Avoiding recession

The Malta Independent

Avoiding recession

Last weekend I had the rare of opportunity of agreeing with views expressed by senior government spokesmen.

Minister Dalli was perfectly right in claiming that whoever was behind the string of anthrax hoax letters has not only inconvenienced those involved, including my team at Super One, but has damaged the economy both through the cost of handling these threats but more seriously through scaring away international business from our shores. The condemnation is unreserved.

I was also relieved to hear that the majority of cabinet ministers feel that the Police Commissioner should not take the Attorney General`s decision not to proceed with criminal charges as a clean bill of health for his credentials to return to the post. These credentials were severely dented by the Commissioner`s own testimony in the courtroom. The country deserves better than having an official in such sensitive post who, even in the best hypothesis, has readily and literally exposed himself to being blackmailed in the performance of his delicate duties. I stress that this is the best hypothesis if we give 100% credibility to the Commissioner`s version of events. Anything less than that would give rise to other much more serious issues.

Where I am finding great difficulty in having any sympathy with the opinion of Minister of Finance is his argument that anybody who dares mention the word recession is actually sabotaging the economy. This is as laughable as it is hollow. Most economies in the world are travelling on the brink of recession.` Japan is actually and officially in recession. USA could` probably be there soon. Economic commentators argue about this endlessly without anyone ever daring to` accuse them that they are sabotaging the economy.

What the Minister of Finance should be doing in order to ward off a recession is that rather than try to shut up his critics he should have emulated many countries who are serious in managing their economies by re-visiting Keynes doctrine in demand management at a time the economy has developed serious problems of over-capacity.

The problem is that the Minister is hardly in a position to do so. Whilst most countries revisiting Keynes are starting from a balanced or surplus budget situation and inflation at historically post-war record` lows, in Malta the Minister is the prime culprit of engineering a horrendous budget deficit co-existing with inflation which has now topped 4% pa. year on year.

The Minister has boxed himself in a corner with no room to manoeuvre with economic tools except to continue enforcing taxation on a dull economy with serious problems of over-capacity and (lack of) profitability.

Stopping talk of recession or the risks of one is as effective as addressing a malady by ignoring its symptoms. This government`s answer to addressing the recession by ignoring it can only guarantee that when it comes it will be deeper and more painful. Probably by that time the Minister will be on the opposition benches criticising whoever has to operate surgery on a moribund economy whilst continuing to pretend, as he did between October 1996 and August 1998,` that the death-bed patient can just walk and run by simply reciting the hail mary of confidence and consumption.