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The natural resource curse is here, but not in its Dutch Disease form

Jul 02, 2023 Letters

Dear Editor,

The Natural Resource Curse (or the Paradox of Plenty) is already doing damage in Guyana, but not through its most cited cause, the Dutch Disease.

The Dutch Disease is only one of several causes of the resource curse – the curse itself being the observation that countries endowed with abundant natural resources (such as oil) can struggle to effectively use their blessings and often end up with high levels of poverty, misery, and economic underdevelopment.

The Dutch Disease, strictly speaking (given its origins), would occur if our currency appreciates (that is, moves towards G$100 to US$1), thus making our exports more expensive and our export industries unable to compete. According to the World Bank, signs of this shift in exchange rate were present in Guyana some time ago during the height of the gold industry. But I have seen no similar assessment from the Bank today.

But the Natural Resource Curse has other causes. The cause now engulfing Guyana is the surge in government autocratic tendencies, the decline of government transparency and accountability, the sidelining or defanging of public institutions, financial recklessness and waste, the cronyism, and the corruption. There is no short label to stamp on this range of ills, hence the tendency, I suspect, of tucking a few of them under the heading of the Dutch Disease.

It is quite true that these ills have been at all-time highs under the PPP regime even before oil. But oil wealth in the hands of the PPP is worsening and entrenching the situation. With billions of dollars of guaranteed oil income, the government has its own piggy bank. It therefore no longer has to depend on our taxes and, critically, on the conditionalities-laden loans and agreements with the IMF and other such donors and overseers to spend any money.  Free flowing oil revenues have thus removed key checks and constraints on government conduct. No wonder badness begins to take hold.

So, where is the evidence of which I speak? The Gas-to-Energy project, with no feasibility study (incredibly) and its billion-dollar hidden deals that bypass the parliament and the public. The political hijack of the EPA and the waiving of environmental impact assessments and the non-enforcement of environmental permits. The Su-gate style approach to business investments (meet me in my living room). The upsurge in questionable costs of roads and other infrastructure projects with casual indifference. The manipulation of the national budget into a slush fund.  The total disinterest in economic development planning. And more.

A government increasingly unhinged from the normal restraints and accountability pressures is the main driver of the natural resource curse we face in Guyana today. The resource curse itself is the result of all this – the high and growing income poverty, food poverty, unemployment, cost of living, economic insecurity, infant and maternal mortality, rates of preventable deaths, functional illiteracy, inequality, loss of hope, etc.— despite vast oil wealth.

Lastly, it is a different kind of curse that the nation’s economic fate currently rests in the hands of the PPP’s “brightest man in the room”, Bharat Jagdeo – who has reached an intellectual and moral plateau that is too low to transform Guyana and the lives of its people.

Respectfully,

Sherwood Lowe

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