Of hope, competitiveness and social responsibility

Put a frog in boiling water, and he will hop out, but put that same frog in cold water and slowly bring the water to a boil, and the frog will sit there and happily let himself be cooked to death."

Al Gore could have been talking about property in Malta when he said this. But he was talking about another inconvenient truth - global warming. Unbelievably, it is happening. And we are still acting like frogs afraid to catch cold, refusing to jump out.

Is this not exactly what has been happening with property prices? Are we smart enough to jump out of the pot before we get too weak to act?

Reviewer Maryann Johanson said: "Gore, though, he gives it a spin: the frog will sit in the heating water... until he's rescued. That's funny, but it's also hopeful and almost exciting: Gore wants us to be scared enough to start doing something about the huge problem we're facing, but not too scared that we get paralysed, because it's not, he insists, too late to do something about it."

How can we be hopeful about Malta's inconvenient truth? Inconvenient it is, by far. Our way of thinking and of doing things is no longer good enough. Perhaps it was the jump in housing debt duration that woke many of us up to the truth.

An annual 15 per cent rise in price was a trifle hot but seems to have made very few people want to jump out of the pot. However, the sudden extension of credit from 25 to 40 years was the shock that made many feel, for the first time, hot enough to want to spring out.

Studies have shown that poverty in Malta tends to hit couples at the beginning of their marriage when they have to pay the hefty parts of their loans - but then there was the prospect of paying up and settling down to a normal life when you can enjoy what you save.

For many couples this was the time to start raising a family. But many are seeing 40 years as a disproportionate burden on the quality of their personal and family life to be justified, except in very dire national circumstances.

No single person can stop global warming by jumping out of the pot alone. Strong action must be led by Government supported by a public that is aware.

Fishing nations have been persuaded that it is for their own good to limit fishing to what makes fishing sustainable. People, therefore, are capable of seeing inconvenient truths and acting in a concerted way for the common good.

Maybe some truths are more inconvenient than others, but think of the prize: keeping property prices affordable while safeguarding the environment and ensuring that Malta is a competitive economy! Do we not 'deserve' it? Are we not capable of putting our heads together to safeguard, in tandem, our competitiveness and social responsibility?

In our bid to safeguard competitiveness, we have persuaded our workers to accept a projected rise in pension age and contributions. We have also persuaded more and more shop owners to be 'FAIR', by not inflating prices during the euro changeover. What similar social responsibility are we expecting from developers, banks, regulators, politicians? Fairness is the name of the game.

Fairness means calling a spade a spade. A developer speaking on television recently congratulated the Maltese population for being so enriched through property development. Let's call a spade a spade.

Construction produces added value, has a multiplier and possibly a trickle-down effect on the general economy. Price inflation of land does not add value. It enriches those who have many plots and properties; it gives short-term gains to people who have several properties as long as they have more houses to sell than houses to use. People who have only houses they need to use for themselves or for their children and relatives gain nothing but more years of work and savings.

The inflation of property brings in foreign currency through the purchase of properties by foreigners; but as long as this market is not isolated from that where common Maltese people purchase (the ones who need property for use and do not have extra ones to rent or sell), the latter will be affected not by any trickle-down gain, but by a shrivel-up effect on their savings and the real value of their holding, because its main effect would be general price inflation.

At a conference on Housing Affordability, back in 1999, Vince Farrugia of the GRTU explained how house price inflation is eroding the population's available spending money and slowing down consumption and the economy. This is a very important point, because it is easy to see housing affordability as the enemy of competitiveness, which it is not.

If we keep calling a spade a spade we can see that the need to curb inflation is important not only for us to enjoy the gains of joing the euro, but also to keep Malta attractive to foreign capital; and it is not good policy to tackle the small inflators and not to curb the ones that drive up the cost of employment because workers cannot afford what is essential for basic quality of life.

To allow salaries to be driven up because of the 16 per cent of the population affected by home loans would also be unwise and unnecessary. But we seem to be coming to the point where fewer and fewer of them can reasonably afford. Restricting help to 250 first-time buyers cannot be enough. A market-wide effect on prices is needed.

Calling a spade a spade seems also to mean agreeing with Family and Social Solidarity Minister Dolores Cristina that liberalising rent laws as such can do rather little. Mere liberalisation involves the danger of doing too little, too late - like timidly telling a diabetic to go on a diet when in fact what is needed is amputation now to avoid a more harrowing amputation later.

Action against speculation needs to be hefty and discerning enough to affect the reverse of the present 'speculation sickness'. Speculation is bad and an economic sickness when it channels money from people's years of work into investment to drive prices further up for the same people and their children, especially when this siphoning spiral feeds, year after year, its own continued acceleration.

We need to arrest this circle through taxation that hits the speculator but not the bona fide house user; through much wider provision of plots and housing of a social nature - above all, by action that is as drastic as necessary to make the difference

And this must not be done the expense of those people who are on a salary. We must give the message that work pays, and contributes to growth, not to speculation and unjustified profits. This also gives the message to foreign investors that inflation is under control and that the pressure for salary increase is curbed by a country capable of putting its money where its mouth is, willing and able to be competitive.

But this will be ineffective if any frog wishing to jump out of the pot finds a blow torch awaiting him! Who has the guts, the intelligence, the creativity, the social responsibility to cut off the heads of the monster - the threat of negative equity in case of lowering house prices?

Is this not what can discourage us from making the market competitive? Is not a competitive market one in which entry and exit are easy, or eased? Which banks have the social responsibility to soften the blow of inability to pay up, or ensure that people in debt get the full market value of their house if they have to resell it?

Which legislator, regulator, NGO, creative think-tank can thus help the market see reason and be competitive? Would a new Monte di Redenzione help? Can we think outside the box?

German stay-home mothers now receive 67 per cent of their salary when giving birth to a child, as an incentive to revive the birth rate. What is the point of carrying out a pensions reform unless Maltese couples are specifically helped to face no dilemma between affording repayments and affording a child?