27th June 2008
The Malta Independent - Friday Wisdom
The privatisation of our shipyards and the government’s determination not to consider any other alternative is the final chapter of a death by a thousand cuts. It is a practical example of how politicians and economists are breeds apart.
Economists and logical thinkers are in search of the truth which is itself a moving and evolving target as it is continually in a reflexive process with the search for truth itself and/or with politicians’ attempts to obfuscate it and change it to their view of the world. Politicians, on the other hand, are in search of preserving power and in the process the truth may have to be sacrificed. This could result from smug concepts such as that the electorate cannot handle the truth, to which I would add “without throwing politicians out of power”.
The shipyards have not made a profit since 1981. In the process of arriving to this last chapter they have undergone various waves of restructuring involving downsizing through voluntary retirement schemes and pumping of millions upon millions of liri in subsidies which seemed like pouring gold into a big black hole.
Yet nothing seemed to work. Management and unions continually blame each other. An industry which has all the ingredients for success (strategic location, good infrastructural facilities, healthy international order book for ship repair, skilled labour force etc, etc) still somehow continues to defy all attempts to render it efficient and profitable. Management argues that the workers and their unions promote inflexible work practices which are a barrier to operational efficiency while the unions blame management for poor organisation and for securing contracts on non-commercial terms.
In the meantime the taxpayer has been had. We have collectively sank more hundred millions of euros than I care to count in trying to turn the shipyards around to commercial success and at the end of it, as we are now at the 1,000th blow leading to final death, we still have very nothing to show for it.
The GWU proposed the setting up of a task force with wide representation to explore all alternatives and not simply the privatisation route. Surely there has been all time in the world to talk about ways other than privatisation to save our shipyards. If the shipyards still cannot stand on their own without further taxpayer support then the time for talking is over. Indeed the taxpayer has to be given due account as to why has it taken us so much time and so many resources to get to a logical conclusion which was apparent from the very beginning as the only real way out of the shipyards’ problem.
If the economists and logical thinkers would have had their way, the solution to the shipyard’s problem would have been arrived at much more quickly and with much less resources and it would have benefited everyone including the workers themselves. A small part of the resources burnt in arriving at a death by a thousand cuts would have been sufficient to retrain workers and re-employ them profitably in new processes that are managed with optimal efficiency and which are well integrated with our ability to compete profitably in a global economy. They would have earned more and enjoyed it more than living all these years with insecurity about sustainability of their employment.
Politicians work differently. As their primary objective is to obtain and retain power they prefer a tactic of making gradual changes over time so that nobody notices or those that do notice do not raise much of a protest. It does not matter to them how much resources and time get wasted to arrive at their objective provided they get there without compromising their position in authority.
It was 1985 when the then Prime Minister Dr Karmenu Mifsud Bonnici sought my assistance to explain why the then Malta Drydocks, which was administered a Council elected by the workers, was regularly suffering illiquidity problems leading to crisis requests for temporary loans from government even to meet wages. Reserves put aside for future generations in Posterity Fund (an equivalent to current day Sovereign Wealth Fund being amassed by oil exporting nations like Norway, Saudi Arabia and UAE and other surplus nations like Singapore and China) were in fact being funneled to never never loans to our shipyards purely to meet their day to day operational needs which banks were refusing to finance. They were evidently financing accumulating losses.
I spent two weeks talking to whoever was in authority at Malta Drydocks and at Malta Shipbuilding and after two weeks I felt I had enough information to go back to Dr Mifsud Bonnici with my findings.
The problem was evident. It was a problem of poor management and outdated work practices. Authority and responsibility were totally divorced. Management had responsibility without authority whereas the council and the unions had authority without responsibility. There was a deep-rooted belief that in one way or other shipyards were too important to fail and that one way or other the wages will be funded if not from normal operations, than from government loans or subsidies.
I told the Prime Minister that the culture was so deep-rooted and that resistance to change was so ingrained that only crisis, through closure of the finance and subsidy tap, will force a scenario which can effectively bring about real change. And that such real change has in one way or other to involve substantial downsizing of the workforce, or its breakdown into more manageable groups of say a few hundred workers each, and that employment has to follow strict commercial principles where there are no guarantees of success except through hard work and willingness to accept change to achieve efficiency and remain competitive.
I was not surprised that Dr Mifsud Bonnici could not accept such drastic solutions in the run up to an election which came along in May 1987 and brought in a generation and more of PN administrations. What I am surprised about is that it took a conservative administration 21 years to arrive at a solution which was pretty evident from the beginning.
Twenty one years ago many present EU members in central and Eastern Europe were still under communist rule. They spent much less time and relative money to restructure a whole economy than we did to restructure unsuccessfully a single industry.
Was the price of buying stability and long term political tenure by killing the shipyards by means of a thousand cuts, rather than through a more aggressive and speedy solution, worth paying?
I think not.
The Malta Independent - Friday Wisdom
The privatisation of our shipyards and the government’s determination not to consider any other alternative is the final chapter of a death by a thousand cuts. It is a practical example of how politicians and economists are breeds apart.
Economists and logical thinkers are in search of the truth which is itself a moving and evolving target as it is continually in a reflexive process with the search for truth itself and/or with politicians’ attempts to obfuscate it and change it to their view of the world. Politicians, on the other hand, are in search of preserving power and in the process the truth may have to be sacrificed. This could result from smug concepts such as that the electorate cannot handle the truth, to which I would add “without throwing politicians out of power”.
The shipyards have not made a profit since 1981. In the process of arriving to this last chapter they have undergone various waves of restructuring involving downsizing through voluntary retirement schemes and pumping of millions upon millions of liri in subsidies which seemed like pouring gold into a big black hole.
Yet nothing seemed to work. Management and unions continually blame each other. An industry which has all the ingredients for success (strategic location, good infrastructural facilities, healthy international order book for ship repair, skilled labour force etc, etc) still somehow continues to defy all attempts to render it efficient and profitable. Management argues that the workers and their unions promote inflexible work practices which are a barrier to operational efficiency while the unions blame management for poor organisation and for securing contracts on non-commercial terms.
In the meantime the taxpayer has been had. We have collectively sank more hundred millions of euros than I care to count in trying to turn the shipyards around to commercial success and at the end of it, as we are now at the 1,000th blow leading to final death, we still have very nothing to show for it.
The GWU proposed the setting up of a task force with wide representation to explore all alternatives and not simply the privatisation route. Surely there has been all time in the world to talk about ways other than privatisation to save our shipyards. If the shipyards still cannot stand on their own without further taxpayer support then the time for talking is over. Indeed the taxpayer has to be given due account as to why has it taken us so much time and so many resources to get to a logical conclusion which was apparent from the very beginning as the only real way out of the shipyards’ problem.
If the economists and logical thinkers would have had their way, the solution to the shipyard’s problem would have been arrived at much more quickly and with much less resources and it would have benefited everyone including the workers themselves. A small part of the resources burnt in arriving at a death by a thousand cuts would have been sufficient to retrain workers and re-employ them profitably in new processes that are managed with optimal efficiency and which are well integrated with our ability to compete profitably in a global economy. They would have earned more and enjoyed it more than living all these years with insecurity about sustainability of their employment.
Politicians work differently. As their primary objective is to obtain and retain power they prefer a tactic of making gradual changes over time so that nobody notices or those that do notice do not raise much of a protest. It does not matter to them how much resources and time get wasted to arrive at their objective provided they get there without compromising their position in authority.
It was 1985 when the then Prime Minister Dr Karmenu Mifsud Bonnici sought my assistance to explain why the then Malta Drydocks, which was administered a Council elected by the workers, was regularly suffering illiquidity problems leading to crisis requests for temporary loans from government even to meet wages. Reserves put aside for future generations in Posterity Fund (an equivalent to current day Sovereign Wealth Fund being amassed by oil exporting nations like Norway, Saudi Arabia and UAE and other surplus nations like Singapore and China) were in fact being funneled to never never loans to our shipyards purely to meet their day to day operational needs which banks were refusing to finance. They were evidently financing accumulating losses.
I spent two weeks talking to whoever was in authority at Malta Drydocks and at Malta Shipbuilding and after two weeks I felt I had enough information to go back to Dr Mifsud Bonnici with my findings.
The problem was evident. It was a problem of poor management and outdated work practices. Authority and responsibility were totally divorced. Management had responsibility without authority whereas the council and the unions had authority without responsibility. There was a deep-rooted belief that in one way or other shipyards were too important to fail and that one way or other the wages will be funded if not from normal operations, than from government loans or subsidies.
I told the Prime Minister that the culture was so deep-rooted and that resistance to change was so ingrained that only crisis, through closure of the finance and subsidy tap, will force a scenario which can effectively bring about real change. And that such real change has in one way or other to involve substantial downsizing of the workforce, or its breakdown into more manageable groups of say a few hundred workers each, and that employment has to follow strict commercial principles where there are no guarantees of success except through hard work and willingness to accept change to achieve efficiency and remain competitive.
I was not surprised that Dr Mifsud Bonnici could not accept such drastic solutions in the run up to an election which came along in May 1987 and brought in a generation and more of PN administrations. What I am surprised about is that it took a conservative administration 21 years to arrive at a solution which was pretty evident from the beginning.
Twenty one years ago many present EU members in central and Eastern Europe were still under communist rule. They spent much less time and relative money to restructure a whole economy than we did to restructure unsuccessfully a single industry.
Was the price of buying stability and long term political tenure by killing the shipyards by means of a thousand cuts, rather than through a more aggressive and speedy solution, worth paying?
I think not.
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