In a recent Facebook post, former prime minister Alfred Sant commented on what he feels is dissonance between the favourable outlook rating agencies have of Malta and the general sense of disgruntlement in society.
Sant acknowledged that governments do experience bouts of widespread disgruntlement during the lifespan of an administration. But he also implied the disgruntlement was being made worse because of the “telenovelas” spun by the media.
The dissonance is real but Sant’s attempt to pin it on the media was a cheap shot that disregards the reality on the ground.
To start with, the disconnect can partly be attributed to the inadequacy of current economic tools to measure wellbeing.
A strong economy - measured by GDP growth, the country’s ability to keep public debt under control, and unemployment at practically zero level - does not automatically translate into better living standards for ordinary people.
Indeed, Sant himself has often questioned government’s economic rationale of importing cheap foreign labour despite the positive outlook of rating agencies.
He knows this rationale enabled Malta’s GDP to exceed that in most Eurozone countries, turn yearly deficits into surpluses (before the COVID pandemic struck), and bring down debt levels to below the 60% mark.
However, Sant can also understand that these positive macroeconomic indicators built on the rationale Sant has questioned have contributed to social unease and put immense pressure on the country’s infrastructure – roads, waste collection, electricity distribution, hospitals, the environment. These pressures and their impact on ordinary people’s lives are not measured by rating agencies, which explains part of the dissonance.
Added to this, there is also the issue of expectation. Over the past 10 years, a thriving economy and certain policy decisions taken by the government have left more money in people’s pockets.
However, the benefits derived from these measures have now run their course and runaway inflation is eating away at earned income. The pressure is not only being felt by low income earners but also the middle class.
The middle class is tangibly seeing its income being eroded and the only way to make up for the shortfall is to work more – either overtime or take up a part time job. Indeed, NSO figures released earlier this year showed a growing number of people in full-time jobs also holding a part-time job.
The middle class’s struggle to maintain its living standard is creating pressure on individuals and families that inevitably translates into disgruntlement.
Added to this is the growing feeling that government ministers have become more arrogant or detached from people’s concerns and aspirations. The Prime Minister’s refusal to hold a public inquiry into the Jean Paul Sofia death – he only capitulated when the country, including Labour voters, erupted into anger following footage from parliament of two hurt parents standing up to government MPs; the inept handling of power cuts during summer’s heatwave as a result of creaking infrastructure overburdened by the rapid population growth; the waste crisis and government’s lack of understanding of people’s concerns; these are only a few examples of issues that affect people in a negative way but are not measured by rating agencies.
Sant is correct to remark on the dissonance but falls short when he tries to pin the extent of the disgruntlement on the media.
There are a lot of other things happening that contribute to the vibe of negativity and rather than point its finger elsewhere, the government and its supporters have to look within themselves.
Only this week, Finance Minister Clyde Caruana made it a point to stress the importance of discipline in public spending. From a macroeconomic perspective, he is right to sound the warning and from the outside it sounded like a veiled message aimed at his colleagues in Cabinet.
But to be credible such a warning has to be accompanied by concrete action to curb unnecessary discretionary spending.
People are understandably perplexed when they hear Caruana speak these words and at the same time the Malta Film Commission acts as if money is not a problem and refrains from publishing the report that supposedly proves the efficacy of the cash rebate scheme.
People are also confused when despite Caruana’s warning, decisions are taken by ministers to employ people of trust on jobs that could easily be done by the civil service.
People are right to ask what happened to public funds poured into a government flagship project – the hospitals deal – that failed to deliver what it promised and was eventually scrapped by the courts over fraudulent behaviour.
These issues are not ‘telenovelas’ spun by the media. They are real events that also cause disgruntlement, especially when people start to feel their quality of life being eroded.
Rating agencies provide important information that business leaders find useful when making decisions on where to invest. It would be a mistake for the government to ignore the agencies’ findings and assessments but it would be a bigger faux pas if public sentiment is ignored.
In his foreword to the pre-budget document 2024 Clyde Caruana says: “Our economy does not simply stop at numbers… it is only when all levels of society are faring well that we can move forward.”
Not all levels of society are faring well despite the positive macroeconomic figures. The dissonance is real and requires immediate attention.