Editorial | The paradox of building a new economy

In recent months, the Finance Minister acknowledged a need for a new economic model that deprioritises construction while generating growth without damaging the environment.. A model that builds on the good of previous years while working to incorporate social and ecological priorities in the economic wheel.

However, beyond these tacit acknowledgements, we are yet to hear much about how the government plans on changing this economic model.

The Labour Party in government, building on the governments before it and informed by neoliberal policy, adopted a growth-first approach. Growth in jobs, growth in spending, growth in population.

And the economy did grow. More people are working in the labour market, and there are more jobs too. Companies grew larger thanks to increased spending and cash flow.

However, this growth approach was always going to be detrimental in other social and ecological aspects.

The construction sector – one of the prime pillars of the local economy - created so many new jobs, brought so many workers to Malta, and lead to so much spending in the real economy.

But it inflated house prices, led to elevated levels of construction dust and noise, gentrified villages. It created a new foreign working class that was forced into low salaries as a generation of nouveau riche enjoyed their recently acquired wealth made possible by the delecate balance of low-paid workers and high-spending buyers.

An economy like this was never meant to preserve Malta’s social fabric. The aim of economic growth was not about conserving the environment.

The aim of economic growth is just that – growing the economy. Making sure there are enough workers to do the work, making sure they are spending their money.

Malta has its limitations, but the government always found ways to work around those limitations. Small countries don’t have the land, labour and often capital to compete with larger counterparts. But what they’ve always had in equal measure is an ability to create laws – laws to lower taxes, (de-)regulate economies, sell passports, regularise ODZ projects. In general, the ability to legislate in order to create an environment that allows for growth.

So, what will a new economic model look like? What’s the government’s vision for this, and more importantly, how does it plan on transitioning to a new model without upending the mechanisms of the economy as it exists today?

These questions are easy to ask, but harder to answer. One solution would be to deprioritise economic growth while prioritising responsible development, fair wages, and investment in vocational training.

However, one must always be mindful of adapting economic models to the realities of small states. Smallness is equal parts challenge and opportunity – by focusing on qualitative development we can leverage our compact size to foster close-knit communities, enhance social cohesion and preserve our cultural heritage.