“There is no magic bullet. A country's economic institutions are a richly textured fabric. There would be big disappointment if a government abolished a quick employment regulation or two before breakfast and expected great things to happen. There are hundreds of things that have to change.”
Edmund Phelps, winner of the 2006 Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel
In spite of the social, economic and political instability it entails, globalisation continues to gather momentum. When assessing how different countries cope with globalisation in order to anticipate and mitigate the resulting imbalances, the quality of leadership proves critical.
As expected, Singapore tops the Globalisation Index 2006 measured by the consulting firm A.T. Kearney. Ireland and Denmark are among the five best performers. A closer look at how the three countries operate is revealing: it debunks many fallacies disseminated by members of Tina F.C., i.e. the “There-is-no-alternative” Fan Club.
One dogma suggests that if a country wants to successfully integrate global capitalism, its government must keep its “hands” off the economy and privatise its business activities. Ironically, the state-led approach has been the Singapore model. Today Temasek Holdings, the investment arm of the Singapore government, powers many global flagship companies. Another dogma suggests that when a country embraces economic liberalism, the Welfare State becomes redundant. Both Ireland and Denmark emphatically demonstrate the opposite.
According to the Quality-of-life Index 2005 established by The Economist, Ireland is the country that best reconciles economic and social imperatives to meet the aspirations of its citizens. Material well-being alone does not adequately reflect quality of life. Ireland would never have enjoyed such a quality of life had it not contained the impediments associated with modernisation, namely the breakdown of traditional institutions and the erosion of family values. After all, is not Ireland the land that swings blissfully between melancholy and joie de vivre?
Viewed through black and white lenses with no shades of grey, as in the case of members of Tina F.C., all our woes can be resolved in a sleight of hand; for an instant relief of our existential crisis, repeat religiously “république laïque”; to recharge our flawed “democracy”, simply “cut” a piece of “proportional representation” and “paste” it to the mechanism of “first pass the post”; to salvage our failed educational system, deride obsessively the streaming test at the end of primary schooling; to balance our abysmal national accounts, target everybody but the networks of patronage and fleece them.
Followership under the influence of the IMF
We are in the creative age. Only those nations groomed to “think global and act local’ will thrive. In a globalised setting your edge is basically how much more creative you are than your competitors because that is where you differentiate yourself. To the members of Tina F.C. faking to “think outside the box”, Steve Jobs, the co-founder of Apple Computers, hailed as the most innovative company by Business Week, offers a candid rebuttal: don’t be trapped by dogma, which is living with the results of other people’s thinking.
The transformation of Mauritius is tributary to the inclusion of the following elements of change management: a project in which all stakeholders believe passionately in, the creation of an environment that stimulates a shift in mindsets and attitudes, the building of a strong and committed top team to drive the process and a leadership by example. Post-independent Mauritius has hardly experienced anything that even brushes with that. Or maybe, our successive governments, barring a few mavericks within, should jointly patent the ultimate brand of leadership; one exclusive of integrity, foresight, vision and empathy.
It would indeed be more appropriate to talk about followership than leadership. That Singapore has never been under International Monetary Fund (IMF) programmes from 1980 to 2002, and till today for that matter, speaks volumes. Mauritius, on the other hand, has spent about 23% of its time over the same period under the influence of the IMF. These figures, arguably much higher today as far as Mauritius is concerned, are excerpted from the findings of William Easterly in his latest book “The white man's burden: why the West's efforts to aid the rest have done so much ill and so little good”.
The book by William Easterly, a professor of economics at New York University, shall make a far more enlightening reading for our policymakers rather than say, “Globalization and its discontents” by Joseph Stiglitz, “The end of poverty” by Jeffery Sachs or even “The world is flat” by Thomas Friedman. If top-down transformation by outsiders is self-defeating, a combination of domestic top-down policies with bottom-up reciprocity has the potential to unleash the crucial synergy.
As long as the government does not question the status of insiders of our system, who live by entrenched privileges, policies are doomed because they are opposed by insiders, who fear that they may be the next on the list, and outsiders, who consider them as discriminatory and continue to dream of becoming themselves insiders. A doctrinaire approach to policymaking may foster short-term economic expansion but when it simultaneously disintegrates social cooperation, it inhibits value creation through productivity gains and retards competitiveness growth.
The bogeymen setting the cart before the horse
In conformity with the bigotry of the IMF and the World Bank, members of Tina F.C. believe that a violent disruption in the form of a “shock therapy” is a quick fix that will reap rewards in a couple of years. “Reform” as spun by the government in reality refers to a few half-baked measures expected to revive our ailing competitiveness. This bland and reductive thinking, that confuses means and end and vice versa, is alienating citizens and polarising the Mauritian community further. “Democratisation” and “Empowerment”, at their worst, are akin to window-dressing.
The government rightly claims that our labour market must be revamped to become more flexible. But where are the evidence and the benchmark? When “hiring and firing” of employers can happen from one day to the next, companies surely get a decided competitive edge over rivals. Is it the one and only factor in the “flexibility” paradigm?
Denmark’s “flexicurity” blends a flexible labour market, generous social security and an active labour-market policy with rights and obligations for the unemployed. Workers pay high taxes, but trade job security for a guarantee, should they be laid off, of time-limited but generous unemployment benefits that they can live on and a promise that they will get new jobs fast. About a fifth of Danish workers lose their job in any given year but most find a new job quickly. The mechanism rests on perpetual dialogue and mutual trust.
The implementation of the National Pay Council (NPC) is a glaring example of how despicable a government can get. The concept per se is sound. But the NPC should not arbitrate the dispute regarding compensation for declining purchasing power that is not, as the government would have us to believe, totally inflicted by global capitalism. Despite the annual inflation-adjusted compensation granted to them, the majority of Mauritians has been subsidising uncompetitive players through a wage cut as persistent and self-inflicted rupee depreciation feeds into a vicious circle that offsets the compensation.
The Consumer Price Index (CPI) basket of goods and services identified to compute CPI inflation does not have the same relevance for people with different pay levels. As their expenditure patterns vary, so does the weightage of the items in the basket. That is why the Singapore Department of Statistics regularly publishes CPI inflation for different income groups instead of relying on a general average figure. What's more, because of the high income divide, an inflation rate of 10% largely under-estimates the impact of price hikes on low-income earners.
In an open economy like ours, the exchange rate is the main determinant in the variation of consumer prices. To make things worse, the current government provoked a massive currency slide coupled with a sudden removal of subsidies on flour with all its knock-on effects. Under these circumstances, it would be criminal to link the compensation of an ever-declining purchasing power to productivity and the capacity of employers to pay the compensation. Reasonably, to be coherent with its policies, the government should have settled for a non-negotiable full compensation for incomes below Rs 16, 500. As for the NPC, it could show its mettle by arbitrating a collective bargaining for end-of-the-year bonuses.
The need for a makeover starting at the top
A lean and efficient government is the incarnation of a clean and smart government. That is a far cry from what the IMF and the World Bank actually promote. When “leaders” indulge in the blame game, like flying the “economic patriotism” flag or grumbling about the “laid-back workforce”, they unwittingly reveal their incompetence. One of the roles of a government is to provide more certainties for households and businesses alike. Gross Domestic Product growth, no matter how dazzling, is futile when it is unable to dent joblessness and inequalities, to overcome structural mismatches and distortions and to boost purchasing power and morale.
Mauritius will be poised for globalisation after an extreme makeover starting at the top. Our civil society and media are still too weak a fourth estate to offer a counterbalance. Neocons of all hues will continue to sell the illusion that they are the genuine progressives and those who do not bow to their proselytism are self-hating citizens, but the Internet and its tools such as the Blogosphere, Wikipedia and YouTube are creating a new reality, where information flows less asymmetrically.
