Finance chief's philosophy not suited to the times
So the chief of the nation’s Finance Ministry, Leasiosiofaasisina Oscar Malielegaoi, thinks that the worst of the COVID-19-led economic downturn may be over. Let us hope he is right.
But in an interview with this newspaper carried on Saturday, the Ministry chief made revealing comments about his philosophical view on the proper role of Government in the economy (“Economy to bounce back: Finance chief”).
In essence, Leasiosio said the role of Samoa’s Government was to create an environment in which businesses can operate but to otherwise get out of the way.
It is a philosophy that would make classic economic conservatives, such as former American President Ronald Reagan, proud.
But it is one that is also out of step with mainstream economic thinking about how to respond to the major economic downturn and the double blow of natural disasters.
Governments around the world have been increasing their role in their economies in an attempt to counter decreased economic activity by pumping serious amounts of money into their economies. Samoa, by contrast, has done, if not the reverse, a very pale imitation.
Our Government’s two rounds of stimulus packages, the last of which ended in June, were fractional when compared to the overall size of the economy.
In April, the Government passed measures totalling $40 million to stimulate the economy. The second phase II stimulus package amounted to $80 million, or less than 10 per cent of the nation’s budget.
We have written in these pages before about how many of these measures are put under the microscope the results are disappointing. They amount to initiatives such as discounts on utilities, payment holidays on Government fees and discounts on loan repayments. These are distinctly different from direct injections of cash into the economy that most economic stimulus is usually made of.
When asked if the Government would dip into its coffers to help businesses who were affected by flooding in December and again on Wednesday, Leasiosio was even more hard-nosed.
"Remember, when the last flooding on December 18 hit, the people said to give money to the private sector,” he said.
“If we had set a [precedent] after that happened, then every time [disasters happen], even if we have a hundred floods, they will ask for handouts because we have gotten them used to it.
"As I have emphasised before: the Government does not give out money. The only thing is the Government helps create opportunities and create an enabling environment for businesses."
We take issue with some of Leasiosio’s logic.
Samoa is not and never has been a purely capitalist economy in the vein of the United States of America.
But even in America, the Government has repeatedly stepped in to assist small businesses.
In March the U.S. Congress offered a loan package to the value of US$7 billion to small businesses across the country in an attempt to see them through the pandemic.
More recently just a month ago, the federal Government passed laws making direct payments of up to USD$1200 to families, major tax breaks to businesses, and more than USD$15 billion in direct loans to small businesses and venues.
But Samoa is not, and never has been a capitalistic dream such as Samoa.
Our economy does not run solely on individual enterprise and a tough-minded succeed-or-die philosophy.
Instead, assistance from overseas in the forms of donations and grants - as well as money sent from Samoans overseas - makes up a huge proportion of our economy.
In 2018 alone, foreign aid to Samoa reached USD$170 million or about 20 per cent of our total economic output.
We think it is a reasonable expectation that the Government should share this wealth, which has been donated to Samoans by our international friends, when they need it most.
What is more, the Government’s limited assistance to the private sector over the past year makes it stand out among its Pacific peers.
Government statistics released last week underscored this difference.
As other countries in the region, such as New Zealand and Australia have racked up record deficits to fund assistance packages, which have included programmes such as incentives given to businesses to not let people go.
Samoa, by contrast, has gone the other way.
Figures released last week show that the level of Samoa’s Government debt has dropped markedly as the economy has recorded major declines. The official Government debt for the June quarter for the 2019-20 Financial Year was $257 million lower than the year before.
The Government’s financial hand has been strengthened even further, it was announced in a December supplementary budget. The Government’s $42 million budget was composed mostly of a $24 million debt holiday from lenders in China and at the World Bank.
We must then ask why our Finance chief is so staunchly ideological when it puts him at odds with Governments around the world. He has also taken this view against the advice of eminent local economists such as Bernie Poort, the head of the Bankers' Association, who has called for more Government assistance for businesses.
Those paying the price for these convictions are the businesses of Samoa and the people they employ.
Leasiosio might be right when he says he believes the worst of the COVID-19 recession is over; what goes up must come down and the reverse is also true.
But the Government has had more than ample opportunity to offer assistance to businesses who have been hit by the twin tyrannies of the record, COVID-19 economic downturn, and flash flooding.
The businesses have done nothing to bring these harms around themselves and as we have said on these pages before, questions remain about the role of Government planning and engineering in preventing these floods.
The Finance Ministry says that this is the week that Samoa’s economy has turned a corner.
That might be true. But if so, how much credit can it be given for helping those Samoan businesses which do eventually survive the downturn when it is finally over? It has had no shortage of opportunities to do so.