The British press — or at least that part of it which is concerned with serious matters — carried on July 10 the story (supplied by the Colonial Office) of the Mauritius Five-Year Plan. The aims of the Plan were listed in The Times: to initiate projects which will increase productivity; to develop new industries; to foster existing industries; to improve communications; to provide more and better social services; and to render administration more efficient.
All these are notable ambitions; and it is right that, at the outset, I should applaud the Economic Planning Committee of the Ministry of Finance for its bold and forward-looking Plan which the Legislative Council has just adopted. Collectively, the projects listed for completion during the period of the Plan (1957-62) bid fair to achieve one of the aims of the Plan: “to meet the more obvious needs of today in a way which will help to cater for the emerging problems of tomorrow.” Having said that, I cannot refrain from making two critical comments in particular, as well as some general observations about the economic theory underlying the plan.
We read in the Plan that “A basic assumption in the planning outlined in this report is therefore that the population of Mauritius will go on increasing at the present rate.” Why? Why is this “basic assumption” made? If, as the Five-Year Plan says in paragraph 10, the rate of increase of the population is the most important single social and economic problem (and it is said to be universally accepted that this is so), why does not the Economic Planning Committee include as an urgent need (to employ its own terminology) the provision of birth control clinics all over the island? Or, as an alternative, the subvention of the Mauritius Family Planning Association so that that organisation (which has this year achieved classification in the International Planned Parenthood Federation’s world directory of national family planning associations) can develop its activities? There is precedent in other parts of the Commonwealth for Government subvention of family planning clinics; I wrote only a few weeks ago of the clinic in Trinidad which is operating successfully despite the high percentage of Roman Catholics in the island.
Pic – vintagemauritius.org
“There are plenty of housewives who can remember what they used to pay for rice, sugar, tea, vegetables, oil, curry, etc., before the war, and who know only too well what they have to pay for the same commodities nowadays. The rise in food prices is the measure of the depreciation of the rupee; it is the measure of what the economists call “inflation”. You get inflation when there is more money in circulation but not an increase in the amount of goods that can be bought…”
Since population growth is problem number one, it would seem logical that need number one is a means to prevent that growth; with economic measures (as proposed) to help the present people of Mauritius as well as future Mauritians who are, in more senses than one, citizens of a planned society. There are reactionary members of the Legislative Council who are opposed to birth control clinics on ideological grounds; they are in a minority, but a very vociferous minority. This minority is preventing the majority of the population from having its future wellbeing assured, by purblind insistence that family planning is “immoral”, “against the law of nature”, and so on. The future of Mauritius is being jeopardised by these gentry, who themselves are snug in their well-built houses, well-fed with their three and four meals a day, travelling daily between Port Louis and Curepipe along the Route Royale. Clinging to their ancient prejudices against family planning and limitation of births, they are imperilling the island’s future, if the population growth is allowed to go on unchecked.
Even the economic measures proposed by the Economic Planning Committee will not prove enough to maintain the standard of living unless there is more energetic action to educate Mauritians in family planning. Venture of July 1958 tells of a Mauritian father who stopped a doctor and asked him “Can’t you help me? My wife is expecting her eighth child?”, under the impression that the doctor, an advocate of family planning, could help at that late stage. Education in family planning is surely a sine qua non of present-day Mauritius; yet nowhere in the Economic Planning Committee’s report do we find it mentioned. No one has ever given any indication that the report of the Population Commission will ever be implemented; that Commission, it will be remembered, urged the establishment of family planning clinics throughout the country. Nothing has been done; it has been left to a little band of private individuals and doctors to set up the embryo Family Planning Association of Mauritius which, even now, the Government is not, apparently, disposed to assist with much-needed finance.
John Maynard Keynes was one of the most renowned economists of the early 20th century. But even he couldn’t time the market. Credit… United Press International – Pic – static01.nyt.com
“Keynes’ argument was that the Government’s business was to provide facilities for full employment (in the particular circumstances of Mauritius he would have replaced ‘full’ by ‘as full as possible’) instead of trusting to the so-called laws of economics to bring this about. The Government should go in for la policy of economic planning, deliberately engaging in planned enterprises, not leaving them to private enterprise. Often, private enterprise has proved most unenterprising; we have before us the recent example of the projected cement industry…”
It is not too late, surely, for the Government to change its mind and find some subvention for the Mauritius F.P.A. After all, the Government itself has admitted that the growth in population is Mauritius’ number one problem, so the Government should be favourably disposed toward the only organisation which is trying to do anything about reducing the size of that particular problem.
My second point of criticism in this. The purchasing power of the rupee has been steadily falling since before the war. As I showed last week and the week before, the rupee has depreciated to one quarter of its pre-war value, and prices have risen enormously, especially of the basic foodstuffs. Wilfrid L’Etang has pointed out in Advance that – Autrefois moyennant une roupie, la ménagère pouvait obtenir 14 lbs de bon riz de l’Inde; de nos jours 3 lbs de riz ration se vendent une roupie. There are plenty of housewives who can remember what they used to pay for rice, sugar, tea, vegetables, oil, curry, etc., before the war, and who know only too well what they have to pay for the same commodities nowadays. The rise in food prices is the measure of the depreciation of the rupee; it is the measure of what the economists call “inflation”. You get inflation when there is more money in circulation but not an increase in the amount of goods that can be bought.
There is a risk, I submit, especially during the first year ( and possibly the second year also) of the Five Year Plan, that the implementation of the Economic Planning Committee’s report will add to the inflationary tendency now obvious in Mauritius. After all, the planners themselves admit – “Its immediate consequence will undoubtedly be a large expansion in the opportunities for employment, and a large increase in the amount of money circulating in the island, since much more than half the total cost of the plan will be disbursed locally in wages, salaries, commission, payment for local products, etc.” This increase in money in circulation will be an immediate effect, and will be felt before the plan increases production commensurately with the increase in purchasing power available. Unless the Government is prepared to act, and act quickly, (NOW, in fact), the increase in money in circulation may well lead to higher prices for the basic foodstuffs… A policy of price control, rigorously enforced, would seem to be the answer during the interim period of the first two years of the Plan. Thereafter, it may well be that prices can be left to find their own level since production will have gone up and there will be extra goods to counterbalance the extra money in people’s pockets.
Perhaps, of course, the Ministry of Finance is prepared for an inflationary period to come as the Plan gets under way. But this does not seem likely, since all future estimates of costs have been in terms of 1958 rupees; whereas if inflation were taken into consideration, with its concomitant fall in the purchasing power of the rupee, future estimates of costs would have been greater than they actually are.
But if the Ministry is aware of the possible dangers of further inflation and depreciation of the rupee, and is ready to take active steps to deal with it (by, for example, price control or excess profits taxation) all well and good.
The general economic theory underlying the Plan appears to be, in the main, Keynesian. That is, it appears to be in line with the economic theory held and propounded by the late Lord Keynes, surely the most distinguished economic theorist of the century. Keynes’ argument was that the Government’s business was to provide facilities for full employment (in the particular circumstances of Mauritius he would have replaced ‘full’ by ‘as full as possible’) instead of trusting to the so-called laws of economics to bring this about. The Government should go in for la policy of economic planning, deliberately engaging in planned enterprises, not leaving them to private enterprise. Often, private enterprise has proved most unenterprising; we have before us the recent example of the projected cement industry. The Legislative Council had before it a report showing that the establishment of a cement industry in Mauritius would be feasible and profitable.
What did the Conservative MP’s tell the Mauritius League recently? (I refer to Advance of June 10). “The British Empire Producers’ Association wanted to invest money in this industry but owing to the high cost of fuel involved, they did not think it would be a paying concern.”
So profits are more important than humanity! The cement industry is referred to in the Five-year Plan; I hope the Economic Planning Committee’s hopes are not dashed by investors whose concern for their pockets exceeds their outwardly professed concern for the Commonwealth and its economic development.
Yet, although the Plan envisages long-term Government-sponsored development (along with Government-encouraged private development) and is thus in line with the Keynesian theories, there is expressed in paragraphs 17, 18 and 19 an anxiety about future budget deficits. In other words, the Planning Committee is worried because implementation of the Five-year Programme will throw up annual deficits of (all in million rupees); 1,788 in 1959-60; 4,669 in 1960-61; and 5,585 in 1961-62. In other words, in those years the Government will be spending those sums of rupees more than it is getting in from all sources. The Government will thus appear to be insolvent, that is, in debt. It will seem that the Government will no longer be able to pay its way. Therefore, the Economic Planning Committee is worried; is it wise to embark upon a Plan which will cause such big deficits?
Having started on the Keynesian Road, it is surprising that the Committee has not kept to it. It is a tenet of Keynesian economies that the time-honoured notion of an annually balanced budget can go by the board. According to Keynes, there is no need to balance the budget every year; or, indeed, ever at all. The state’s economic activity should be the master of the state’s budget; not the other way round. A budget deficit, which means the state playing out more than it receives, might well be the only way to maintain employment and stave off a recession, a slump.
Lord Beveridge in ‘Full Employment in a Free Society’ recommends a break with the past principle that state expenditure and income should balance each year. Like Keynes, Beveridge argues that in certain circumstances (and the circumstances of Mauritius would be among them) “the State must be prepared at need to spend more than it takes away from the citizen by taxation, in order to use the labour and productive resources which would otherwise be wasted in unemployment.”
Beveridge also suggests that a country where Government economic activity is being undertaken on a large scale could well have a “double” budget each year.
This suggestion is contained in a pamphlet, which he summarises and quotes, published by Lever Brothers and Unilever Limited. The annual budget should be split into two parts: “One containing the standing expenditure that should be met annually out of current revenue; the other containing normal capital expenditure and all such emergency measures as should be taken in times of depression to fight unemployment or stimulate trade.”
The Five-year Plan is an emergency measure to maintain people’s standard of living, and to improve it. But in any case, it is clear that modern economic theory is against the age-old shibboleth that annual budgets must be balanced. The Economic Planning Committee can, I submit, view the probable deficits with equanimity.
5th Year No 207 Friday 25th July, 1958
Mauritius Times ePaper Friday 7 October 2022
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