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The 1948 sugar strike provided invaluable organisational experience for the PAC. By holding meetings with workers of different ethnic backgrounds in various parts of the country, it saw the increasing need to bring and keep all the ethnic groups together under its umbrella. The membership also decided to step up the plans to organise a disciplined political party to champion the cause of all the people of Guyana. Thus, in 1949, the PAC which was now much expanded in terms of membership, but which no longer included Jocelyn Hubbard, began serious discussions for the formation of the political party which would champion the cause of the Guyanese masses at all times.

By mid-1949, the members agreed that Dr. Jagan would be the leader of the Party to be named the People's Progressive Party (PPP). The pro-worker militant Progressive Party formed by Henry Wallace and Paul Robeson in the United States influenced the selection of the name. Dr. Jagan and his colleagues also decided to pattern the new party's constitution, organisation and structure after that of the People's National Party (PNP) of Jamaica. It was also the general consensus that Ashton Chase would be the Chairman.

Towards the end of the year while discussions were going on, Forbes Burnham returned to Guyana after completing his law studies in England. Based on his reputation as president of the West Indian Students Union in London - which had a close association with the British Communist Party - he was invited to become an executive member of the new political party. It was felt that his charisma, which was attracting attention among the Afro-Guyanese, would help to win greater support for the PPP.

At that period, many educated young Afro Guyanese were still looking to the racially oriented League of Coloured Peoples for leadership, and it was felt that Burnham would draw them to the PPP. Despite not being a member of the PAC, Burnham himself was eager to participate in the work of the new Party. Late in 1949, he was sent by the PAC leadership to Jamaica to study the operations of the PNP, since it was expected that the PPP would pattern its work after that of the Jamaican party.

The members of the PAC were of the opinion that Dr. Jagan and Burnham, working together, would be able to mobilise more than 80 percent of the people, in the form of Indo- and Afro-Guyanese multi racial unity, to support the policies of the new party. It was therefore decided that, instead of Chase, Burnham would be offered the chairmanship, a position he readily accepted. Janet Jagan was named Secretary of the Party.

The final edition of the PAC Bulletin came out on 26 December 1949. On the 1 January 1950, the PAC dissolved itself and formally announced the establishment of the People's Progressive Party. Among the members of the new party were some of the members of the now defunct Labour Party. The first headquarters of the Party was Dr. Jagan's dental surgery at 199 Charlotte Street, Georgetown. The initial issue of the Party's organ, the Thunder, was published shortly after the Party's launching.

The aims of the Party were clear. It stood for self-government, economic development, and the creation of a socialist society. The party also pledged itself to the task of winning total independence for Guyana.

The Party set out its programme as follows:

A. Constitutional reform

1. Self Government

a) Universal adult suffrage.
b) Wholly elected Legislative Council.
c) Increase in the number of electoral districts to 21, having due regard to population and territory.
d) Executive Council elected by the Legislative Council with full ministerial powers.

2. Acceptance of Federation under these conditions:

a) Dominion status
b) Internal self-government.

3. Local Government Reform

a) Universal adult suffrage
b) Wholly elected Village and City Councils.
c) Development of County and Area Council system.

B. Economic development

1. Effective and democratic control of all major industries.

2. Land reform and land settlement.

3. Adequate compensation for exploitation of natural resources.

4. Reduction of indirect tax and increase in direct tax.

5. Planned development of industries to provide work for all.
Establishment of secondary and minor industries.

6. More economic export price for primary products.

7. Elimination of waste in public expenditure.

First employment opportunities to be given to Guianese

C. Social services

1. Housing rent control, slum clearance, Government housing schemes.

2. Education free and adequate primary, secondary and technical education for all.

a) Removal of dual control.
b) Better trained teachers.

3. Medical improvement of public hospitals, sanatoriums, health clinics.

4. More emphasis on preventive medicine.

5. Social security in old age and sickness.

6. Unemployment insurance.

D. Labour legislation

1. Improvement in trade union laws.

2. Improved minimum wage legislation.

3. Equal pay for equal work.

4. Industrial injuries insurance.

From the beginning the Party was labelled as "communist" by the conservative press in Guyana and the Caribbean. This was no doubt due to the anti-colonialist policies outlined by the party and also to the fact that many of the leaders, including Cheddi and Janet Jagan and Forbes Burnham, openly expressed pro-socialist views in their writings and speeches. Indeed, Cheddi Jagan, as a legislator, had already become well known throughout the Caribbean region for his anti-colonial and socialist views.

With the establishment of this political movement, the showdown to bring an end to colonialism now entered a new and decisive stage.