Apres Joe-le-Taxi, Here's Joe-the-Plumber

Click below to watch the 3rd and last 2008 Presidential Debate. Well-researched perspectives about the US as you would expect. We can certainly use those to ask corresponding questions about Mauritius.

This is Not Like the Great Depression

Although our optimism that there is light at the end of the tunnel for the current global financial crisis continues to be tested, there is one expressed parallel that is not evident. A major precursor for the Great Depression of the 1930s was the Immigration Reform and Control Act of 1925 which shut the door. Growth in the US population which had averaged nearly 3 per cent per year fell quickly to much less than 1 per cent. Housing starts, which totaled 900,000 in 1926, fell to 300,000 by 1929, the year of the stock market crash. The restriction on the international movements of people paved the way for restrictions on international trade via Smoot-Hawley. The Fed raised interest rates and reduced liquidity to the financial system.

None of the above exists today – a very positive fact. There is grousing about current account deficits in the US and surpluses in Asia but no one is even hinting at imposing restrictions on the movements of people and/or goods as occurred 80 some odd years ago. Be that as it may, it would be a major mistake to have America go on a diet and Asia to binge given the major imbalances in their demographic positions. Asia needs even larger surpluses to help them prepare for their very rapid aging.

Ex-Governor's Memory Playing Tricks on Him

This is the impression I got on skimming through an interview of Basant Roi that was published in a newsletter earlier this week. In it the guy who was in charge of the Bank of Mauritius for a little over eight years stated that the independence of our central bank had now been thrown out of the window.

Kind of funny to come from the person who was Governor precisely when the independence of the institution he had been entrusted with was murdered during the MCB-NPF saga before being hanged in the second half of 2006 when the rupee was allowed to freefall despite the record FDI.

And the hansard contains interesting replies that will kind of support the view that when it comes to degrading our institutions Berenger has no match. Except maybe Sithanen.

Today of course is a great day to read a few pages of The Great Crash for at least an extra reason: John Kenneth Galbraith would have turned 100.

Hong Kong Baffles Market Fundamentalists

In a key policy address following the global financial crisis, Hong Kong Chief Executive Donald Tsang states that "the government's role is increasingly important and needs to be redefined ... We should be ready to take decisive action to help stabilize the economy and rebuild people's confidence to ride out the difficulties."

Quite logically, the Hong Kong Monetary Authority (HKMA), the territory's central bank, and the Securities and Futures Commission (SFC) would look for ways to strengthen the city's financial regulatory regime. Among other measures, guess what, Hong kong, one of the champions of global capitalism, is about to establish an advisory Minimum Wage Commission.

Hong Kong has not evolved on the same planned track as Singapore, but they both share the same ideology-free approach to make their vulnerable open economies as lean and nimble as possible.

Thanks George, But I Think We'll Pass

I am referring to what looked like an assurance given by the economist and MEXA boss this afternoon on a private radio about the apparent prudence with which the National Pension Fund (NPF) invests workers' money. He was up against Ashok Subron who knows infinitely more about how the economy of Mauritius works than Sithanen and his university buddy, Mansoor, lumped together.

Indeed, standard corporate governance practice suggest that the people of this country be provided with all the information and given the opportunity to make that determination by themselves. That should be relatively easy for the Financial Secretary, who chairs the investment committee of the NPF, to do: the cost of disseminating information is close to zero nowadays. 

Besides, there's a moral obligation for the government to rapidly become more transparent in this and some other areas given that the MCB-NPF scandal is still fresh in everyone's mind. There are also so many great models for pension fund governance. Click here and get ready to say Wow!

World Not in a Hurry to Borrow from IMF

Or to take any of its phony macroeconomic advice. And that's in spite of IMF Chief's announcement that the loan-shark is "ready to lend quickly... based on streamlined conditionality" three days ago. Indeed, countries have been sidelining the Washington-based institution for some years now and everybody, save Rama Sithanen, knows that its loan portfolio has collapsed from SDR* 70 billion to SDR 20 billion in 3 short years with a single country, Turkey, now representing about 1/4 of that dwindling portfolio.

It also made the first loss in its history last year and that is expected to widen to about USD 250 million next year if its own numbers are to be believed. The IMF has also desperately been trying to appear as a development agency. This has failed too. Blame it on the availability of tons of money and better ideas elsewhere.

*you need about USD 1.50 for each SDR.

Wake-Up Call to Corrupt Leaders Issued

This is how Transparency International has characterised the Stolen Asset Recovery (StAR) initiative launched by the UN Office on Drugs and Crime and the World Bank (WB) two days before Samad's post on corruption. The aim of this program is to help developing nations recover funds looted by their leaders and usually stashed away in an account in the west. Estimates of the annual fraud range as high as USD40 billion and that's before factoring in the attendant degradation of public institutions. The 56-page joint report which makes good reading includes three case studies: Nigeria, the Phillipines and Peru.

This initiative comes 12 years after the famous Cancer of Corruption speech of Jim Wolfensohn at the annual meetings of the WB. And isn't it wonderful that we have someone attending the 2008 edition of these meetings in the week-end in Washington? Here is one great opportunity to look at Zoellick straight in the eyes and to announce that Mauritius intends to be the poster child for StAR.

Etienne Doesn't Make the Grades

But Rashid Beebeejaun, who apparently did, reassured everybody when he said that Sinatambou is a bright guy. I found all of that kind of weird because I can't remember what Beebeejaun should be remembered for since he returned to power in 2005. As a matter of fact, I have an extremely hard time recalling what he achieved as a Minister between 1996 and 2000.

If my math is as good as yours that's a full eight years in the cabinet (1/5 of the time since the Union Jack was lowered if you prefer fractions). Granted he did not literally transform his ministerial responsibilities into a job search as one globe-trotting MSM-MMM Minister did. But then again, the latter performance hardly qualifies as a benchmark.

In a similar vein you get the impression by looking at how they work and what they say that Nita Deerpalsing and Cader Sayed-Hossen need at least 800 years each to finally achieve some tangible democratisation of the economy. And of course there is Navinchandra: 8 years as Prime Minister and all that he's achieved in the top job of the land fit comfortably on a stamp.

Sugar, Already a Small Sector When the Bean-Counter Joined Politics had Shrunk by More than 70% by 2007

When Sithanen was sworn in as Finance Minister in 1991 that sector, as shown above, represented only 9.99% of our economy. Last year it accounted for a mere 2.90%. Unsurprisingly, about 57% of this shrinkage happened in 1999, a year of severe drought. Sugar should keep on shrinking in an erratic fashion thanks to higher growth rates elsewhere in the economy and to increasingly unpredictable weather patterns.

Naturally, your explanation as to why Dr. Sithanen deemed fit to bestow a multi-billion rupee gift to that sunset industry while not finding Rs 100 million for the SC/HSC subsidy is most welcome.

After Massively Creating Poverty, Minister Now Aiming to Kill the Economy

For an open and small economy like Mauritius if there is one concept that we should focus all of our energies on it has to be our competitiveness. Not something Sithanen has on his mind though.

After having made an indecent gift of Rs5 billion to a industry that has been dead for ages, he now seems to want to shut down Mauritius Inc. by not capping how much money government makes on rising fuel prices through VAT.

That's on top of uncompetitive electricity prices that reflect the vested interests of a few rent-seekers and public investments that have declined for three straight years in real terms. Which means that we should expect more misery and trouble until he is shown the exit.

Is Wall Street's Meltdown a Blessing in Disguise?

As China, and to a lesser extent India and Latin America, continue to flex their muscles, the American financial debacle is very likely to hasten the demise of the unipolar world that rose from the ashes of the Cold War. However refuseniks of unfettered capitalism elsewhere should refrain from rejoicing too soon. They should instead keep an eye on the response of their local political, business and opinion leaders.

Wall Street’s meltdown has clearly exposed the flaws and fallacies of the anti-regulatory ideology. Ironically, it could also provide a lifeline for the aid industrialists from the International Monetary Fund (IMF) and the World Bank (WB) whose “expertise” has never been so widely the source of contempt, with the exception of few countries like Mauritius, where the WB has even been welcomed to set up office.

Leaders who invariably outsource their thinking unwittingly reveal their incompetence. Alternatively, the words, however presumptuous, of Singapore's Lee Kuan Yew aired on CNN – I am not following any prescription given to me by any theoretician … I work from first principles, what will get me there – typically underpin the leadership behind any iconic country, business or institution for that matter.

To put it bluntly, if a country is really willing to cope with global capitalism, neither the IMF/WB drivel nor any other “adviser” will help. The best consultants may be required for technical assistance, but never for strategy development or a turn around. Vision, foresight and capacity to implement regularly updated policies “will get us there”. Sound macroeconomics (monetary stability and fiscal discipline) are key but without smart microeconomics (synergy between households, businesses and markets) to complement, everything is nothing.

Toxic policies driven by crony capitalism and greed merely inflate bubbles that are bound to burst. Capitalism itself is not the problem but, left unchecked, its excesses can be devastatingly contagious.

It's corruption, stupid!

According to Fernando Lugo, the new President of Paraguay, the fight against poverty goes hand in hand with the fight against corruption. To put it bluntly, GDP growth and job creation alone, no matter how upbeat, do not provide "an antidote to poverty". Why? Because poverty is created, or exacerbated, when "national" prosperity is diverted massively and subtly into the pockets of the "chosen few". How? Through "privatisation" of policies and lullabies filled with distorted data. Should the legislation proposal submitted by the Independent Commission against Corruption to query dubious asset ownership and prosecute offenders be enforced, it could potentially turn out to be a critical disincentive against graft. To be even more effective overseas purchases should also be scrutinised.

Labour's Think-Tank Mostly Tanks

Indeed, the several MMM and MSM diehards conveniently turned Labour cling-ons only a few years ago just dealt SAJ a trump card for free. The latter can now accept or refuse to celebrate Halloween at Le Reduit next month. He can, for instance, stay on as President and then resign sometime next year to head a MSM-MMM coalition and possibly return as PM in 2010 for 5 years. Or he can stay on as the Head of State until 2013 and happily welcome the Federation III government for its swearing in. He can also refuse a new mandate and throw Mauritius right into an election campaign overnight.

This a major blunder because Ramgoolam could have nominated one of the many loyal Labourites still around instead. And quite surprising too given all the steam he let off, as pictured above, on July 10, 2005. Too bad the think-tank did not have a turbine besides him then. That would surely have brought our electricity prices to more reasonable levels.

Tourists Target Not Blazing New Trails

The 2015 target of 2 million tourists means increasing the 761,063 arrivals we got in 2005 by a factor of 2.63 or if you prefer by a little over 10% annually for 10 straight years. This has happened in 5 of the last 22 10-year periods ending December 2007 with the last one occurring for the decade ending December 1996. The average of these 10-year growth factors is 2.27 so that if an average history were to repeat itself we would hit that 2 million mark a little later, sometime in 2017. A few seconds after 13h45 on Friday October 11 to be more precise.

Have We Fallen on Our Heads?

Almost fell off my chair when I heard one unconstitutional DPM saying that he was prepared to downgrade his official car from a BMW 540 to a 530 following the recent ruling of the Supreme Court. While he should of course comply with the law (and we hope that he will now rapidly comply with article 5.2a of the Bank of Mauritius Act 2004), I find it totally unacceptable for public funds to be wasted on luxury items like this.



If the Minister wants to buy himself a super car with his own money that's his problem. But he should have gone a little easier with our money. Especially after having imposed a policy of ser sintir on us. Gone are the days, I guess, when the guy who envisioned and implemented free education would hop to his office in his little Hyundai.

Ladies and Gents, We Have Arrived!

Have we? But for sure we have missed the boat... again! I'm talking about the 2009 OECD’s PISA (Programme for International Student Assessment). I had drawn the attention back in April 2006. That was 11 months before the cutoff date. The next one is in 2012.

It would have be fun for our education system to be compared to those of 67 other countries more than half of which are outside of the OECD (including Singapore, Indonesia and Tunisia). And the results would have provided an independent perspective as to whether signs like the one above should stay where they are. Nevertheless, just in case we have MPs who are also teachers, please start here.

LBOI: Rings A Bell?

Probably not. That was part of the disorientation plot along with the 100+ measures presented in the last three budgets that produced little more than robust poverty and acute frustration. LBOI stands for Land-based Oceanic Industry. Now you remember, don't you?

I have to admit that when I heard Sithanen talk about this project for the first time almost three years ago on the radio I was completely mesmerised. Just imagine. He was promising air-conditioners running with cold deep sea water. I even remember dreaming about hordes of unemployed people donning their gear and proudly diving to Stella Maru to place those pipes or whatever you call them.

And to top it all, I was planning to write an article about LBOI to ask whether it would be technically feasible to also place pipes all the way to La Fournaise and Karthala volcanoes. Hey, hey! Air-con and almost free hot water: what more could you possibly ask from life? Three years after we're realising that LBOI was nothing but hot air. This definitely doesn't look good, given that summer seemed to have arrived quite early this year.

Global Schizophrenia

In a bid to overcome a "handicap" as he puts it, French education minister Xavier Darcos is planning to increase school exposure to English language, which he claims is a "key to success". Ironically, Dodoland could claim yet another achievement as probably the only country in the world where the global lingua franca is receding and French language is flourishing. But who cares? We are more competitive than Chad after all. N'est-ce pas?

The Worst Enemy of the Poor

That would be inflation. And the best friend of inflation is definitely Rama Sithanen when you realise that he has created almost as much inflation as the previous government did in 4.75 years (23.90%) in 2.5 short years (20.15%).

The opposition can count on him to make the lives of Labour MPs excruciatingly painful once parliament will be dissolved by everybody's favourite uncle. And that's after his crappy policies pulled Federation II out of the grave Ramgoolam so poetically dumped them into three years ago.

By 2010 cumulative inflation would have reached around 40% with the corresponding rate for the poorest of the poor gyrating around 55% if we use South African estimates. Bring the average growth (4.62% for Sithanen first 30 months vs 4.33% for the 2000-05 government) and unemployment rates (9.08% for the bean-counter's first 2.5 years vs 7.69% for those politicians that apparently gave us the best managed country in the world) into the picture and you confirm that there is no trade-off between inflation and a generalised measure of economic activity.

Something that has always been known to anyone with at least 2 grams of leadership!

Maximising Disorientation

Only a crisis, real or perceived, produces real change.

Milton Friedman, 1982

Sithanen wanted to give 'a little shock to the system' by hiring Ali Mansoor as FS who hails from the shock-exploiting Bretton Wood Institutions. He then disoriented the people of Mauritius -- that includes our gullible PM -- with the fallacious Triple External Shock argument.

But his bluff was called more than two years ago and his plan of using shocks as a tool to thrust toxic bean-counting policies down our throats has backfired so that he is now living on borrowed political time. Having said this and given that it's Tuesday evening, let's go to the movies.