The contradiction of the economy

Jan 17, 2012 Editorial

Guyana is a contradiction of sorts. On the one hand there are reports to the effect that some sixty per cent of the population live in poverty with half of that number living in abject poverty. These figures have been peddled by international monitoring organizations and by local economic experts.
However, when one looks at the numbers receiving public assistance one sees nothing of the sort. It could be that qualification for public assistance is limited to a few and to constant review. Not everyone who is currently in receipt of public assistance would be eligible six months hence.
Perhaps the people computing the poverty levels look at factors that operate in other countries—factors such as the rate of pay and the number of people who must live on a certain amount of money. For example, in the United States the minimum wage is about US$8 per hour. If that is translated into local currency then such a person would be affluent. That person would be earning in the vicinity of $12,800 per day or $384,000 per month.
Less than five per cent of the working population would earn that kind of pay in Guyana. And those who do can own their own cars and build a comfortable house.
But an American earning the minimum wage is considered to be living in poverty simply because the cost of living is so much higher than in Guyana. Utilities bills are higher and when these are paid not much is left for food.
The fact that the minimum wage in Guyana is as low as it is must surely influence any calculation to determine poverty levels. One of the factors that have helped the low-salaried earner is the escape from rental. Rent has jumped by leaps and bounds to the extent that only the more affluent can afford. The worker has sought escape by taking the opportunity of the government’s house lot programme and the loans offered by the commercial banks to support the housing programme.
In most cases the size of the mortgage is far less that what the rent for a property of equal size would have been. It is no wonder that the number of households has increased dramatically and more people are going this way, even if it is to fashion a substandard shelter commonly called shacks.
When the economic crisis hit the developed world many business places there closed their doors, commercial banks failed and unemployment was the order of the day. Guyana escaped the harsh reality of this economic collapse. The then president Bharrat Jagdeo said that Guyana did not do too many investments in the metropolis, that most of its money was secured in places not affected by the crisis.
Many of the so-called middle income wage earners did not suffer any significant loss but the poor suffered. They were largely subsidized by overseas-based relatives. Some of these relatives were now struggling to make ends meet and could not help their poorer Guyanese relatives. The gap between the rich and the poor widened.
The contradiction is that every major business house made a profit. Demerara Distillers Limited made a billion-dollar profit as did Banks DIH, and Demerara Bank and Citizens Bank. Many other private businesses recorded a profit. The Georgetown Private Sector Commission boasted of significant profits in the wake of the Christmas season.
This begs the question of who could have found the money to ensure the profits for the business places? If the majority of people are so poor then the very affluent have been carrying the various businesses. But in a society this is not usually the case. It is the poor who spend the bulk of the money.
The Central Bank as well as the commercial banks also recorded increased deposits. In the case of the Central Bank the money could have come from foreign inflows from places like India and China toward national development. Such monies, however, are recorded so that there is no confusion with local deposits and there has been a marked increase in local deposits.
Taxes accounted for some seventy per cent of revenue. The poor would have paid via value added as did the rich. Gold with its high price would have accounted for some of the money but the increase in deposits tell story of the contradiction where poverty seems on the increase and where affluence increases correspondingly.

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