About four weeks ago, I had the opportunity to attend a conference organised by the Office of the President of Malta on the state of our nation. The conference opened with a recorded speech by the President of the European Parliament, Dr Roberta Metsola and ensued with the delivery of a speech by the President of the Republic of Malta, Dr George Vella, as well as a presentation on the main findings of a survey by Dr Vince Marmara.
The reason why I did not write an article about the contents of the conference was mainly to see how the electorate would react. In her speech, Dr Metsola questioned whether it is time for the Maltese authorities to examine the current economic policies that are impinging on our scarce resources. Obviously, as I had the opportunity to write in my preceding opinion pieces, we must use resources efficiently. Last year, in my podcast with Jon Mallia, I referred to the idea of the right to solar for those who might be dwarfed by the erection of a block of apartments adjacent to their renewable energy investments. In her speech, Dr Metsola spoke of the right to light as a source of energy for the EU to transit to a greener economy. Surely, I agree with the policy of the right to light and I was glad to see that this narrative is also being pushed by the European Parliament. The message conveyed by Dr Metsola on the right to light is coherent and in alignment with the EU’s Green Deal.
Certainly, what we need is to think differently. And we need to be creative to ensure that anyone negatively affected is also compensated. Undoubtedly, we must internalise the environmental costs and devise a clear definition of property and investments’ rights lest they are affected by third parties. What people aspire to is for the government to create wealth and to foster political and economic stability. However, their individual concerns must be addressed by having proper safeguards in place. Rather than changing the current economic growth model, we must take care of the needs of one another. Unless we are considerate towards each other, we can keep on changing our economic model ad infinitum. Plainly, it won’t solve anything.
Last week, I tried to explain that the standard international metric of wealth is economic growth, and not the other way round. To start transiting to a different economic model we must revise the international rules, otherwise economic growth as a standard metric, is here to stay, not just in Malta, but also globally. Dr Metsola’s political message was direct. The gist was grasped by those present in the room. However, it is worth mentioning that it is the European Commission, and not the European Parliament, who has the powers to change things. President Ursula Von der Lyen can issue legislative proposals. The Treaty is clear. The EU Commission has the right of initiative. They can propose policies through regulations and directives. Afterwards, they are sent for legal scrutiny and revisions to the two legislative arms, being the Council and the European Parliament.
In his presentation, Dr Marmara explained the results of the survey in a comprehensive style which was quite easy to follow. A panel discussion proceeded after the presentation of the results. One of the panellists questioned the Maltese economic model of GDP growth as an indicator of material wellbeing. The message conveyed on the day was incoherent when compared to international practices. After the panel discussion, questions were taken from those present in the room. When I was given the opportunity to speak, I reiterated that we must be cognisant of the fact that GDP is the denominator of most of the measurements used by the EU Commission for its quarterly forecasts and the governance of the euro including the six-pack and two-pack rules.
Hence, the economic policies are skewed towards attaining a higher economic growth rate. Not just in Malta but also in other member states. Otherwise, the European Commission puts a member state in an excessive deficit procedure or under strict monitoring rules. Unless we revise this policy, we cannot change our economic model, and neither will other member states. Yes, economic growth is what defines material wellbeing. It is a standard international metric, at least for now.
Additionally, the survey showed that people are planning less, nowadays. Obviously, it is understandable. However, it might be a temporary effect as we are still transiting from a global pandemic, which was followed by a war in Europe. The war is still ongoing and we have no clue when it will end. Surely, the war distorted global food and energy prices and proceeded to create additional social pressures due to persistent high inflation elsewhere around the globe. The world was not ready for it. Economic shockwaves are still experienced, and they seem to be lingering for a little longer. However, a member state can leverage its diplomatic relations with other countries and tap into new opportunities.
Needless to say, we do not need to wait for the EU to promote green policies. Our prime minister was in Tripoli last week to sign a Memorandum of Understanding with Libya for a renewable energy interconnector between the two countries. The preliminary agreement seems to be covering joint cooperation in the field of green energy. The idea is to create additional green energy investments thereby promoting the Mediterranean region as a green energy hub. It is an opportunity to create additional investments and perhaps stabilise countries through economic growth.
What I explained in my preceding columns relates to the efficient use of our resources. Clearly, we must compensate those negatively affected. In a standard economic model, the resources I am referring to relate to labour and capital. However, we should start including natural capital, as well as human capital in any econometric modelling, if we are to factor in sustainability. Undoubtedly, it is important to factor in such variables in the equation to provide for sustainability practices, especially with the newly proposed ESG metrics.
Frankly, I think that it is also worth exploring a common framework on how to handle future crises, including pandemics. The European Parliament and Council must push the European Commission to propose a common framework on how to avoid using abnormal occurrences as a pretext to consume supplementary powers. Member states’ competences must be clear, but so should the EU’s. Clearly, we require a Common Framework on emergency rules factoring in safeguards in case of tyrant policies. The way restrictive measures were imposed on EU citizens during the global pandemic, in certain member state, should have taught us a lesson on how to avoid exerting disproportionate powers.
Plainly, now that the EU is planning to transit to a more sustainable economy, it must explore the possibility of creating a common framework by also introducing clear safeguards for EU citizens. It is not just economic growth that we must consider but also the other political ancillary measures that do not foster wellbeing beyond GDP. Case in point disproportionate emergency measures.
Hopefully, next week I will try to dedicate an opinion piece on the situation that unfolded last weekend in Russia between the paramilitary group and the defence authorities.