Economic democratization : A utopia?

Economic democratization has since long been high on the agenda of successive governments. It was one of the main electoral campaign themes in 2005, with the Labour party promising to democratize the Mauritian economy. A decade later, economic democratization is still in its infancy and critics even argue that there is a perception of the contrary effect.

What is economic democratization?  Economic democracy or stakeholder democracy is a socioeconomic philosophy that proposes to shift decision-making power from corporate managers and corporate shareholders to a larger group of public stakeholders that includes workers, customers, suppliers, neighbours and the broader public. In our local context, economic democratization refers to the availability of increased opportunities for small and medium entrepreneurs to enter any sector of activity without any barrier and to thrive.

Economic democratization is a socioeconomic principle being promoted in many countries. In Pakistan, the government is looking forward to promoting ‘economic democratisation’ in a bid to realise a fair-competition economy that protects the market and smaller firms as well as consumers from strong economic forces like Samsung and Hyundai Motor Group. In Sri Lanka, there is a ‘Collective for Economic Democratisation’ whose objective is ‘to keep questions of economic justice at the heart of on-going policy debates, research, rights advocacy and peoples’ struggles.”

The Collective is of the view that ‘the meaningful exercise of democratic rights cannot be restricted to the civil and political spheres alone. Precisely because economic decision-making is complex and contested, debating it cannot be the sole prerogative of the political elite or experts and democratising economic decision-making is an urgent imperative’. In the UK, economic democratization was a key component of the Labour party’s electoral campaign, with its researchers producing a report on “Alternative Models of Ownership” with a core message: We must begin to democratize the economy.

In Mauritius, successive governments have tried to implement measures to focus on the growth of small and mid-sized enterprises and checking the monopolistic position of large businesses. Former top civil servant, Prithviraj Fowdur, a seasoned entrepreneur who is also an economist, says that democratization of the economy has remained largely a myth. “Today we have big commercial houses selling even apples! Conglomerates are entering almost every sector, and it is difficult for small entrepreneurs to compete.”

According to him, economics is a discipline that impacts everyone, yet it is also a subject where few people are able to have their say. The majority of people feel that the subject is not for them, or is something best left to the ‘experts!’ “Economic issues must be communicated to the population in an accessible way to relate to their lives and to make them understand broad concepts.”

An inclusive economy

An inclusive economy requires economic democracy, one that affords all people the possibility of achieving a dignified life including decent jobs, access to health services and education, and a clean environment. It should allow people to develop to the best of their abilities.

Such an economy can develop only in a society in which people participate in shaping their economic lives, that is, it requires economic democracy. One key component of economic democracy is the development of a solidarity economy. A solidarity economy is based on economic units owned and managed by their workers. These include cooperatives, associations of small producers, local community initiatives for the delivery of services, etc.

 Nivedita Nathoo : “Economic democratization remains a myth if root causes are not addressed”

Nivedita Nathoo, a woman entrepreneur and former chairperson of the National Women’s Entrepreneur Council (NWEC) told News on Sunday that she has always been a strong proponent of the democratization of our economy. However, she believes that economic democratization will remain a myth if the prerequisites are not there. And what are the prerequisites?

She explains that any government that comes, whatever the political parties, may have the best programme for economic democratization, however, if the political parties were financed by strong economic lobbies, then the hands of the government will be tied. Therefore, to address the economic democratization issue, we must first have relevant legislation to govern the financing of political parties.

Equal opportunities, economic democratization, good governance, all these will be vain concepts if there is no law to regulate party financing.  Secondly, our education system is to be blamed as the system moulds us into believing that we must study hard, pass exams and then get a good job. The system does not allow us to think differently, for example in terms of becoming seasoned entrepreneur.

Our children are not given the opportunity to think and dream big. Once they get a good job, they think they have made their lifetime achievement. Thirdly, common people themselves do not understand the principle of economic democratization. When they see a small entrepreneur trying to reach new heights, they would regard him as a ‘greedy’ man. They fail to see that, by trying to break new grounds and enter new business segments, the small entrepreneur is also opening new doors of opportunities for other entrepreneurs.

This is a mindset that needs to change.” Nivedita Nathoo concludes that most people spend much time and energy facing social ills like poverty, drugs, kids getting out of control, unsafe society, rising cost of living, unemployment, etc and thus have no time to ponder over issues such as economic democratization.”

 Amar Deerpalsing : “Increasingly difficult to do business”

The president of the Federation of SMEs, Amar Deerpalsing, is categorical: There cannot be democratization of the economy without greater access to land. “What business or what project can you do if you do not have land? It is up to the government to use economic policy to obtain land which is concentrated in the hands of a few. For example, there could have been trade off when giving large concessions such as land transfer tax exemption, land conversation tax exemption and other duty exemption to smart cities project.

Remember in the past when we had the Illovo deal, where government obtained nearly 18,000 acres of land and the Sugar Investment Trust could parcel lands for sale to the common man. With the sugar industry reform by the Decentralised Cooperation programme, the government benefited. But with the way incentives are being given to smart cities, government is not obtaining anything.

The current economic policies are not really conducive for economic democratization. On the contrary, I would speak of economic concentration in the hands of a few,” explains Amar Deerpalsing. He said that, today, government is no longer making any physical development planning. “Urban planning is now being done by the large economic groups. Each group controls one region.

For example, in the South, Government has invested in a new motorway to the airport, that crosses the smart city project of a private enterprise. Let’s take the Moka smart city as example. We would have expected that, with all the incentives and facilities obtained, the project would sell affordable residential units to the common man, but this is not the case. If we look at the trade sector, we note that today, the importer is himself the distributor and retailer.

So where is there room for others? Small shops are closing as large businesses take over the market. There are many anti-competitive practices. A small entrepreneur knows the ‘parcours de combattant’ he has to go through to see his product on a supermarket shelf. I would say that it is becoming increasingly difficult to do business in this country.”

Dr Bhavish Jugurnath : “We need competent leadership and institutional innovation”

Dr Bhavish Jugurnath, economist, states that, as good as democratisation of the economy sounds, its implementation still resides in the abstract world. “In my opinion, and following economic logic, opening the Mauritian economy to international competition, and encouraging an entrepreneurial attitude will put everyone at par with today’s financial elites. Wealth can be generated through a neo-liberal order, which gives the multinational corporations favourable terms, that can bring unparalleled prosperity to Mauritius.

The disparity between rich and poor, which demonstrates a country’s ability to redistribute wealth or democratisation of the economy, is wide. Mauritius comes 64th in the UNDP report out of 177 countries; it is still plagued by poverty. Attracting foreign companies also means that the government will have to provide incentives. Mauritius has favourable tax regimes, where profits can be freely repatriated.

This gave rise to the anomaly of a GDP larger than the GNP, meaning that a sizeable part of the economy depends directly on foreign investment. Subsequently, sizeable sums are shifted offshore rather than invested in health, infrastructure or social security. A certain democratisation of the economy is overdue in Mauritius. There is a real need to protect those who will be undeniably left behind in a cut-throat and competitive environment and develop solid local companies. The equal opportunities bill as announced by the government is a good endeavour.

On independence in 1968, Mauritius was a poor sugar-economy with deep ethnic cleavages in the population; the fact that talented political leaders were personally committed to democratic government, and to economic development; the creation of a competent, politically independent state bureaucracy with personnel policies based largely on merit, but with a composition that is reasonably representative of their societies; the development of a public realm that is capable of imposing at least modest checks on the actions of the state, and that is characterized by a balance between universalistic and particularistic norms.  Perhaps the main message is the importance of competent leadership and some measure of institutional innovation.”

Arvind Nilmadhub : “High barriers to entry in many sectors”

Economist Arvind Nilmadhub claims economic democratization is a myth because of very high barriers to entry in many sectors of activity. “For example, not any small player can operate in the financial services industry because of the costly permits.

Similarly, the hotel sector is not open to any entrepreneur. It is also very difficult for new players to compete with established conglomerates, who can kill competition by either buying the new entrants or resort to unfair pricing or any other strategies to force new entrants to close down. We have seen many examples.”

The economist further adds that democratization of the economy is possible if there is strong willingness on the part of the government and if economic policy is formulated taking into consideration the inputs of seasoned entrepreneurs, economic observers and social workers, among others.

VIEWS : electoral reform: Empowerment at grassroots level

Electoral reform is an issue very dear to our political leaders. At any given opportunity, politicians do not fail to debate on electoral reforms. Unfortunately, our politicians’ vision of electoral reforms is limited only to the National Assembly and the number of MPs. For real economic and democratic reform to take place, it is important that there is complete power devolution from central government to local authorities, but not the way they are now.

To encourage greater public participation in local and regional affairs, it is time to empower village councils and let local residents have greater say in the management of their villages. This will ensure development occurs according to people’s needs and wishes, and also eliminate waste of public resources. Under our current system of local administration, we have a few municipal and district councils that have jurisdiction over a large area, but are unable to satisfy everyone.

Let’s take the municipality of Port Louis for example. It extends from Abercrombie in the north to Pailles in the south, to La Tour Koenig in the west. The council is unable to meet the needs of citizens. The global trend is now towards smaller councils for efficient management. We often hear complaints from citizens about poorly maintained public infrastructure, lack of projects, etc.

Imagine if each village was independently governed at regional level, with its annual budget determined by virtue of its land area, population size and development needs. There would have been a balanced development across the country, with greater efficiency. The most important of all, local people could become councilors and better manage their village or town wards, rather than relying on mainstream political parties. Economic democratization starts with empowering of citizens to take their destiny in their own hands.