Doing more for less: is the government right?

by Rafael Benzaquen

In chapter 23 of the book of Exodus and chapter 25 of Leviticus, the Lord exhorts the people to reduce agricultural output to zero every 7th year. Land was to be left fallow, following which the people would be rewarded with increased yields in subsequent years. A fascinating Biblical example of an artificially created recession in order to reduce price inflation.

The resemblance with current times is uncanny. Chief minister Picardo has also triggered an artificial recession, both in input and output terms. Not for inflation control purposes though, but for public health reasons.

To be sure, chief minister Picardo's enforced recession is far more severe than that required by the Bible. Exodus and Leviticus only foresee a recession in supply terms. The recession we are currently living through create a recession both in supply and demand terms. Bars are prevented from selling and patrons from buying.

Government policy finds other parallels in Scripture. Leviticus chapters 13 and 14 refer to a contagious desease commonly translated as Leprosy, with the duty of afflicted individuals to self isolate for 7 days. The difference is, of course, that the government has gone further by using self isolation to suppress both supply and consumption, in the promotion of public health.

The fact that our economy has contracted over the last 4 weeks and will continue to contract over the near future is therefore a given. Shops are closed and buying is restricted. Chief minister Picardo's challenge, of course, is how best to reinvigorate the economy against the backdrop where no treatment or vaccine against Coronavirus is yet available.

In recent statements, the chief minister, the chief secretary and minister Bossano have all made pronouncements hinting at a recovery based on what the chief secretary had termed as "more having to be done for less".

Predictably, the Unions have taken offence, whilst the GSD opposition appears to support the approach. But what does this mean.

Gibraltar will emerge from the pandemic with a smaller economy. The challenge for Fabian and his team is to grow the economy back to where it was before, as quickly and efficiently as possibly.

There are a number of ways of doing this. The problem is of course, that if we proceed as the Unions suggest and increase inputs, this will perpetuate the recession by increasing costs. For example, increasing the corpus of employees merely imposes an extra financial load on the employers. For sure more is being produced but at greater cost. This will have an inevitable effect on prices. Alternatively, employers might choose to reduce their margins by investing more of their capital to keep the business ticking over without making it perform better, but this will have an

inevitable effect on disposable income. The more of your money is tied up in your business, the less you have to spend on other things.

The only sensible way forward is what the chief minister and minister Bossano have been proposing. It is the only way of boosting supply while keeping costs down. In other words, the only sensible way of pulling Gibraltar out of recession has to be by making the economy more efficient. For example, let's assume a contractor seeks to expand his business. He's got one carpenter available. He can employ a second carpenter but this will increase costs and reduce his margins. Alternatively, he can make his carpenter more efficient by motorising his equipment. He will then be able to do more work in less time.

The Coronavirus pandemic has imposed huge unforeseen costs on our government. It is is incumbent on all sectors of our community, Unions included, to accept that the only way of nursing our economy back to health is by keeping a closed lid on new costs by making the economy perform more efficiently. The chief secretary put it as doing more for less. I would propose a better description as being."doing more for the same". It will help reduce gross debt and promote prosperity for the sake of our public health.