The bathtub theorem states that an economy grows when injections are greater than leakages, and an economy shrinks if leakages exceed injections.

A key reporter that works for the Government News Agency (GINA) and I were having a conversation this past week, the person was defending the Government for the improvements they have done over the last five years and disputing some of my criticisms toward them stating that from an economic standpoint they are both harsh and untrue.

This reporter has worked for GINA for over a year. Incidentally, just prior to defending the improvements made by the government, this person was also complaining of having to live at home, the high cost of transportation and that they needed a new cell phone. My response was automatic, "you can't afford a motorcycle, you can't afford a car, you can't even afford to move out of your parent's house, much less upgrade your cell phone, yet you believe there have been significant improvements in the economy. I asked the reporter if they knew anyone that has left recently for the United States, the answer was yes. I went on to ask does this person now own a car? Immediately the response was yes, within six months. I rested my case.

Many of us have observed the increase in newly constructed palatial-type homes as well as the increase of expensive vehicles in Guyana, and we assume our economy must be improving. In more developed countries, this might be true, but not necessarily so with Guyana.

We have an increasing dependency on remittances from the Guyanese Diaspora in the US, Canada, Europe and perhaps even Trinidad - together providing over 30% of our national revenue according to a US Government study. Let us consider what might happen if the USA or Canada decided to restrict remittances to Guyana. Will our economy be the same? This can hardly support any argument that our economy is improving. Another factor to consider as we try to determine our economic growth is the other economy - our underground economy revolving mainly around the illicit drug trade which accounts for approximately 20% of our GDP according to a US DEA report. No one knows for sure, but we would be naive to believe that our country has not become increasingly reliant on this underground source of revenue. Take these away; we may be shocked at what is left in the bathtub.

To determine whether our economy is improving, we must ask 1) whether there is an increase in new job opportunities as a direct result of new public policies, and 2) whether our investment climate has improved so that we see investors streaming through our airport to set up factories and offices in Guyana. A key measurement is the creation of jobs.

One reason may be attributed to the lack of sound investment policies that are indisputably geared towards achieving more household income and ultimately the creation of wealth for our citizens. Our tax and investment policies must become transparent and consistently applied to all investors, and we must enforce rules that ensure companies doing business in Guyana also operate under the same rules or within the same level playing field. These are just a few of our primary challenges. A major condition we must overcome in our nation is that we prefer to buy foreign products, e.g. Busta, even if there is a competitive local product on the market such as the Topco juices. The more Topco juices sell, the more jobs will be created. If we continue to give our power to someone else through our conspicuous consumption of their products and services, we will continue to have billions of dollars in aggregate income and only thousands of dollars in individual family wealth. Additionally, we will continue to have the power of income rather than the power of wealth, which only allows us to pay our bills and contribute to the power of wealth for others. I am assuming that our policy makers share my belief that the private sector drives our economy. That may not be the case. We hear our politicians turn business pundits talking about what we need to create wealth, while pounding on the private sector as the evil empire, describing that any tax advantages will go directly to the consumer not through the private sector. This statement still has me boggled as to how the consumer would have a reduction on goods if not through the private sector. The only possible explanation I can come up with is that those politicians may be operating from an old Soviet Union mindset.

Describing people in certain income brackets as "wealthy" is false for a more fundamental reason. No matter how much income passes through your hands in a given year, your wealth depends on how much you have accumulated over the years. If any of our citizens receive a hundred thousand dollars in a year, and spend a hundred and fifty thousand, he or she is not getting rich. The socialist likes to use the term income distribution, but in plain English that does not exist, some people just make more money than others.

Last week I wrote about the treatment of GT&T and the political motives and intervention that has brought in a new major player. Yes, we must attract and encourage new investment into Guyana. But, we also have an obligation to ensure that we help to protect the investment of those entities that are already operating here while at the same time providing opportunities for competition. Those are the considerations which should govern our decisions to grant new licences. Other motivations including personal vendettas serve as signals that deter future investments and consequently affect every Guyanese. We need investments that create jobs so our citizens can achieve a level of income that they can live on and hopefully accumulate wealth.

Once again, the call made by the private sector for the reduction of business and personal income taxes in order to stimulate the economy is a good call. When a household has more disposable income, this can lead to the creation of wealth, the purchase of a car or a house or even the resources to rent an apartment. Higher take-home pay means more spending power and it is the surest way to boost our economy. This is precisely why President Bush fought so hard to implement tax cuts across the board, and the result is a growing US economy despite massive job loss through outsourcing.

The power of wealth manifests itself in ownership and control of income-producing assets. The power of income manifests itself, via the transfer of that income to others, in ownership and control of assets by others. If we allow that system to continue, by pouring the vast majority of our income into the vast pools of wealth owned by others, we will always be on the bottom of the economic heap.