Latest update March 29th, 2024 12:59 AM
Mar 01, 2010 Features / Columnists, Peeping Tom
Markets are an integral part of both socialist and capitalist systems. Where the departure begins is in the level of government involvement in these markets, and this is what primarily differentiates socialist economic systems from capitalist economies.
The latter is often referred to as market economies because of the diminished role of the State in the supply of goods and services. However, the State in these so called market economies are often burdened with the provision of services which are not profitable enough for the private sector to supply.
This is a framework under which I propose today to examine a fundamental contradiction in the manner in which the ruling PPP administration deals with the market in the local economy.
Despite the recent flashback of the Minister of Finance, during the Budget Debate, into Memory Lane, the indisputable fact remains that all the PPP administrations since 1992 have more or less followed the free market economic strategy which was launched by the Hoyte administration.
The PNC had the misfortune of being saddled with bearing the labour pains for this strategy but the PPP has continued to nurture the offspring of the mating between the local economy and neo- liberal policies imposed by the international financial institutions.
The PPP continued the liberalisation of the State started by the Hoyte administration. They have continued the process of removing the State from certain economic activity and have handed these over to the private sector. But they have maintained a presence in certain strategic areas of the economy.
In the case of sugar, the government has not only continued State-ownership but has gone further and is providing indirect support for this sector since, “it is too big to fail.” For years also, bauxite was being buoyed by states subsidies. But what about the other sectors of the economy? Are some of these not also too important to fail?
Take for example rice. Rice milling and exports have been privatized. So when farmers complained about the poor prices they received for last crop’s production, they were told that the government could not intervene in price –setting since this was a function of the market. Yet, at taxpayers’ expense, the government offered last year to pay out to rice farmers close to five hundred million dollars in the form of support. They intervened. But would it not have been more prudent to have intervened and set a base pricing mechanism to be paid by millers based on international prices. Under such a system both the interests of the rice farmers and the interests of the millers would have been protected for it would have resulted in a fair price setting mechanism and not expose the farmers to predatory price-setting.
During this very crisis last year within the rice industry, the government urged the sector to explore new markets. Then it dawned upon the government that the opening of new markets itself is a role for governments and not just for the private players in the market.
Eventually, the government negotiated a deal with the Venezuelans which would see the sale or Guyanese rice to that country. But the rice is being supplied by the millers and not by the government. The government no longer has rice milling and storage capacities and therefore farmers have to sell their rice to the millers.
There is now a need to renegotiate aspects of that agreement and a Guyanese delegation is to visit Venezuela to iron out some hiccups in the system. We are further told that the rice farming community has had consultations with the millers before a price is agreed. This it is believed is intended to ensure that the farmers get a fair price.
Well if the government can facilitate the opening of a market which will be supplied by millers and exporters, why not intervene to ensure that in other markets, including the local market, rice farmers get a fair price.
In the fiber optic sector, the government is now in direct competition with the private sector. The government is bringing in a cable from Brazil as part of some e-governance project and the cost of this cable is expected to run into billions. However, GT&T is also having its own cable and thus the government cable will compete with a provider in the private sector.
The justification being used for this significant expenditure by the government is that it is intended to remove any monopoly in this new sector. If however the government wanted to guard against monopolistic tendencies why then did it not simply license another provider and move towards anti- monopoly and fair price setting mechanism. The government acquiring the cable amounts to State intervention in the market, whatever the intention of the government.
But why would the government wish to bring in this cable? Are there sufficient opportunities available to justify having two cables in Guyana? The government says that it is to move government administration into cyberspace. But what happens to the spare capacity that will be generated from the new cable from Brazil. Is the government going to offer the service of this cable to the private sector and are there sufficient takers in the economy to allow for this?
There is not that many investors lining up to open satellite phone services- which in any event is expensive- or call centers. We did learn some time ago that there was a proposal for the establishment of a call center at Sanata.
So can we expect that the government will be willing to offer cheap bandwidth to the proposed investment in a call center at Sanata? Or will the government commit to the principle of not crowding out the private sector and thus would be unwilling to offer bandwidth to private individuals and firms, even if it is Sanata?
THIS IDIOT TELLING GUYANA WE HAVE NO SAY IN THE 50% PROFIT SHARING AGREEMENT WE HAVE WITH EXXON.
Mar 29, 2024
By Rawle Toney Kaieteur Sports – After a series of outstanding performances in 2023, Tianna Springer, dubbed the ‘wonder girl’, is eagerly gearing up to compete in this year’s...Kaieteur News – Good Friday in Guyana is not what it used to be. The day has lost much of its solemnity. The one day... more
By Sir Ronald Sanders Kaieteur News – In the face of escalating global environmental challenges, water scarcity and... more
Freedom of speech is our core value at Kaieteur News. If the letter/e-mail you sent was not published, and you believe that its contents were not libellous, let us know, please contact us by phone or email.
Feel free to send us your comments and/or criticisms.
Contact: 624-6456; 225-8452; 225-8458; 225-8463; 225-8465; 225-8473 or 225-8491.
Or by Email: [email protected] / [email protected]