Mintoff: a history of his economics
More has been written in the local press about the demise of Dom Min-toff, his life and times than about any other local politician in living memory. More will be written as both objective thinkers and the either-way prejudiced will seek to classify him into good and bad parameters. Perhaps someone will take up the way the economy developed under his rule in the 1970s and early 1980s.
Without doubt the anti brigade will focus on and lament the import controls, quotas and bulk buying, and the wage and prices freeze which are pure Mintoff relics. He did not introduce those measures to gain popularity. Placed in his time context, as serious writers ought to place him, he risked unpopularity for the sake of economic growth.
Import substitution was intended to make room for local industry to develop. We do not even have a factory that makes biscuits, he used to say. At the cost of untold complaints even by Labourites and the working class, the restriction worked to an extent, given Malta’s small market.
Bulk buying was introduced as an attempt to keep the cost of living down. So was the prices and wages freeze, in response to the massive hike in the price of oil. All the measures had their detractors. Controls always give way to suspicions of preference. No one ever dared say, though, that Mintoff was benefiting personally from any of the measures, or that he was not putting Malta first and foremost at the cost of popularity.
This aspect of Mintoffian economics have been debated ad nauseam. That does not mean that there will not be those who will call for a fresh charge into the apparent freeze.
The question is not only their objectivity, but whether there will be a reasoned response from others willing to look at the big picture without blinkers. So far in the Mintoff wake only economist and Labour MEP Edward Scicluna, a professor of economics, has commented. In the process he coined the ugly phrase “Mintoffianomics”. He will pardon me if I reject it and stick to Mintoff economics.
Prof. Scicluna will be charged that he is biased, since he now militates within the Labour Party. I too will face that charge, in view of having been a minister in a Mintoff cabinet. That’s the way it goes. In Edward’s case, though always on the left side of politics, he worked for years as a consultant to what might be called the right side, if one is to place employers anywhere. He has always been objective and I doubt that his economics are about to change now.
Among other things in his article he sprayed details of the macroeconomic situation as it was under Mintoff. In all but two years in the 1970s, Scicluna recalls, the Budget was in surplus in the context of a high growth rate. Public debt was less than 10 per cent of GDP and its servicing cost stood at 0.05 per cent of GDP. That compares to a public debt of 75 per cent of GDP today and a servicing cost of three per cent of GDP.
Encapsulated in a few sentences the situation in the 1970s becomes clearer.
The restriction of consumer choice and importers’ freedom was counterbalanced by the macroeconomic performance as Malta strove to ease out of the remaining reliance on British military expenditure under the deal Mintoff brilliantly negotiated with Britain – and eventually her allies – about the phasing out by March 1979 of the British military base which had both sustained and distorted the Maltese economy for decades. The full picture also records the heavy inflow of foreign investment which shores up part of the economy to this day.
One aspect which Prof. Scicluna did not mention, and which has yet to be taken up by economic historians when they make their presence felt, refers to the valuation of the Maltese lira. When Mintoff took office in 1971 the Lm was still tied one-for-one with the pound sterling. Mintoff immediately broke the link, setting the lira at 1.05 to sterling. In due time, he went further afield. I recall he initiated a stimulating discussion at Castille about the possibility of setting the valuation – I deliberately do not say value – of the lira against a basket.
I am sure he was drawing upon economic literature which included a proposal by the respected economist Kaldor – like Balogh a friend of Mintoff’s – who explored the rationality of having a currency based on a basket of commodities.
That was not suitable for Malta but the basket principle stuck in Mintoff’s mind. The question was what to put in the basket. It did not take much time for agreement to evolve that the basket should be based on the currencies of Malta’s trade flows.
That became the basis of the Malta lira. In time it went wrong because, as Alfred Mifsud observed at the time, it was not corrected for movements. But it is the basket principle which I am emphasising. The Malta lira basket came into being before the IMF came out with its Special Drawing Rights, still in existence, and the euro itself.
Mintoff has not been given credit for his breakthrough. He deserves it. He also deserves an economic history of his time in office which will show his work, warts and all.
The time is not yet. But, hopefully, it will come.