As inequality, regional imbalance and societal tension heightens, the question still remains of how Mauritius will navigate its external integration into this paradigm shift
By Kannen Ramsamy
The effects of globalisation – the clue being in the word – have spread across every corner of the earth. So when people think about economic integration, it is normal that they should think about integration into the increasingly interconnected world economy. Mauritius has enjoyed many of the advantages that have come with a shift to a globalised economy over the past few decades. But it is important for the newly elected government and business leaders to remind themselves once more of the distinction between external integration and internal integration.
External integration concerns itself primarily with international economic relations and trade. For much of the modern age this has equated to embedding one’s country into the American and European vision of a liberalised global economy, characterised by low measures of protectionism (aside from Intellectual Property protection) and the free flow of goods, capital and services in a comparative-advantage arena. More recently there has been an understandable attempt by Mauritius to shift away from the European sphere of power and forge stronger relations with ASEAN, as attested to by the new Free Trade Agreement with China that was signed last month. Overall Mauritius has garnered a highly positive reputation in the field of external integration, often cited as a ‘great place to do business’ on the international stage.
“With the real-estate sector being touted as key industrial field for Mauritius’ future growth, tax incentives and refunds have been formulated in order to facilitate large-scale speculative development by international companies. Yet these initiatives are such that ultimately only a handful of foreign companies, foreign individuals and Mauritian elites benefit. Meanwhile national integration fragments. Regional production takes major hits as resource usage tracks a non-domestically orientated real estate market and deploys unevenly, while decent affordable housing shifts further and further away from the reach of the majority of citizens…”
Conversely, internal integration is concerned with maintaining a rich ecosystem within national boundaries, rather than being concentrated on exports and attracting foreign capital. Strong input-output linkages are formed between the productive industries of rural communities like those in Flacq and urban populations like those in Port Louis. Policies are geared to generate a structure of demand where national wage earners are able to consume a significant portion of national production, thereby integrating domestic wages, production and consumption. In doing this the benefits of sustainable wages to capital owners, the state and workers becomes interconnected on a national level, thus providing fertile ground for the development and continuation of institutions focused on political inclusion and a fair distribution of wealth.
The aim is of course to sustain economic efficiency by finding an appropriate and complementary balance between both forms of integration. I’ve written previously on the economic prudence historically demonstrated by Mauritian government and business, which had balanced integration at the heart of policy-making. But we can begin to see quite clearly the ways in which Mauritius is slipping into a narrow and elitist functionality, where external integration into a globalised world is eroding beneficial internal integration. This should serve as a warning sign to the newly elected government in power.
Take the current policy approach to property development and real estate as one example. With the real-estate sector being touted as key industrial field for Mauritius’ future growth, tax incentives and refunds have been formulated in order to facilitate large-scale speculative development by international companies. Yet these initiatives are such that ultimately only a handful of foreign companies, foreign individuals and Mauritian elites benefit. Meanwhile national integration fragments. Regional production takes major hits as resource usage tracks a non-domestically orientated real estate market and deploys unevenly, while decent affordable housing shifts further and further away from the reach of the majority of citizens.
To dogmatically oppose external integration into the globalised economy would be a self-inflicted handicap. Mauritius has seen huge growth over the past few decades by embedding itself into the global supply chain and there may in fact be no other way to go. But free trade and laissez-faire economics intrinsically creates winners and losers. And over time, if the focus of economic development is placed too heavily on external integration alone, the divide between these two groups becomes increasingly asymmetric. Like we’ve seen in the Mauritian real-estate sector, wealth and power concentrates across an international elite, while hosts of the national population lose out.
Intelligent development therefore consists of ensuring that the nation has the appropriate domestic capacity to buffer and mediate the losses of the citizens who fall behind in the globalisation game. This is the domain of internal integration, which should be formed of a contextual mélange of productive welfare support and strategic protection of certain groups or industries – something Mauritius has excelled at in the past. Ignoring this leads to a dangerous path, as illustrated by the disarray Western democracies are currently experiencing.
Catalyzed by the financial crash in 2008, many of those who support the staunchly nationalist politics of Trump in the US, Le Pen in France and Orban in Hungary, are individuals who have suffered as a result of globalisation. While wealth has continued to flow into the hands of a narrow set of multinational corporations, huge swathes of people in the Western world have seen their living standards stagnate or decrease for over a decade. And with the reduced domestic institutional capacity that comes with weak internal integration, these very people have been left in the political wilderness, without a voice. So they are angry, and when people are in a state of anger, there will always be someone to exploit it.
With this in mind, how will our newly elected wave of policy-makers move? As we progress onwards, China will take the place of the US and other Western states as the centre of the global economy. This works well for Mauritius, which has enjoyed a fruitful relationship with China for many decades and will therefore not experience the fear and agitation that China’s rise has created in the West. But as inequality, regional imbalance and societal tension heightens, the question still remains of how Mauritius will navigate its external integration into this paradigm shift, in such a way that it does not fragment on a national level.
* Published in print edition on 15 November 2019