Latest update November 13th, 2024 1:00 AM
MISMANAGEMENT, THEN AND NOW
Urgent action is needed to improve the country’s fiscal management in order to reduce inflation and avoid significant devaluation of our currency in relation to the benchmark U.S dollar. The devaluation of our currency is due to a number of issues, including the continuing tepid and relatively anemic growth in the economy, a huge negative trade balance, lower production, massive increase in imports and excessive borrowing. These are some of the problems that must be solved quickly.
It is estimated that for every one billion dollars of goods exported from the country, there is $4.5 billion in imports. Such burgeoning negative balance of trade could lead to a drop in the country’s foreign exchange reserves.
The classical economic theory and understanding between exchange rate and economic performance is that a country’s currency value is determined by its relation to its trading partners, in terms of its production or the lack thereof. In other words, money facilitates the exchange of goods and services in contrast to the previous system of bartering. But money is of no value unless it is not backed by the production of goods and services within a country.
This was evident in the United States in 1929 during the Great Depression when the economy crashed. It had deleterious effects on the domestic, economic, social and political situation in the U.S. and around the world.
In this period, the value of the U.S. currency took a precipitous slide and became useless due to the non-productive, depressed economic sector. It was rumoured that people used the money as wallpaper in their homes. This experience gave birth to several economic theories, the most prominent being the “Demand and Supply Side Economics” which influenced President Franklyn Roosevelt’s “New Deal” programme and revived the American economy.
However, the economic law of supply and demand and its impact on prices remain universal, regardless of the political models of democratic liberalism or totalitarianism (communism). But each country has had its peculiar experiences in its march to achieve economic viability and social harmony, which are the primary objectives of all nations.
Guyana is no exception in this regard, but its economic management has not produced the results that the nation has longed for. Rampant corruption and the inequitable distribution of the country’s wealth during the last administration have made the rich much richer, the poor far poorer, and brought unprecedented levels of uncertainty.
For our youths and for those who have forgotten that period, we owe it to them to revisit it in order to bring greater clarity about what happened. It is not an attempt to lambast the last administration, but to purge its economic and political distortions, omissions, embellishments and dishonesty. The steep stretching of the truth and the misleading of young people about the fiscal mismanagement then, are dangerous, and warrant a strong rebuttal.
To now hear all the nonsense being peddled by the opposition about this government, which is in the process of cleaning up its huge mess, is deceptive. What is hidden is the massive corruption, the gigantic flight of capital and the loss of jobs under the last government that amounted to a significant loss of percentage of GDP.
Instead of hope and change, the people cringed as life became oppressively difficult. Many wondered whether there was any coherent economic plan. The acute polarization of a large segment of society and the widespread social alienation of the poor was horrendous. It was a rough period. Only a few benefited from the classic mismanagement of the economy then, and sadly, this administration seems to be heading in the same direction.
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