After years of rapid growth for everything apart from people’s wages, we’re facing dark clouds ahead. The war in Ukraine is shaking the very foundations of the economic model in ways we have yet to fully understand. What we should have learned from the last economic crisis is that resorting to spending cuts and austerity will not bring us into brighter days any time soon.
Intuitively, hard times seem to call for harder negotiating positions, employers freeze or cut salaries and the government slashes spending on public services. It’s like we try to save something out of very little or nothing at all. We forget we’re all connected.
Consider the restaurant owner with a tight grip on the wage bill, freezing salaries and undercutting trusted labour with cheaper imports. Their employees have less money to spend. They stay inside rather than go to the movies. They cancel their gym subscription. They postpone upgrading their kitchen and spending money on life and leisure.
If less money comes to them, they will spend less money on goods and services, slashing the income of the guys working at the movie theatre and at the gym and the journeymen installing kitchens.
One thing the guys working at the cinema or the gym or the guys installing kitchens won’t be doing is eat out as often as they used to. It comes back to bite the stingy restaurant owner.
In times when we need the economy to work more than ever, to make up for the hardship caused by all those external elements entirely out of our control, the last thing we need to do is starve economic activity of the oxygen of liquidity.
Economic players have a role in this. True, the government in our economy is a behemoth. But businesses, especially small businesses employing a handful of people, are still, as a collective, a mover and shaker of things.
The last thing we need to do is starve economic activity of the oxygen of liquidity- Justin Anastasi
The last thing we can afford is the spread of a pandemic of psychological trepidation, a contagious urge to curl up in a cave and wait out the storm in hibernation. Hibernation is a bad idea for any business.
After the months of COVID and years of Labour’s assault on Malta’s international reputation as a trustworthy investment destination, we’d be hibernating on an empty stomach. That’s just a recipe for never waking up.
The last few years, we were repeatedly told, were years of plenty. Let’s make good use of that. We need to put more money in people’s pockets, even at the cost of short-term returns. The thing with an open economy is that the money we spend on honest labour is paid forward, it is spent again on other honest labour, and finally that money comes back to us with interest.
If we stop spending, however, we stop earning.
I’m not arguing for a drunken orgy of irresponsibility. Far from it. I’m arguing for a redirection of our attention. Slashing money spent on air conditioning in public service offices is all very well. But the real saving would be in terminating the hundreds, even, thousands of cronies hired as ‘persons of trust’, paid a salary by us to have professionals lying to us about the state of our nation.
The real saving would be cancelling and getting back the hundreds of millions we paid for a botched national hospital contract, yielding no improvement from when it was signed till now to our quality of life.
For the cronies and the corrupt, this should be a time of austerity, however, it seems that this is becoming more and more the case for those good, lawful citizens who are carrying the largest weight, and for the most part this being carried on their own.
Our attention should be focused on screwing the tap on kickbacks, direct orders, draining the swamp of corruption and the slush funds rolling about the fat pockets lined in the years of plenty. They’ve had more than their fair share.
It’s time to give our hard-working people better wages for their honest work. Don’t you think?
Justin Anastasi is a director of We Consult You Ltd.