The merits of a mixed economy

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President Mohamed Irfaan Ali’s recent announcement that his administration will disburse, effective immediately, GY$100,000 one-off prosperity cash grants to every adult Guyanese, was greeted with much praise by almost everyone and for good reasons. The President also expanded the policy of a free education at the University of Guyana to include all government technical and vocational training institutions, a decision that will benefit another 3,000 individuals.

APNU+AFC supporters applauded the grant and claimed credit for it. The opposition’s former Finance Minister, Winston Jordan, made it appear that he was a personal advisor to President Ali until an August 2018 Kaieteur News story by Kiana Wilburg showed up with a headline that screamed: “Jordan opposed to direct cash transfers of oil money to every household.” To buy back some relevance with their diminishing audience, APNU+AFC claimed the prosperity grant was hardly enough, a mere drop from the millions of barrels of Guyana’s oil. There is no science to back up the amount a one-off government cash grant should be. Too low a number would render the gesture financially meaningless, while a higher number might signal that Guyana has become a “nanny state,” something APNU+AFC’s leadership would apparently relish.

It is important to recognise that the cash grant and free post-secondary education are mere appetizers on the menu of dishes this administration has been serving up for Guyanese for the last four years. To take a society from widespread poverty, illiteracy and poor healthcare access to one of mass prosperity, the PPP/C recognises the urgent need for it to co-exist with private capital. It doesn’t take a political science degree to figure out this is exactly what Vice President Bharrat Jagdeo has been driving at in his weekly press conferences.

Yale political economist Charles Lindblom described this as a “mixed economy” and likened it to a human hand where the four fingers of private markets work with the thumb of the government to effectively address negative externalities – pollution, climate change, natural disasters or a prolonged period of inflation, which has been devastating economies just about everywhere in the world.

The prosperity bonus is not diverting state funds away from education, health, infrastructure, science and research. Those sectors have been served well and still there is a surplus of money in the till to help ease the financial stress in the lives of ordinary Guyanese. My point is that the PPP/C is engineering a social innovation like we have never seen before and they are doing it by finding the right balance between state authority and private enterprises.

History has many examples of free market actors failing to honour the division between private capital and political authority. Powerful economic elites will always try to shape public policy to their advantage. It is in their DNA. However, only the thumb of the government can reduce the undesired influence of economic actors. Empirical historical evidence suggests that to have a truly prosperous society, you need a strong, effective and responsive government and this in no way translates into bigger or more government.

The absence of a thriving civil society in a country like Guyana is another compelling argument for government’s intervention to protect and defend the interests of its citizens. That’s what a well-functioning government does. There are a lot of examples of governments messing things up, but there are also enormous examples of governments that get it right. That being said, there are no magic switches and there certainly is no fixed blueprint. Sound public policy means shifting the needle when it comes to economic output, but that’s not the end of the story. The 23 highest-output cities in the United States account for roughly half the value of its economy.

Cities like San Francisco, New York, Boston, Seattle and Austin account for the bulk of research, development, patenting, hubs of innovation and advanced manufacturing in America. It’s an incredible feat, but it is causing alarm bells to go off over an increasing level of inequality between rural communities and the handful of urban centers that is driving the economy. What about Guyana? Should the government allow Georgetown, Linden, New Amsterdam and centers in between to attract the bulk of private and public capital and thrive, while the rest of the country’s population lags behind?

The merits of a mixed economy dictates otherwise. The PPP/C’s direct interventions in education, research and innovation, agricultural technology, health, jobs, homes, roads, delivering access to potable water and improving sanitation, etc… is aimed at preventing inequality and bridging the social gap that divides hinterland communities from those on the coast. The goal, again, for those who haven’t been paying attention, is and has always been, ‘prosperity for all.’ All means everyone, even the folks in APNU+AFC and those who stubbornly cling to their false promises.

DISCLAIMER: The views and opinions expressed in this column are solely those of the author and do not necessarily reflect the official policy or position of the Guyana National Newspapers Limited.

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