World economic growth slowed down suddenly in the wake of the international crisis of 2008. Millions were thrown out of jobs. Several economic activities went into downturn. Since then, economic growth has been erratic and slow-going the world over.
The latest on the casualty list in this regard is China, which was believed at the onset of the 2008 economic crisis to be the new locomotive to re-launch the world economy that had gone into downturn. It is now increasingly believed that the Chinese economy will produce a lower than 7% growth this year, compared with its double-digit growth rates in the last decade. Forecasters are less sanguine now.
The IMF has been adding its own dose of pessimism, by revising down successively its forecast rate of current global economic growth. Even though there are positive rates of economic growth being registered by several countries the world over, these are not proving strong enough to pull up the global economy into the next sustained phase of strong all-embracing growth. It will come, no doubt.
We have always depended on external markets
It would be a mistake on our part to abstract from our fundamental dependence on strong global economic conditions. As a primarily exporting country, we stand to gain from improving conditions in other countries, especially in our customary trading partners.
Unfortunately for us, Europe, a major market for our exports, has been tightening up both monetary and fiscal policies. They appear to be managing their fear of the worse to come more than doing things that will usher in the confidence people need to “get on to work” again.
Lawmakers in America, especially Republicans, are also bent on cutting down welfare spending and not raising enough taxes from those able to pay. Despite budgetary shutdowns and gimmicks of the sort we’ve been seeing over there, America is still one of the bright spots. It has been recording positive and sometimes higher rates of growth than during the just-gone economic depression.
Faced with this situation, government leaders have been doing a number of things to unlock the situation. It is not for nothing that more than a year back UK’s David Cameron visited India, then China. The US President has not only been pressing the Republican-dominated Congress to shift away from their ill-advised austerity plans to help America get off the hooks; he has also been working on other projects such as the Trans-Pacific Partnership which was concluded last week. Only this week the Chinese President is on official visit to the UK. He was in America the week earlier. On the sidelines of the UK visit, China is investing $5.2 billion in essential infrastructure projects in the UK, a drop in the ocean compared with China’s foreign exchange reserves of more than 3 trillion dollars.
More is in the offing along these lines. The Indian Prime Minister has proceeded on a series of visits to other countries, including to the US, Germany, the United Arab Emirates, Australia and so forth. The aim is no doubt to enlist support of entrepreneurs from these countries to come over to India to translate into reality his ‘Make in India’ project. Between 26th and 29th of this month, he is hosting the India-Africa Summit. Fifty-four countries from the continent will attend. Hopefully, we on our part would have done our homework to convince all those leaders that we are in a position to become a meaningful – not a sentimental – cornerstone of the India-Africa economic build-up and how so? No one else is to blame if we aren’t.
How we can be part of the next spurt of global growth
All this is aimed at one objective: get the world economy going once again. At the end of the day, the misguided policies which are holding back economic growth in different key economies of the world will give way. Economic growth will not be as brisk and sustained as it was during the pre-crisis years of 2007-08, but the world will have turned over to a new leaf. This is where the opportunity will knock at our doors to engage more forcefully with other economies and increase our economic scope.
There is no mistaking how world leaders see the next spurt of economic growth. It will not be based on individual countries sheltering themselves behind huge walls of trade tariff (and non-tariff) protections, each group working in cosy isolation from the other, as it was the case till the late 1970s.
Mauritius was then building up an untenable rate of unemployment in excess of 20% of the workforce and we were yet to be knocked out pitilessly by the quadrupling of the oil import price and the simultaneous strengthening of the US dollar towards the end of the decade. The recent moves show that global leaders are busy opening up and reconstructing interdependencies among world economies to uphold a new spurt in global growth. We also need to team up, with results to show.
We have to change the poor mentality to grow again
Can Mauritius be part of this process? We can, if we build up fast enough our comparative advantage in the export trade, both in goods and services. It stands to reason that, for our merchandize export sector to gain momentum in the emerging situation, we need to be internationally competitive, technically driven and embracing as wide a spectrum of exports as possible – more than what we have already.
When local companies drive up our exports despite challenging external market conditions, they enhance their competitiveness, make productivity gains, reap economies of scale, become more resilient to external shocks and end up upholding the greater integration of the domestic economy. All this contributes towards upholding long-term growth, often by inducing virtuous new rounds of foreign direct investment. We should be targeting a multi-pronged growth of this sort.
Needless to add that we cannot look forward to the much needed contribution from our exports of services in such a context if we’ve managed to ourselves clip the wings of the sector by publicly denouncing it from time to time. In the unfolding international context, no country can hope to make significant inroads on global financial services markets, for example, by deliberately tainting itself with misdemeanour.
The same applies to Mauritius’ merchandize export sector. In the past, there have been opportunities for other countries’ businesses to tie up with us and thus expand our economic space. Local business resistances have however not always allowed all those opportunities to materialize, unless they played into their hands, e.g., the Independent Power Producers. Rival cement producers were made to go due to the threat they posed to importers from global cement companies. The future lies in importing strong production backups from international investors, not in shunning them. We have to break away from those jealousies of a past age to make progress in the modern world.
It is becoming pretty clear that greater international tie-ups hold the secret to our future economic growth – just like they did in the 1970s and the 1980s. The question is not whether we’ll open up to outside influences. We must. It is whether we’ve done our homework enough for them to be interested to tie up with us as the international drama unfolds.
- Published in print edition on 23 October 2015