Dear editor,
THE PPP swept into power in 2020 on the unpopularity of the coalition’s high taxation and extravagant spending on current expenditures that resulted in a depressed state of the economy, with almost everyone complaining that they could not make ends meet. Aside from minerals and oil, the economy was in a four-year decline (2016 to 2020) with over 10,000 jobs lost and hundreds of businesses shuttered.

The PPP, under the leadership of Bharrat Jagdeo and Irfaan Ali, projected a sense of optimism in the campaign that they can be counted on to fix the economic problems of the country. The country had faith in Jagdeo as a man who could create wealth ever since he entered government in 1992. And once the PPP returned to office in 2020, the government started rolling out various grants and increments in social welfare and the minimum salary.

The government, in any situation, is required to step up and focus on expansionary fiscal policies in order to grow the economy, while creating jobs.

Jagdeo, as an astute politician and able economist, had shown that when times are bleak, the government (or he) could take simple, doable steps that make a difference in job creation, get those losing faith in the government to support it, and grow the economy. His predecessors seem to lack those basic skills as the coalition turned people against its administration, eventually resulting in its fall from grace.

Anyone who studied economics, as I did, knows that when unemployment rises, the government steps in to pave the way for job creation — gives incentives to start or expand businesses and or hiring workers, and even to pursue state work projects as the US repeatedly did when faced with high unemployment or recession. Short-term, temporary fiscal expansion, even if incurred from deficits, to create jobs in times of labour market weakness is very good for the economy. Fiscal expansion creates jobs and restores confidence in a government.

Jagdeo recognises this economic principle and has announced plans for the distribution of targeted cash grants at various engagements around the country with the public. He also offered part-time jobs to help the swell of the unemployed to get spending money.

It is empirically grounded from studies in economics that fiscal expansion, although coming from borrowing as is the case in Guyana, is good when an economy is facing a recession or when jobs are scarce for the unemployed. Guyana is faced with high unemployment as a result of the policies of the coalition and a government (Keynesian) activist approach is needed to address the problem.

Those who study economics understand the importance of government action during economic crises. The role of government is to take measures to stabilise the economy with incentives and work programmes. The billions of dollars spent is an important part of the economy, as it helped to create more jobs. Money earned from the proposed job-creation initiatives announced by Jagdeo, even if part-time, as well as the announced cash grants, have economic multiplier effects of at least six times. People spend their earnings and grants and the money is repeatedly circulated or recycled, resulting in greater demand for goods, creation of more jobs, and increased tax collection. While government spends money, a lot is collected back from taxes that would neutralize the initial expenditures.

Thus, jobs and grants benefit the economy all around. The many thousands of government- induced part-time jobs and the thousands of grants to start businesses, at which billions of dollars would be spent by the government, will help to further stabilise and grow the economy. People spend, demand is created (which brings in revenues from sales taxes or VAT), and ultimately jobs are created which brings in additional taxes for additional government spending. Putting people to work expands the consumer base for businesses and the economy as a whole.

Separately, the government is also taking steps to create private-sector jobs, especially in infrastructure-related companies and construction. A lot of investments are committed to housing and infrastructure that the public needs — in roads and bridges, and energy efficient cleaner economy (gas to shore, Wales Industrial complex, etc.). There is also a lot of investments in education and in training workers for the oil-and-gas sector. All the state-initiated steps will benefit the economy in the long run.

Yours sincerely,
Dr Vishnu Bisram