Ram Seegobin's Speech on the Budget

01.09.2006

At LALIT's International Seminar on the Politics of an Economic Alternative on 25 June 2006 at Grand River North West, Ram Seegobin gave a speech, which has been translated into English now. The speech was titled: "Does Sithanen's Budget Address the real problems in the country? Can this Budget do anything to resolve the problems in the country?"


1. My aim in this Paper

This paper doesn't aim to give any sort of global analysis of the content of the budget. That's work that's has already been done in our initial reaction to the budget, the night of the budget speech. Our comments have also been published in the press, Lalit members have been on radio programs, and we have circulated documents, too. So we have already commented on the budget, as a whole. And then, today (Sunday 25 June 2006), in the Week-End newspaper, there is an interview of Lindsey Collen in which she talks about the budget globally.

What I intend to do, instead, is to analyse the budget to see how far Sithanen's proposals address the present economic and social crisis, and compare his supposed solutions with Lalit's own proposals. So, we will compare this budget with our program. We launched a political program for an alternative economy quite a while ago, even before the General Elections. And in our electoral campaign, it was the political program for an alternative economy, which was really the pillar of our electoral campaign, whether on radio, on television or in our indoor meetings, or public outdoor meetings we held.

Sithanen in his budget acknowledges the seriousness of the crisis, especially in terms of employment and unemployment. So he does recognize that there is a grave crisis. But when he comes to making proposals for possible solutions, these are diametrically opposed to Lalit's.

I would like to underline that when we proposed an alternative political economy during the course of the election campaign, we made it clear that both the Social Alliance and the MSM-MMM alliance, whichever would form the next government after the elections, would go ahead and implement ultra-liberal policies -- no matter what they said in the campaign. That is, we predicted that either Alliance, when it came to power, would impose a "solution" to this economic crisis that would shift the entire burden of this crisis on to the backs of the poor and the working class, who are in no way to blame for the crisis.

In fact, the bourgeoisie and past governments, by refusing to anticipate what would quite obviously happen in the textile and sugar industries and what is happening, are responsible for this crisis. And they did not predict that the two crises would happen at the same time, either. This double crisis is something that has been lurking around for the past 20 years, and everybody knew it was coming. But neither the bosses nor the political parties that came to power one after the other anticipated the problem, as it could have and should have been anticipated. They did nothing to cushion its effects. They did nothing to prepare other types of production to replace the collapse of the two main sectors.

In our electoral campaign we also warned against austerity measures, and the way they would be imposed by the State through repression. These were the very words we used in our party political broadcasts on TV and radio during the electoral campaign.

It is quite funny really to hear the MMM and its leader Berenger denouncing this budget as "ultra-liberal". Berenger, himself is an ultra-liberal. Everybody knows that. Maybe he means Sithanen's budget is not just ultra-liberal but ultra-ultra-liberal [Laughter], which is true. This is of course the type of demagogy we expect from a parliamentary opposition like the MMM. Today whatever the MMM says, it can say the exact opposite at the same time, without batting an eyelid.

The first thing I'll do is to analyse what the Social Alliance Government's budget proposes to do in the context of this economic and social crisis. We will judge this by looking at specific measures in the budget. Then we can look at how we intend to continue our campaign after the budget. We have already heard the Budget Speech in the National Assembly. It has been examined in the "Committee Stage". It's been voted. So, the budget is now a fact. So, we will be looking at how, we, in Lalit, given that there's this new budget with its own specific measures, will need to adapt our ongoing campaign. This will also be an important aspect of today's theoretical seminar.

So we will look at specific measures in the budget, and at how we will modify our campaign given these new measures being brought in for the next year to come, and perhaps having effects for many years after that, too.


2. Title of the Budget Speech

The title of the Budget Speech is interesting. It is "Securing the transition: From trade preferences to global competition". That is to say, how to ensure a transition from an economy based on preferential markets, especially for sugar and textiles, to an economy based on global competition. That is to say, the sugar and textile industries can no longer rely on protected markets. Now they will have to compete on the global market and Mauritius will have to be "competitive". The Budget Title gives away a great deal on the nature on the budgetary measures.

The end of preferential trade
The title of the Budget Speech refers to two things: "trade preferences" and "global competition". But "preferential trade" is an abstract concept. Whereas preferential markets for the Textiles and Sugar, refers directly to two big very, very concrete sectors of production. It means loads of different concrete textile factories, it means 80% of our agricultural land, and 11 sugar mills. Touchable things. Which produce specific products for trade. So you can't just hide behind the abstract words like "trade preferences". These are the two biggest sectors of the economy. The textile industry employs 40,000 - 50,000 people, even though the numbers have decreased. In the Sugar Industry there are still a lot of jobs, though there too jobs have decreased. So when we talk of "Trade Preferences", we are talking of 2 big sectors of production, which employ more than 100,000 people, directly and indirectly.

Then when Government says that we are making the transition between this, "trade preferences" (which we now see means 2 huge sectors) and "global competition", when they talk of "global competition", they are not talking about production at all. They are not talking about particular sectors of production that they see as being about to go into this "global competition". They are not saying what kind of factories they are talking about. They don't say what will be cultivated. What will be produced? They don't say. They just avoid specifying. They just talk of producing any old thing, they don't say what, so long as its done cheaply.

So the title of the budget itself gives away the political fraud that the budget is: two specific huge sectors of production which employ thousands and thousands of people are failing, and instead we are heading for another economic reality where there is no hint as to what will, in fact, be produced. They don't even bother to tell us whether there will be jobs created in this new "global competition" economy. So the title exposes very clearly what's in Sithanen's head, and what's in the mind of the Social Alliance regime.

But the end of the preferential market is something that has been predictable for ages, and especially since the creation of the World Trade Organization in 1994-1995. It was evident where everything was heading. Maybe the time schedule was difficult to foresee, but it was certain that it was coming. What is being experienced today both in the textile and the sugar industry can be seen as an outcome of the logic inherent in capitalist globalization. It follows like day follows night. And when we analyse the logic inherent in capitalist globalization in regard to what is happening now, we can see that this economic crisis is part of the very logic of the system.


3. The consequences of Capitalist Globalization
This budget for the first time reveals the consequences of capitalist globalization to the people of Mauritius. In the other parts of the world, the consequences have already been felt for the past three, four, five, six years. In such places as India, Latin America and Africa, they have started to witness its direct effects. When I say "direct effects", I meant the effect on the daily lives of people. In many countries these effects have already been felt. This is why, in India for example, where there is a huge peasantry, millions of small planters, one small farmers' association has 10,000,000 members, once GMO seeds under the control of multi-national corporations were introduced, many planters were completely ruined, and as we have learnt, thousands of farmers have been reduced to selling one of their kidneys just so that they could buy seeds to plant for their next harvest. This is due to the fact that the WTO is mainly responsible for the bankrupting of small planters, not only in India but also in Latin America. In France, small planters, in their association uniting peasants, together with José Bové, have for years already been reacting to the consequences of globalization as they have felt them. But in Mauritius, to some extent precisely the preferential market for sugar and textiles has protected the masses of the people, but the drive of this logic means that for one, two, three years there can be some protection, but not after that. But now, in fact, this budget comes and reveals clearly to everyone the consequences for the people when there will no longer be any protection. This is what the budget is in fact doing. As I have said, perhaps for the first time the people will really be hit by globalization when, for example, they go to buy bread in the morning, when they send their children off to school each week-day, when they are looking for a job for their 16-17 years old children. Wherever we turn, we will be forced to understand what a crisis is. It will be felt in the marrow of our bones what this capitalist globalization logic is. This is only happening now in Mauritius. But in other parts of the world there have been mass movements, and the big international conferences in Mexico, in Mumbai in India, in Porto Alegre in Brazil, attended by 80,000 to 100,000 people, from all sorts of different organizations, have for years now been discussing the effects of capitalist globalization. Lalit, you will remember, sent a delegation of 4 people to the World Social Forum in Mumbai where there were 100,000 people.

It was precisely these issues that were discussed two to three years ago, in Mumbai. It is this movement, which is known as the alter-globalization movement, that has for a number of years now been explaining exactly what is happening to the people in Mauritius today.


4. How the Sithanen Budget intends to deal with disappearing preferential markets

In order to cope with the disappearing preferential markets, what does the Sithanen Budget propose? How does he intend to re-launch the economy? Even in his own terms, how does he intend to attract investments? How does he intend to improve growth rates? And how, more importantly, does he intend to create jobs?

It's obvious that the crisis of the sugar and textile industries presents itself, in the main, as a crisis of unemployment. These are two big work sectors. Both industries have already had drastic decreases in their employment over the past five years or even more. But, now catastrophic decreases may suddenly be upon us. These are two huge sectors where no new employment will be created, and where on the contrary there will be a reduction in employment. Just to show how this is "the chronicle of a pre-announced crisis", you will all remember how Ministers like Sushil Kushiram, Bérenger, Pravind Jugnauth, ex-Finance Ministers of the previous MSM-MMM regime were already talking first about "jobless growth" and then afterwards saying maybe they had been wrong and that it was more accurate to refer to "job-loss growth". So this has been cutting through the different political parties in power. The logic marches on and does not flinch, no matter who wins the election in Rose Belle and Plaine Magnien! [Laughter]

Let's see what Sithanen is proposing by way of attracting investment, re-establishing growth rates and created jobs.

(a) Lower real wage rates. The main thrust of the Budget, from the point of view of working and poor people, is that Sithanen proposes to decrease real wages, and worsen work conditions. When you read the Budget Speech, this is, from our viewpoint the central point. Sithanen wants to attract investment, increase the growth rate and create employment by means of first and foremost by reducing the cost of production, and he intends doing this by reducing real wages. I'll come back to how he intends doing this, later.

(b) Privatization. When you close down the Development Works Corporation (DWC) which was set up to create jobs, and you are encouraging DWC workers to set up private companies so that they can then buy the DWC's rotten old equipment so that they can run private businesses, this is a form of privatization of the construction sector. There is also the privatization of the National Transport Authority (NTA), the car "Fitness certification" to be done by private firms. The garage for repairing the Government fleet is being closed down. Government work is being out-sourced, privatized, and given to the private sector. At first I was very worried about closing the SMF Garage because I wondered what we could then do with people like Assistant Superintendent Raddhoa! [Laughter] Where could he then be transferred to, to keep him out of contact with the public so as to curb him and his brutal team of investigators?

However, privatization in the budget also involves, at the same time, opening up the economy to international capital by means of taking all sorts of measures to make Mauritius look more attractive, more inviting, more seductive, to foreign investors. Not just investors, but also speculators, mafias, and fly-by-night businesses out to make a quick buck, then move on to where it is once again more profitable elsewhere.

And this privatization involves dismantling the provisions of the Welfare State. It is a form of privatization. Here, as anywhere else in the world, children have to go to school, people have to look after themselves when they are ill, have to organize how to live in their old age. The Welfare State starting point is that the State offers free education, free health care, and universal pensions for everyone. But when you start "targetting", making people pay, this too is a form of privatization, in that people will have to move into private institutions because the State is no longer providing the service as a right. For health, for university education, for pensions, the State is intending to phase out the services as a right. Now, this kind of privatization has as one of its additional aims, that it attracts foreign investors. In education, for example, especially since the WTO and its commerce in services "GATS" (General Agreement on Trade in Services), the State has committed itself to opening up tertiary education to international investments. So now you have all sorts of universities from Australia and South Africa opening up here. Tertiary education is being privatized. Secondary and primary school may follow. Already there are more and more investments in these kinds of private institutions. In fact, privatising what were services as a right under the Welfare State.


Creative Accounting!
The budget is also an example of accountancy tricks. We know Sithanen used to work for Rogers as an accountant, and we know that that type of company knows about accountancy tricks. [Laughter]. This budget certainly contains one big bit of "creative accounting", as they call it. Sithanen makes proposals for measures that will directly lead to land speculation.

There are a number of measures which seem fair enough, like the decrease in Registration Duty when you buy a piece of land, but in Mauritius, there aren't many poor people buying and selling land. So the measure turns out to facilitate real estate speculation and land transactions.

Another measure encourages Integrated Resorts Scheme (IRS) projects and extends the scope of the previous IRS. In the same way that the former Government invented this concept of IRS as rich ghettos, special touristy places where rich people will buy bungalows for Rs 15 millions with a golf course, marinas, boats and beaches for their personal use. This was the old IRS concept on the MMM-MSM model. This new government is now extending the scope of the IRS. There will now be IRS projects for different income groups and they will offer different forms of residences.

This will also promote real estate speculation, land transactions and a lot of shady deals.

Perhaps many comrades will have read in the newspapers yesterday and even today, that the Medine Sugar Estate Company, immediately after the presentation of the budget came up with a spectacular plan for the whole of the West of Mauritius. It will build new housing estates, roads, and residential projects. A golf course. A private sugar company will come and re-design one-quarter of the landscape of Mauritius. It is not a coincidence that the Medine Sugar Estate Company, one week after the budget speech comes up with this project. This project, if you look at it closely, will transform Medine from being a sugar company (it'll keep it's cane, of course) into a real estate Company. Now it will make its profits through land transactions and through land conversion.

We should not lose sight of the fact that through the IRS projects, the Sugar Industry is being given the chance to convert its agricultural land into residential property. When agricultural land is converted to residential property, its value goes up by 10-15 times. On the spot. The Government just signs a bit of paper, and the value of the land soars. The government just classifies this bit of land "residential" instead of "agricultural" and there you go, its value increases 10 to 15 fold. The piece of paper is perhaps the size of a page of copybook paper, and yet 1,000 acres of Medine land will find its value being multiplied by 10 to 15 times A piece of Paper! It is this kind of financial speculation, which Sithanen is encouraging through a series of budgetary measures.

Why is it that I call this accountancy tricks? Sithanen is no fool. Well, maybe sort of! [Laughter.]. What Sithanen is doing, when agricultural land value is going to be multiplied by 10 or 15 times as residential land, when Medine parcels off more land, it builds sites, it builds this and that, soon there will be enormous value to its business This is an accountant's "value added" because nothing new has been produced. It is the same piece of land. Only its nature has been modified and its value has risen by 10 to 15 times. So in 4 to 5 years' time Sithanen will come to say, "There you are!" The brave measures I took have brought us an economic growth of 4.5%, 5%, 6%".

But it is an accountancy trick form of "economic growth", because it is based on speculation. It is based on artificial land transaction values. So with these measures, that is the IRS, more assistance on the part of the government is being provided to new IRS projects, to make these wild plans of Medine's come true, and thus very quickly Sithanen is going to increase "economic growth", but in a totally artificial way. This is why I refer to this budget as containing a huge accountancy trick!

So those are the three main budgetary measures. Then there are a number of other measures that aim to encourage SMEs (Small and Medium Enterprises). What a Minister of Finance we've got! Listen to his argumentation. In one and the same speech, he tells us two different things. When looking at the sugar industry he says that the 11 existing sugar mills in the country that each produce 50,000 tons of sugar can't survive because they aren't big enough. He says in order to survive they have to produce at least 100,000 tons in just four huge, huge production units. But, then he also says that what will save Mauritius is 1,000, 2,000 or 3,000 tiny little small enterprises.

To compound his error, he does not even specify what they will produce. What on earth will all these enterprises produce instead of the sugar and textiles that are disappearing? You can't just repeat SME, SME, SME. SME has become like a kind of mantra that you chant in the hope of it creating employment. In this country SME's have created jobs, in that country SME's have created jobs. But SME's producing what?

Sithanen is no fool. He knows for a start that the SME's don't create jobs. If you take all the SME's started and look them up 5 years later, three-quarters have disappeared altogether, closed down because they didn't work. As it is that is a waste of resources, just encouraging people to take loans, to go into debt when you know most of them will go bankrupt before five years is over. The Budget doesn't give any idea as to what the projected SME's will make? What will they produce? For what market are they supposed to produce? Sithanen replies to none of these questions. A tobacconist shop is also an SME. Imagine if everyone in Mauritius opens up their own tobacconist? (Laughter). Is that the economic development that will save Mauritius from ruin? And Sithanen puts lots of emphasis on these SME's in his budget.


5. What pressures are there on Government?

(a) IMF, World Bank and WTO pressure
Any Government, when it comes to preparing its Budget, gets put under all sorts of different pressures. Institutions like the IMF, World Bank and the World Trade Organization represent one kind of pressure. And this pressure will be even stronger than usual because, accordingly to the Financial Secretary, the interim one anyway, Ally Mansoor, negotiations have already begun for a big new World Bank Loan.

When you are negotiating a World Bank loan, you are not just under pressure, but your two ears are in a veritable vice, being squeezed [Laughter]. So, that is one kind of pressure.

(b) Pressure from local bosses, businessmen, international financiers, bourgeois ideologues
The Government is under pressure from the local bourgeoisie and from international financial advisors. Perhaps people present have read the long interviews by a person called Percy Mistry (he is "very mystery")? He is a banker, an investment banker in a group based in Oxford in the UK. For a long time, he has been given these long interviews, especially in Mauritius Times, and he clearly has a vision, a political project, an economic projection of what he would like Mauritius to become. And then when we hear the budget being discussed, we keep hearing the name Percy Mistry coming up. Sithanen himself says, "Go and see what Percy Mistry had to say one that". As though he is an oracle. He may well be an oracle for finance capital, but we certainly don't have to take his advice.

Then there are other ideologues like the firm De Chazal Du Mee, or consultancies like Kemp Chatteris, who are always giving their opinions on everything, including on things like the budget. There are ideologues in the press. In some newspapers we now have press atachés, who don't work for government Ministers but for a section of the economy, a section of the private sector. There is one journalist, for instance, that speaks as if she is the MSPA, the sugar oligarchs. Her opinion is that of the sugar bosses. Another defends the interests of the free zone. When you read the newspapers, you learn to recognise them. So anyway, it is clear that the Government is under pressure from different international institutions, local forces or various kinds, and bourgeois ideologues.

(c) Counter-pressures from unions, consumer associations
There is, however, a counter pressure from the trade union movement and from consumer associations. But it has for a long time now been very weak. It is weak for various reasons. The present Government has had clear mandates in three successive elections, general elections, the municipals and village elections. This makes the regime feel it doesn't need to concede to this pressure, or any pressure from the masses of the people. It would, however, not hesitate to "concede" to pressures from its own bank-rollers, the bosses. Its clear mandate was a mandate to "democratise the economy" and to "put people first". This is the type of slogan that, in fact, gave the government its clear electoral victories. But that is not what it is putting into practice in the Budget.

But the counter-pressure of the unions is also rather weak because unions find it notoriously difficult to think or act outside of the logic of the bosses' logic. It is difficult, in the first place, for a union to see outside the logic of its own sector, its own sector of work. Then it is difficult for a union to think beyond the logic of capitalist relations of production. In general, a union aims to get a better treatment for workers, but within the existing system. Unions have difficulty challenging the system itself.


6. Budget: What kind of transition?

The second part of my paper aims to look at the budget while asking the question "What choice is there?" What kind of transition could there have been, given the world situation? What kind of transition could there have been, in relationship to the crisis, in relation, particularly, to employment? In relationship to the crisis in the sugar industry and textiles?

The choice was either to re-establish "growth" and "create employment" through the re-establishment of the rate of profit. That is one choice. There is a crisis looming, unemployment is increasing drastically, there are more and more lay-offs, more and more people seeking work, and you try to relaunch the economy by, as the budget does, re-establish economic growth and create jobs through making existing companies make more profits. This is supposed to increase growth. That is one choice. That is Sithanen's choice.

On the other hand, there is an alternative. A budget can put forward the basis for a new productive apparatus. The crisis is in the productive apparatus of textiles and sugar. And this means that the Budget must face up to this, and suggest alternative sectors, alternative ways of creating employment, of keeping jobs secure, and of how to create jobs fast. The budget had an obligation to do this. But didn't.

Our campaign, unlike Sithanen's budget, takes up this second, real alternative.

Now let us examine the option Sithanen has taken. People call it "ultra-liberal" or "monetarist". What are the concrete measures he proposes? He proposes to facilitate business, but to do this through de-regulation. This means cutting out any controls and rules that slow down business.

The Government has brought about deregulation, even from the point of view of the environment. Long ago you had to, before setting up a business, to get an Environment Impact Assessment (EIA) to ensure that the environment was not being negatively impacted on. No longer. Just start up, wait 3 days, and if you don't hear any objection, there you go. Only afterwards, when the factory has already polluted the river that goes past or poisoned everyone in the neighbourhood, only then will the government step in with controls. So the aim of the budget is to make business "easier" through taking away any controls. This way, they also say, and I've mentioned this before, that they will be also helping SMEs.

This ultra-liberal option is what Sithanen and the Social Alliance in power have chosen. They have also chosen to decrease the taxes on the rich. Sithanen argues that he is decreasing taxes on business and on companies so that they can make more profit, because they are paying less tax. In the long run, he promises in the Budget, however much you earn, as an individual or a company, you will only be taxed at the rate of 15%. This means he is decreasing company tax so that the companies become more profitable. But it means a reduction that is at the direct expense of State revenue. Which means it is all of us that are paying for the boss to get a higher rate of profit.

He is also reducing income tax for the rich. The range that used to pay 25-30% tax will soon only pay 15%. So, even those earning Rs200,000 a month, not mentioning any names, [laughter, as the newspapers that day referred to one such person] will pay at the rate of 15%, the same rate as a teacher earning Rs10,000-15,000 a month. A flat rate of 15%. The same rate as IBL, Rogers or Harel Mallac. Everyone will pay the same rate.

As I mentioned, there are measures that will cause land speculation. Speculation will be done relative to land conversion (one type of use to another), parcelling, and through opening the land market to international buyers. Mauritian land will be re-zoned, parcelled and sold off on the international market. Because of exchange rates, because of different standards of living, and different costs of living, there are people in abroad that can pay huge amounts. With the World Cup on, we are all aware of the footballers who we see 3 times a day and who earn a million rupees a week.

So, there are people out there who earn astronomical amounts. They will come and bid the price of land here right up in the auctions.

The Budget also has measures that really aim to make Mauritius a country where labour is cheap. Today Mauritius is not one of the countries where labour is as cheap as in others. In the past, because Mauritian wage levels were not the lowest, we saw the bosses "delocalising" and moving out to Mozambique, Madagascar, Tanzania and elsewhere, where labour is cheaper. In this Budget, Sithanen is taking measures that will bring Mauritian wages down to these lower levels. This is being done so as to re-establish competitiveness on the global market. But whatever their reason for doing this, the result is that the working class and the poor are getting lower real wages for the same amount of work than they were used to getting.

Let's study these measures aimed to lower the cost of production by lowering wages, one by one:

1. Annual Wage Compensation to be done away with.
Annual wage compensation is what allows workers to face price rises. But there is another aspect that is not often mentioned.

When prices increase in Mauritius, it is mainly because of the depreciation of the rupee. Depreciation is what brings most inflation to Mauritius. So the increase in prices comes along with depreciation. What depreciation means is that there are windfall gains, windfall profits, for enterprises that export. A factory making T-shirts sells one for US$1. Before depreciation the T-shirt-la bring the boss US$1, which he goes to the bank and changes for Rs28. After some years of depreciation, the boss takes the same T-shirt money US$1, but this time round the bank gives him Rs32. This is for the same T-shirt, with depreciation. ... [Article truncated]