‘The economics of the answer’
In a recent interview with the Financial Times, former UK Prime Minister Tony Blair spoke of the “politics of the anger” and the “politics of the answer”.
He was referring to two particular situations: the political situation in the Middle East and the difficult economic situation in the European Union.
I believe we could adapt his point slightly and speak of the “economics of the anger” and the “economics of the answer”.
Obviously these are not new economic theories but simply a way of how to view the current international economic recession, the sustainability of the euro and the austere economic measures being adopted by countries such as Greece, Spain, Italy, Portugal and Ireland.
We must view things from the perspective of the “economics of the answer”, even though it is proving increasingly difficult.
The decision of a credit rating agency to downgrade Italy, while their premier Mario Monti was on a visit to the US seeking to attract American investment, should be enough to convince many that persuasion and seeking to find the right answer must make way to anger and conflict.
This week’s popular protests in Spain and Greece appear to be reasonable as speculators continue their profiteering activities in the financial markets and raising the cost of debt in these countries.
One can also understand the sense of helplessness that others feel, as the interest rate fixing scandal by some the UK’s leading banks, continues to unfold. This has led some analysts to call for drastic reforms of the banking system.
The creation of a banking union at EU level, whereby supervision of the larger financial institutions stops being the responsibility of national authorities and starts to become a responsibility of EU structures, is one such proposal that may soon start to sound palatable.
So is the recommendation that there be more competition in the banking sector, thereby minimising the monopolistic tendencies of the larger banks. There is also the fear that the conclusions arrived at during the last European Council two weeks ago will not become concrete measures as the details in the implementation of such measures have become the centre of political wrangling among EU member states.
Moreover, the new French President François Hollande appears to be taking a soft approach to economic reform. He wants the reforms to be gradual and not so drastic.
He is also seeking to hold back a restructuring programme at French carmaker Peugeot, without which the company would be unable to compete in the international markets.
The debate over the benefits of fiscal austerity that started a couple of months ago seems to be getting hotter.
There is today more disagreement among economists and political leaders as to whether fiscal austerity measures are leading to a healthier economy or a worsening situation.
Even the International Monetary Fund is now concerned that the efforts to reduce government borrowing in a number of countries is causing further economic slowdown.
Too little fiscal consolidation will not calm the financial markets but too much of it will stifle economic recovery and hence will get financial markets worried.
Thus the international scenario is becoming more complex but there is still the requirement to find answers to these problems. We still need the “economics of the answer”, rather than the “economics of the anger”.
The same applies to Malta.
It may be easy to respond in an angry manner at the measures being taken by the government to reduce the budget deficit and to keep the economy on a steady course.
However, it needs to be admitted that we are doing well when compared to other countries.
A recent report of the International Labour Organisation claimed that Malta is one of only two countries in Europe (the other being Germany) that has a level of unemployment that is lower than that of 2008, just before the crisis in the financial markets.
We are also one of only five countries that has a higher number of persons in a job than in 2008.
During the five years after the 2009 recession, the economy will have probably grown by around 10 per cent in real terms, which again places us is a league with Germany.
We seem to have found the right answers through our economic policy – something which should not be taken for granted.