The Times, Friday, 10th December 2010
In the past days, various important statements were made about Malta’s economic situation. Michael Bonello, the governor of the Central Bank, said that in order to be sustainable, the Maltese economy needs to reduce public expenditure. At the same time, the International Monetary Fund said that even though Malta was not hit very hard by the economic crisis experienced by other countries, the Maltese economy faces risks in sectors such as finance and property.
In the meantime, as I already had the opportunity to explain in my previous article in The Times, the United Nations Development Programme placed Malta in the 33rd position on its Human Development Index in a list of 169 countries. The index combines income per capita, education and health.
The Maltese economy therefore has its upsides and downsides. I might not agree with certain proposals made by Mr Bonello but I surely agree with him when he says we cannot act as if we are not part of the world.
Any talk of the economy which simply ignores the global context does not make sense, especially for Malta which is one of the most open economies in the world. The same holds for talk on the economy that simply ignores the ecological context. By way of example, I shall refer to three vital issues related to the Maltese economy: land development, water and pensions.
In this regard, it is plain wasteful that Malta does not have policies aimed to reduce property speculation and unlimited construction. About one out of every four properties are vacant in Malta. Is such a situation sustainable in such a small and overbuilt country? Fiscal policy can surely help discourage speculation, for example by taxing one’s vacant property from the third one onwards. Such a mechanism would encourage the renting or selling of such property, which would otherwise be kept vacant. Unfortunately, one cannot expect the introduction of such a policy from political parties that are financed by construction magnates.
Another issue which deserves priority is that relating to water. Malta is one of the driest countries in the world, yet, we keep acting as if we have an unlimited supply of water. The biggest irony is that there are about 8,000 private boreholes through which groundwater is taken for various uses including the production of soft drinks, animal husbandry, manufacturing, swimming pools, agriculture and gardens… all for free!
This takes place while all people connected to the water supply of the Water Services Corporation are charged for their metres and water consumption. In a few words, precious groundwater is being stolen and this amount exceeds the amount produced by WSC through reverse osmosis plants.
In the short run, all unregistered boreholes should be banned. In the longer run, save for some strategic exceptions such as agriculture, the true price of water should be reflected in its consumption. WSC should have full control of all water production, which should then be redistributed according to the country’s priorities.
Another pressing issue relates to Malta’s demography. Given that people are living more, which in itself is a major socio-economic achievement, it is clear Malta’s pension system has to be reformed in order that sufficient funds are available for its financing. In simple words, at current trends, in a few years’ time, the ratio of pensioners depending on contributions by workers will increase so much the contributions of the working population will not be enough to meet the pensions.
Hence, in order to render Malta’s pension system sustainable, it is vital more money is saved to finance the pensions system.
The closer we get to the general election, the less chance there is for the Nationalist government to take concrete action on such pressing issues. Yet, both the Nationalist Party and the Labour Party will not take action if this means loss of votes in the short term.
In this regard, Labour does not seem to be producing enlightened alternatives. For example, its criticism of the governor of the Central Bank was uncalled for and, if anything, only confirms the “moderate and progressive” strategy of this party is more interested in cheap populism than sober analysis. Instead of engaging with Mr Bonello, Labour chose to resort to personal attacks on his income and job conditions. Perhaps Labour, like the PN, can illuminate the public on its own sources of income and how this influences its policies or lack of them.
Labour should also inform the public how it expects to finance a comprehensive welfare system when it is promising tax cuts for everyone.
Any serious economic policy cannot ignore three realities. First, that income to finance expenditure has to come from somewhere. Second, that natural resources are limited. And, third, that we live in a global economic, ecological and social complex. AD’s economic stance recognises these three realities through a green new deal that aims to reduce carbon footprint and unsustainable practices while improving quality and life and generating employment opportunities.
The author is chairman of Alternattiva Demokratika – the Green party.