Zistwar Kadi

Meet Something A Lot Better Than the Gini Coefficient

It’s called share of income growth. It looks at how the increase in GDP over a given period has been distributed among the different income groups. The clip below shows what happened after a most regressive policy was adopted. 

8 Essential Questions Voters in No. 18 Must Ask Themselves

1. Do you like what has happened to your beautiful town or neighbourhood over the past 11-12 years? You know like a proliferation of casinos and all the bad things that come with it.

2. You've invested in the education of your children. Their skills are needed to solve the problems of our country. Are they doing meaningful work and being provided with numerous opportunities to make our country move forward and remain the beautiful garden it has been for so long? Or have they gone elsewhere as too many doors are shut here?

3. Do you remember the wicked plan to turn our country into a banana republic that was hatched by Sithanen, Ramgoolam and Berenger in 2014? Doesn't it look like they will try that again banking on how unhappy Mauritians are with the poor performance of the Lepep government?

4. There's about 1,200 billion rupees of GDP missing from what Sithanen promised for slashing top tax rates starting in 2006. That's more than Rs10 billion of government revenue which could have been spent in every constituency including yours. The Lepep government has also given unreasonable tax breaks. Do you want to have to work harder and for less because of parties like the MMM, Labour Party, MSM and PMSD work for the few and not for the many?

5. Do you remember what happened to the savings plan you built over several years when an incompetent finance minister started taxing your interest income because he had to make the rich pay less taxes?

6. Shouldn't the level of debate in our Parliament be raised so that solid solutions to matters of national interest are found?

7. Our electoral system (FPTP) makes it quite easy for us to keep politicians out of parliament. The MMM, LP and Rezistans ek Alternativ want to remove this right from us with a dangerous modification called double candidacies. Do you want to vote for candidates from such parties?

8. The bottom 70% of households saw their share of the national cake fall to 20-year lows in 2012 while the policies started by Sithanen and maintained by governments with ministers from the LP, PMSD and MSM have thrown a record 22,000 extra people into poverty. Do you want this to go on or do you want to bring sanity back?

Simple Tools To Evaluate Political Projects (4)

Let's bring back the income distribution data from the previous post.

Income share in % 1986/7 1991/2 1996/7 2001/2 2006/7 2012
Bottom 20%              5.6      6.4      5.9      6.2     6.1      5.4
Top 20%                  44.2    43.5    46.2    44.8    45.6    47.5
Ratio                         7.9       6.8      7.8      7.2      7.5      8.8

After Bheenick and Bunwaree had reversed some of the damage of policies of Sithanen, Berenger and Pravind Jugnauth reduce slightly the share of the bottom 20% while they increase that for the top 20% by 0.8%. Finally after the first five years of the Sithanen flat tax the weakest 20% households see their share fall to at least a 25-year low while the top 20% hit a record level of 47.5% after they get an increase of 1.9%. There is little surprise then in seeing the share ratio reach a record 8.8X.

So each time Sithanen has been Finance Minister inequality has increased. After his first stint the top 20% saw their share rise by 2.7% of GDP and his flat tax has handed this group another 1.9% in 2012 while the bottom quintile have seen their share fall by 0.5% and 0.7% after his stints or toxic policies were implemented. Lutchmeenaraidoo, Bheenick and Bunwaree on their side have reduced inequality when they were Finance Minister. At this point in time it is useful to have another look at the different cakes that were baked.

We can see that not only the biggest cake was produced by Vishnu in the five years ending in 1992 but the sharing was also the best for the bottom 20% as they grabbed a 6.4% share. Compare this to the smallest share of the bottom 20% and one of the smallest cake produced in the first five and half years of the Sithanen flat tax. There are other interesting conclusions you can draw from combining these two data sets. Have fun. We'll return with a few more tools.

Simple Tools To Evaluate Political Projects (1)

Aka "projet de societé" or social contracts. An important part of any political project is how big a cake a government will bake over a period of time and how that cake will be shared. The size of the cake is usually measured by something like gross domestic product (GDP) while the sharing by a host of numbers. Breaking down a political project like this will provide us with interesting insights. Stay tuned!

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 should aim to make the economic system dynamic enough so that poor people can move up the social ladder fast. Like it was before 2006.

What's New on The Jag!

We shouldn't worry too much about Brexit. We better focus on the mess we're in. Including raising top tax rates and drastically improving our land use.

Lutchmeenaraidoo will not deliver a second miracle now that he's in another ministry. SAJ didn't either. And don't count on Pravind. Bringing some basic common sense back to policy-making is a good place to start.

Ramgoolam was way too vague about Labour's DNA during a rally organised to mark the LP's 80 birthday. We made it a lot more precise but not before checking how he did on the criteria he listed. It's not the first time Ramgoolam tries to go cerebral.

A good look at income distribution over a 20-year period. Helps answer the following question: who's the better cake-cutter?

Some politicians say that our youth got a skills mismatch. I disagree.

A quick look at the performance of Sithanen from a political perspective.

Enn ti lokasyon pu tiek mo kreol.

And here's a flash review of a few other pieces on The Jag!

Reforms See Poor Make Tiny Progress

Indeed the 10% poorest households saw their real disposable income increase by only 6.2% for the five years ending in 2012. This compares very unfavourably to the huge progress recorded after the first mandate of Navin Ramgoolam as PM -- Bheenick and Bunwaree (BB) were his Finance Ministers. At that time the weakest households of our country saw their purchasing power increase by a very healthy 48.6% -- that's 7.8X the 2012 increase -- over the levels of the preceding half-decade. 

The reforms have been very good for the 10% wealthiest though: their disposable income has surged by almost 30%. Of course the increased inequality has helped Mauritius clock some of the worst growth rates in more than 35 years: 2014 will be the fourth consecutive year with one under 4%. Which is half what was promised to us in 2005. And the basis for the 15% flat tax.

Happy voting!

Why Sithanen Won't Eliminate Poverty

Simply because he's so good at creating it. See, at the end of Ramgoolam's first mandate -- Bheenick and Bunwaree were his Finance Ministers -- there were only 500 more poor people than five years earlier. But at the end of Ramgoolam's second -- I guess you recall who was Finance Minister -- there were an additional 22,000 Mauritians that had been thrown into poverty. That's a staggering 44 times more. Or if you prefer almost 2.5 times the 8,902 votes Sithanen got at the end of his first stint as FM back in the 1995 general elections when his party was routed with a 60-0.

There are only two reasons to create so much poverty. One is you love doing that. The other is you don't have the slightest clue what you are doing. In either case I don't think we want someone with that kind of a skills mismatch to be our next Finance Minister.

Navin Ramgoolam Joins Select Club

As the third of our Prime Ministers to also cumulate the Finance portfolio. Of course the first and most famous member of this very exclusive group is SSR who happened to be our FM at the most famous time in our history.

It's a real pity that Navin Ramgoolam did not take over that ministry back in 2005 as I had suggested when it was already kind of obvious to the trained ear that a toxic politician was doing his level best to send the country to the dogs. Especially when you consider that Mauritius not only had the best growth rates of the past twenty years during the first mandate of Ramgoolam II but the cake-cutting was also a lot more compatible with that of an avowed socialist. But it's true that PMs can sometimes, but not always, get busy. Still, he could have entrusted the ministry to a Rs5 coin and the outcomes would have been a lot better. But let's not cry over a spilled decade. And instead watch how he plays the trump card he's been dealt.

Ramgoolam's Cake

Quite funny to hear the PM on TV say that we first need to make the (national) cake before distributing it. Funny because it's almost nine consecutive years that he's been baking one. That's an amazingly long time to bake a cake -- if you know how to bake one that is -- when you remember how long it took us to defuse the demographic bomb. Or how long it took the American economy to create her middle class.

We know for a fact that the cakes that we've been making since 2005 are the smallest in decades. Which can be attributed mostly to the incompetence of the bean-counting duet. We also know that the poorest segment of our citizens have seen their share of the cake shrink so that those who already had too much can get more. That's complimentary of the regressive effects of the flat tax of the same toxic pair.

Labour should get another baker-in-chief.

2013: The Year in Review (Q3)

July: The book Steve Jobs read once every year. How high should top tax rates be? Bus conductor sues CNT for Rs15 million. Rezistans should ponder over alternatives.

August: How Robin Sharma beats laziness. Michio Kaku on civilisation paths. Civil service hostage of Finance Ministry.

September: Terminal 3 launched to a difficult crowd. Harbour bridge project should be scrapped. Ballmer finds quick way to make a billion: resigning from Microsoft. Inpe zafer ki totalman inprevizib. Wanted: new devil's advocate. Understanding our recent budget deficit numbers. Indian cinema turns 100. Better income distribution is route to shorter workweek.

Read the review for Q1, Q2 and Q4.

Better Income Distribution is Route to Shorter Workweek

An interesting debate.

La Crise Financiere A Bon Dos

Wealthy French See Wish Come True: Pay More Taxes

Indeed those earning in excess of EUR250,000 will pay an extra 3-4% as per the French 2012 Finance Bill. They have probably asked for this after realising that their continued prosperity inextricably depends on average citizens having enough discretionary income to spend. And also because they are the ones who can shoulder the brunt of putting back national finances on a sustainable track.

The French are not alone: billionaire Warren Buffet too asked the US government, earlier this year, to make him pay more taxes. All of this comes after wealthy Germans requested Chancellor Merkel to raise their taxes two years ago when some of them found that they had a lot of money they didn't need.

Rezistans Organises Evening Debate on Poverty

Lefe Savat Leponz Ek Gato Pima Lor Inegalite

Minis finans abitie dir ki li konpran kiete lamizer parski li ti mizer limem ek ki li ti van gato pima dan bazar rozil. Resaman lor radio li fin azute ki li ti osi met savat leponz ziska laz sez an e ki donk ban pov kav kont lor li pu zot refer.

Abe ler nu get distribision reveni nasional apre so premier pasaz kom minis finans de septam 1991 a desam 1995 nu oblize met so parol an dut pu trwa rezon prinsipal kuma sa tablo lao p indike:

1. 10% ban menaz pli mizer (mo sipoze dan sa group lamem truv ban dimun ki met savat leponz e van gato delwil) fin truv zot par reveni nasional degringole par 13%. Apel sa laflam.

2. Tu le 10 grup menaz, sof en, fin truv zot par diminie. An efe, zis 10% menaz pli ris fin truv zot part gato nasional ogmante par 10.8%. Apel sa dimiel.

3. Par 10% menaz pli ris fin pas de 12.1 fwa par 10% menaz pli pov a 15.4 apre premier pasaz Sithanen kom minis finans.

Donk nu konklir ki probableman akoz minis finans, buku dimun fin bizin met savat leponz ziska o mwin laz sez an e ki zot fin oblize van gato pima dan bazar.

Byin sir sa pa v dir ki si u fin met tanga ziska laz diset an trwa kar e ki un van badia, gato lisu ek pima frir dan bazar porlwi u pa pu rapel u la mizer si u vin minis finans.

Growth Rate Numbers Have Serious Limitations

And so do people who keep on using them in isolation. Take the 4.79% average GDP growth rate of Sithanen from July 2005 till December 2008 for example. What does that number mean? Nothing much besides the fact that the national pie got bigger by that amount on average. It doesn't say a single word about how that pie has been divided.

For instance, both graphics above have an average growth rate of 4.79% but the distribution, unless you're wearing Bretton-Woods goggles, is not exactly the same. We know for sure we didn't get equally-distributed growth because otherwise Ramgoolam would have presented a candidate in the last bye-election. We also have additional clues that's telling us that the growth while benefiting only a few people has sent a majority of the population into an 'L-shape' type of recession since July 2006: a very robust average inflation rate of 8.53%, elimination of a progressive tax structure, FDI flows in speculative real-estate projects and depreciation of the rupee to name just a few.

And now more and more people are taking to the streets to say no to Sithanen.

Any Resemblance With Our Local Situation is Anything But Purely Coincidental

Not Exactly What Karl Had in Mind

A year after the power-sharing deal had ended in 2005 the poorest 20% households had 0.3% less while the top fifth saw their share of total income increase by 1.6%. Drill down the data and you will find that in fact the top 10% got 1.8% more. Drill it some more and it turns out that 1.6% is twice what the poorest 5% households got in 2006/07 as share of the national pie. Naturally, it's absolutely fine to view the above table while listening to Soldat Lalit Militant.