PN economic vision: All hype with no beef?

It’s easy to get seduced by the futurist vibe of the Nationalist Party’s new economic vision, so reminiscent of the early 1990s when the PN had the discursive edge over Labour but which for years now, has been absent. But there’s as much blue-sky mumbo-jumbo inside to make Claudio Grech’s manifesto-like economic programme totally unintelligible to average voters.

Scrolling through the proposals, the sensation is that this party blueprint is aimed at pleasing all and sundry. After all an “economy for the people” assumes that there are no conflicting aspirations between the various classes and social groups in Maltese society. In fact it shares the same discursive sphere of Joseph Muscat’s own blueprint (which also inherits many features of the economic model pioneered by successive Nationalist administrations): Malta as a hub for international business, fuelling economic growth, creating wealth, eventually… eventually trickling down.

Its savvy author Claudio Grech – moulded out of the visionary IT and infrastructure ministry headed by Austin Gatt – seeks to temper a neoliberal inclination with an emphasis on sustainability, strengthening the country’s reputation and seeking less crude ways of bringing over business than simple acts like selling passports.

In his introduction, PN leader Simon Busuttil sums up his aversion to Muscat’s model, declaring that he is “not attracted to an economy which is intended to transform my country into a playground for the rich but one in which knowledge, innovation, entrepreneurship are given equal if not more importance than personal wealth.”

But ultimately when the bullet gets bitten, wealth redistribution is only an afterthought even for the PN’s brave new vision, a mere consequence of accelerated growth, with construction remaining the driving force of the economy.  

Trickle-down economics?

The document recognises the challenge that our economy needs to better address the distribution of wealth that is being created – to enhance welfare and alleviate poverty.  

It is here where the two parties converge: rather than redistribute wealth by increasing salaries (ie: private sector wage costs) the goal is to increase the size of the cake, and keep it growing.

Underlying this logic is the concern, shared by both parties, that any sudden increase in wage costs may well undermine present and future prosperity.

The PN proposes an “entrenched” mechanism that links any wage increases with productivity increases. While this makes salary costs sustainable in the long run, it undermines the idea of a living wage based on a right to a decent living, and ignores the multiplier effect that an increase in purchasing power has when minimum wage is increased.

In fact the document starkly rules out “zero sum pecuniary wage debacles” to instead favour “productivity enhancement”.

So it is unclear whether the party’s logic on wages being linked to productivity is at odds with the Cost of Living Adjustment (COLA) system, which links wages to the cost of living. Surely employers, through organisations such as the Chamber of Commerce, have long harped on linking wage increases to productivity enhancement. But trade unions warn that this could undermine the basis of a social contract which has served to secure social peace. 

Moreover, the only concrete measure proposed by the PN to entrench redistribution of wealth consists of a Private Public Partnership scheme to support low-income earners by seeking to increase their wages through productivity enhancement.  

Curiously, the document proposes “partnership with the President’s trust” in schemes to support low-income earners, and linked to productivity enhancement. This vague proposal suggests a relegation of active state social intervention to charity. 

This discourse on social enterprise is also reminiscent of David Cameron’s ‘big society’ and also reflects MP Claudio Grech’s own involvement in social enterprise through his foundation, which employs charity as a way of accelerating educational development.

The document suggests that “social enterprises” can move beyond charity to commercial activity in fields such as healthy lifestyle projects, integration of immigrants, the environment and social projects.

But while social enterprise may humanise bureaucratic and rigid welfare structures it may also result in the State absconding from its role. The document in fact treads carefully on this aspect, by proposing the identification of public sector functions, which can be performed more effectively in partnership with social enterprise. In this sense social enterprises will complement rather than substitute state action. But in a context of austerity, the big society may well be used as a pretext for reducing public expenditure.

Significantly, the PN omits any reference to precarious work and conditions, and ignores the entire debate on whether we should seek job security to avoid exploitation or adopt a Dutch model where highly rewarded part time work is seen as a way of achieving a good work life balance. 

On a positive note, in direct reference to the exploitation of cheap foreign labour, the PN’s document does speak about “stemming off the shadow economy in construction and waste collection and hospitality”.

Clearly this is a recognition that this shadow economy is contributing to a lowering of wages and standards.

It also speaks about the certification of workers in the construction industry, including immigrants, and speaks of the integration of migrants through the avoidance of ghettoes and shadow economies

Environment: All carrot and no stick

The PN document vaguely hints at tax incentives favouring businesses with a lower carbon footprint, which use land sustainably and who employ more people.

But the document does not propose any disincentive against those who persist in unsustainable practices. In this sense the PN’s document is full of carrots rewarding correct behaviour but lacks any stick. Even when it comes to water conservation the document pays lip service to sustainability but refrains from any mention of boreholes and ground water extraction.

When it comes to land use the document speaks of “cheaper and faster planning procedures” for those who respect the environment. But it is unclear how one can decide beforehand which developments have less of an impact on the environment, in the absence of any assessment. This could be problematic for developments, which may be beneficial in some aspects but problematic in others.

One example is the mention of positive discrimination in planning for projects, which create more open spaces. Would this apply to high-rise developments, which apply the floor area ratio to maximise open spaces?

Interestingly, the PN’s document links the environment to liveability – an innovative concept which relates to the everyday life of citizens.

Going underground

While the document emphasises that “Gozo has exceptional natural, environmental and lifestyle capabilities which should be leveraged in their own right”, the Gozo tunnel is seen as a way of mainstreaming Gozo in an integrated economic hub where the “development of underground space” is seen as a way “to intensify land use”.  Significantly, the document seems to discount the value of maritime transport through the expansion of ferry links.

Just as Labour proposed land reclamation (which the PN thinks is limited by sustainability issues) and high-rise development as a way to circumvent Malta’s spatial limitations, the PN seems to be tempted by the prospect of using Malta’s underground space, both for transport and basement development.

There must be some sense in the idea, for an underground transport system is less intrusive than a monorail and utilising underground space may increase the footprint of buildings without encroaching on open spaces. But such development also raises issues related to geology in a country which lacks a geological survey, and an entity to safeguard geological resources. Moreover the document overlooks the problems related to excavations and the creation of more construction waste, which comes as a result of this. 

Underlying the PN’s interest in underground development could be its concern that developers have deserted the party. The document makes it clear that construction should not be demonised but is also very clear on the need to restructure the industry towards regeneration of existing open spaces. But the document overlooks the vacant property issue.

Significantly, the party has deserted the right wing’s aversion to planning and speaks of a 10-year-plan for modernising the transport infrastructure of the country through what could be seen as Keynesian injection in the country’s economy.

One of the most controversial economic proposals, which impinge on the environment, is the reference to the need of a plan envisioning  “warehouse expansion” in the vicinity of the Freeport. The document proposes “widespread afforestation” as a mitigation for the impact of this development.

The proposal coincides with a development application by Harbour Investments Limited, a company owned by Hili Investments, which is seeking a permit for the development of 32 warehouses and offices in the Tal-Harrub and l-Inwadar area in Kalafrana, next to the Freeport.

Reputable actor in the global market

Innovatively, the PN’s document links transparency and good governance and the reputation of the jurisdiction with economic growth. 

Instead of lowering standards to attract the global rich, the document speaks of higher standards to make it more attractive for investment.

It also sets a benchmark for a future PN government: that of climbing the ranks of Transparency International Corruption Perception Index – a yardstick governed by an independent international institution.

It also links Malta’s attraction as a business district to liveability and a vibrant urban fabric, which thrives on culture, history, climate, and the “intrinsically friendly inclination” of the Maltese.

But the PN’s document does not question Malta’s reliance on gaming and the financial services sectors and also envisions attracting multinationals to base themselves here, without in any way questioning the fiscal mechanisms which make Malta so lucrative for foreign businesses that set up shop here. Whether having a fiscal edge on other countries co-exists with being a reputable jurisdiction may not be so clear in a world where tax evasion is increasingly frowned upon.

But while seeking to project Malta as a business hub, the PN’s economic vision also envisions incentives for the indigenous sector through tangible incentives to start ups and new companies.  

The PN’s vision also hinges on a futuristic vision where architecture itself serves to connect us through connectivity sensors to each other and the rest of the world, and where through e-citizenship people can share in the “benefits of economic participation without the obligations of physical citizenship.”