Unconventional Economic Wisdom
The Mauritius Miracle
Joseph E. Stiglitz
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NEW YORK – Suppose someone were to describe a small country that provided free education through university for all of its citizens, transportation for school children, and free health care – including heart surgery – for all. You might suspect that such a country is either phenomenally rich or on the fast track to fiscal crisis.
After all, rich countries in Europe have increasingly found that they cannot pay for university education, and are asking young people and their families to bear the costs. For its part, the United States has never attempted to give free college for all, and it took a bitter battle just to ensure that America’s poor get access to health care – a guarantee that the Republican Party is now working hard to repeal, claiming that the country cannot afford it.
But 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.
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 that 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 fueling a housing bubble.
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. 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….[T]he 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.
During my visit, my interest was to understand better what had led to what some have called the Mauritius Miracle, and what others might learn from it. There are, in fact, many lessons, some of which should be borne in mind by politicians in the US and elsewhere as they fight their budget battles.
First, the question is not whether we can afford to provide health care or education for all, or ensure widespread homeownership. If Mauritius can afford these things, America and Europe – which are several orders of magnitude richer – can, too. The question, rather, is how to organize society. Mauritians have chosen a path that leads to higher levels of social cohesion, welfare, and economic growth – and to a lower level of inequality.
Second, 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 health care and education to those who cannot afford them.
Third, Mauritius recognized that without natural resources, its people were its only asset. Maybe that appreciation for its human resources is also what led Mauritius to realize 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 cooperation between workers, government, and employers – precisely the opposite of the kind of dissension and division being engendered by conservatives in the US today.
This is not to say that Mauritius is without problems. Like many other successful emerging-market countries, Mauritius is confronting a loss of exchange-rate competitiveness. And, as more and more countries intervene to weaken their exchange rates in response to America’s attempt at competitive devaluation through quantitative easing, the problem is becoming worse. Almost surely, Mauritius, too, will have to intervene.
Moreover, like many other countries around the world, Mauritius worries today about imported food and energy inflation. To respond to inflation by increasing interest rates would simply compound the difficulties of high prices with high unemployment and an even less competitive exchange rate. Direct interventions, restrictions on short-term capital inflows, capital-gains taxes, and stabilizing prudential banking regulations will all have to be considered.
The Mauritius Miracle dates to independence. But the country still struggles with some of its colonial legacies: inequality in land and wealth, as well as vulnerability to high-stakes global politics. The US occupies one of Mauritius’s offshore islands, Diego Garcia, as a naval base without compensation, officially leasing it from the United Kingdom, which not only retained the Chagos Islands in violation of the UN and international law, but expelled its citizens and refuses to allow them to return.
The US should now do right by this peaceful and democratic country: recognize Mauritius’ rightful ownership of Diego Garcia, renegotiate the lease, and redeem past sins by paying a fair amount for land that it has illegally occupied for decades.
Joseph E. Stiglitz is University Professor at Columbia University and a Nobel laureate in Economics. His latest book, Freefall: Free Markets and the Sinking of the Global Economy, is available in French, German, Japanese, and Spanish.
Copyright: Project Syndicate, 2011.
www.project-syndicate.org
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kg234 07:16 09 Mar 11
Wow...talk about a mirage! Having lived and worked in Mauritius for several years, I highly doubt that the system of government and education should be a model for the US. While health care is free, doctors are severely underpaid with very little benefits. Not to mention there are incredibly few preventative health care programs, which is why Mauritius has the dubious honor of having one of the highest rates of diabetes and heart disease globally. As for free education, well...I went to college for free right here in the US in one of the most expensive university cities in the NE. And I know plenty of other people who do. I think before you start rhapsodizing about the idylls of a tiny tropical island and their "miracle of modern health and education" do some more research.
Finally, your comment about Diego Garcia is very naive - you do realize the reason why the Brits are the ones leasing it to the US is because the first Mauritian Prime Minister gave the Brits Diego Garcia in exchange for Independence, right?
Emler 11:19 09 Mar 11
There is simply no way to compare the economy of Mauritius with that of the U.S. The differences in scale -in all aspects- of these two economies are overwhelming! The U.S. has 308.5 million people vs. Mauritius' 1.3 million? The U.S. with 3.8 MILLION square miles of land vs. Mauritius' 788 square miles? Come on...
I think he wrote this article just to have a place to publish his opinion about Diego Garcia, as the last two paragraphs do not seem to have anything to do with the original intent of the article.
musa 06:41 10 Mar 11
I am an American and long-term resident of Mauritius. It was pleasant to read Mr. Stiglitz's encouraging comments. I do not agree completely with his glowing comments about either education or health care. Secondary school education was made free as an election promise. The government, however, does not have enough schools to educate everyone at this level. As a result, a grueling entrance exam system is in place where students who fail, at age thirteen cannot continue their education, unless they go to expensive private schools. The same is true at the University level, although the Minister responsible for Tertiary education has an ambitious expansion program in place.
Health care is free but effectively rationed. Although Mauritius has one of the highest diabetes rates in the world, some of the most effective diabetic medication is not available from the public clinics, but only for purchase at the private pharmacies. Patients face long waits for appointments. Although Mauritius has a high cardiovascular disease rate, the stress test equipment at the main cardiac hospital has been broken since 2009, and patients have to pay for the test at private clinics, where the cost is about a third of monthly wages.
What does work well here is business, largely due to strong institutions and the rule of law, especially compared to other small countries. Mauritius has a strong entrepreneurial culture as well. How to duplicate these results in other countries, particularly our neighbours in Africa would be the most useful contribution economists and political scientists could make. I doubt the United States can learn much from Mauritius in health care and education.
simplyme 05:01 10 Mar 11
i quote from musa "As a result, a grueling entrance exam system is in place where students who fail, at age thirteen cannot continue their education, unless they go to expensive private schools."
mayB you dnt know about the mauritian law, but school is compusory till the age of 16 and prevocational school for these students are free of cost...
do make some research before blogging things that you have heard from people.
RAYMONDS 07:44 10 Mar 11
1.3 million...less difficult to govern than 300+ million.
Written by a very intelligent ivy leage professor...of course.
Sneh 09:09 10 Mar 11
lol seems you guys cannot digest the fact that Mauritius is a great country.. I do not say it is perfect, but as all countries we have our flaws, but it is great.. n for those who dont even know what you are talking,, better do some research.. we have compulsory education and the number of people going to school and college is increasing year by year. You talking about the US? People have to take huge loans to go to college and at a young age have debt. is that how your country wants to educate people? Indeed you guys should learn from us,, we have a culture, we value man power and education remains number one for us. and about medication not available in clinic,, are u being serious musa? you're such a joke.. Mauritius is our pride and we have come so far and there will be much more to come.
alexrylie 09:35 10 Mar 11
Why in the world would you expext the USA to pay anything because it leased this Island from The U.K.? It would be the U.K.'s place to pay if they did anything illegal, not the USA. and why did this lil country just decide or maybe you, to want $$$
alexrylie 09:36 10 Mar 11
Here's another thought, let this country operate like our Congress does and in a few years they will be as broke as we are! So much for capitalism.
RAYMONDS 01:01 11 Mar 11
I'll clarify: It's impossible to compare a small country to a large country...I beleive it would be much more simple to provide social services to all citizens in a smaller country.
Sounds like Mauritius is a great country compared to other small nations, however, it's difficult to compare to the US.
Sneh 07:09 11 Mar 11
thats it,, we dont want to be as broke as you guys are.. investing in military rather than man power.. how bright is that eh.. you guys just have to learn n stop thinking that your country is the best at everything.. look outside the box,, there are much more going on elsewhere rather than being self-absorbed..
kg234 03:19 11 Mar 11
If Mauritius is so great, why are all the intelligent people leaving the country? Why is the cost of living gone through the roof in the past couple of years? Why are people living off credit and taking out equity loans on their homes to make ends meet? Why aren't they investing in local agriculture to feed the local populace instead of importing? Why are they *still* investing in sugarcane when they cannot compete with Brazil's prices on the global market? Why is violent crime on the rise? And once again, I am not sure why some people don't realize that you can go to school for free in the US. My undergraduate degree was free and clear. And thanks to that education - I ended up at a pretty good grad school, with a pretty amazing job. Frankly, I've been through the secondary education system in Mauritius for a little bit (unfortunately) and there is a lot wrong with it with respect to preparing young people for jobs in today's global marketplace, not to mention the psycho-social prep that doesn't seem to happen during their formative years.
One thing about the US that makes it the US is that it truly is the land of opportunity - you can be anything you want to be here, you just have to try. And I agree with alexrylie - if Mauritians want to get back the leasing rights that they gave away in exchange for independence, they have to talk to the British, not the Americans.
REMant 07:38 19 Mar 11
A bit too much like Ireland, Iceland or some Caribbean tax shelter and clothing factory I'd think and hardly a poster child for globalization.
Mtighilt 07:23 21 Mar 11
did you visit mauritius ? i am just saying that GDP and per capital standards dont really tell you any thing , i come from a country that has free health care for everyone and free education , sounds amazing on paper and very appealing for someone in the outisde. However the standard of the hospitals , Education system is a mess , it has never progressed since it has been there from several years. Doctors are unequiped and under paid and strikes are more common the rainfall in the amazon.
hoplite 02:35 25 Mar 11
The other posters miss the point of this article, which is: The US should give them more money.
I disagree.
kiers 12:59 02 Apr 11
Hmmmm. Interesting. An entire discussion on the "Miracle" of Mauritius (including from some who purport to "have lived in" Mauritius) without mentioning the elephant in the room so to speak: INDIA.
One of the MAJOR reasons why Mauritius has made it big, is by attacting BLACK capital (number two money) from India. It is a "miracle" like the Cayman Islands, Jersey, the Islle of Man, Macao....are "Miraces". They prey on the ill gotten fruits of powerful economies that are bled out.
jmagrud 03:43 07 Mar 11
Of course, this is terribly disingenuous, because the US has provided universal education for over a century. Almost anyone can attend a community college, and most who are qualified can attend a state college or university affordably. The growing hole of middle-aged folks who find medical care difficult to afford still are the exception, and transportation on a par with what Mauritius provides largely is a rural problem.
Now, the transformation of Mauritius is a phenomenal achievement, but its per-capita achievement should be compared with Taiwan, not the US. How is Mauritius' education or transportation or industry compared with other countries of comparable purchase-adjusted per-capita GDP? One would expect a Nobel-laureate to compare apples to apples, so to speak. The question of how a desparately poor country can build a sustainable economic growth basis is necessary, but Dr. Stiglitz doesn't address the wars that exhausted Mauritius or the financial and legal frameworks there. Were does this apply? China? Spain? Canada is performing well too. Germany is going gangbusters, but the problems across its borders suggest that the big picture needs tweaking. Israel is great, if only all the neighbors weren't so schizophrenic and its economy so reliant on US military "co-operation." Its miracle may not be all divine intervention. One can only hope that US Nobel-laureates in economics would have lunch together more often and reach for answers grounded in economic data, and leave sociology and politics to others.