Monday, 3rd November 2008
Learn the lessons of history
As the Minister for Finance, the Economy and Investment, the Hon. Tonio Fenech prepares to deliver his first budget he will be well advised to learn the lessons of history.
I am not referring to Maltese history but to global economic history.
The financial and economic crisis the world is in at present can only be compared to the Great Depression of 1929 -30. Then the stock market crash lead to a prolonged period of economic recession and it was only the visionary policies of Franklin Roosevelt’s New Deal which began to change the economic tide.
An authoritative academic assessment which I read while I was up at Oxford too many moons ago had this to say about that era; “Keynesian macroeconomic theory also helped provide acceptance for the New Deal industrial relations system. This theory can be traced to the underconsumptionist view of the Great Depression. In brief, this view held that the Depression was caused by insufficient aggregate demand and a failure of purchasing power to keep pace with the productive capacity of the growing mass-producing industries. This was to be cured by Keynesian fiscal polices and government demand for war material and, after World War II, by the expansion in consumer purchasing power spurred by the reconstruction of western economies.” (Kochan T.A., Katz H.C. and McKersie R.B., 1994: 26)
What this meant in simple terms was that, apart from ensuring stable industrial relations, Governments were to see to it that they put, or at least left, money in people’s pockets.
Following the Great Depression and World War II, therefore, the governments of the industrial western democracies did all in their power in order, to borrow a phrase used by the Prime Minister, Dr Gonzi, before last March’s General election, to give their countries a much needed and sustained economic stimulus. This came from spending on reconstruction, investment in the infrastructure and creating the social welfare state that was the model for all emerging and developing nations at the time.
That model stood the test of time until Reagan and Thatcher decided that they would rather go for monetarist economic policy. That led to unprecedented levels of unemployment and the creation of a generation of financiers whose greed knew no limits. The result was the stock market crash we have seen and experienced since last September.
The way out of this, even in Malta, is not to go listen to those who say that the Government must balance its books at all costs but to keep the economy going by leaving enough money in people’s pockets to do so.
In my humble view, therefore, Mr Fenech would be well-advised to put his accounting background aside and take heed of the lessons of macro-economic history before he finalises his Budget Speech.
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Comments
How much money is your government leaving in your pocket, these days?
The new President/Congress will be hard pressed to let you keep more after the $700 billion it is spending to bail out failing banks and near bankrupt Ford, GM and Chrysler ! You have lost 750,000 jobs so far this year and many more will follow. Not only that, I hope that unlike me, you did not have anything invested in the stock market. No need to point out that losses are now in the 20 - 25% of portfolio values. All because of irresponsible lending by your financial institutions. It seems to me that the 'beacon of light in a world of darkness' as the USA used to be described, is dimming its light.
Worse is yet to come for the USA and unfortunately for its suppliers the world over.
Joe seized means: To come to an end / No longer / to bring an activity or action to an END. So yes if you became a citizen on Canada before Feb 10th 2000, you ceased your Maltese citizenship. The question is why? Did the Canadians force you? Did you feel prouder to be a Canadian than Maltese? Did Mintoff take your citizenship away?lol. If you got your Canadian citizenship after Feb 10th 2000 you don't need to answer these questions, because you never ceased your Maltese citizenship. Please note you don't need to answer any of these questions as they are your personal business.
Are you not aware that if you Google ‘Maltese Citizenship’ you will not need to argue the mechanics of dual citizenship.
Dear Mr. Vella you make it amply clear to me that you are a born confrontationist..... Brother even when I agree with you in essence you still look for confrontation.
I am a retired person enjoying life as much as I can, do you sincerely thing that I’m in the least concerned where the unemployed or the dole dodgers spend their time? You insist that most of them hang about at the MLP clubs and went on to suggest a drive around Malta to find them. Fat chance, with the price of petrol an-all?
The fact that these people hang around in clubs means that they are genuinely unemployed, if you find them at MLP’ clubs and not in PN clubs it means that all PN supporters are employed or, alternatively they are at work while on the dole. Makes a lot of sense.
I think that there are two contributors here by the same name,one of you writes good English, and you sound like the one from my home town. Would you confirm?
Well, well, well! Then by your own admission the Mintoff regime hit people with a double whammy!
In the first place, it took control over the importation of basic necessities resulting in empty shelves, black market etc. which you already agreed with.
Secondly, I remember quite distinctly that when coming over for a visit, on more than one occasion, I would be stopped by customs and asked what I was bringing in. My standard answer would be - clothing, since I were staying for a month and a few toys for nephews and neices. The customs officer would say, "Ara tini ghaxar liri u ma niftahlek xejn" (Give me ten pounds and I will not open your suitcases). Ten ounds would be handed over - no receipt and I would be let through.
On one occasion I simply did not have any Maltese currency so I offered $20.00 instead. The C.O. refused the $20 (traceable) and I had to leave the luggage with my wife and C.O. and exit in order to borrow the Maltese money and upon paying the C.O. - again no receipt - we and our luggage were released!
I or anyone that obtained Canadian Citizenship did not have to denounce Maltese Citizenship. We lost Maltese Citizenship at the time because Maltese laws didn't allow for dual Citizenship. CANADIAN CITIZENSHIP LAWS ALLOWED FOR NATIONALS TO HOLD DUAL CITIZENSHIP.
When the Maltese Government of EFA introduced the legislation to amend the applicable legislation, the amended legislation was written in such a way that does who have lost Maltese citizenship in the process of obtaining the citizenship of the adopted country were deemed as if they have not lost their Maltese Citizenship at the time. The process that you are talking about dealt with only to verify that the individuals concerns lost their Maltese citizenship in the matter I described and not through by any other means.
The ones that were unjustly forced to denounce their citizenship where foreign born children of Maltese Nationals. They were made to denounce the citizenship of the country of their birth in order to obtain their Maltese citizenship.
Is it so hard to comprehend this?
“Strict rationalization on imports - EMPTY shelves - bulk buying - black markets?” Agreed. Remedy moderate rationalisation.
Excessive excise on imports also results in empty shelves and black market. Agreed? Remedy moderate excise duty?
"Hey, keep your shirt on, I’m with you on this 100% Nobody should get anything for nothing, but I see more of them at the PN clubs than in ours. Who would protect them at the MLP clubs?"
Take a drive around Malta, and quickly you will discover where you would find them.
You utterly confuse me.
However, did you have to renounce your previous Maltese citizenship when you arrived in the USA? Or when you applied for American citizenship?
Go through my comment once again please since I stated 'unless you use a Maltese passport'.
For your information I was pulling your leg and not clutching at straws. I hope I haven’t ruined your day.
Those like Joe Martinelli and others didn't have to denounce their Maltese Citizenship in the process of obtaining Canadian Citizenship. Canadian Citizenship provides for dual citizenship.
Those like Joe Martinelli lost their Maltese citizenship because Maltese laws at the time didn't permit Maltese Citizenship to hold dual Citizenship. THERE WAS NO DENUNCIATION ON THE PART OF NO ONE. Those who obtained Citizenship in the adopted land did so for the very reasons they left Malta; that is for economic reasons and nothing else. When the Maltese Government introduced Maltese Dual Citizenship, the Legislation was written in a way that those who have obtained a foreign citizenship were deemed as if they never lost thier Maltese Citizenship in the first place.
@ Franco Farrugia.
It’s clear that my remark about the unemployment benefits was misunderstood nobody to blame for that except myself. I was only being sarcastic and it came out the wrong way.
That system (the budget measure) should had been part of the deal when the benefit was introduced in the first place as ‘a take it all or leave it all option’
On this particular issue I give a standing ovation to the government moreover I would also support a campaign to overhaul our health system to impose payment or partial payment for medicine and health care to people who can afford it. The removal of the 50 cents payment on prescriptions was a dishonest action.
Our coffer has its limitations; state health care ought to be considered like a social service for people who cannot afford it not an insurance policy for all and sundry- that to my way of thinking is a supreme socialist principle. Note the small‘s’ in socialist.
“To me it sounds more like no more unemployment benefits to those who choose to stay playing cards at MLP Clubs instead of engaging fully in an employment program”
.
Hey, keep your shirt on, I’m with you on this 100% Nobody should get anything for nothing, but I see more of them at the PN clubs than in ours. Who would protect them at the MLP clubs?
But to claim, as you do, that demanding those who have been getting social services for unemployment for some years 'forced labour' is over the top. Why do you call it so? Can't you see the advantages of such a move? If for nothing else, it will stop certain receivers of social services from working without the authorities knowing. What will you have? People who are well able to work, and in fact DO have work, but don't declare it, don't pay taxes, and, most important of all, having the State dishing out monies to them????
Is this your idea of justice?
Is this your idea of social assistance to those who need it?
Right, so, I, who have been working for so many years, am still unsure with regard to my pension, cos there is not dough! Yet, there is more than enough for these people!
"2009. Gonzi. Unemployment benefits in exchange for forced labour."
To me it sounds more like no more unemployment benefits to those who choose to stay playing cards at MLP Clubs instead of engaging fully in an employment program.
So the e0.50 not only is not exorbitant, it does not even apply to me.
I can envisage thousands of tourists who spend hundreds of euros just to fly to Malta, will cancel their plans for having to pay e0.50 a day! In that case who needs a tourist who cannot afford less than a coffee's worth extra a day?
Just clutching at straws are you?
By the way, even though you live in Canada, for once you will be directly affected with the budget presented to us yesterday; you will be charged 0.50c for every night which you (as a foreigner / tourist) will be spending in Malta, unless you use a Maltese passport. Ok, I know it is not that exorbitant but every penny helps.
Strict rationalization on imports - EMPTY shelves - bulk buying - black markets?
Gonzi. Unemployment benefits in exchange for forced labour? What exactly are you talking about, Charles? RECORD number of gainfully employed - LOWEST number of unemployed for years, and you talk of FORCED LABOUR ?
BTW the present record number of gainfully employed does not include any MASS employment by a Nationalist government on the eve of any election into the civil service creating a massive burden on the Public Treasury.
1930-36 FDR. “Second New Deal" included labour union support, the WPA relief programme, the Social Security Act, and programmes to aid farmers, including tenant farmers and migrant workers. The Supreme Court ruled several programmes unconstitutional; however, most were soon replaced, with the exception of the NRA
197I-80. Mintoff. Para-military voluntary labour corps, strict rationalisation on imports.
2009. Gonzi. Unemployment benefits in exchange for forced labour.
Malta does not have the means nor the ambition to copy the USA and our leaving more money in the public's pockets can only mean one thing: less services - less social spending. I am almost certain that your party will be first to cry foul should any benefits be reduced.
Just look at the rabid reaction by your party and by your Leader to the new W&E rates. Your party wants to continue with subsidies which are an indirect form of taxation since the subsidies come from taxpayers' pockets anyway.
The only difference is that rates are visible and therefore a glaring opportunity to be criticized while the portion from taxes going towards subsidies is an invisible component.
Lessons learned from other countries' experiences do not always fit the Malta model exactly. Any stimulus to the economy will by necessity be financed by the taxpayer.
Benefits should be gradually replaced by coupons (egfood coupons). Prior to onset of recession, over 60m US citizens rely on food coupons for their daily bread.
Trying to sustain an artificial demand for homes will be very counter productive unless the buyers have a reliable source of income and can contribute at least 30% towards the purchase price.
This will stabilise the business cycle along its circumference and help it to a soft landing. Government should embark on major projects as the number of unemployed rises above the 8000 mark.
Government should not support wholesale consumption across board. This will mostly fund improrts. It is obvious that the economy must deflate to bring consumption down to sustainable levels both on the financial and environmental front.
Another Government priority is the curbing of inflation. Government must switch off the autopilot and take hold of the driving stick. For he will soon find that financial models are useless in a heavy recession.