RICE PRICES MUST BE REGULATED

Sep 20, 2009 Features / Columnists, Peeping Tom

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When we were kids the girls used to play a game called, Dolly House. It was game that stereotyped the traditional roles of both boys and girls.
The girls played the role of mothers and housewives doing the household chores and the cooking. The boys played the roles of fathers and providers. Money was pure imitation and took the form of pieces of paper for dollar notes and drinks corks for coins.
Well instead of this use of play money going out of fashion, it seems it has been elevated into a development strategy. When I look at how the Jagdeo administration is dealing with public finances I wonder whether this is not some advanced form of dolly house being played on a national scale. When you look at the manner in which public funds are being deployed, you sometimes have to ask yourself whether the government believes it is dealing with monopoly money or simply pieces of paper and drinks corks such as the ones used during the game of dolly house.
On Friday it was, for example, announced that some $400M has to be found to support the rice industry. One would have expected that this sum was arrived at after a careful study of the problems in the industry and the measures that needed to be taken to deal with the problem. Four hundred million dollars is not chicken feed, but from the manner in which this support package for the rice industry has been announced you could be fooled into such a view.
The government is now saying that consultations will have to be held with the stakeholders to decide how the money is going to be spent. Now if this is not dolly house economics, then what is?
This is a clear case of placing the cart before the horse. Instead of assessing where assistance should be targeted and trying to determine the resources that are needed and those which can be afforded, a ball park figure is plucked from God knows where and allocated to help soothe the passions of rice farmers who are upset over the poor prices being offered by millers for paddy.
Just a few days ago, we were being told that the Ministry of Local Government did not have money to help bail out City Hall to pay its garbage contractors. The sum owed to the contractors is known. However, without determining just how exactly close to half of a billion dollars will be used, the government announces a rescue package for the rice industry.
This make-believe allocation will however be to the advantage of not only rice farmers. Because of the fractured nature of Guyanese politics, the government will have no choice but to find the money to bail out City Hall. By the time this column is read there would have been an agreement reached, for there is no way the government can justify granting four hundred million dollars to rice farmers, the majority of whom are East Indian, and not bail out the municipality in which the overwhelming majority of residents are Africans.
The rice industry has problems. The problems have to do with the price of paddy. Just a few days ago, the Minister of Agriculture was seen on a national newscast encouraging millers to do more and to seek markets in other countries such as Cuba and Haiti.
Then only Friday the minister was at a Caricom forum in which he was stressing the importance of the removal of trade barriers to facilitate greater market access. The minister therefore must understand that government has a proactive role to play in securing markets for rice and cannot ask rice millers to do this on their own.
The history of Guyana would emphasize the important role that governments have to play in securing and protecting markets for national products. Entering both the Haiti and Cuban markets require the intervention of government; it cannot be done by private millers alone, who once they have an established market, have little incentive in seeking additional markets once there is no great financial incentive involved.
Right now the farmers are worried about the prices being offered for paddy. They are so worried there have been calls for government to set the price. The Minister of Agriculture, however, says that we are operating a free market system, thus implying that the market must set the price.
Well, the Minister must recall that the government once threatened to set the price of public transportation. So why now that the free market globally is in crisis and there is an insistence for greater regulation of market economies, would the government of Guyana, mindful of oligopolistic tendencies in the rice milling and exporting sectors, not insist on the regulation of prices.
True, prices have to be negotiated. But what happens when all the millers and exporters decide to, as we would say in Guyana, “hold a head”, thus removing competition in price setting, something that is at the backbone of price determination in market economies? What happens then? The farmers then are at the mercy of a small band of millers and exporters.
The only solution to this every-crop problem is for the regulation of prices in the same way as prices are regulated in the electricity and telephone sectors. The government must meet with the millers and work out a formula that would see farmers obtaining a fair price.
The government should insist on minimum prices to be paid for each grade of paddy. This price should be calculated based on a formula. The formula should be derived based on the international price for rice, and one that would allow for millers and exporters to gain a profit.
In the heart of capitalist countries, there are calls for markets to be regulated. Why then can’t Guyana regulate prices for rice? The question is now no longer whether we can intervene in markets; it is now just a question of how we intervene. Setting a formula based on the international price for rice would not distort the free market.

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