Interview: Kugan Parapen, Economist
That is most probably why the 1976 scenario did not materialise’
‘A recent study ranked Mauritius as one of the 50 most expensive places to live on the planet! And this will get worse’
‘Can we deem that a student who has earned SC credits in French, English, mathematics to be educated? What about the student’s behaviour in society?’
In his first interview to this paper after the last general elections, economist Kugan Parapen of Resistans ek Alternativ says that the figures available do not support the impression that the economy is doing great if one is to go by the multitude of infrastructure projects. On the contrary, he is worried about the debt level and repayment. Besides, he maintains that the development model is neo-mercantilist, and is skewed in favour of a new local elite that has substituted the colonial power. He also believes that our democratic model is flawed. He comments on the education system and is concerned about access to affordable housing by the locals given that the market is geared towards catering for wealthy foreigners. Read on…
Mauritius Times: What is your objective assessment as an economist of how the country is doing in 2020, and what are the prospects for the immediate future, say the next five years?
Kugan Parapen: Anyone visiting Mauritius for the first time would think that the country is one big construction site given the sheer amount of public infrastructure projects underway. One would thus tend to think that the economy is doing great and that Mauritius is booming. Many local residents, it would seem, would agree to this.
The figures suggest otherwise though. The momentum behind the domestic economy has been slowing down in recent months with key economic sectors facing several headwinds. The recent slowdown in tourist arrivals has been well documented while the offshore sector, somewhat predictably, is facing all sorts of compliance and regulatory issues. Had it not been for significant levels of public sector investment in recent years, the economic outlook would have been quite bleak. But for how long can we rely on such levels of public extravaganza? Especially bearing in mind that a great proportion of that public spending was carried out using foreign money. We should not be expecting any free lunch, for one day this whole bankrolling masquerade will come to an end and it won’t be pretty.
If one looks at the pattern developing across neighbouring countries, it is quite simple to understand what is happening. Take Zambia, for example. International financial institutions like the IMF refused to give them lines of credit unless structural economic reforms were undertaken. China did not ask for any such reforms and was happy to finance mega infrastructure projects as part of its Belt & Road programme.
As of today, Zambia’s debt to GDP is above 100% with above 70% of the debt being external and the majority being owed to China. Now that the Zambian economy is slowing down and that a debt refinancing programme needs to be implemented, the Chinese are playing hard ball and asking for collateral in the form of the country’s mining reserves.
That’s the sad reality for a country which, only 13 years ago, was granted large debt waivers under the HIPC (Heavily Indebted Poor Countries) initiative. Most sub-Saharan countries currently find themselves in a state of high indebtedness and with the global economic cycle showing increasing signs of coming to an end, the day of reckoning might unfortunately be sooner rather than later for a few of them. The legacy of poor governance…
* Most economists who have come out publicly about the state of the economy have been saying that it’s going to get rough in the years ahead. But they have been saying the same thing for years now, and we have seen none of that happening so far. Why is that so? Is their reading wrong, or are we sufficiently protected?
It is only when the tide wears out that we know who has been swimming naked. This famous proverb is very relevant in the financial world, for as long as the global economy keeps expanding, even the worst economies will be floating.
Since the 2008 Financial Crisis, the global economy has been expanding with the help of accommodating central banks. But as economic cycles go, booms are followed by busts and vice versa. Economists are often criticised for being critical of economic systems but there is a strong element of subjectivity to it. Because, at the end of the day, not all economists pursue the same objectives nor use the same evaluation methodologies.
An economist within a corporation will invariably assess performance based on profitability metrics while another seeking to maximise the welfare of a society will use a whole different array of metrics, including the degree of income inequality, the quality of life of the workforce and so on.
So, while the economy has been muddling through over the last few years, it is important to assess the quality of the growth being achieved and the resilience of the growth model to cyclical patterns. Economic models cover a wide spectrum and are guided by ideological conceptions. For example, the mercantilist economic model, predominant in the 18th and 19th centuries across European colonies like Mauritius was based upon exploitation of land and human resources for the sole purpose of profit maximisation.
Under such a system, the labour force was to be given the strict minimum such that its productive capacity remained intact. There was no consideration to be given to the quality of life of the labourers apart from that. No concept of societal welfare maximisation was to be incorporated in such a model. Based on that premise, any economist who criticised that economic model from a welfare perspective would have almost always been wrong.
Coming back to our present economic model and going beyond the fallacy of economic growth, there are numerous reasons to be concerned about the recent trends being displayed within our new economic model. Gentrification of the local population is beyond doubt a major issue which is worsening by the day. Most Mauritians are today priced out of the housing market with international millionaires bidding to secure premium properties all across the island.
At the same time, the cost of living is absurdly high as a constant depreciation of the Mauritian rupee since Independence has rendered extremely onerous our mostly imported consumption. A recent study ranked Mauritius as one of the 50 most expensive places to live on the planet! And this will get worse over the years given the structural recurrent international trade imbalance which has never been properly addressed – as it is not in the interest of the domestic capitalist cronies running the show. And let’s not forget, the tide is yet to wear out…
* Besides public debt, slowing growth, widening inequality gap, etc., there are also challenges in different sectors – in energy, sugar, global business… Are there alternative solutions to what have been applied traditionally within the framework of the present economic model?
If you were to ask the policy shapers in Mauritius, they are likely to echo Margaret Thatcher’s slogan: There Is No Alternative! In effect, they have been brainwashed into thinking so by the ruling economic class.
One typical example is the obsession of government officials with Foreign Direct Investment (FDI). Speak to anyone about the local economy, and invariably the necessity for a country like Mauritius to rely on FDI will be paraded as the absolute truth. But is it actually the case? Does the recurrent trade deficit arise from an actual inability to be self-sufficient on multiple counts or does it arise from an economy already moulded to be an export-oriented player?
If we could draw our inspiration for our Constitution from the British Constitution at independence, don’t you think that our economic model could have been inspired from a colonial model? Had we been given a clean slate at independence and been asked to come up with an economic system to satisfy our societal needs, it is an almost certainty that we would have come up with a different economic model.
What I mean to say is that at independence, we did not only inherit British institutions and rule of law but also a colonial economic model. It is with this in mind that I refer to our current economic model as a neo-mercantilist one. We touched on mercantilism earlier and in a nutshell, it is a model that is furthest from the notion of a fair and integrated society. Neo-mercantilism is but a modern version of this model whereby colonial power has been substituted by a local elite whose main mantra is There Is No Alternative!
The average Mauritian has been conditioned into thinking that the current economic model has been instrumental in significantly improving his quality of life. While it would be absurd to suggest that Mauritius has not experienced real growth since independence, the magnitude of such growth is certainly overestimated.
The purchasing power of the Mauritian Rupee has never been weaker on international markets and this is the trick behind the Mauritian economic miracle! While the average civil servant earns almost ten times more today than in the 1980s, do you think he/she actually enjoys a higher quality of life after taking into consideration inflationary pressures and the constant weakness of the Mauritian Rupee?
Had we been consuming locally produced goods and services, the reality would have been different but when an economy cannot be self-sufficient even in terms of food consumption, the value of the currency on international markets matters greatly! And yes, the Mauritian Rupee has never been so weak. There Is No Alternative!
* On the other hand, besides the concern about the law and order issues which cuts across all sections of our society, we hear more and more about young people seriously considering emigrating to countries like Canada and Australia – as it happened in the past — and a growing number of young professionals moving away from public schools and investing in private education for their kids. Aren’t these indicators of loss of faith in the country equally important?
A growing number of Mauritians are disillusioned by their homeland and more precisely its decision makers. I’ve heard many stories over the years of fellow citizens, mostly of the younger generations, leaving the island for good. It’s a bit sad to be honest that most prefer to turn their back on the country instead of staying and fighting for their ideals but also understandable to some extent. It is a bit of a vicious circle in that the more people leave the country, the more elusive progressive societal change becomes. I wouldn’t term it as loss of faith in the country but rather loss of hope that things can change.
With respect to parents opting to send their kids to private schools as opposed to public school, this is a reflection of the progressive demise of the welfare state. It’s the consequence of a few generations of Mauritians being conditioned into thinking that ‘private is beautiful’. It is the same conditioning process that makes Mauritians think that privatisation is better than state ownership.
Firstly, the corrupt nepotist politician places his/her people at all hierarchical positions. Then, successive politicians replacing the first one adopt the same practice. And finally, the same politicians who have maneuvered to leave the state-owned enterprise in a dismal state will come forward with the crony privatisation proposition for the greater good of the nation.
If we have a look at tax havens around the world, we will notice that the same pattern which happened in those havens is slowly but surely materialising here. The 1% does not want to have anything to do with the welfare state. Their school of thought is very simple: I can afford everything I need privately, so why the hell do I need to contribute for others?
It’s basically an application of the law of the jungle in stark contrast to what underpins the ideology of society itself. If a millionaire goes through the hassle of relocating to another country to optimise his fiscal bill, do you think he gives a damn about the local population of the country which he has adopted out of financial convenience?
* As regards the education issue, the 2019 SC results have been widely debated in the past weeks. Some people have been saying that our current education system is creating, despite all the money that is spent on every student every year, a “masse d’illétrée” at the end of 18-19 years, but it does appear that we are “in deep trouble” given the country’s ambition to be a knowledge hub, doesn’t it?
There is certainly cause for concern with regards to the drift in our education system. It’s a thorny issue for which there is no panacea unfortunately. Taking into consideration that a flawed education system more likely than not translates into a flawed society, it follows that finding the right formula is key to addressing many of the societal ills of our society.
I am a strong advocate of a ‘leave no one behind’ policy whereby the weakest elements within the educative system are given the adequate attention required. ‘A society will be judged by how it treats its weakest members.’ Those words were pronounced by some great charismatic leaders and they are worth their weight in gold. Imagine we had an education system whereby the weakest member could successfully complete his/her secondary studies. That does not boil down to a somewhat sterile debate around 3 or 5 credits at SC level but rather to embracing an education system which provides continuous and assiduous assistance and guidance to all students, irrespective of social class.
Rezistans ek Alternativ proposed limiting the number of students to 20 per class and doubling the budget for the education sector in its electoral manifesto. And we should aim even higher. Can we deem that a student who has earned SC credits in French, English, mathematics to be educated? What about the student’s behaviour in society, her attitude towards the environment, his ability to think critically, her attitude towards the law, his idea of being a good citizen?
Education cannot limit itself to the boundaries of academia but has to be imagined in a holistic manner. The aim should be that a good student becomes a good citizen. The rest will follow…
* What are your views about the current state of affairs then?
The new government has had its honeymoon period whereby a new team is allowed to settle in and make their first moves. We’ve had the chance to see some of the new political faces in action and the general feeling is that they are unfortunately not going to be the refreshing change we have been hoping for.
Personally, I did not expect too much from them but the feeling out there was that this new team would be something else. While it is probably too early to make a definitive judgement, the preliminary perception is not positive. A point I would like to touch upon and which was bizarrely not tackled by our political analysts and pundits is that this government is by far the most unpopular on record to be elected. By unpopular, I do not mean that they have become unpopular through their acts or anything of the sort. I am simply referring to the actual support they garnered from the electorate at the latest elections.
I have been a constant critic of our electoral system over the years and the 2019 general elections shaped up to be a textbook case of one of the shortcomings of our electoral system. In a democracy, the majority is always right and thus in an electoral contest, the majority should always be the winner. Can the actual government claim to be the democratic winner with only some 38% of the votes? When more than 6 electors in 10 did not vote for the actual government, can we feel democratically vindicated?
Since Independence, the lowest popular support a government had was 48.50% in 2005. In 1976, when we had a three-cornered fight, the post-electoral agreement between the PTr and PMSD implied a 54.60% popular support from the polls. In 2019, we are talking about a coalition with 38% of the votes being in power! Talk about a democratic let down.
The thing with electoral systems is that you cannot refer to historical outcomes only to assess their suitability. All possibilities (even those which never happened before but are plausible in the future) should be tested and then only can one say that a system is valid or not. Our current electoral system is unfortunately not a democratically valid one. We just had the proof of it but it could even get worse in the future.
In a four-cornered fight (which is increasingly an occurrence in many democracies around the world), there is the possibility that a party could be in parliament with say 28% of the votes. Is that the kind of democracy we want to represent? The reason why we did not have this democratically weak scenario until 2019 is down to one main factor. Many predicted the MMM to be a kingmaker ahead of the elections in November. This did not happen. In effect, the MMM was too weak to become a king and too strong to be the kingmaker. That is most probably why the 1976 scenario did not materialise.
Given its weakness, I fully expect the current ruling government to consolidate before the end of its five-year mandate. Either it will add another mainstream party to its ranks but more likely than not, it will poach prominent members of the opposition to add to its ranks. Should it not do this, it faces the risk of receiving a battering at the next elections.
* Published in print edition on 28 February 2020
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