Les Manison, a former senior economist at the International Monetary Fund, criticizes current government policies for favoring the elite while neglecting the welfare of the masses, resulting in widening inequalities and environmental degradation. Manison calls for a realignment of expenditures, increased investment in infrastructure, and optimization of social benefits to address these challenges and build a more equitable and sustainable economic future.
What are the main issues with the current government policies?
The current government policies are creating widening inequalities by favoring the political and business elite, neglecting the welfare of the masses, and contributing to environmental degradation. There’s a misallocation of resources, with excessive government spending on compensation, and insufficient public investment in infrastructure and social benefits. High inflation and interest rates, alongside wage stagnation and unaffordable housing, are further straining low and middle-income families.
Economic Management and Environmental Concerns
Under the current administration, policies are skewing to favor a select few over the greater populace. This trend is particularly evident in economic management and environmental stewardship. Abundant resources, sourced from taxpayers and expensive borrowing, are being channeled to compensate a growing number of government employees and advisors. Likewise, funds are being generously allocated to preferred contractors and consultants. Meanwhile, public investment is disproportionately aimed at bolstering the burgeoning automotive and tourism industries, which exacerbates environmental degradation.
On the financial side, government spending on “compensation of employees” soared by 14% in the first quarter of 2024, an increase that followed a 12.8% hike the previous year. Capital expenditures, however, plummeted by more than 16%. This imbalance indicates a shift in focus to budgetary excesses over public investment, resulting in a surplus that bolstered bank deposits to €5.5 billion by the end of April 2024.
Widening Inequalities and Misallocated Priorities
The current fiscal approach neglects the welfare of the masses. Austerity measures and a focus on fiscal surpluses do little to aid most citizens, while the political and business elite, along with their advisors and affluent pensioners, receive unwarranted financial gains. Inflation and high loan interest rates are causing a spike in the cost of living, hitting low and middle-income families hardest. Wage stagnation and the lack of affordable housing are compounding the strain, with social benefits failing to address the needs of those most deserving.
Contrary to the perception of economic progress suggested by GDP growth figures, the distribution of wealth is increasingly inequitable. Profits are capturing a larger GDP share, while compensation for employees is on the decline, except in the public and finance sectors. Private sector workers, especially those outside finance and insurance, have seen their real disposable incomes diminish due to inflation and rising taxes.
Recommended Policy Revisions
To address these challenges, immediate policy changes are imperative. The government needs to realign its expenditures on personnel to reflect the approved budget for 2024. Investment in infrastructure must be expedited to meet set targets. Social benefits should be optimized to support vulnerable and lower-income individuals effectively.
In preparation for the 2025 to 2027 budgets, a substantial overhaul of economic and financial policies is required. The Recovery and Resilience plan (RRP), along with EU-agreed reforms, should guide this restructuring. Moreover, an independent development financing institution should be established to appraise and finance large-scale investment projects, a strategy advocated by experts like Savvakis Savvides.
Furthermore, the tax system should incentivize investments in productive firms and discourage speculative property development and environmentally harmful activities. Regulations should be tightened to curtail property developments that flout environmental norms, and tax evasion and labor rights abuses must be addressed to phase out unproductive firms.
Addressing Corruption and Long-Term Economic Health
Corruption between government officials and private entities undermines fair competition and deters investment. To combat this, the government must ensure that legal authorities prosecute and penalize corrupt individuals, regardless of their status. This measure will curb corrupt practices and help narrow the widening inequality gap.
To secure the economic future, the government must prioritize investments in high-productivity sectors, especially as the working-age population is expected to decline. Reliance on low-skilled labor in key industries like retail and hospitality must be reduced to prevent wage suppression and to foster a more skilled workforce that can drive productivity gains.
By implementing these recommendations, the government can shift its focus from short-term gains to building a robust, just, and sustainable economic future for all its residents.
Les Manison is a former senior economist at the International Monetary Fund, an ex-advisor in the finance ministry, and a former senior advisor at the Central Bank.
How are current government policies impacting the wider population?
Current government policies are favoring the elite while neglecting the welfare of the masses, leading to widening inequalities and environmental degradation. This has resulted in high inflation and interest rates, wage stagnation, unaffordable housing, and inadequate social benefits, which are putting a strain on low and middle-income families.
What are the main recommendations for policy revisions to address these challenges?
Immediate policy changes are recommended, including realigning expenditures, increasing investment in infrastructure, and optimizing social benefits. Furthermore, an overhaul of economic and financial policies is necessary, guided by the Recovery and Resilience plan and EU-agreed reforms. Establishing an independent development financing institution and tightening regulations on property developments and tax evasion are also key recommendations.
How can corruption be addressed to ensure fair competition and economic growth?
Corruption between government officials and private entities must be tackled by ensuring legal authorities prosecute and penalize corrupt individuals, regardless of their status. This will help curb corrupt practices and narrow the widening inequality gap, fostering a more equitable economic environment.
Why is it important for the government to prioritize investments in high-productivity sectors and skilled workforce development?
Prioritizing investments in high-productivity sectors and reducing reliance on low-skilled labor is crucial for long-term economic health. This will prevent wage suppression, drive productivity gains, and prepare the workforce for future challenges, especially as the working-age population is expected to decline.
