Over the course of the last century, Malta has adopted three major economic models to modernise its economy.
Between the two world wars, the economy revolved around the British military base. As the island’s strategic importance declined, our political leaders devised plans to wean the economy off military spending by investing in tourism and labour-intensive industry in the post-independence era.
In the 1990s, it became evident that many low-cost labour manufacturing activities were no longer sustainable.
Investment in services was encouraged through innovative legislation that promoted the country’s fiscal advantages to foreign investors.
Consensus is now building across the political spectrum that the time has come to develop a fresh approach to economic growth. Recent pronouncements include that by European Parliament president Roberta Metsola, who told the State of the Nation conference last week that Malta needs a new economic policy and must encourage critical thinking if the country is not to face a lack of talent and skills.
Finance Minister Clyde Caruana told the Institute of Accountants biennial conference “we don’t just need to rethink and reform, we need to reinvent ourselves, we need structural change, not mere reform”.
For proof that radical change in economic planning is inevitable, he projected that if nothing changes, the country’s population would need to grow to 800,000 by 2040 to keep its economy growing at the current rate.
Over the weekend, both Prime Minister Robert Abela and PN leader Bernard Grech addressed the issue. Abela spoke of transiting to a greener, digitalised economy while Grech urged a switch away from a model dependent on importing foreign labour.
The weaknesses in the present economic model are evident to anyone with a good understanding of the changing dynamics that influence economic growth and societal well-being. For too long now, the country has relied on low-added-value tourism, rapid growth in construction, the selling of European citizenship, tax friendly legislation to attract foreign investment, and the importation of high- and low-skilled labour to fill gaps in the labour market.
The consequences are clear. Malta is already overpopulated and the quality of life will deteriorate further if the serious environmental issues are addressed only by political rhetoric.
Today’s economic model is not sustainable. The economy can no longer rely on low-paid imported labour with so many economic operators focusing on boosting production rather than productivity.
A fundamental problem is that our educational system is not preparing enough young people to take up the jobs offered by the more enlightened operators who form the vanguard of the new economy. This much is clear. But there is a difference between knowing what needs to be done and knowing how to do it.
A realistic vision for tomorrow’s economy already exists. What is exceedingly difficult is finding the right people to lead us out of the current failing model to a new era of sustainable prosperity.
Inspirational leaders who want to transform the society they serve look beyond winning the next electoral contest. They have a laser-sharp focus on convincing people to change, even if this is often painful.
Delaying the needed root-and-branch reform in economic planning will deprive the younger generations of the opportunity to achieve their ambitions.
It may take a few more years – but not too many – to teach more of our youth the skills needed to excel in areas that create wealth and improve quality of life without straining the environment or living conditions. Policymakers must act now to define and do what needs to be done to remodel the economy.