Mauritius: A Case Study

• Author: Arvind Subramanian
• Position: Division Chief in the IMF's African Department

"And they (the political parties in Mauritius) seem to recognize that, at the end of the day, they will be left with what they started with: an agricultural colony, created by empire in an empty island and always meant to be part of something larger, now given a thing called independence and set adrift, an abandoned imperial barracoon, incapable of economic or cultural autonomy."

"They (the Mauritians) have such confidence in their rights, their votes, the power of their opinions."

-V.S. Naipaul, The Overcrowded Barracoon

Few sub-saharan African countries have achieved high standards of living. A notable exception has been Mauritius. Yet we had it on the highest possible authority-the economist and Nobel Prize winner James Meade, who prophesied in the early 1960s that Mauritius's development prospects were poor-that Mauritius was a strong candidate for failure, with its heavy economic dependence on one crop (sugar), vulnerability to terms of trade shocks, rapid population growth, and potential for ethnic tensions. History-or, rather, Mauritius-proved Meade's dire prognostication famously wrong.

Are Mauritius's achievements due to favorable initial conditions, good policies-especially openness to trade and foreign investment-sound domestic institutions, or other factors?

Achievements

Between 1973 and 1999, real GDP in Mauritius grew 5.9 percent a year, on average, compared with 2.4 percent for sub-Saharan Africa as a whole (see chart). Through the magic of compounding, the income of the average Mauritian more than tripled over a 40-year period, while that of the average African increased by only 32 percent.

[ SEE THE GRAPHIC AT THE ATTACHED RTF ]

Improvements in human development indicators have been equally impressive. Life expectancy at birth increased from 61 years in 1965 to 71 years in 1996; primary school enrollment increased from 93 to 107 per 100 children of school age between 1980 and 1996, while it decreased from 78 to 75 in the rest of Africa. (Enrollment rates may be higher than 100 percent because of repeaters, adults who are enrolled even though they are not in the age group being measured, and other discrepancies.) The income gap between the richest and the poorest Mauritians has narrowed considerably: the Gini coefficient (a measure of income inequality, with 0.0 representing total equality and 1.0 representing total inequality) declined from 0.5 in 1962 to 0.37 in 1986-87.

High growth rates have been achieved in a stable macroeconomic environment. Between 1973 and 2000, annual consumer price inflation averaged 7.8 percent in Mauritius, compared with more than 25 percent for sub-Saharan Africa as a whole. The unemployment rate declined from nearly 20 percent in 1983 to 3 percent in the late 1980s, although it has since edged up above 7 percent.

Social protection in Mauritius is similar to that seen in the industrial countries: a large and active presence for trade unions, which are able to...