The rise of the phantom economy and social decline Guyana and the wider world
By Dr Clive Thomas
Stabroek News
April 9, 2006
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Leverage

Last week I drew attention to the brazenness of phantom power. This brazenness arises out of the real economic power and therefore tremendous leverage the phantom economy commands in relation to the official economy - both formal and informal. The phantom economy is a real economic force and not an 'apparition' as its colloquial name might suggest. As a rule we can expect that (although there may be exceptions) the larger the size of the phantom economy relative to the official economy, the greater is the potential (as against actual) leverage, which it can exercise.

The phantom economy, as a living social force, is protected by a multi-layered, multi-dimensional, and dense cocoon of social, cultural, institutional, political arrangements as well as individual and social behavioural norms. This occurrence should not be surprising, founded as this economy is, as we saw last week, on turning moral precepts on their head; by-passing and or subverting due process and legality; and unreason.

The fundamental illogic of this phenomenon becomes very visible when the society in which a phantom economy is embedded runs into crisis and/or when threats emerge against the protective layers of the cocoon that envelops it. Otherwise, when there is no crisis or threat, order is turned upside down. Disorder and irrationality become the right and proper way for doing things.

From the present 'goings-on' in Guyana, as we Guyanese say, readers are familiar with the sort of circumstances to which I am referring. Here utter legal nonsense, which denies or rejects the plain ordinary commonsense of everyday life in a civilised social order, is masqueraded as high-level legal theory. The basic illogicality of such legal nonsense is reflected in efforts to force the common sense of everyday social life in a civilized society into retreat by seeking to create a dis-connect between law and moral, legal and ethical behavioural norms. In other words society is asked to discuss 'law' as a dis-connect from society itself! At that stage legal nonsense postures to define social values. This is the ultimate absurdity of all we have been discussing these past few weeks. Values, norms, individual and social behaviour, it is hoped, will evaporate into phantasmagoric shadows and nothingness.

Rise to prominence

All this has become relevant in Guyana in fairly recent times. The rise to prominence of our nation in the international illegal drugs market has been as dramatic as the decline of its economy we have been witnessing with the prolonged depression since 1998. For those still skeptical of the accuracy of this statement, as we saw last week, recent Bank of Guyana estimates (Statistical Bulletin December 2005) show that between 1997 and last year, a period of eight years, the real GDP of Guyana (measured at 1988 prices) had grown by about one (1) per cent, rising from G$5,360 million to G$5,419 million.

At the end of the decade of the 1990s various United Nations, US, and European Union (EU) narcotics reports had indicated the Caribbean's illegal drug market was of the order of US$3.5 billion, or slightly more than 3 per cent of its GDP. The illegal drug market, which had begun as a home-based activity with the production and export of marijuana was by then cocaine-based, (which accounted for nearly 90 per cent of the trade) and dependent on trans-shipment rather than local production. Up until 1980 Jamaica was considered to be the largest marijuana producer in the world, but had subsequently been replaced by Colombia, a major base for the present-day production for the illegal drugs market in the hemisphere.

The EU reports the Caribbean as the main source of illegal drugs from the hemisphere into its market. And, the USA reports the same for Central America. Caricom countries are transit stops to these destinations and source their drugs mainly from Colombia, although Venezuela and other Central American countries are significant.

In reports of this trade at the end of the 1990s Guyana did not often qualify for mention as, on the whole, it was a marginal supplier. Today, several successful 'busts' in Europe, the USA, and Canada have been sourced to shipments out of Guyana.

The frequency and high profile nature of these 'busts' have no doubt brought attention to the rapidly growing role of Guyana in the regional trade. This reached its peak when the USA Narcotics Control Report recently cited areas of major concern about developments in our country.

The issue of domestic demand

Although the focus on the effects of the illegal drugs market in Guyana has been on its distribution role in a transnationalised structure, its domestic effects as a substance of abuse have not been negligible. Overall drug abuse in the Caribbean has been low relative to the rest of the world, although the rate varies between individual countries. The prevalence rate has been reported as being on average fewer than four (4) per cent of the adult population. This is in fact below the global average, which has been estimated at about 4.5 per cent of the adult population. In the markets to which the drugs are shipped (for example the USA and the European Union), the adult prevalence rate is far greater - about 2-21/2 times the regional prevalence rate.

For Guyana and the rest of the Caribbean it appears as if marijuana is the drug of choice. This is often times linked to life-style and even the religious preferences of some groups. Cocaine consumption, however, has grown and it is reported that for the region its prevalence rate is reaching levels of concern as governments and social groups have been engaged in public awareness and education campaigns as well as rehabilitation for drug abusers.

Important as the domestic demand considerations are becoming as time passes, the primary concern is still Guyana's insertion into the global structure of organised drug trafficking. This is, in the end, where the phantom economy is located in the global value chain of the illegal drugs market.

Phantom economy: Life after death

This week's article should have been submitted last Sunday but for reasons beyond my control I was unable to do that. It completes my present commentary on the phantom economy as I plan to turn to another topic starting next week.

In recent weeks a number of persons have sought to develop and extend the discussion of the phantom economy into particular areas of its operations. Some have written letters to the press extending the notion by speaking of 'jumbie- economics,' which is similar to the caricature of 'voodoo economics' expressed by PNC Parliamentarian Jerome Khan in commenting on the last national budget, during the last debate in the National Assembly.

I welcome this development. My series, however, tries to avoid such particularisms. This is not because I consider them to be less important, but because I believe the salient features of Guyana's insertion into the emerging processes of economic globalisation is of particular interest to us as citizens given the country's size, vulnerability, location, racial configuration, geography and history. To be fair, some of the features these other writers highlight do impinge on globalisation, but not necessarily as a central feature of their emergence. Thus when one letter writer speaks of the "Authorities" claiming that a "feasibility study is only relevant after a decision is made" he aptly highlights the quackery of jumbie-economics. This does not, however, portray this particular manifestation as a derivative function of the economy's response to globalization, given the way its central rhythm operates.

From the more limited perspective of this series, the relevance of such particular issues is best gauged by the extent to which the managers of economy are driven to the irrational, the ad hoc and even the absurd. In other words to what extent this develops as a by-product of Guyana's location in the wider world. This distinction may, to many people be too subtle, but nevertheless it is the premise on which the series stands or falls. The series is in that sense not intended to be day-to-day comment on on-going topical events.

Life after death

After spending the past several weeks exploring the phantom economy the most frequent query I have encountered so far is whether there is any hope left for Guyana. The concern, I believe is, whether the economy can be turned around onto a sustainable path to growth and development. Such a question evokes either a fundamental philosophical or religious response. It is like asking the perennial question: is there life after death?

One thing all the great thinkers and moralists would agree on is that irrespective of what certainties of belief they hold, they would acknowledge that life and all living organisms and organisations are subject to continuous change. This change may be 'materially' based as in Marx, driven by conscious intelligent design as in evolution theory, or following a path laid down by the Omnipotent with and without 'free will.' All these organisms and organisations are in a state of constant movement or flux. On this basis there is no permanent social order nor set of social relations. These are continuously developing, changing, mutating, declining or even rolling-over. As these occur change remains a permanent feature of their existence. From this standpoint the phantom economy is not a fixture for all time. It will change, as will all else around it.

What therefore makes the question pertinent? It is that when one compares the phantom economy to certain features of the Guyanese economy the prospects for transitioning to a sustained path of growth and development look hopeless.

What are these key economic features, which account for this situation? The answer is that it is the smallness of the economy; its vulnerability to natural and human-made disasters; the disparity between population size and geographical area; the pattern of settlement; our extensive and weak borders; the low-productivity of our workforce; the very weak physical and economic infrastructure; and the wastage of resources that has occurred for nearly three decades now and continues to occur. The latter comes from a number of causes including exceptionally high levels of migration of skilled workers, mismanagement, and corruption.

Consistency of change

If change is permanent and assured then the phantom economy will be subject to change and transformation. Will it be subsumed in Guyana society and miniaturised, or will it absorb the rest of the economy and lead to the 'Colombianisation' of Guyana? By Colombianisa-tion I refer to the popular image of druglords and bandits operating as a state within a state, while being hotly pursued by US-led international forces. A situation where violence is endemic. This may not be the reality of Colombia on the ground, but it is an image we are all in Guyana familiar with from television and the movies.

The danger for Guyana lies in the weakness of the official economy. This has not grown from the late 1970s to the late 1980s. After a spurt of growth between 1989-1997, it slipped back into a depression resulting in a one per cent increase in real GDP between 1997 and the end of last year. Its structure has remained more or less the same, heavily dependent on primary exports available either through simple extraction (bauxite, gold) primary agricultural production (rice and sugar) or harvesting (timber and wild-life). Sectors like tour-ism and Information and Communications Techno-logy (ICT) are at a very infant stage of development. In the former example we lack the basic infrastructure of security, access and recreational facilities to accommodate tourists in large numbers while in the latter we are hampered by many factors including the migration of skilled labour to handle ICT and reliable and cheap power supplies to power ICT based operations.

Our domestic markets are also far too small to advance import substitution to an efficient level, and even with CSME our firms, after years of punishment, are not competitive and geared to operate in even regional export markets.

Meanwhile the structural gap between population size and country-area leads not only to low population densities in border areas but to a marked separation between the coastland where much of us live and the interior. The low settlement of the interior areas makes it extremely vulnerable to operations of the phantom economy, if only by making our borders porous. The weak state of infrastructure covers all areas, from physical infrastructure (roads, harbours and ports), the utilities (electricity and water) markets and town services, to the social infrastructure.

With such a weak official economy fears over the growing dominance of the phantom economy are understandable and face a realistic prospect of coming true. Ultimately, the solution to this is still the age-old one of wise political choice and well-protected agreements. Fortunately, Guyana has the potential resource-base in the context of Caricom to still produce the best-placed economy in this hemisphere.