This column went missing for the past two weeks, for reasons well beyond my control. Four back-to-back meetings held overseas in such a short period left little opportunity for me to complete the column 'on-the-road.' Optimistically, I had thought I would be able to do it, which is why I did not advise readers beforehand.
Over the past two weeks, however, I found opportunity to have face-to-face and e-mail exchanges with a number of persons who were intrigued by the data which showed that improved productivity had not, contrary to expectations, promoted growth in Guyana. Indeed as we observed the reverse held true. Readers would recall that the data showed for the entire period for which the IMF had made calculations (1953-2000) the average economic growth rate was 2.9 per cent per year. Of this growth, increases in the capital stock contributed 4.2 per cent, while the other productive factor (labour) contributed 0.7 per cent. With a combined total contribution therefore of 4.9 per cent to growth from the two productive factors, capital and labour, and an actual growth rate of 2.9 per cent, the obvious inference was that productivity, technology and all the other factors, which in most economies contribute between 50-70 per cent of growth, actually slowed the economy on average, by 2 per cent per year over the period 1953-2000.
Measurement error
The exchanges I had with readers, here helped identify a number of reasons or explanations for this perverse occurrence. One has been questioning the accuracy of the IMF's measurements. There are serious and well-known data limitations in regard to the Guyana economy. Indeed readers have already written to challenge the national accounts data, the price data, the basis for estimating the capital stock and arriving at measures of labour supply and their 'contribution' to economic growth.
I acknowledge all these problems. My purpose here is not to defend, or for that matter present the results of the IMF studies uncritically. Indeed in my last article I had referred to the fact that the labour force measure used in the studies is the annual series of total population, which as every Guyanese knows is one of the most unreliable statistics in Guyana. This remains true despite the fact that it is one of the most commonly available statistical series worldwide.
I should point out, however, that readers who find the time to visit the studies would note that sensitivity tests were conducted on the results. This is a method designed by economists to see how robust the results would remain if there were large and significant changes in the estimated data. The results stood up to these tests.
The missing economy
Putting the question of measurement aside, the next important issue is whether or not the national accounts data are true and accurate measures of economic activity in Guyana. Do they miss important areas of economic activity? One obvious discrepancy that arises is the size of the parallel or underground economy. Earlier in this series I had visited this issue and pointed out that recent studies suggested on average the parallel or underground economy was as large as about two-fifths the official economy. There is therefore a big discrepancy. The existence of this discrepancy, however, does not lead to the certain conclusion that the activity excluded would systematically reverse the estimate of the contribution of productivity/technology to economic growth in Guyana.
Performance
Other explanations focus on the performance of the productive factors, the state and the overall management of the economy. Over the past two decades and more a substantial portion of economic activity in the country was based on the unsustainable exploitation of mineral resources. Mineral production requires high capital outlays to get mines and their related communities functioning as productive units.
In some instances in Guyana, the situation was that mining operations were from the outset not expected to be sustainable. A good example is Omai, where the mine had a limited and finite life over which it was expected to contribute positively to growth then cease production. In other instances such as Linmine, mining operations have imploded and the bauxite industry entered into a vicious circle of collapse, disrepair, obsolesence, and management decay. As a result output plummeted, so that the productivity of the assets the industry possessed as well as the labour force it employed inevitably declined.
A broadly similar situation occurred in the agricultural sector. Drainage and irrigation systems collapsed, access roads to farms fell into disrepair, storage and drying facilities were neglected, and the output and yields of major agricultural products declined for most of the period 1953-2000. In particular the two main crops, sugar and rice, went into crisis and it was not until after the ERP reforms had taken hold that there was a halt to the degeneration of the agricultural sector. In such a situation it is not surprising to find that there would have been negative impacts on productivity/technology.
All these developments reflected, as well as contributed, to a decline in the physical and social infrastructure of the country. It was not only drainage and irrigation and access roads as mentioned above that were affected, but virtually every sector of the infrastructure went into a collapse mode.
This included particularly, electricity, telecommunications, road and river transport in the physical infrastructure as well as education, health, sanitation, and housing in the social infrastructure. Again it would seem obvious that in such
circumstances it would be unreasonable to expect positive contributions from technology and productivity to economic growth.
Non-economic factors
The problems were, however, not only economic. Bad politics, antagonistic industrial relations, and weak management of the public and private sectors have made enormous negative contributions to economic performance in Guyana, both separately and together. A massive amount of human resources (dwindling every day because of exceptionally high levels of migration) has been consumed in the struggle for political office and control of the machinery of government. This has been, typically, pursued as an end itself, so that it would be fair to say that the pursuit of economic development of the society as a whole and the promotion of economic growth in that context has never been a number one priority. I am aware that lip-service has been paid to this goal throughout the entire period, but there is considerable evidence in support of the point of view expressed here.