The first preliminary exercises are in train in anticipation of an early pre-election budget. It is earnestly hoped that the government will go beyond the theatrics of so-called “public consultations” and settle down to a few businesslike sessions with the Malta Council for Economic and Social Development, in the expectation of some positive and constructive suggestions.

The budget is an instrument of policy. In Dr Gonzi’s domain lies the power to create the right conditions for economic mobility and sustainable growth. Only if the omens are promising, could the social partners put their shoulders to the wheel and make the best of any available opportunities.

It takes two to tango – but the social partners will not be in the mood unless the Finance Ministry provides the music.

The music has not been all that inviting particularly during the past three years.

Public sector requirements have been voracious as the cost of government soared relentlessly. Instead of staunching the haemorrhage, the government breezily revved the engine of taxation and relied for excess fuel on public debt.

In so doing, the government flew persistently in the face of dire warnings by the Governor of the Central Bank who lamented long ago that “we have been living beyond our means for far too long, and the time of reckoning has come”. Undeterred, the government, aided and abetted by the cohorts of the bureaucracy and quangos land, looked the other way, stopping only at the cliff’s edge.

There was a time when the constituted business bodies seemed to have come to their senses when they declared openly that “the situation was worrying because the government’s spending requirements could only maintain their present momentum by further taxation”. Further taxation, they then insisted, “ could only serve as a disincentive for investment and the situation is leading the country to a lower level of competitiveness”.

Key consideration.

All of this contributed to a defensive, inward-looking psychology, with the social partners concentrating on survival policies, rather than on outward-looking opportunities. This continues to be a key consideration in an economy, which, like Malta, must rely on self-sustaining growth, and has to depend on outward-oriented initiatives in order to keep its rightful place in the sun.

It would be myopic on the part of all concerned if budget policy were to be restricted, at this stage, to shoring up the bastions of the weather-beaten Maltese economy. The priority should be how to go for growth and, in particular, how to tap new sources of foreign earnings – not only by encouraging new investment, but also by exploiting Malta’s potential as a regional hub.

Given all-round cooperation, it ought to be possible to seek opportunities in high-tech activities compatible with our geographical location.

In the last several years, workers have been replaced by machines. Over the same period, the number of jobs worldwide has nevertheless grown continuously, as have the real incomes of workers in the industrial world. This growth and enrichment has come about, not in spite of technological change, but because of it.

Technology is capable of creating more jobs than it destroys, provided it is fruitfully employed and provided there is a clear understanding of its mechanism.

There is a case for enhancing the technology of traditional industry thereby improving production. But there is also a case for economic restructuring by shedding weak industries in order to shift resources to new activities with a high yield.

The world of information technology and telecommunications opened up new possibilities and has, in fact, provided more job openings and good earnings even in Malta.

Fallacious assumptions

Doomsayers predicted that with the intensification of automation, more workers would be displaced and unemployment queues were bound to become longer with the passage of time. It is true that new machines and technological gadgetry are capable of achieving higher productivity with fewer people. But the assumption that this was bound to result in fewer jobs proved to be fallacious. Technology is capable of creating new demand either by increasing productivity, and hence real incomes, or by creating new goods.

As demand for black and white television reached saturation point in advanced economies, colour TV was introduced and videocassette recorders enhanced the demand for them. More disposal income in the hands of better-paid workers created a demand for video games, microwave ovens, computers and so on. Many of these goods were hardly available in the sixties. Today they are considered as essentials in many homes.

New labour-saving devices or items aimed at people’s leisure time are continuously being invented. Mobile telephones with amazing potential are the latest fad. As output expands, productivity growth marches in step with employment.

If information technology has destroyed jobs by making manpower redundant, its pervasiveness had a compensating demand-generated effect with new investments and growth opportunities for the national economy.

The number of job vacancies advertised in the press – like computer systems analysts, software engineers – did not exist in the seventies.

In Malta, new outward-looking initiatives in the private sector tapped new sources of foreign incomes which were earlier altogether dry – like offshore activities, aquaculture – or hardly active in the real sense, like transhipment in the volume now generated by the Freeport, ship registration and other maritime activities. The steady expansion of the tourist sector was another example of a revenue-earning source being developed to create new employment openings.

Momentum in these sectors has stalled. How can it be reactivated and how can Malta widen its bridgehead in foreign markets?

Salutary lessons

It is salutary to bear in mind that the countries that have been most successful in creating jobs – Japan, the Tigers in South-East Asia and so on –saw the fastest shift in their industrial structure by moving to a high-tech, knowledge-based economy.

It would be salutary as well if trade union leaders everywhere were to absorb these facts of life and appreciate that the unemployment upsets associated with restructuring could be more easily absorbed when general economic growth is strong and markers for both labour and products is flexible.

Governments and unions could help by creating facilities for workers to become more adaptable through improvements in education and training, and by removing obstacles to free markets through the elimination of restrictive practices.

Above all, the government must think how to incentivise labour and investment, which are both capable of providing the ham that goes with the sandwich.

It is this initiative that has been lacking. There is no viable bridge for the social partners to gain rightful access to the national decision-making process.

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