The Mauritius miracle: What can the United States learn from this tiny island nation?

Commentaries on economics and technology.
March 7 2011 3:58 PM

The Greatest Country on Earth

What the United States can learn from the tiny island nation of Mauritius.

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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 United States 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 international law but expelled its citizens and refuses to allow them to return.

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The United States 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.

This article comes from Project Syndicate.

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Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University.  The paperback version of his latest book, Freefall: Free Markets and the Sinking of the Global Economy,with a new afterword, was published in October.