Dear Editor,
Dirigisme is an economic doctrine that originated in France after World War II. It was embraced to foster rapid growth, and it is currently being used in different parts of the world primarily by ex-communist regimes and those communist countries transitioning to a stronger economy. It is when the government plays a very active role in the development of the nation’s economy.
The main difference between this model and capitalism is that market dynamics are not allowed to adjust based on supply and demand. In our young democracy, Guyana is also partaking in Dirigisme, and this can be seen in several sectors of the economy where competitive forces, both internal and external, have been weakened by government intervention. In this economic model taxes, duties and subsidies are the levers most used. This can result in less competitive sectors, an increase in the size of government and wasteful spending if transparency and accountability is lacking. During this period in France an old boys club also emerged that tightly controlled the economic power.
Somewhat similar to what Guyana experienced under President Burnham.
In Guyana’s context we are witnessing a similar path being taken today towards Dirigisme by President Ali and his mentor. Consider the tax being placed on our Natural Resource Fund. Its depletion has been accelerated, and its usage has been less than transparent. As Margaret Thatcher once said, “The state has no source of money other than the money people earn themselves. If the state wants to spend more, it can only do so by borrowing your savings or by taxing you more”. This in effect is what is happening in Guyana. The fund established for our natural resources, especially from the oil and gas sector, does not belong to the government. These are funds that belong to the people of Guyana. It is the people who must decide how it will be spent or saved by electing leaders who will carry out their wishes.
The money spent from this fund is money which belongs to the people of Guyana and every dollar spent from it comes out of the pockets of our citizens. We must ask ourselves, is our money being put to good use by the government? Would it be better if the funds being spent by the state were distributed to us for us to spend as we see fit?
The government would in return benefit from taxes on purchases and the economic multiplier that occurs with consumer spending. The tax rate will determine what is available for the state to spend and allocate to each ministry. Thus, returning the power of the national purse back to the people of Guyana. Currently, expenditure has been occurring at an accelerated rate while taxes have been reduced, depleting the savings of our people via the reduction of the natural resource fund.
Due to corruption and nepotism, we the people are provided with less value for our money. The easily washed away road to Timehri / CJIA is evidence of this loss in value. The mocking of our citizens with the holiday cash grant that never arrived on time is further evidence of the ill will of the current government and their total disregard for the owners of the funds being spent. We were told that we must behave to receive the money which belongs to us. The government has overstepped its authority and has insulted the people who it works for.
We are also seeing the expansion of government into nontraditional sectors, where government officials are using our savings to unfairly compete with fellow citizens of our country in every sector.
Yet another pitfall that occurs with the Dirigisme economic model that is bad for independent companies. If it is the preference of we the people to have the funds in our own bank accounts to do with as we see fit and provide the government with the resources they need via a reasonable tax rate then we must show that preference with our vote. This will help curtail the unfair business practices that are hindering local businesses from becoming more competitive.
The current situation is before us, and the outcome is being witnessed. Pilferage and poor-quality work are happening before our eyes, and the people of our nation are losing the benefit of the dollars gained from the oil & gas sector and other productive sectors that fund government spending.
By pursuing a regular distribution schedule of funds to the people and a reasonable tax rate for expenses, the wealth of the nation will reach the pockets of our citizens equally and not just enrich the few that are in a position of power and their families, friends and favourites. A concern that must also be safeguarded against with the launch of the new development bank that doesn’t require collateral for loans nor charge interest. The risk of default is quite substantial without consequences for the borrower. An easy target for the unscrupulous.
Today, in Guyana we are seeing the pitfalls of the Dirigisme economic model as major projects exceed budget estimates and weakening sectors are subsidized. As our country grows in wealth and access to capital increases, the government can, if not restricted in spending, overspend in areas that appeal to large voting blocks to secure their support at the polls. This can be seen with renewed subsidies in the rice sector and was another one of the pitfalls of this economic model when in place in France.
The preference should be towards seeking balance by equally distributing the funds amongst the population and allocating a portion of tax revenue to support sectors that can become more competitive and gain a long-term competitive advantage in the market. Otherwise, ingenuity and innovation will not be incentivized, and competitiveness will decline over the long term. The sugar industry is an example of this problematic. While European subsidies in the form of favourable prices were in place, improvements in cost and productivity lagged competitors and once those subsidies were removed our sugar industry could no longer compete in the open market. The consequences are still being felt to this day.
It is CRG’s recommendation to keep the tax breaks currently in place to sustain the gains in disposable income while also using the amounts allowed for NRF withdrawals for distribution to each household, and have the government fund their expenses with the taxes collected. This will foster better fiscal management, help reduce waste & corruption, and encourage improved project management and selection. The kickbacks will decrease and the people of Guyana will be in a stronger position to hold the government accountable because future government spending will depend on the spending decisions made by each voter. In today’s Guyana most voters trust themselves to do more for themselves with their own money vs letting the government spend it for them.