Gordon Cordina

Economist

Gordon Cordina is a leading economist and Executive Director at E-Cubed Consultants Ltd.


Quo Vadis Melita?

Wednesday 07th September 2016

Malta needs an economic and social development programme. These are words that I am choosing very carefully.

I am using the word ‘programme’ for the sake of political correctness, because the prevalence of decades of Chicago-school economics have lent a tinge of obscenity to the word ‘plan’. Yet, we need forward-looking planning and programming because reliance on the free market to provide us with all we need is not realistic for Malta. The process of creative destruction can only work well if you have a lot to destroy in order to create something better. And alas, our economic sectors are limited in number, the extent of environmental resources is small, and educational institutions are very few. So we cannot afford costly mistakes in any of these, in the hope that something better will come out of them. We have to get it right across the board, and first time.

I emphasise the word ‘development’, not ‘growth’. Growth is having more of what we already have, which could lead us to less satisfied lives and often to sacrifices which we would later regret. Growth could become something of an addiction, as growth records need to be beaten time and again if they are to continue meaning anything. Development means transformation into something better, where our lives would be enhanced through learning, new experiences, better ways of working, better family and social interactions, with a better quality of life for all. Growth on its own may lead to surprisingly low dividends in terms of happiness, especially due to its tendency to be accompanied by increased poverty, at least in relative if not in absolute terms.

Growth is thus a tool for development, probably an essential one at that, but of course not a final goal in itself. We now have sufficient affluence to enable us to become a little choosier, questioning each growth opportunity in terms of its ability to deliver genuine development to the Maltese people.

I am of course thinking of the environment, which many have turned into a sacred cow with the same fixation with which the dirtiest capitalists are seeking profit. The confrontational style between growth and environment is not leading to development, but merely to a stronger entrenchment of fixed positions through which our best minds are being constrained from thinking outside the box in the pursuit of genuine win-win solutions.

But there is more to the issue than the environment. A key element is the extent to which individuals are finding opportunities to fulfil their aspirations in life, in terms of their aptitudes and attitudes towards work, social and family life. There should for instance be sufficient opportunities for those with an aptitude to work in manufacturing or crafts to realise their calling and talents, without these being viewed as second-rate jobs. Likewise, the hours and efforts spent on family life, or in volunteer work should receive equal recognition to those spent at work.

The terms ‘economic’ and ‘social’ are essential to the balance and complementarities to be sought. To my mind, ‘social’ represents the spectrum of needs, aspirations and problems to be solved. ‘Economic’ represents the tools from which we need to derive solutions. The only economics that we need to care about is that which brings forward effective and creative solutions rather than that which is limited to describe the dire state of the human condition or the impending catastrophes facing our society – solutions which need to be based on fulfilling a number of fundamental choices which our society urgently needs to make. Examples include:

• How many people do we want our economy to support by, say, 2030?
• What type of jobs do we want these people to have?
• How many hours do we want them to work?
• What kind of disparities in income and wealth will be acceptable?
• What will they consume, and how will they spend their free time?
• How will the elderly be more effectively engaged and how will we cope with fewer children around?
• How will they lead healthy, rewarding lifestyles with continuous learning and adaptation capacity?

As it is, without answers to these and other equally fundamental questions, the pursuit of growth, while commendable, cannot be used to reap the best outcomes in terms of development. This leads us to the need for a programme or plan, looking squarely and honestly at our long term aspirations and solutions.

Approaching this question from an idealistic stance is possibly the worst answer we can provide. We are not to emulate Nero, who burnt Rome over a few days to build an ideal world on top of ashes and suffering. We have to start in full recognition and respect of the situation which we are in today, with its many problems and not few opportunities, in order to make small, incremental improvements in the right direction.

And solutions cannot either be based on miracles to transform ordinary people into saints. Behavioural economics provides us with multiple tools to use the very base instincts typically manifested as greed or stubbornness to produce co-operative behaviour instead, which would lead to long-term and sustainable solutions. As long as we push the right buttons which give the necessary stimuli, and as may be necessary, kick to one and all.


George Mangion

Senior Partner, PKF Malta


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