The headline indicators of the last five years show that the economy performed well. Economic growth has been significantly high, inflation under control, unemployment low and the cost of money kept at historically low levels.
The main motors of the economy continued to be public and private consumption, mass tourism, property development, financial services and e-gaming.
Bottlenecks in labour supply were resolved by very liberal labour policies that facilitated the importation of low-skilled and specialised workers from all parts of the world.
However, in the last two years, the Maltese economy has experienced a massive shock from the COVID-19 pandemic, greylisting by FATF and now the Ukraine war.
Future threats include the looming prospect of EU action against the sale of passports and the probable increases of minimum corporate tax for international companies. To these, one needs to add unresolved endemic challenges, including the low achievement levels in education, the deterioration of the environment and the unsustainable mass tourism model.
So far, the government has resorted to massive subsidies to absorb the impact of economic shocks, inflating the deficit and public debt. Short-term subsidies are necessary to defend jobs and protect families from spiralling inflation in food and fuel prices.
The time will soon come, however, when the government will have to explain to the public and the European Commission how it will restore public finances to more prudent levels.
Still, after several years of mainly robust economic growth, one would have expected a significant closing of the socio-economic gaps in society.
But, like many European social democratic parties, the PL shifted to neoliberal policies that no longer put workers at the centre of political action. While this political strategy has broadened the appeal of the PL to larger sections of society, it has also promoted persistent inequality. The levelling up of the working poor and immigrants has been as much of a failure in Malta as it in other EU countries.
Social transfers are known to reduce income inequality. While personal income taxes are progressive, consumption taxes absorb a larger share of the income of the less well off.
But, rather than redistributing tax income in a way that helps the working poor emerge from the poverty trap, the Labour administration does it evenly over the whole population through populist measures.
The most significant failure of the social democratic administration has been in education, universally acknowledged to be the most effective way to promote social mobility.
Despite some incremental improvements in the last decade, in 2020, Malta had the highest level of early school-leavers in the EU, with 16.7 per cent leaving the education system with little to no employability skills. The bargaining power of these workers to secure decent working conditions is inexistent as they face competition from cheap imported labour.
Joseph Muscat’s notorious comment that third world, low-paid migrants rather than Maltese nationals should be employed in menial jobs like waste collection shows how far the PL has abandoned its traditional social democratic values.
The proportion of non-indigenous workers in the labour market creates a significant challenge for the well-being of society. Rather than be easy targets for exploitation, they need to benefit from policies of integration if we are to avoid social unrest of the type being experienced in other European countries.
Populist rhetoric and electoral promises are no substitute for hard talk. Many voters cannot be fooled forever into thinking that political leaders have a magic wand that will always shield us from the country’s daunting economic and social challenges.