Our Own Worst Enemy

The Times of Malta

Our Own Worst Enemy

` Only hard work and discipline will realise Europe`s dream of sustaining growth` wrote FT correspondent Peter Norman last week.

The same recipe is the only one which could extract our economy from the structural problems it has been locked in for the last 5 years.

It borders on the tragic that the unions are pushing the Government to turn problems on their head. Even more so that government seems only too willing to oblige.

The UHM pins all its solutions upon fiscal enforcement. Its General Secretary went as far as admitting rubbing shoulders with tax evaders to learn how they manage to get away with it and thus suggest effective fiscal enforcement methods.

Fiscal enforcement is a virtue. It is indispensable for sustainable economic growth. It cultivates an environment of social justice where the cost of the workings of civilised society is borne equitably and not by over-taxing the sitting ducks whose earnings are subject to at source deductions. It also keeps the fiscal impact` bearable without having to raise rates to levels which scare away investments.

Equitable tax systems and efficient enforcement thereof may be likened to the` physical exercise which the body of society needs to keep it fit and healthy.

Sudden extensive physical exercise to a sick overweight body that has lost agility will do more harm than good. Sudden fiscal enforcement, even if it were possible, could indeed complicate not solve our economic ills. Funds otherwise available to service commitments already incurred or to finance new investments would flow to the exchequer.` This can only raise the latter`s temptation to continue financing unsustainable recurring expenditure or pseudo capital expenditure in the form of wasteful subsidies, rather than address the problem at its source.

The GWU on the other hand seems to be focussing its demands on just one side of the equation, that of government agreeing to wave the magic wand promised in the electoral manifesto to alleviate the adverse impact of the budget on the working class. As noble as such objective is, one cannot but look at the other side of the equation and ask how the cost of any concessions` is to be financed.

Only hard work and discipline can save us from the misery which the expenditure largesse` and loose purse policies of the last decade has got us into. There exist no easy, magic solutions.` The world around us is speeding away whilst we continue digging deeper the whole in the firm spot which we continue to pretend to run on.

Can this country make economic progress if we continue to burn resources by having its public service run by 38% of the national work-force when in competitor countries it is run by 16%` A simple calculation would show that even if only half of the 30,000 public sector employees which must be re-deployed in the private sector, to reach the 16% average mark, are so effectively placed, recurrent expenditure would reduce by Lm100 million and the tax take could increase by Lm30 million. A full Lm130 million permanent improvement in government finances without having to sell off the family silver through` crisis measures! Furthermore this redeployment of resources would increase the GDP by a good 20%.

This is by no means simple or easy. It can only be achieved through hardwork, discipline and leadership which is unfortunately so missing.

A solution to our economic problems cannot be found in industrial disputes. It can only come from realistic bi-partisan action plan to restore to our economy the agility to compete in a ferociously competitive world. It can only come through productive investments ( not mere property speculation) to create new employment opportunities.` Real re-structuring cannot happen unless the economy produces new employment at roughly the same tempo` with which` the process itself destroys the old fictitious jobs.

Sudden application of fiscal enforcement diverts funds in a directly opposite direction to where they are needed to re-structure properly.

The problem is that government has no mandate, aptitude or energy to drive real re-structuring. Swelling public sector`s employment to honour irresponsible electoral pledges seems more within government`s realm particularly if the endemic waste continues to be financed for some more time by privatisation revenues.

The political nightmare of the last four years has to be brought to an end before we inflict more pain on ourselves. We need true leadership to pass from problem analysis to capturing the electorate`s imagination with real solutions and then to proceed with democratic authority based on a clear mandate to do what we have to do.

There is no other way we can put our economy on a realistic growth path as part of the economic boom which our trading partners are enjoying. Failure to meet our responsibilities with tempestivity will make us our own worst enemies.