(The Daily Express, Mary King, 26.Feb.2019) — Sometime ago I wrote about the petroleum find in Guyana and given the state of our planet, climate change, global warming, sea level rise etc., I suggested that the petroleum should be left in the ground. However with the immediate need for money, for the rents that will accrue from the foreign exploitation of the resource, the irresponsible attitude of the Trump regime to carbon-based damage to the environment and the subsequent US dominance of the global petroleum trade because of shale oil and gas, it may be a pipe dream to expect Guyana to forgo the immediate rewards of having its petroleum on the world market.
Guyana has T&T as an example as to how such an economy can become one in which, as a small open economy, the rents are used to fund the necessary imports, provide the social services, make-work etc., and infrastructure that all serve to improve the lifestyle of the population. Such an economy, as T&T has learnt, is not sustainable and with little savings from the rents over the years it has become difficult now to fund the reconstruction, diversification of the economy. Further, the hope was that with a better educated workforce and various incentives the local private sector would have by their individual activities created an export sector in the local economy. This was not to be. Instead some 70 per cent of our graduate labour force emigrates.
Guyana may be hoping that its energy sector will provide the jobs for both its home- based population and its diaspora. Again, from T&T’s example the petroleum sector employs a small number of people and even this number is reducing as the energy industry takes advantage of the new technologies of robotics, automation and artificial intelligence, thus raising the skill level of the needed employees.
Surely Guyana cannot ignore its immediate needs in social services and infrastructure. But its prime interest, to which Dubai subscribes, should be how to turn its cash into wealth. In other words how does it use its rents to build a sustainable economy? Indeed T&T built a boom-bust economy; using its rents to live it up when things are good and in the bust, tighten its belt, use up its reserves, incur debt and await the next boom– all the while chatting about diversification, economic development, hoping also that foreign investment would converge on our industrial estates and build our economy.
What we ignored as Paul Romer, Nobel Prize winner, tells us, is that economic development is about the activities of the endogenous population, particularly in new ideas.
In T&T we tried import substitution with negative listing, building commodity plants at Pt. Lisas to attract the private sector into downstream manufacturing, establishing industrial parks hoping for foreign investment, awarding prizes for local innovation so as to encourage the local private sector into export activity — all have failed to date; all depended on un-coordinated serendipity. Yet the evidence is before us that sustainable economic development depends on the integrated activities of the Triple Helix, on the coordinated activity of government, the R&D institutions and the private sector in building both the foresighting and innovation systems.
Since in Guyana the government will be in possession of the rents, the finance that could underpin economic diversification, it should assume the lead role in transforming the non-energy economy. Still, the fear remains that without the requisite institutions, checks and balances, much of the rents can disappear into the black hole of corruption.
If the views expressed herein are indeed accepted by the government of Guyana then its first task is to set up its foresighting system, staffed by agents drawn from government, NGOs, R&D institutions, private sector and expert individuals. The continuing results from this system is the envisaged future of its economy as Guyana sees it and back-casting of how to get there.
This foresighting may include also the selection of expert teams who are gathered to have their say on what Guyana’s future should look like. As experts they will take into account the perceived non-linearities (the future is not simply a linear continuation of the past) and surprises the future may bring.
Legitimation will be required in which the expert team decides on the future options for the economy and then put these to the wider public, to inform, persuade and consider modifications.
It is important to appreciate that the envisaged future is not fixed but something out there to be explored further. For example, if innovation in a particular technology is an option, then the approach should be to experiment with various projects in the technology for some time and based on this commit resources to those that appear best.
The fundamental thought in this discourse is that the rents that are expected from the exploitation of the Guyana’s petroleum resources are not the end of Guyana’s woes. Using them to fund the various current activities of the economy does not promote a sustainable economy. The challenge is to use some of these rents to generate a wealth producing system which will sustain Guyana int the future.
The Stone Age did not come to an end because we ran out of stone; so may be the fate of the petroleum age.
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