A surreal atmosphere prevails over the Malta scene as Parliament proceeds to embark on the next budget exercise. On the one hand, you have the Prime Minister, Dr Gonzi, claiming that the government is “performing miracles” unnoticed by the electorate.

On the other, the groans about the increasing burden of taxation get louder and louder, and the general consensus is that most sectors have been set back, and many firms clamour for relief.

The challenge is to move forward.

Forward movement demands an understanding of Malta’s predicament. It means avoiding past mistakes. It means first resuscitating the economy, and then charting a course that would take advantage of fair winds.

Fundamental issue

Fundamental to all this is a clear grasp of the prevailing state of the economy, and why it has lost its competitiveness.

I have maintained, time and again, that the core problem derives from the Fenech Adami ‘money no problem’ philosophy, preached and practised with abandon for so many years, and still prevailing, at least in part, to the present day.

The motive behind all this was, initially, to create a ‘feel-good’ atmosphere. It was useful to keep the gravy train going, and to accelerate its speed.

It stimulated the appetite of the bureaucracy. Indigestion was inevitable.

As the government indulged in more spending, it had to rely on increased taxation. The State Leviathan became more voracious. So it resorted to more and more borrowing.

Telling statistics

Figures are more persuasive than words.

Total government revenue (tax revenue included) shot up from Lm221 million in l987 (approximately €540 million) to €2,466 million at the end of last year.

Total government debt escalated from Lm86 million (approximately €210 million) to €3, 723 billion during the same period. Central Government debt had catapulted to €4.246 billion by the end of last August.

Where and how were these resources employed – and this at a time when technology was making great strides forward and globalisation was gathering speed?

Looking behind the statistics, we do not find ourselves ahead in the competitive league table.

The traffic jams, the pollution of the environment, the growing number of restaurants and other places of entertainment, bear witness to the emergence of a large and growing middle class, which is the economic dynamo of society. Its aspirations to an improved lifestyle created a new market for televisions, computers, clothes, sports apparel and equipment, even holidays. The accent was on consumption.

Counter-productive measures

The government should have marshalled all its resources to boost production. Alas, in many ways, its policies were counter-productive. It created more and more quangos. Far from being frugal, it featherbedded its bloated bureaucracy. It siphoned off private savings to sustain its borrowing requirements instead of devising policies and incentives to promote private enterprise and initiative.

The strains began to show and, in fact, the harm done came into the open when the EU obliged Malta, on accession to the Union, to take countervailing measures in the form of a Convergence Programme. This notwithstanding, Malta never managed to free itself from the shackles of the structural deficit

The problem of stimulating enterprise and productivity, and achieving economic momentum by sheer competitive results in the global market, remains.

It calls for effective investment, for skill in acquiring technology from elsewhere, for a successful mix of macroeconomic and labour market policies.

Local entrepreneurs have to be weaned away from their propensity to concentrate on the local market and to seek their survival by eating from the same local plate. The answer is to be outward looking and to enrich the economy by augmenting its foreign earnings.

Government’s role

This is, of course, much sooner said than done, because no forward movement is possible unless the government orientates its policies and outlook in this direction. It is the government that can offer tax incentives, fertilise the economic climate, reduce the costs of bureaucracy, and clear the ground, where necessary, by way of diplomatic initiatives.

Alas, although the spirit is willing, the flesh is weak.

There has been no attempt to stimulate public discussion on this basic overall problem that stands in the way of Malta’s progress,

One would have expected the business institutions and trade unions to air their concerns persistently on this issue. The university and some of the bodies representing civil society could have taken the lead to launch an ongoing debate. The media, in particular, could have helped stirring the still waters.

Apathy has prevailed, leaving the ground clear for gladiatorial scuffles by political partisans.

Meanwhile, most of our productive, export-oriented firms are struggling for survival and some firms, which are supposed to be dynamos, are beginning to look like dominos in view of their projected weak growth rate.

Malta needs the sort of leadership capable of revitalizing the economic sector with a credible wake-up call.

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