Editorial: Between a rock and a hard place

The significant economic growth of the last decade created a boom in consumer consumption, with the increased demand being satisfied by a proliferation of retail and wholesale businesses. The liberal labour market policies ensured that thousands of third-country nationals, mainly low-paid and low-skilled, joined the labour market to help small businesses grow.

With the obvious physical limitations of the country and the local market, it was inevitable that the low-cost business model many small enterprises adopted would no longer remain viable.

Moreover, consumers are beginning to show concern about the negative effect of the growth-at-all-costs economic thinking on their quality of life.

A survey conducted by the Malta Chamber, a lobby group of small and medium-sized businesses, confirmed SMEs’ growing concerns. According to this survey, a worker shortage is the most pressing issue for small- and medium-sized enterprises. At the same time, the problems created by overpopulation are increasingly worrying both businesses and the public. The business community is caught between a rock and a hard place.

Despite the community’s growing uneasiness, the government remains inert, unwilling to define and implement a plan to ease pressure on people’s lives. Tourism policymakers, for instance, continue to press for more mass tourism at a time when most argue that the capacity limits of the country have already been broken.

The chamber believes Malta should invest in upskilling the population and use immigration to solve the worker shortage. The first part of the chamber’s recommendation is no more than a platitude  and the second part is an over-simplification. The old saying that you cannot have the cake and eat it applies to how we define the solutions to the endemic problems the country is facing.

Overpopulation and over-tourism are among the most critical risks that the country faces. The effect on the infrastructure is evident, with buildings sprouting all over the place, power cuts, air and noise pollution and traffic gridlock, becoming growing challenges to most ordinary people who see their quality of life deteriorating steadily.

Of course, stopping the influx of third-country nationals overnight is certainly not viable. Our health and care services, public transport and other essential support services would collapse if experienced third-country nationals were banned from joining the local workforce.

However, the solution is not to let the current liberal labour market strategies continue to drag on as economic policymakers keep talking about the risks we face but fail to develop a viable action plan.

Finance Minister Clyde Caruana has repeatedly sounded the alarm bell about the risks of overpopulation. It seems that neither the prime minister nor the tourism policymakers have any appetite for change. The next election may be too near to convince the government that a reset of the economic model is an urgent priority.

The business community would do well not to wait for the government to define what needs to be done. Good business strategy management should lead to anticipating the adverse consequences of internal and external factors that affect business life. The low-cost, low-investment, low-return model is dangerously fragile, especially at a time when overreliance on consumer spending is hardwired into a business plan.

The most significant risk the business community faces today is policy inertia at the highest level of government. Short-term political expediency is taking priority on the grave responsibility a government has to lead the process of change to improve people’s quality of life.

The business community will do well to steer out of the dangerous waters that surround it without waiting for government leadership.