Subsidies against investment

The argument about electricity tariffs and energy subsidies shows just how shallow our political and economic discussion tends to become when partisan politics take over what should be rational important collective debates.

It is obvious that, from a shallow perspective, people will always prefer to be subsidised if they believe someone else is paying for those subsidies. Shallow short-sighted politicians will immediately tread that populist path.

But from a deeper and more valuable perspective, the argument about energy subsidies is actually about the right choices for public expenditure. In such an important debate, we should be asking ourselves what we should be spending on collectively. One very important question is about the alternative expenditure we would be able to make with the money the government is now spending on energy subsidies to artificially reduce the electricity tariffs.

An important point to bear in mind is that Malta has no oil whatsoever and no other source of energy, unlike some other countries in the EU. This means that subsidising electricity tariffs is ultimately a subsidy on the importation of ever more expensive fuels from abroad.

An essential question we should be posing ourselves is: Should the government be spending €50 million or thereabouts subsidising fossil fuel imports or should those €50 million be invested in alternative sources of energy reducing the imports of fossil fuels in future (and saving our environment in the meantime)?

Should the government indirectly subsidise foreign oil companies that sell us refined oil products or should it be investing in a public transport system that cuts car and car fuel imports for years to come (saving our roads from increasing congestion as well)?

Should we be spending €50 million on a subsidy that immediately seeps out of our economy or should we be investing those same €50 million to modernise and transfer next to Mater Dei Hospital the services that are now being given at Boffa Hospital (and, in the process, release for other purposes a prime site overlooking Grand Harbour)?

Should the government be spending €50 million every year that goes into buying fuels we have to import or should it be investing those subsidies in education to have the engineers, pharmacists, scientists, mathematicians, bankers, IT technicians, doctors, nurses and other qualified personnel we need for the shift we are experiencing in our economy to specialised manufacturing and services? And to invest in guiding youngsters to take up studies and training for these specialised manufacturing and services sectors basing their careers in well-paying areas for themselves and the economy?

One should always bear in mind that imports are a minus for the economy with money leaking away from Malta, especially when we literally "burn" what we import in consumption rather than investment. Imports also reduce the multiplier effect public expenditure would otherwise have if the money were spent on goods and services we produce locally. Investment, on the other hand, reduces future imports and boosts the economy to grow further and export more.

The ball is in our court to choose and decide collectively. We should also hold shallow politicians to account when they talk up energy subsidies. Politicians who keep telling us they will subsidise fuel imports are actually saying they will be investing less in alternative energy sources, less in training the workforce, less in health and less in business growth incentives.

One cannot spend money twice; having spent it on energy subsidies, the government cannot then invest it more wise-ly in health, business, the environment and education. This is what we need to question when shallow and short-sighted politicians take the populist path.

eddiea@onvol.net