[Published with permission from the author: Professor Roman Grynberg]
Original content Source http://mg.co.za/article/2011-08-26-mauritius-not-an-act-of-divinity
The fact that the small island nation is relatively prosperous is the product of a fortunate history.
The world-famous Nobel Laureate in economics and former vice-president of the World Bank, Professor Joseph Stiglitz, flew a great deal and his feet rarely ever touched the ground—and when they did, it was only for brief moments to advise the great and the good, and sometimes the not-so good. The intensity of the lifestyle that such people have usually gives rise to two dangerous effects—cardiac arrest and superficiality.
Earlier this year the professor paid a visit to Mauritius and wrote a piece about “the Mauritius miracle”. In economics there have been so many “miracles”—indeed, Botswana has often been referred to as just such a miracle economy and even Japan was considered a miracle economy in the 1980s. But miracle economies, like items of fashion, come and go.
Stiglitz’s article pointed out the fact that Mauritius not only had excellent, free education and universal healthcare, but also high economic growth rates of above 5%. For a United States economist, high growth rates appear to be like a distant Asian mirage or something that, more properly, belongs in the previous century.
Americans are accustomed to a first-class but patently unfair healthcare system: until President Barack Obama’s reform it was not universally available to all working citizens. They are also used to an education system that works only if you live in a good area or are rich enough to afford a private school.
For Americans, Mauritius must seem like something of a miracle, but it is man-made. If Stiglitz had stayed just a bit longer on the beach and read about Mauritius’s economic history, he would have discovered that the country, since 1975, could sell almost every tonne of sugar it produced to the European Union at prices normally between two and three times higher than the world price. No other country in the world was ever granted such a rich and generous commercial legacy by its former colonial masters, and nothing is as important as the EU sugar protocol in explaining why Mauritius has the surpluses it does to invest in its own people.
The sugar protocol created massive surpluses in the hands of the sugar plantation owners, the so-called “sugar barons”, as they are known in Mauritius. After 1980 these mostly European and mixed-race planters were handed a business environment that allowed them to diversify rather than hide their surpluses in Swiss bank accounts, as happened in so many other developing countries. Being only a night’s flight from London and Paris, the sugar barons developed a successful tourism product and used their Asian connections to develop a garment industry prior to the liberalisation of the world garment trading system in 2005.
They also used their abundant tuna resources to develop a canning industry, using the high EU preferential market access of 24% for canned tuna from countries such as Mauritius and Namibia. Because Mauritius is a small island state and therefore has a very high cost structure compared with its Asian or even African neighbours, everything it produced for export was under one trade preference system or another, and even its tourism sector was geared towards high-end travellers who could afford its high prices.
Mauritius’s relative prosperity is no act of divine intervention – it is the product of a fortunate history and clever leaders who took advantage of what little a small, remote island could offer. They then invested it, as Stiglitz rightly pointed out, in their one real, renewable resource—the people.
But the generosity of the former colonial powers in providing surpluses in this equation cannot be overlooked. Although it may have made no difference in some of the strife-torn countries of Africa, one can only wonder: if the EU and US had agreed to pay overly high prices for African maize or cotton for an entire generation, instead of providing aeroplane loads of $1 000-a-day consultants while subsidising their own farmers, would there not be more countries on the continent that looked a bit more like Mauritius?
Professor Roman Grynberg is employed at the Botswana Institute for Development Policy Analysis. He writes in his personal capacity.