18th April 2008
The Malta Independent - Friday Wisdom
In a globalised economy, there is only one way to generate wealth. That is to adopt business-friendly policies, to lower taxation and to liberalise the economy.
This quote from a recent interview I gave to the media has apparently raised concern about the congruence of such views with basic social democratic principles espoused by left of centre political parties whose doctrine I openly profess.
Such concerns quite understandably are often raised by people whose economic thinking is ingrained in the protectionist attitude of the 1970s rather than the globalisation realities of modern times.
There is much to complain about the unpleasant side effects of globalisation. However it is not something we really have any choice about. Unless we participate and effectively compete in the globalisation process we will not be able to grow our economy at healthy rates that can sustain the economic growth we aspire for. And to compete we need to attract investment which would only come our way if we adopt consistent business-friendly policies.
So most governments today, whatever their basic creed, cannot actually succeed and survive unless they adopt business-friendly policies.
However I do not subscribe to any argument that by so doing social democrats would be betraying their basic socialist doctrine. The biggest of all social services is giving all able-bodied the opportunity to participate in economic growth by having a productive job that satisfies their economic needs with a fair pay as well their psychological needs through the self respect generated by feeling useful and appreciated. A very close second to this is the opportunity of having a whole menu of such jobs giving the opportunity to switch jobs to improve economic status.
This can only be realised through the adoption of business-friendly policies that attract quality productive investment. The alternative would be economic stagnation, loss of job opportunities, higher unemployment and clear advantage to right-wing parties to win elections to implement such policies that sit better with their traditional political philosophy.
If social democrats are constrained to espouse business-friendly policies in order to generate wealth, in the process giving rise to accusations of becoming cloned right-wing parties with a left name tag, they can still differentiate themselves in the way the wealth is distributed.
In this respect conservative parties had to clone themselves on traditional social democratic principles. Though their conviction is rarely more than skin deep few can disagree that the conservative parties had to abandon their traditional free market approach to wealth distribution and pose as defenders of the social model.
In so doing conservative parties in Germany, France and Italy have enjoyed electoral successes by keeping their traditional right-wing core while making gains in the centre strip. The UK and Spain are notable exceptions marked by electoral success of Labour/socialist parties who moved their policies substantially to the right of the centre, often to the dismay of their grassroots base.
In Malta we have had a similar experience with the conservative PN winning a higher percentage of the vote than liberal Labour in six out of the last seven general elections. Labour really has no option but to accept wealth creation through adoption of business-friendly policies. But there is ample scope for differentiation in the development of the Maltese social model. The conservatives have rendered the social model an unsustainable hotchpotch which unless overhauled with dignity and foresight will eventually explode much to the detriment of those in society who are least protected.
What social model can be truthful to its name if we have devised a system where the fruit of labour is taxed at a much higher rate than the fruit of capital? Why should earnings through hard work, whether the wages of an employee or the business profits of an entrepreneur get taxed at 35 per cent while the unearned investment income from capital, quite often not even declared for tax purposes, gets away with a 15 per cent final withholding tax at source?
Not only are we discriminating through our fiscal policies against those who have to work and take risks for their income in favour of those who simply enjoy the fruit of their capital, but in giving universal free social services to all, we are basically either not giving enough to those who really need such services but cannot afford them, and/or we are giving such services by accumulating debts which require expensive servicing that absorbs resources that would otherwise be available to give more to those truly in need.
The result is evident in overcrowded hospitals, long waiting lists for ordinary operations, lower quality of schooling at primary and secondary level of public schools and inadequate level of support to those who because of age factors, health barriers and genuine unemployment cannot participate through active engagement in the benefits of economic growth.
Which principles of socialism teach us that we have to provide universal free services for all rather than to give more to those who are most in need? The very principle of universal free services, in the context of the limited resources available to any government, automatically imply that we cannot be giving enough to those who need most.
Would it not be more fruitful if in full engagement with globalisation realities we aim to reduce all forms of taxes, direct and indirect, to one unified low rate which eliminates the discrimination between earned and unearned income and in the process stimulating economic growth by leaving more funds in the pockets of those who earn them? Would these people who benefit from a much lower impact of direct taxation honestly find any objection if they have to start contributing for what is so far free and universally available public services, especially in health (through insurance-type of arrangement) and education, to ensure that government resources are directed to those most in need so that no one, really no one, is left behind.
Should we not, as social democrats, aim to transform our social services, as enabling schemes, to place people back in the economically active market as quickly and painlessly as possible, while reserving application of assistance type of expenditure only to those, who because of age and health limitations cannot participate in the productive economic activity?
Yes, social democrat policies can be both business friendly and protectors of the social model they had founded when the world was much less open and challenging than it is today; when competition for a worker in a job was from colleagues seeking a similar job rather than the millions in faraway lands that each month are abandoning their rural activities to engage in productive manufacturing that force factories to close in developed countries and relocate in lower cost emerging ones. When Labour can persuade the electorate that it can do so it will quickly find the majority it has been missing.
The Malta Independent - Friday Wisdom
In a globalised economy, there is only one way to generate wealth. That is to adopt business-friendly policies, to lower taxation and to liberalise the economy.
This quote from a recent interview I gave to the media has apparently raised concern about the congruence of such views with basic social democratic principles espoused by left of centre political parties whose doctrine I openly profess.
Such concerns quite understandably are often raised by people whose economic thinking is ingrained in the protectionist attitude of the 1970s rather than the globalisation realities of modern times.
There is much to complain about the unpleasant side effects of globalisation. However it is not something we really have any choice about. Unless we participate and effectively compete in the globalisation process we will not be able to grow our economy at healthy rates that can sustain the economic growth we aspire for. And to compete we need to attract investment which would only come our way if we adopt consistent business-friendly policies.
So most governments today, whatever their basic creed, cannot actually succeed and survive unless they adopt business-friendly policies.
However I do not subscribe to any argument that by so doing social democrats would be betraying their basic socialist doctrine. The biggest of all social services is giving all able-bodied the opportunity to participate in economic growth by having a productive job that satisfies their economic needs with a fair pay as well their psychological needs through the self respect generated by feeling useful and appreciated. A very close second to this is the opportunity of having a whole menu of such jobs giving the opportunity to switch jobs to improve economic status.
This can only be realised through the adoption of business-friendly policies that attract quality productive investment. The alternative would be economic stagnation, loss of job opportunities, higher unemployment and clear advantage to right-wing parties to win elections to implement such policies that sit better with their traditional political philosophy.
If social democrats are constrained to espouse business-friendly policies in order to generate wealth, in the process giving rise to accusations of becoming cloned right-wing parties with a left name tag, they can still differentiate themselves in the way the wealth is distributed.
In this respect conservative parties had to clone themselves on traditional social democratic principles. Though their conviction is rarely more than skin deep few can disagree that the conservative parties had to abandon their traditional free market approach to wealth distribution and pose as defenders of the social model.
In so doing conservative parties in Germany, France and Italy have enjoyed electoral successes by keeping their traditional right-wing core while making gains in the centre strip. The UK and Spain are notable exceptions marked by electoral success of Labour/socialist parties who moved their policies substantially to the right of the centre, often to the dismay of their grassroots base.
In Malta we have had a similar experience with the conservative PN winning a higher percentage of the vote than liberal Labour in six out of the last seven general elections. Labour really has no option but to accept wealth creation through adoption of business-friendly policies. But there is ample scope for differentiation in the development of the Maltese social model. The conservatives have rendered the social model an unsustainable hotchpotch which unless overhauled with dignity and foresight will eventually explode much to the detriment of those in society who are least protected.
What social model can be truthful to its name if we have devised a system where the fruit of labour is taxed at a much higher rate than the fruit of capital? Why should earnings through hard work, whether the wages of an employee or the business profits of an entrepreneur get taxed at 35 per cent while the unearned investment income from capital, quite often not even declared for tax purposes, gets away with a 15 per cent final withholding tax at source?
Not only are we discriminating through our fiscal policies against those who have to work and take risks for their income in favour of those who simply enjoy the fruit of their capital, but in giving universal free social services to all, we are basically either not giving enough to those who really need such services but cannot afford them, and/or we are giving such services by accumulating debts which require expensive servicing that absorbs resources that would otherwise be available to give more to those truly in need.
The result is evident in overcrowded hospitals, long waiting lists for ordinary operations, lower quality of schooling at primary and secondary level of public schools and inadequate level of support to those who because of age factors, health barriers and genuine unemployment cannot participate through active engagement in the benefits of economic growth.
Which principles of socialism teach us that we have to provide universal free services for all rather than to give more to those who are most in need? The very principle of universal free services, in the context of the limited resources available to any government, automatically imply that we cannot be giving enough to those who need most.
Would it not be more fruitful if in full engagement with globalisation realities we aim to reduce all forms of taxes, direct and indirect, to one unified low rate which eliminates the discrimination between earned and unearned income and in the process stimulating economic growth by leaving more funds in the pockets of those who earn them? Would these people who benefit from a much lower impact of direct taxation honestly find any objection if they have to start contributing for what is so far free and universally available public services, especially in health (through insurance-type of arrangement) and education, to ensure that government resources are directed to those most in need so that no one, really no one, is left behind.
Should we not, as social democrats, aim to transform our social services, as enabling schemes, to place people back in the economically active market as quickly and painlessly as possible, while reserving application of assistance type of expenditure only to those, who because of age and health limitations cannot participate in the productive economic activity?
Yes, social democrat policies can be both business friendly and protectors of the social model they had founded when the world was much less open and challenging than it is today; when competition for a worker in a job was from colleagues seeking a similar job rather than the millions in faraway lands that each month are abandoning their rural activities to engage in productive manufacturing that force factories to close in developed countries and relocate in lower cost emerging ones. When Labour can persuade the electorate that it can do so it will quickly find the majority it has been missing.
I need to to thank you for this very good read!! I definitely loved every little bit of it. I have you bookmarked to check out new things you post… store name ideas
ReplyDelete