|
While working in the United State House of Representatives several years ago, I had the privilege of working with members of the Maltese delegation at the embassy in Washington. I admit my knowledge of Malta was sparse at the time consisting mainly of its history during World War II. But my interest of the islands’ history and its people rapidly grew beyond the serious trade and manufacturing issues I was working on directly.
Since that time I have attempted to keep up to date on news and events in Malta. Most items being reported, on the whole indicate continued growth and prosperity for the country. However, as an economist, a recent report gave me much to think about – Alfred Sant stated he would devalue the lira if the MLP was voted back into power.
Mr Sant was trained as an economist and has a degree from Harvard. Yet, he seems to have missed nearly half-a-century of growth in the science. The idea of big government taking care of each and every individual is a model that though not quite dead is nearly in its last breath in this world.
Economic and political freedom go hand-in-hand, but evidently this is not something Mr Sant realises. A belief in the abilities of the individual and freedom should be the basis for the beliefs of any modern political leader in a democracy. The recent statements by the leader of the MLP move a black cloud over the belief in freedom and the individual in Malta.
Countries that pursue policies that build confidence in the actions of their central bank and in their currency provide an environment for a stable currency. Combined with policies to keep inflation in check, individuals and business are free to plan and invest free of fear of those dark horses of confiscation – inflation and devaluation.
Mr Sant’s desire to devalue the lira amounts to a confiscation of money from the bank accounts of every individual, charity, club and business in Malta. For example, if Mr Sant decided, by fiat, to devalue the lira by 10%, 1LM would suddenly be worth 0.90LM. But as the rest of the world combined has more pricing influence on goods than does Malta alone, prices would remain the same. So, for example, if an apple cost 1LM before devaluation it would still cost the same afterwards – just priced at 1.10LM. At the same time the individual still has just one lira in his bank account but needs another 10% in order to afford the apple.
In attempt to “cure” problems with smoke and mirrors, Mr Sant’s imagined government would confiscate tens of millions of lira from the people of Malta whist instilling uncertainty about the future direction of currency policy. This uncertainty would have two major affects – hording of goods that would be perceived as having a chance of increasing in price and in the increased unwillingness to commit capital to investment in projects in Malta.
By proposing confiscation of the lira from everyone’s bank account and instilling uncertainty into the markets, Mr Sant proposes taking Malta back to the dark days of government nanny-ship. Personally, I believe the individual workers and business owners of Malta are smart enough to decide how and when to invest their own money without the government getting in the way. Unfortunately, the leader of the MLP seems to think otherwise.
Blair L. Fortner is a political consultant and trained economist. info-fortner@charter.net
|
