I was hardly impressed by the Nationalist Opposition’s critique of the 2016 budget and of the present economic direction. It is clear that when the economy is on a roll, as is happening now in Malta, any Opposition will find itself constrained in the comments it can make.

However the Opposition should seek to present a thorough critique, even if it might not be well understood by the man in the street. It still would prepare the ground for what could happen subsequently.

For a government on top of an expansionary economy faces the temptation of adopting measures which could eventually brake economic activity in the short to medium term. This for instance happened under the second Fenech Adami administration between 1992 and 1994, when the economy was performing quite well. On the back of the optimism this generated, the government rushed to introduce VAT just after it had needlessly devalued the Maltese lira.

Few understood the warnings we then made from Opposition, till in a very short time, the prevailing fine weather became stormy.

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Greater expense, less investment

The danger is that even today, a sense of optimism – which itself within limits is necessary – could foster mistakes if it generates overconfidence. I am certain the government is aware of this and will ensure that it won’t let too much confidence lead it into a cul-de-sac, even if the Opposition continues to perform poorly when reviewing government positions critically.

Good times encourage the perception that recurrent expenditures can grow without too much trouble. This can only be true up to a certain point. Problems arise when, let us say, additional recurrent expenditures cannot be reversed in future; year in year out they will recur and increase. If growth in the economy or in government income decelerates – as will surely happen at some stage – the burdens of the additional expenses will be keenly felt.

They would be felt even more keenly should recurrent expenditures be meanwhile rising at a higher rate than public investment.  

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Rome and immigraton

“The Wall Street Journal” featured an interesting article by Mary Beard about how the Romans managed their immigration policies. Beard, who is one of the best scholars specializing in the history of Rome, wrote that the Romans would accept within their empire all arriving immigrants and refugees.

They were prepared to grant Roman citizenship in the most open manner. At one point, with a single decision, the number of citizens in the Roman empire increased by 30 per cent. On these lines, according to Beard, the Romans ran for long centuries a stable empire which huge as it was, remained prosperous and powerful.

However Roman history stretches over about two millenia. Immigration would sometimes be a source of significant instability at the borders of the empire. The Gallic wars for example were triggered by the migration of tribes moving towards the Roman province established on the other side of the Alps. At least that’s how Julius Caesar framed his account of what happened; he then used the threats posed by migration as an excuse to extend the frontiers of Roman territory.