Beyond Macroeconomic Stability: The Role of Selective Interventions in Guyana’s Growth

Abstract

This paper examines Guyana’s growth record 1992 to 2010, against one aspect of the World Bank’s Functional Model of Growth (1993). This model was developed by the Bank following its review of the development experience of several of the high performing Asian economies, many of which are island states. In this model, growth depends on three pillars : a) policies that promote macro-economic stability- that is low increase in price levels, stable currency exchange rates, low indebtedness, b) selective policy interventions, and c) institutional policies such as a technocratic civil service, and wealth sharing mechanisms. Since each of these three pillars can be the subject of lengthy discussion, this paper focuses on the role of Selective Interventions in Guyana’s growth record since 1992. The paper will discuss how selective interventions were the cornerstone of the Asian Islands industrial policy which allowed them to achieve sustained growth over three decades (1960’s to 1990’s), and then use that basis to discuss Guyana. According to current development thought, selective policy interventions are the cornerstone of a successful industrial policy. Such interventions includes the following: low interest rates or credit often provided by development banks, focusing credit on the high growth sectors, deliberately giving certain industries tax concessions, and supporting arrangements that will push exports of the favored industries. In keeping with structural change theory, the favored industries tend to be manufacturing and services. The paper in focusing on Guyana will therefore look at the kind of selective policy interventions that Guyana has used to stimulate growth since 1992. It looks at whether there was a policy using such special interventions, and kind of interventions used. We will also assess the extent to which these special interventions have focused on high growth industries using case studies of sugar and tourism. We offer an assessment of what factors prevented the Government from using the selective interventions to the extent they were used by the island states in Asia