The Hard Reality of Economics
— Murli Dhar
For some time, it was believed that the economic crisis which broke out in the West in 2007-08 was behind us. It was thought that actions taken by the European and American governments to stimulate the economy and salvage financial institutions from impending disaster had served the purpose and that the economic recovery, even though proceeding at a slow pace, was setting it. Now, all this assurance has suddenly given way in the wake of successive crises which hit several European countries, Ireland and Greece in particular, with the future of the Euro at the heart of preoccupations. The serenity is disappearing and huge clouds of uncertainty have darkened the skies so much that many forecast that we might be in for a much longer global economic downturn. This situation poses the question whether we in Mauritius have again been caught napping.
It is well known that we depend on the good health of Europe and America to make our economic statement from a position of strength. It turns out that politicians in these places have muddled up things to such a point that a serious catastrophe is beckoning the very places to which we market our goods and services. Can they repair their houses in time so that we can breathe some amount of fresh air to get our own economy going? No.
For them to be doing the right sort of things, they will have to take reverse decisions that will rub off the little credibility they still have. The right thing to do was to revive activities by pushing money and market into sectors of economic activity. The wrong thing to do was to concentrate their batteries on introducing even stronger doses of fiscal rectitude in the economy coupled with significant largesse towards failing banks. It is very difficult now for them to change direction and look at the bigger picture unless they are grown up enough to swallow their inflated egos.
It is true that our pronounced dependence on countries which have been mismanaging their economies in this manner will have an adverse impact on us. We ought to have anticipated this situation and taken pre-emptive action to beef up our production sector, the bulk of which lies in the private sector. Our politicians concentrated instead all their guns in years past to “cleanse” the public sector of its rigidities, which they called “reform”. They taxed more heavily the lower and middle classes but had no clear productive plans on what to do with the money squeezed out of their pockets. The effort should have been concentrated instead on the apparatus of production, which is the private sector, big and small. Had we engineered and adapted it efficiently to face the current tougher global demand conditions, we would have really gained in the famous ‘resilience’ factor today. Our scope of production would have expanded. A sector like ICT has done well without such policy trimmings that should have acted to make it even more cost-efficient and skill-diversified. Imagine how much more a more focussed approach on production could have contributed to economic uplift in the foreseeable tough global economic environment. It has been a tale of misplaced priorities in the field of economic management.
In the circumstances, our current economic mission should now be twofold. We should (i) get the private sector to gather a higher momentum than it is the case in normal international economic conditions, and (ii) concretely multiply our marketing efforts without losing an iota of emphasis on persistently widening the range and constant upgrade of local value-addition. The time has come for government and private policy makers to stop thinking in straightjackets. This is the time for adopting a collective multi-level policy towards development. Our record on entrepreneurship has been dismal; economic drivers have preferred to live on rents by monopolising their points of vantage rather than going out into hitherto unexplored sustainable areas. The thinking that should have materialised this outreach has been totally absent.
So long we go on evaluating government budgets by the tax benefits they give to some while squeezing out more money from others, we will remain off the track from the bigger picture. The cake will not grow by such petty devices. It is sound investment in productive capacities that makes the cake grow. It is by liberating the ground for more economic activity, as it happened in the 1980s, that we can really make a breakthrough at this hour of potential stress from external factors.
One wonders why the real priorities have remained dormant over such a long period. Were we waiting for the potential global economic catastrophe to paralyse us before taking the actions which were needed? Were we content with what we were doing, leaving it to chance to tackle issues as and when they arose? We cannot afford to live by this customary nonchalance any more. It is time for action, real action.