The Mauritian Miracle

The Mauritian Miracle is a term that is mainly used by economists while describing the astonishment regarding the significant success of Mauritian economy considering its development in the past decades. While some of the renowned and reputable economists including James Meade (a Noble Prize winner), predicted dismal performance and collapse of Mauritian economy considering numerous challenges that it faced, the economy continued to grow (Zafar 91). Most surprising is the growth trend that it has followed in the last decades maintaining an economic growth rate of over 5% annually. It should be noted that Mauritius was a mono-economy depending mainly on production and export of sugar. Besides, the aftermath of World War II brought adverse economic as well as social challenges to the growth of many nations, particularly on African Continent. This necessitated business offshoring as illustrated by Jo-Hui (407). However, numerous reforms in the economic sector coupled with globalization and political economic developments have enabled the country to move from an agricultural mono-crop dominated by low salaries, high unemployment, and boom-or-bust cycles to an economy marked by manufacturing, tourism development, and expanding financial services. The growth story can be seen as a contrast to Dani Rodrik’s ideas and those of Great Krippner. Among many reasons, globalization and key political, economic decisions including offshore banking in the country have immensely contributed to the economic success story of Mauritius.

Firstly, Krippner argues that state policies that presented global conditions that were conducive to financialization allowed states to avoid numerous economic, social, and political wrangles particularly the ones that confronted policy-makers in the postwar prosperity, especially in the 1960s and 1970s. In his arguments, Krippner indicates that financialization of the economy is not a planned or deliberate outcome of the policy-makers but rather an inadvertent result of the attempt by the state to solve particular problems. However, such arguments are contrasted by Dani Rodrik particularly on his take towards the impact of globalization. In his writing, The Globalization Paradox, Rodrik indicates that it is dogma particularly on economists as well as right-thinking members of the business elite towards the goodness of globalization. While he considers their reasoning that the free flow of goods as well as capital across borders among other gains of globalization outweigh any negative impacts including reduced wages, increased unemployment, and depopulated communities, he illustrates that the paradox is that those questions and justifications seem to be more hypothetical. Such controversies depict the complexity of Mauritian miracle considering the impact of globalization and financial-economic goals in the country’s economic success (Muyambiri 90). Being a small country with a meager population of about 1.3 million people, the country established a democracy with a positive human rights records. By so doing, the country attracted considerably high foreign investments that propelled it to one of the Africa’s highest per capita incomes. Its dazzling economic success that can be traced soon after independence depicts the significance of both planning and globalization.

Defying the predictions of James Meade, who had predicted a poor economic development prospectus considering the vulnerability to weather and price shocks as well as limited job opportunities, Mauritius has transformed its status based on numerous financial and economic reforms coupled with benefits of globalization. One of the area that contrasts Rodrik’s arguments is offshore development, especially on banking. Mara (1640) indicated that financial development relies on taxation and decisions made. In the modern society, the country has developed to a home of many banks which are regarded as high quality regarding customer service as well as products offered. It in this respect that financial goals and decisions seem to have played a critical role in Mauritian development. For example, Mauritius is among a few non-European jurisdictions that have adopted the International Bank Account Number (IBAN) system. This is even more interesting considering that the country is not a member of any single euro payment area (SEPA). It should be noted that many companies, as well as individuals in Europe, take IBAN for granted although they will often find it easier to transact with a person whose account as an IBAN number. Such decisions that are unique in the majority of the African countries illustrate the political, financial decisions that the country has made that has propelled it to economic growly (Petri 56). It is, therefore, important to note that while the country inherited an open economy based on sugar exports and other imports to sustain its population, its openness of the economy has remained a distinctive feature of its development. Despite the emergence of other economic sectors including seafood, tourism, textile, and communication technology, its economy is poised to serving external markets.

Government policy in Mauritius, which has been a major contributor towards its economic boom, is firmly centered on promoting the domestic and foreign investment. For example, Gandhi (102) indicated that the country had had several partnerships including treaties with foreign countries. In this regard, the country has been aggressive in attracting foreign direct investment, particularly from the emerging economies. To achieve this, multiple reforms, especially in the areas of legal provisions for the protection of the investor, have facilitated integration with the outside world. As opposed to Rodrik arguments regarding the paradox of globalization, the country was able to open most of its economic sectors to the foreign ownership. Besides, there was an establishment of Board of Investment thereby enhancing widespread simplification of doing business (Sooreea-Bheemul 124). However, Rodrik’s argument that open markets could only succeed when embedded within the legal, social, and political institutions seems to be justified. This concept helps to understand the legitimacy of actions considering that the benefits of capitalism are broadly shared in such an economy. As noted in his arguments, the richest and most financially developed nations tend to be more open and most extensive to the rest of the world. Besides, Boswell (146) discussed the importance of social functions on a country’s economic success. It is on this point that the Mauritian miracle manifests its self. Mauritius was not a big economy neither was it rich. To the contrary, the country was impoverished, relied on a single crop for its economy and popular economists predicted its stagnation. However, the small island developing with limited resources and being in a remote geographical area embarked on a program of diversification that contributed to its growth (Stiglitz 2). For example, the country adopted the import substitution policies while emphasizing on tax exemptions, protective import duties, and long-term loans with favorable terms to combat unemployment and raise the living standards. By so doing, the country opened to the outside world and embraced globalization for its success.

The concept of financial goals and economic policy-making as discussed by Krippner show that any country’s success is largely dependent on those actions. Many economists doubted Mauritian ability to grow since the country was dependent on single sectors (Khandelwal 74) while facing severe competition from other countries like Jamaica. It should be noted that Mauritius only relied on sugar exportation to the United Kingdom under the sugar protocol. In this regard, there were high levels of dissatisfaction among the Mauritian workers including the sugar workers who were largely productively ineffective. Besides, poor weather contributed to the country’s darkening future since it hampered the country’s only reliable source of revenue (Ramtohul 18). However, the ascension of the state to industrialization triggered by the era of globalization enabled the country to be among many others who are opening their economies. Industrialization policies that were adopted by the country (Padachi, Rojid and Seetanah 99) in the 1970s created new pillars for economic growth. It should be noted that many developing nations greatly concentrate on primary sector production like agriculture which often faces stiff competition thereby resulting in poor growth of the economy. However, Mauritius despite being an impoverished nation managed to adopt secondary sectors like industrialization that enabled a structural change key to the economic growth. This was enabled by industrialization policies that facilitated technological and infrastructural changes as well as human development especially concerning ethnic and social values (Muyambiri 90). In this regard, it is evident that industrialization and industrialization policies contributed immensely to the Mauritian miracle.

In his book, Krippner presented arguments for the theoretical innovative accounts of financialization that are largely plausible. For example, he argued that the path to financialization was critical towards public policy. He observed that the policy-makers had a tendency of deregulating financial activities with the aim of allaying a series of crises that would beset capitalist economies. This argument is proved by the fact that financialization was common among OECD considering the social, fiscal, and legitimation crises of the 1960s and 1970s (Vlcek 1466). In this respect, Mauritius continued to reinforce the reforms with the aim of improving its business climate. For example, the Mauritian government partnered with OECD as well as NEPAD to conduct a comprehensive review of its investment policies in the year 2012. From the review, it was evident that several policy advances have been achieved despite the systemic changes of the previous years. In most of the financial transactions, there has not been deposit insurance although the Central Bank of Mauritius has been contemplating its necessity. Besides, the major banks in the country are generally considered too big to fail. The government has been stepping up in few cases where banks have failed. In this regard, Banks in Mauritius have been stable regarding international standards with the entire nation enjoying stable credit rates. This illustrates the significance of offshore banking in the country enhanced by proper policy support. In this regard, banking can be seen as a positive experience in the country with reasonable fees, cards variety, and wide currency which make it an excellent start-up for offshore business.

Despite the successes of the country and their attribution to globalization and financial goals, the concepts by Rodrik concerning globalization seem to have also played a role towards some challenges in the country’s economy. As noted by Rodrik, globalization can work in every aspect if every country was governed by the same rules thereby being enforced by some form of technocratic global government. For example, the country has faced weak labor unions considering the surplus cheap labor resulting coupled with the ever-increasing number of companies (Stiglitz 2). Considering that the unions hold limited power especially in the foreign countries, the Mauritian workers are likely to be subjected to poor conditions which are adverse for economic health (Fitzgibbon 5). Besides, globalization has led to more consumption that saving. Opposers of globalization including Rodrik argue that increased companies will seek unfair means such as gifts and bargains to hold over to the market. Besides, the offshore banking system in the country has embraced easy loan facilities thereby encouraging Mauritian people to spend rather than save. This has resulted in the deficit in the balance of payments. Mauritius has been facing a shortfall in their current accounts especially in the fiscal year 2007-08. This coupled with the fact that the country has been importing more goods and services, especially from the Asian countries that exporting is not good for the country. Opposers of globalization as a factor for economic development cite such examples.

However, despite the opposers of globalization citing numerous reasons, policy development and financial integration played a critical role in Mauritius economic development. However, this could not have been achieved without globalization. Towards the end of colonialism from the British, the country had already adopted a program of diversification where it adopted import substitution policies with an emphasis on long terms loans as well as protective import duties. However, this approach of import substitution didn’t bear as much expected returns considering that the country had a very small domestic market with limited resources and technical know-how. In this regard, the economies could not benefit from the economies of scale. This informed the outward-looking export-oriented strategy. To achieve this, they set the labor-intensive export-oriented manufacturing enterprises that were aimed at opening open the economy further thereby being described as a high migration state (Ramtohul 19). Through these developments and the authorities’ prudent economic management, the country was placed on a sustained growth path. These developments show the importance of globalization to the steady growth of the nation. For many years, many companies and investors from Hong Kong, Taiwan, and Singapore have settled in the country. Investors from mainland China would join These countries that are mainly from the economic processing zones (EPZs) by 2008. Even with the financial crises and depression in 2008, the state was able to maintain a stable economic growth. Expansion of the strategies and proper monetary policies can, therefore, be seen as the force behind their successes. However, this could not have been achieved without opening up of the economy through globalization.

Conclusively, Mauritian miracle can be illustrated in the form of better financial decisions, global and economic policies, coupled with positive impacts of globalization. From the analysis, it is evident that globalization played a key role towards the achievements and the ultimate success of the country. For example, it was illustrated that the political globalization brought the nation together with more nations thereby better decision making for the international issues. Despite the arguments of Rodrik towards globalization, it is certain without globalization, the nation would not have achieved political and economic ties that propelled the country towards a stable economic growth. However, his sentiments make the understanding of the concept better. His ideas can, however, be contrasted with the reason of Krippner. As noted from the analysis, Krippner focused on financialization and decision making. His sentiments too were imperative to better understanding the situation and growth of Mauritius. Despite the opposers of globalization who indicate increased poverty rates of citizens due to more spending than saving, the analysis indicates that it facilitated industrialization thereby transforming Mauritius from a mono-crop agricultural economy to a secondary and tertiary producing country which has been imperative to their economic success.

Works Cited

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