BUDGET 2015-2016 : An economic miracle or a social disaster

After the failed ‘democratisation of the economy’ project and the trouncing of the Labour party, the expectation was that there would be a shift away from trickle down neoliberal economics. While the much needed paradigm shift has not occurred, there are some good measures which if effectively implemented, can assist in going some way to bringing us on a sustainable human path.
The minister claims that sharing and solidarity are the philosophical tenets of the budget. The former have become some kind of mantra but the way  the minster chants his mantra may not have the desired results: that of a solid, peaceful and unified nation. In the 1990s, I wrote that the national unifying principle was the economic nationalism that Sir Anerood Jugnauth  successfully managed to glue the people. The context was different, with flows of capital coming in from Hongkong and people moving from the sugar sector into tourism and the EPZ. To many, it meant the possibility of an income and some kind of social mobility.  A nation can only become ONE when opportunities are genuine, when respect and appreciation of the ‘Other’ is truly in place, and income and wealth inequality are addressed. The deteriorating Gini coefficient, the thinning of the middle class, and the growing chasm between  rich and  poor are kegs of powder that cannot be ignored any further.
If there is one philosophy truly underlying the budget, it is the affirmation of the state that the best driver of growth is the private corporate sector, with the foreign investor having pride of place…True, we need growth but we need growth that creates jobs and quickly. This is what is legitimately expected. 15000 jobs in one year… that was the promise!
The minister is aware that poverty constitutes  a major threat to peace and to economic development, but he seems to be blind to the linkage between inequality and poverty. The word ‘inequality’ is in fact mentioned only once and yet it has a major role in trapping  people into poverty. Often times, inequality is the major source of disaffection, alienation and frustration, leading to various social ills, reinforcing the vicious cycle of poverty.
More than 40 years ago, the economists Hirshman and Rothschild presciently warned the world of the human being’s threshold of tolerance regarding inequality. They noted:
“In the early stages of rapid economic development, when inequalities in the distribution of income among different classes, sectors and regions are apt to increase sharply, it can happen that society’s tolerance for such disparities will be substantial. To the extent that such tolerance comes into being, it accommodates, as it were, the increasing inequalities in an almost providential fashion. But this tolerance is like a credit that falls due at a certain date. It is extended in the expectation that eventually the disparities will narrow again. If this does not occur, there is bound to be trouble and perhaps , disaster. “
The malaise creole and the riots of 1999 are a stark reminder of our threshold of tolerance.
A more recent work, that of Thomas Picketty, makes  a strong case for a higher tax on the rich and the wealthy. A couple of days back, we had the privilege of listening to Nick Hanauer, the great American billionaire on Hard Talk. Nick Hanauer explains why it is important to tax the rich and why taxes should be progressive. He also argues that it is the middle class who are the creators of growth and not the capitalists. The dominant view however is that if you go after the rich and wealthy, you kill all incentives.  Hardly any one speaks about the rich people’s garguantuan appetite for profits – there can be no effective sharing if such appetite is not curtailed. Being propoor does not mean being anti rich nor does it mean the rejection of the capitalist system.  
it is foolhardy to believe that this is a ‘no tax ‘budget – the taxes are hidden and regressive. What is even more unacceptable is its deceitful nature. The average person with little financial literacy and fiscal understanding will perhaps not understand how government is raising revenue through the ‘reduced’ price  of petrol which remains ‘unreduced’ to the mauritian consumer. Moreover, the rapid depreciation of the rupee and the consequent inflation will take its toll on the middle and working class.
In its discussion forum ‘From unrelenting growth to purposeful development’ , the inter parliamentary union meeting in Quito, march 2013, affirmed that:
“Growth alone is not the answer to the social, economic and environmental challenges of our time …a different approach that focuses on well being in all its dimensions is required if we are to evolve as a global community able to fulfil core human values of peace, solidarity, and harmony with nature… The perennial cycle of increasing consumption and production that is at the heart of the current economic model is no longer sustainable.”
Has L’alliance Lepep changed the model? Not really.  It is business as usual with a few good measures here and there.  Without some new taxes such as a rural tax, a coal tax, and what I call a ‘poverty consciousness’ tax on the enormous profits made by the commercial banks, the task of sharing would remain very difficult. Good social economics requires honest politics.
The 3 major disappointments of the budget
There is total silence on the national minimum wage. Many workers are voiceless and powerless but this is no reason to continue exploiting them. Votes were bagged on the promise of a national minimum wage. Modern inclusive Mauritius cannot continue to have some 100,000 workers earning less than Rs6000 per month and hundreds of women cleaning public or school toilets for some Rs 3000 only. The NESC study on Income inequality and wage policy has highlighted how a small percentage of the population obtains the largest share of the income and how those at the bottom and the middle are losing out. Instituting a national minimum decent wage is a priority.
Another major disappointment: Very little  transpires through the budget as regards the combat against waste. The audit reports year in, year out have shown the extent of waste. The programme-based budgeting was adopted as some kind of mechanism to at least partially address the problem. I wonder what the UNDP, the World Bank and the 2 former ministers of finance still in cabinet have to say about the jettisoning of the programme-based budgeting. Millions of rupees were spent beefing up the capacity of technicians, cadres  etc and now the Minister of Finance  tells us : “…that there was a consensus that the programme-based budgeting was bulky and too complicated for legislative purposes and for the public….” Consensus between who and who?
A third major disappointment is that there is no incentive whatsoever to develop a culture of savings. What came as an attack on the commercial banks some weeks back led some to expect that the government would find some  mechanism to incentivize savings.  The dismal rate that the banks offer is no encouragement at all. The budget informs us of some report produced by the Bank of Mauritius which will look into the abuses of the commercial banks. Will the low interest rate be part of the abuses?
In short the budget 2015 -2016 continues in the established tradition of a ritual and an all too familiar strategy of making grand announcements which may not lead to the meaningful change sought after in the government programme.

- Publicité -
EN CONTINU

l'édition du jour

- Publicité -