With the issue of wage compensation, Xavier-Luc Duval sure has his work cut out for him. The question is does he want to do it in a way that is fair to all. For the minister of finance has shown time and time again that his sympathies lie with business rather than the working and middle classes. It’s possible to argue of course that his portfolio requires that he side with the big boys, that he create the right macroeconomic conditions for them to prosper so as to stimulate growth and employment. Tenuous at the best of times, this highly reductive worldview is currently teetering on the brink of obsolescence. The global financial crisis has in effect shown up supply-side economics for what they are: a recipe not just for growing inequity but for bad policy too.

Enter the Mauritius Employers’ Federation (MEF): different year, same skit. Times are tough and we’ll do our best, but don’t expect us to be overly generous with regards to compensation. Its chairman, Clency Appavoo, said as much this week: “We’re aware that we need to grant compensation, especially to those at the bottom of the ladder. But at the same time, we predict that the situation is going to get worse from an economic point of view. We have to remain prudent.” This is where things get interesting. How is the economic situation going to get any better if the overwhelming majority of the population doesn’t have any money to spend? Perhaps Mr. Appavoo should ask the members of his organisation how they expect all those shopping malls they’re dotting the landscape with to turn a profit if most people are constantly broke?

An economy is a dynamic system comprised of an almost endless set of variables. But it’s obvious to even the most blinkered observer that it can’t run solely on encouraging supply via tax cuts and deregulation there needs to be some sort of demand.

That the MEF has chosen once again to ignore this basic tenet of economics is slightly startling, especially given that the model of export-driven growth isn’t the force it used to be. And with growth forecasts constantly being revised downwards, employers are going to have to think outside of the box if they don’t want the numbers to become a self-fulfilling prophecy. For that to be possible, they’ll have to suspend their fanatical opposition to paying their employees anything more than the absolute minimum.

The unions are asking for Rs750. That’s far too little: employers should double that figure (at the very least). Doing so will have an immediate feel-good effect on the nation’s morale, which can only be good for the economy. Remember Messrs. Duval and Appavoo, it’s about supply and demand.

Nicholas RAINER