Pen pushers and traders are becoming contractors overnight

Jan 15, 2024 Features / Columnists, Peeping Tom

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Kaieteur News – Very few persons, if any at all, will dispute the view that investment creates value. The role of investment in driving economic growth and increasing wealth is widely accepted in financial and economic circles.

But what makes this view particularly worrying is when politicians emphasize the role of investment in creating wealth to the exclusion of how this wealth is derived, the environmental costs of this wealth-creation and how it is distributed. While investment can contribute to value creation, it can also have negative consequences. Evaluating investments, therefore, should consider long-term sustainability, equitable distribution of benefits, and broader societal impacts, to ensure that to ensure that investment truly creates value for all stakeholders and not a for handful of persons.

One of main criticisms of the tendency of politicians to emphasize the relationship between investment and wealth-creation is that this often lead to a short-term focus. Particularly in the extractive sector, investment often prioritizes short-term gains over long-term value creation.

When Vice President Jagdeo therefore keeps harping about the necessity of Guyana extracting as much oil as it can and as fast as it can, this approach has danger of encouraging investors who aim for short-term financial gain, rather than long-term sustainable benefits. In pursuit of immediate profits, investors may engage in speculative or risky behaviour that can lead to market volatility and economic instability. This short-term focus can undermine sustainable growth and neglect investments in areas that may not yield immediate returns but have long-term societal benefits.

Investment can create value, but the distribution of that value is not always equitable. In many cases, the benefits of investment disproportionately accrue to a small group of investors while the broader population may not experience significant improvements in their well-being. The Vice President has been forthright in admitting that the oil and gas sector is not fully integrated into the local economy, and as such much of the benefits are developed in enclaves, such as with the FPSO, and thus appropriated outside of Guyana.

The IMF has said that since the start of oil production the size of the country’s economy has tripled. Yet the paradox has been that the wealth of the average citizen has had anywhere near a corresponding increase.  This paradox is due to the phenomenon that Jagdeo referred to: where much of the wealth has been offshore.

The wealth that has trickled onshore has been uneven and skewed in favor of the contractor class. This is as much a result of the capital-intensive nature of the oil and gas sector and the limited penetration by locals as it is because of the skewed nature of government’s public sector investment programmes. There are persons in this country who have never held a hammer in their lives. Yet, these same persons went ahead established companies and tendered and won government contracts to build community roads even though the company lacked the experience to do so. Most of these persons belonged to a particular economic class and they would employ an engineer, pay him or her a salary, and get them to do they job while they creamed off the millions in profits. Some of these workers had to labour in the elements for hours each day for a paltry $6,000 per day. Inequality is being exacerbated in Guyana because the bourgeois class is creaming off the benefits from the government’s public investments. But do not dare tell that to the PPPC; it is in bed with the same class. Investment is not always positive. Investment activities can have unintended negative consequences on society and the environment. Certain industries have detrimental effects on public health or contribute to climate change. For this reason, the myopic focus by politicians on wealth-creation often neglects the broader social and environmental impacts.

The concept of value is not solely limited to financial returns. Investments should also be evaluated based on their social, environmental, employment,  and ethical impacts. Narrowly focusing on financial gains may ignore the broader dimensions of value creation. Failed investments challenge the notion of investments always creating values.
Failed investments can result in significant financial losses for investors with the possibility of a contagion effect on the economy and on people. For example, if an investment project in a particular industry fails, it may result in job losses, reduced economic activity, and social dislocation. Additionally, failed investments in environmentally harmful activities can lead to pollution, resource depletion, or other ecological damages.

When the President goes to the West Bank of Demerara and waxes lyrically about value-creation, he is speaking to and for a particular economic class interest: the investor class. That class has enjoyed the fruits of the phenomenal growth in the economy over the past four years. He surely cannot be speaking for the working class, burdened by the high cost of living and inadequate returns on their labour.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions and beliefs of this newspaper and its affiliates.)

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• contractors, Economic, investment, overnight, Peeping Tom

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