Dr. Mandle says oil will bring the “Dutch Disease”

Aug 19, 2016 Features / Columnists, Freddie Kissoon

Professor Jay Mandle, whom I consider an outstanding scholar in development economics, has sent me a research paper titled, “Guyana’s Future as a Petroleum Exporting Country.” This is elegant analysis of the pitfalls awaiting small, poor countries that found oil and are exporting it. This is compulsory reading for every member of the leadership of every political party that feels it could win the 2020 general election. I do not have Professor Mandle’s permit to make his paper public, since it is his research project.
Professor Clive Thomas is a lifelong friend of Dr. Mandle, and no doubt may be in possession of the paper. I would suggest to Professor Thomas that he ask Dr. Mandle if the paper can be distributed. If his answer is yes, I would forward copies to any politician or Minister who wants it. The paper is a poignant critique of the danger oil brought to the Trinidadian economy, meaning the inability to shape an oil economy for the future growth of a country.
Using the theory of the “Dutch Disease,” Professor Mandle argues that what Trinidad did was to virtually build and shape a country solely on the revenues that came from oil exports, and that is not sustainable in the future, on the contrary, it is destructive.
Professor Mandle writes; “Of particular importance from the perspective of gaining insight into Guyana’s possible economic future is the fact that Trinidad and Tobago, like many other petroleum exporting nations, has had only limited success in diversifying. As a result, it is a nation to which the term “resource curse” is often applied. Understanding why its diversification has been limited, and exploring the debates about the energy sector that have occurred in that country, can provide insight into what Guyana will have to do if it is to turn the petroleum curse into a blessing.” (unquote)
One hopes that the Guyana leadership, compromising all the major parties, digests this fine paper.
This column here is not about the economic consequences of oil but its political implications. The discovery of oil and its marketability in five years’ time have opened up endless possibilities for political parties. But it has also opened up scary possibilities for the political culture of Guyana. First, after 2020, who holds the government possesses the strong potential of reelection, because state funds will be available to pursue attractive projects.
What this means is that beginning around late 2017, political parties ought to be on their best behaviour to win the embrace of the population so as to get their votes. I honestly doubt that the three major parties can undergo such an attitudinal metamorphosis. Certainly not the PPP. Jagdeo will undo the PPP long before 2020. Granger will keep his integrity but it will come under strain, because he will have to make excuses for unchanging PNC leaders, and the PNC is not going to allow him to ostracize erring PNC bigwigs.
The AFC will be in the most enigmatic bind a small political party can find itself in. If it goes it alone for 2020, the rural Indians will see it as opportunistic and reject it. The opportunism song about the AFC, the PPP will play every day. If the AFC stays in the Coalition, it will not receive the kind of support it got from the PNC in 2015.
What oil money does for the politics of Guyana is to open up the chances of a third party with good intentions and good people. A party like the WPA could opt out of APNU and join a third force, although the third force may reject the WPA, accusing it on merely trying to survive after it was smothered by the Coalition Government. In terms of political culture, oil money will bring a Macbethian devil into the picture.
Most people argue that there needs to be a political compromise, with strong displays of reconciliation, between the PPP and PNC. The often chosen method is some form of power-sharing. An oil economy will bring that reconciliation, but it will not engender a wholesome political culture. What the PNC and PPP will become after 2020 if they form the government is an untouchable Leviathan. They will turn a blind eye to each other’s decadence, corruptibility and oligarchy. Power-sharing between the PNC and AFC has not shown signs of transformation. Imagine power-sharing between the PPP and PNC with petro-dollars flowing like Kaieteur Falls. Then it will be time to say; “the last person leaving Guyana, please turn off the lights”.