The editorial Welfare System Under The Spotlight Again (February 3) maintains that the expenditure on the prevailing welfare system is responsible for the year-to-year budget deficits. More than that, it asserts that the welfare system leads to "a rapid deterioration of the sustainability of its (Malta's) finances". This assertion gives the impression that the welfare system needs to be eroded as much as possible if not dismantled altogether.
Mention is made of (a) the European Commission's calling "on Malta to curb spending particularly on health and education"; (b) the International Monetary Fund's reference to "Malta's spending slippages in healthcare" and (c) the Central Bank Governor's drawing "attention to the need of adopting a more cost-efficient (i.e. less expensive) approach to the provision of public goods and services "whereby only those demonstrably in need would benefit" (my emphasis). "Demonstrably" meaning "means tested".
No doubt the IMF, the European Commission and the Central Bank resent having their financial rectitude criticised or faulted.
In his book The Death of Economics (1994), Paul Ormerod writes: "From the pensioned security of their vast bureaucracies, economists from the International Monetary Fund and the World Bank preach salvation through the market to the Third World. Austerity and discipline are the hallmarks of the favoured policies of the IMF throughout the world, yet its own salary bill has risen by 38 per cent in the last two years and is budgeted to rise by a further 22 per cent in 1994".
That is not what they mean by austerity. And they show concern for Malta's "spending slippages" in healthcare.
Then on page 124 one reads: "The IMF, for example, staffed by bureaucrats on tax-free salaries and inflation proof pensions, regularly calls for greater flexibility of labour markets as being the only policy which will reduce unemployment."
Since labour is a commodity there is no need for the IMF to think about cost of living and living standards.
As regards the European Commission, it can be said that some years ago almost all the members of the Commission had to resign after a whistleblower revealed the corrupt frauds and scandals and the misuse of the EU's finances. Incidentally, another whistleblower has also appeared lately making the same charges. Needless to say the Commission fired the two employees for their "disloyalty" to the EU.
Now the European Commission is telling Malta to "reduce the budgetary costs of an aging population". Curiously, the Commission avoided advising cold-bloodedly, instead, to "get rid of the aging population to reduce the budgetary costs".
The Commission has conveniently forgotten that even its own economists subscribe to the view that investment in health and a good educational system contributes to economic growth.
Why doesn't the government find out how much the independence of the Central Bank is costing the country?
Could not the bank be made "more cost-efficient" so that it will provide more profit from year to year?
A thorough investigation of the bank's administrative expenditure would show the lavish honoraria and perquisites of the board of directors, not forgetting the governor and his deputies as well as the high officials under them and, of course, the payments to the various consultants for their services.
The erstwhile printing of money by the bank was adduced as an important reason for making the bank independent as it may probably have printed more money than necessary and therefore been responsible for some degree of inflation. The modern "printing of money" is government borrowing from banks. So the government is borrowing from them at various rates of interest thus involving servicing a debt, another substantial expenditure.
Forgotten is the "ways and means" facility by which the government could borrow interest-free from the Central Bank 15 per cent of its annual budgeted current expenditure which debt was invariably paid back by the end of each financial year.
Both the IMF and the EU agree that a healthy population and a good education system constitute two primary factors contributing to economic growth. But, under no circumstances, should health and education be made market-oriented. To conclude, the prevailing welfare system may need genuine reform, but it certainly is not mainly responsible for the recurring budget deficits.