Mauritius’ economic development is an astonishing feat that few countries have been able to achieve. Starting with nothing but its sugarcane cash crop, it recently emerged as a middle-income economy in what seems to be less than 3 decades.
A recent article that appeared on the African Times cited Mauritius as being the richest country in the continent, which isn’t surprising given an income per head that amounts to a whopping Rs900 000 ! Of course, realistically speaking, it’s a mere average of the wealth accumulated throughout the glorious high performing years but it does give us a glimpse into what we’ve done as a country and where we’re headed.
What role did the government play in helping the country advance economically? Let’s just say, a myriad of roles. The task of liberalising the economy and opening it up to trade and tourism has been the government’s magnum opus in the mixed economy to date. Through lax regulations and a business friendly economy, our country has prospered immensely but it was mainly the trickle-down effect of our government’s fiscal policies that enabled the ‘economic miracle’ to take place.
The government is responsible for maintaining the social order as well as the economic balance but its roles as far as the economy is concerned are extended beyond the conventional requisites of an economic watchdog. The government has been the negotiator of deals that oversaw the partial sale of companies like Mauritius Telecom, the recently approved Metro Express project and countless other big deals.
The government has also attracted the ire of the public for its needless meddling in pecuniary affairs such as Heritage City which drew a considerable loss! More-so, budgetary overviews have revealed that the public sector is quite incompetent when it comes to handling its finances, such as the failure to ensure supervision over budgetary allocations.
So the role that the government plays in our economy takes different forms, but it’s not always an Oscar-worthy role, per se.
The History of the Government’s involvement in Mauritius’ Economic Miracle
Our government’s expansionary, free-market visions for the economy were the driving force behind our extraordinary transition from a low-income economy to a middle-income economy. Despite a relative lack of resources, we’ve been able to monetize on our human capital as well as our natural backdrop, turning it into one of the primary sectors of our economy. MSM’s win in 1982 was the culminating point of decades long of misery and poverty, it was because of their liberal attitudes towards trade that Mauritius saw its first bout of industrialization. After the textile industry took off, it was a matter of time until the economy was attractive enough for multinationals to set up camp.
As far as economic growth is concerned, there are 2 main ways in which Mauritius has progressed, through the emancipation of its main asset, its labour force and technological progress. By making education accessible to all students in 1976, the government ensured better prospects for its constituents. This forward-looking policy has helped hundreds of thousands of people to educate themselves and become specialists, a field that is growing quite fast. Indeed, our service-based economy is yet another pillar that the government has been directly responsible for.
Moreover, the socialist part of the government that oversees the progress of public institutions and entities has helped better the lives of our citizens. By making healthcare accessible and free to all, not only does the government provide state-of-the-art healthcare, it does so while a supposedly advanced economy like the U.S is still debating how to resolve their healthcare crisis. So, for a tiny island nation, we can be proud of our government who maintains a good balance between the social and the financial spheres.
All of this has been possible due to the first seed that was planted back in 1982. A liberalized economy and a capitalist stance whilst maintaining a social balance were made possible by an optimistic government.
The Advantages of a Mixed Economy
An economy where resources are co-owned by both the government and the private sector is called a ‘mixed economy’ and it has both its advantages and disadvantages. One glaring advantage is that with the right philosophy, a government can help humanity advance in countless ways, such as the economic miracles not just in Mauritius, but in China as well, a country that suffered massively from Mao’s Great Leap Forward but recovered miraculously after adopting a capitalistic stance in the economic sphere.
Of course, they are full-fledged communists when it comes to the political ideologies but their economy is in a way diametrically opposed to communist values. If anything, theirs is a mixed economy, with business flourishing due to little to no regulations.
Such has been the case for Mauritius as well. The philosophy that our government has adopted is laudable to say the least for it prioritizes economic development in tandem with human development. It’s gutsy and admirable to put the people on a pedestal and by making education accessible and cheap to the mass, thousands of people got out of the poverty trap that their ancestors were confined within.
Not only do we boast a skilled workforce, but the development of the IT sector has made Mauritius a significant cyber hub in Africa and in the Indian ocean. The policies that the government enacted also attracted foreign direct investors and big shot multinationals, providing employment to thousands of people who would otherwise be unemployed. In the Tourism field, by advertising Mauritius as the paradise island ad infinitum internationally, it’s almost always preceded by its moniker when spoken of, a testament to an arduous and successful campaign.
The task of modernising the economy is a daunting one but the government is intent on making the public transportation system less of a nuisance and more of a futuristic, modern way of commuting. It goes without saying that the government’s direct hand is guiding all the resources into worthwhile projects, a very Keynesian way of doing things per se. Adam Smith’s ‘invisible hand’ cannot always be trusted.
The Disadvantages of a Mixed economy
Our mixed economy has been the precursor for all our successes but it’s also faced constraints because of lobbyists such as Youshreen Choomka, who it was revealed, was pocketing an ostentatious salary for dubious work. It seems like every month or so, allegations of corruption and bribery surface to vilify the government even more. Russia is notorious on the international scene for the hundreds of oligarchs who share the wealth and the power whilst millions struggle to make ends meet. It seems like Mauritius is on its way to join their ranks.
As mentioned earlier, we’re supposedly the richest country in Africa, yet all the wealth is concentrated in the hands of a few. Even though our nascent economic miracle has helped better the lives of hundreds of thousands of people, it has also paved the way for extreme inequality that starts with the government itself! While they do negotiate deals that seemingly help the country as a whole, they also squander huge sums of taxpayers’ money by employing unqualified people at the head of parastatal organisations and by misallocating resources.
The Audit report of the last cycle shone a light on the incompetence of the public sector, revealing odious details such as the remuneration of secretaries that amounted to 2 million rupees or the millions of rupees that get lost in hospitals each year. It does seem that the private sector fares better as they do have the profit motive as an incentive but the government seems to be scraping the bottom of the barrel in that regard.
The government’s inefficiency in the public sector shows a failure to use proper cost-benefit systems and common sense. The lack of profit motive also worsens their performance it would seem. But in the private sector, there’s always an enthusiasm that makes up for the lackluster performance in the public sector.
However, taxpayers suffer from this lack of initiative and it’s the oligarchs who gain from the government’s business deals. The recent dismantling of the BAI Corporation caused a ripple effect that led to hundreds of people losing their jobs and thousands of people losing their investment portfolios. The government had zilch to offer in compensation even though the Ponzi scheme they claimed BAI used was a fake allegation.
If Mauritius ranks high on indexes such as the HDI and the GINI, it’s due to a protracted effort by the government to propel us to the top and while there’s still a long way to go, they have done a good job thus far compared to our African counterparts whose governments are autocratic and corrupt beyond words.
However, the government’s role should only apply as long as it’s advantageous to the public, since they should be acting in the public’s interest. Recent studies have revealed inefficiency and incompetence in the public sector, which should be dealt with post haste if we want to become a high income economy.
The government’s fiscal policies have evidently helped the economy thrive but constant meddling and appointing government friendly agents can disrupt the course of otherwise intelligent policies.