Tijo Salverda explains what the financial sector can learn from a former colonial elite.
Hedge fund managers, the City and Wall Street’s top bankers, regulators and politicians involved in reshaping the financial markets, should take a look at the tropics. They can learn a great deal from the former white colonial elite of Mauritius.
The Franco-Mauritians have a history of power struggles but are still sipping their gin tonics (a British legacy) in their bungalows overlooking the turquoise Indian Ocean. Their historical experience shows regulators that financiers (hedge fund managers, bankers, etc.) can accept change, while financiers on their turn will see that they could still enjoy the luxuries of Mayfair and Upper East Side even if they compromise some of their power.
Mauritius, an originally uninhabited island, relied predominantly on its sugar industry, controlled by the Franco-Mauritians. In the early twentieth century labourers of Indian and African descent started to push for change. This was the beginning of a radical shift in the island’s political landscape.
Until then the Franco-Mauritians had successfully defended and maintained their elite position. The Franco-Mauritians were, notwithstanding, the source of occasional resistance to the British, an effective collaborative elite through whom the British ruled the island from their takeover in 1810 until the postwar period.
But under mounting pressure from non-white Mauritians, especially the Indo-Mauritians, the British substantially increased suffrage in 1947. The Franco-Mauritians were furious with the British because, contrary to in the past, the British colonial administration virtually ignored their suggestions.
This new policy stemmed from the fact that the British were now of the opinion that, for the well-being of the colony, the working classes and other non-whites should be given a voice. It lead to Mauritian independence in 1968 under the leadership Sir Seewoosagur Ramgoolam. An event opposed and dreaded by the Franco-Mauritians.
Financiers in the current financial centres equally fear their positions and oppose and dread the decrease of their bonuses and stricter regulation. They feel they are being blamed for all the wrongs of the financial sector and, understandably, don’t like this. And like anyone else they neither like a setback of living standards.
They will probably only gradually come to terms with the new situation, just like the Franco-Mauritians who only in the early 1980s realised that their (in)direct political role had to come to an end in a democratic Mauritius.
But the Franco-Mauritian case also shows that forty years after independence they are still a business elite controlling a number of the island’s largest business groups and hotel chains. They have a rather carefree life at their seaside bungalows with pampering by nannies and servants who look after the children and take care of a number of daily chores.
The Franco-Mauritians, indeed, lost their political power but could maintain their economic power and help to make Mauritius the success it became (for Mauritians of all backgrounds). Briefly put, Franco-Mauritians survived by effectively giving part of their power away.
Hedge fund managers who ‘threaten’ to relocate from the City and bankers vehemently opposing change will probably lose some of their power. But more importantly they should realise that it is highly unlikely that they will lose so many privileges that they will no longer enjoy a very pleasant life style. The UK, US, France and Germany will not change into socialist states where hedge fund managers earn as much as their cleaners (though they may have to pay as much tax).
The global financial centres are a far cry from the sandy beaches of Mauritius. Bankers and hedge fund managers can easily direct their money and business to a Swiss canton. Franco-Mauritians, on the other hand, had no lever because their sugar plantations and hotels were immovable. Regulators and politicians are, therefore, understandable wary to not be the first and scare their bankers away.
But they should realise that financiers, rightly or wrongly, perceive themselves to be under threat and act accordingly. People go up in arms when they perceive their position to be challenged and react defensively to such situations even though they then often end up gradually accepting the new realities that in many cases actually turn out to be not too disadvantageous for them anyway (conversely, more threatening changes seem sometimes to be harder to notice before it is too late).
Regulators should, thus, not easily give in to opposition but realise that financiers eventually accept their new situations and often prefer their life styles in London over a Swiss canton.
But for restructuring the financial markets regulators also need financiers and better not pressure them too much but rather strike a balance. The Franco-Mauritian case shows that when the perception that the outside world is against you takes the upper hand, a strong sense of victimisation is reinforced. This prevents self-reflection and thinking outside the box (because all, even sensible, arguments, are labelled as ‘anti’ and cannot therefore be supported). This is undesirable because for reinventing the financial markets all creativity and free-thinking from financiers and regulators is needed.
Tijo Salverda is a PhD candidate at the Department of Social and Cultural Anthropology at VU University Amsterdam and part-time lecturer at the University of Amsterdam. He will defend his dissertation Sugar, Sea and Power: how Franco-Mauritians balance continuity and the creeping decline of their elite position, later this year.
He wrote earlier about the ‘culture of the crunch’ (Dutch).