Thursday, July 28, 2016

Basu Says Mauritius Doesn't Save Enough

He is the Chief Economist of the World Bank. Too bad he didn't visit us before two Voodoo economists -- one hailing from the Bretton Wood sisters -- started messing it up with their trickle-down economics in 2006. But he could have looked at a chart or done his homework. Then again one of his predecessors didn't exactly dazzle us when he visited Mauritius. 

A Trillion Rupees of GDP Missing, Almost

With respect to the robust growth trajectory that Sithanen's flat tax was supposed to place our economy on. The shortfall was about Rs5 billion in 2006 but has been growing exponentially because we managed only a 4% average growth over the last decade. Add all the shortfalls -- shown in red in the above chart -- together and you get Rs927 billion. That's greater than our GDP for 2006, 2007 and 2008 lumped together by almost Rs200 billion. Or a little more than three times our 2010 domestic production. The cumulative shortfall at the end of 2016 will likely be a tiny bit larger because the growth forecast has been revised downwards.

Of course a smaller but still gigantic toohrooh has helped eject Ramgoolam from power and Parliament in 2014. By the end of this year it would have grown by 72%. A meaner beast that Pravind Jugnauth must absolutely tame tomorrow to avoid political mayhem in a couple of years. At most.

Wednesday, July 27, 2016

How Long It Takes To Eradicate Poverty

Back in October 2007 Sithanen, as Minister of Finance, declared that it was possible to eradicate poverty within seven years that is by 2015. This hasn't happened. Last week he made another prediction: that poverty could now be eradicated by 2026 or 2031. Why didn't we make poverty history last year? Is it because Sithanen was not Finance Minister after 2010? Not really. Because the main plank of his reforms -- the flat tax -- was still in place after he had left. And because his other toxic half who was not sacked before October 2013 kept himself quite busy with their agenda of screwing up Mauritius. Besides, some of the damage done by the bean-counting duet will take a lot of time to fix. Just look at our domestic savings. In any case as the above chart shows Statmu reported that an additional 22,000 people became poor over five years of his reforms. That's forty-four times more people than after Navin Ramgoolam's first term.

So how long does it take to eradicate poverty? You can start your stopwatch once you bring back policies that make sense. Income distribution will improve overnight with progressive taxation. We can also look back at our history for clues. Krugman told us that the American middle-class was built in seven years. We shoul aim to make the economic system dynamic enough so that poor people can move up the social ladder fast. Like it was before 2006.

Friday, July 22, 2016

Robust Growth Targets Never Reached

The basis for flattening our tax structure to 15% was average growth rates of 8%. We know it had to be higher than the 5% our economy had been clipping for ages and with higher top tax rates. This makes sense. It's like a business which was previously growing at 5% and had a gross margin of 20% decides to cut that margin to 15% thinking it can grow at 8%. It would go for something like this if it wanted to increase its market share. A predator would of course raise prices after and if it had managed to drive its competitors out of business. For example now has physical stores. 

But as the above chart shows we never got the 8% growth rate in any of the ten years since Sithanen starting promising them. We got only half that rate on average. Which is less than what we were clocking before tax rates were slashed. And it's not because of the Great Recession which lasted only 18 months. As he had argued. In fact the rates we've been clocking for the past six years reflect the low growth path his massive policy blunders -- implemented to finance his tax-cuts -- has put us on.

Saturday, July 16, 2016

Ambassador Who Made Sure Many Kites Flew in the Air Passes Away

Chitmansing Jesseramsing died peacefully on Thursday, at 82. Educated in Delhi, Canberra, Oxford and Georgetown he was the Principal of Islamic Cultural College before joining the PMO as diplomatic officer just before independence. He opened the Mauritius Mission to the UN in 1968 and then got posted at our Washington Embassy. Jesseramsing progressed all the way to Ambassador in 1982 till his retirement in 1993.

He served a last term between 1996 and 2000 during which his extensive connections on Capitol Hill and at the White House -- he met one William Jefferson Clinton at Georgetown -- along with his knowledge, effectiveness and grit were instrumental for the passage and the implementation of the Africa Growth and Opportunity Act. One of the longest-serving diplomats in the US, his 25-year career spanned seven US Presidential Administrations.

I was a kid when I first heard about him: my dad told us he was expecting a call from Jesseramsing who happened to be in Mauritius. I found the name quite interesting. Essentially because I had recently completed reading the Lucky Luke Adventure entitled Jesse James. I wondered if they were connected. I also wanted to ask him a very important question: whether he knew John Wayne personally. I almost did.

Decades later our paths crossed and we got closer. Close enough to tell him about that question I never asked. And to appreciate how he had used his mastery of one trade to serve Mauritius so well. He will be missed by many. So will his sense of humor. 

Wednesday, July 6, 2016

Galileo Arrives at Jupiter With Telescope in Hand

And he's not alone. Nope, he took two friends along on this super long journey. Essentially to fight boredom. The trio will go around the big planet a number of times to try to figure out how it works. They are not expected to return to Earth any time soon.

Galileo is the Italian fellow who made pithy observations such as "Holy Writ was intended to teach men how to go to Heaven, not how the heavens go."