Classical, Schumpeterian, neoclassical, endogenous mo-dels… the theories on economic growth are numerous. Each one has its own perception. However, one shall know that at the heart of the economic growth process and the economy in general stand people. The merit of the endogenous growth theories developed in the 1980s and 1990s is to recognise this aspect.

There are two major factors determining a country’s economic growth. The first factor to be taken into consideration is the background and culture of its people (e.g. know-how, experiences, risk aversion and entrepreneurial culture). The second one has to do with the desire of institutions (public and private) to foster economic growth through mainly education and high skilling of people and the setting-up of a business and innovation friendly environment.

In the 1950s, which economist would have bet on the economic success of South Korea? After the war with the North, South Korea was barely functioning again. At that time, South Korean people were “ill-dressed and shivering in their still war-wracked capital, Seoul. Today the main complaint of Seoul’s citizens is that too many people can now afford cars, which clog the roads for the car owners who got there first.” (Rowher, 1996).

For Jim Rowher, four categories of constituents can be identified to explain the economic performance of South Korea, namely:“the quantity of labour (how many people are in the workforce and how many hours they work); the quantity of physical capital (how much land and many machines, buildings, and bridges are available for the workforce to work with); the quality of labour (how well educated and well trained the workforce is); and the efficiency with which the inputs of capital and labour are combined.”

Yet, the two key factors behind the rapid economic growth of South Korea were first the efficient use and combination of capital labour and second the role played by the government as its intervention provided a spur rather than a cushion. Indeed, “the aim of intervention was not to protect the beneficiary firms from competition, from foreign influences, or from change itself but to accelerate the impact of all these things as a way of upgrading the firms’ abilities.”(Rowher, 1996).

The two reasons put forward by Rowher, even though he does not talk explicitly about it, underline the essential role of people and institutions. Indeed, the efficient use and combination of capital and labour can be explained by the know-how of South Korean people while the role played by the government is to be associated with the positive role of institutions.

In the 18th century, England became the first country to experience the Industrial Revolution and emerged as an economic titan. Why did this phenomenon first take place in England? For Steven Kreiss, culture is one of the main reasons.

“Although the Industrial Revolution was clearly an unplanned and spontaneous event, it never would have been made had there not been men who wanted such a thing to occur. There must have been men who saw opportunities not only for advances in technology, but also the profits those advances might create which brings us to one very crucial cultural attribute. The English, like the Dutch of the same period, were very commercial people. They saw little problem with making money, or with taking their surplus and reinvesting it. Whether this attribute has something to do with their Protestant work ethic, as Max Weber put it, or with a specifically English trait is debatable, but the fact remains that English entrepreneurs had a much wider scope of activities than did their Continental counterparts at the same time.” (Kreiss, 2004)

However, Kreiss overlooks another key reason: the institutions. Why the Industrial Revolution started in England and not in France ?

In 1688-99 took place the Glorious Revolution in England. The autocratic regime led by James II was replaced by a parliamentary monarchy. “The English monarchy was no longer in a position to be predatory”. And, “the legal measures surrounding the Glorious Revolution taken together with earlier common law decisions and Parliamentary legislation established a set of rules protecting property rights and enforcing contracts, free from arbitrary actions of the Crown. These rules enabled Britain in the eighteenth century not only to enjoy faster growth of the economy but also led way into the Industrial Revolution”. (Dam, 2006)

 To put it short, English people succeeded in establishing political structures which were sufficiently flexible to accommodate economic change whereas their French neighbours were at that time living under absolute monarchy. 

This example, once again, shows that the background and the culture of the people as well as the institutions are the essential driving forces of a country’s economic growth. This explains the recent measures adopted by the Mauritian government to boost economic growth. With the Business Facilitation Act, the government wants to get rid of red-tapism and set up a more trade-enabling environment where businesses could thrive.

The Empowerment Programme will address the skills mismatch issue. Furthermore, institutions such as the Small Enterprises and Handicraft Development Authority and the Empowerment Fund Ltd will help foster an entrepreneurial culture in Mauritius. Nevertheless, even though the government seems to be on the right track in its endeavour to refuel and restart the economic machine, it should be borne in mind that like cars, good policies are useless if not well-driven!

<B>T.A. Pather</B>