We often use the saying that there is no gain without pain, a very useful principle in life, which we discover for ourselves from personal experience and pass on to our children. Economics and, especially, economic policy is replete with examples as well. Businesses have to shave off their prices to sell more products. Industrial sectors have to undertake unpalatable and unpopular restructuring, costing thousands of euros to remain competitive. During a slowdown, firms have to release long-time workers or use wage restraint to survive. Whole economies go through severe austerity programmes in order to become leaner and meaner in a highly-globalised world.
For many disciplined countries, like certain self-disciplined persons, this comes naturally and as a matter of fact. Some observers tend to associate such people with a particular religion such as those who abide by the protestant ethic. Others stereotype the Germans or the Chinese as being sterner and less indulgent than, say, the Latino or Mediterranean people. For the latter group, which include the Maltese, we tend to hold the view that discipline has to come from above to have any effect at all: parents, Church authorities, governmental authorities.
However, wherever it comes from, within or outside, pain is perceived as a precursor of long-term gain.
In the macro economic sphere, especially regarding public finances, the pain economists require to deliver economic stability refers specifically to the need to ensure that political promises can be kept without causing long-term damage and to avoid wasteful expenditure. Essentially, they are the principles of living within one's means: very simple principles but very hard to maintain.
Even governments that are self-restrained enough to avoid extravagance find the pressures of the welfare state hard to control. We can say that health, education and social security, including pensions, can become the three nightmares of every Administration. One has to keep an eye on the budgets available, the demographics, the cost of supplying these services and the politics. Self-disciplined governments often find the need to redesign these programmes to make them sustainable. This exercise we refer to as reform or restructuring.
Malta today is passing through a very difficult and painful episode of its post-war economic history.
No matter how you measure and label this general malaise, calling it absolute poverty, relative poverty or near poverty, the state of affairs is pretty much the same. Many Maltese middle-class families once again fear sliding into the hole most had managed to come out of and would have never dreamt of sliding into again. The Maltese business class has nearly given up all hope of ever winning the losing battle with rising costs and falling revenues, which it has been fighting all throughout this decade. Now many of its members, especially the small ones, are finally deciding to hang up their boots and rush into an early retirement.
But all this pain is not the result of structural reform that will reap long-term economic benefits. It has been caused by a decade of economic stagnation; by two prolonged recessions in the space of a decade, by an ever-increasing national tax burden and by a lack of attention to good economic and fiscal management and regulation, especially in the area of utility pricing.
Not all pain begets gain. There is so much pain in the world that begets only more pain and suffering.
Some of it might have been self-inflicted through past foolish decisions or misjudgments. It is quite dishonest to point to all the economic and social pain suffered to date by the Maltese and say that it has been necessary for our economic well-being.
If the government, the Central Bank or the European Commission can convince us that, during these last 12 years, Malta's price competitiveness has improved, that its public expenditures have been kept in check, that Maltese taxpayers are getting more value for money from their taxes and that the health, education, social security and pension programmes are now on a sustainable path, then we can truly state that our pain has been real worth suffering. If not, then the government should grimly admit that it has all been pain without gain.
edward@edwardscicluna.com
www.edwardscicluna.com
Prof. Scicluna is a Labour member of the European Parliament.