Reining in inflation

Inflation is the rate of increase in prices over a given period of time. In Malta, it is still above the EU average. The culprit is upward pressure from food prices.

According to the National Statistics Office (NSO) the highest annual inflation rates in December 2023 were in the food and non-alcoholic beverages sector – a peak of 9.5%. The NSO explained that this largest upward impact on annual inflation was largely due to higher prices of vegetables.

A recent report in the Times of Malta claimed that the government was pressing retailers and importers to reduce prices of selected food items by 15%. This pressure undermines all the principles of a free competitive market.

On the other hand, considering the relatively small size of the Maltese market, one must acknowledge that the possibility of food importers agreeing to put prices up – rather than compete between themselves – is not necessarily far-fetched. But this possibility should be investigated by whoever is responsible to monitor an unfettered market and not by direct government interference.

The Chamber of Commerce reacted to this news by alleging that this meant the return of price fixing that will serve to narrow customers’ choice rather than reducing inflation. The Chamber said that the government was trying to control the market rather than promoting competition through proper monitoring and regulation.

It also pointed out that the way the government was negotiating the ‘scheme’ was of particular concern. Market operators were being contacted individually by the government and prodded into complying.

The Chamber opposes any government direct intervention in the free market as a matter of principle, more so because such intervention will only stifle competition to the detriment of both the consumer and the provider of goods.

Such interventions encourage consumers to shift their consumption to lower quality goods and ‘will not yield the systematic control of rising costs because it does not address the roots of inflation’, insisted the Chamber.

While it is easy to measure the price changes of individual products over time, human needs extend beyond just one or two products. Individuals need a big and diversified set of products as well as a host of services for a comfortable life.

They include commodities like grains, metal, fuel, utilities like electricity and transportation, and services like healthcare and entertainment. Higher costs lead to demand for increases in wages – a problem that in Malta led to the creation of a system that calculates each year the Cost Of Living Adjustment (COLA).

Inflation aims to measure the overall impact of price changes for a diversified set of products and services. It allows for a single value representation of the increase in the price level of goods and services in an economy over a specified time.

Higher prices mean that one euro – in the case of the Eurozone – buys fewer goods and services. This loss of purchasing power impacts the cost of living for the common man in the street. This ultimately leads to a slower rate of economic growth.

The consensus view among economists is that sustained inflation occurs when a nation's money supply growth outpaces economic growth.

Many observers, including yours truly, had criticised the economic direction of this year’s budget because in a full employment situation, a budget deficit is necessarily inflationary. Throwing away money in such a situation could not but result in higher prices besides an increase in foreign workers.

Instead of restraining economic growth that depends on more imported workers, this year’s budget deficit encouraged our economy to move in the other direction.

The Prime Minister apparently does not understand this.

He seems to think that government interference in the free market can tame the inflation monster.

He said that his government would not give up and wanted to ensure what he called ‘guaranteed stability’ in the food market, and promised to continue with his efforts in this direction in line with ‘the people’s pleas’!

This simply shows that the government prefers to flaunt its populist methods, rather than following sound economic advice.

But this game cannot go on for ever. At the moment, the Prime Minister apparently thinks that he will be able to postpone the torrent until after the European Parliament and the local council elections in June.

He might find that the he will afterwards lose any semblance of control when it is time for the next general election.

Less and less priests

More than 40 laymen and laywomen in the Clogher Diocese in the north of Ireland will soon begin presiding over funeral services amid a shortage of priests.

The phenomenon of the drastic decrease in the number of priests in Ireland was the subject of a recent Irish TV documentary: The last priests in Ireland. It is an absorbing documentary about the decline of what was once one of Ireland’s most sacred institutions, the Irish clergy.

This was followed by another programme on the decrease in the number of nuns in Ireland. Priests and nuns are getting old with practically no one to replace them.

This year, only 20 seminarians are studying at the national seminary in Maynooth to become Catholic priests for Ireland's 26 dioceses. Weekly Mass attendance, which stood at 91% in 1975, was down to 36% in 2016 according to figures from the Irish census. In the past, Ireland – like Malta – was known to be priest-ridden, suffocating under the weight of its moral guardians wearing cassocks.

“We liked being patronised,” says Ardal O’Hanlon, the Irish presenter of the documentary. “When Bon Jovi tells us we’re the best audience in the world, we lap it up. The Church infantilised us. We weren’t encouraged to think for ourselves. We were given a single catechism and told to learn it off by heart.”

‘The Last Priests in Ireland’ suggests an overview of the Church today and its dwindling clergy. O’Hanlon interviewed a number of priests, including a missionary to Ireland from abroad who speaks of the loneliness of his calling.

The comparison with what is happening in Malta is too evident to ignore.

The influence of the Church and of its priests is dwindling in Malta as it has dwindled in Ireland.

Our Archbishop’s recent statement that he is in favour of  priests being allowed to marry was, perhaps, inspired by the dwindling number of men taking the sacred orders in Malta.

The parallelism between what has happened in Ireland and what is happening in Malta is glaring.