Issue link: https://maltatoday.uberflip.com/i/1224129
14 maltatoday | SUNDAY • 22 MARCH 2020 NEWS ON Wednesday Prime Minister Robert Abela, flanked by his Fi- nance and Economy Ministers, boldly presented an unprece- dented 'mini budget' which in- cludes €200 million in direct op- erational aid to businesses, more than twice the promised €100 million in EU funds promised to the Maltese before the 2003 ref- erendum. This was accompanied by €700 million in tax deferrals and bank loan guarantees aimed at ensur- ing liquidity to the tune of €900 million. But in a clear indication of the government's social priorities, the package also includes an €800 a month unemployment benefit for Maltese and EU work- ers made redundant by the crisis, and a crucial €35 million more invested in health care. The package goes half-way in socialising the risks faced by businesses but not at the cost of bankrupting the country's fi- nances or undermining public expenditure on health, education and welfare. The question now is whether this Keynesian package goes far enough in avoiding a complete collapse of economic activity which risks having even bigger repercussions on the country's finances than over spending. Is the government being too fiscally conservative even in times of cri- sis? Ironically, up until yesterday it was business groups which ad- vised against government spend- ing. Not enough to save us Despite this unprecedented aid package, the reaction of busi- ness organisations has been a unanimous chant of "this is not enough". Travel group ROCS chief executive Colin Aquilina took to Facebook to express his outrage at the package, calling it a "joke" and claiming that it is "bound to fail". The argument is that the gov- ernment should have spent more on directly subsidising wages and not just ensuring liquidity through guarantees. Just a week ago, the reclusive Mizzi Group director Alec Mizzi took the unusual step of penning his opinion on social media. In a short paragraph, he managed to sequentially mention three anathemas for neoliberal doctri- naires: state aid, taxes and social solidarity. "Yes, the country may need to dip into its reserves and suffer deficits once more, but this is a matter of survival. Certainly, the EU will allow state aid, and all taxpayers will accept eventual new taxes to help us get out of this nightmare with as little so- cial and financial fallout as pos- sible. This is social solidarity in practice," he opined. But when it comes to imme- diate solutions Mizzi also put most of the burden on the gov- ernment, suggesting that all businesses forced to shut down should continue paying their employees "say 75% of their sal- ary", with 50% being funded by the government, and 25% by the employer. Other business organisations were more prudent, with the Malta Chamber of Commerce expecting bolder decisions from the government to "indi- cate clearly when it is going to dig into the country's reserves to make good for the hardships companies are currently facing and enduring through no fault of their own". Disaster capitalism under the lens The underlying lesson is that when disaster strikes, govern- ments are increasingly expect- ed to intervene to socialise the risks faced by business, whose exponents are normally averse to intervention. Even when re- acting to the latest package, the Malta Employers Association complained about government failing to cut down on its own expenditure. The risk of this approach is that to avoid economic collapse, gov- ernments end up spending tax- payers' money to bail out busi- ness instead of allocating funds to healthcare, and ensuring that the most vulnerable and exposed have some kind of safety net. The renowned writer and social activist Naomi Klein, author of The Shock Doctrine: The Rise of Disaster Capitalism, in fact noted how various governments around the world are "exploit- ing" the coronavirus outbreak "to push for no-strings-attached corporate bailouts and regulato- ry rollbacks". Still, unlike other economies impoverished by a decade of aus- terity policies, which crippled the health sector among others, Mal- ta starts with the advantage of being cushioned by an economic surplus and the blessing of a ro- bust national health system. Ironically, Malta's ability to dodge a wedge in the world econ- omy by exploiting citizenship and fiscal loopholes also endows it with a stash of cash, which can be used to make up for this emergency. While the morality of these schemes remains ques- tionable, putting these funds to good use now is imperative. However, one should still be wary of using such an emergen- cy to endow legitimacy to these schemes. While these may serve as a buffer for a small island de- prived of other resources, this sort of dependency may also have given us a false sense of security, of being insulated from the va- garies of the world economy. Saving the good businesses While bailing out businesses may be problematic, one cannot ignore the reality faced by small and medium sized firms which all of a sudden have had either to close shop or scale down opera- tions. For even though Malta is home to predatory capitalism, ex- ploiting cheap and disposable foreign labour (particularly in construction and tourism) or fa- vourable tax rates, most jobs in Malta are created by honest and hard-working small and medi- um-sized enterprises (SMEs) and small businesses who are now most exposed to the crisis. Faced with the prospect of mass layoffs as a result of a drop in economic activity, their demands carry urgency and legitimacy. For if a business suddenly has to cease (or downscale) its oper- ations, it cannot be expected to operate and pay the wage bill of its staff. Even the left-wing group Mov- iment Graffitti has recognised this reality while coming up with a very interesting set of propos- als aimed at both businesses and workers. Crucially, the NGO sug- gested that a government fund should be created to offer inter- est-free loans to private compa- nies, "especially so that these will be able to pay their employees". But the NGO also made one important consideration, noting that while it is commendable The unthinkable has happened. Facing bleak times, business leaders who generally shun government intervention are now unanimous in demanding state aid to rescue an economy struck by a virus. Is everyone a so becoming socialist or is socialism only needed when capitalism is at the brink? Asks JAMES DEBONO Has disaster turned our capitalists into socialists?