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Building Guyana

Sep 27, 2013 Editorial

The government is rightfully proud of the positive growth rate that our economy, averaging around 5%, has experienced over the past six years. We have not only bucked a regional decline, but the one that has brought low our top trading partners in North America and Europe. But when we disaggregate the numbers that have contributed to that growth, we notice some worrisome features. Gold was a big contributor, but its fall from the heady US$1800 per ounce into lows of two-thirds that value, hit us hard.
It should remind us that the growth was not built on the “solid macro-economic fundamentals” that the administration is fond of citing. It was built on a worldwide search for a “store of value” in economically treacherous times. As speculators feared that the dollar and the euro might be fundamentally weak in light of their issuing countries’ persistent economic downturn, they turned to their old standby, gold. However, one signal from the US Federal Reserve that would reverse its “stimulus” policies, which had led to a pronged period of low interest rates, wiped out much of the “gains” by gold.
Our economy cannot be built on such speculative foundations. But from the other side of the coin, we have also repeated the mistake of other countries that serendipitously came into sudden wealth – like the Netherlands, some years ago. Their money was not invested into activities that would generate new exports for their country and so position the economy onto a higher productive platform. It was rather plunged into consumption and importation that basically exported the finances earned from the newfound wealth. This is exactly what is happening in Guyana today.
There has been no investment of consequence as far as creating new wealth from the proceeds of our “gold boom”. Restaurants, while welcome to the consumer, do not create new resources to create a virtuous circle of wealth creation that will sustain us when the gold runs out or the prices continue to founder. The question has to be asked as to why there have not been more investments by our local businessmen into major productive projects.
One answer that has been floated is that our local business community is “not big enough”. This cannot be. We have had a billion dollars (American dollars) pass through the country annually from gold alone. We are also told by some that an equivalent amount might not have been declared but instead smuggled abroad, with the money repatriated. Our banking system is awash with these (and other) funds and has had to be rescued by the Central Bank through the issuance of Treasury Bonds.
Those banks offer very low interest rates on their deposits – not ever reaching even 2%. Yet the money is not invested into areas, such as manufacturing, that could generate greater returns. This leads to the other excuse that our business community is not “entrepreneurial” enough. It does not identify business opportunities that veer off the beaten track of restaurants and shopping malls. In a word, it is not willing to take “risks”. There has to be a candid national discussion as to why we have such a risk averse collection of businessmen.
One answer to the conundrum of “money, money everywhere, but not a buck to invest” is that the entrepreneurial spirit is not being fostered in our educational institutions. Coming out of a British educational system in which there was more than a faint distaste for earning money in businesses, (“learning” was supposed to be concentrated in declaiming Latin and Shakespeare) we have not yet embarked on a programme to break out of the “risk averse” mentality. America has some of the most energetic entrepreneurs because their system fosters investment and entrepreneurship from the nursery schools. Unlike most Guyanese adults, American elementary school children can explain about what the stock market, for instance, does.
To build Guyana in a globalised world, entails building businesses that can produce higher value-added products that we can export. Not fast food joints that are not even Guyanese.

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