L'Express
INTERVIEW WITH PERCY MISTRY, ECONOMIST
“No society that trades off excellence for equity, ever succeeds”
● l I’d like to start with an unorthodox question – what is the nature of your interest in Mauritius?
(Laughs…) I have no idea. There is something that happened to me. It would be ridiculous to say that I am in love with the people or in love with the place. In fact, Mauritians are extremely frustrating to deal with. There’s just something about this place. A tremendous spiritual affinity with the land. And I know it’s irrational…
I have very rarely come across a place which had so much potential and so much disinclination to realise it. As an economist who has been to 150 countries out of the 212 countries there are on earth, you begin to develop an instinct for what works and what doesn’t. Mauritius has unlimited potential with a very low propensity to realise any of it!
● You have been quoted as saying you thought Mauritians had some kind of a psychological problem in that they didn’t like to compete with outsiders and foreigners for what they believe is their own space. Why do you say that?
No, it’s not like that – I think Mauritians are one of the most gracious, charming, adorable and kind people on earth. But I believe that one does get the feeling that if you’re here for a week or two, that’s fine. But when you live in paradise, it’s perfectly natural not to want to share it with others.
But the world of preference is gone. Mauritius has to make the psychological shift from arguing for itself as a small island with limited means and limited economic opportunities to a microdot in the Indian Ocean that must now make its way in the big wild world.
In the last few years, Mauritius has begun to realise that it didn’t actually need to ask for preferences because there were loads of opportunities out there. But a closed mind will not let you do this successfully. And that’s the thrust of the message; you have to deal with the world on the world’s term and not on your own. And you cannot say to the world: “We want to exploit all the opportunities you have to offer but you cannot come here.” That kind of asymmetry is no longer possible.
● Easier said than done! How does one overcome that natural fear of losing what we believe is ours, to foreigners?
It is equally natural when your economic interests are threatened, to adjust. So it’s one natural impulse overcoming another natural impulse.
I don’t think Mauritians are consciously discussing setting up barriers to keep people out. I believe that they would essentially like the world to leave Mauritius alone and yet provide it with an income of 50 000 dollars. (Laughs…) That is what is unreal.
So the question is; what’s your next best thing? And if you want to make your own way in the world, what is it you want to be ? It’s in your own interest to operate at the highest possible spectrum of human value-added that you can.
● Could it be that maybe we feel we can’t?
If that is the problem, then why? If it’s an innate feeling, an emotional reaction, then it is wrong. You have proven every time that whenever there has been a challenge or a crisis thrown at you, you have met that challenge and overcome the crisis. Then why should you still have this complex that the world is too complicated for you to deal with?
You can cope with cyclones; you can cope with the world! That, to me, is an irrational response, which is to make yourself believe that because you’re small, because you were colonized, because you have a whole range of legacy issues, that you cannot cope. In fact I have reached the opposite conclusion; I think you have a better capacity to cope than most. It’s just a question of wanting to do it.
“The whole story of human progress
is based on unhappiness and dissatisfaction.
When you have a society that is happy with
the status quo and wants to protect it, you
know it is a society that won’t be
along for very long.”
● Mauritians are not used to being competitive; can you blame this reluctance to competition?
But you’re going to have competition anyway! The point I am trying to make is that for 40 years, you got away with saying: “I’m scared of competition so I am going to produce sugar at a ridiculous price and have the European Union (EU) support me. I am going to produce textile goods at uncompetitive prices and I am going to have the EU protect me by giving me quotas.”
I think that’s what, in a sense, has helped this ridiculous mindset that the world owes you a living. Once you accept that it does not and you have to go out and make a living, then those inhibitions drop.
● Again this sounds good on paper but the fear of the Mauritian is very real; he has seen expatriates being treated better and getting paid better than he does. Can you blame him for thinking that if they all come to his country, he will lose out?
Then this means that you still have a deep-rooted colonial inferiority complex. Who will treat the expatriate better? The Mauritian himself? The government? Society? Then you have to ask yourselves why this is happening, if you are just as qualified as the expatriate, just as experienced, knowledgeable and effective.
The funny thing in India is that we used to have that inferiority complex until 1995 – until we stopped imprisoning ourselves with the stupidity of our repressive economic policies. It would, today, be hard to find an Indian with an inferiority complex. That’s just in the space of 15 years. In fact, I worry about the opposite. I worry about India developing a superiority complex, an arrogance much too quickly.
So if India, that large gigantic mass, has been able to change in 12 to 15 years, I see no reason why Mauritius can’t change. Success breeds success. The more Mauritians open themselves up to the outside world and succeed outside their country; the more they will find that this inferiority complex will disappear, if not overnight, then certainly over a generation.
● How can you be so confident?
Every time we took an Indian out of India with the same qualifications, the same knowledge and experience – you took him out of that swamp and put him in a swimming pool, he discovered he could swim faster than everybody else. And since Mauritians have an enormous affinity with India, Europe, China, with Africa, I have absolutely no doubt whatsoever that if you were made to compete in the world, you would compete and you would win. There is nothing in your attributes that tells me that you won’t, except for the fact that you have grown very slow, lazy, inertial and complacent as a result of the fact that you have been enjoying the benefits of preferences for very long. I don’t think you need to compromise paradise – you simply have to deal with it in different terms.
Again India used to be exactly like this ten or 15 years ago. Today you find that most Indians are being paid more than expatriates in their own industries. My advice would be: don’t focus on the economics of envy.
The system that Mauritius has – European socialism – makes me think that Mauritians haven’t learnt that the formula of making everybody into equals does not work. Mauritians should tolerate the possibility of people being unequally rich as long as the bottom also shares the fruits of those riches.
You see, the problem is this European mindset and it’s a foolish one. That somehow there is some “natural” ratio that should govern the lowest and the highest. And to me, anybody who’s actually tried to apply that ratio has built the foundations of a society about to destroy itself. No society that trades off excellence for equity ever succeeds. The whole story of human progress is based on unhappiness and dissatisfaction. When you have a society that is happy with the status quo and wants to protect it, you know it is a society that won’t be along for very long.
● And equity is a faulty notion?
That’s too simplistic a notion. I didn’t say that and I think it’s a wrong conclusion. Too much emphasis on equity, which then destroys the pursuit of excellence, is what is bad. I have no problem with equity being part and parcel of a consideration but not the only consideration in driving the structure, nature and process of a society. It is important that the poor are not marginalised, it is important that opportunities are equalised.
I believe in complete equity, complete equality of access to opportunities, but I do not believe in the equality of wealth or ability. There is no natural law on earth that says that somebody who sweeps the road should be paid exactly the same and has exactly the same wealth as Bill Gates.
● As long as what he has enables him to live a decent life?
Exactly. To make sure that whatever he does, his child has the same opportunity as Bill Gate’s child. What he makes of that opportunity is up to him but one thing that society must not deny is that the child of everybody has the same equality of access to equal opportunity. If Bill Gates can afford to send his child to the best university in the world and there is a very poor child who has the same ability, it is incumbent on the state and society to make sure that he has access to that university. But there is no requirement on the part of the state to ensure that that person then has equality of income or wealth. That’s where societies fall out.
● Equal opportunity is a nice theory but how do you make it happen?
It’s not just a nice theory. Basically Europe is sclerotic whereas America has managed to remain competitive because of that difference in attitude and approach. Europe really believes in trying to equalise everything and rips you off in taxation to provide universalism in the name of equity. This, as far as I am concerned, in a globalized world, is passé. Countries that are going to succeed will be India, China and America because they allow for competition and they do not go so overboard on equity that they destroy the quest for excellence.
● Yes but how do we do this?
You get rid of this notion that everything should be universalised for everybody. That everybody should have free education, free health, free transport.
● A complete dismantling of the welfare state for better equity?!
Yes because the welfare state is not feasible and it’s not affordable. I think what you have to get down to is helping where the hurt is. There is no point giving rich people free education and free transport – they’re not going to use it anyway. When you universalise, lowering the price of bread for everybody, the common Mauritian ends up subsidising the bread that a tourist eats in a hotel. Does that make sense? You have to target.
Governments will always have limited resources unless they overtax people. If they do that, society and economy die. When you have limited resources, use them well. Don’t universalise everything – it is just plain stupid! Make sure that people who are really hurting are helped. When you spend a lot of money helping people who are not hurting, you’re wasting it.
And this whole notion that the rich can be taxed indefinitely in order to be able to finance that is absurd. Because in a globally mobile world, the rich will tell you: “if you are going to overtax me, I’m going to Dubai and I’ll still enjoy my sugar plantations in Mauritius and you won’t be able to tax me.”
I think that Mauritius needs to break out of what I call the absurdities of the past. These beliefs are no longer useful nor valuable nor functional.
● But we do know this! The minister of Finance constantly talks about it; so does the Prime minister, if less often. We just can’t seem to put out nice theories into practice!
I think Mauritius doesn’t realize how lucky it is to have a minister of Finance like Rama Sithanen. By the way, I am not getting a commission and I have no ulterior motives but I think Sithanen is a genuine professional and one of the best Finance ministers in the world. And for the Mauritians to beat up on him for all the wrong reasons, tells you how crazy the Mauritians are and how they cannot differentiate fantasy from reality. This shows you that they don’t understand how basic economics work. That they don’t understand that the government doesn’t have any money of its own, that to get this money, it has to tax somebody somewhere.
“There is no question in my mind
that Mauritius will not succeed in
competing in the world if it has second-rate
public institutions providing third-rate
services at ridiculous prices.”
● Maybe they don’t understand this because the message government is sending is not that clear, because government is sending mixed signals?
No, I think they don’t understand it because they don’t want to and they don’t make the effort to learn. And because economics is not taught the way it should be. You see, Mauritians don’t know what’s good for them! You know what you want – you want an easy life, you want an infinite capacity to consume without working – that’s what you want. But that’s not real. It is not real to want your consumption proclivities and not to want to work for it. Not want to work harder than other people.
● But if you tell people you believe in targeting and then don’t target and keep on subsidising everything, will you be surprised if nobody takes you seriously?
First of all, what is targeting? People need to start coping with the fact that price subsidies on bread, on fuel are a very bad way to run an economy in order to deliver equity. Why does a rich Franco-Mauritian family need to have its fuel subsidized? They don’t need it; neither does the upper middle class. Neither does the middle class. There may be a case now for saying that the lower middle class needs to be helped. You’re wasting so much on subsidy that goes to the wrong places. Income support is a much more sensible way of helping the poor.
● It doesn’t seem to have done us much good so far! We’re doing it – partly.
No you haven’t tried it at all. You haven’t reached a societal agreement that price subsidies are plain bad. See, the price of fuel in itself should have induced a voluntary rationing of usage in the people. If the price of fuel is very high, you might decide to drive less. But to the extent that the price of fuel is highly subsidised, you drive far more than you need to! You waste fuel, you damage the environment, you’re hurting your pocket and you’re hurting the exchequer! It’s bad on all counts.
Now if you give the poor people that oney so they make theirown choices, then they are free to decide how much they’ll spend on food, fuel etc.
● How about if I told you that here people get income support and subsidies?
In a sense you have the worse of both worlds. You’re not getting income support because you’re wasting so much on price subsidies. To really support income, you’d be much more effective in delivering equity. Today you’re failing on both counts. It’s not that Rama Sithanen doesn’t know it, it’s that the foolish people in his own coalition don’t let him do it.
● This is what I meant when I was talking about mixed signals sent by the government!
I don’t see anything mixed in the signals that Rama gave in his interview the other day. He is saying exactly the same thing I am saying today.
● But what’s the point of saying something and doing the opposite?
But I think that is something due to the contradictions of working in a coalition as unwieldy as this. There is no unity of purpose and leadership at the top. No cabinet, no government can succeed in delivering the goods if it is as divided in its views. When you’re in the middle of a transition and a transformation, you don’t keep bargaining and you don’t keep pulling back. That’s the best way of losing credibility. You stick to what you believe in and speak to every Mauritian you need to, to effect this change. What you do not do is have internal dissent to the extent it is publicly expressed in a cabinet. When you have a government, you cannot be at odds with each other.
Today there is more opposition within the ruling coalition than there is without. It is the government that needs to get its act together. You can’t put yourself into election mode two years before the elections. That’s a very bad way of doing business. You don’t need to do that.
What you need is another five years of reform because you have the first stage of the reform with the opening up of the market – government was very brave, they were very bold – and the reforms are working. Left to themselves, they’ll work even better because nothing happens overnight.
The second stage of reform is moving from wasteful public expenditure to productive public expenditure, which means reducing wasteful subsidies and going for income support and really helping people who need money. The third phase is reducing the size of debt. Because from a productive point of view, government is an extremely inefficient way of getting things done.
● What do you mean?
I do not believe that government should run businesses. You have to reduce the size of government and privatise the parastatals. There is no question in my mind that Mauritius will not succeed in competing in the world if it has second-rate public institutions providing third-rate services at ridiculous prices.
In a competitive world, the one thing Mauritius needs, given its geography, is connectivity. You cannot afford to have substandard corporations running your airlines, your airports and your telephone system. They have to push the frontiers of competitiveness and cost. They have to offer the best technologies in the world at the lowest possible cost. They have to ally themselves with people who can deliver that.
Now public institutions in a democracy like Mauritius with its own political code of conduct – which is not of the highest standard – need to say, like India has done, that we have to delink politics and economics. Let’s focus on what the role of government should be. It should be minimal, it should be to deliver justice, fairness and to make sure that competition is properly regulated. It should not go beyond that – to maintain a good defence policy, a sound foreign policy, a stable and solvent currency. That’s the job of the market and of the private sector.
● And you think we will go through these three phases?
Of course. It is a question of survival – you don’t compete, you don’t survive and it’s as simple as that. For forty years, you have been spoilt – you’ve said: “I’m a child, I need protection.” All that has stopped. Nobody in the world feels any guilt for you or feels the inclination to support you and your lifestyle – you have to do it on your own. Now those are your decisions.
When I argue like this, I am not saying this is something that has to be forced on Mauritius. What I am saying is that Mauritians live intelligently – and they are an intelligent people – look at reality in the face and make those decisions that will make your lives better. Even if temporary pain is involved. Now why don’t you put the burden of adjustment on those who can afford to bear it even if they will complain rather than put the burden of adjustment on the poorest? And that’s what these transformations enable you to do. When you remove universal price subsidies and go for income support, you enhance the ability of the weakest to cope.
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