Parliamentary disagreement on capital projects hurting growth


THE parliament of Guyana does not seem to agree on anything of substance to this country. The constant disagreement has become a disease. At first, I thought it was an acute disease, but it has graduated to becoming chronic. Parliamentary inaction and disagreement on most things that matter do not bode well for Guyana.

This year you would recall the stagnancy of several capital projects from Budget 2013, where parliament put on hold some public investment projects, among others, as the Cheddi Jagan Airport Modernization Project, Ogle Aerodrome assistance, CJIA cooperation, Civil Aviation equipment and Hinterland/Coastal Airstrips.
Public capital investments as these accrue more gains to the people than private capital investments (Toye, 2000); and government consumption expenditures generally negatively impact growth, while government capital investment expenditures are more likely to positively influence growth (Saleh and Harvie, 2005). Most of the budget 2013 axe fell on capital expenditures, producing the expected outcome of a growth deceleration.
The bottom line is that governmental activity mainly focuses on the vulnerable and the poor, and who would now be at their wit’s end with a brake on growth. Columbia University’s Professors Jagdish Bhagwati and Arvind Panagariya in their just-published book Why Growth Matters, How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries, compellingly argued that economic growth is the only strategy to to raise people out of poverty  with considerable results. Rave endorsements for this view and the book come from, among others, George A. Akerlof, Nobel Laureate in Economics, 2001, Martin Feldstein, George F. Baker Professor of Economics at Harvard University, Economist, Forbes, Wall Street Journal, Ernesto Zedillo, Director of the Yale Center for the Study of Globalization and former President of Mexico.
Richard Adams, Jr. of the World Bank in his study of 50 developing countries found that economic growth as a strategy can reduce poverty. Professor Robert Solowof MIT also provided support for the view that low unemployment and increased real wages (growth) can reduce poverty.

And growth comes from capital investment projects. American President Franklin Roosevelt introduced massive capital projects to fight depression and poverty in the 1930s and 1940s. The Works Progress Administration (WPA) was one such US$5 billion capital project that focused on constructing bridges, roads, public buildings, parks, and airports and employed 8.5 million Americans; this program also put thousands of artists to work that eventually created the National Foundation for the Arts and the National Endowment for the Humanities ( And is well known, Roosevelt established the social security system in 1935 as a safety net for workers and in this way enhanced consumer spending even in workers’ periods of unemployment. The bottom line for Roosevelt was the creation of capital projects that would absorb the growing army of unemployed during the Great Depression, and improve the country’s growth. In the end, there was some level of poverty reduction.
And as mentioned earlier, Saleh and Harvie (2005) noted that capital projects are amenable to growth. These projects may also provide a conduit for export capacity for the economy. But several capital projects are at a standstill in Guyana awaiting the parliamentary opposition stamp of approval. Leader of A Partnership for National Unity (APNU), an opposition party, Mr. Granger criticized the Budget 2013 for not addressing poverty. But it is difficult to reduce poverty without massive capital expenditures, and the Budget 2013 includes several capital investment projects. The parliamentary opposition and its commentators would do well to assimilate the nature of the relationship between growth and poverty, with growth emanating from capital investment expenditures.