Wednesday, December 30, 2009

Jack Bizlall Voted Mauritian of the Decade

OK the sample is not "scientific" - whatever that may denote. So what? We are all too aware of how cynically crony capitalism promotes its heroes.

Gilbert Ahnee
1 (5%)
Navin Ramgoolam
1 (5%)
Nita Deerpalsing
1 (5%)
Ashok Subron
4 (22%)
Paul Bérenger
0 (0%)
Cassam Uteem
0 (0%)
Jack Bizlall
8 (44%)
François Woo
2 (11%)
Dawood Rawat
1 (5%)
Satyadev Tengur
0 (0%)

Votes: 18

It is indeed very unlikely that Jack Bizlall and Ashok Subron do not represent, in the eyes of a citizenry aspiring to something else than roder-boutisme, the most dedicated and vocal change agency. For the country to regain its shine, progressive Mauritians can only pray that grassroot initiatives continue to gather momentum until high-profile politicians, entrepreneurs and thinkers join the movement to drive a well-deserved sanzman.

Monday, December 28, 2009

Sanzma, You Must be Kidding!

The purpose of this article is not to impute motives to the running government, but to attempt to detect in its decision-making and its actions, the least indication of coherence in its mission to “democratise the economy”. Assuming, of course, that such a policy - expressed in less pompous terms - fulfils a twofold need: more freedom for enterprise and the pursuit of economic goals, and better distribution of the wealth generated.

Following the ritual change of government in our “electocracy”, with the measures of “the first hundred days” as a bonus, one could feel an almost palpable enthusiasm among the Mauritian population. Instead of taking advantage of that renewed surge of energy to propel Mauritius on the road to change - which would have made strategic sense - some budgetary measures have not only undermined the trust of the population, but also revived their cynicism.
The targeting of subsidies on flour, the distribution of bread to school children or even examination fees could probably be justified, provided that, before applying such measures, some equitable methodology had been devised to ensure that the beneficiaries are clearly identified, so that the new subsidies could take effect simultaneously with the suppression of the old ones.
As for the tax on housing, even if one considers that the surface area of Mauritius is too small for the rural/urban dichotomy to persist, it would have been better, first, to draw up a complete cadastre and to make sure that the services offered by the local authorities are of the same standard, before applying such measures. Failing to anticipate the furore caused by such misguided actions reveals an embarrassing lack of realism.
After so many years of self-indulgence, the entire population must have been relieved to hear the government speak of breaking with the past – even if this change is due to the world economic situation – with a development plan based on preferential trade agreements. It is still clear, however, that the stated objective of “modernisation” has not been defined after hard thinking, leading to an action plan deprived of local privileges and spread over several years.
There are many alternatives
The solution to a complex economic situation cannot be found in an a one-off “structural adjustment” along the lines of the “Washington Consensus”, taking into account only the “economic fundamentals” and a few dogmas. That is a view shared by many observers, such as Michael Porter, the competitiveness guru from Harvard University and Bill Lewis, the productivity guru from of McKinsey & Co, neither of whom could be considered “neoliberal’ or “antiglobalisation”.
Mauritius must be comprehensively reformed; there is no contention about that, but not for reform’s sake. When faced with tremendous challenges, one does not gullibly apply doctrines, but searches for innovative solutions. John Kenneth Galbraith, author of “The Affluent Society”, famously said that mainstream economists “are economical, among other things, of ideas”. Obviously, to those equipped with a similar mindset, there can only be one alternative for transforming the country.
In contrast, iconoclastic economists such as Steven Levitt, author of that must-read “Freakonomics”, Gary Becker and Edmund Phelps provide us with so much more stimulating analysis. As a matter of fact, the latter has recently been awarded the Nobel Prize in economics, for having shown how absurd it is to bet on a trade-off between inflation and job creation to devise economic policy, without any thought for the behaviour of market participants.
The last government lost the elections, so it said, because communication regarding its performance, which it qualified as “extraordinary”, failed to convince. So, guess why Mauritians now turn their backs on the resolutely “reformist” policies of the present government? Poor communication, of course! It’s so much easier to attribute the lack of vision in government actions to the supposedly “irrational” behaviour of those who do not accept them. Yet, as long as the Mauritian people are not convinced that a real project for a future society has been designed for their benefit, they are not going to “tighten their belts” in the hope that the situation will eventually improve.
As the government finds it more and more difficult to make ends meet, taxpayers have been exhorted to sacrifice the social benefits awarded by the Welfare State, and which are already much below their expectations in sectors such as housing, education and health. Moreover, the so-called benefits do not include a decent minimum wage or an unemployment benefit or insurance as in more developed economies.
It is not the Welfare State, as such, but the incompetence of each successive government that must be held responsible for this fiscal fiasco. Reducing wastage in government spending would require a measure of decency and something like a “cost killer” a la Carlos Ghosn, the emblematic leader of Nissan’s renaissance, to track any misuse of public funds in the allocation of contracts, for instance. Talking about the reality of market prices does not mean condoning a mercantile mentality.
This casual approach lies behind the proposal for a toll at the entrance of Port Louis, in order to relieve traffic congestion. Assuming that the proposed bus lane coming from the south could possibly offer a choice to motorists, what about commuters from the north where no bus lane is on the agenda, for example? An action derives its nature from context and timing that determine whether it is perceived as progressive or arbitrary.
The same applies to the additional pressure upon our rupee, in which a lot of people seem to have already lost confidence anyway, since the introduction of a tax on interest at source, and the abolition of deductions from taxes payable by individuals. As for the appeal to foreign currency holders to convert their money in order to stabilise the market in the name of “patriotism”, it is part of the emergency calls our successive governments shamelessly impose on us after their blunders.
Blind Faith
The relative stability of the rupee over a short period is attributed to the fact that “the former government used monetary policy for political purposes.” This means that the massive depreciation of the rupee was what the present government wanted. Not at all surprising when we know that a “competitive currency”, a euphemism for “painless” depreciation, is one of the ingredients of the universal remedy every star pupil of the World Bank or of the International Monetary Fund has been taught to concoct, regardless of the vicious circle it creates and perpetuates.
Stephen Roach, an analyst from Morgan Stanley, accuses his colleagues of behaving more like “data junkies”, hooked on a few macroeconomic data. The figures provided by the CSO (Central Statistical Office) cannot be interpreted in absolute terms because they are influenced by the countless distortions in the economy, and the model used in their calculation. The more so because, when they are not translated into constant rupees, they tend to create an enduring illusion of progress.
Ending a crisis cannot in itself be defined as an objective without an intuitive grasp of the interactions among all stakeholders, which, in turn, means going down to grassroots level. There is not the slightest possibility that data will emerge by themselves, unless the relevance of microeconomic research has first been recognized. One could start by measuring the pass through of the endemic depreciation of the rupee, which is undoubtedly the cause of most of the distortions.
This deliberate choice of policy affects practically the entire system. First, it has a perverse effect on market prices directly (goods and services, whether imported or locally produced, the latter being still dependent upon imported inputs, etc.) and indirectly (interest on loans, property, wages, etc.). Then, less obviously, it is an incitement to xenophobia, because of the great gap between the salaries of local personnel and those of expatriates.
Lastly, it has an even more dangerous consequence, in that it discourages expansion through productivity and innovation. A stable currency and increased productivity re-enforce each other. A strong currency, on the other hand, can only be sustained by a constant and significant progress in overall productivity. Besides, a microeconomic perspective allows an evaluation of the fiscal burden of businesses as a whole, because a mere reduction of corporate taxes, by itself, will not attract investors.
Collecting taxes and, especially, the growth of “national’ wealth, however essential they may be, should not become an obsession. The GDP (Gross Domestic Product) is not a reliable indication of the quality of life in a country, because it does not take into account parameters such as inequalities, purchasing power, environment and leisure activities. There are so many inadequacies between what our system is able to generate and what is essential to a competitive nation. Up to now, unlike the largest countries on the African continent, Mauritius has been spared a brutal confrontation with its grassroots problems, probably because of its resilience, which it owes much to its small size and population.
A societal crisis, a flourishing underground economy, the extent to which the economy is “dollarised”, anarchy on the road, crime rate and brain drain are some of the symptoms of a gradual loss of trust in the system. It is up to the government to interpret those symptoms and to adapt its policies to a world that keeps changing, with fiscal incentives and new laws to contain any excesses, should the need arise. It is essential to keep a balance between prevention and repression, in order to ensure that our attitudes always evolve in harmony with public interest.
Shining Mauritius
Opening up our skies for more connectivity, seats and price reduction, making the most of our oceanic resources and the milk farms project all indicate that the government has a reasonably thought out diversification plan. However the caveat is that, overall, government is still “pro-business” in its endeavours; in other words, government policies are still dictated by lobbies from dominant players, instead of being adamantly “pro-market”. This attitude is clearly indicated by the delay in achieving the (real) liberalization of telecommunications and the proliferation of projects under the IRS (Integrated Resorts Scheme). The government would do well to ponder the “Shining India” syndrome.
The “shock” caused by the drop in the agreed price of Mauritian sugar on the European market, which did not come without warning, tells us a good deal more about the gap that still exists between the facts and the alarmist declarations of spin doctors. The impact on the “country’’ is not as devastating as they would have us believe. The trickle down of the profits is negligible, when compared with the revenue. Besides, our economy today is much less dependent on sugar, and the expected loss of revenue has already been largely compensated by the persistent depreciation of the rupee as well as by other “accompanying measures” over many years.
The business climate should favour healthy competition and a level playing field. Otherwise, it promotes a rent-seeking culture. The “country” can surely go through another period of high exuberance any time, brought about by another economic “bubble”, which is all part of the boom and bust cycle. The question is whether we have the desired entrepreneurial spirit to cope with it through a “creative destruction’.
Innovation is the driver of change. Yet, our successive governments create reaction to change. Currently, the government is proposing an accounting exercise in lieu of a strategy. In any case, even if the official inflation figure of about 10% does not reflect the reality of the situation, the next pre-budget session on the compensation of our purchasing power, whatever the appellation, is likely to be explosive.
Our long-term prosperity depends on the capacity of the government to satisfy the aspirations of all stakeholders. As long as this capacity remains strong, our standard of living will progress, even when higher returns in domestic production, or outsourcing to countries where wages are lower cause job “losses”.
Should that capacity deteriorate, there is no issue, neither through the sullen choice of protectionism, nor through the more glamorous alternative of free trade. It is time to set aside the tunnel vision of semantics, performance relativism and party politics and adopt a holistic as well as critical approach, based on a permanent quest for excellence.
Mauritius is desperately waiting for such a major change.

Monday, December 14, 2009

Green Energy, as Brought to You by Crony Capitalism

Writing in NYT, Doreen Carvagal raises the alarm about how the "freewheeling approach of the fast-evolving energy industry is luring a rogue’s gallery of corrupt politicians and entrepreneurs trying to literally create money out of thin air." Furthermore, Andrew Campanelli, a forensics investigator for Deloitte Financial Advisory Services in New York, states: “In a down economy, individuals might be more inclined to need more cash. They might look at green energy as a mechanism to use ill-gotten funds.”

Eco-warrior Ashok Subron and crusader Jack Bizlall have time and again exposed the shady character of similar accords with hardly any echo elsewhere - with the notable exception of Mauritius Times, Nicholas Rainer and few others. We are being sold scaremongering for instant gratification. No wonder fiscal incentives on electric cars, photovoltaics and so on are so mired in trivialities and no coherent strategy is on offer. In contrast, interests in ethanol production and wind farms are glaring examples of eco-bandwagonning where we might well end up paying, yet again, a higher price dictated by rent seekers.

Saturday, December 12, 2009

The Monetary Trap

 Common sense is the habit of practical reason by someone whose soul is open to reality. Ideology is not simply opinion, but a libidinous refusal to perceive reality
Abdolkarim Soroush, philosopher

Due to the relative small size of their domestic markets, small economies have no alternative but to boost their integration into the global market in order to sustain their economic expansion. To put it bluntly their very survival is tributary to their degree of openness. However, unless the State, through its institutions and their policies, can instil a reasonable degree of integrity, stability and flexibility into the system, more openness will only translate into an ineffective, if not dramatically polarised, allocation of resources.

How does the choice of monetary policy set the basic condition to achieve convergence with the developed world? There seems to be an ingrained consensus in Mauritius, at least within some affluent circles and their “useful idiots”, about the inevitability of resorting to rupee (MUR) depreciation. For instance, citizens are forced to surrender to a trade off between MUR depreciation and job security. In other words they must bear with an annual collective pay cut if they do not want to lose their jobs. Today, with such waffling, even the most seasoned spin doctor would struggle to lure thousands of workers laid off from the export industries over the years.

The conventional nation-centric view of an economy is completely obsolete. Nowadays we live in a world where tightly knitted supply chains and financial markets are a reality. As a small and open economy itself, Mauritius has indeed subscribed to this rational assessment, albeit under preferential treatment for many decades. An export business operating in Mauritius, say a garment manufacturer, no matter how vertically integrated, is dependent on imported fibre, yarn, fabric, technology, human resource and so on. In case imported inputs are not denominated in the same hard currency as the sales receipts, futures markets are available to hedge against currency risk that can dent bottom lines.

Should a business, a sugar exporter or a hotel operator for example, have less import content, depreciation may provide a temporary cost cushion (not to mention a “windfall gain”) under some circumstances, but as depreciation filters through a broad spectrum of prices it breeds a vicious circle, or a “mess”, as Francois Woo, a leading textile industrialist, warned. Export performance is not linked to currency valuation but to other factors such as demand, supply and, more critically, the productivity of each and every individual, firm and service provider, big or small, export-oriented or not, in the exporting country.

Mind The Gap
Internally, a firm can astutely create a working environment that stimulates productivity gains to some extent. However a business does not operate in a vacuum as its activities are connected to those of a multiple of players in other sectors. When offering value for money is far from the norm, this inescapable inter-dependence insidiously erodes our competitiveness. The shortcoming reflects a mindset problem and it takes much more than just pep talks to tweak it. Worse, blaming a demotivated workforce for its output deficit is bound to produce a dead-end scenario.

Instead, the government must strive to provide the incentives and disincentives within the mechanism that defines the interactions between all stakeholders so as to foster a synergy. It means heeding to progressive demands while resisting corporatist pressures. It also implies, more centrally, that as long as citizens anticipate an improvement or maintenance by default of their living standards they will be cheery and productive. When, alternatively, ordinary working citizens perceive that the manifestation of wealth generation is at their expense, it is only a matter of time before the more fortunate residents are driven to seek refuge in “gated communities”.

Paul Volcker, the former Federal Reserve chairman widely credited for putting the clamp on the runaway inflation of the 1970s in the U.S., once referred to rising prices as “a cruel and maybe the cruellest tax, because it hits in an unexpected way, in an unplanned way, and it hits the people on a fixed income hardest”. Inflation that goes unaccounted for might help explain an increasing squeeze on the Mauritian working and middle classes, which many observers feel are too deeply in debt to cope with an economic downturn.

Since 2002, the US dollar (USD) is down about 24 percent against a basket of 26 currencies. Because of the marginal pass through of the depreciation to prices and their food self-sufficiency American citizens do not feel the pinch as would people in a highly open economy like Mauritius that must even rely on imported food staple. Moreover, the U.S. can afford the depreciation because the cutthroat competition in its vibrant and large domestic market has a tendency to force businesses to relinquish profits for market share.

If, as standard theory contends, exchange rates must reflect “fundamentals”, the USD must then be allowed to depreciate to accommodate the accounting shortfall. Notwithstanding the empirically-tested rebuttal of Morgan Stanley’s Eric Chaney that in “the real world of financial markets, fundamentals matter only in the long term and deviations from fundamentals may last for long periods of time”, one can safely bet one's life on the assumption that the USD will reverse the trend.

The same could hardly be said of the MUR, which, barring few sporadic laps of respite, has experienced a general downward slide, more precisely a loss of about 90 percent of its purchasing power vis-à-vis the USD over the last 30 years or so, induced by a recurrent stop-and-go monetary stance. Large interest rate differentials prompt market participants to act in ways that tend to push exchange rates in the “wrong” direction, amplifying rather than reducing accounting imbalances. With overwhelming trade shares and high foreign-currency debt Mauritius cannot afford to ride out the ups and downs of the exchange rate of the MUR.

In the wake of the 1997 East Asian financial crisis and in a bid to explain “international financial perplexity”, after honestly revising his earlier off-the-cuff comments, Paul Krugman, a caustic economic thinker from Princeton University, and also recipient of the Nobel Memorial Prize in Economic Sciences in 2008, devised “The Eternal Triangle”.

His insight: the majority opinion (namely influential economists like Robert Mundell, Robert Barro, late Rudiger Dornbusch and, contrary to popular beliefs, late Milton Friedman too) seems to be that the burden of foreign currency debt and the risk of inflation from massive currency overshooting make flexible exchange rates unacceptable to small and open economies. Such countries must either strongly manage their currencies (e.g. Singapore), adopt a currency board (e.g. Hong Kong), start off down the road to monetary union (e.g. parts of Europe, Africa, Latin America, Middle East, Asia) or they must restrict capital movement until the market cools down (e.g. Malaysia). In short the features that have relatively insulated the few countries from the 1997 shock.

Practically all SIDS (Small Island Developing States), financial centres or transition economies around the world have also solidly tied their currencies either through a currency board (e.g. Bermuda, Cayman Islands, East Caribbean Islands, British Overseas Territories, Estonia etc.) or a more conventional peg (e.g. Bahamas, United Arab Emirates etc.). Even Denmark's krone is pegged to the Euro. Panama has gone all the way to adopt the USD as its legal tender. As an aspiring financial hub where financial and capital markets are deeply integrated into the global market, Mauritius would be wise to embrace a little bit of realism. 

Furthermore, “The Eternal Triangle” vividly exposes the sloppiness behind the full exchange control liberalisation in 1993 when the government stooped to comply with the shoddy prescriptions of the IMF. It is not that liberalisation is not commendable, it is even desirable in this case, but in typical “Washington Consensus” fashion, it was implemented without ensuring the equilibrium of all parameters. Since then reality has been settling in. While it has been a boon for most foreign exchange earners, liberalisation has been the bane of most MUR earners.

A weak MUR also pushes up interest rates because sooner or later investors demand higher yields to offset the weak currency. It is doubtful, however, that bolstered exports could significantly overcome the economic drag of higher inflation and steeper borrowing costs. Now that the demise of protected markets heralds the imminence of smart management, it is expected that even the most self-absorbed voices of our export sector will be compelled to give up their fantasy of having the cake (a weak MUR) and eating it (competitive borrowing cost) too.

What Matters Is What Works
The Monetary Authority of Singapore (MAS) “promotes sustained non-inflationary economic growth”. To achieve low inflation, the MAS manages the Singapore dollar (SGD) by allowing it to fluctuate within either side of a pre-determined trading band against a basket of currencies whose weights vary according to their relevance in the international trade of Singapore. What's more the modest appreciation bias – the SGD has appreciated by about 30% against the USD over the last 30 years – has remained supportive of economic growth while ensuring price stability.

“Let the historians and the Ph.D. students work out their doctrines. I'm not interested in theories per se”, Lee Kuan Yew, the first Prime minister of independent Singapore confessed in an interview with International Herald Tribune. With such legacy, little wonder everything Singapore does seems so groundbreaking. Its monetary policy is no exception. The MAS has reiterated the government's inflation forecast of 1.5 to 2 per cent for this year in spite of the overall strong price pressure from rising food and energy costs. Here “price stability” is not an abstract and elusive concept.

Singapore has not been waiting for a future Nobel laureate's model to weigh the benefits and costs of “inflation targeting” in small and open economies. It has just been doing it, applying rational common sense and dumping statistical bunkum such as “real” exchange rates that The Economist finds “difficult to model empirically” and “while theories abound, there is only weak empirical evidence supporting quite plausible theories like purchasing power parity and the Balassa-Samuelson effect”. The MAS has sensed that, given the specificities of the economy of Singapore, the most reliable road to tempering rising prices is via a nominal exchange rate target.

The ultimate job of any institution is to exude credibility. Monetary institutions that are not perceived to be immune to unhealthy lobbies and with a dismal track record in terms of issuing sound money will never be trustworthy. At first glance Mauritius can replicate the monetary mechanism of the MAS. But under one precondition, that the credibility gap of our institutions is restored.

It is very likely that the implementation of a currency board that two visiting monetary specialists, namely Alan Walters, formerly from London School of Economics, and Peter Sinclair from University of Birmingham, have advocated is our fittest alternative. The rule-based mechanism of an orthodox currency board is arguably its hallmark since restricted discretionary powers tend to depolitise monetary policy.

The “currency board” which was under close scrutiny during the Argentine debacle was placed into proper perspective by Steve Hanke, a professor of applied economics at Johns Hopkins University, in ““Currency Board” a Misnomer for Argentine system” published in Financial Times and also by Gary Becker, recipient of the Nobel Memorial Prize in Economic Sciences in 1992, in “Deficit Spending Got Argentina into This Mess” ran in Business Week.

To factor in the “decoupling” pattern of world markets from the greenback, the Hong Kong Monetary Authority (HKMA) has adjusted its currency board, officially known as Linked Exchange Rate System, in 2005. Now the Hong Kong dollar (HKD) is not pegged to the USD so much as it is corralled within a narrow trading range referred to as “Convertibility Zone”. More importantly from a currency board-operations perspective, it is relatively easy for the HKMA to defend the HKD at the strong end of its trading band.

In theory, there is no limit to the amount of USD the authority can take in. It can simply create all the HKD it needs to buy them. The currency board is also self-correcting and it does not have to set interest rates. As the supply of HKD arising from such purchases grows, interest rates fall, depressing demand for the local currency. Mauritius can either follow the footsteps of the HKMA or can still pioneer another modified currency board with a basket of currencies aligned with our international trade as anchor instead of one single currency to inject a dose of flexibility.

While trying to control local interest and exchange rates in blissful ignorance of the moves of the Federal Reserve and increasingly of the European Central Bank is merely an act of wishfulfilment in an era evolving towards “fewer monies, better monies”, shifting from a de facto link to an official one should not bother any forward-thinking policymaker. Like Rundeersing Bheenick, Governor of the Bank of Mauritius, for instance, who is a proponent of unifying the MUR with a common Southern African currency in the future.

Winning Formula Redux
A stable currency and low inflation lengthen economic horizons and are conducive to investment and risk taking. As a reward, households and businesses in Mauritius can potentially benefit from up to four times less borrowing costs. A sound monetary policy is a decisive driver in the journey towards a rewarding destination but in no way is it the only driver. Together with a strong commitment to spend taxpayers’ money efficiently, governments must get their priorities right, like planning for food and energy security, before chalking out other policies with a clear-cut strategy of redistribution, inclusion, and opportunity.         

It is essentially due to the foundation laid by John Cowperthwaite, the spirited visionary who managed Hong Kong's finances from 1961 to 1971 and helped create its free-market economy, that Hong Kong can today boast to run the gauntlet of boom and bust so nimbly. Popular dissent to policies being implemented is an indication that governments are trading off elements reminiscent of “trickle-up economics”. Any attempt to transform a country without a balanced approach will surely backlash into outcry for “social justice”.

If our business, intellectual and political elites do not wish to hover like ghosts over future generations for writing a tale of two or more Mauritius, they must mull over the advice of Stephen Roach, a senior executive with Morgan Stanley, in New York Times: Yet history is clear: no nation has ever devalued its way into prosperity. Common sense also seems to suggest a link between “bread and butter issues” and true competitiveness.

Le piège monétaire

Le bon sens est la raison pratique de quelqu'un dont l'âme est perméable à la réalité. L'idéologie n'est pas que de l'opinion mais un refus charnel de percevoir la réalité.
Abdolkarim Sourosh, philosophe
En raison de la relative petite taille de leurs marchés domestiques, les petites économies n'ont d'autre alternative que de promouvoir leur intégration dans le marché global afin de soutenir leur expansion économique. En fait, leur propre survie est tributaire de leur degré d'ouverture. Cependant, à moins que l'État, par le biais de ses institutions et de leurs politiques, imprègne le système d'une dose raisonnable d'intégrité, de stabilité et de flexibilité, plus d'ouverture ne pourra que produire une allocation inefficace, voire gravement polarisée, des ressources.
Comment le choix de la politique monétaire sert-il de condition primordiale pour se mettre au diapason du monde développé ? Il semble qu'il y ait un consensus bien ancré à Maurice, du moins dans certains milieux et parmi leurs "idiots utiles", sur l'inévitabilité d'avoir recours à la dépréciation de la roupie mauricienne (MUR). Par exemple, les citoyens sont forcés de choisir entre la dépréciation de la MUR et la sécurité de l'emploi. En d'autres mots, ils doivent se résigner à une réduction permanente de salaires s'ils ne veulent pas perdre leurs emplois. Aujourd'hui, avec un tel subterfuge, même le spin doctor le plus chevronné se démènerait en vain pour berner les milliers d'ouvriers licenciés au fil des années dans les industries d'exportation.
La conception conventionnelle d'une économie centrée sur la nation est complètement dépassée. Aujourd'hui, nous vivons dans un monde où des chaînes d'approvisionnement et des marchés financiers sont étroitement connectés. En tant que petite économie très ouverte, Maurice a, en effet, souscrit à ce raisonnement, bien qu'elle ait bénéficié d'un traitement préférentiel pendant plusieurs décennies. Quel que soit son degré d'intégration verticale, une entreprise d'exportation opérant à Maurice, disons un fabricant de vêtement, ne peut se passer de fibres, de fils, de tissus, de technologie et de ressource humaine importés. Au cas où les intrants importés ne sont pas libellés dans les mêmes devises que les recettes de vente, les marchés "futurs" sont disponibles pour palier les risques de change qui peuvent plomber la profitabilité de l'entreprise. 
Si une entreprise, un exportateur de sucre ou un opérateur d'hôtel, par exemple, compte moins d'intrants importés, la dépréciation pourra, temporairement du moins, contribuer à absorber des coûts additionnels (pour ne pas mentionner les bénéfices exceptionnels) dans certains cas, mais comme la dépréciation se faufile à travers une large palette de prix elle engendre un cercle vicieux, ou un "désordre", comme prévenait François Woo, un industriel de premier plan.
La prouesse à l'exportation ne se joue pas au niveau du taux de change mais au niveau d'autres facteurs tels la demande, l'offre et, d'une manière plus centrale, la productivité de chaque individu, entreprise et prestataire de service dans le pays exportateur, qu'il soit grand ou petit ou qu'il s'oriente vers l'exportation ou non.
Attention au fossé
Dans une certaine mesure, une entreprise peut astucieusement créer un environnement de travail interne qui puisse stimuler des gains de productivité. Cependant, une entreprise n'opère pas dans un vide d'autant plus que ses activités sont liées à celles d'un grand nombre d'acteurs dans d'autres secteurs. Comme souvent les prestations n'offrent pas un bon rapport qualité/prix, cette inéluctable interdépendance ronge insidieusement notre compétitivité. Cette faiblesse reflète un problème de mentalité. Il faudrait certainement beaucoup plus que quelques incantations pour le résoudre. Pire, oser blâmer une ressource humaine démotivée pour son manque d'application risque de nous conduire à une impasse.
Au contraire, le gouvernement doit s'efforcer de pourvoir le mécanisme définissant les interactions entre toutes les parties prenantes en incitations et désincitations nécessaires à la formation d'une synergie. Cela signifie tenir compte des demandes progressistes tout en résistant aux pressions corporatistes. D'autre part, cela implique plus essentiellement, qu'aussi longtemps que les citoyens s'attendent à une amélioration ou au maintien par défaut de leur niveau de vie, ils seront heureux et productifs. Cependant, lorsque les citoyens ordinaires se rendent compte que l'ostentation de la création de richesse se fait à leur détriment, il est alors une question de temps avant que les citoyens les plus fortunés ne soient forcés à chercher refuge dans "des ghettos de riches".
Paul Volcker, l'ancien président de la Federal Reserve célèbre pour avoir jugulé l'inflation galopante des années 1970 aux Etats-Unis, avait décrit la hausse des prix comme "une taxe cruelle et peut-être la taxe la plus cruelle, parce qu'elle frappe à l'improviste, d'une manière non-planifiée, et parce qu'elle frappe le plus durement les gens à revenus fixes". L'inflation, que les chiffres officiels ne captent pas, pourrait aider à expliquer la compression grandissante de nos classes ouvrières et moyennes, qui, selon certains observateurs, sont trop endettées pour faire face à un déclin économique.
Depuis 2002, le dollar américain (USD) a perdu environ 25 pour cent de sa valeur par rapport à un panier de 26 devises. En raison des retombées marginales de la dépréciation sur les prix et du fait de leur autosuffisance alimentaire, les citoyens américains tirent à peine le diable par la queue autant que le feraient les consommateurs pris dans une économie grandement ouverte comme Maurice qui doit même dépendre de l'importation de sa nourriture de base. De plus, les Etats-Unis peuvent se permettre une dépréciation d'autant plus que la concurrence féroce au sein de son vaste marché dynamique a souvent tendance à inciter les entreprises à conquérir des parts de marché au détriment des bénéfices.
Si, comme le postule la théorie établie, les taux de change doivent refléter les "fondamentaux", l'USD doit se déprécier afin d'accommoder le déficit comptable. Malgré la réfutation empiriquement vérifiée de Eric Chaney, analyste chez Morgan Stanley, selon laquelle "dans le monde réel des marchés financiers les fondamentaux ne comptent qu'à long terme et les déviations des fondamentaux peuvent durer pendant longtemps", on peut sans risque avancer que le USD va finir par inverser la tendance.
On ne saurait en dire de même pour la MUR qui, mises à part quelques périodes de répit comme actuellement, a connu un glissement généralisé, plus précisément une perte d'environ 90 pour cent de son pouvoir d'achat par rapport au USD au cours des trente dernières années, laquelle est due à une approche stop-and-go. De larges différentiels de taux d'intérêt incitent les acteurs du marché à agir de sorte à pousser les taux de change dans la "mauvaise" direction, amplifiant au lieu de réduire les déséquilibres des comptes. En raison d'une part écrasante de son commerce international et de ses dettes énormes contractées en devises, Maurice ne peut se payer le luxe de surmonter les mouvements en dents de scie du taux de change de la MUR. 

Dans le sillage de la crise financière du sud-est asiatique de 1997 et dans une tentative d'expliquer "la perplexité financière internationale", après avoir honnêtement revisé ses commentaires impromptus antérieurs, Paul Krugman, un penseur économique du Massachusetts Institute of Technology, conçut "Le Triangle Eternel" fondé sur les axes ajustement-confiance-liquidité. Voici son éclairage :
Selon l'opinion majoritaire (à savoir, les économistes influents comme Robert Mundell, Robert Barro, le défunt Rudiger Dornbusch et contrairement aux croyances populaires, le défunt Milton Friedman également), le fardeau de la dette en devises étrangères et le risque d'inflation dû à la volatilité de la monnaie rendent les taux de change flexibles inadmissibles aux petites économies ouvertes. Les pays doivent soit vigoureusement gérer leurs monnaies (par exemple, Singapour), instituer un currency board (par exemple, Hong Kong), commencer à réfléchir sur une union monétaire (par exemple, l'Europe, l'Afrique, l'Amérique latine, le Moyen Orient, l'Asie), soit restreindre le mouvement des capitaux jusqu'à ce que le marché se calme (par exemple, la Malaisie). Bref, les éléments qui ont relativement épargné ces quelques pays du choc de 1997.

Pratiquement tous les petits Etats insulaires en développement (SIDS), les centres financiers ou les économies en transition de par le monde ont aussi solidement arrimé leurs monnaies soit à travers un currency board (par exemple les Bermudes, les Iles Caïman, les Iles Caraïbes Orientales, les territoires britanniques d'Outre-mer, l'Estonie etc.) soit à un régime de parités plus conventionnel (par exemple, Bahamas, les Emirats Arabes Unis, etc.) Même la couronne danoise est indexée sur l'euro. Le Panama est allé jusqu'au bout pour adopter le USD comme sa monnaie légale. En tant qu'aspirant centre financier où les marchés financiers et de capitaux sont profondément intégrés dans le marché global, Maurice a intérêt à faire preuve d'un peu de réalisme.
En outre, "Le Triangle Eternel" met à nu le manque de vision qui caractérise la libéralisation complète du contrôle de change en 1994 lorsque le gouvernement se plia aux prescriptions mal inspirées du FMI. Ce n'est pas que la libéralisation ne soit pas louable en soi - elle est même désirable dans ce cas - mais dans la pure tradition du "consensus de Washington", elle a été mise en pratique sans tenir compte de l'équilibre de tous les paramètres. Dès lors la réalité s'est manifestée. Autant la libéralisation des changes a été une aubaine pour ceux qui sont rémunérés en devises, autant elle a été la ruine pour ceux rémunérés en MUR.
Une MUR faible fait monter les taux d'intérêt parce que tôt ou tard les investisseurs exigeront des rendements plus élevés pour compenser la monnaie faible. Cependant, il est permis de douter que les exportations soutenues puissent considérablement surmonter l'entrave économique que constituent une inflation plus forte et des coûts d'emprunt plus élevés. Maintenant que la mort lente des marchés protégés annonce l'imminence d'une gestion intelligente, il faut s'attendre à ce que même les voix les plus nombrilistes de notre secteur d'exportation seront contraintes de laisser tomber leur fantasme qui consiste à désirer le beurre (une MUR faible) et également l'argent du beurre (un coût d'emprunt compétitif).
Ce qui importe, c’est ce qui marche
La Monetary Authority of Singapore (MAS) "encourage la croissance économique non-inflationniste". Pour réaliser une inflation peu élevée, la MAS gère le dollar Singapourien (SGD) en le laissant flotter de chaque côté d'une bande prédéterminé contre un panier de devises dont les poids varient selon leur pertinence dans le commerce international de Singapour. Qui plus est, la modeste tendance à l'appréciation - le SGD a apprécié d'environ 30% contre le USD au cours des trente dernières années - continue à soutenir la croissance économique tout en garantissant la stabilité de prix.

"Laissons les historiens et les étudiants de PhD développer leurs doctrines. Je ne suis nullement intéressé par les théories en tant que telles", avoua Lee Kuan Yew, le premier chef de l'exécutif de Singapour indépendant, dans une entrevue à l'International Herald Tribune. Il n'est guère surprenant qu'avec un tel héritage tout ce que fait Singapour a l'air d'être si révolutionnaire. Sa politique monétaire ne fait aucune exception. Ici la "stabilité des prix" n'est pas un concept abstrait et évasif.
Singapour n'a pas attendu la consécration des recherches d'un futur lauréat du prix Nobel pour évaluer les avantages et les inconvénients du "ciblage de l'inflation" dans les petites économies ouvertes. Le pays l'a intégré depuis longtemps, mettant en pratique le bon sens et se défaisant des leurres statistiques telles que les taux de change "réels" que The Economist trouve " difficile à mesurer empiriquement" et "alors que les théories abondent, il n'y a qu'un faible point empirique appuyant des théories plausibles comme la parité du pouvoir d'achat et l'effet Balassa-Samuelson". La MAS a compris qu'étant donné les spécificités de l'économie de Singapour le moyen le plus fiable pour atténuer la hausse des prix est de cibler le taux de change nominal.
Le but ultime de toute institution est de démontrer sa crédibilité. Les institutions monétaires qui ne sont pas perçues comme étant immunisées contre les lobbies malsains et qui détiennent un bilan lamentable en ce qu'il s'agit de l'émission d'une monnaie saine ne seront jamais dignes de confiance. À première vue Maurice peut reproduire le modèle monétaire de la MAS. Mais à la condition expresse que la crédibilité de nos institutions soit restaurée. Une tâche difficile en perspective, le moins qu'on puisse dire.

Il est fort probable que la mise en place d'un currency board, tel que préconisé par Alan Walters, anciennement de la London School of Economics, est notre choix le plus approprié. Le mécanisme régulateur d'un currency board orthodoxe est sans doute son cachet puisque les pouvoirs discrétionnaires limités tendent à dépolitiser la politique monétaire.

Le currency board qui était sous les feux des projecteurs durant la débâcle argentine fut mis dans sa vraie perspective par Steve Hanke, professeur d'économie appliquée à l'université Johns Hopkins, dans une mise au point intitulée "Le "currency board", une fausse appellation pour le système argentin" publié dans le Financial Times. Et aussi Gary Becker, Prix Nobel de 1992, dans un article paru dans Business Week "Les dépenses déficitaires assomment l'Argentine".

En 2005, afin d'intégrer le schéma de "découplage" des marchés mondiaux du billet vert, la Hong Kong Monetary Authority (HKMA) a ajusté son currency board, officiellement connu comme Linked Exchange Rate System. Aujourd'hui le dollar Hong-Kongais (HKD) n'est pas indexé autant sur le USD qu'il est retranché dans la "zone de convertibilité", qui dispose d'un champ de mouvement étroit. Ainsi, vu sous l'angle du mécanisme d'un currency board, il est relativement facile pour la HKMA de soutenir le HKD au niveau le plus élevé de sa bande de fluctuation.
Techniquement, il n'y a aucune limite à la quantité de USD que la HKMA peut négocier. Elle peut tout simplement créer la quantité équivalente de HKD pour les acheter. Le currency board s'auto-régule et n'a pas besoin d'ajuster les taux d'intérêt. A mesure que l'offre de HKD augmente pour acheter les USD, les taux d'intérêt baissent et réduisent la demande de la monnaie locale. Maurice peut soit emboîter le pas à la HKMA ou elle peut toujours innover en introduisant une dose de flexibilité à travers un ancrage à un panier de devises aligné sur notre commerce international au lieu d'une monnaie unique.

Alors que la tentation de vouloir maîtriser les taux de change et d'intérêt locaux dans l'ignorance absolue des actions de la Federal Reserve, et de plus en plus de la Banque centrale européenne, s'apparente davantage à une illusion dans une ère qui évolue vers "moins de monnaies mais de meilleures monnaies", passer d'un lien "de fait" à un lien officiel ne devrait guère importuner aucun responsable politique ayant le regard tourné vers l'avenir. A l'image de Rundheersing Bheenick, le gouverneur de la Bank of Mauritius, qui est un partisan de la réunification de la MUR avec une monnaie unique régionale.

"Winning formula" revisitée
Une monnaie stable et une inflation basse rallongent les horizons économiques et sont propices à l'investissement et la prise de risque. Comme prime, les ménages et les entreprises à Maurice peuvent s'attendre à une diminution allant jusqu'à cinq fois moins que les coûts d'emprunt actuels. Même si une politique monétaire fiable est un élément incontournable sur la route de la prospérité, elle ne saurait accomplir quoi que ce soit seule. 

Avec un engagement ferme à dépenser judicieusement l'argent des contribuables, les gouvernements doivent d'abord s'assurer qu'ils aient correctement identifié leurs priorités, comme un plan pour la sécurité alimentaire et énergétique, avant d'énoncer une stratégie bien définie autour de la redistribution, de l'inclusion et de l'opportunité.
C'est essentiellement la concrétisation de la vision de John Cowperthwaithe - le secrétaire financier de Hong Kong entre 1961 et 1971 qui contribua à transformer le pays en un champion du libre-échange - qui permet à Hong Kong de naviguer si agilement entre les cycles de boom et d'effondrement aujourd'hui. La résistance populaire aux politiques mises en place est souvent une indication que les gouvernements abusent d'une méthode qui tendrait plutôt à évoquer une démocratisation économique à l'envers. Sans une approche intégrée, toute tentative de réforme butera sur une revendication de "justice sociale".
Si nos élites politiques, intellectuelles et des affaires ne souhaitent pas hanter les esprits des futures générations pour avoir écrit un conte de deux ou plusieurs Maurice, elles doivent méditer sur le conseil de l'analyste Stephen Roach publié dans le New York Times : "L'histoire l'atteste: aucune nation n'a prospéré à travers une dévaluation persistante." Le bon sens aussi semble suggérer un lien entre le vécu quotidien des citoyens et la vraie compétitivité.

Monday, December 7, 2009

A Femme Fatale Named Tina

"Social injustice is killing people on a grand scale." This is how Commissioners of a report at the World Health Organisation assess the legacy of a "toxic combination of bad policies, economics, and politics".

They further elaborate: "Economic growth is raising incomes in many countries but increasing national wealth alone does not necessarily increase national health. Without equitable distribution of benefits, national growth can even exacerbate inequities. Nordic countries, for example, have followed policies that encouraged equality of benefits and services, full employment, gender equity and low levels of social exclusion."

No stone must be left unturned in our quest to relieve the zeitgeist of its severe stress. We must ponder and act upon the report's recommendations:
  • Improve daily living conditions, including the circumstances in which people are born, grow, live, work and age;
  • Tackle the inequitable distribution of power, money and resources – the structural drivers of those conditions – globally, nationally and locally;
  • Measure and understand the problem and assess the impact of action.