Issue link: https://maltatoday.uberflip.com/i/181770
22 Opinion maltatoday, SUNDAY, 29 SEPTEMBER 2013 Spending your way out of a recession T he recession that has hit Europe in the last few years has put macroeconomics at the forefront of many news bulletins. The great majority of us had never spared a thought for topics such as GDP, growth rates or unemployment rates until we started to feel the pinch. Four years down the line of the financial crisis we are now all amateur economists with 101 views on how the global economy, and indeed the Maltese economy, should be chivvied along the way to recovery. The first instinct, based on our experience at the personal and family level, is to decrease the amount of money we spend and in the meantime try to increase our income. That's what's happened since time immemorial – if the family budget is stretched, little luxuries are eliminated and one or two of the grown-ups in the family get a part-time job to earn more cash. It is basic economics but it is intuitive. However, economists are at odds as to how to revive ailing economies; Keynesian economists (after the economist JM Keynes) claim that in such situations the government should actually spend more money to revive an ailing economy, while others claim that the way forward is austerity, to balance the books. Like every debate, it is highly unlikely that the solution lies squarely in one camp or another. It is more likely that both are right to some degree. Reasonable spending while holding back on excesses is probably the key to economic success, both in the good and the bad years. What made me write my opinion piece about government spending was a CNN article I read online on Claudine Cassar the public health effect of Greece's austerity measures. The article describes the terrible effects brought about by the troika's insistence that Greece slash its healthcare spending by 40%, bringing down the country's expenditure on healthcare to 6% of GDP (as opposed to the UK's 8% and Germany's 9%). This cut led to a shocking 200% rise in HIV, given the excision of Greece's needleexchange programme for drug addicts and an epidemic of malaria – yes, malaria in Europe! – after pesticide programmes had their budgets cut. Besides the human cost of such ill-conceived budget cuts, it simply does not make sense to cut corners in areas that can backfire in such spectacular ways. Back in the 1990s, New York City slashed some US$120 million from its tuberculosis prevention budget, only to end up having to fork out US$1.2 billion to pay for an outbreak of drug-resistant TB. Apparently the troika did not learn from New York's mishap! I am of course not saying that governments should go on a spending spree like the ones of the 90s and early 2000s, which led to the mess we are currently in. Back then our government (along with most other governments in the developed world) basked in an economic growth spurt and spent like there was no tomorrow. The feel-good factor reigned supreme and trumped any other consideration. That is most definitely not what the doctor ordered. However the old adage 'prevention is better than cure' is one that we should always keep in mind when planning expenditure, and this does not apply only to healthcare but is true for various other sectors. Investing in education and welfare programmes, for example, is vital to foster a more productive society, which in turn produces a richer economy. Countries in northern Europe have managed to weather economic storms very well with their typical Protestant economic responsibility, as opposed to the Catholic PIIGS (That is Portugal, Ireland, Italy, Greece and Spain… OK Greeks are Orthodox… but you get the gist). Estonia, for example, recovered quickly from its own economic recession, brought about by a real estate bubble a few years ago. It cut spending, keeping the debt level at a manageable 10% in order to join the Eurozone. The low level of debt enabled the country to keep investing and spending, John Maynard Keynes while the recession was hitting Estonia's southern counterparts. The Estonians cut back state salaries and froze pensions, while our government gave state employees a pay rise without even suggesting an increase in productivity! The epitome of fiscal responsibility must be Norway. I know the country is filthy rich. It was blessed with enormous amounts of gas reserves, which makes one wonder whether God is a Viking or a Catholic. The Norwegians have enough money to lead a lazy existence while living off their God-given bounty. But no, that is not the way of the responsible Norse. They save the money their country earns from oil and gas in a sovereign wealth fund. They know their gas reserves will not run out in the near future, but they are already preparing for when the inevitable happens. They even make sure that the companies they invest in behave in an ethical manner, as they don't want their wealth to be hurting other people. There are some people who claim that the Norwegian government might be going too far and some more spending might actually be good for them. But in a typical Scandinavian way, the Norwegians weigh all options and don't take decisions based on emotions or spur-of-the-moment decisions. I am still trying to get to grips with the ins-and-outs of the European economic crisis, which thank God is showing signs of recovery. However, there is no doubt that it is neither austerity nor free-for-all government spending which is the secret to economic health, but fiscal responsibility. Spending is good when there is a good reason to spend. On the other hand, spending just to satisfy personal or national egos is a recipe for disaster. CHECK OUT CLAUDINE CASSAR'S LATEST COLUMNS ON http://www.maltatoday.com.mt/en/blogs Vocational education: learning by doing M ost adults have fond memories of their childhood years, and rightly so: it is a time of imagination, new horizons and youthful innocence. It is a time to explore and understand the world around you in order to find the passion you need for true fulfilment. However the reality among some of today's children and young adults is that they're back to the chair and table they'll be sitting at for the next nine months as they wind up on the receiving end of a one-way channel of knowledgebased waves. We expect them to sit there quietly and nod graciously. We expect them to be silent, and any semblance of a two-way street or interaction is seen as needless and noisy. After five months of this, they sit for an exam, and four months later they sit for another one, and we hope that some of the information we have thrown at them has stuck. They then do it all over again the following year, and for the next 10 years or so. We then arrive in postsecondary and tertiary education and look confused when there's no creative spark, a lack of innovative Evarist Bartolo ideas and no entrepreneurial spirit. Sometimes we have to ask ourselves whether children are successful because of the education system or in spite of it. Let's start by stating that there is no easy or quick solution to the current state of affairs. If we are to change what we have today we must look to the long term, which in education usually means a period of 20 years. Finland, which has built the envy of most education systems around the world, took 50 years to change its system to what it is today. However if you don't swim towards the shore, far away as it may be, you're never going to get out of the water. MCAST has been a positive experience, and at the postsecondary and tertiary levels we have managed to offer vocational training and education to many of our youths, who have gone on to develop fruitful careers in a number of industries such as aviation and maritime. We must not only keep the solid foundation that is MCAST but continue developing and building, which in the case of MCAST can also be taken literally. However we must also expand and propose new roads and focus policy changes to combat the ever-worrying early school-leaving rate, while making schools and lessons more two way rather than one way. One of these policy changes is introducing vocational education in secondary schools. Gozo will have the first secondary school to offer vocational education, and we are hopeful that over the coming years we can build on this and offer an increased selection of new pathways that our children can take based on their passions and capabilities. Offering new pathways does not restrict others from taking more traditional ones, but allows a wider variety for individuals to test their abilities and to find the right mix of talent and passion, which every parent would like their child to experience. Even university students are aware that they also need a real-world education and exposure to the workplace while they are studying. We must not let our students down. We must ensure that one of the aims of education is to make them employable by giving them the knowledge and attitudes they need. Employability is not just about finding a job after your formal education. It is also about ensuring that the syllabi and curricula also help employability by being relevant and up to date respecting what is happening in the real world. This new policy direction allows us to address the disconnection that a meaningful proportion of students face at the secondary level. It is a policy direction that Austria has smartly put into practice in past decades, resulting in high exports backed by a strong engineering, technological and manufacturing base. The fruit of such policies needs also to be seen in the wider context: it makes individuals more employable, and vocational education offers new pathways to a wide range of job opportunities. It also exposes our children to a wider educational and more meaningful experience, while offering new possibilities to those that today are being left behind. Evarist Bartolo is Minister for Education CHECK OUT EVARIST BARTOLO'S LATEST COLUMNS ON http://www.maltatoday.com.mt/en/blogs