of small, independent, ‘peripheral’ states. With the Caribbean operating as a cohesive ‘mini economy’ under policies implemented at the governance level of CARICOM, the opportunities for specialisation improve as result of free trade within the region. Such advances in efficiency and production, combined with the improved status of the Caribbean, ensures that global market access has in general been enhanced under the process of progressive liberalization in CARICOM.

However, Guyana has seemingly failed to make much progress under the CARICOM infrastructure and the possible reasons for this come in many forms. With the purpose of this thesis being to establish the extent to which neoliberalism since Burnham has been an appropriate development framework for Guyana, one is encouraged to consider the degree to which Guyana simply isn’t suited to the concepts of market liberalization and exports as a driver of economic growth. The idea that Guyana’s colonial experience is the major cause of its subsequent status as a periphery nation has been explored; the pursuit of global neoliberalism by core states undermines the capabilities of periphery nations such as Guyana to establish themselves in the global marketplace. Yet this notion suddenly becomes somewhat frail when considering the internal, physical situation in Guyana.

Lewis argues that the size of the islands, even within a customs union in the form CARICOM, is insufficient to facilitate a manufacturing base of ample magnitude to benefit from economies of scale. The small population size of the Caribbean, in particular Guyana as a result of its relatively large size, cannot provide a basis for internally propelled growth. The recognition that foreign markets are essential for any form of economic sustainability is widespread, proven by agreements such as the ‘Lomé Convention’ and the subsequent ‘Cotonou Agreement’, which gives Caribbean states preferential access to European markets. Whilst such agreements can still be viewed as being underpinned by mercantilism (Europe receives primary resource imports such as rice at relatively low costs due to Guyana’s comparative advantage), it is necessary to further analyse why developed countries are so persistent in their support to developing countries in their pursuit to operate under a neoliberal framework. The mainstream literature talks of modernization and neo-liberalism as two distinct development theories. However, Guyana’s continual reliance on a narrow, primary resource base leads one to re-consider Lewis’ suggestion of an absence of mechanisation as being the heart of Guyana’s development issues. The importance of an increase in capital goods and manufacturing in order to achieve development is incorporated in to the modernisation theory of development. Yet, as one looks at those states that tend to thrive under the prevalent present day neoliberal economic framework, the relationship between these two concepts is clear: those states which have undergone the transition from traditional to modernised society in terms of infrastructure and institutional capability fair well within the liberalised market environment which now dominates global economic relations. As such, one can introduce the concept of paradigms and paradigm shifts.

A paradigm refers to a ‘specific worldview underlying the theories…of a particular [social] scientific subject’. As such, the theories of modernisation and neoliberalism can be viewed in the context of paradigms as the beliefs of world actors were implemented within the respective frameworks of modernisation and neoliberalism. The major difference between referring to a theory in the context of a paradigm is that a paradigm adds a more dynamic explanation for how one theory can result from the implementation and physical experience of another. Thomas Kuhn captured this concept by introducing his term, ‘paradigm shift’. In basic terms, a paradigm shift captures the change from one way of thinking to another, necessitated when new scientific discoveries produce inconsistencies in the current paradigm. It is a revolution or transformation, a form of metamorphosis that takes place over time and is driven by agents of change.

As one considers the presence of modernisation and neoliberalism as real world economic and development paradigms, the concept of paradigm shifts becomes an interesting tool of analysis. Rather than both frameworks being dealt with as separate entities, it is possible to suggest that neoliberalism is a direct result of the changes experienced under modernisation. The improvement in infrastructure and increasing utilisation of capital goods that has led to the transition of many nations’ societies and economies from ‘traditional’ to ‘modern’ subsequently ensured that these same nations were the drivers of change towards the now recognised neoliberal paradigm. The key point to comprehend is that the process of modernisation must take place in order for a nation to prosper within the boundaries of the neoliberal paradigm. Without improvements in technology, progress in education and enhanced institutions such as government to monitor such change, the pre-requisites for success under the neoliberal development framework are ultimately missing.

It is this point that is directly applicable to Guyana: the country has not undergone a sufficient period of modernisation, proven by the economy’s continued reliance on a narrow, primary resource base, and the resulting absence of a significant secondary, industrial sector ensures that the nation lacks the economic power and resources required to effectively compete within the global, liberalised marketplace. The World Bank acknowledged the failure of its predominantly neoliberal measures in Guyana, when it stated in its programme document for poverty reduction in 2002 that the country still has a ‘heavy dependence on a few export products (rice, bauxite, gold, sugar) whose future look uncertain’. The sectors identified by the ERP as having the most economic development potential performed badly, as data for Guyana on real GDP growth by sector in 2005 demonstrates. In that year, real growth in agriculture was -10%, in manufacturing -13.8%, and in mining and quarrying -17.8%. The focus on expansion in export-oriented production failed to lead to physical improvements demonstrated by the fact that export earnings in 2005 were below levels for 1997, having declined from US$593 million in that year to only US$490 million in 2005. Output in traditional and non-traditional agriculture also declined, no transformation in the land use and tenure system occurred, and there was no serious crop diversification: sugar and rice remain as before the main agricultural exports.

In effect, Guyana and many other developing countries can be said to have 'missed' a development paradigm. The ultimate consequence, as outlined, is that the country is not prepared to participate within the dimensions of the current neoliberal paradigm. One can argue that Guyana’s status as a ‘Heavily Indebted Poor Country’ (HIPC) acts as evidence that the IMF and World Bank have recognised the need to stimulate modernisation as financial aid is a traditional modernisation belief. Guyana's qualification for debt relief in December 2002 under the enhanced framework of the HIPC Initiative ensured the country would benefit from a US$30M annually for 10 years to further aid in the development of the country's social sector. Such news was well received, demonstrated by President Jagdeo’s declaration that the resulting aid would help Guyana in achieving the Millennium Development Goals of the United Nations.

However,

Satellites experience their greatest economic development when their ties with their metropolis are cut.

Regions which are the most underdeveloped are those which had the closest ties historically to the metropolis.

The is not advocated by neoliberalism however – conflicting message. However, much of this aid has failed to contribute to development – impact of corrupt government.

Explain how a cohesive government is the basis for success – eventual success under neoliberalism will require a sound accountable system of government. The issue with Guyana is racial entrenchment which is reflected in the politics. One of the keys to development is breaking such tension down. This should start from the bottom up – education and participation in communal activities such as sport to break down the divide between Indo and Afro, segregation that is learnt from parents etc.

Re-gain the diaspora – mention how reliant the economy is on remittances which maintains AD but ensures that the country ‘stays in a rut’. Guyana should be providing these incomes as a result of its own production. Ultimately, skilled managers are likely to be the best solution to increasing production however importance of foreign direct investment to stimulate infrastructure. This is only going to be attracted if political situation is good. Once businesses are seen to do well acts as a catalyst for new business…snowball effect – growth.

Focus on paradigms – aid as a modernization belief, trying to induce paradigm shift to neoliberalism too quickly by opening up to markets– conflicting objectives Investigate IMF loan- IMF as a neoliberal institution but is neoliberalism the right solution for Guyana and other developing states? It appears not – what is the alternative?
HIPIC – aid – neoliberals don’t conform to aid so the wrong development path has been chosen

In order for neoliberalism to work it appears the state needs to function in a certain way. However, neoliberals claim that government intervention should be minimal. Looking back at history, government intervention in the form Keynesian based economics was necessary for USA etc. to transform form traditional to modern…developing nations missed out on this stage. Need a good, sound government to monitor modernization then open up to markets and neoliberal values. However, is Keynesian coming back on to scene? Market shave crashed due to greed. Learn lesson and develop appropriately

ot been fully realised. There are a number of critical and complex constraints which Guyana faces in the international trade arena, which need to be urgently addressed. These include lack of reform of the imbalances in the prevailing multilateral trading system which affects Guyana and other developing countries, the impact of the growing trend towards bilateral and regional trading arrangements, limitations of the country’s ability to deepen trade integration and inadequate technical capacity for effective participation in the multilateral trading system.
Encourage skilled labour back to Guyana

Page 36 of Singh for final sentence of chapter/conclusion

Bibliography

Barker, J.A. (1993), Paradigms: the Business of Discovering the Future, HarperCollins: UK

Canterbury, D. (2007), ‘Caribbean Agriculture Under Three Regimes: Colonialism, Nationalism and Neoliberalism in Guyana’, Journal of Peasant Studies, Vol: 34, Iss: 1, pp. 1-28.

CARICOM, (2012), ‘CARICOM Secretariat: The Caribbean Community’ (online source), Available from: http://www.caricom.org/jsp/community/community_index.jsp?menu=community (accessed on 23.3.12)

Davidson, W. (2003), ‘HIPC Initiative approval Guyana's best Xmas gift - President Jagdeo’, Guyana Chronicle, December 20, 2003
Egoumé-Bossogo, P., Faal, E., Nallari, R. and Weisman, E. (2003), Guyana: Experience with Macroeconomic Stabilization, Structural Adjustment, and Poverty, International Monetary Fund: Washington DC.

European Commission, (2012), ‘The Cotonou Agreement’ (online source), Available from: http://ec.europa.eu/europeaid/where/acp/overview/cotonou-agreement/index_en.htm (accessed on 23.3.12).

Girvan, N. (2007), ‘Towards a Single Development Vision and The Role of the Single Economy’, In Collaboration with the CARICOM Secretariat and the Special task Force on the Single Economy, As Approved by the Twenty-Eighth Meeting of the Conference of Heads of Government of the Caribbean Community (CARICOM), 1-4 July 2007, Needham’s Point, Barbados
The Inter-American Institute for Cooperation on Agriculture (1990), Annual Report (1990) to the Government of Guyana, The Inter-American Institute for Cooperation on Agriculture: Georgetown.

Kay, C. (1993), 'For a renewal of development studies: Latin American theories and neoliberalism in the era of structural adjustment'. Third World Quarterly, Vol: 14, Iss. 1, pp. 691-702.
Kuhn, T. (1962), The Structure of Scientific Revolutions, The University of Chicago Press: Chicago
Latin America Bureau, (1984), Guyana: Fraudulent Revolution, Latin America Bureau: London

Lewis, W.A. (1966), Development Planning, George Allen and Unwin (Publishers) Ltd.: London

Neppe, V. and Close, E. (2011), ‘Applying Consciousness, Infinity and Dimensionality Creating a Paradigm Shift: Introducing the Triadic Dimensional Distinction Vortical Paradigm’, NeuroQuantology, Vol: 9, Iss: 3, pp. 375‐392.

Powell, D. (1973), Problems of Economic Development in the Caribbean, British-North American Committee: London

Saxegaard, M. (2004), ‘Creditor Participation in the HIPC Debt Relief Initiatives: The Case of Guyana’, Georgia Journal of International and Comparative Law, Vol: 32, Iss: 3, pp. 725-733.

Staritz, C., Atoyan, R. and Gol, J. (2007), ‘Guyana: Why Has Growth Stopped? An Empirical Study on the Stagnation of Economic Growth’, IMF Working Paper, International Monetary Fund, April 2007.

Take the Leap, (2012), What is a Paradigm Shift? (online source), Available from: http://www.taketheleap.com/define.html (accessed on 30.3.12)

Tewaire, B. (2003), ‘Redesigning strategy for Caribbean Success in the Age of Globalization’, Sixth Lecture of the Distinguished Lecture Series Celebrating the 30th Anniversary of the Caribbean Community, St. Augustine Campus, University of the West Indies, Belize, 17th September 2003.
United Nations Development Programme (UNDP). (2011), Millennium Development Goals: Guyana Progress Report 2011, UNDP:
The United Nations Economic Commission for Latin America and the Caribbean (ECLAC). (2006), Economic Survey of the Caribbean, 2005–06 World Bank. (2002), ‘Program Document for a Poverty Reduction Support Credit in the Amount Equivalent to SDR 9.1 million (US $ 12.0 Million Equivalent) to the Cooperative Republic of Guyana’, International Development Association, World Bank: Washington, D.C. World Trade Organization (WTO). (2003), ‘Diversification of production and export base will be best achieved by strengthening economic reform and trade liberalization’, Trade Policy Review: Guyana, WT/TPR/S/122, 31st October 2003.

--------------------------------------------
[ 2 ]. Singh, C. 1988: 141
[ 3 ]. Singh, C. 1988: 105
[ 4 ]. Saxegaard, M. 2004: 730
[ 5 ]. Latin America Bureau, 1984: 68
[ 6 ]. Canterbury, D. 2007: 13
[ 7 ]. Canterbury, D. 2007: 13
[ 8 ]. The Inter-American Institute for Cooperation on Agriculture, 1990: 3
[ 9 ]. Staritz, C., Atoyan, R. and Gol, J., 2007: 4
[ 10 ]. Staritz, C., Atoyan, R. and Gol, J., 2007: 4
[ 11 ]. Staritz, C., Atoyan, R. and Gol, J., 2007: 3
[ 12 ]. Latin America Bureau, 1984: 70
[ 13 ]. Staritz, C., Atoyan, R. and Gol, J., 2007: 1
[ 14 ]. Powell, D. 1973: 46
[ 15 ]. Powell, D. 1973: 45
[ 16 ]. WTO, 2003: 24
[ 17 ]. CARICOM, 2012: http://www.caricom.org/jsp/community/community_index.jsp?menu=community
[ 18 ]. CARICOM, 2012: http://www.caricom.org/jsp/community/community_index.jsp?menu=community
[ 19 ]. WTO, 2003: 1
[ 20 ]. Lewis, W.A, 1966: 43
[ 21 ]. European Commission, 2012: http://ec.europa.eu/europeaid/where/acp/overview/cotonou-agreement/index_en.htm
[ 22 ]. Neppe, V. and Close, E. 2011: 375
[ 23 ]. Kuhn, T. 1962: 85
[ 24 ]. Barker, J.A. 1993: 44
[ 25 ]. Take the Leap. 2012: http://www.taketheleap.com/define.html
[ 26 ]. World Bank. 2002: iii
[ 27 ]. ECLAC. 2006: 287
[ 28 ]. ECLAC, 2006: 286
[ 29 ]. Davidson, W. 2003
[ 30 ]. Davidson, W. 2003
[ 31 ]. UNDP. 2011: 75