Thursday, 5 May 2016

The Mauritius miracle, or how to make a big success of a small economy


Suppose someone were to describe a small country that provided free education through university for all of its citizens, transport for school children and free healthcare – including heart surgery – for all. You might suspect that such a country is either phenomenally rich or on the fast track to fiscal crisis.



villas in mauritius

Mauritius, a small island nation off the east coast of Africa, is neither particularly rich nor on its way to budgetary ruin. Nonetheless, it has spent the last decades successfully building a diverse economy, a democratic political system and a strong social safety net. Many countries, not least the US, could learn from its experience.

villas in mauritius

In a recent visit to this tropical archipelago of 1.3 million people, I had a chance to see some of the leaps Mauritius has taken – accomplishments that can seem bewildering in light of the debate in the US and elsewhere. Consider home ownership: while American conservatives say the government's attempt to extend home ownership to 70% of the US population was responsible for the financial meltdown, 87% of Mauritians own their own homes – without fuelling a housing bubble.

villas in mauritius

Now comes the painful number: Mauritius's GDP has grown faster than 5% annually for almost 30 years. Surely, this must be some "trick". Mauritius must be rich in diamonds, oil, or some other valuable commodity. But Mauritius has no exploitable natural resources. Tourism is among a pilar of the economy. The government is trying hard to get more tourist to the island. These tourists can stay in hotels or Mauritius villas. Indeed, so dismal were its prospects as it approached independence from Britain, which came in 1968, that the Nobel prize-winning economist James Meade wrote in 1961: "It is going to be a great achievement if [the country] can find productive employment for its population without a serious reduction in the existing standard of living … [The] outlook for peaceful development is weak."

As if to prove Meade wrong, the Mauritians have increased per capita income from less than $400 around the time of independence to more than $6,700 today. The country has progressed from the sugar-based monoculture of 50 years ago to a diversified economy that includes tourism, finance, textiles, and, if current plans bear fruit, advanced technology.

Unlike many other small countries, Mauritius has decided that most military spending is a waste. The US need not go as far: just a fraction of the money that America spends on weapons that don't work against enemies that don't exist would go a long way toward creating a more humane society, including provision of healthcare and education to those who cannot afford them.

Mauritius recognised that without natural resources, its people were its only asset. Maybe that appreciation for its human resources is also what led Mauritius to realise that, particularly given the country's potential religious, ethnic, and political differences – which some tried to exploit in order to induce it to remain a British colony – education for all was crucial to social unity. So was a strong commitment to democratic institutions and co-operation between workers, government, and employers – precisely the opposite of the kind of dissension and division being engendered by conservatives in the US today.

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