Political hindrances to economic development

Malta used to depend heavily on British defence expenditure before independence in 1964. Local politicians hardly ever tackled the island's economic development. It was more a question of how much money our government succeeded to obtain from the British colonial office.

Only since the last 38 years have the Maltese had to plan and develop their economy to support themselves. The Borg Olivier administrations of the Sixties embarked on the development of tourism and industrialisation since Malta's economy could no longer depend mainly on British military expenditure.

Economic development is the most important challenge facing the human race. According to the World Development Report, the study of economic development is considered to be one of the newest, most exciting and most challenging branches of the broader disciplines of economics.

Although one can consider Adam Smith to be the first "development economist" and his most famous work An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776, to be the first treatise on economic development, the systematic study of the problems and processes of economic development in Africa, Asia and Latin America only emerged over the past five decades.

The nature of development economics has three important facets: traditional economics, political economy and development economics.

Traditional neoclassical economics deals with the advanced capitalist world of consumer sovereignty, automatic price adjustments, perfect markets and marginal analysis, besides other topics that are all based on the assumption of rationality as well as self-interested attitudes towards decision making;

Political economy encompasses, among other themes, the social and institutional processes through which well-endowed groups in the economic and political spheres influence the allocation of scarce productive resources, either exclusively for their own benefit or for that of the larger population. It goes beyond traditional economics and is concerned with the relationship between politics and economics; and

Development economics has an even wider scope than both traditional economics and political economy. In addition to dealing with the efficient allocation of existing scarce (or idle) productive resources and their sustained growth over time, it also deals with the economic, social, cultural, political and institutional mechanisms, both public and private, necessary to bring about rapid and possibly large-scale improvements in standard of living levels for the masses of poverty-stricken, malnourished, and illiterate peoples.

As a result, economic development concepts represent implicit as well as explicit value premises about desirable goals. Mahatma Gandhi described the successful achievement of these noble ends as the "realisation of the human potential". But these targets are attainable only if there prevails sovereignty, modernisation of institutions, political and economic participation, and grassroots democracy.

Of course, other spheres may be considered to be influential, particularly those relating to human resources development, nurturing the work ethos and an infrastructure that is sufficient to meet planned and envisaged development.

It is not enough looking at development by lumping all states into one basket. There are developing states, particularly small ones, that succeeded and others that failed to achieve the desired results. The former succeeded in restructuring their economies, blending their cultures with economic needs, introducing flexibility and encouraging creativity. But in both situations, whether there is a success story or a failure, governments always play a major role.

Recent history illustrates that the type of government is not significant for economic development to take place. There have been instances when dictatorial regimes, colonies as well as countries governed by truly democratic governments, have delineated the topography required so that their respective economies could move forward. What really matters to a large extent is the quality of government, its policies, its foresight and its handling of complex issues that have procured favourable outcomes.

If one looks at the small developing states' success stories - besides the Asian tigers, Mauritius, Cyprus, the Bahamas, Iceland, Hong Kong (prior to its handover to China) and only recently Botswana - one should observe the impact of government activity on the development of their respective national economies.

In Malta we are rightly still concerned with the development of our own economy. It is perplexing to note that other similar small developing countries that have had nearly the same number of years of independent sovereignty have succeeded to obtain more consistent economic growth.

What are the underlying factors that have hindered us from surging ahead consistently, particularly when Malta practises representative democracy? The objective, simple and short answer may be that Government operates in a political mechanism that generally vitiates economic development.

For a relatively long time, Malta has had only two major parties represented in Parliament; the people have to choose one or the other. Although smaller parties appeared from time to time, these could not match the enormous resources of the two major parties.

The fact is that the two major parties are well organised. They have district and local committees, newspapers, radio and television stations; of greater significance is that they have easy access to financial resources. They thus have all the means to mould and influence public opinion.

Polarisation and blind party loyalty make matters worse - the majority of the people stick to the radio, TV channel and newspaper of their party; as a result political immaturity ensues and political polarisation is perpetuated.

This scenario is conducive to a disturbing paradigm It is a destabilising situation. Consistency in peculiar economic situations is extremely hard to maintain; arguments are rarely allowed to evolve; the majority of the population is only allowed to think and discuss what information the parties bring to the cognisance of the people.

In actual fact, there is no encouragement for people to think with their own minds but rather with their emotions, with prejudiced attachments, with pecuniary interests at the back of their minds and, perhaps, with the hope of political advantage. Thus government cannot assess the true significance of its policies and activities as there are always partisan considerations.

The Archbishop, not surprisingly but quite rightly, in his address during a pontifical Mass celebrated on one of our five national days (another legacy of political polarisation), referred to the fact that information on economics and politics primarily comes from the political media. And he was concerned. This is because the information provided is rarely objective, hardly the full picture is given, and it is certainly tailored to make people think what the power-mongers want them to. Criticism is certainly not encouraged on either side.

Actually, the situation is even worse than the Archbishop depicted. A party in government normally manoeuvres in such a way as to minimise criticism to its policies. People with expertise in economics, politics and other spheres of government activity are hired to either give advice or are placed in numerous commissions so that they do not have the time and the inclination to publicly air their preoccupations about certain measures.

As a result knowledgeable people, the public at large and "independent" media can hardly analyse, assess and evaluate measures and decisions taken by government. Through such an approach Government is doing a disservice to itself, for constructive criticism is healthy.

We are primarily preoccupied with short-term partisan political considerations and hardly conscious of the implications of the present economic problems. We are concerned with short-term solutions, just trying to make both ends meet and ignoring possibilities that lead to new ventures that may in turn lead to a better export performance, our real lifeline.

For successful economic development to really take place, a wider objective participation by the different layers of society is required. People should be encouraged to constructively and objectively criticise, assess particular situations and provide ideas that ultimately contribute to a better well-being of all our people. Provided, of course, that these ideas are not ignored or stifled.

Perhaps, Malta yearns for a think-tank concerned with professional studies to pick up ideas pertinent to economic development.

Dr Borda is an economic and political analyst