RICE REVISITED – CREATING A ‘PUBLIC OPTION’


‘The Public Option’ has become a popular phrase in the United States. It relates to the ongoing efforts of the Obama Administration and the Congress to reform health insurance. One of the proposals to keep the cost of health insurance competitive and prevent its escalation, estimated to double in eight years, is a “public option.” It involves the government offering health insurance to those who are interested in purchasing it. Because this would be a non-profit scheme which would require less overheads it would offer health insurance at cheaper rates and would prevent the insurance companies from unduly increasing prices.

There have been many arguments against the public option. A major concern is that it would be unfair to the health insurance industry because it can never compete with a government scheme which is non-profit. The other argument is ideological. Government intervention in the economy is frowned upon in the US’s private sector driven culture even though similar opposition was not raised to the government bailout of Wall Street. There is also opposition based on the conservative philosophy of small government arising from historical circumstances in the US.
During the 1990s, in the grip of IMF conditionalities, the PNCR and later the PPP/C governments had to contend with the demand for privatization of state owned enterprises. After the PPP/C was elected in 1992, a modification of the PNCR/IMF policies on privatization took place. The principal changes took place in connection with the Guyana Sugar Corporation and the Guyana Oil Company (Guyoil). In relation to the latter, the argument was that it was necessary to retain Guyoil in state ownership to ensure that oil companies in Guyana do not exploit their near monopoly situation in controlling prices at a high level. The evidence was that in a situation of fluctuating oil prices, the oil companies demonstrated great speed in increasing prices, even where the gas in the pumps were paid for at the lower prices. When prices dropped, there was a noticeable hesitance to reduce prices. The activity of Guyoil since the advent of the PPP/C administration has transformed this situation because Guyoil acts to protect the consumer – slow to increase prices but rapidly reducing them when possible. Guyoil, as a publicly owned company, has fulfilled its mandate to the Guyanese public to keep fuel prices as low as possible.
The rice industry faces both long term and short term problems. Since the dismantling of the mechanisms establishing government control over the industry, problems between millers and farmers over many issues, including the prices paid to farmers for padi, have continued to surface with disconcerting regularity. The recent problems have arisen because rice prices in the world market are declining and millers have reduced the prices they are paying to farmers for padi. Farmers are alleging that millers are exploiting the situation by paying unduly low prices, not justified by the market fluctuation, which are unsustainable for them.       
The time has come to consider the public option for the rice industry. The Guyana Rice Development Board (GRDB) is already a legally structured organization. Some amendments to it laws will enable it to go into competition with millers to purchase padi, mill it and market the rice produced. Operating similarly like Guyoil, the GRDB would pay the farmers the highest possible price when prices are both high and low. By this method, the government would be able to reduce the capacity of millers to exploit farmers. Government’s ownership of the Burma Rice Mill gives it the capacity to mill padi.
In a well functioning market, competition would reduce the possibility of exploitation although this is not always the case as in the health industry in the US. In an imperfect, small, market economy as Guyana’s, market mechanisms do not always work and there is enormous potential for exploitation. I do not know whether this is the case in respect of the situation in the rice industry. But if the government determines this to be the case then it has a responsibility to intervene to assist farmers who are in an unequal bargaining position vis-à-vis the millers.
There is no reason why this would not work. The modern rice industry reached its greatest potential under conditions of nationalization. Prior to the reforms in the 1990s, the GRDB’s predecessor, the Guyana Rice Marketing Board (GRMB), was the sole purchaser and exporter of rice. Farmers controlled the GRMB and there was no dispute as to prices. The GRMB was solvent at all times. The government was able to open up new markets, including in Cuba. This era saw the rice industry achieving its greatest productivity and growth. The entire economy benefitted.
There are many other problems in the rice industry which need to be resolved. The main issue is productivity. The rice industry may not be sustainable in the long term unless production moves up from 30-35 bags an acre. Some rice growing areas can achieve higher production with better drainage and irrigation and more intensive research to identify varieties which are suitable to our climate and conditions. Work is going on in these areas but the elimination of the potential for short term problems, such as the devastating impact of price fluctuations, will allow the government to concentrate its energies fully in modernizing the industry, enhancing its productive capacity and its survival in the long term. 
  

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