With the lack of investment and re-investment by capitalists in the Mauritian free zone sector at the end of the "multi-fibre agreement" with the European Union, banks are now facing a crisis of holding too much rupee liquidity. This has been made worse by the fact that Mauritian capital is moving towards investment in stock exchanges abroad and in real estate in the UK. This was part of the introduction by a visiting economic analyst to the LALIT regional (Rose-Hill and East) discussion on the economic crisis.
LALIT members present at the meeting held in Rose-Hill at 5.00 pm Saturday 20 November, said that they had noticed that banks were trying literally to "force" loans upon individuals, in the public. This was being done by means of all sorts of incentives, like no collateral being necessary for the first 250,000 rupees, and offering loans for everything the banks believe the working public needs.
At the same time as investment falling, creating an excess of rupee liquidity, big importers who do not also have export earnings, are having difficulty getting hold of foreign exchange to pay for what they import.
This crisis can have dramatic effects. The State Trading Corporation, for example, is having difficulty buying foreign exchange for the import of oil and other important commodities with its rupees. Any further increase in oil prices, can dramatically worsen this situation.
What the STC is having to do is to borrow on the international foreign exchange market. This means it has to repay, in addition to its interest, at worse exchange rates. It is as though its interest rate is cripplingly high.
This is happening at a time when there is strong pressure from the sugar and textile sector bosses for the Mauritian Rupee, in addition to its gradual ongoing depreciation, to be weakened drastically by a devaluation. Some are demanding a 30% devaluation.
This will bring misery to the ordinary people, in a country where we all rely on imports for almost everything we use. In addition, no governments have been bold in investing massively in genuinely renewable sources of energy (based on sun, waves and tides, wind), so that at least this source of unpredictability (oil price fluctuation) can be controlled.
This present financial crisis is linked with an even more fundamental crisis, the meeting observed. When the sugar bosses see the only way out from the end of the Lome Agreement (between the Africa Caribbean Pacific countries and Europe) and the projected decrease of 39% in the price given for sugar, is to cut production costs by sacking further workers. Already over 10,000 labourers have been forced to take the so-called Voluntary Retirement Scheme package. Now the bosses, encouraged by the new Government just as they were by the last one, intend to force more labourers out of work, and to destroy further jobs.
The meeting spent time analyzing the way in which LALIT, and before LALIT was formed as a party, LALIT DE KLAS, were famous for predicting exactly what is happening today if there was not proper diversification from cane-and-sugar production, and if there was not more integrated economic development than the free zone strategy. The development strategy has been wrong for too long now. All the weaknesses are now coming home to roost.
The crisis that faces the State Trading Corporation, and thus the entire country, is not dissimilar to that the exploded crises in the Asian economies in recent years. But it will be made much worse by the fact that successive governments have continued to tie the Mauritian economy to the fragile sectors of sugar cane and export processing zone textiles. The only sector the Government sees as expanding is the most fragile of all sectors, the tourist industry, an industry which any number of uncontrollable factors (ranging from bird flu to rioting, from economic problems elsewhere to political blackmail). In addition, the newish ICT sector is slow in creating jobs, and it creates jobs that are not suitable for those who have lost their jobs or job prospects.
The offshore sector brings into the country little other than the wages of the few people it employs. The offshore banks are mere transits for capital, mainly US capital, into India. By transiting in Mauritius the capital benefits from the Non-Double Taxation agreements between India and Mauritius. This agreement has been put in peril by the fact that Indian companies were also leaving India, incorporating in Mauritius, only to re-invest in India, but without the tax obligations necessary.
The conclusion was that globalization capital, the three trillion dollars per day of which 95% is speculation, is a worse bubble than Karl Marx could ever have predicted. Until it bursts, it is the theft by finance capital from working people world-wide, as well as from productive capitalists.
This economic contradiction (value increasing without work producing anything) makes the present liberal capitalism all the more unstable, when coupled with the increase in expectations of people about life. People want a better life, with more control over their destinies, with decent work, with a minimum of security and predictability in their lives. And yet, with all the technological marvels, everything about most peoples' lives is getting markedly worse: there is more insecurity at work, less meaning to life, and less a feeling of happiness.
This goes some way to explaining the massive social crisis that is causing so much heart-searching in the bourgeois press at the moment: increasing numbers of suicides (when the rate was already high), intra-familial destructiveness beyond all previous kinds, and an increase in drug-use, in violent robberies. While this massive social crisis, in turn, tends towards a point when it will threaten the existence of the tourist industry.
The leitmotif of the meeting was the importance of LALIT's program of an alternative economic strategy, one that puts into question what is produced and the conditions under which it is produced.