When Professor Thomas made his cash transfer proposal public, he knew he would be throwing the cat among the pigeons. After all, Professor Thomas is a walking, talking economics textbook. He is no uninformed professional, trying to sound intelligent but failing at it.
As our general election approaches, I have pondered the issues that the cash transfer proposal brings to the fore and I have come to the firm conclusion that some things are not meant to happen and cash transfer is one of them. It is no mystery that our political leaders have shown no taste for it even though they have not rubbished the idea altogether.
And it is inconsequential whichever party wins the next election, as cash transfer is a no-go, and for good reasons. Firstly, I do not think that our current cadre of political leaders have the appetite to gamble the “oil money” on a venture that Professor Thomas would call income subsidy, but which is so obviously high risk that it puts them in fear of the Chavez syndrome.
Professor Thomas would have more likely than not read countless articles and treatises on the subject of cash transfers.
So he would understand that when we are discussing the utility of cash transfer, we need to consider whether the policy will help to make us richer or poorer in the future and whether the risk associated with this venture is worth taking.
Yes, I agree it would it be nice to have cash transfers to the poor, but it is even nicer if the giveaway turns out to solid investment spending. Only then can meaningful poverty alleviation ever work.
The promoters of the cash transfer policy know that the social and economic benefit formation is possible, but not impressively likely.
In fact, no one knows with any reasonable certainty that the recipients of this largesse will use it to expand their farms, add livestock to the herd, engage in new start-up business, invest in their children’s education and health care. On the other hand, will they spend the oil windfall on rampant consumerism, leaving the country with a large import bill and unprepared for the reckoning when the oil wells run dry?
Professor Thomas would work his guts out trying to advance his case and make reliable predictions but he would not be able to sidestep the occupational limitation that economics is an uncertain science. Whenever our subject is human behaviour, our predictions will always run into certain divergences.
Secondly, no government would want to be in a position where the oil money disappears and they have nothing to show for it. Cash transfer will not satisfy this criterion; mega spending on infrastructure will. Infrastructural spending leaves visible artefacts- paved roads, bridges, ports, airports, schools, which serve as proof that the government did not just come into office and left with its arms swinging.
There is also the expected positive impact of job creation on a big scale that infrastructure building creates. And when I think of it, politicians will also benefit greatly through the usual kickbacks. This is not an endorsement of corrupt practices in government, but a mere acknowledgement of the realpolitik associated with the award of government contracts.
Great infrastructure does not automatically translate into a great economy. But it creates a foundation that will attract the inward investment we need if Guyana is to move to the head of the pack in the Caricom region. For much too long, our economy has been embarrassingly too small to match our aspirations for a good life. Oil may help to get us there.
Can the government do infrastructure, cash transfer, and big pay increases to government employees all at the same time? Frankly, it is not feasible, given the unfavourable royalty agreement the government inked with “Big Oil”. In fact, no blockbuster revenue inflow is going to nourish the public treasury- not now or anytime soon.
The party that wins the government next March will have to focus. My bet is that it will focus on our physical and social infrastructure, and cash transfer will remain just a talking point.
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