Filling gaps can be healthy
The way the government seems to be approaching the creeping problems in the manufacturing sector seems to be unfolding. It has not been stated in clear terms, which is a pity. The externalising of policy would lead to a healthy public discussion which...
The way the government seems to be approaching the creeping problems in the manufacturing sector seems to be unfolding. It has not been stated in clear terms, which is a pity. The externalising of policy would lead to a healthy public discussion which could bring about positive suggestions, as well as useful objective criticism.
The government has indicated repeatedly, through the Minister of Finance, the Economy and Investments, that it does not plan to prepare and launch a package to stimulate the economy, as various economic operators' representatives are calling for. The official position, articulated by the minister, is that the budget for 2009 is itself a stimulus package.
Whether that is the case or not is a moot point. The budget was presented three months ago and may not have been able to address the way the deepening global recession is affecting our economy. One thing is certain about economic management - it has to be nimble and fast to react to changing trends, and preferably to anticipate them.
The second part of the government's approach starts with a negative appreciation. It holds that any attempt to stimulate local spending will not assist export companies such as ST Microelectronics. A chunk of the stimulus will, instead, go into imports. I have expressed my broad agreement with this approach. Karm Farrugia, one of our most respected economists, disagreed with me and the minister, using Keynesian arguments. Views like his should also be taken into appropriate account. There are few around who possess his technical grounding and experience.
In place of traditional macro stimulus the government is focusing on directly aiding individual companies who are badly affected by the recession. Last week it was revealed that an export company which had become a cropper because of the decline of the global motor industry, and which had put scores of workers on a four-day week, was to be aided directly.
As a result, said the government, the company would be making substantial new investment and would go back to regular hours. This was projected as a successful outcome for the government's alternative policy. No details were given, however, of the assistance to be made available to the company.
If my information is correct then assistance will go in the main to retrain a number of the company's human resources. Should that be the case, it would certainly be useful that details be made public.
On a macro basis retraining is certainly essential, if displaced workers are to stand any chance of finding alternative employment. Retraining employees of a particular company also makes sense, should that entity be about to diversify into new activities.
If, on the other hand, the company remains dependent on its old activities, in this case related to the motor industry, retraining its work force may not be a sustainable policy.
Under this scenario the company would only recover when its orders recover to their previous levels or higher, and at the right price. For that to happen the global motor industry has to turn round. There are no hard signs that that is happening. Car makers are desperately seeking financial assistance from their governments. Their pleas are not being met with alacrity precisely because governments recognise that the problem is one of weakening demand and competitiveness.
This is not a criticism of our government's efforts. Yet, and the point bears repeating, it would be useful to know what these efforts consist of. The Finance Minister has established a task force to deal with the situation. That shows there is an intention to focus on problem areas as they develop, rather than to continue to play the tune that, through some miracle, we are not being hit by the global recession.
Maybe the impact has not yet been strong. But when it arrives, as it surely will, we'll have no doubt that it's here. The government is on surer ground when it reminds one and all of the old truth that every unfolding situation, no matter how bad, brings along new opportunities.
And these opportunities have to be watched out for. It is here that retraining has to take place with increasing emphasis on the skills being demanded by these opportunities. At present it could be the case that there is a mismatch between human resources threatened with, or suffering redundancy, and new job openings in the pharmaceutical sector, say, or in the broad financial services industry.
This mismatch will not be easy to adjust to, but retraining to do that as much as possible is essential. Such retraining may be different from that to be financed within companies passing through hopefully temporary contraction due to reduced demand.
That is why there is a gap developing between what the government is doing on a focused basis and healthy public discussion on the details of it, in the context of perceived requirements.
The sooner this gap is removed, the better. It will not be removed by controversy, or the usual type of political bickering. It can be removed through serious public discussion made possible by more public transparency. The government has nothing to lose, and possibly a lot to gain.
The government has indicated repeatedly, through the Minister of Finance, the Economy and Investments, that it does not plan to prepare and launch a package to stimulate the economy, as various economic operators' representatives are calling for. The official position, articulated by the minister, is that the budget for 2009 is itself a stimulus package.
Whether that is the case or not is a moot point. The budget was presented three months ago and may not have been able to address the way the deepening global recession is affecting our economy. One thing is certain about economic management - it has to be nimble and fast to react to changing trends, and preferably to anticipate them.
The second part of the government's approach starts with a negative appreciation. It holds that any attempt to stimulate local spending will not assist export companies such as ST Microelectronics. A chunk of the stimulus will, instead, go into imports. I have expressed my broad agreement with this approach. Karm Farrugia, one of our most respected economists, disagreed with me and the minister, using Keynesian arguments. Views like his should also be taken into appropriate account. There are few around who possess his technical grounding and experience.
In place of traditional macro stimulus the government is focusing on directly aiding individual companies who are badly affected by the recession. Last week it was revealed that an export company which had become a cropper because of the decline of the global motor industry, and which had put scores of workers on a four-day week, was to be aided directly.
As a result, said the government, the company would be making substantial new investment and would go back to regular hours. This was projected as a successful outcome for the government's alternative policy. No details were given, however, of the assistance to be made available to the company.
If my information is correct then assistance will go in the main to retrain a number of the company's human resources. Should that be the case, it would certainly be useful that details be made public.
On a macro basis retraining is certainly essential, if displaced workers are to stand any chance of finding alternative employment. Retraining employees of a particular company also makes sense, should that entity be about to diversify into new activities.
If, on the other hand, the company remains dependent on its old activities, in this case related to the motor industry, retraining its work force may not be a sustainable policy.
Under this scenario the company would only recover when its orders recover to their previous levels or higher, and at the right price. For that to happen the global motor industry has to turn round. There are no hard signs that that is happening. Car makers are desperately seeking financial assistance from their governments. Their pleas are not being met with alacrity precisely because governments recognise that the problem is one of weakening demand and competitiveness.
This is not a criticism of our government's efforts. Yet, and the point bears repeating, it would be useful to know what these efforts consist of. The Finance Minister has established a task force to deal with the situation. That shows there is an intention to focus on problem areas as they develop, rather than to continue to play the tune that, through some miracle, we are not being hit by the global recession.
Maybe the impact has not yet been strong. But when it arrives, as it surely will, we'll have no doubt that it's here. The government is on surer ground when it reminds one and all of the old truth that every unfolding situation, no matter how bad, brings along new opportunities.
And these opportunities have to be watched out for. It is here that retraining has to take place with increasing emphasis on the skills being demanded by these opportunities. At present it could be the case that there is a mismatch between human resources threatened with, or suffering redundancy, and new job openings in the pharmaceutical sector, say, or in the broad financial services industry.
This mismatch will not be easy to adjust to, but retraining to do that as much as possible is essential. Such retraining may be different from that to be financed within companies passing through hopefully temporary contraction due to reduced demand.
That is why there is a gap developing between what the government is doing on a focused basis and healthy public discussion on the details of it, in the context of perceived requirements.
The sooner this gap is removed, the better. It will not be removed by controversy, or the usual type of political bickering. It can be removed through serious public discussion made possible by more public transparency. The government has nothing to lose, and possibly a lot to gain.