We are living in times of global economic policy anarchy. The year that is ending has so shaken the entire world economic system and brought the whole world structure so near to total collapse that governments, everywhere, are throwing anything and everything into the struggle to keep afloat.

First we had the Lehman collapse, now universally acknowledged as a terrible mistake, then the domino-style collapse or impending collapse of just about everything, saved literally at the last minute by the massive intervention of governments with a massive bailout of the banking system. This has, so far, averted the collapse.

But it has also brought about a dangerous agnosticism as governments all over the world made U-turns, foreswore what had previously been their main economic beliefs. They forgot Milton Friedman and penitently turned back to Keynes, years after abjuring him. Doctrines of macro-economic stability were forgotten by governments terrified of the alternative scenarios of civil strife and breakdown, such as seen in Iceland, in Greece and in the collapse of the Belgian government and they pushed and kicked each other to open up their purse strings to, as they call it, seed the economy.

The worst case of how this works can be seen in the US, with a Bush administration on its last legs bailing out a car industry whose problems (like the problems of the banks, essentially) were self-inflicted, and crucially forcing the new incoming administration of Barack Obama to take a crucial and potentially painful decision next March when one or two car giants will most probably have to be declared bankrupt.

That, in essence, is what really is happening: in the absence of an accepted economic doctrine, those countries with a weak economic policy are taking decisions that will prolong and even increase the coming pain.

The anarchy reaches everywhere, even in the Ecofin council, even within the EU, even in what goes for public policy here in Malta, as populist urgings to the government to ‘seed the economy’, to stimulate the country, to protect the country from the impact of high oil prices, and so on, multiply and carry the day.

Instead of which, economics remains very much a predictable, unfortunately boring, and explainable science. It is increasingly clear how the crisis was allowed to grow by regulators and politicians who all mistook what they called ‘light touch regulation’ for what was actually complete irresponsibility.

It is equally clear how those countries, which in their ‘wisdom’ chose to follow their ways instead of the pain of coming together with the others, are now ruing their decision not to join the euro. Look at Denmark, at Sweden, and most of all, look at Britain. It is equally clear that not joining the euro was only one of a series of bad mistakes, made worse by years of deficit financing, as money was thrown at anything that moved – and no visible results were obtained.

When the crunch came, and governments started to throw money to kick-start the system, some had money to spare while others dug deeper into their empty pockets and deepened their deficits.

The coming months will tell us, as sure as day follows night, who was right and who was, and still is, wrong.

For the lesson that will inevitably be learnt will be the one that praises balancing the budget over any other consideration, (including that of joining the euro, were it not for the simple fact that the Maastricht criteria point along the same way). We will see how those countries which have balanced the budget will be less hurt by the recession and the crisis. Read in today’s paper the kind of medicine that has been forced down the throats of the citizens of Latvia: this is what we would have had to swallow had we stayed out of the euro or continued on the way of growing deficits.

But just as we have not balanced the budget so far, (as our page 3 story says, whether the end-of-year deficit will be e200 million or e271 million, or less), so too we will have to struggle hard, much harder than we think in our Christmas-drinks-befuddled minds. Along with balancing the budget, we must improve our competitiveness (where we together with Germany kept our wages low, but whereas Germany regained its competitiveness, we continued to slide. The Sterling’s decline obviously affects us far more than it does Germany).

Then we have our home-bred problems: a government machine that does not deliver, that increases its expenditure and even then does not deliver (look no further than Mater Dei Hospital, still a white elephant we did not need), an R&D spend that does not take off and which is so crucial for innovation, a top-heavy government regulatory network that hampers business and still does not deliver (look at Mepa and the countless stories one still hears about inexplicable delays). And a government that resolutely refuses to curb its growing expenditure patterns. Not to mention the mess we have in our environmental handling and our fuel-related problems.

All this carries a political message, of course, but the focus of this leader is on the handling of the economy in such critical times. We have taken some very important, crucial and right decisions, and we would have been far, far, worse had we listened to the siren voices and held off. But we now must move on, for we have much more to do. This is no time to rest on our laurels and pat ourselves on the back.