Sunday, 8 September 2013

Time to shape up

This article was published in The Malta Independent on Sunday - 08 September 2013

Six months ago almost to the day, the PN got an electoral blow of unprecedented proportions.  Not only did they lose the election with a margin beyond their most horrifying dreams, but they were forced to admit that the party was in a deep financial mess, unable to pay its most basic commitments and basically needing a top to bottom makeover.

This rotten state was more than confirmed last Sunday when the party’s new General Secretary issued a brief statement saying that the last election campaign cost the PN just under €2.2 million which was €368 k short of revenue collected to fund the campaign.
It is symptomatic of the no-value-for-money metrics with which they were running the country. How could such a flat, disjointed and ineffective campaign cost the PN more than two million euro? It is a carbon copy of the state of the country they left behind with high debt level and poor infrastructure as reflected by the energy supply, road network and public transport.
The country needs a strong and effective Opposition. The government needs it too to remain faithful to its mandate, without getting too comfortable in their seats and remembering that the electorate retains a democratic choice.
Unfortunately, the evidence so far is that in spite of a total change in the leadership and administration line-up, the disastrous mind-set that led to the electoral defeat is too ossified to accept the new reality and shape up for the challenges ahead.
The performance of the Opposition in the Public Accounts Committee (PAC) when questioning the Auditor General on the Enemalta report is shocking. It was an outright assault on the institution of the National Audit Office (NAO) and had a clear objective of trying to discredit the NAO in order to gain cover for the gross faults of ex-PN Minister responsible for Enemalta between 2004 and 2011. The performance of the PN’s members on the PAC was so grossly out of order that at one stage it elicited from government’s members on the PAC a sin of reaction.  They made an equally wrong demand from the Auditor General to confirm corruption on the part of whoever was responsible for running the Fuel Procurement Committee (FPC) at Enemalta and of those that appointed them.
The Auditor General admirably stood his ground against both affronts.   The purpose of the NAO report was not to prove or disprove corruption.  It was to prove that the FPC was operating without even the most basic standards of governance and that documentation and records were so lacking and deficient that the whole fuel procurement process is basically incapable of being subjected to a proper audit.
Is it so hard for the PN to realise that having already paid the price at the last election for the faults of their ex-ministers, further efforts to defend the indefensible can only lead to their having to pay the bill over and over again?
The PN should move on. The election is some five years away. Simon Busuttil should borrow a leaf from Alfred Sant’s performance as Leader of the Opposition between 1992 and 1996 which led to his unexpected election victory. For the first three to four years of that legislature, Alfred Sant’s focus was inward looking, seeking to refresh the Labour Party, new headquarters and all, to face the challenges of the future. Sant did not waste energy and resources trying to defend the past.
What sense does it make to blow cases of administrative slip-ups, which can be written-off to inexperience on the part of any new administration, beyond all reasonable limits? Have the police never accused the wrong culprit? Does it really make sense to try to discredit the Police Board headed by a retired Judge even if the Opposition does not agree with its findings, which incidentally I find logical and sensible? Was the police catering unit set-up on 9 March? Have Secret Service appointments always been approved without the Minister’s nod even if not sitting at the interview process?
Why do I find the Police Board report logical and sensible you might ask?  In my area of expertise, if an operator makes a profit by operating outside the rules and another makes a loss by operating within the rules, you discipline the one who operated outside the rules and give whatever assistance is necessary to the operator who plays by the rules to improve performance, which in any case cannot and should not be judged by a single event.
It is all a matter of objectives. It seems that the PN have set their objective to denigrate whatever the government does so that they get elected by default. It does not work that way. Such an approach is diabolical persistence in the mind-set that the PN have a God-given right to govern this country, that Labourites are children of a lesser god and the electorate was grossly mistaken in voting the PN out six months ago and should not miss the first opportunity that comes along to correct their mistake.
The PN should set as their primary objective the rebirth of the party and accept that such a clear electoral verdict cannot be questioned - it has to be accepted without reservation. The decision to shift the party independence activities from the eve to the national day proper is a further sign that the PN have not yet understood what the electorate voted for last March.
Another re-birth is needed in economic policy thinking. As Europe struggles through the sixth year of recession, as recovery is proving slow and inconsistent, and as many countries are grappling with atrocious levels of unemployment especially among the under 25s, we must ask ourselves what changes are needed to the traditional tools of economic policy.
Fiscal policy has lost its effectiveness. Many countries have no fiscal space to manage demand levels in their economy. But we must ask ourselves whether it makes sense to be so rigid with 3% of GDP or similar limits without making any distinction between deficit caused by excessive consumption and deficit caused by financing of productive infrastructure investment.  
Monetary policy has been overused to make up for the deficiency in fiscal policy. But we are finding out that beyond a certain limit, excessive doses of monetary accommodation have the same effect of ‘pushing on a string’ explained by Keynes in the General Theory. Worse still, excessive monetary accommodation is economic uncharted territory. It could render its timely reversal destabilising and worse still, if such timely reversal fails, it risks sowing the seeds for future inflation.
And if fiscal and monetary policies have lost their effectiveness as the primary tools of economic management, what tools are left for economic managers to increase the potential productive capacities of their economies and restore economic growth to pre-crisis levels?
Probably it’s time to go to basics. It is time to bypass policies and act directly on the real economy. It’s time to ensure that banks in the euro area are re-capitalised, if necessary through the European Stability Mechanism and monetisation by the ECB, to start acting as banks and give credit to businesses and SMEs that are the real creators of new employment opportunities.  
It’s time for government to accelerate the regeneration of productive infrastructure irrespective of artificial budget limits. Good investment invariably repays itself through economic growth. It’s time for structural reform to be accelerated with further liberalisation of the product and services market, with added incentives for labour mobility throughout the EU and with countries in distress being aided through a Marshall Plan type of investment assistance for upgrading their education levels and fiscal enforcement systems. It’s time to think outside the box to get rid of this never-ending recession. 
The EU must focus once again on the Lisbon agenda, which has been forgotten or abandoned as the bloc has been consumed by endless fire fighting the crisis.

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