The electoral razzmatazz is over, and the surviving political gladiators have withdrawn from the arena to lick their wounds. The spectators are back home, discussing the carnage, and wondering whether or not it was worth their while to attend to the spectacle. They have no answer to the question that haunts them. The question is: Has reality changed?

The answer to that question will not be forthcoming before the next general elections. At that fateful moment, the Maltese sovereign electorate will face the fundamental issue, namely how to extricate itself from its present predicament.

For some years, the Maltese economy has been bleeding and steadily debilitating. It has survived on its own fat, and continues to languish under the burden of a structural deficit and mountainous debt.

A government inebriated by ‘money no problem’ philosophy never seemed to care.

It seems like light years ago – in the early months of 2001– when the Governor of the Central Bank of Malta drew attention to the fact that “we have been living beyond our means for far too long (my emphasis) and the time of reckoning has come”.

That speech lost its sobering effect when it was delivered because the media were distracted and public opinion had no opportunity to assimilate the message. Neither did the Central Bank governor continue to press his point with the necessary persistence.

Red alert

The governor’s message was nevertheless a red alert. We are overextended, he said. He pointed his finger at a number of rigidities and inefficiencies in our domestic economy.

A point had been reached where the productive side of our economy remained fundamentally unable to generate enough earnings to cover the country’s import requirements. In other words, he pointed out, not enough of the country’s resources were efficiently dedicated to exports, which are crucial to Malta’s survival.

During the post-independence years, Malta had to switch from a fortress to a market economy. On the way, we aspired to construct an open, dynamic society, conscious of the need to achieve qualitative improvements in an atmosphere of social harmony. The process of change gradually gathered momentum in certain important respects.

Today’s imperative is to sustain and improve the rhythm of progress without jerks and avoiding zigzags.

We have proved that the tyrannies of space, and our population density, are not insurmountable barriers when it comes to improving the quality of life. Given singleness of purpose and resolute determination, it is possible to advance.

An outward looking mentality, creativity and flexibility are needed if we are to survive in an unforgiving world of cut-throat competition and, more importantly, if we want to ensure our rightful place in the sun by staying in the vanguard of development.

Traditional vocation

Malta’s traditional vocation as a regional centre, serving its neighbours on the Mediterranean rim and beyond, and the adaptability and aptitude of our people, could be exploited in this information age. But the going is tough.

The challenge put to the test, to a large extent, the willpower, organisation, enterprise and quality of Malta’s leaders.

Experience has proved that a market-oriented economy is not its own gravedigger. On the contrary, it could uplift an entire social structure, provided it sees to it that the wealth it creates is justly distributed.

There is a raison d’etre, of the social market – namely the market that recognizes and acknowledges its social obligations.

These obligations call for social solidarity, for fair shares, for the fair distribution of fiscal burdens.

It is one thing to whip up the necessary enthusiasm to construct an imposing edifice. It is another to ensure that the edifice holds together with the right mix of mortar. Providing the right mix is the tough challenge that Malta has been facing.

The challenge calls for decisive, if belated, action on a number of fronts.

Central theme

The central theme of the Central Bank governor five years ago was that Malta had been living beyond its means for far too long – meaning that it had been spending beyond its foreign earnings.

The first and obvious answer to this predicament is to try to increase our foreign earnings, not only by finding ways and means to attract more foreign investment, but also by providing pro-active formulas to incentivise the workforce.

Instead, the government has been far too slow in the uptake. It opted for redressing the situation by incurring greater debts, and by sustaining and expanding the volume of its spending.

That’s how the cook spoiled the broth!

Once the government has been in the red for so long, the least it could have done was to economise and to restrain public sector expenditure to some significant degree. It did the opposite.

The government’s ‘money no problem’ philosophy aggravated its plight beyond repair. Once Malta became an EU member, it was called to order and obliged to launch a Convergence Programme – another word for an austerity regime – to repair the damage.

Let alone the fact that the then Finance Minister wrote a few days after the clarion call by the Central Bank Governor that “it would be madness to continue to spend that which we do not earn, and to think that everything will sort out by itself” (In-Nazzjon, 31 March, 2001). What was worse was the government’s failure to lead by example. It did not reign in public expenditure. And it failed to manipulate the budget as an instrument of policy.

Fiscal sin

While Malta was “living beyond its means for too long”, wouldn’t it have been at once reasonable and profitable if it opted to tax extravagant and ostentatious expenditure, like newly-built sumptuous villas, yachts, high-powered cars and high-grade jewellery, instead to precipitating rises in the cost of bread, kerosene and public transport among other things?

In the intervening years, small businesses have been pushed to the wall by rising taxation. Thousands of middle and low-income families have come nearer, if not below, the poverty line, as their spending power has been eroded. The fat cats have remained on the prowl.

The electorate has absorbed the lesson that the wages of fiscal sin on the part of the government is penury.

Electors need reassurance to restore their faith in the politicians who contributed to their present predicament. That reassurance must come from the electorate itself.

After all, there is a proverb which says. “God gives the grain. But we must make the furrow”

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