There are still some in Malta who valiantly struggle to form their own opinions on the basis of facts. This contrasts with those living in a parallel universe of group-think and excitable conspiracy theories based on vacuous self-serving political ideology.
John Maynard Keynes – the great British economist who gave birth to the “Keynesian” economics being practiced by every advanced economy in the Western world today to combat the economic effects of the coronavirus – is often quoted as saying: “When the facts change, I change my mind.”
As with many remarks attributed to Keynes, however, it does not appear to be what he actually said. According to some sources, Keynes reportedly said: “When my information changes, I alter my conclusions.”
There is a subtle, but important, difference between “the facts” and “my information”. The former refers to some objective change that should be apparent to all; the latter to the speaker’s (or writer’s) knowledge of relevant facts.
All this came to mind as I sat down to write this week’s column, aware that the speed at which the coronavirus pandemic is forcing policymakers to change position marks an epoch. Life will never be the same, but it will go on.
Many leaders are telling us with gathering gravity that we are at war. President Trump has declared himself a “war leader”. President Macron and Boris Johnson have used the rhetoric of war to encourage their citizens to operate under tightly restrictive rules more usual in wartime.
The rhetoric is overdone. This is not a war. In previous conflicts, which many of my generation experienced, people had to do rather more than stay at home and wash their hands. Even during World War II the real economy never fully shut down.
The Blitz in Malta haunted us and imposed great suffering. But in much of the island, despite the deprivations, economic life – if somewhat limited – still went on. There were blackouts and food rationing and constant air raids, but not the kind of lockdowns currently imposed.
Today’s pandemic is shaking the world and may be worse than the Blitz. Worse for the Maltese economy. Worse for business. I can understand why the comparison with war comes up. Our lives are already changing. Our government is introducing policies without parallel in peacetime. Getting through this will require the kind of tolerance and national cohesion that is born out of war and earned Maltese the George Cross.
While I do not see unity happening politically in today’s ideologically divided country – with small-minded headbangers actually hoping to see an economic meltdown – I do see steadfast support for heroic health service personnel and those in the front line dealing with this emergency. I do see volunteers forming to help those less fortunate than themselves.
Could we come to regard the early 21st century in pre- and post-corona terms?
Malta’s economy has always balanced on a knife edge. Today and for the foreseeable future, its economic prospects are bleak. Bleaker than the 2008/9 financial crash. This time, those most exposed to the rot aren’t just bankers and stock market investors, but low-paid workers.
Whole swathes of the economy – small hotels, bars, restaurants, hairdressers, start-ups, small businesses which in Malta employ so many workers, the self-employed and freelancers – don’t have capital reserves, big or small. These small businesses are the lifeblood of the economy and many may soon be in cardiac arrest.
The tragedy is not that these businesses are fundamentally unsound. They are not rotten, as the financial system was in 2008. Yet whole sectors are facing collapse.
What happens to the travel and tourism industry when people can’t travel? What happens to the hospitality sector when no one goes out? What happens to any business starved of income because of regulations which could be in place for months, if not longer? At best, they go into hibernation. At worst, they disintegrate. This is not a war. In economic terms, the shock is worse.
But there is good news. Wars can last for many years. If we are lucky, this disease may be measured in months.
Once a vaccine or treatment is developed and the pandemic has passed, there is no reason why Malta cannot bounce back. But getting to that point will require – as has already happened – an almighty financial stimulus from the government.
Vast sums must be given away by the government and central bank. It probably won’t prevent the worst recession in many years, but at the very least it should lead to a working economy when the outbreak is over. Loans and short-term tax holidays may not be good enough. In the end, the government may need to become the insurer of last resort for the entire economy.
Such apparent profligacy may prove prudent. In the face of a crisis that is threatening to impoverish thousands of hard-working people, and with global interest rates close to zero, there could hardly be a better time to dust off those old Keynesian economic text-books.
How will this existential challenge change us as a people? Real wars reorder societies, remake the relationship between people and the government. In the last century the two world wars marked a great fissure in modern history. Could we come to regard the early 21st century in pre- and post-corona terms?
If this pandemic has taught the millennials anything it will be that they live in an interdependent world and that having a competent government plays a critical part in the welfare and prosperity of the nation.