A do Nothing Solution

23^rd July 2006
The Malta Independent on Sunday

There is momentum building behind a general impression that this government has damaged itself beyond repair and that the next general election is for the opposition to lose.

It is not an impression built out of thin air. It is supported by independent surveys showing that the opposition has held its ground whilst the government has disgruntled a good part of those that voted it power at last election.

There are three particular reasons why this has happened.

Firstly it is because that the government had over-promised regarding the immediate impact of EU membership and in people’s perception it is therefore under-delivering on the promised benefits. At next elections government will be judged on its performance as there will not be, as the EU issue was in 2003, a higher order issue which distinguishes the PN from the MLP and veils over the PN’s shortcomings on its performance in office.

Secondly it is because people tend to judge their government by the money in their pocket. Clinton had coined the dictum ‘it is the economy stupid’ to define this concept that government’s popularity depends on economic performance irrespective of government’s merits or demerits for such performance.

There is no doubt that on this score there are many disillusioned voters who care not so much that government has no control on international energy prices, but do care very much that the surcharge on their utility bills as well as the increase of fuel prices at the pump are chipping away at their standard of living just when the opportunities to earn something extra are hard to come by. In this respect there is rough justice being meted out seeing government tasting its own medicine considering it had ferociously criticised a Labour government for raising utility rates in 1998 following 16 years of price freeze.

Unlike, economists, central bankers, rating agencies and financial analysts such people are not the least impressed by progress made in controlling the fiscal deficit or the public debt. The benefit from such macro-economic successes will only cascade to the consumer at glacial speed through enhanced economic growth which is hardly visible and difficult to materialise in time for the next electoral test.

In fact government has seriously got its electoral timing wrong. The sort of fiscal discipline meted out in 2005 and 2006 should have been delivered in the first two years of the legislature in 2003 and 2004 giving such measures time to bloom into economic buoyancy in the years leading to the next general election. However the first two years of this legislature have been wasted through changes of PN leadership and the run up to EU membership. Government was in celebratory mode then when it really would have been in prescriptive mode.

The third and final reason for government’s loss of popular support is the decision to join the Euro in 2008. By so deciding government has bound itself with an additional wrapper of fiscal discipline which thankfully ( from a macro-economic point of view) does not allow much space for economic pump-priming for short term electoral purposes. Again this might earn the government applause from rating agencies and financial analysts but does pretty little to generate any feel good factor that tends to be the ultimate ingredient for electoral popularity.

Many other countries that joined the EU with us in 2004 have now resigned themselves that the Euro bar is too high to reach in the short term and are planning Euro membership in 2010 or later, no doubt keeping the domestic electoral calendar in mind as well. We chose to plod on regardless and are taking a very serious risk of finishing with an egg on our faces this time next year if, like Lithuania, we fail to make the grade for Euro membership. We seem particularly tight on the inflation test and given that inflation is calculated on a moving average basis for the year ending March 2007 and that there seems pretty little we can do to change our fortunes. One has to bear in mind the considerable time lags before any measures we may take actually impact the measured inflation indices.

Against this backdrop the opposition is adopting a do nothing approach. If the government is sinking letting it sink as default presents the most practical way of regaining the electoral mandate without having to be very specific about the opposition’s own policies. Policy document updates are therefore understandably vague on the methodologies and focus mostly on the objectives. They give the final destination without explaining, even in generic terms, the route to get there.

Its experience of the last three elections conditions Labour to such an approach. In 1996 Labour opposition adopted the removal of VAT as a major electoral issue as a matter of convenience not conviction. There is nothing in the socialist credo that should render VAT as more socially regressive than the high import duties it replaced. It worked. VAT convenience delivered the government mandate in the 1996 elections.

1998 election was fought on the conviction issue of governability and 2003 election was fought on the conviction that a partnership relation with the EU was more suitable than membership. In both cases the personal convictions of the Leader rode roughshod over many who did not share such absolutism and who wanted to put some electoral convenience in the political equation for formulating the policies on which the 1998 and 2003 elections were fought and lost.

Having been so heavily bruised by these electoral defeats it seems that Labour is again switching to the 1996 mode of letting convenience have the upper hand over conviction. Only this can explain Labour’s policy about pensions, as recently announced, which essentially is a do nothing solution as pension reform can wait.

Politically it is very convenient to face the next electoral test without having subscribed to the PN’s commitment to increase pension age to 65 years and to render pension benefits more directly related to pension contributions calculated on a span of 40 years contributions to reflect the longer time spent in active economic activity caused by later retirement.

Labour is correct in arguing that government’s pension reform is not exhaustive enough and should be seen alongside other reforms including the funding for the universal public health service and non-contributory social payments which currently are sourced from the pension fund with government having to finance the annual pay as you go deficit. Labour is also right in stating that part of the funding solution has to come from faster economic growth and increased participation by females in productive economic activities in order to widen the contribution base.

This does not mean however that pension reform can wait or that it is realistic to expect that under any version of widened or revamped reform one can escape the basic measures being proposed by government. The argument that reform does not go far enough does not mean that the few steps proposed, inadequate as they may be, should be discarded until we spend a few more years searching for the perfect solution which in any event will have to include such few steps.

A do nothing solution is a total victory for political convenience but it does nothing to make Labour life any easier once it is returned to government. Governments change but the inherited problems remains for instant ownership by incoming incumbents.

No to Backdoor Diivorce

21^st July 2006
The Malta Independent - Friday Wisdom

The tragedy of Lebanon is that as a country it has lost its sovereignty and has allowed itself to be used by foreign countries as a training ground for their eventual direct clash in an unstoppable quest to impose their supremacy and annihilate their opponent.

Syria controls the security services of the country to the point that it has been implicated in the murder of an elected Prime Minister. It considers Lebanon as part of Greater Syria.

Iran sponsors an armed group Hizbollah in the south, which teases Israel and challenges internationally recognised borders. Hizbollah are effectively a state within a state. The old native Lebanese Christians have either fled their homeland or live in terror unable to protect their country’s sovereignty and their freedom to live in peace without being used as a war proxy for other countries. Israel is now unlikely to stop before they push Hizbollah further north and establish a border cushion wide enough to ensure that Israeli territory cannot be reached by rockets fired from Lebanese territory.

What has this got to do with Maltese divorce? It has, if only in the way fundamentalist religion in both cases seeks to impose itself on civil liberties of individuals.

The Islam fundamentalists do not want what the rest of the world wants i.e. a peaceful co-existence of countries free to practice their religion within internationally recognised borders. Iranian President Ahmadinejad believes he is Allah's "tool and facilitator" bringing the end of the world as we know it and the ushering in of the era of the Mahdi. He has a blind messianic belief in the Shiite tradition of the 12th or "hidden" Islamic savior who will emerge from a well in the holy city of Qum in Iran after global chaos, catastrophes and mass deaths and establish the era of Islamic Justice and everlasting peace. Unashamedly he wants to seal his place as top Jihadist for Allah by making good his promise to "wipe Israel off the map”.

Maltese religious fundamentalism is by contrast a purely domestic affair. The Church imposes its will on whoever has political power to ensure that the word divorce is struck out of the local dictionary so that it is not even considered let alone debated. A Maltese citizen is not allowed a right which is enjoyed by the rest of the world, bar the Phillipines.

Only this week the EU has proposed endorsement of national governments to allow citizens of a member country residing in another member country to seek divorce in the courts of the country of residence under the law of their country of citizenship. This means that a Maltese living abroad would still be unable to seek divorce foreign courts under Maltese law as Maltese law does not permit it. But our politicians prodded by a fundamentalist church immediately expressed reservation on such a matter to ensure that divorce is not introduced through the back door.

The poverty of such reasoning is that divorce through the back door already exists and a Maltese residing in a foreign country can seek divorce from a marriage celebrated in Malta under the laws of his or her country of residence and certainly has no motivation to seek divorce in a foreign court under the laws of Malta. The democratic tragedy is that such backdoor divorce is available only to the rich and mighty who can afford to take up residence in a foreign country.

Of course Malta does not need divorce through the back door. Who wants a solution only for the rich whilst the poor and the not so rich have to continue living with their human problems of failed marriages and families formed out of wedlock? What we need is divorce through the front door, divorce as matter of right available through the courts of our own country to all, rich or poor, who merit it and meet rigid criteria to qualify for it.

I am not proposing a free for all divorce but if super catholic Ireland and a double super catholic Poland has felt the need to give its citizens the right to divorce subject to rigid conditions, why are we denying our citizens such civil liberty? Divorce like marriage is not for everyone. It is a facility to be used only by individual choice and subject to strict conditions. Those who wish to continue following the church teachings on divorce are free to do so but cannot impose their will on all the rest in Hizbollah style.

Even the Catholic Church, perhaps a few Popes down the line, will have to consider its position on divorce unless it wants to loose an ever growing minority from its fold. Otherwise the minority will keep increasing until it becomes a majority, relegating the Church to the minority. The Church cannot remain eternally insensitive to the plight of people of good faith whose marriage has irrevocable broken down and want a second chance in life.

Theology is a strange subject to me but I would be surprised if there are not already scholars musing whether ‘till death do us part’ could also mean till death of the love that binds us. What is marriage without love? Should a parent of children born in a new family out of wedlock following breakdown of first marriage go back to live out of love with his estranged wife and abandon his children? Would not he or she be committing a bigger sin if he or she were to do so?

Georg Sapiano the new PN candidate has broken new grounds in declaring he would vote for divorce if his party were to allow a free vote in parliament on the matter. We are probably years away from such a possibility but at least he showed the courage to state where he stands. It is time that others do the same and for civil society to start demanding the civil liberties that most others take for granted and to insist on disengagement of Maltese politics from religious fundamentalism.

Exit While on Top

14^th July 2006

The Malta Independent - Friday Wisdom

Marcello Lippi gave us a perfect example of what it means to exit while on top. Just when he had the whole country at his feet heaping glory for the unexpected victory at the 2006 World Cup against many odds, Lippi wisely declared that his mission had been accomplished and that he needed to move on to different challenges.

He no doubt reasoned out that when at the top one can only go down.

It is a lesson that ought to be heeded by many leaders in different spheres, politics and business included. It applies in two particular situations.

Leading is a tiring job. If one tries to do it for an overlong period of time in the same job, there comes a point when personal objectives will start to over-ride the corporate goals of the organisation one leads.

Extended time in the hot seat inevitably allows over-confidence to seep into the decision-making process.

Blinded by familiarity which impedes an objective view of the organisation’s strengths and weaknesses, even the best leaders will start taking decisions subjectively.

“Let’s do this because I say so and I am usually right” starts to become the rational for charting the organisation’s way forward. Little heed is taken that past successes were sourced from objective decision making and that in the absence of such objectivity one can hardly expect future decisions, based on over-confidence verging on arrogance, to have the same success as past decisions based on objective analysis.

Margaret Thatcher has suffered a bruising exit during her third term when she should have exited just after scoring the third consecutive electoral victory.

Tony Blair is risking a similar fate. In business we have the contrasting examples between the leaders at Microsoft and Nokia. Bill Gates was the brains behind Microsoft in the eighties creating an operating computer system which stole market share from under the nose of more resourceful and established players until it practically formed an international monopoly with its Windows operating system and related office software.

Success easily breeds inertia. Microsoft has been getting slower in issuing updated versions and has been wasting more energy in packaging its products to protect its dominant market position rather than to keep refreshing its product lines. In the process, it has allowed newcomers to take leading positions in electronic advertising and search engines while Microsoft kept guarding its cash piles. Microsoft share price in fact now trades on multiples resembling a fatigued low-growth giant rather than an agile high growth new era winner, a business mantle now carried by Google and Yahoo. Bill Gates should have left earlier.

Jorma Ollila joined Nokia in 1985 when it was still basically a tyre factory. He became CEO in 1992, chairman and CEO in 1999 and in 2006 he left his CEO role and stayed on as non-executive chairman whilst making it clear that his energies will now be mostly devoted to his new chairmanship of Royal Dutch Shell.

He left while Nokia is on top having protected market share in sale of mobile phones and continually refreshing its product line taking the breadth away from competitors, possibly with the exception of Motorola.

Another scenario when leaders should exit is when they set themselves very clear and specific targets at the start of their tenure. Once these targets are achieved, continuing to lead an organisation which is itself transformed by the achievement of the objective could be a recipe for disaster as the leader could lack the skills needed to lead the company post-goal achievement.

Mintoff post-1979 is a typical example of someone who achieved the very specific objective he set himself at the start of his 1971 tenure but continued to lead in the old manner when in fact the country needed new skills to win its way through a competitive global economy. Post-1979 Mintoff became a rebel without a cause.

Lippi set himself the target of making a very good show in the 2006 World Cup. This was never specifically defined but every one understood that the minimum would be the quarter-finals and the probable maximum would be the semi-finals. With Totti coming from a serious injury and with most of his players serving with Clubs involved in Calciopoli, it would take a strong charismatic leader to keep the team focussed. Luck helped. France failing to win its group meant that Italy could reach the semi-final before clashing with a football giant. Compare that with France that had to clash with Brazil, Germany who matched Argentina and Portugal who had to overcome England before making it to the semi-final.

But luck on its own will not win you a World Cup. Beating Germany at home in the semis was a feat largely attributable to Lippi’s daring changes to play four attackers during extra time hoping to avoid a decision by penalty shoot-outs. Containing the brilliance of Zidane at its very best in the final needed skills and determination, even provocatory ones that eventually led to Zidane’s dismissal.

Pity Zidane did not understand the absolute need to exit on top. He was within minutes of it but ruined it by his senseless reaction in head-butting an adversary. Whatever Materazzi might have told him to cause such provocation it was between them. The head-but was shared with the rest of the world.

Clearly Italy’s success at the World Cup is in no small measure due to a proven leader who consolidated his fame by exiting while on top.