The solutions to our most pressing problems are political as much as economic, and one hopes that the coming budget will strike the right balance – only this would contain the nefarious growth of “enemies within the gate”
In less than three months the new Prime Minister and Minister of Finance and Economic Development will be presenting the budget for 2017-18. This is a particularly important milestone for Pravind Jugnauth as expectations are going to be even higher than usual – the population as well as economic operators anticipate a real break from the poor show which has so far characterized the performance of the government which came to power in December 2014.
Although the Minister will surely be under immense pressure to provide rapid fire solutions to what are perceived to be the most pressing problems – fall in exports for example — these will be far from sufficient if they only treat the symptoms and do not tackle the root causes of the phenomenon. Expectations will also be higher because, as the popular saying goes, “new brooms sweep clean” and for all intents and purposes we do have a “new government” under fresh leadership and purportedly with new ambitions. Two previous Prime Ministers – SAJ and Navin Ramgoolam – have each presided over distinct phases of economic development. Very schematically these can be summarized as follows:
1. We have had our “economic miracle” of the 1980s which was characterized by an average economic growth of 6-6.5% over a period of at least seven years and a visible improvement in the material comfort of large swaths of the population.
One of the consequential effects of industrialisation and full employment was to attract large numbers of female labour out of the households into employment. Access to basic household furniture and electronic appliances was facilitated through the introduction of a legal framework for hire purchase facilities – the famous introduction of Mammouth in Mauritius and duty-free import of video players.
Whereas these could be regarded as a “progressive” measures to the extent that they allowed a large fraction of the working classes to enjoy a quality of life of which they had been deprived until then, it also marked the beginning of an entanglement in “consumerism” which would later become a real bane for many of the people involved as they became trapped into the abyss of consumer debts.
2. There was the spate of ultra-liberalism of which the iconic measure was the rapid lowering of corporate taxes in the framework of a flat tax policy. “Stimulus Packages” were dished out to companies which were classified as being in “temporary” financial impasse, while simultaneously the liberalization of labour laws to facilitate dismissal of workers was promoted in the name of greater mobility of resources.
In the eyes of the beholders of market liberalization as a panacea to all economic woes, the surest and shortest way to ensure competitiveness of the economy was through the sacking of “redundant” labour. Business facilitation was the buzz word and probably rightly so in the light of heavy handed bureaucracy which had become a real obstacle to economic decision making.
All these measures were of course taken on the premise that such liberalization would result in better allocation of resources, improved competitiveness and a satisfactory rate of economic growth – defined as one which brought about remunerative job creation.
3. While in its rhetoric the government from 2005-2015 was committed to a policy of “democratization of the economy”, there has probably never been so much concentration of wealth through systematic rationalization and restructuration of the shareholdings of the owners of the “commanding heights” of the economy over such a short period of time in the whole history of the country.
While it is arguable that such concentration of wealth was an inevitable outcome of the prevailing liberalization credo in the global and local environment, it nevertheless remains problematic to the extent that such concentration runs in the face of the professed “economic democratization.”
Furthermore it remains highly debatable that the policy dynamics which leads to such concentration have “unintended consequences – such as the loss of competitiveness following the social chaos which results from such manifest inequality in opportunities and outcomes, unemployment and breakdown in law and order situation.
Going forward there is no doubt that the overriding regime in Mauritius still remains, at least formally, more of a “social democratic” nature in spite of the above-mentioned assaults by market liberalizers – but for how much longer? The basic structures of the welfare state, namely free education and health services remain intact although open private competition is gradually favouring the latter as the middle classes choose to opt out of the public services.
The dominant trend though remains one of seeking to dismantle the welfare state as witnessed by the overbearing threats over the right to Universal Pension and the imminent menace of privatization of distribution of water supply.
In the global context right up to the financial crisis of 2008 and its bitter political consequences in the form of Brexit and then Trumpism in the United States, the “unfettered market” ideology had managed to all but monopolize the political landscape. Leftist parties were marginalized and their voices were dismissed in political wilderness, while the “social-democratic” parties all but adopted the same credo as the political right except for some sentimental and ineffective rhetoric about notions of social justice and equality.
Against the background described above and a stagnating economic growth of around 3.5%, the biggest challenge with which the Minister is faced is the constant and accelerating degradation of the social fabric. Alarming drug trafficking levels, increasing domestic violence, breakdown of law and order and a perception of corrosive levels of corruption in the country will remain considerable constraints on the implementation of economic policy, however well designed. How far can a government budget presentation impact on such social issues and signal a real will to roll back if not eliminate them?
In our view, only a radical review of economic policy and a return to a determined social-democratic framework supported by demonstrated political will can start to make a dent on this increasingly damaging situation. There are no reasons to believe that the same regressive “trickle down” economics which has so lamentably failed in the past should give any different results going forward.
Historically social democracy was based on the provision of transfers and public services to everyone according to his needs, financed by contributions according to everyone’s ability to pay. It is high time that all progressive forces have the courage and determination to affirm this again.
Our contention therefore is that the solutions to our most pressing problems are political as much as economic, and one hopes that the coming budget will strike the right balance – only this would contain the nefarious growth of “enemies within the gate”.