The chance of a real rethinking of our economy

(Published in Weekly no.421, 8-15 Oct 2020 and l'express 13 Oct 2020)

The Mauritian economy, in deep distress, scarred by job losses, salary cuts and lost livelihoods, is going through one of its toughest phases ever. It was already struggling and was in the midst of a slowdown when Covid-19 pushed it over the edge. A pall of uncertainty now hangs over the economy as it tries to sporadically limp back to normalcy. The extreme disruption caused by the pandemic is also an opportunity for the government to reset the economy and turn adversity into opportunity. It has injected a sense of urgency around discussions of economic growth and the economy and daring suggestions to rebuild a post-Covid economy. 

This week some top economists have provided a whole alphabet soup of recommendations and policies that will be needed to shape the recovery - a lot on government policies, the pace and nature of reforms and the level of government interventions. Some of these seemed to have been lifted directly from different IMF article IV documents and WB’s diagnostic studies of the Mauritian economy. For some of them, Covid 19 was just a passing phenomenon; everything will be back to normal and we will go back to business as usual and we will continue applying the traditional IMF and WB prescriptions and remedies like business facilitation, liberalisation of air transport, unlocking our potential comparative advantage à la Korean and managing the decline of sunset industries, etc- which we have tried umpteen times resulting , time and again, in a lopsided weakening economy with its huge and widening disparities of income and wealth.This has impacted on the trust of the common man in the country's economic system.(A reply to our PM-Sak fois ki nu réussi à faire gato-la grosi, corporates finn gayn enn pli gros par, malérezman Lepep so par gato-la li continué retréci, pé vinn pli tipti tipti”)

 

The current recession is not caused by business cycles and if we start implementing the list of proposed policies that are more suited to business cycle recessions now, we might later find that we were barking up the wrong tree. Covid-19 has prompted many countries to revisit their development goals. Dennis Snower, President of the Global Solutions Initiative, in his opening address to the Global Solutions Summit 2020, reminds us of the lesson that we must take into the post-Covid-19 world: ‘The time has come to mobilize this goodness in our midst, rather than drive it to the sidelines through institutions and incentive systems that reward selfishness and predatory competitiveness. The time has come to re-evaluate the appropriate goal of business; the goal of our economic activities; the goal of our ideologies and social conventions; and the goal of our local, national and international governance structures. The pandemic shows us that the goals of all these domains must always be the same: contributing to the fulfillment of human needs and purposes.” 

 

With globalisation in retreat and rising protectionism, the Covid-19 crisis has demonstrated the relevance of a sustainable business approach: the companies and countries that already started to shift away from stranded assets are actually the ones that are showing more resilience in the crisis. For instance, countries with economic models that have wellbeing indicators rather than GDP as their main economic indicator, such as Iceland, Scotland, New Zealand, Finland and Costa Rica, are emerging from the acute phase of the crisis with less economic hardship than other countries.

There is this tendency here to want to rush back to normal. But there’s also a very narrow window of being able to say: ‘Is normal really what we want to rush back ? The economic elite, the intelligentsia and their newspeak, the mainstream press, smug in their echo-chambers, have imposed upon us the present economic model and the the tyranny of “no alternatives”.

Why are we not questioning the very basis of our development model -a failed economic system that doesn’t deliver for large parts of the population. It is a model that cannot extricate us from our current inegalitarian low-growth economy because it encourages private sector connivance with the public sector resulting in rent-seeking activities, restrictive markets and crony capitalism.

 

Why do we have to continue with the smart cities and real estate schemes with the result that a large part of the population is being crammed into smaller and smaller and relatively poorer areas? Why do we continue to graft on our economy imported concepts of economic development like the tax-centric Global Business Sector and unproductive FDI inflows that have not delivered in terms of competitiveness, technology, management know-how and jobs ? But is this what the population really want or is it a development model imposed on us by a detached ruling elite out of touch with ordinary people’s lives, realities and hopes? -A model of an unhealthy coalition between the family-dominated political elite and the island’s few families-dominated economic elite whose policies have remained too eurocentric, and have thus been hampering our diversification strategies in markets and products. The tourism sector, our Africa and IT strategies are paying the price today. Digital technology, for example, is moving at a fast rate often driven by the private sector, leading to doing things in new ways: more bottom-up, more plugged into outside networks and with a greater willingness to accept the risk of failure. But here our private sector is slow to move things up a gear. Where are the new emerging local and global services industries? Is our family-dominated private sector too conservative, too claustrophobic to open up to top IT firms from India, Korea, China and other Asian economies? 

 

How can we talk about self-sufficiency in food when our strategic land assets are being sold to foreigners when they should have been put to productive use? There is also no coherence in our policies for a more optimal utilization and sustainable use of land and other natural resources, the development of our coastal regions and protection of marine life, agro-industrial production for food security and a thriving fishing industry.

 

This opportunistic coalition is also reflected in the alacrity with which government rushes to the rescue of the private sector in terms of stimulus, subsidies, exchange rate support schemes and cheap loans in the face of any external shocks. This government’s assistance even extends to the interest rates and exchange rate policies. And we are paying a heavy price for that. The low real interest rates are leading to low savings, less productive investments in the construction and real estate sectors and unsustainable current account deficits - the diversion of our scarce resources to unproductive projects. Should we be surprised then that the private sector is not forthcoming with investment in new sectors/pillars? Why ? Because this model of growth is providing them with a more than reasonable rate of return on the low-hanging fruits.

 

And some of the recent “ regards croisés sur l’economie”  show how we are still trapped within the box of the old policies and the old ways of thinking !!! There are alternatives to this model of development which are both desirable and workable. Alternatives which are actually far more resilient, sustainable and inclusive, far more oriented towards achieving quality growth than the race to the bottom and far more targeted towards improving happiness and welfare indices rather than the Doing Business indicators. -an alternative model of development with ample creative ideas on “land democratization”, import substitution, the local economy, food security, the SME sector, culture, education, sports, the fishing industry ,….while integrating environmental constraints. Truly major reforms await the country, things that were not tried in the past. When economic actors rethink their activities and financing models around more sustainable frameworks, social and environmental objectives are not only complementary, but also more innovative and more resilient across their value chains in the long term.

Hopefully, more and more Mauritians are becoming cognisant that we should not be returning to a pre-Covid world and that there is the urgent need for Mauritius to adopt a new model of development to thrive in a Covid-19 world.

 

, Prakash Neerohoo, Rajiv Khushiram and 7 others