IN a recent editorial, it was highlighted that the recently approved emergency budget for 2020 contained fiscal measures to put the productive sectors of the economy back to work, which in turn will create employment and help to reduce the level of unemployment in the economy, and, in turn, set the stage for a sea of transformational development projects over the next five years.
With the potentially huge growth in GDP in the first decade of oil production, thus transforming the economy into a trillion-dollar or potentially a two-trillion dollars economy, on account of large sums of oil revenues – does not necessarily mean that the quality of life on a broader spectrum – will be improved and/or experienced by a wide-cross section of the Guyanese people. This does not guarantee real economic growth against the background of the human development paradigm, with respect to poverty reduction in particular.
Case in point, with the largest retrenchment under the previous regime of some 10,000 sugar workers – having the far-reaching implication of further adversely affecting about 40,000 dependants – could be devastating. This outcome has in effect taken away approximately $10 billion in income distribution to these workers and the broader economy annually.
This means that the economic and social well-being of these people are going to decline rather rapidly and oil revenue would not necessarily create direct employment for them. There were a number of government programmes nonetheless, aimed at re-engaging these people in productive income-generating activities such as training with new skills, namely carpentry and plumbing, etc. But these measures, though designed with good intent, will not compensate for the economic loss incurred, neither would it give rise to stability and progressive growth in the income distribution of these thousands of retrenched people.
Fortunately, the current regime is so far demonstrating its strong commitment to fulfil its manifesto promises, where the government has indeed embarked on a programme to resuscitate some of the closed sugar estates.
There may be various reasons for “economic growth lopsided” nations, that is, those which have high rates of GDP growth relative to improvement in human development indicators, including low social expenditure, government corruption, or inequitable distribution of incomes. The resultant effect of such cases suggests that good economic growth not accompanied by increases and/or improvements in human development may prove to be ultimately unstable.
Economic growth is the most powerful instrument for reducing poverty and improving the quality of life in developing countries. Both cross-country research and country case studies provide overwhelming evidence that rapid and sustained growth is critical to making faster progress towards the Millennium Development Goals – and not just the first goal of halving the global proportion of people living on less than $1 a day. Growth can generate virtuous circles of prosperity and opportunity. Strong growth and employment opportunities improve incentives for parents to invest in their children’s education by sending them to school. This may lead to the emergence of a strong and growing group of entrepreneurs, which should generate pressure for improved governance. Strong economic growth therefore advances human development, which, in turn, promotes economic growth.
But under different conditions, similar rates of growth can have very different effects on poverty, the employment prospects of the poor and broader indicators of human development. The extent to which growth reduces poverty depends on the degree to which the poor participate in the growth process and share in its proceeds. Thus, both the pace and pattern of growth matter for reducing poverty.
A successful strategy of poverty reduction must have at its core, measures to promote rapid and sustained economic growth. The challenge for policy is to combine growth-promoting policies with policies that allow the poor to participate fully in the opportunities unleashed and so contribute to that growth. This includes policies to make labour markets work better, remove gender inequalities and increase financial inclusion.
Asian countries are increasingly tackling this agenda of ‘inclusive growth.’ India’s most recent development plan has two main objectives: raising economic growth and making growth more inclusive, policy mirrored elsewhere in South Asia and Africa. Future growth will need to be based on an increasingly globalised world that offers new opportunities, but also new challenges. New technologies offer not only ‘catch-up’ potential, but also ‘leapfrogging’ possibilities. New science offers better prospects across both productive and service sectors.
Future growth will also need to be environmentally sustainable. Improved management of water and other natural resources is required, together with movement towards low-carbon technologies by both developed and developing countries. With the proper institutions, growth and environmental sustainability may be seen as complements, not substitutes.