Neo-liberal economic persistence and its pitfalls

Jun 13, 2024 Features / Columnists, Peeping Tom

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Kaieteur News – One of the most profound lessons life offers is the notion that repeating the same actions yields the same results. In the context of national economic policy, this axiom is instructive.

Since 1999, Guyana has adhered to a specific economic strategy often termed “Jagdeonomics,” after the policies instituted during the tenure of former President Bharrat Jagdeo. This neo-liberal economic approach has emphasized foreign direct investment, extensive public spending, and a focus on infrastructure to stimulate private sector growth. However, despite these efforts, the nation continues to grapple with persistent issues such as rising inequality, corruption, and rural underdevelopment.

Jagdeonomics represents the adoption of a neo-liberal agenda aimed at integrating Guyana into the global free market economy. This was unnecessary because Guyana’s economy has always been export-oriented.

This approach has had its pitfalls. It has resulted in the emergence of a powerful oligarchic class with close ties to the ruling People’s Progressive Party/Civic (PPPC). The economic policies of PPPC governments have heavily favoured this elite group, leading to a significant concentration of wealth and power.

This skewed distribution is now being made worse since the country’ designation as a  high-income nation. The failure to equitably distribute the country wealth, now means that it is rich and the middle classes that will cream-off most of the country’s wealth, leaving only morsels for the poor who will be left further behind.

The hallmark of this failed economic strategy has been high levels of public investment, particularly in infrastructure projects. These investments were intended to lay the groundwork for private sector development and attract foreign direct investment (FDI). In theory, this influx of capital would create jobs and alleviate poverty. However, the reality has been far less promising. Despite substantial public expenditure, poverty remains a pressing issue, and the expected trickle-down benefits have not materialized for most of the population.

One of the critical failures of Jagdeonomics has been its inability to address rural underdevelopment. The rural economy remains anaemic with high levels of unemployment and poverty. The focus on urban-centric development and large-scale infrastructure projects has neglected the needs of rural communities, perpetuating cycles of poverty and underemployment.

Moreover, the neo-liberal model’s emphasis on market liberalization and privatization has exacerbated inequality. As wealth concentrates within a small elite, the gap between different social classes has widened. This growing disparity is not just a social issue but poses significant economic risks, undermining social cohesion and stability. Perhaps the most glaring fault-line of this model, as it has been applied in Guyana, is the pervasive corruption. The close ties between the ruling party and the new economic elite have fostered an environment where corruption can thrive. Public investment projects, often awarded controversially, have become avenues for rent-seeking and embezzlement. This corruption diverts resources away from vital social and economic programs that could benefit the broader population. Despite being market-oriented, Jagdeonomics has seen invisible hand of the market being absent. Despite a steady flow of foreign exchange earnings from oil revenues, the Guyana dollar has failed to appreciate, raising questions about the authenticity of the floating exchange rate system. This suggests that the underlying economic policies are not facilitating genuine market adjustments but rather propping up an unsustainable economic structure.

The current government continues to adhere to the same neo-liberal policies, increasing public spending with the expectation that it will stimulate economic growth and address poverty and unemployment.  However, without substantial alterations to the economic model, this increased spending is unlikely to yield different results. The rich will continue to amass wealth, the gap between the rich and the poor will expand, and a living wages for workers will remain elusive.

Increased spending within the same flawed framework is akin to treating the symptoms of a disease rather than addressing its root cause. For genuine progress, there needs to be a fundamental shift in economic strategy. This shift should prioritize equitable development, transparency, and accountability in public spending, and greater economic inclusion.

To break free from the cycle of inequality, corruption, and underdevelopment, Guyana must adopt a new economic paradigm. This new model should focus on a pro-poor economic agenda so to narrow inequalities. This would create the foundations for more inclusive growth that benefits all segments of society, not just the elite. It new model should invest heavily in rural economies, creating job opportunities, and ensuring that public resources are used efficiently and transparently. A reformed economic strategy should also emphasize the importance of a living wage for workers, ensuring that the benefits of economic growth are shared more broadly. This would help reduce poverty and improve social stability, laying the foundation for true development. But so long as the present government is doing what has been done before, the results will be the same. All the oil revenues in the world, will not change that reality.

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• Economic, governments, Peeping Tom, pitfalls, PPPC

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