Kisana Ki Papa Mirak Ekonomik?

Mazorite dimun pu dir Vishnu Lutchmeenaraidoo. Me depi omwin 2019 Paul Bérenger dir ki se li ki veritab papa sa period de bon krwasans ekonomik dan ban lane 1980 la parski li ti fer le pli difisil e sa ve dir met sales tax. Problem ki en anvol ekonomik pa selman depan ki ranflue lakes guvernman. E pli inportan, kuma tiart la ilistre, kifer li pan fer u ede pu fer en lot mirak ekonomik kan limem ti minis de finans pandan trwa lane e trwa lezot fwa li ti dan guvernman? Nu kav osi fak tiek ansyin lider MMM pu gayn en bon lide so metriz ban size nasional inportan. Nu kav usi analiz 10 pwin ki li pe reservi pu lans so nuvo parti. Ah wi, Lutchmeenaraidoo pan fer en lot mirak ekonomik apre le 10 Desam 2014.

Another Reason Why Doing Business is Wrong Target For Mauritius

Bérenger Says He’s the Real Miracle Man

And not Lutchmeenaraidoo because he did all the work after the 60-0 in 1982. This is another funny statement from him because he was Minister of Finance for only nine months and if you read Cuttaree’s Behind The Purple Curtain you can’t fail to notice that about the only thing they were busy doing until March 1983 was fighting each other inside the alliance. This of course leaves even less time to do good work. Furthermore if a neophyte in 1982 can create an ‘economic miracle’ with one budget surely he will be able to do at least as well if he ever returned as Finance Minister later.

The trouble for Bérenger is that he did return as Finance Minister in 2000 and got the chance to present not one but three budgets. And what did Cuttaree have to say about the state of the economy after those budgets? Something very interesting: “Nous sommes en urgence économique. La situation est sans précédent.” It was a period in which almost twenty-three thousands jobs were lost in one industry alone in a few years. Mr. Bérenger of course described the situation differently dubbing Mauritius the best managed country in the world. What else to expect from a party with more than a little penchant for self-aggrandisement?

Knowledge about the economy is not something that the MMM seemed to have got better at since. Reza Uteem, their shadow Finance Minister, was heard a couple of years ago on a radio saying that the offshore sector needs a stimulus package. The MMM has also set saving the dead sugar industry as a top priority in its electoral manifesto. It doesn’t do well on other important national issues either. 

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 (3)

So we've seen the types of cakes that have been cooked over five-year periods for the last 35 years. In this post we look at the second part of our framework to analyse political projects: how the cake is shared. Statmu provides us with a wealth of data to do this. The simplest information is the share of the cake going to the bottom and top 20% households. For example this what happened since 1986/7 (the sexy charts will be for later).

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

Clearly this puts the lie to the assertion used by TINAwallahs that there is little we can do about inequality and that it is a phenomenon which is entirely tied to globalisation. As the data shows although it has been increasing -- let's focus on the ratio for now -- since 2001/2 there are also two interesting periods where it actually fell. One is in 1991/2 which coincided with the passing of the baton of Finance Minister between Lutchmeenaraidoo and Sithanen. So the former actually decreased inequality by putting an extra 0.8% of GDP in the hands of the bottom 20% and this was mostly financed by reducing the share of the top 20%. Enter Sithanen and he reverses most of the gains of the bottom 20% while giving the top 20% an extra eye-popping 2.7% -- that's more than three times what the bottom 20% got in the preceding 5 years. This ensured that the top 20% got their biggest share since 1986/7.

And then five years later Bheenick and Bunwaree clawed back three-fifths of the loss the bottom 20% experienced and reduced the share of the top 20% by 1.4% or half of what they gained during the first stint of Dr. TINAnen. We obviously have more to say on this interesting dataset. We'll do this in our next posts.

Breaking Down The Sithanen Toohrooh

At Rs297 billion Xavier-Luc Duval accounts for the biggest share of the almost trillion-rupee GDP gap which accumulated over the 11 years ending last December. That's a couple of billions shy of our 2010 GDP. Vishnu Lutchmeenaraidoo is in second place with Rs227 billion which was generated over around fifteen months. Pravind Jugnauth is in third position with a Rs195 billion gap which also accumulated over fifteen months but he is set to capture the pole position by end of June when another Rs125 billion will be added to his running total.

Rama Sithanen, the father of massively regressive policies, is in fourth with only Rs85 billion because although he was there for the longest period among the six finance ministers the disease hadn't gathered enough momentum as it would in later years. That's how compounding works, right? This point can be illustrated by the GDP deficit generated on Navin Ramgoolam's watch: Rs79 billion although he was Finance Minister (FM) for only seven months. This puts him in fifth position and SAJ is last with Rs44 billion.

If you want to know how much revenue is missing you just have to multiply these numbers by 15% to 20% depending on the growth rates you assume the economy has to generate when you mess around with the tax rates. Finally a rough estimate of Ali Mansoor's share -- he promised back in 2006 to implement Bretton Woods policies that work -- would be the sum of the first three numbers.

Busy Year For The Jag!

Ten posts have been published in 2016 so far. So we returned after about a year (last time we took a pause of five years). Here's the gist of what we said.

Ramgoolam doesn't understand that FPTP, progressive taxation and spotting talent are core elements of the DNA of the Labour Party. Lutchmeenaraidoo shifts to Foreign Affairs but SAJ is in the mood for an economic miracle. Looks like voters are on track to resume one of their favourite habits.

Mauritius has far more important things to worry than Brexit. One such thing is the current Governor at the BOM. What the pound hasn't seen in 31 years we've seen here in the first 69 days of the return of Basant Roi. We showed how the Sithanen flat tax has spun public finances out of control and seriously damaged our economy. That of course provided Pravind Jugnauth with a great opportunity to bring some basic common sense back.

Mauritius is losing the battle against poverty because of the flat tax. Abysmal policy-making has transformed the economy into a machine that throws 1,000 people into poverty every three months. Little will change until policies start making sense again. The Minister of Finance fails to defuse a time bomb that is rapidly reaching a trillion rupees. Instead he presents a bland budget that will not take Mauritius anywhere we want to go. Tic tac. Tic tac.

We debunked a few myths about our excellent FPTP system. And we illustrate how wise voters are in ranking unsuccessful candidates. America can learn from our experience with trickle-down economics. The Duval Committee is like the 2014 Faugoo Committee. We formalise the concept of minimum opposition size which tweaks our excellent FPTP system in a mindful fashion to solve a couple of important problems.

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!

What Lutchmeenaraidoo Must Do, Fast

Increase top tax rates for individuals and for corporates in the next budget. So energy prices can come down to levels that reflect international conditions. And government can start help the economy humming nicely again. In a sustainable fashion. Smart Cities which are more like glorified IRS will not take us anywhere good. They are like the wrong type of FDI we've been getting since 2005: they don't help our young knowledge workers contribute their skills to push Mauritius forward but only make sure that another whole generation is buried. Alive.

Or Lepep and Vishnu -- who can't seem to tell the difference between a Black Swan and a White one -- stand to lose a lot more than bragging rights about delivering a second 'miracle'. They will inevitably be thrown out of office and voters will finally experience an aha moment when revisiting the 'first' one.

What Will Municipal Voters Do?

Vote for the MMM because Lepep ended up with about 10 MPs more than what was necessary? Or stick with Lepep based on what they've achieved in the first five months of their mandate? The plus points are mostly the increase in pension payments and fully subsidising the SC/HSC exams. The appointment of Ms. Fakim as head of state is definitely a history-making event but that doesn't really change the lot of the victims of the neocons.

The main negatives are the significant depreciation of our rupee while the BOM supposedly waited for the budget to set the tone, the joke of the Finance Minister claiming that his bland budget was a no-tax one, not passing on the collapse of oil prices and of course the BAI affair. The latter has embroiled Government into a thick cloud of confusion and suspicion that is not going away any time soon. Indeed the BAI saga is so far looking more like a political vendetta than a ponzi scheme. That's especially evident when you consider the kind of help our Governments have dished out to hubris-infected companies in the past. There have also been surprising statements by the President of the Bar Council and many are not happy with how the biometric ID project has evolved.

We'll find out on Monday how voters weighed the facts.

First Vishnu Budget in 25 Years Now Available

Given that it was supposed to be a 75-minute budget I listened to most of it. It's a lot more pleasant than those that were presented between 2005 and 2010. There are a number of interesting things like gaming houses leaving city centres and the ban of plastic bags. Which has been in force for over nine months in Rodrigues. And they have increased their lead having recently announced the sorting of garbage like some countries do. Promising to implement the report which looked at making banking practices fairer is also not a bad idea.

Of course it's not a no-tax budget. Government has already quietly depreciated our rupee -- 12.8% as of today's speech -- and kept petrol prices higher than they ought to have been. The steady depreciation will make sure that Mauritius doesn't benefit from the collapse in oil prices. Again.

There are also other problems with this budget. Like inequality is likely to persist. More on this later.

What did you think?

How To Build A Plutocracy in 2 Steps

1. Reduce top tax rates -- rates paid by the richer segments of our population -- to get more political contributions. This may require more and larger safes to stash the cash away. It's even better to flatten the tax structure. This will provide even more enticing incentives for useful idiots to make the wishes of their financial masters come true. But will require even bigger safes.


2. Screw up our excellent constitution with an electoral galimatia to include party lists so that the link between voters and MPs is severed. Party lists will also allow political donors to enter parliament and cabinet -- to enact their own dangerous laws -- without voters really choosing them.

Top tax rates were reduced in 2006 before the tax structure was flattened. And then a wicked electoral reform was proposed with the blessing of Navin Ramgoolam at the start of 2012. But that was massively rejected last December. Now Mr. Lutchmeenaraidoo has an opportunity to strengthen our democracy on Monday.

Vishnu is Lucky, Again

To be Finance Minister these days. After almost a quarter of a century. Because that's after almost 10 years of the worst economic management -- Paglanomics -- our country has seen and started by Rama Sithanen with the help of Bretton Woods Ali. And of course with the blessing of Andrew Scott and one pseudo-socialist, Navin Ramgoolam. So improving things should not be that difficult. For example increasing pensions has helped compensate the lack of reasonable progress that the weakest groups of our fellow countrypersons have registered with the toxic bean-counters. And there are many more low-hanging fruits to pick.

But monetary policy was definitely not one of them. So it was quite surprising that Manou Bheenick was asked to leave. And replaced by depreciation-obsessed Basant Roi. Who unsurprisingly since returning to the BoM less than 80 days ago has presided over a double-digit depreciation -- 12% as of today -- of our national currency against the USD. After our central bank had issued a communique on January 30 informing the nation that there would be no MPC meeting in February because Lutchmeenraidoo's budget was due March 16. Or 45 days later.

Hopefully the Minister of Finance who keeps on insisting that he will deliver a 'second miracle' understands how to assess the quality of economic policies. Computing our real GDP growth in USD for the current quarter might be quite enlightening.

FM Warns Banks Not To Mess Up With Him

And to play a more active role supplying working-capital to the many SMEs that Government wants to see created. If they don't banks should expect problems from him. Banks have responded that they have helped the development of every sector in Mauritius. Mr. Lutchmeenaraidoo also said that banks were the only sector which makes money without working hard.

A few years ago Mauritius was deemed to be held back by some pretty bad interest rate spreads.

Basant Roi Back, Rupee Down By 3%, Already

By yesterday our currency had lost 3.28% of its value against the dollar. In the mere 18 trading days since Basant Roi has been back at the BoM. He is known to have a strong and silly depreciation bias. In fact if you had to chart the number of times he has asked for a lower value for our rupee -- when he was not in a position to sink it himself -- you would literally have to use a log scale.

I hope Mr. Lutchmeenaraidoo's idea of a "second economic miracle" doesn't involve making Mauritius increasingly insignificant in the world. And keeping local pump prices artificially higher after oil prices collapsed is kind of contradictory about making SMEs the backbone of our economy. And is oblivious to the fact that he is presenting a budget in a few weeks. Besides we've been suffering from such a disconnect for way too long. And for very wrong reasons.

All has not been bad though. Swiftly increasing pensions to Rs5,000 will surely help restore some disposable income to those who need it the most. And that cannot do our economy any harm.

SAJ Returns To Parliament, History Accelerates

We now have a Prime Minister who has lived 84 years or 3 years more than my all-time favourite at the time he lost power in 1982. Today is also the first time the Speaker of our National Assembly was addressed as Madam. More history is on the way at Le Reduit when Ms. Fakim will replace Kailash Purryag. The sooner the better.

SAJ is also making a comeback 11 years after having announced his retirement in 2003. This never happened before. Mr. Lutchmeenaraidoo is back too for a third term -- or a fourth one -- after almost a quarter of a century. If he does that again -- assuming he loses his seat in 2019 -- he will be eligible for one of those phones that centenarians receive.

So a larger pension has been paid and there will be a Rs10 billion item in the next budget to unleash the creative capital of Mauritius.

Not missing Sithanen and Mansoor by any chance?

Will Vishnu Make An Economic Miracle?

It depends how you define a miracle. But I'll tell you this. Compared with Sithanen almost anything will feel like a miracle.

Voting centres open as from 7 am. Go Mauritius! Go!

77% of Poll Find Vishnu Better Finance Minister

Than Sithanen. And that too by a very large margin. Only 22% found Sithanen better. Voters from all walks of life and parties are not exactly happy with this choice of Ramgoolam. We're gonna find out how much on Thursday.

Resources For The December 10 Elections

Who will you vote for? Well it will have to be three of these candidates.

Where will you vote? Enter your NIC# and the Electoral Commissioner's office will tell you where that will be. That's specially useful if it's the first time you're voting.

Who's the better cake-cutter? That is who divides the national cake more reasonably. I've looked at the HBS data for the past 25 years and it all boils down to who is the Finance Minister. Lutchmeenaraidoo -- at least in the data analysed -- has been good. So have Bunwaree and Bheenick. Sithanen has been a reverse Robin Hood -- takes from the poor to give to rich -- each time he's been MoF. So he's to be avoided at all costs.

Who bakes the bigger cake? Have looked at this data recently and what I've found is that Lutchmeenaraidoo baked a bigger one than the FMs who came after him; the Sithanen reforms generated the smallest cake and that Bheenick and Bunwaree hatched a cake which was slightly bigger than what Sithanen cooked in his first mandate. More on this soon.

Of course we don't want a second republic, party lists, more MPs and double candidacies.

Suddenly, Labour/MMM Alliance Promises 60,000 Jobs

Because a few weeks ago when Rama Sithanen was asked (scroll to 31m30s) how many jobs he would create in the first twelve months if he was to become the next finance minister -- God forbid -- he said he could not forecast that. He couldn't even give a rough estimation. Of course we can come up with a ballpark of how many jobs he might create because he's been FM for several years and we just have to look at his stats. Turns out we should expect around 7,200 jobs or 2.5X less than what Vishnu Lutchmeenaraidoo could create.

He also said that he would not be able to create jobs immediately. Hmm. We can estimate that too by looking at how many jobs were created in the first full calendar year -- we could look at monthly figures too -- he was in office in each one of his two terms. That number is around 8,300 jobs. But given that he messed up the economy so badly and that he increased unemployment every single year in his first mandate and in every full calendar year of his second that could be really hard to achieve.

Mr. Sithanen also says he will eradicate poverty. He said that before. I'm sure you remember he said he could do that in 7 years. The snag is that it's almost ten years since his bogus reforms have started. And far from eliminating poverty he has thrown an additional 22,000 Mauritians into it during his second term. That's about 350 people every four weeks. And his inflation record doesn't look too good.

So I guess they've thrown this number to look a lot less silly. And to try to be a bit less on the defensive. After lalyans lepep announced their 12 measures.