For a new state?

Feb 08, 2009 Features / Columnists, Ravi Dev

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Contrary to the expectations of some, the financial crisis that emanated from the developed north is beginning to lap on our shores.

From the sudden deafening sounds of silence in the bauxite sector about trumpeted expansion plans to those in the hydroelectric initiative; from the assurances by CLICO that its subsidiaries in Guyana are completely unaffected in its meltdown (sure!) to the frantic efforts of GuySuCo to find a new foreign banker, we have been affected. And then some.

Almost all of the discussions and analyses of the crisis, however, has focused on its economic roots and ramifications. At first glance this is rather odd since it suggests that the purported economism of Marxism may have won out after all in the end of history precipitated by the victory of liberalism.

But it was Marx himself who noted that economics and politics are joined at the hip, so to speak, and the present dominance of the economic is purely a consequence of the world-view of the neo-liberal order that has been in ascendance since the eighties.

Their mantra (expounded in Guyana and practiced as the “Washington Consensus”) that the state must simply be a “night-watchman”, practicing “politics as management”, inevitably produced the corollary of the primacy of the economic. The latter was equated, of course, with the market.

That this depolitisation of the state led to many social groups losing both “corn and husk” – economic as well as political enfranchisement – could be papered over as a non-issue – and the social consequences dealt with by building more jails.

Many have forgotten that we have merely been swinging from one failed model of development pushed by the World Bank, et al, after 1945 to another. The “big push” led by “big government”, as exemplified by the PNC regime of 1968-1988 – to the present one which has failed just as ignominiously were all foisted by them on us.

The solution to their own failure was to insist that not only should the state withdraw from the management of the economy (privatisation) but should regulate the market that was going to solve all allocation decisions with the “lightest of touch”. The focus was to be on stabilising the “macro-economic fundamentals”.

Further emphasis was to be placed on liberalising the financial sector as well as the trade regime and these “innovations” were supposed to automatically guarantee investment and growth in the manufacturing and other sectors of the real economy. We know to our cost (and hopefully, to the chagrin of the political directorate) that this has not happened here. Or anywhere else when the dogma was applied in wholesale fashion.

The success of China and India in the last few decades is touted by many as a proof of the success of the neo-liberal prescriptions. But the fact of the matter is that in neither of these countries, nor in the other successful “Eastern Tigers” before them, did the state roll over and play dead as far as intervening in the economy, as dictated by the neo-liberal script.

Nor did they follow the move away from prudential rules in the financial sector (e.g. Basel 2 rules to encourage greater leverage for banks or IAS accounting rules that encouraged inflationary statements of assets, as has occurred even in our obscure economy) nor in executing clearly articulated industrial policies.

Just as the fall of the communist bloc by 1990 led to a re-evaluation of the role of politics in the economy we believe that the fall of the neo-liberal market-fundamentalism model demands a new re-evaluation of our political arrangements, as well as our economic ones, in Guyana.

We have argued for two decades for the need for a “Catalytic Entrepreneurial Development State” that plays a more dirigeste role so we will not repeat arguments for, say, a more export directed strategy here. We simply want to highlight a very important political implication.

The reason for the failure of the massive state intervention during 70s and 80s in Guyana was not necessarily state ownership of productive enterprises – note China’s performative refutation of that argument.

Rather it lay in as much a failure to secure acceptance by the overwhelming mass of the population to accept that the inevitable belt tightening (“deferred gratification”) while working at full throttle necessary to generate the public savings that could be ploughed back into new endeavours.

Many of the Eastern Tigers such as South Korea, Singapore, and Taiwan relied on an authoritarian state to quell dissent in the early stages of their mobilisation out of poverty and this was maintained until their economy was quite advanced. Singapore is still stuck in that mode.

There is a school of thought – led by Samuel Huntington and his student Fareed Zakaria – which believes that too much democracy in those early stages – when certain liberal political institutions are not established and entrenched – would lead to instability and chaos, with a loss of both economic and political viability.

We will defer comment on the nuances of that position for a later time but point out that in our ethnically severely divided polity the experiences of the PNC regime should caution us against an easy acceptance of the thesis. But we may have to redefine democracy itself.

What we have suggested in the past, and do so once again, is that rather than sacrificing our democratic gains, we ought to instead broaden it to garner the greatest possible legitimacy. The latter, after all, can only come when a state or government has the declared support of as many of its citizens as it can garner.

We are talking about the need for shared governance that includes the government and the opposition in the near and medium term, until we climb to a more secure economic footing. This, if the experience of others is any guide, should also facilitate political stability.

We have argued before, as have some others, for a limited term of shared governance from the standpoint of justice, which as Rawls pointed out, has to infuse any social institution.

But such an argument can only stand if by the operation of the present majoritorian system, an ascriptive group with its unique perspective is systematically excluded from the decision making process. With the absolute refusal of the present crop of political parties to concede that they may represent ascriptive ethnic interests (horror of horrors!) the justice argument falls.

The necessary widening of legitimization of a dirigeste state, however, is a horse of a different colour – even if the effects will be the same. While the argument may appear too instrumental, it may even lead us to the higher moral ground in the end.

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