Agius and Agius

▪️ Agius and Agius ▪️ Old age pressures ▪️ Inflated claims ▪️ Motherly love

The campaign for the European elections is becoming great fun. The daily entertainment is being provided by a sitting Labour MEP, Alex Agius Saliba, and an aspiring PN one, Peter Agius.  The Agius and Agius duo have been at each other’s throat for several weeks now and the red lion and presumptive blue lion are giving us a fight worthy of the Colosseum.

The latest salvo was about the red lion’s petition requesting an investigation by the European Commission into the Maltese food import market and its impact on consumer prices.  The red lion has invited the blue one to join him in the meeting with the Commission.

“I am doing what I am doing because I want the Maltese to be given the same deal as citizens of other member states,” Agius Saliba said, having petitioned the European Parliament’s petitions committee to bring the matter to the European Commission’s attention.  Unfortunately, the blue lion had to decline because on the day he was going to do home visits.  He barely feigned his disappointment! 

Presumptive lion Agius criticised the red lion for having aired Malta’s issues “unnecessarily” in the European Parliament.  I sympathise with the blue lion’s short memory, when he forgot all the occasions that his fellow lions in the pride submitted complaints to all and sundry in the EU.  But all those occasions were not meant to embarrass the Maltese government, he hinted; only the red lion’s one was.  The thinking behind such a claim is extraordinarily convoluted.

Now, I too happen to have doubts about the red lion’s case, but not at all about whether he should have referred to the competition authority in Malta first.  He shouldn’t.  That authority is moribund and an object of fun.  If anybody can do something about uncompetitive or anti-trust issues in Malta, it is the European Commission.  Whether it will actually do so is still in doubt.

Another funny aspect of the squabble between the two lions is that the blue lion claimed that, by going to a European forum, the red lion was unnecessarily highlighting the “incompetence” of other red people.  How sweet of a lion in a deadly struggle to be protective of the other one.  No wonder, the Agius and Agius Saliba act is a moral on the somersaults of politics.

P.S.  Mr Agius Saliba will pardon me for taking liberties with his surname.  I know that for electoral purposes it is Agius Saliba, but for my purposes it was more opportune to use only the Agius part in referring to the duo.

Old age pressures

Italy, Finland, and Germany were among the countries which in 2022 had the greatest share of populations over 65 years of age   ̶   22-23%, versus an average of 21% in the EU.  By comparison, Malta’s ratio was 19%.

But, by 2050, the percentage of the world’s over 65 population will increase by some 10 percentage points.  In the EU, it will rise by almost six percentage points.  Greece will have the highest proportion of all, with a proportion of 35.5%, while Italy will have an average age of 35.1%. By that time Malta will have caught up with a percentage of almost 36%.

At the same time, life expectancy is increasing. It’s currently almost 81 years in Malta   ̶   that’s the fourth highest in the EU, compared to the lowest expectancy in Latvia, at 70 years.  However, by 2050, life expectancy will be 84.7 years in Malta compared to the highest, 84.8 years, in Spain and the lowest, 78 years, in Latvia.

Such population trends have implications for social security and other parts of the economy.  They will put enormous pressures on social expenditure, mainly pensions.  There is no way that the governments of the day can postpone introducing higher social security contributions or extend the pensionable age.

Photo: Kampus Production

Demands on governments and health providers to deliver greater volumes of care will grow because of potential escalating risks of disease among the elderly. The ratio of workers to pensioners is falling, which is also putting pressure on the sustainability of current pensions systems.  Today, 58.1% of the population aged 20-64 years in Malta have to support those aged over 65.  By 2050, the ratio will reach 61.4   ̶   though the lowest ratio in the EU   ̶   compared to the highest 109 years in Greece.

In addition, there is evidence that the ageing of the population affects labour productivity and labour supply. It can, therefore, affect economic growth, trade, savings, and investment.  In 2016 Shekhar Aiyar et al of the International Monetary Fund studied the impact of workforce ageing on European productivity and estimated that a one percentage point increase in the 55–64 age cohort of the labour force is associated with a reduction in total factor productivity of about 0.8 percentage points. 

Extrapolating that result forward, the authors estimated that the ageing of the workforce in the euro area could lower total factor productivity (TFP) growth by about 0.2 percentage points each year between 2014 and 2035. This effect is very substantial, given European Commission forecasts that most countries are expected to post average TFP growth rates of less than 1 percent every year over that horizon. To put it another way, absent the adverse impact of ageing, TFP growth could be higher by about a quarter over the next two decades.

The largest negative impact will occur in those countries   ̶   such as Spain, Italy, Portugal, Greece, and Ireland   ̶   where rapid workforce ageing is expected, and which also face high debt burdens. Malta is not one of them; that doesn’t mean that there will be no impact, but less of it.

Inflated claims

I decided to let the dust settle before commenting on the labelling, by the Chief Executive Officer of the Chamber of Small Enterprises (CSE), Abigail Mamo, of the anti-inflation agreement reached by the Government with importers and retailers as an “artificial intervention in a free market economy  …. unfairly singling out the food sector”.

This criticism came on top of an earlier statement by the Chamber of Commerce that the agreement to reduce the Recommended Retail Price of some 400 food items by 15 percent was “price-fixing”. 

Photo: Malta Today

Let’s start with the last claim.  Price fixing occurs when competitors reach an agreement (written, oral, or inferred from conduct) with the purpose and effect of raising, lowering, or stabilising prices for services or products. Under the free market principles underlying the economy, competitors should freely compete in the marketplace and individually fix their prices based on the market forces (supply and demand). However, when competitors form a price fixing agreement, it can prevent the proper functioning of market-based pricing leading to higher costs for consumers and less competition.

Now this is not an agreement strictly between importers and retailers reached behind the scenes.  It is one between the trade and the government.  Neither does it fix prices in such a way that retailers and importers cannot compete; nobody is forcing them to lower their prices by more than 15 percent should they wish so.  Nor is it an economy-wide agreement, because not all importers and retailers have joined it.  Lastly, it is not a legally enforceable agreement, because it was reached on a voluntary basis and it does not compel anybody to continue participating if the importer or retailer decides to withdraw from it.

Price-fixing normally takes the form of what is more properly known as Resale Price Maintenance (RPM).  This is a practice whereby a manufacturer and its distributors agree that the latter will sell the manufacturer’s product at certain prices (resale price maintenance), at or above a price floor (minimum resale price maintenance) or at or below a price ceiling (maximum resale price maintenance). If a reseller refuses to maintain prices, either openly or covertly, the manufacturer may stop doing business with it.  Resail Price Maintenance is illegal under EU law

The agreement we are talking about is more like a variation of the Recommended Retail Price (RRP). This is the price that a product manufacturer or importer suggests to the retailer of the product. It is often used to standardise a product’s cost across different stores and multiple sales channels and gives resellers a better understanding of the valuation of an item. Although the price is called “recommended”, retailers can still sell the products purchased from the manufacturers at the RRP, as well as below it. 

What the Government has done is to reach a voluntary agreement to reduce the RRP by at least 15%.  So, from a competition point of view, the agreement is not ”anti-competitive”, as the Malta Competition and Consumer Affairs Authority has pointed out.  It would have been anti-competitive had the parties involved abused their dominance in the market to stifle competition.

I found the statement made by the CSE’s CEO as particularly misleading.  She claimed that high inflation had occurred in the majority of consumption categories included in the Retail Price Index (RPI).  Wrong.  A look at the RPI for last year shows that almost 52 percent of the inflation was due to high prices in the food category, whereas all the other eight categories experienced much lower inflation.  Indeed, there was one category where prices were stationary, two categories which had a decline in prices, three categories with minimal inflation, and three categories with inflation between 10-13%.   

Where I agree with Ms Mamo is in her argument that the Government should think more long-term about how to protect Malta from inflationary prices.  This can only be achieved through structural reforms which have been mentioned by a number of stakeholders and by international institutions like the European Commission and the International Monetary Fund.  Unfortunately, the Government seems paralysed on this front whereas some economic operators themselves are happy to be coddled by protectionist policies.

Motherly love

A young man recently admitted in court that he had sent his mother a text message threatening to kill her when she didn’t answer his various previous text messages asking her whether she still loved him.  Magistrate Joseph Mifsud has not yet sentenced him as he awaits an expert’s report regarding the young man, who is said to suffer from ADHD.

Magistrate Mifsud was quite right to tell the youngster that “you only have one mother.  Cherish her!”  The court reporters did not say whether it had been revealed why the mother had not replied, nor whether she was among “the relatives” who were present in court.  But we do know that he lives with his father.

Could I venture to say that motherly love is a two-way process, requiring both the mother and her offspring to work at it?

Photo: Michael Burrows
0 0 votes
Article Rating
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments