Edward Scicluna

Private sector is driving force

I would be a very worried minister and member of this government if the surge in Malta’s economic growth was solely, or primarily, due to uncontrolled government employment. But this is the picture which the Opposition is trying to depict. It is building its case through anecdotal evidence and questionable use of statistics.
The Opposition has one big problem though. It has scared the electorate with so many gloom-and-doom forebodings prior to the election should the Nationalist administration be removed from power, it is now lost when faced with one positive economic report after another, whether from the European Commission, the IMF or the rating agencies.
Rather than sinking to the bottom of the eurozone economic league, thus emulating Greece in asking for a bailout, Malta has instead gone to the very top.
Since the Opposition is far from convinced of the government’s fresh approach to economic thinking and direction and is quite sceptical of its firmness when it comes to fiscal governance, it truly believes Prime Minister Joseph Muscat’s success is pure alchemy.

 

“The Opposition is lost when faced with

one positive economic report after another”

During the first year, the Opposition’s economic discussion in Parliament and the media was wasted on a self-evident and accepted principle that the registered unemployed were expected to go up during an unprecedented expansion of the labour force participation rate.
They ignored the fact that the registered unemployed are only a poor reflection of the nation’s unemployment rate. But they held on to it as if it were the proverbial straw, only to be heavily disappointed when it was blown away by irrefutable evidence from several quarters, namely that employment activity was significantly up and economic inactivity was down.
The latest Opposition project is now to depict government employment as the primary, if not sole, cause of the reported economic successes. That it is all done at the taxpayers’ expense. It is ephemeral, almost a mirage; now you see it, now you don’t.
The case is primarily built on a pre- and post-election spike in government employment, no different to the one noticed in early 2008 and every other election before that. This phenomenon is observed in many countries and is known to economists as a political cycle. (Some of my research assistance income was earned estimating these political cycles for Canada’s public expenditure programmes at various levels of government.)
Add to this the new Prime Minister’s style of government wherein all government MPs’ hands were called on deck. This is a formula which keeps the government team united, focused and energised, in a positive sense of course.
That was lacking before and led to so much political instability.
The third leg is being sought in statistics, with its policy connotations. And here comes the serious part. This pro-business government is adamant to see the private sector as the main engine driving Malta’s economic growth. Period.
Public sector employment has a role to play in regulating the economy and providing or assisting only services where there is admittedly some form of market-failure: health, education, public transport.
This government is watchful, seeing to it that public sector employment does not go over its current share.
The same applies to the labour market where the employment share stands at 26.5 per cent, down from 26.8 per cent a year earlier. Keeping that share constant is the government’s primary aim. In time, as the economy grows, the public share would slowly decline.
The government is modestly pleased that economic shoots are being observed in the private sector including manufacturing. They are being nourished by strong private initiative which is revving to go if the government’s bureaucratic practices and monopolistic restrictive practices were to give them a chance.
Consumers, like investors, are bullish. They both have set their mind at rest that this government will continue on its stability platform and be ready to honour its promises and agreements.
The private sector is the driving force behind Malta’s current economic activity.
So when I saw that the leading sector in employment generation was being misreported as being public administration, just because about 3,000 government employees were this year reclassified, I was taken aback.
Year-on-year changes reported for April of this year show that of the 5,339 net increase in jobs, only 1,033 were in the public sector. The rest, 4,306, were all generated by the private sector. For every five new jobs, four went to the private sector.
No revision or playing with data can alter this stark fact. It is ridiculous to use the Arriva temporary reclassification, or any other reclassification, to alter this fact.
The three top employment generators during the past year were private administrative and support services with 736 additional jobs, private professional, scientific and technical activities by 617 additional jobs and, third, wholesale and retail trade, by 606 additional jobs. Public administration does not even feature among the top three best performers.
The government is rightfully proud that the private sector is the driving force behind Malta’s economic growth.

 

– Friday, September 19, 2014

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