Wishful Thinking

The Malta Independent 

This being my last contribution for the year I thought it appropriate to spice my best wishes for a peaceful Christmas and a prosperous New Year with some economic wishful thinking.

Now that we have run out of all other easy solutions and with government`s back economically against the wall, we are hearing much talk of the inevitability of consensus driven painful measures through the promotion as some new discovery of a vintage idea termed as social pact.` Reality is that government can only be successful in economic management if such social pact is a permanent fixture in our economic firmament and if it is used effectively to drive the message that government can only set a fair and positive backdrop for economic growth. The real drivers of such growth have to be the social partners through their joint collaboration.

So whilst the Irish celebrate the first successful decade of the social pact we are still trying to understand what it is all about and we have everyone repeating the catch-phrase without concretising on what deliverables we should expect from such an objective.

As some wishful thinking is not out of season in the run-up to the Christmas festivities I thought of concretising the Social Pact into ten clear deliverables to see if those paying lip-service to this abstract notion really have the courage to translate it into an effective and lasting economic cure. 

1. Rebalancing in the rights and obligations of workers across the whole economic spectrum facilitating the mobility from public to private sector employment.
2. Funding a massive training and re-training mechanism to render our employees multi-skilled and employable as technology continues to kill old jobs and create new ones.
3. No new taxes/tariff deal from the government to ensure that we stop the addiction to tax and spend policies
4. A deal whereby additional revenues from better tax enforcement are allocated specifically as to 50% for reduction of the tax burden to the lower and middle sector of society, especially those in employment who never needed any tax enforcement mechanism to pay their tax dues, and 50% to fund re-training schemes.
5. A freeze on public employment recruitment and on public sector payroll costs ensuring that benefits are mostly given in re-training opportunities and in subsidising/promoting transition of excess public sector personnel to productive jobs.
6. A freeze on all public sector operating expenditure
7. Rendering the economy more market driven by moving away from COLA wage increases and adopting only increases in minimum wage level in order to protect non-unionised employees who normally operate at or near minimum wage levels.
8. No new debt until we get the debt level down to 60% of the GDP. Any capital expenditure has to be financed by one off revenues (privatisation, sinking fund and similar arrangement) to avoid recourse to new debt issues, other than roll-over of maturing debt.
9. Keep social benefits at their current real level and forget all possibility of giving tax incentives for private pensions before government finance comes in good shape to make this affordable.
10. If all this is agreed make a one-off adjustment to our rate of exchange to re-establish our international competitiveness and prepare for joining the EURO at a rate which is sustainable and which attracts FDI and promotes economic growth.

If we can build a Malta Consensus (plagiarising the Washington Consensus from John Williamson) around these 10 deliverables than may be we can pass from platitudes and wishful thinking to the formation of a concrete action plan where all parties acknowledge that solutions cannot be painless, that expecting all else but themselves to carry the pain is unworkable, and that a fair sharing of the burden of the adjustment pain will make the sustainable pain acceptable as a fair price to pay to get to the light at the end of the tunnel.

I wish all readers a merry wishful thinking Christmas but more importantly a full year of effective consensus driven solutions.