Buying back into state control

So Joseph Muscat's idea of controlling inflation is to take a leaf out of Dom Mintoff's book on state-controlled economies and throw us back a good 30 years.

For one of his key solutions to fighting inflation is for "the government to import goods and services itself" and that "these should be sold to the public in different ways".

Clearly oblivious of the consequences of the bulk-buying system of yesteryear, he goes on to state that, "It is therefore crucial that there should be full transparency, the reduction of inefficiencies, a stop to excessive bureaucracy and to step up the fights against negligence so as to ensure that consumers do not pay for inefficiencies."

Fine, but then why is he proposing a throwback to the inefficient and corrupt bulk-buying system which produces exactly the opposite?

The idea of allowing the government to intervene in the economy in this grotesque manner - of buying goods and services itself so as to influence the price - is a blast from the past of nightmarish proportions. And it is also an economically bankrupt policy.

Let there be no doubt that if a Labour government had to reintroduce bulk-buying, it would be breaking almost every rule in the EU book, making a mockery of our membership of the EU single market and losing one of the major benefits of being part of the EU.

But bulk-buying would also squeeze out small enterprises which are the lifeblood of our economy and far from protecting consumers, it would come at their expense.

Let me explain why.

EU rules make it clear that an EU country must liberalise the importation of goods and services. Indeed, the free movement of goods and services are two or the four pillars of the EU single market (the other two are the free movement of persons and of capital). Instead, Dr Muscat is telling us that we should ignore these principles by allowing the government to roll back liberalisation and become again a major player in the economy.

EU law makes it clear that restrictions to imports are prohibited. Yet, the bulk intervention of government in importation would create indirect restrictions to importation and severe distortions to competition that would throw hundreds of importers - which are often small or micro enterprises - out of business.

Small wonder that the GRTU has baulked at this proposal.

EU law also provides that state monopolies of a commercial character should be adjusted so as to eliminate any possible discrimination in the conditions under which goods are procured and marketed. But Dr Muscat's proposals put this rule on top of its head by proposing the exact opposite - adjusting the market to state control instead of vice versa.

EU law further states that any agreements which may affect trade between EU countries and which purport to restrict competition shall be prohibited. This includes agreements which directly or indirectly fix purchase or selling prices or other trading conditions and which limit markets or share markets or sources of supply - all classical objectives of a bulk-buying system.

Dr Muscat does not specify which "goods" he wants to put on his bulk-buying scheme - but it is likely to include most food and day-to-day shopping items; so we can all wave goodbye to free choice and quality without any real guarantee of low prices. We have been there before.

As to services, his idea of having the government import services is bizarre, to say the least, coming as it does on the eve of the entry into force of the new EU Services Directive which will throw out all remaining figments of protectionism in the vast EU services market.

Again, he refrains from spelling out which services will be affected. Will it be air transport services, will it be banking or insurance, will it be postal services or perhaps, telecommunications? But surprise, surprise, none of that is possible under EU law.

Nor does Dr Muscat tell us how he intends to re-sell the goods and services imported by the government, limiting himself to stating that these will be "sold to the public in different ways."

That presumes that the government would have to choose which retail outlets would stock and re-sell its imports or worse, set up its own state-owned retail outlets.

How will they be chosen? Will he do it through existing supermarkets and grocers or will he establish his own "B-B retail outlets"? Will a new licensing regime be re-introduced? Who will decide?

It's a mess, a total mess, and there is no way that Dr Muscat can do this as Prime Minister of an EU country - unless, of course, he intends to do a Sant by fiddling around with EU rules (ibażwar ftit 'l hemm u jbażwar ftit 'l hawn). So much for Labour's EU conversion.

Ironically, Dr Muscat quoted an IMF reports stating that Malta "needs to adopt a more proactive stance, expeditiously addressing any monopolistic behaviour in the wholesale and retail markets, while the regulated segments of the markets should be liberalised".

But what is his answer to the IMF? Far from addressing monopolistic behaviour, he is proposing to let the government all the way back in to do it all on its own.

Goodness. It would be funny, were it not so serious. Because, ultimately - as the consumer - you will be the one to foot the bill for these grossly incompetent ideas.

Dr Busuttil is a Nationalist member of the European Parliament.