Last Updated on Thursday, 1 August, 2024 at 9:16 am by Andre Camilleri
Economists define “development” as a force for good, implying change resulting in growth and advancement to improve the quality of life for all citizens.
Sustainable development can be given an economic definition: one that makes a country wealthier, better educated, healthier. If this is the case, why do so many vociferously complain about excessive property development, nepotism and its impact on society? Is it true that development has rendered Malta more beautiful in the past 20 years? Answer yes, if development was a force for sustainable property expansion, the converse is, it can be harmful and undermines the quality of life.
The government and others tarnish with a broad-brush NGOs and activists, of being against development. This is not true. It is naïve at best to argue that activists are against a growth that betters society as a whole and makes it more prosperous. Populists embrace a definition of higher growth, which targets rises in gross domestic product, which in turn reflects a higher level of economic activity.
Our economic model is primarily based on numbers – cars, tourists, building permits, hotel rooms, property sales, income, and so on, all measured in monetary terms. Sociologists warn us to be cautious. Europe has a low fertility index and ageing population, which both lead to enhanced TCNs’ immigration, thus one hopes to balance in the long-term fertility rates or by working longer hours and retiring later, and even seeking technological advances to improve productivity.
Notice how western economies have a combination of lower labour output and a larger number of dependants. In Malta, imported cheap labour is extenuated to reach up to 95,000 or one in six of the population. These have become an essential element within Malta’s logistics industry, with their input being crucial for its ongoing development and prosperity.
Castille maintains that by embracing the skills and abilities they offer, this helps the business community to address hurdles while advocating for fair and inclusive employment practices. In the private sector, the share of foreign workers is at times higher than that of the public sector, such that one in four firms reported that more than 50% of their employees are non-Maltese.
The number of unemployed last month climbed to 9,865 from 7,820 in June 2023, while the unemployment rate remained practically unchanged in percentage terms however at 3.1%, down by 0.1 percentage points from the previous month and up by the same margin from June 2023.
Our fly in the ointment is education. This is not gearing up sufficient students particularly conversant in Stem subjects, as 20% failed their Matsec exams. Many express concerns that automation and artificial intelligence would soon drastically change employment and new recruits would have to be equipped with specialised and specific set of skills if they want to venture out into tomorrow’s careers.
Moreover, as AI improvements in productivity flourish, a smaller labour force will struggle with increasing demand from consumers wanting quality goods and services. Is Malta Enterprise’s board of directors sharpening their efforts to succeed in attracting businesses with high IP values, investment and talent to the country.
On a positive note, it is a sigh of relief that energy minister Miriam Dalli said the government has pledged €60m to support businesses and start-ups investing in research and innovation, skills, digitisation and energy efficiency.
These will be disbursed through schemes by Malta Enterprise and include the continuation of myriad schemes such as Business Development, Business Start, Innovate – Innovation Aid for SMEs, Rent Subsidy scheme, Research and Development, Skills Development, Smart and Sustainable Investment, Start-Up Finance Scheme, Micro Invest and the Get Qualified scheme. By extension, stop and reflect how the Keynesian theory became the ultimate goal of post-war economic theories. Unlike other forms of economic theory in the early 20th century, Keynesianism envisaged a large role for the state in achieving that end. Governments were supposed to run large deficits (that is, spending more than they collected in taxes, as is the case in Malta) during downturns/slowdowns to prop up the economy, with the expectation that they would pay down the accumulated debt during the good times. The Keynesian paradigm collapsed in the 1970s.
The persistently high inflation and high unemployment of that decade (stagflation) baffled mainstream economists, who thought that the two variables almost always moved in opposite directions. But bigger impacts of the post-pandemic, the Russian war and the Middle East hostilities, have applied brakes on the demand side.
Our targeted fiscal-stimulus programmes mean that public-debt-to-GDP ratios continue rising. Yet these factors, alarm the Commission so long as we are reporting an annual deficit exceeding 3% of GDP. We have been faced with an order to mend our ways in a structured approach to curb an excessive deficit mechanism.
Our government gingerly aims to reach a level of €13bn in national debt by the end of the legislation. This is not sustainable, unless future generations put up their socks and skip the queue by exploiting AI; thus, work harder and do more with less.
George M. Mangion is a senior partner at PKF Malta
