The Moorish Wanderer

Deficits and Cycles in Morocco

Posted in Dismal Economics, Moroccan Politics & Economics, Morocco, Read & Heard by Zouhair ABH on September 12, 2012

No one needs to be hardcore Keynesian to understand why governments – and Morocco is no exception to that- prefer to go deficit-spending when the economy is in recession, especially when it is a serious one. Indeed, Robert Lucas (a big name from the University of Chicago) quipped:

I guess everyone is a Keynesian in a foxhole.

(TIME, Oct. 23, 2008)

And Morocco has been -and continues to be- a Keynesian-style economy. Unfortunately, it indulges a lot more into Zombie Keynesianism, fiscal and expenditure policies are indeed supposedly designed to stimulate domestic demand, but they do not reach the majority of our citizens (just think of household consumption distribution in Morocco: a third of its aggregate total is controlled by 10% richest households) the same can be said of public investment, although the argument is not as clear-cut as one might think it is.

relatively strong negative correlation might lead to think deficits are there to smooth economic fluctuations (captured by GDP growth volatility)

Look at the graph: deficit as a percentage of GDP opposite GDP growth over the period 1960-2011. correlation seems strong enough to sustain the assumption deficits are there to alleviate deficit. However, beware of confusing correlation with causality; we can also produce equally good evidence that deficits are the ones responsible for GDP volatility.

There is also the question of how much historical volatility is linked to deficits. The choice of 3-years deviation of GDP growth was purely arbitrary, and if anything, the strongest correlation between deficit and volatility in GDP is observed for 6-years periods, and immediate correlation between GDP growth (as it is) and deficit in percentage of GDP is equally significant. Finally, there is relatively weak evidence deficits limit somehow fluctuations in the economy (less than two years). This result seem to be in line with usual assumptions in taking 5-years averages to smooth things over.

We therefore have a glimpse to the double effect of deficits: in the shorter run as well as the longer run, deficits are negatively correlated to GDP volatility and growth.

Why do we care about standard deviation in GDP growth? For many reasons, chiefly because of government targets and growth itself; large deviation in GDP from one year to the other reflects badly on average growth – think about the 5.5% average growth projected for 2012-2016 and the impact of large ups-and-downs in GDP growth; as it stands, 2014-2016 needs to deliver consecutive growth figures close to 6.75% each year.

Second, volatility in growth means higher uncertainty. Last year, Morocco created in 2008 some 72.6Bn dirhams worth of goods and services. But the next year, only 43Bn where created, and the next years after, an average of 36Bn. These differences in expected additional GDP – about 30 Bn from one year to the other that could have benefited to many businesses and individuals, but did not, because GDP growth fluctuated a lot (not as much as the  10-year average).

Let us take a leaf from serious academia from the World Bank about the matter:

This paper examines the relation between fiscal deficits and growth for a panel of 45 developing countries. Based on a consistent treatment of the government budget constraint, it finds evidence of a threshold effect at a level of the deficit around 1.5% of GDP.

While there appears to be a growth payoff to reducing deficits to this level, this effect disappears or reverses itself for further fiscal contraction. The magnitude of this payoff, but not its general character, necessarily depends on how changes in the deficit are financed […] and on how the change in the deficit is accommodated elsewhere in the budget.

Now, this paper (from 2005) shows the optimal level for budget deficit is 1.5% for emerging economies, even as Morocco tends to flaunt the 3% target as an article of faith. A 1.5% deficit today means the government needs to cut about 38.7Bn from its deficit, or enact a net cut of 21.8Bn in the 2012 Budget – a 6.3% reduction in the Budget size. But then again, the figure of 1.5% GDP is not absolute: there are other parameters to take into account, which makes the ‘optimal’ deficit for Morocco a bit higher, and more manageable; in fact, 3% deficit GDP falls within the 95% confidence interval for the estimated, optimal 1.5% deficit. With a 3% deficit target, the Government needs to cut the deficit some 24Bn dirhams, or enact net spending cuts of 14Bn (on the basis of a maximum tax increase of 14.6Bn)

All in all, the past 40 years have been a period of relentless deficit spending policies, that ultimately culminated with the 1970s (8% over the period 1970-1981). Even the Structural Adjustment programs did not do that well; while they did indeed reduce the budget deficit considerably with respect to the spendthrift years of the 70s, the deficit between 1983 and 1992 averaged 6%, while the deficit between 1999 and 2010 was cut in half, close to 2.9%, with two surplus consecutive years.

In many respects, Budget deficits in Morocco are not deficit-spending per say. The ‘Rapport du Cinquantenaire‘ correctly pointed out in this graph that investment lags behind current expenditure (pay-wage and stationary, for instant). The deficit has a lot more to do with weak fiscal structure, that prefers to tax easy aggregates (consumption mainly, and it companies are actually the ones collecting the money) instead of taking on special interests (the supplementary report to the Budget bill estimates 33Bn in tax exemptions and breaks are embedded in the 2012 Budget) and broadening the tax base.

Course 5 : Flamewoman, Ana Castillo

Posted in American Minority Voices by Zouhair ABH on February 15, 2009

Ana Castillo

a short bio to begin with : Castillo was born and raised in an inner city barrio of Chicago, Illinois. After completing undergraduate studies, she immediately began teaching college courses.

She earned her Master’s degree in Latin American and Caribbean studies from the University of Chicago with a thesis entitled “The Idealization and Reality of the Mexican Indian Woman”. She received her doctorate from the University of Bremen, Germany, in American studies in 1991. In lieu of a traditional dissertation, she submitted the essays later collected in her highly acclaimed work Massacre of the Dreamers.

Castillo writes about Chicana feminism, which she dubs “Xicanisma“, and her work centres on issues of identity, racism, and classicism. Many of her protagonists are fiercely independent, sometimes lesbian, women. Her “imaginative fiction” shows the influence of magical realism. For example, the novel Sapogonia is about a fictional country that is the home to all mestizos. Much of her work has been translated into Spanish. She has also contributed articles and essays to such publications as the Los Angeles Times and Salon. (Wiki reference).

What one could say about “Xicanisma” ? Ana Castillo claims it is a different sort of feminism, a feminine third world solidarity that is. I like the radical criticism of the WASP society (eventhough Castillo turns to be as simplistic in her ‘whit people type’ generalization just as the ones she criticises). In a sense, the woman is right : Women were subdued and alienated for a long time, and often still are in third world countries. Because of here Latin-American roots, she focuses on the women’s situation in Mexico, where women are confined into the classical sexual segmentation : they are housewives, and their sole purpose is domestic : They give birth to babies (boys are preferred), take care of their husbands when they come home. One might argue that ‘white women’ (let us consider white American people as WASP, Italian-Americans and other European-like communities) also experienced the same situation.What is different with Chicanas, is the ambient racism they had to cope with. A racism expressed by others and by fellow Chicanos. Perhaps racism is too strong a word. In latinos communities, though women were considered human being, they had a restricted access to the public life, their life being mostly a domestic one. Some might see in it a middle-east/arabic influence

There was an asymmetric situation, were Women were worshipped for their purity (as virgins or as mothers) or despised as ‘whores‘. On the other hand, men’s virility is on display when a man has girlfriends or several mistresses. (a situation similar to the way Moroccans look at relationships : If every family wants their daughter to be pure and their son to experience their virility, how could things be carried out ?). Latina women were therefore more or less objectified. Immigration, industrial and economic changes destroyed the traditional gender norms, and latina women had to work outside their house.

The most educated of them -like Ana Castillo- got an early grip on feminist ideology, as well as an interest in Third- World struggle. Eventually, Chicanas joined in the 70’s emancipation movement. Ana Castillo said she had little in common with a white American women claiming civil rights, while she shared the suffering  and the issues of a Third World woman. Xicanisma, in this sense, is more a revolt against traditional sexual norms, rather than a quest for equality.

As a member of a minor community, Castillo’s work, as for other Xicanismas writer, is highly political. It remind of the Black Panther literature, (minus the political violence) of course. However, one might notice that her own analysis is purely ethnical, due to the lack of a detailed and a fair point of view of the American society. It seems to be the case for many minor authors : A superficial criticism of the dominant culture/community/political power, a paradox, in view of the rich work and analysis on their own people.