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Introduction
Last Friday, November 7, the Labour Department of the US Government released the unemployment rate and changes in payroll for the month of October, just seven days later. It was a song and dance by and for the Bush administration, drowning out the ever worsening news coming out of Iraq, with the November toll of deaths in the first seven days already the highest in the six months since the infamous ‘Mission Accomplished’ pronouncement aboard the USS Abraham Lincoln.
This piece is not about either of those two events, significant as they are for both economic as well as geopolitical considerations. Rather it is intended to emphasise the importance which any serious country would place on unemployment. The taking over of the airwaves by the Bush administration is a response to critics who have been emphasising the jobless growth over the past few months. Not that one sparrow makes a summer, or that the fall in the unemployment rate from 6.1% to 6.0% is where the administration would wish it to be one year before the 2004 presidential elections.
As CNN Money pointed out, “job growth is crucial for the health of the economy,” and that while the economy’s growth for the third quarter was the strongest in nearly twenty years, the economy still lost 41,000 jobs. Equally importantly, the US economy needs 150,000-160,000 jobs just for new entrants to the market, let alone to make any serious impact on the unemployment figures. So that while the October figures were obviously good news for President Bush, unless the number of new jobs increases quite dramatically over the next few months, the very expensive tax cuts by the administration would hardly have been justified on economic grounds.
Where are the figures?
In Guyana on the other hand, unemployment is hardly ever discussed in official, or indeed any circles for that matter. I recall sharing a panel discussion on youth employment with Minister Gail Teixeira some weeks ago, and was quite surprised at her reaction to those of us who took the view that the unavailability of data on unemployment limited the scope of the discussions. With the usual mindset that even the most sincere and innocuous comment is a criticism of the performance of the PPP/C, the Minister’s retort was that the problem was not the availability of data but that the comments would only come from those who did not know where to look! Even allowing for the fact that one should not have to go searching several disconnected documents to find what is absolutely critical information for planning purposes, but accepting that the Minister could be right, I referred to several recent documents including the Budget Speech 2003, the undated Guyana Poverty Reduction Strategy Paper and more recently the Millennium Development Goals. In none of these official documents does one come across any data on unemployment, and hopefully the Minister would be kind enough to point the nation to the information.
Guinea pig
To understand the lack of attention to unemployment we should go back to the genesis of current policies - the Economic Recovery Programme (ERP) of 1989 - inherited and continued by the current administration with an almost evangelical fervour. The key elements of that programme were liberalisation of the exchange and trade system; removal and restrictions of capital flows; removal of price controls and subsidies; and reform of tax policy and administration. The first three could easily be summed up in one word ‘globalisation,’ which more and more countries are recognising as having favoured the richer nations, while even in the poorer countries in which its advocates claim some success, the empirical evidence is that it has favoured the rich while widening the gulf between the haves and have-nots.
When Guyana accepted the IMF/World Bank/rich countries’ imposition, it really had no choice, and being one of the first of the poor countries to do so, it was implicitly agreeing to be a guinea pig for an experiment with very loosely defined objectives or rules. Indeed, since it was understood that the multi-national companies and financial houses would be in charge, it was naive to expect any grand plan since there was no single authority in charge of the process. The most that could be hoped for was that we would have some kind of global regulators such as the WTO, Rio/Kyoto and the UN to restrain excesses.
Recent developments in Latin America in particular have demonstrated the other side of such experimental economic policies, with the result that left-leaning political parties are scoring electoral successes which would have been unthinkable a few years ago. Chile, the home of Pinochet, Brazil, Venezuela and Bolivia now have governments that have challenged the philosophy of globalisation. As usual Guyana is at least ten years behind the rest, still willing to eat at the not-so-healthy trough of the USA.
Lost jobs
That lowering the rate of employment could not be a direct goal of the economic strategy is clear from the privatisation process accompanying the ERP. Has anyone stopped to think of the number of jobs lost as a result of the sale of the nation’s resources in the name of economic progress? Has an evaluation been done of the social and economic impact of privatisation? Did the policy make any effort at retraining the several thousands who were terminated, to equip them for other jobs? In fact do we know how many new jobs have been created since the ERP and what is the net gain? Are these not issues which we need to openly and honestly discuss as we seek to rebuild our economy?
National Development Strategy
Then we had the National Development Strategy (NDS) which from time to time is resurrected purely as a matter of convenience. The stated objectives were to achieve sustainable growth rates; reduce poverty; achieve geographical unity; ensure equitable geographical distribution of economic activity; and diversify the economy. Perhaps one can measure of the chances of success of the NDS by looking at its prerequisites - prudent economic policy and management; good governance with inclusivity, participation, accountability and transparency; development of strategic investments in the infrastructure sector to complement rapid private sector development. Indications of these being central to our current national policies are few indeed. Even at the official level, the NDS is seen as containing recommendations on which there is disagreement and as having limitations which the Poverty Reduction Strategy Paper (PRSP), another expensively-produced report, claims to address.
PRSP
The PRSP in various incarnations has itself been around for some time and claims to set the priorities and to develop an action plan for implementation. Few would feel heartened by the title of this very important blueprint, which suggests that we are locked into some kind of perpetual poverty mentality. Is it being fair to say that here again, some form of generic framework was conceived by the IMF and World Bank as a precondition for further debt-relief? And the organizational structure to oversee the PRSP must rank among the best bureaucrats’ dreams. As the document proclaims, the strategy for public participation led to the creation and/or strengthening of four units to implement or monitor the participation process, namely the Donor Coordinating Unit, the PRS Steering Committee, the PRS Secretariat and Resources Teams. As though the Office of the President does not have enough on its plate, the whole exercise is located within that office which is not particularly well-known for its flexibility, effectiveness or competence.
One of the main goals of the PRS focuses on ‘sustained economic expansion within the context of deepening participatory democracy,’ a term over which there seems to be endless conceptual difficulty, particularly between the two major political parties. While some may argue that the resolution of this difficulty does not pose an insurmountable hurdle to the achievement of the PRS’s goals, its boast that “for the last ten years Guyana’s macroeconomic management has been good” hardly seems consistent with the poor economic performance over the past five years. The PRS accepts that there is a strong correlation between GDP growth and poverty reduction, and that there needs to be a “restoration of growth rates to pre-1997 levels” which were in excess of 7 per cent. It has projected average real GDP growth rate at about 4% per annum between 2002 and 2006 and ‘about 6.1% a year thereafter.
Lack of co-ordination
Clearly while there were all kinds of consultations among stakeholders in formulating or rather finalising the PRS, there does not seem to be the same or any degree of co-ordination at the inter-ministerial level. Or was it that those responsible for the PRS’s finalisation were not interested in what everyone else knew about the economy? These include the Minister of Finance who had set a target growth rate of 2% for 2002 and the Bank of Guyana (BoG) which in its 2002 half-yearly report had already signalled that 4% was just not on. For 2003, the Minister of Finance has projected a growth rate of 1.2.% for 2003 while the BoG has reported that the economy remained relatively flat for the first half of 2003 compared with a 1.4% growth during the same period last year. The economy will have to grow by about 6% in 2004 - 2006 if the PRS’s goal is to be realized - a rate that is not only challenging but unlikely as well.
Impact of failure
The question which the architects of the PRS must now answer is what would be the precise impact which the failure to achieve growth targets would have on the levels of unemployment and poverty? This is apart from the issue of addressing the condition of the employed poor who make up a large part of the population. Can anyone earning the minimum wage in the public sector and in the retail stores and sweat shops be considered anything but poor given the level of rents and utilities?
Cynics may want to draw a parallel between the PRS and the well-crafted and professionally presented business plans submitted to potential lenders for financing. No sooner is the money received than the plan is shelved never to be looked at again either by the borrower or the lender/donor, who is then too heavily involved and embarrassed to pull out. Given all the time and other resources that have been invested in the NDS and the PRSP, it would have been reasonable to assume clear linkages with the annual targets contained in the national budgets. The divergence is so wide that one is forced to conclude that whatever the intentions of the NDS in particular, both this and the PRS are not taken seriously enough by those responsible for the country’s management.
Introduction
Business Page today concludes the article begun last week about the unavailability of unemployment figures and the little attention given in official documents to setting any clear targets to reduce the level, even as part of the much publicised efforts to reduce poverty. The Guyana Revenue Authority and the National Insurance Scheme are two agencies which on a monthly basis receive information which could offer some reasonably accurate indicator of the state of the employed workforce. However as this column has pointed out, an Annual Report of the GRA is required to be tabled in the National Assembly by the Minister of Finance.
However, so far not a single report has been tabled and the Minister appears disdainful of calls for him to comply with the law without a word of concern being expressed by the opposition political parties, the trade union movement or the private sector. The National Insurance Scheme also receives (or is supposed to receive) monthly remittances for employed and self-employed persons. In addition, because of the statistics which the NIS is required to maintain for actuarial purposes and in order to facilitate the remittance process, it also records and issues an identification number for new registrants.
NIS Reports
While Business Page recently had to comment critically on the misleading dates used by the NIS in forwarding its annual reports to the Minister of Finance, those reports show on an annual basis not only new registrants but also cumulative numbers. Since these reports are from entities over which he has ministerial responsibility and entities over which he has ministerial responsibility contain information that is objective and reliable and therefore more useful, one would expect that they would form the basis for any serious planning done by the Minister. This, however, has not been the case, and this column is not aware of a single instance where such data have ever been quoted in any public pronouncements by this or indeed previous governments.
Private investment?
Under the heading 'Job Creation' in Budget Speech 2003, the Minister referred to five areas of job creation: businesses facilitated by Go-Invest and the Institute of Private Enterprise Develop-ment, small business development and training, jobs emanating from the public investment and maintenance programmes and the Temporary Employment and Mainten-ance Programme. Yet only two sets of numbers were quoted by the Minister both from sources that are speculative and/or meaningless.
The Minister announced that private investment in the economy facilitated by Go-Invest was expected to grow to nearly G$18B, creating "over 2800 jobs" at about $6.5M per job! These figures are of course submitted to Go-Invest by potential investors in project documents designed to win government backing and quite possibly incentives. Does the Ministry or the agency undertake any follow-up work to verify the projections and statements? Can there be any serious credence placed on numbers that raise questions about whether the potential job numbers are understated or the investment overstated or indeed both? Where is the evidence of the US$90M of new investments in 2003 facilitated by Go-Invest, or is this playing with numbers?
Micro-enterprise
The other number quoted is in relation to projects funded by IPED and which is always stated as "jobs created/sustained." According to the Minister, the number of jobs created and/or sustained was 7,113 in 2002 as a result of financing of loans amounting to $670M - at an average of $94,193 per job. Now quite what does this mean? How many new jobs are created - ten, one hundred or one thousand? IPED's efforts at financing the micro-enterprise sector are indeed commendable, and its record quite impressive, but it should surely refrain from the misrepresentation of data that it must know are critical to an understanding of the wider economic and national interest. While IPED's high-interest lending rate policy has been widely criticised even in official circles, its loose use of numbers regarding employment is both convenient and helpful to the government which obviously and uncritically embraces them.
Declining numbers
The more objective NIS data paint a picture that is vastly different. The Annual Reports of the NIS show that the number of new registrants of employed persons in 2001(6,915) has been falling steadily since 1996 and is considerably down on the numbers registering in 1992 (10,712) and 1993 (15,517). The statistics on the number of self-employed persons registering annually is even worse with only 332 in 2001 compared with 1030 in 1992. In cumulative terms the position appears less serious with the number of active employed persons actually increasing over 1992 (+6.6%) but decreasing since 1996 (-5.4%). Compared with 1992, the cumulative number of self-employed persons has increased quite substantially (220%) but since 1996, the number of active self- employed persons with the NIS has declined by 31.4 per cent.
While statutory bodies will always have some difficulties in registering members of the public, the decline can only partly be attributed to NIS inertia since the same process produced significant increases from 1993 to 1996.
Private sector
There is also some corroboration between these numbers and the findings of the annual Business Outlook Survey Report done by Ram & McRae, in which respondents had reported increases in their staffing up to 1997 and decreases thereafter. Now even if the numbers are better in 2001 than they were in 1992, what about all the persons who have entered the job market in the past ten years including those who write the CXC examinations annually?
The success of any poverty strategy depends on the creation of jobs for the majority of the unemployed and the capacity and willingness of the private sector to generate those jobs. Here the story is also not a good one.
Training
Despite the ever present platitude which appears in directors' reports that the company's employees are its most valuable asset, employers have consistently said that in the event of a business downturn, staff cuts are among their top two preferred options. Expenditure on training currently makes up only a tiny part of the annual expenditure of any of our companies. Pre-privatisation, the state-owned companies expended considerable sums for training their staff, many at the University of Guyana which the private sector now loves to criticise.
The army, the police force and the public sector, including teaching and nursing, still probably train a much larger number of persons annually than the combined private sector which has developed an impressive capacity for poaching the better-trained persons from the public sector. In the areas of employment generation and training, the private sector has been a major disappointment, with its emphasis on short-term maximisation of shareholders' wealth, tax minimisation and capital export by a large number of the players in the sector.
What can be done?
The undeveloped political culture has of course retarded economic progress, and helps to explain the sluggish performance of the economy over the past five years. But this is only part of the problem, since the economy had been losing steam after the expected rebound from the economic disaster of the seventies and eighties. In truth, only the most extreme pessimist would have believed that there was any direction the economy could go but up, particularly given all the adjustments which the poor and the employed class (referred to as working class pre-ERP) were asked to bear.
Experimental models/false assumptions
The country has become locked in a model of experimental economic development dictated by the IMF and the World Bank, based on several simplistic and sometimes misleading assumptions, including the ability of market forces to produce balanced economic development. Even the advocates of such economic recovery programmes, however, saw so-called safety nets such as SIMAP and now the PRSP as inherent to economic development, though they like to represent such nets as temporary. These are, however, only temporary in name, going through several reincarnations.
Another of the false assumptions is that the private sector is inherently superior to the state, particularly when it comes to ownership and management of economic activities, and that the state's role must be relegated to facilitator and provider of physical and other infrastructure.
Appalling record
Taken to its logical (?) conclusion, this ideology will see the private sector running education, health, police, the army and ultimately the government, raising interesting possibilities about the fate of the professional politician! While bad governance and political interference and control certainly created a poor image of state-ownership, referred to by the ANC of South Africa as "an inferiority complex about public ownership," many of the privatised entities have been no more successful than when under state control. This holds true when profits are measured in accounting terms, and their record is even more appalling if considered in economic terms, when other factors such as employment creation, capital retention and human development are taken into account.
Conclusion
The market model of development has also placed capital out of the reach of the masses of people ignoring the immense potential of the co-operative movement which is often more suited for this country's level of development. Just think of the potential implications of a fundamental restructuring of the country's social security system including unemployment benefit underwritten by the government. Could it then play with the unemployment numbers?
The assumption is also made that privatisation is the only way to mobilise investment and management, an assumption to which Guysuco has proved a major exception which could have been replicated many times over with the right level of political will and commitment. But with the proceeds of privatisation already spent, and reduced control over major economic sectors lost, how much better off are the workers and, not unusually in many cases, former workers?
The ERP had a number of features which were both commendable and necessary, but which also contained serious flaws. When combined with the country's backward political culture and unrestrained private sector behaviour, these makes the high level of unemployment unsurprising. Does anyone care? If so, can we start with a serious and honest effort at determination of the available working population across region, gender, age, qualifications, etc, to form the basis not only of a real economic and social development programme, but also for the formulation of sector policies on industrial, regional and other areas of development. Understanding where we are is an important step in getting where we want to be. Accurate information would be a good place to start.