INEQUALITY IS A TINDER BOX
January 10, 2014, By KNews, Filed Under Features/Columnists, Peeping Tom, Source
If you do not agree that Guyana’s economy today is at its best ever, do not read any further. If you cannot accept this fact then today’s column is not for you, because you will be blinkered to the view that there is increasing wealth being created in the society.
The fundamental thesis of this particular column follows from this line. It argues that despite the economy being in its best shape ever, there is an emerging endogenous threat that could undermine the future stability of the country, and not just the economy.
The former Chief Economist of the World Bank, Joseph Stiglitz, has just written a new book. It is called the Price of Inequality. It is worth every dime that it costs. It is a fantastic study/commentary of inequality in the world’s greatest economy and a forewarning that economic growth does not always cause all ships to rise.
It confirms what this column has always been arguing: markets are grossly inefficient in distributing the economic benefits that flow from growth.
This is a lesson that Guyana should take heed, because while it is undeniable that all ships have risen since Guyana set sail behind the neo-liberal winds twenty-five years ago, the inescapable reality is that some large ships have risen faster than others, and to the extent that they are dwarfing the smaller ships and threatening to drown them out.
The evidence of growing inequality in Guyana is overwhelming. Just take a look at land. The price of land has skyrocketed in recent times. This is mainly due to land being used for financial speculation by those who benefit from massive tax avoidance and tax evasion, the proceeds of which are ploughed into the acquiring of real estate. The high cost of land keeps this vital resource out of the reach of the poor.
The poor can no longer compete in the open market and unless the government allocates to them subsidized land, they will never be able to own anything in their lifetime. Vested interests within the government are however opposed to subsidized housing for the poor, because to do so would cause the price of real estate to collapse. This is not what the propertied classes want. They want to maintain their stranglehold on economic wealth, even as they appropriate more and more of the wealth produced in Guyana. The propertied classes have now moved into the land market. Private developers are making an obscene fortune on land transactions, while the poor see their dreams of owning their own home and having a car in every garage slip away.
The ongoing census in Guyana, if done accurately, will confirm that inequality is growing in Guyana at an alarmingly rate. Something needs to be done to reverse this situation, because unless this is done, Guyana is going to explode.
There are workers who travel long distances to get to work each day. They take the bus. During their travels they observe what is taking place along the coast. They notice how a small group of individuals are mopping up private lands. On the East Coast, one individual has gobbled up prime lands alongside the public road to add to the large tracts he already owns. They notice the expensive homes that cost a stinking fortune.
They ask themselves questions as to how these persons got so rich and whether they pay their fair share of taxes. They see wealth increasingly being concentrated in the hands of a small fraction of the population.
Even in the award of public contracts, monopolies have developed. Did you know that the bulk of the major contracts, those in excess of five hundred million dollars, are usually awarded to just a handful of companies? Did you know that most of the major road contracts are done by only a few companies? Did you know that in the health sector one company enjoys eighty per cent of the total purchases of pharmaceuticals?
What more evidence is needed of failure of market forces, especially open competition in public procurement, to distribute wealth more evenly? Should there not be a cap on the value and share of contracts any individual or firm should enjoy in Guyana? Should there not be a limit to how much land any one person can own? Should there not be a limit to how much wealth one person can have in such a small society?
Inequality is a tinder box. If a small 1% of the population continues to appropriate a greater share of the wealth of the country while the poor remain struggling, then an explosive situation will threaten and this is not desirable for the country.
All ships have risen in Guyana, but when you have vessels the size of aircraft carriers alongside canoes, it is inevitable that the canoes will be sunk.
What is needed is a more interventionist government. The government needs to intervene to correct this growing inequality and to promote greater egalitarianism. To do this runs the risk of being accused of being socialist, but that should be the least of the worries of the present administration. After all, are they not the ones who are calling for a Broad Left Front?
