The recent Budget was heralded by Prime Minister Robert Abela as "the best budget ever."  The ink had not even dried on it before he told a gathering of Labour followers that "the next budget will be even better".  Barring some unforeseen catastrophe, I would say both cases will be true.  But that is not my point today.  Instead, I want to concentrate on the concept of "abundance", which is implicit in the claims.

Some time ago, I had read the book "The Serviceberry: Abundance and Reciprocity in the Natural World" by Robin Wall Kimmerer.  In it, the author referred to the American Economic Association framework on economics. The AEA describes economics as "the study of scarcity, the study of how people use resources and respond to incentives."    

However, if one goes through a period of high economic growth and government largesse - as we have done over the last 12 years   ̶   it is easy to forget that there is still such a thing as scarcity.  So, Kimmerer's book reminded me of the hard fact that our whole economic system is built on scarcity, not abundance. 

Coincidentally, recently I also read the book "Abundance", written by The New York Times' Ezra Klein and The Atlantic magazine's Derek Thompson.   The authors quite rightly argue that, rather than chasing a fantasy called abundance, we must learn to cope with scarcity.  This also involves a heavy dose of institutional competence, complemented by the balanced reasoning of established economic wisdom. Klein and Thompson remind us that economic progress depends on reconciling competing interests through sound rules and predictable governance.

I fully understand that, especially when a general election is in the pipeline, abundance is a compelling political slogan.  The word has positive connotations and is appealing, especially at a time when other countries such as the UK, Germany, and France are engaged in belt-tightening.  While austerity has been the byword in the EU since 2008, it might appear that abundance has become the norm in Malta.  I wouldn't be surprised if "We deliver abundance" might be the PL's next billboard.

My considered opinion is that any worldview that ignores scarcity is generally doomed to fail.  There is a finite amount of land, even more so in Malta. We are already densely populated.  We are in the throes of over-tourism. The built environment is rapidly replacing virgin land and open spaces.  As of September, the total stock of licensed motor vehicles reached 454,140 and, unless it is controlled, will soon equal the population itself.  Human resources are under stress.  The infrastructure is not coping, and millions will need to be spent to upgrade it. The public financial wherewithal is heavily dependent on continued growth.

Abundance is the opposite of scarcity.  Instead of pretending that land is abundant, we should be doing the hard work of figuring out how to make the best use of it.  Cars or public transport?  Single-family homes or high-rises?  Thousands of low-productivity jobs or fewer high-value-added ones?  Two million quality tourists or five million low-spending ones?  These are questions that fancy slogans and wishful thinking cannot answer, but textbook economics can.

Most textbooks define economics as the study of behaviour in the face of scarcity.  Economic principles are a powerful tool to optimise systems with a view to achieving objectives subject to specified constraints - accounting for trade-offs, pricing externalities, and shaping institutions that provide incentives instead of stifling them. Granted, textbook economics do not provide a powerful rallying cry.  Instead, their focus on clear thinking about opportunity costs, efficiency, and welfare remains the best recipe for policymaking.

The interplay between supply and demand is a fundamental principle of an economic system.  The underlying principle is the assumption that money, goods, and market dynamics are all based on a zero-sum game, meaning that the system is finite. When a finite system is divided up, some have more, and others have less (that's the state of our unequal society). The only way to get more is to take it from someone else   ̶    that is, the better-off.  This implies that richer people will fight to keep what they have.  As a result, self-interest becomes integrated into people's thinking and shapes the values that influence how we live our lives.

Going back to "The Serviceberry", Kimmerer offers two examples of a gift economy: one where he harvests berries and shares them with friends, one of whom then bakes a pie with some of the berries and shares it with a neighbour; the other that of a nursing log in the forest which nurtures a new seedling by providing the nutrients it needs to grow through its decomposing compost.  A gift economy invites "enoughness" into our lives.  Not abundance, but enoughness.

Nature flourishes based on mutual exchanges between diverse species. Why can't people care for and about each other in the same way as nature?  Why can't we have enoughness as our model?  Do we need to buy the latest Apple i-phone costing some €1,200 when the previous model costing €900 did the job?  Why do we need to have four cars in a four-person family when they could share with three?   Why do we have to waste 162 kg of food per person per year when we could at least waste 30 kg less, like other EU citizens?  

Our solution is that what we don't do with each other, we leave to the government to do it.  Then, the government has to tax production and consumption in order to raise the revenue needed to help the less well-off.   The taxes serve to make payments to those who are at risk of poverty   ̶   living on the minimum wage or having an income that is less than 60 percent of the median. The definition of the less well-off is then expanded gradually to include people who are in the middle class and are earning around the median.  The government pays them energy subsidies, student stipends, and other benefits.  

I am not, by any stretch of the imagination, arguing against the Welfare State improving people's lot, but has anybody ever stopped to ask himself whether this is the right way?  It is a fact that tax rates have not increased, but the tax burden has.  In other words, the government is claiming a bigger share of taxes on income and production.   That is all well as long as income keeps increasing healthily, but if one asks what will happen if the economy hits a bump   ̶   like it did with Covid   ̶   one is likely to be accused of scaremongering.

I do not for a moment subscribe to the notion that, because of man's ingenuity and technological prowess, scarcity has disappeared.  The economist Thomas Malthus believed this was an eternal condition, that resource requirements for a growing population would always outsize natural resource availability. The social theorist Murray Bookchin and Buckminster Fuller, a pioneering polymathic engineer, agree that scarcity remains, but not as a result of natural conditions, as Malthus claims; instead, they suggest that it now persists because of social arrangements.

Buckminster says that technological innovations are fuelling a process called ephemeralization   ̶   an ability to produce "more and more with less and less."  We keep learning how to convert the stock of finite natural resources into life-supporting forms more efficiently, until our efficiency becomes such that we need not deplete resources at a greater rate than natural cycles regenerate them. The problem is that we keep asking for more and more.

On the other hand, Bookchin suggests we need to study the configuration of society, the dynamics, laws, and ideologies that govern resource flows, and ask if there's a better way to organize ourselves and our resources to achieve more desirable outcomes.  This is necessary if one believes that abundance is a fantasy.

Reading what some people are saying in the social media, I get the impression that the majority embrace the idea that our economic growth has brought about abundance, and they think that abundance means receiving an income high enough to afford all they need.  This is manifestly wrong because income is conditional upon labour, which is now scarce in Malta.   Rather, abundance has more to do with wealth and its distribution.

In 2023, total net wealth held by Maltese households was more than double that in 2010, increasing by €59.8 billion to stand at €105.3 billion. The growth in net wealth over this period was driven by the appreciation of housing wealth and the accumulation of financial assets.  Distributing that evenly across the entire population, there is enough for everybody to receive €186,899.  

The problem is that the share of net wealth held by households in the bottom 50% of the population declined from 14.3% in 2010 to 12.0% in 2023, whereas that of households in the top 10% of the population increased from 39.7% to 44.8% throughout the same period.  At the same time, households in the top 5% of the net wealth distributions also exhibited an increase in the share of wealth held, the share growing from 26.6% in 2010 to 31.7% in 2023. This implies a divergence in wealth held by the top and the bottom ends of the wealth distribution in Malta, hinting at increased wealth inequality.

I'm not advocating an equal distribution of wealth, but that gives an idea of where the problem lies. At the lower end of the income spectrum, increasing your income does little to increase your ability to increase your wealth. Moving from €20,430 (the median equivalised income per annum in 2023) to €40,800 might be a serious lifestyle change, but this additional income alone is unlikely to snowball into further gains.  Imagine, rather, going from €20,400 to $200,00k. Now, you can invest your money in bonds and shares, earn interest and receive dividends, or see the value of your investment appreciate, requiring minimal labour on your end.

It is clear that normal increases in income will not do the trick.  The free market will simply not deliver better income distribution.  With the right taxes (more progressive taxes, taxes on windfall profits) and incentives in place and with much better education, we can harness the upward momentum of capital to ensure a fairer collective distribution of wealth and abundance. Without them, history suggests our present course of high disparity will persist, if not increase.