Guest Editorial: Direct Cash Transfers

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Title after title, we announce the astronomical increase in Guyanese GDP; its oil production of nearly one million barrels a day by 2025, more per capita than many of those incredibly wealthy Gulf states; a country that is expected to receive revenues in excess of its current annual budget.

And yet and yet … the average Guyanese, the “per capita”, must still feel it, believe that it will happen and especially that it will benefit them one day. Right now, the cost of living and floodwater are the only things increasing in Guyana, although Covid-19 remains a drag on what has been a largely Georgetown-centric mini-boom. For a family from deep Rupununi, talking about oil is still an abstraction; housewife Anna Regina is more worried about having enough for her weekly shopping list.

This disconnect between the gushing headlines and the lived experience of the average Guyanese is only likely to widen as oil production and revenues rise. The government will have to close this gap or risk revenue hoarding costs for its private sector allies and other special interests. Already strong economic inequalities can quickly become an obstacle to stable governance.

There are signs that the current government understands the plight in the country linked to Covid-19 and the flooding. The Covid-19 relief program with $ 25,000 per household and cash grants to parents have undoubtedly helped. Less useful was Monday’s announcement of $ 4.8 billion in concessions to importers thanks to the drop in the assessed value of freight charges – a move that, despite government guarantees, will not be passed on to consumers with lower prices and is another example of discredited economic benefits.

Recently, the president also announced that he would allocate what he described as “direct cash transfers” to farmers affected by the floods. Direct cash transfers were an interesting use of terminology for a concept that many developing countries have applied to distribute wealth from a bonanza of resources such as oil, or in the case of Botswana’s diamonds, universally. , fair, transparent and regular.

You could say that the UNPA + AFC coalition missed an important opportunity by not having the imagination or the courage to embrace this concept under what was the “Buxton Proposal” as defined by Dr Clive. Thomas who had asked in 2019 that it be a theme of the upcoming elections. Indeed, the fact of not seriously considering the proposal of its partner Working People’s Alliance was the beginning of the schism which saw them leave the coalition. Dr Thomas had proposed – regardless of income in order to avoid controversy – that each of Guyana’s 210,000 households receive $ 1 million per year at a total annual cost of $ 1.05 billion. He had calculated that this was manageable in the long term and that by the time it was implemented, probably in four to five years, it would only represent 10% of the government’s total oil revenue.

Reception of the proposal was understandably split based on class, enthusiastically among those who would benefit most, while exposing the hypocrisy of many who, Thomas noted, were receiving tax breaks and other handouts. for their businesses.

The main objection to such a system seems to be the view that people would stop working and live a life of dissolution. But human behavior is difficult to predict, and it is more useful to focus on the many benefits of direct cash transfers, primarily the economic security and dignity they can bring to poor households. Guyanese are generally resourceful people who have been making do for decades while seeking financial progress. So it may be that as part of a cash transfer program, the single mother decides that she can now afford to go back to school, or that a young couple can now cope with the payments of a new one. house, or that a farmer feels confident enough to take out a loan to expand his production. Far from “encouraging idleness”, cash transfers can stimulate economic development at the crucial micro / community level. Second, the uniform geographic distribution of cash transfers means that economic activity would be triggered nationwide and avoid concentration along the coast. Third, if one accepts the strong correlation between poverty and crime, then direct cash transfers would have a significant impact. Some countries have made transfers conditional on children’s health checks and school attendance. In very poor countries, the results have been very encouraging in improving child nutrition. Perhaps more importantly, cash transfers would bring resilience to households and economies in a world where pandemics and climate crises could become regular occurrences.

For more details on the design and benefits of such programs, a helpful book is “Oil to Cash: Fighting the Resource Curse through Cash Transfers” by Todd Moss, Caroline Lambert and Stephanie Majerowicz.

The authors also suggest an additional intriguing element to the cash transfer equation. Recipients must pay taxes on what they receive. It may seem like an unnecessary administrative burden, but it responds to a very real danger Guyana might face. As the book explains: “Simply put, governments that do not depend on citizens for their funding do not need to heed the demands of citizens. Taxation may be the best way to ensure that governments act on behalf of the governed… ”.

We have to be realistic here: the political environment in Guyana could not be more hostile to such an initiative. To be well done and to be seen as capable of withstanding political vagaries, it needs the contribution and agreement of the opposition, civil society and unions – elements that the government refuses to include in any meaningful discussion on the long-term development of the country. But when all agree on the plan, it can become so popular that the funds that feed it are protected from special interests, while it cultivates a sense of common ownership in a country’s natural wealth.

We also wonder if this government is politically mature and far-sighted enough to adopt a system that is not overtly political. They prefer to distribute money from suitcases with a click of a camera, whereas a direct money transfer system ideally turns the process into an administrative one, which can involve the simple bureaucratic press of a button. However, that does not mean that whatever government institutes such a system will not benefit from it in the long run.

And despite its many disappointments, politics remains the art of the possible. If this government – still worried about its hold on power – wants real political stability, cash transfers can form the basis of a more peaceful and harmonious society.


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