The Malta Independent
30th July 2004
Malta is giving the world a text book case study on how not to conduct economic re-structuring. Two examples I encountered this week at ground zero level will help to explain this in the clearest possible terms.
Mr G had joined Barclays as a bank messenger in the late sixties. Internally he was known as the most efficient in his job often being entrusted to perform other duties well beyond his rank, always delivering what was expected of him and beyond.
I recently visited my HSBC branch and Mr G was there with all his usual smile and alertness guarding the main door and greeting customers in and out. As we had not seen each other for some time we exchanged courtesies when suddenly I noticed that he was not wearing the usual bank uniform but the uniform and badge of a private security service company.
Upon enquiry Mr G explained that he applied and was given early retirement from the Bank, enjoying an early pension but meanwhile he was performing duties for a private security firm which was contracted by the Bank to perform the duties formerly performed by the police.`
I congratulated Mr G for his decision which put him in command of two salaries for doing one job which he was perfectly capable of doing if the Bank, rather than send him out on early pension, just re-assigned duties to gain efficiency from its existing work-force. Good luck for Mr G but a general waste of money at macro economic level.
Then Mr Z came to see me to discuss something on a professional matter. As it is my duty to get to know clients before accepting to do business with them I discovered that Mr Z was until recently employed with a public sector company which has been privatised. There he was performing a very specialised job which takes years of training and experience. However as the privatised companies could not continue certain business lines he became surplus to requirements and as part of the privatisation agreement he was transferred to perform a job in the civil service without any loss of pay.
On enquiring what sort of posting he was occupying Mr Z, almost red in the face, told me that he was attached to a Ministry making coffees and performing other messenger duties, a job well below his status and capabilities and which normally is done by someone earning half his salary.
Mr Z did not have the same good fortune of Mr G. The fact that he had preserved his salary does not lessen the humiliation of somebody that is forced to perform a job well below his rank. People don`t work just for the money but also need to feel fulfilled and useful to their employer and to society in general.
Yet just like Mr G , Mr Z`s case is a typical example of waste and a sample case of how not to re-structure.
At a time when extension of pension age is well on the agenda the extra salary being paid to Mr Z should have been used to put Mr G on to a re-training programme to teach him new skills permitting him to be fitted into a new productive job not too far away from his rank and his true abilities.
These are not isolated cases. Thousand of such like cases have rendered us globally uncompetitive.` Without global competitiveness we will not attract investment and without investment there will be no growth. Without growth re-structuring will be difficult almost impossible.
So the focal point of any re-structuring exercise has to be on how to boost economic growth by making our economy competitive again.
The lack of competitiveness is currently the main topic of such fatigued economies as that of France and Germany.` Both countries are members of the Euro area, cannot rely on fiscal, monetary and exchange rate policies to re-gain their competitiveness the same way the US has done these last four years. Monetary and Exchange rate policies no longer reside within the national government of France and Germany but have been passed on to the European Central Bank who has to take a wider view than just the immediate needs of the French and German Government. By consequence the use of fiscal policy, whilst theoretically still a national prerogative, has also become restricted by the Growth and Stability Pact of the single currency.
The result is that with the French and German governments largely unable to stimulate the economy by using the traditional tools of fiscal, monetary and exchange rate policy, restructuring is being performed at factory level with workers having to give back benefits like the 35/37 hour week, additional holidays etc which they thought they had earned for good. Workers are having to work more without seeking additional pay merely to protect their jobs under the threat from employers that otherwise they will move their production units to lower cost countries or regions.
Unless our government conducts a proactive re-structuring exercise this will happen in Malta soon with private sector employees being forced to accept reduced conditions to protect flight of investment. Indeed, it is happening already and in some cases investment has moved or is thinking of moving.
Unless we want the crisis to hit us when it is too late government had better re-think and co-ordinate how to use monetary, fiscal and exchange rate policy to re-establish our international competitiveness. Thankfully these are still ours to use but will no longer be so a few years down the line once we join the Euro. The consequences of giving up these policies before conducting true and real re-structuring are just too drastic too contemplate.
30th July 2004
Malta is giving the world a text book case study on how not to conduct economic re-structuring. Two examples I encountered this week at ground zero level will help to explain this in the clearest possible terms.
Mr G had joined Barclays as a bank messenger in the late sixties. Internally he was known as the most efficient in his job often being entrusted to perform other duties well beyond his rank, always delivering what was expected of him and beyond.
I recently visited my HSBC branch and Mr G was there with all his usual smile and alertness guarding the main door and greeting customers in and out. As we had not seen each other for some time we exchanged courtesies when suddenly I noticed that he was not wearing the usual bank uniform but the uniform and badge of a private security service company.
Upon enquiry Mr G explained that he applied and was given early retirement from the Bank, enjoying an early pension but meanwhile he was performing duties for a private security firm which was contracted by the Bank to perform the duties formerly performed by the police.`
I congratulated Mr G for his decision which put him in command of two salaries for doing one job which he was perfectly capable of doing if the Bank, rather than send him out on early pension, just re-assigned duties to gain efficiency from its existing work-force. Good luck for Mr G but a general waste of money at macro economic level.
Then Mr Z came to see me to discuss something on a professional matter. As it is my duty to get to know clients before accepting to do business with them I discovered that Mr Z was until recently employed with a public sector company which has been privatised. There he was performing a very specialised job which takes years of training and experience. However as the privatised companies could not continue certain business lines he became surplus to requirements and as part of the privatisation agreement he was transferred to perform a job in the civil service without any loss of pay.
On enquiring what sort of posting he was occupying Mr Z, almost red in the face, told me that he was attached to a Ministry making coffees and performing other messenger duties, a job well below his status and capabilities and which normally is done by someone earning half his salary.
Mr Z did not have the same good fortune of Mr G. The fact that he had preserved his salary does not lessen the humiliation of somebody that is forced to perform a job well below his rank. People don`t work just for the money but also need to feel fulfilled and useful to their employer and to society in general.
Yet just like Mr G , Mr Z`s case is a typical example of waste and a sample case of how not to re-structure.
At a time when extension of pension age is well on the agenda the extra salary being paid to Mr Z should have been used to put Mr G on to a re-training programme to teach him new skills permitting him to be fitted into a new productive job not too far away from his rank and his true abilities.
These are not isolated cases. Thousand of such like cases have rendered us globally uncompetitive.` Without global competitiveness we will not attract investment and without investment there will be no growth. Without growth re-structuring will be difficult almost impossible.
So the focal point of any re-structuring exercise has to be on how to boost economic growth by making our economy competitive again.
The lack of competitiveness is currently the main topic of such fatigued economies as that of France and Germany.` Both countries are members of the Euro area, cannot rely on fiscal, monetary and exchange rate policies to re-gain their competitiveness the same way the US has done these last four years. Monetary and Exchange rate policies no longer reside within the national government of France and Germany but have been passed on to the European Central Bank who has to take a wider view than just the immediate needs of the French and German Government. By consequence the use of fiscal policy, whilst theoretically still a national prerogative, has also become restricted by the Growth and Stability Pact of the single currency.
The result is that with the French and German governments largely unable to stimulate the economy by using the traditional tools of fiscal, monetary and exchange rate policy, restructuring is being performed at factory level with workers having to give back benefits like the 35/37 hour week, additional holidays etc which they thought they had earned for good. Workers are having to work more without seeking additional pay merely to protect their jobs under the threat from employers that otherwise they will move their production units to lower cost countries or regions.
Unless our government conducts a proactive re-structuring exercise this will happen in Malta soon with private sector employees being forced to accept reduced conditions to protect flight of investment. Indeed, it is happening already and in some cases investment has moved or is thinking of moving.
Unless we want the crisis to hit us when it is too late government had better re-think and co-ordinate how to use monetary, fiscal and exchange rate policy to re-establish our international competitiveness. Thankfully these are still ours to use but will no longer be so a few years down the line once we join the Euro. The consequences of giving up these policies before conducting true and real re-structuring are just too drastic too contemplate.
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