OPINION: Stimulus… Or Mollycoddling?

If one were to judge the local business sectors’ current constantly expressed expectations, our Government should endlessly keep on holding their hands like mama during the current extended pandemic, and keep pumping into their business coffers funds which, sane economic judgement suggests, should be considered as there being existing alternative, and better, possible uses therefor.

Yes, it has been in the whole of Europe that over 2019 and 2020, governments have spent massive funds to keep key sectors going. One estimate by the International Monetary Fund (IMF) puts the total amount of that spending at US$ 226 trillion. But in no country anywhere, have governments been placed (threatened? blackmailed?) into a situation where it is on them, as governments, that future responsibility for business or employment continuance or outcomes come to be totally placed.  Indeed, many authoritative voices in Europe and the US are now insisting that good money should go to improving infrastructures and facilities and services, and not on more pandemic support.

There is a possible analogy here between what in-trouble Maltese taxpayer businesses keep threatening Government with when pressed to pay their dues: “You force us to pay, and we will kick our workers out!”. Now it goes something like this: “You keep extending the Wage Supplement (plus other forms of so-called Pandemic Perks!!) into January, February, March, even the General Elections campaign months, or, if you don’t, we throw workers out… and you know what that will mean in terms of votes!”

Nowhere in this discourse do we ever hear words like “business reserves”, “insurance cover against loss of profits/sales”, “cyclical financial planning”… no, of course not.  But in good times these are the same businesses that accumulate assets, private shareholder wealth, dividend payouts, luxury vehicle and boats and property acquisitions, donations to relatives, holidays abroad, and so on and so forth.

If this sort of insistence/threatening persists one can easily posit questions like:

  • Who should, in a free economy, be taking business conjuncture risks: the business owners or Government (for which read the taxpayers)?
  • With who are workers in reality employed – the businesses, or the Government – if their salaries or wages continue to be “insured” by Malta Enterprise?
  • If COVID assumes all the endemic (note, not pandemic) characteristics of, say, the annual periodic strains of influenza, should such pumping of public funds be persisted with for-ever-and-ever-amen?
  • How much price and profit cutting, even during the COVID rage, have certain sectors, like e.g. the building and construction sectors, indulged in? Not much evidence of this is being seen in practically all markets. 

What we are in reality still seeing is the continued rising of prices and rising inflation. The short-sightedness and lack of brave forward-looking, where decisions are taken are suggestive of a lack of deep economic thinking, or dearth of wise economic counsel. Brave economic thinking – but this always needs to be decoupled from political considerations – would suggest rigid conditioning to businesses that, if they need to receive further temporary wage supplements, or indeed other forms of mollycoddling, then they should be rigidly required to provide cast-iron guarantees that they will not raise the prices for their goods or services.  Similarly, guarantees that payments of due income taxes, VAT, their own and employees’ national insurance contributions, rental and loan repayment dues to government are all always kept religiously uptodate.  

Brave, drastic, possibly aggressive too… yes, and possibly more. But money in the hands of government at this time should certainly be much better used, in the interests of the economy and the general citizenry… and certainly not spent on more of the same mollycoddling that the local business sector, and its lobbies, continue to keep showing all signs of wanting to see perpetuated.