In his article entitled ‘GDP: not fit for purpose’ (The Sunday Times, January 29), David Marinelli made a number of noteworthy observations, including two which, to my mind, rank above the rest.
Firstly, that GDP is not and should not be the statistical equivalent of royalty. It is simply one of many other economic and non-economic indicators used to measure the quality of life.
Secondly, that GDP is often used and abused by governments to produce ‘desired results’. In other words, GDP data, mainly through the use of ratios, is manipulated to justify actions that ‘otherwise would not make sense’.
Marinelli’s article certainly merits discussion. Let us start by the second argument.
Less than a month ago, the National Statistics Office revised its GDP growth figures for 2014 from 3.45 per cent to 8.4 per cent and from 6.2 per cent to 7.5 per cent for 2015. Such radical revision, which brings into question the method of collection of data, certainly merited more explanation. This administration has milked GDP data dry and has attempted to use it to hide some serious economic flaws. Some of these were in fact mentioned by Marinelli.
For starters, national debt has increased significantly in absolute figures during this administration. It shot up by €1 billion in the space of four years. However, by constantly referring to ratios and proportions, the government managed to imprint the very opposite of this truth in people’s mind. People think the national debt is going down.
The Finance Minister has repeatedly shot down the Opposition’s legitimate concerns on the increase in national debt. This increase is due to the weak central control exercised by the Ministry of Finance over the day-to-day spending by the various government ministries, departments and agencies. These publicly funded bodies have adopted a free-for-all mentality with our tax money.
Suffice to say that the government has overshot its recurrent expenditure targets by over €100 million for the past three years in a row. Last year alone, the excess in budgeted expenditure was €158 million. This government has increased the number of people in the public sector by the thousands, pushing up the wage bill to dangerous levels. Jobs are all too often being dished out as political favours, as opposed to public necessity. High salaries in many cases did not bring about improved services. On the contrary, we have seen the abuse of power by the people placed in positions of trust.
Recurrent expenditure, that is the money spent by the government to function on a daily basis, has increased by an average of eight per cent every year over the past four years. This is double the rate of increase we had under the previous administration. The government is spending much more. However, this expenditure is not going to build schools, hospitals or new infrastructure. It is used to fund the government’s largesse, which, to borrow a phrase from Marinelli’s article, smells of “abuse which goes beyond all rational justification”.
In most economies, including our own, inequality is growing, throwing doubt on economic sustainability
The increase in public sector expenditure could lead to a country failing to meet its fiscal targets. If the economy, albeit for reasons beyond the government’s control, slows down or if the government fails to reduce its expenditure, then these targets will be missed. This was clearly stated by the International Monetary Fund and the Central Bank.
Both institutions called on the government to curb expenditure. They have even called on the government to hold back in the collective agreement negotiations expected to take place in the coming months. The government has to date completely ignored these remarks, preferring to gloat over and focus on other comments made by financial institutions.
The other argument by Marinelli is that GDP should not be the stand-alone indicator used to measure the well-being of an economy. This line of thought echoes the findings of a report published earlier on this month by the World Economic Forum. The central theme of ‘The inclusive growth and development report 2017’ is that GDP no longer provides an adequate measure of economic activity. GDP growth must be accompanied by lower inequality to improve well-being.
The truth is that, in most economies, including our own, inequality is growing, throwing doubt on economic sustainability.
Left unchecked, this phenomenon could lead to social unrest and instability.
The increase in the cost of essential items, including food and accommodation, is piling pressure on lower-income families and first-time property buyers, who surely must feel alienated by the government’s gloating over a growing economy. The young people buying property today will take longer to pay back their loans, assuming they can afford to buy property in the first place.
There is also the environmental argument. Economic growth should not bulldoze over environmental considerations, as seems to be happening locally.
The Opposition has come forward with hundreds of proposals, including how to better manage the economy and how to improve our environment. We also shared ideas on how one can ensure that the wealth generated cascades through to the whole population in an equitable and fair manner. We also called on the government to increase its efforts to open new economic sectors.
Most of our proposals were ignored. Some, like that for Maltese shareholding in our national airline and for a tunnel linking Malta to Gozo, as opposed to a bridge, were taken on board very late in the day and only after the government wasted time pursuing other ill-thought ideas.
As an Opposition, we have striven, through a wide process of consultation, to come up with the right and realisable strategies. Over the coming months, we will continue to work hard at convincing people that not only are these strategies urgently needed but that the Nationalist Party is the party that can deliver them.
Mario de Marco is deputy leader of the Nationalist Party.