Ian Boyne, Contributor
A POLL last week showed that any party which is to win the next general election must appeal to a substantial section of the 30.5 per cent of the people who say they will be voting on issues rather than party loyalties. With the large percentage of uncommitted voters in Jamaica, therefore, the parties had better realise that histrionics, polemics and mud-slinging will not be enough to swing those voters.
After all the scandals have been uncovered and the charges of corruption traded, we will still be left with the vexing question of how do we deliver economic growth and social development in Jamaica. What are the strategies which Jamaica needs to pursue to deal with its seemingly intractable economic and social problems, primarily the lack of economic growth, poverty, unemployment and crime? Are there "models" from which we can draw lessons? What is the way forward?
In the last week of Black History Month, I want to focus on a country whose economic transformation and "miracle" is little known. This country stands in stark contrast to fellow African countries mired in economic stagnation, poverty and social decay. I refer to the small nation of Mauritius, one of only two African countries ranked among the top 50 in the UNDP's Human Development Index. While much attention has focused on the Asian tigers, Mauritius' example of economic buoyancy has in a number of ways been even more impressive and salutary to the developing world-especially small island economies.
As the Cabinet meets over this weekend to fine-tune its economic machinery, members would do well to glean some lessons from this dynamic economy, and the JLP's Audley Shaw should take a little time out from prying open closets with skeletons (a very important activity, mind you), to learn what is needed to grow an economy.
FASCINATING
The case of Mauritius is fascinating. A Nobel prize-winning economist, James Meade, in 1961 totally dismissed Mauritius' economic prospects, asserting "heavy population pressure must inevitably reduce real income per head below what it might otherwise be. That surely is bad enough for a community that is full of potential conflict. The outlook for peaceful development is poor." Mauritius, with a population of approximately 1.8 million persons, attained independence in 1968. Between 1973 and 1999, real GDP grew on average 5.9 per cent.
High growth rates have been combined with macroeconomic stability. Between 1973 and 2000, consumer price inflation averaged 7.8 per cent per annum, compared with 25 per cent in Africa. Employment growth was also impressive, with unemployment declining from nearly 20 per cent in 1983 to 3 per cent in the late 1980s. Indeed, Mauritius has found itself with more jobs than job-seekers and was forced to import workers!
Out of a working population of 505,500 about 10,000 are overseas workers. In 1970, GDP per capita was US$700. By 1996 it had reached $3,400. Exports stood at US$1.7 billion in 1999. Even more significant than these indices of economic development has been the fact that the Mauritius story is one of growth with equity. Life expectancy at birth has increased from 61 years in 1965 to 71 years in 1996. Primary school enrolment increased from 93 to 107 per 100 children of school age between 1980 and 1996 (while it decreased from 78 to 75 in the rest of Africa). Income inequality has also declined significantly.
In an IMF Working Paper titled: Who Can Explain the Mauritian Miracle: Meade, Romer Sachs or Rodrik? Arvid Subramanian and Devesh Roy, note that the Mauritian economic performance has been sustained by OECD-type social protection. "This has taken several forms: A large and active presence of trade unions with centralised wage bargaining; price controls especially on a number of socially-sensitive items; and generous social security. Unlike the OECD countries, however, generous social protection has thus far not necessitated high taxes."
It is important to look at the things which were stacked against Mauritius initially: A monocrop (sugar) economy prone to trade shocks; with a rapid growth in population plus susceptibility to ethnic tensions. In 1970 its share of commodities-to-exports was approximately 30 per cent while for the rest of Africa it was an average of 18 per cent. Besides Mauritius is 25 per cent further away from the world's economic centre of gravity than the average African country and 30 per cent further than the average developing country. No wonder Meade dismissed Mauritius' prospects for economic development.
OPENNESS
What made the difference? Is it Mauritius' acceptance of the Washington Consensus-free markets, liberalisation, trade openness, neo-liberal economics? Indeed, there was a high degree of openness. But contrary to the free market purists, Mauritius practised what Harvard's Dani Rodrik called "heterodox" opening. The average effective protection in the Mauritian economy was 65 per cent at the end of the 1980s. "Mauritius is not the poster boy for the Washington Consensus", say IMF economists Subramanian and Roy in their IMF Working paper, Who can Explain the Mauritian Miracle: Meade, Romer Sachs or Rodrik? "The data suggest that Mauritius would not have met the two criteria-relating to average tariffs and coverage of quantitative restrictions-that Sachs and Warner deemed necessary for classifying a country as open". This is a most significant statement coming from economists associated with one of the two most conservative of multilateral institutions. Rodrik is right: Mauritius had a creative mix of policies and rejected the purist neo-liberal model. But the authors of this well-researched, cogently argued IMF Paper show that external factors played a significant part in Mauritius' success.
Preferential access for two of its most important exports sugar and textiles helped considerably. These products accounted for some 90 per cent of Mauritian exports. Since independence in 1968 Mauritius has had a guaranteed market for its sugar into Europe. Foreign investment poured into Mauritius because of its guaranteed access into the United States market. This again demonstrates the far-sightedness of Michael Manley who understood clearly that the international economic order had a profound effect on national development and that unless the Third World could get certain trading and financial arrangements in place, its prospects for growth would be severely restrained. "Had these industrial countries liberalised their markets it is quite likely that Mauritian trade performance would have been quite different" say the authors of the IMF Working paper.
Foreign investment in the export processing zones (or freezones), also played an important role. But noteworthy is the fact that some 50 per cent of the total equity of the firms in the freezones was owned by Mauritian nationals. So the Mauritians demonstrated confidence in their own economy. But other developing countries (like Jamaica), have had preferential access to export markets as well as attracted substantial freezone investments without that translating in economic transformation.
What they have lacked, the IMF Working Paper shows, is efficient and appropriate domestic institutions. The quality and integrity of domestic institutions have a lot to do with reducing the corruption, favouritism and rent-seeking which retard economic development. The way the ethnic groups have built consensus has been a major factor explaining the Mauritius' success, say the IMF economists.
Mauritius' overseas Chinese have used their ethnic ties to pull substantial Chinese investments into the economy hence the country's ethnic diversity, rather than being a source of conflict, has proved to be a source of strength. Jamaica's divisive, contentious, zero-sum culture would militate against all that.
"The cash cow in the case of Mauritius was the sugar sector owned predominantly by the French community. On the one hand, it was far-sighted of the majority of Indian community not to have nationalised or heavily taxed this sector. Equally the economic elite-the French-exercised their clout and ensured that an adverse outcome to them did not result." It is precisely this kind of consensus-building, political bargaining, give-and-take, and win-win situations that we are ill-equipped for. Unless the social capital can be raised, our prospects for economic growth will hardly be encouraging.
The Mauritian story is inspiring but not replicable for developing countries in this WTO-governed world of liberalised trade. For countries like Jamaica with a high level of mistrust, fractiousness and social and political disharmony, the challenge is even greater. The big talk in development circles these days is of the importance of domestic institutions.
But as a recent World Bank paper On 'Good' Politicians and 'Bad' policies: Social Cohesion, Institutions and Growth puts it, "The strength of institutions itself may be in part determined by social cohesion We therefore propose that key development outcomes (the most widely available being economic growth), are more likely to be associated with countries that are socially cohesive and hence governed by effective public institutions".
So perhaps the heated discussions about corruption in Jamaica needs to be informed by a wider discussion of the imperatives of development.
