Issue link: https://maltatoday.uberflip.com/i/741600
maltatoday, SUNDAY, 23 OCTOBER 2016 8 News Helping young people buying their first homes @MaltaGov THIS IS A PAID ADVERT Budget 2017 Budget 2017 crystallizes Joseph Muscat's economic vision: state intervention to distribute wealth, without harming business interests. What is the prime minister thinking? Muscat makes everyone a stakeholder in an unequal economy that is driven by profit, while ensuring that nobody feels completely left alone maltatoday, SUNDAY, 23 OCTOBER 2016 How Muscat ditched Robin Hood without forgetting the poor PRIME Minister Joseph Muscat has relied on the State to sub- sidise the income of vulnerable categories of people through in- work benefits and rental subsi- dies, steering away from auster- ity politics or being totally reliant on the trickle-down effect: which expects the poor to scrounge for left-overs falling from the tables of the everlasting rich men's buf- fet. Instead Muscat – a social demo- crat but inveterate pro-business believer – prefers a system where the rich can party on, while the State actively intervenes by top- ping up incomes to avoid resent- ment and "envy" among the poor. This is why Muscat shies away from redistributive measures that would directly redistribute wealth from the rich to the less well off. For the long-term sustainability of these measures relies on the continued economic growth of sectors like construction and real estate, which themselves may well continue to erode everybody's quality of life and the environ- ment. But in this way Muscat makes everyone a stakeholder in an unequal economy that is driven by profit, while ensuring that nobody feels completely left alone. Muscat reaps a political dividend: those on the receiving end of benefits remain grateful. Indeed, State paternalism can be more politically rewarding than rent controls or an increase in the minimum wage, today almost anathema for the business class. Strengths of a narrative Surely Muscat has managed to create a coherent political nar- rative, which reconciles limited and targeted State intervention through top-ups for low-income earners without punishing the drivers of economic growth. In this way Muscat can continue projecting himself as being pro- business without losing his social conscience (he calls it 'prosper- ity with a purpose'). The govern- ment relies, as expected, heavily on more indirect taxation such as the excise on non-alcoholic bev- erages (almost €1 million in ex- cise, and €600,000 from chewing gum excise), which hits rich and poor alike to generate its revenue. While excise is raised on cement and construction prefab concrete, Muscat can offer a reduction in stamp duty to whet the market's appetite to sell off housing stock. All this retains whiffs of Tony Blair's third way and Eddie Fene- ch Adami's Christian-democrat model, but Muscat's narrative is always geared to make his elec- toral bloc gel – both working class and business interests seemingly partaking from one large cake. A quandary for Busuttil It is a narrative that puts the Nationalist opposition in a quan- dary. For as a centrist party it is reluctant to support more radi- cal measures like rent control and an increase in the minimum wage. Instead the Opposition has jumped the gun by calling for re- ductions in electricity bills. While such a call may exploit a rift be- tween small businesses and the interests of big energy companies like ElectroGas and Shangai Elec- tric Power, it may fail to resonate in a context where energy bills have actually decreased in the past three years. In this Muscat was incredibly lucky, benefitting from a collapse in international oil prices. Busut- til's reaction showed that he is tapping into all niches which may be disenchanted by Labour poli- cies, ranging from the traditional Labour voter to small businesses, but he has so far not managed to convey an alternative narrative to Muscat's – which is not an easy task when considering that the economy is doing so well. Structural weaknesses In reality Muscat's business model depends on the current conjuncture of low energy prices and continued growth of the con- struction, real estate, tourism, fi- nancial services and gaming sec- JAMES DEBONO