Latest update May 22nd, 2026 12:38 AM
Reviewing economic dogmas
Over the last two decades, our economic policies were all honed in accordance with the “conditionalities” of the International Financial Institutions (IFIs) – the World Bank/IMF.
Dubbed the “Washington Consensus”, its originator claimed that its ten policy recommendations could be grouped under three broad headings: “macroeconomic discipline, a market economy, and openness to the world (at least in respect of trade and FDI).”
The “market economy” meant in practice, wholesale privatisation, deregulation and a vestigial role for government in the economy. Criticised as “market fundamentalism” by many, it was pointed out that the “invisible hand” that guided the market, according to Adam Smith, did not necessarily mean “no hand”. These critics appear to have been vindicated with the economic turmoil that has gripped the most developed economies of the world, all of which insisted on the lightest of “hands” in the running of their economies – especially the one that threatens to bring down the whole house of cards – the financial sector.
Going against their core tenet of “market fundamentalism”, the governments of those countries have intervened massively (and continue to do so every day) into their financial system.
It is very clear by now that the rot has spread into the “real” economy of manufacturing etc, such as the car industry of the US and it is very likely that state intervention in these sectors may also be necessary.
The point we wish to highlight is that with the object lesson playing out in front of our eyes (as tragedy) on the dangers of dogmatically sticking with “market fundamentalism”, we in Guyana should be taking a second look at all the policy prescriptions of the Washington Consensus.
At least we can point to the example of the conceptualisors and promulgators of the doctrine abandoning one of its central doctrines, if pressed by the IFIs.
Take for instance, their insistence on “macroeconomic discipline”. This is an area in which Guyana has consistently earned kudos from the IFIs but which also did not seem to do much for promoting growth in our economy.
While inflation and the budget deficits were not exactly stellar, their variance from the IFI targets were never, as a result of the government, deliberately taking a risk in a particular area to stimulate growth but merely cases of simply missing the marks.
Several schools of economics had suggested that higher rates of inflation that what we have been shooting for is not necessarily detrimental to a directed higher growth rate.
A more concrete example is the tremendous amount of cash that the government has had to “sterilise” in the Bank of Guyana –amounting at this time to some $60B or US$300.
They do this by offering commercial banks, which are refusing to offer low interest loans to businesses, a way out through the purchase of Treasury Bills. Given this choice, it is not surprising that banks opt for the safety of the T-Bills and not investing in the real economy.
The government ends up paying the banks billions in interest all towards honing to the IFI dogma that low interests from the banks will loosen inflation in our economy.
So we remain starved for investment, while billions are “sterilised”.
And this brings us to the last dogma of “openness” and free trade. There has been no economy in the history of the world that has moved from the agrarian stage of development (where we have been stuck) to a developed one without a significant amount of protection for “infant industries” through tariffs etc. This is true for Britain, Germany, the US in the past or Japan, Korea, China in the present.
But while the powers that be ignored the reality that freeing up our markets did not in any way lead to increased growth for our economy (to the point of incorporating it prominently in the just signed EPA with the EU) we do not have to go along in perpetuity.
The government can intermediate our “excess liquidity” into identified targets for development such as the value added wood sector and protect such sectors until they become world class, through export induced competition.
Let us take charge of our own destiny.
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