Anil Gujadhur

Mauritius in the Globalised World

Do we stand to lose out a significant strength globalisation conferred upon us?

Anil Gujadhur

The dominant theme at this year’s IMF-World Bank annual meetings which opened in Washington DC on Friday 7th October is the fate of globalisation. This means the prevailing trade and openness of economies are being challenged. And something has to be done about it.

Globalisation was the successor some 40 years ago to social-democracy (social emancipation, workers’ rights, labour unions, welfare spending, mixed economies,…) which lasted from WW II up to the mid-1970s. Globalisation and pro-market policies in developing countries have raised equality among countries at the global level. They have induced significant welfare benefits in countries the world over.

The World Bank estimates that globalisation has halved the number of poor people on the planet from 1.75 billion in 1990 to just over 702 million in 2015. It has caused the proportion of people living in extreme poverty to come down from 37% to 9.6% over this period. The world Gini Coefficient, a measure which indicates lesser inequality as it falls towards zero, has improved from .75 to .62. All these positive outcomes have been realised by favouring a freer flow of goods and services, liberal capital flows, and freer movement of people across borders under globalisation.

Yet, there seems to be a backlash against globalisation. Fragile recovery in the West since after the global financial crisis of 2007-08 and its repercussions in other countries have thrown up a highly unpredictable political environment in rich countries such as Britain and the US. Those who have lost out in the last 40 years of neo liberalism associated with globalisation have a feeling that the interests of the working class have been sacrificed in favour of big corporations.

Not only has inequality increased all over. The income of the bottom 90% of the population has stagnated in America during the last 30 years and jobs have become increasingly precarious to hold on to. Some 65-70% of households in 25 high-income economies have seen stagnant or falling income between 2005 and 2014.

This situation has led to a polarisation of forces between globalisers (economic elites) and anti-globalisers (victims of low growth). Countries are being urged to fall back on themselves, introduce protective trade tariffs and barriers, do away with regional trade deals (suspected to be the doing of big corporations) and finish off with neo liberalism. All this is manifest in the Brexit and Donald Trump, also Bernie Sanders, phenomena.

It is the reason globalisation has become such an important issue at the last IMF/World Bank spring meetings. How should governments calm down the backlash and can they do so before the applecart has been upset?

How globalisation produced favourable spin-offs for Mauritius

Mauritius has been one of the beneficiaries of globalisation. Had capital and know-how not come to us in the first instance under this free regime, we would not have seen the take-off of our manufacturing. And, from here to additional new economic activities. Had we not signed up favourable agreements with our trade partners (EU, US, India) and made good use of them, we would not have seen the economy sustained as well as it was during this phase of freer international exchange under globalisation.

Globalisation ushered us into an era of greater transparency and accountability in public life. This had the effect of strengthening our public institutions and setup: law and order, rule of law, non-aggressive settlement of industrial disputes through an array of negotiating panels, uniform and predictable rules applicable to all, free and fair elections, etc.

Not many realise this but it is the assertive independence of public institutions of the country, unalloyed by undue political interferences, that has distinguished us from many others, in our immediate neighbourhood and elsewhere, who could not make it during this phase of global liberalisation. The pervasive influence in public life of strong public institutions has been the single most important factor in the remarkable uplift of our economic life in the 1980s. Globalisation put pressure on countries to discipline themselves, open up and align their institutions to the highest global standards.

Unlike other resource-rich neighbouring countries, the fact that the economic lever and the political lever have remained not in the same hands, has also proved to be a benediction for us to take advantage of with the opening up of global markets.

There was enough separation of powers for the two sides to work constructively. Policies were predictable. Politicians of all sides did mess up to an extent but not enough to dilute significantly this critical institutional strength inherited from the previous British colonial administration and then, under the impulsion of global forces, to abide by non-interference in the effective working of public institutions.

More to the point, the independent functioning of our public institutions permitted them to act on time. They dealt with the available information to ensure that early warnings were acted upon on time, that we were state-of-the-art in keeping to globally acceptable standards of public conduct.

Electricity supply was regular and not subject to disguised systematic load shedding; water supply was sustained; the infrastructure kept being upgraded; warning signs were acted upon and not allowed to uncontrollably degenerate; applicants knew what conditions they should objectively satisfy to get authorisations and licences; economic agents could confidently take risks; contracts were cast in stone.

When potential problems raised their head, the independent institutions acted swiftly enough to avert the danger, comply with international norms and tackle the problem before it put our economy and good international standing in jeopardy. Public servants could freely tell politicians when they were unduly intruding – and the latter were reasonable enough not to invest the institutions with their own personal cravings or to subvert them to serve private political agendas.

This is why figures show that between 1977 and 2006, our GDP grew at the average rate of 5.2% per annum. Despite globalisation continuing just the same until the present threat to its potential folding-back, our growth rate has plateaued around 3-3.5% and even slowed down thereafter. To be fair, the whole world is gripped in a downturn since 2008 so we should expect not to be doing as well as in the past. Somehow, however, we are still looking for a clue on how to make the break from the stagnating situation.

It is important not to lose this important structure of strong and independent public institutions inherited from the last phase of globalisation, albeit we need not accentuate its negative aspects and invite the revolt its unfairness has been raising in the bigger economies. Neither should we set out to build the economy by destroying it first. Nor should we make it an agenda of “people for growth” in lieu of “growth for people” as far as the economy is concerned.

For the moment however we know not whether the doors which opened up for our prosperity in past decades will close upon us due to anti-globalisation.

Anil Gujadhur

Tags: Anil Gujadhur Mauritius IMF-World Bank Globalisation Gini Coefficient Brexit Donald Trump