‘Cash Transfers’ From Oil Revenues May Restore Their Political Viability!
By Dr. TARA SINGH
Well known WPA (Working People’s Alliance) executive member and political commentator David Hinds is working feverishly to make Clive Thomas’ idea of “cash transfers” to Guyanese households, payable from net oil revenues, a reality. Hinds has cited reports from Latin America and the Caribbean where cash transfers amounting to as much as 20-25% of household income have been shown to alleviate poverty. He chided critics for not examining such research before taking a position on cash transfers.
Hinds and ssupporters of the cash transfers argue that, based on the experience of oil producing countries like Nigeria, Venezuela, Trinidad and Tobago, it is not likely that the oil wealth will reach the vast majority of Guyanese and that the best way to ensure that this happens, is to give the money directly to households. At a theoretical level, this sounds nice but at the practical level it is filled with problems. Before we proceed further, we are asking Hinds and Thomas that, since they appear to be serious about poverty reduction, why didn’t they support the $(US) 50 per family per year school voucher program?
Hinds-Thomas’ cash transfers idea has apparently been given the cold shoulder by the Minister of Finance, Winston Jordan, as well as, by President David Granger (an attitude to be explained later), while Opposition Leader Dr Bharrat Jagdeo seems to offer partial support in the sense that cash grants should be accompanied by job creation programs, poverty reduction, expansion of social security and public safety. But when a prominent envoy offers his opinion, everyone pays close attention. At the launch (Demerara Waves: 8/13/2018) of the American Chamber of Commerce, Guyana Chapter, US Ambassador Hon Perry Holloway did not seem impressed with the idea of cash transfers. He stated: “I think the more important conversation should be about not giving every citizen a check but giving every citizen a quality education, giving every citizen quality healthcare, a secure environment in which to live and work, and I think that if you do all of those things with the revenue that petroleum generates everyone will make plenty of money and be prosperous.”
Hinds-Thomas know that cash transfers is a ‘juicy’ subject that can also bring them huge political capital. In response to reservations expressed by the US Ambassador, Jagdeo and others, Hinds now admits that cash transfers cannot stand alone and must be supplemented with programs to increase education, social services, reduce poverty, etc. Perhaps if Hinds had said in the beginning that both direct cash payments and social amelioration impact programs are essential, critics might have been somewhat accommodating to his viewpoint. A study on the impact of remittances on poverty reduction and employment could throw important light on this issue.
Dr Tarron Khemraj’s call for a study first on the impact of remittances on job opportunities and the capacity to work, is a good step forward. For example, every year (2001-2013) the Guyanese diaspora remits on average $(US) 294 million to Guyana. It would have been useful to determine if this cash transfer has alleviated poverty. We know that poverty still persists at about the 30+% level (Guyana Budget & Policy Institute) and that it varies among groups and regions. For example, children under 16 years have a poverty rate of 47.5%; for young adults (16-25) the rate is 33%. In hinterland communities, the poverty level is 73.5%, while region 8 (Potaro/Siparuni) has a poverty level of 94%. The statistics on poverty is startling. Any call for poverty reduction could not be ignored or brushed aside.
Cultural and social variables play a huge part in wealth creation as well as in poverty reduction. What works well in Latin America may not necessarily work well in Guyana. Nevertheless, let’s say that we accept Hinds-Thomas’ argument for direct cash transfers; how does this work out? The cash transfer amount floating around is $(US) 5000 per household. It’s not clear whether this should be a onetime payment or an annual payment that is spread across a number of years. With about 207,000 households, a cash transfer of $(US) 5000 per household would mean a payout of $(US) 1.035 billion. When will the Guyana government get that level of net oil revenues to make this level of award? The best estimates of net oil revenues in the first years is at an average of $(US) 300 million annually, though international legal consultant Melinda Janki will dispute this figure! Furthermore, would cash transfers be taxable or tax exempt?
Assuming that $(US) 207 million of net oil revenues are paid out annually, it would take 5 years to make the payment of $(US) 5000, which would mean on average $(US) 1000 per household per year. Financial analyst Sase Singh suggests that cash transfers be capped at $(US) 90 million per year, which translates into $(US) 435.00 per household. We assume that this would be an annual grant that covers the life of oil production. The logical question is: “Will $(US) 1000 or $(US) 435.00 per household make any significant dent on poverty reduction?” What lesson (anecdotal or otherwise) can we draw, if any, from the impact of remittances on poverty reduction in Guyana?
Hinds-Thomas’ concern for the poor may be genuine but in trying to give the poor a transient economic lift, that measure will also place the well- to-do in a relatively better position vis-a-vis the poor? And won’t such cash transfers likewise increase inequality, something which they both speak out against? Or, is Hinds-Thomas going to say that income households over a certain level should not be eligible for cash payouts? Or should the poor get more money than the well-to-do?
However, we concede that if any study is done in Guyana that supports the grant of cash transfers to households, we believe that many Guyanese will support the idea. In this regard, however, we will go a little further. We suggest that cash grants be given as an “incentive.” For example, cash incentives could be given to start up small businesses, to expand agricultural production, to engage in job creation, to further one’s education and skills development, for home improvement, as well as, for businesses to hire more workers. Or, there is an alternative suggestion; cash transfers can take the form of vouchers for food, healthcare, education, clothing, local travel, housing, and tools/equipment as well as to expand social security benefits. Whatever method of cash payments is utilized, the logistics of implementation will be formidable.
Let’s examine also the context that gives rise to this idea. The WPA which is a junior partner in the coalition government, has always been complaining how they have been marginalized, and have also accused the PNC of dominating the government’s decision making process through Cabinet and the Presidency. They have been crying out that they have no voice in policy making. They have been crying out that there has been no consultation between them (WPA) and the government. They have been crying out because they claim that they have been treated with disrespect by the PNC. They (WPA) have watched how their senior partner in the coalition, the AFC, has allowed itself to self-destruct in the face of PNC intrigues and machinations.
The WPA knows that they are onto something big and is seizing the moment; this is the time to stamp their authority on the coalition governing apparatus. If the WPA can get this (cash transfers) implemented, that initiative would probably recapture their lost glory of a viable political force endowed with creativity and a vision, unlike the AFC which is under the domination of the PNC. If the WPA succeeds in this effort that will be their “brand,” which could propel them into running as a third party at the 2020 elections. And Granger would not be happy! He would not allow the party of Dr Walter Rodney to outshine the PNC! But whether we support or reject the WPA’s idea of cash transfers to every household, this subject is too ‘juicy’ and could turn into a powerful 2020 election campaign theme.
The views expressed in this column are solely those of the writer and do not necessarily represent the views of the THE WEST INDIAN.