Red flag, red bag: Comrade Clyde rediscovers the S-word

“Our heart was, remains and will always be socialist” – so declared finance minister Clyde Caruana in his no-pain budget for economic stability and alleviation of poverty. No big lurch to the left was noticeable in the budget itself – but – semantics and gestures are important in politics.

And clearly, even sporting a brand new ‘colonial red’ budget box (paid by his own cash to take back home once he hangs up his finance shoes) and muttering the S-word a few times, Caruana has sent a clear message to those in the grassroots who feel unease with the party’s reinvention as a big-tent ‘Nationalist-lite’ party under Robert Abela.

Re-exhuming socialism

Ever since the party started toying with building social alliances beyond its working-class core, the party has downplayed socialism and its legacy.

This started with Alfred Sant’s successful bid to power in 1996 when he sensibly broadened the party’s working-class appeal to a broader one by appealing to voters as citizens, albeit retaining an antagonism towards the “baron” class of Maltese businesspeople.

Under Joseph Muscat the party went further in proclaiming its “pro-business” credentials and underlining the party’s “progressivism” in civil liberties but negated any class antagonism, except when hitting hard at the elitism of the opposition. As for socialism, the party even stopped paying its membership in the Socialist International, with Muscat toying with shifting his allegiance to Emmanuel Macron’s umbrella group in Europe.

Even despite his kinder disposition towards liberalism and his own flirtation with the barons once denounced by his predecessor, Muscat remained popular with his party’s grassroots: his demeanour remained that of a fiery and combative Labour leader facing the dreaded Nationalist-aligned establishment.

Robert Abela on the other hand, obliged to distance himself from his disgraced predecessor, cannot deny his patrician roots as a lawyer-politician, making him more vulnerable to criticism that he has forgotten his socialist roots. Now facing a zombie opposition on the centre-right, the party seems more concerned with those in its ranks who do not recognise the party anymore.

Roughly, they can be broken down into two distinct categories: those alienated by collusion with big business under both Muscat and Abela, and folkish types who remain loyal to Muscat and a socialism rooted in a classic antipathy of PN-associated elites. The answer to this is to emphasise rather than hide the party’s supposedly socialist roots.

Ironically despite being himself an architect of Muscatonomics, it is the unpretentious and frank demeanour of Clyde Carauna, which gives this rediscovered socialist trait a degree of authenticity. For Caruana resonates with a new generation of more educated Labour-inclined voters whose loyalty the party cannot afford to take for granted.

Fair yes, socialist… not so much

Did Caruana even really present a socialist budget?

For sure it was a budget marked by sobriety and a degree of fairness. Given a choice, Caruana opted to spend more money on cushioning the vulnerable from inflation, while postponing the tax cuts promised by the party in its manifesto.

Still, one cannot but notice that while wages remained stagnant in these best of times for business, it is the government which is now shouldering the burden, by introducing a separate mechanism which would see low-income earners get a direct cash injection of around €200 before Christmas.

The risk is that such measures are perceived as acts of government generosity rather than a recalibration of the economic model towards greater social justice. And for all his frankness and meritocratic talk, Caruana did not shy away from taking credit for a controversial tax refund cheque just days before the last general election.

Another sign of Caruana’s socialist pedigree is the clampdown on tax evasion. And in this aspect Caruana has shown that he means what he says: securing an extra €120 million in the public coffers in the past year thanks to stricter enforcement and increasing interest on unpaid tax.

But largely absent from the budget is any hint of redistributive taxation, one of the hallmarks of social democracy in western Europe. Instead, Labour is one of the few parties on the left which prides itself on not introducing any new tax. But one may ask: why inflict pain when there is no need to do so? For  in Malta is still able to square the circle – that of spending more without taxing more, simply by increasing the size of the economy.

For this budget hinges on an increase in public debt, which remains within sustainable limits and less than the 60% debt to GDP ratio, which means Caruana has enough room to wiggle, unlike many of his colleagues in Europe in countries with higher-debt ratios who have to choose between higher taxes or painful spending cuts.

But Malta’s success is also the result of a model where increased social spending was made conditional on economic growth, triggered by sane labour market policies to increase female employment, but also by endless construction and exploitation of migrant labour. Ironically it’s the same model questioned by the finance minister himself when he warned that: “If we adopt the same recipe, in the morning, rather than being stuck for one hour in traffic, we will be stuck for one-and-a-half or two hours; the tourism sector will invest in hotels that will remain empty, and this will apply to other sectors eventually.”

Caruana’s quandary

It is here that Clyde Caruana is in a quandary. It is thanks to this model that he has enough room to spend his way out of a pandemic and the inflationary effects of war in Europe. For it was during this period of unprecedented growth between 2013 and 2019 that public debt was cut down from 70% of GDP in 2012 to 43% in 2019.

Yet Caruana and Abela also face the first clear signs of discontent over the social and economic consequences of this growth model. It is here that an ocean still separates words from action. Malta may well be too addicted to its growth model to be in a position to change it in a time of global instability.

Still, following his wake-up call on the unsustainability of the current model, one still expected Caruana to give a glimpse of a new one in his budget. Surely the country cannot afford a sudden change in its direction right now at a time of crisis. But a bolder use of fiscal measures, aimed at gradually changing the overall direction, would have been expected. And Labour’s aversion to taxation may well be Caruana’s greatest enemy, as it leaves him powerless.

For example: in the budget he recognised that traffic is one of the greatest challenges facing the country. But it falls short of addressing this problem, apart from suggesting that some services are not provided in rush hour. The only exception to the aversion to fiscal pain – even where necessary – is the decision to increase gate fees for landfilling, as recently suggested by the European Commission. The same logic could be applied to other sectors, including construction, exploitation of groundwater sources, and even traffic.

And while the government is right in shielding Maltese families and businesses from the hike in energy prices, it is questionable whether petrol and diesel should be subsidised at the same level as electricity for households.

It is positive that white elephants like the Gozo tunnel have been shelved, but investment in a mass transport system – of which no mention was made in the budget – remains crucial, even when its cost might not be as prohibitive with a hybrid of dedicated bus lanes and tinkering with existing infrastructure.

Such public goods come at a cost: but socialism is not just about handouts, but also about delivering the public services which make the life of the many better.