Jean Monnet, one of the founding fathers of the European Union, famously predicted that Europe has been forged by crisis. But what makes the crisis engulfing the continent today, so grave is that it has three interlocking dimensions: geopolitical, economic, and institutional. It’s a crisis that cannot be resolved solely by more borrowing or a blizzard of new rules from Brussels. It requires a complete change in mindset. Are Europeans really prepared for such a leap?
Mario Draghi – former European Central Bank President and one of Europe’s great economic minds. was tasked by the European Commission to prepare a report of his personal vision on the future of European competitiveness. The report looks at the challenges faced by the industry and companies in the Single Market. It outlines how Europe will no longer be able to rely on many of the factors that have supported growth in the past and lays out a clear diagnosis and provides concrete recommendations to put Europe onto a different trajectory. The Draghi report originally identified three necessities for the EU to boost its competitiveness:
The report spells out how the European Union will boost innovation by:
But how does Malta rank in innovation. It now ranks 12th among EU Member States, firmly within the “Moderate Innovators” category and edging close to the EU average. In some areas we have become leaders. Since 2018, the number of foreign doctorate students has surged by 294 per cent, while non-R&D innovation spending, and trademark applications continue to strengthen our position as a hub of creativity. Regrettably, the island’s public and private R&D expenditure continue to lag far behind the EU average, while venture capital availability and support for business R&D remain among the lowest in Europe.
The number of new ‘home grown’ doctorate graduates is also a persistent weak point. If we are to fully realise our Vision 2050 strategy, we must not only continue improving in innovation adoption but also invest in the foundations of research capacity, talent development, and long-term funding mechanisms. This leads us to the next topic of productivity. Are worker output the best we can achieve with our engines firing on all cylinders? Productivity growth is important because it allows an economy to produce more goods and services with the same amount of labour, serving as the primary source for increases in per capita income and higher living standards over the long term.
Higher productivity can lead to increased economic output, which may help support a growing population by providing more goods and services. However, if as is the case, population growth outpaces productivity gains, it can strain resources and economic stability. It is not popular jargon in Castille that productivity is a foundation of prosperity. The only way a country can raise its standard of living sustainably is to produce more with existing or fewer resources. However, everything else about productivity is surprisingly complex to us. We know that productivity must play a more important role in driving sustained growth as our societies age and having a low female fertility rate. Especially vexing is the sluggish growth being a way of measuring how efficiently businesses turn capital and labour into output, the part that basically captures innovation and technology.
While innovation is exactly what’s needed to revive productivity growth, it is not sufficient on its own. New technologies and digital transformation, notably artificial intelligence, have the potential over time to underpin a major surge in productivity. Ultimately, as Nobel laureate Edmund Phelps writes: a productive society should allow people to enjoy “mass flourishing” from the grassroots up. Back home, it is a favourite trick of politicians to promise economic growth to flatter our ego how never to worry how to pay debt mountains. Debt is only one-half of the debt-to-GDP ratio; while increasing output can be as good as shrinking what you owe. In the mid-20th century, Malta witnessed the catch-up of a baby boom, a late rush of women’s entry into the workforce which was partly the result of smart ideas such as the expansion of secondary education, provision of free childcare centres, generous children’s allowances and free school transport.
Today, as can be expected in the productive race there is no free lunch, while the low-hanging fruit has largely been picked. But our politicians still pin hopes on growth to shore up public finances. The left tends to favour more immigration (the decor politicians flood gates by unlicensed temping agencies for over 100,000 TCN’s ), which is seen as a natural response to the problem of an ageing society and the urge to increase domestic demand, ergo GDP. Unfortunately, population gains are unlikely to replay today’s burgeoning state debt.
As Malta continues to build its reputation as one of Europe’s emerging technology hubs, local…
While Malta's recent major worry is concentrated as to whether grass will grow through a…
Last week I asked a question on my social media that may sound simple but…
‘Customer experience is our compass’ – Kenneth Farrugia, BOV CEO Bank of Valletta (BOV) reaffirmed…
Student enrolments in post-secondary and tertiary institutions during academic year 2023-2024 increased by 4.6 per…
Last week, I gladly accepted a series of interviews because I felt it was time…