Uncertainty has come to dominate the global economy as geo-economic shifts and geopolitical tensions upend long-held economic assumptions. The World Economic Forum, for instance, gauges the perceived level of uncertainty though regular surveys of chief economists from various sectors.  This year, it reported that 90% of them said that heightened uncertainty would likely have adverse impacts on trade volumes, GDP growth, and levels of foreign direct investment.

Malta's situation is somewhat more nuanced.  While Malta ranked second in the EU for economic optimism in June 2025, a year later businessmen in Malta said that they face deep uncertainty.  Almost two-thirds (64%) of small and medium-sized enterprises felt that the country was moving in the wrong direction, and uncertainty was holding them back from investing.

Unlike more tangible economic indicators like inflation rates and gross domestic product (GDP) growth, uncertainty is inherently abstract.  It cannot be measured directly, so economists often use proxy data such as surveys and sentiment analyses like those I have just mentioned to identify trends.

The post-war economic order, which had defined economic, financial, and trade relations for some 60 years, imploded because the system could not adapt to its own contradictions and deficiencies. It was based on tenets dear to many economists and liberal thinkers.

Democracy is self-correcting, according to the mantra, and markets know how to allocate resources and impose discipline; the rules ensure fair play.  Accordingly, those who hold these beliefs blame the destruction of the economic order on outside forces.  The rise of China, populist leaders, and technology have reshaped public discourse and caused a concentration of power, they claim. Their solution?  Improve democracy, free markets, and introduce more rules about how we should live with technology.

It is granted that China's successes demand that the rest of the world rethinks which political institutions work best.  But it is easy to blame al the current woes on China. Surely, climate and technology, for example, challenge the hubris and irresponsibility of dominant countries like the United States.

This explains why Eswar S. Prasad, in this new book "The Doom Loop: Why the World Economic Order Is Spiraling into Disorder," blames policy failures for a set of negative feedback loops in a global system that has fallen short on prosperity, security, and the fair distribution of power. As Prasad puts it, "The feedback loop between economics, domestic politics, and geopolitics is spiralling out of control and becoming destructive on every front, turning into a doom loop."

Being a Keynesian economist, I would argue that the outstanding thinker's legacy can help us navigate today's treacherous waters.  If only we go back to his original genius, we can see how his flexible economic models were crafted by observation and philosophy, and we can then apply his insights to the problems of 2026.

John Maynard Keynes discerned that the future is obscure and it is "better to be vaguely right than precisely wrong."  This remarkable insight refashioned economics in the 20th century, and it remains even more relevant today. Keynes's ideas still provide clues on how to address today's trade and external imbalances and financial disruptions, without resorting to blunt tools such as global tariffs.

Before Keynes, neoclassical economists saw the future as predictable.  He did not.  That is why he developed a distinctive theory of probability.  He described probability as the degree of belief in a conclusion justified by evidence. 

Keynes's deep analysis of uncertainty led him to award money a starring role in the economy.  He demonstrated that, rather than just a passive tool for barter, money is in fact a psychological refuge, though it can push an entire economy toward collapse when people flee to the safety of cash. 

Man's desire for cash is a moral flaw.  His "love of money" is a disease of the mind that starves the economy of life.   The "vampiric" quality of money unleashes a power struggle between those who lend and those who build.  This conflict, Keynes believed, defined much of human history.

For this reason, Keynes had no hesitation in concluding that it is rational to be "unreasonable" in hoarding cash when there is no reliable basis for making calculations about the future. But the realisation that money plays "a part of its own" in the economic drama   ̶    that it does more than merely lubricate barter, as previous economists believed   ̶   led him to ground-breaking new theories.

Keynes's initially proposed to emancipate economies from the Gold Standard that prevailed between 1875 to 1914   ̶   a period known as a "golden age" when major industrial nations pegged their currencies to fixed weights of gold.  Instead, Keynes developed his "Quantity Theory of Money," which promised to restore monetary "neutrality" through a scientifically managed elastic currency to fit the "needs of trade."

Realising that this mechanism didn't yield results quickly enough, he then wrote "A Treatise on Money," which considered the implications of money circulating at different speeds. He divided money flows into two types of circulation, one for what is now called the "real" economy, the other a "financial" circulation, which explained how asset prices and unemployment can rise simultaneously in the short run.

The Great Depression of 1929-1939 then led him to develop "The General Theory of Employment, Interest and Money," in which he showed how a collapse of investment is simultaneously a flight to liquidity, where cash is king.  This flight confers added value on money, what one might call a "liquidity premium" that causes interest rates to rise rather than fall.

We see the liquidity preference at work today. In fact, economists concur that it was at the root of the global financial crisis of 2008, the early-COVID-era dash for cash, dramatic swings in stock prices known as "flash crashes," and other recent market seizures. Could the next crash come from over-investment in artificial intelligence?

Already, there is a massive disconnect where tech hyper-scalers are projected to spend roughly $760 billion on AI infrastructure in 2026, while direct generative AI revenues are expected to reach only $80 billion to $150 billion. This spending surge has triggered fierce debates over an impending market bubble reminiscent of the late-1990s dot-com era.

Keynes would not have given money such a starring role had he not found something intrinsically immoral about it. To him, the love of money, far from being a rational response to uncertainty, is motivated by avarice, love of power, and love of gold (ergo the Americans get President Trump who has all three).

In Keynes's monetary drama, the love of money is Janus-faced.  It pumps blood into static economies, but the excess of it sucks the blood out of modern ones. He symbolised the vampiric quality of money by reference to the legend of King Midas of Phrygia, whose greed for gold was so intense that he starved to death.  So it is that money, rather than a rational necessity, becomes a psychological morbidity.

Keynes's proposed economic reforms reflected his view that the love of money is a disease of the soul.  Yes, money drives the economic growth that will free humanity from toil, but he advocates that government programmes should harness "the inordinate desire for getting wealth" to drive productive investment not just ordinary spending.

In my opinion, this outstanding thinker's legacy suggests various ways forward.

First, we must return to the question of the purpose of economic growth. How much more growth, and what kinds of growth, are needed to secure a good material life? Which economic system can best bring about the required conditions?  The answers to these questions are that economic activity should not be extended beyond what is needed for that purpose.

This is all too relevant to Malta's current condition.  Our economic growth since 2013 has been staggering, especially by EU standards.  But the headlong rush for growth has brought many problems: a creaking infrastructure, too large a population for the size of the island, massive transport problems, ever-higher levels of stress and anxiety, a feeling that if we get off the rollercoaster we will crash.  

Second, there is a sore need to disgorge hoarded wealth and use it for productive investment.  This means transforming stagnant cash or bank deposits into assets that build physical capital, fund businesses, and drive value-added.  Instead of sitting idle in low-yield accounts, these funds are channelled into tools like corporate stocks, bonds, infrastructure projects, or direct business expansions.

In Malta, bank deposits and savings accounts account for the vast majority of household liquid financial assets, with roughly 73%-84% of savers utilising standard savings accounts and over 96% of households holding bank deposits. It is reckoned that some €27bn are currently sitting idle in our banks.  Capital market or risky asset participation remains low, with only about 27% investing in wider instruments. 

Unfortunately, the commercial banks have become very risk-averse, while other savings institutions invest a large proportion of their funds overseas.   The ten largest insurance companies in Malta sit on €4bn, but only a tiny proportion of it is channelled to productive investment.  While 26% of the life insurance sector's assets are in bonds and cash, and 18% are in investment funds, equity assets account for just 15.5%   ̶   and these are total figures, so the proportion invested in Malta itself wouldn't be substantial. While the Malta Development Bank has made some impact, its contribution remains well below potential.

My conclusion is that, while it is hopelessly impractical to remove all economic uncertainty, reducing policy uncertainty as much as possible could actually benefit the Maltese economy. In this respect, a comprehensive approach to addressing uncertainty is very critical. By fostering adaptability and sound risk management practices, government working with businesses can better navigate the complexities of the economic situation and reduce the negative effects of uncertainty.

Frans Camilleri is an economist