EYEWITNESS: Incentives…

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…or booty?

Some people seem to think Clive Thomas put his foot in his mouth when he said we shouldn’t be surprised that Exxon is here to “rob’ us. He was responding to critics of the Government who’d lambasted Natural Resources Minister Raphael Trotman for “renegotiating” a contract for our oil that is overwhelmingly stacked in favour of the oil company

But Thomas didn’t: he was just exposing the fact he’s just an academic with absolutely NO experience in the real world!!

On one hand, he accepted that with the oil contract, we have what is known in several academic and legal fields as   a “Principal-Agent” problem. Basically that’s, when you hire someone to do something for you – you’re the “principal” and he’s the “agent” – but your interests aren’t necessarily the same. You, the principal, want the thing done as quickly and as cheaply as possible (you call it “efficiency”!) while your agent wants to get paid as much as he can, with doing the least he can. (He calls this “getting a fair shake”!)

So what Thomas is saying with the oil contract we mustn’t be surprised ExxonMobil will try to make as much money as they can. Now he’s really being condescending to Guyanese to imply we don’t know this elementary point. Guyanese know, for instance, fellas (agents) who’re driving buses owned by those Police top brass (principals) will push the bus beyond the max to make sure they not only have enough money to pay off the Police brass, but to fill their own pockets.

We’re not surprised when those bus “agents” drive recklessly but nonchalantly into craters or even into posts – it’s not their bus and all they’re thinking about is to increase their take (profits). But in real life the bus owners know about all these “tricks of the trade” and so take precautions to ensure they’re not left holding the bag  by the driver (agents) when the bus becomes unserviceable.

And that’s all the Guyanese people are concerned about – that Trotman, acting on our behalf as owners of the oil, should’ve taken precautions that Exxon doesn’t leave us with holes under the sea and we have nothing in our hands. Which is pretty much what the present contract ensures! You’d think he was the agent and Exxon was his principal!!

Thomas says we shouldn’t be beating up on Trotman and the Government because of the foregoing but we should start looking at ways to prevent Exxon from taking all the profits. But it’s a bit too late for that, isn’t it? The contract’s already signed, sealed and delivered!!
It’ll be like closing the (oil) spigot after the oil’s been pumped out!!

…for politicians

The “Principal-Agent” problem can also occur in politics. In fact, it ALWAYS occurs in politics. We the people (the principals) elect the government (the agent) to do the things they promised in their manifestos. But how many governments keep their campaign promises? Certainly not this APNU/AFC coalition!!

Coming back to the theory of the Principal/Agent problem, the task of the principal is to provide “incentives” to the agent so he’ll do the job and at the same time, feel he’s getting his fair shake. In politics the ‘incentives” are the trappings of office, big salaries and outriders – etc. Just ask Nagamootoo! But the problem is, most politicians (agents) invariably act like they’re the principal after the elections!!

On our behalf (presumably) the Minister of State claimed he even RAISED the ‘incentives by 50% so his peers in Government would work for the principal (us). But it’s clear that hasn’t worked. And this points to the dilemma of the problem and its solution.
Which is to throw the agents out – FIRE THEM!! – when they don’t perform. 2020?!!

…for revenge

When politicians don’t react to incentives by courting voters, there has to be a reason. With the mass firings of sugar workers the reason, it isn’t politics.
It’s revenge!!

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