New year, same challenges

It is again time for reflection and resolutions. Another year, another decade, has gone by. The outgoing 2009 was foretold as "the year of the great unknown"; the global economy was at the brink of a black hole. It was not to be. The world had learnt the lessons of the Great Depression (1930s). Still, there is a high price to be paid. The legacy of 2009 will be with us for many years to come as taxpayers will have to make good for the big money pumped by governments into their economies.

Did 2009 really mark the end of the neo-liberal, post-Soviet "globalisation" era? It is early to say. While world leaders such as Barack Obama and Nicolas Sarkozy keep talking about the need to tax speculation and extravagant pay bonuses in the financial sector, the latter seems to be settling fast into its old habits. Inevitably, it is the poorer classes that end up carrying the onus of economic and social mismanagement.

Poverty is on the rise and the 2015 UN Poverty Goals are a mirage. The Economist (December 28) claims that social conditions all over the world will continue to deteriorate in 2010; more than 60 million workers will lose their jobs. Perhaps, the 2009 recession was not painful enough to bring about a radical change in mind-set. Nevertheless, as the global population nears seven billion, there is an urgent need to redefine progress. Rampant consumerism cannot remain the driving economic force. And the answer has to come from the West, which should lead by example. Otherwise, the world is doomed to many more Copenhagen-type experiences. It is senseless to keep pointing fingers at China.

Despite lower exports, the Chinese economy grew by an estimated nine per cent in 2009. Its reserves exceed $2 trillion. China remains an enigma for the West, proving that capitalism can equally thrive in autocratic, communist societies. China, with its 1.3 billion population, has become a global player as the axis of world power increasingly shifts to Asia. China is a key, albeit unnatural, partner for the US. Democracy or no democracy, America needs Chinese savings as much as China needs the US market and a strong dollar.

Ironically, despite its economic woes, 2009 saw the "resurgence" of the US as world leader. True, its style has changed. By promoting multilateral decision-making, its coloured "Venusian" President has won new respect for his country. It also earned him a Nobel Prize for Peace. And, yet, the US remains plagued by the anxieties of its rape on 9/11, two unnecessary wars, a vagrant "war on terrorism" and its $13 trillion debt. Mr Obama may not have changed the world but he is giving it what it was looking for: leadership. At home, getting his healthcare reform programme legislated in his first year of Presidency is enough to earn him a place in American history.

By contrast, aging Europe continues to wrangle over crucifixes and minarets. Its late post-modernism is fast evolving into a politics of fear and division. Its ideas of grandeur remain largely halfhearted measures: the EU Constitution, the Lisbon Agenda, the euro. Now it has chosen an unknown Belgian, a feather lightweight compared to Mr Obama, as its President. What message is the EU trying to send to the rest of the world?

The next big economic problem for EU countries is their sovereign debts (even though, with some exceptions, these are nowhere near that of the US). The European Central Bank is worried; most economies are drifting further away from the Maastricht criteria. There are growing doubts as to the capacity of countries, such as Greece and Ireland, to service their debts once interest rates start to rise.

The ECB has given Malta a "vote of no confidence" when it grouped us with these "high risk countries". It is increasingly sceptical about our government's ability to reduce its fiscal deficit. My question is simple: Why now? The year 2009 was a rough ride for Malta too but really we got little which was new. High liquidity enabled our banking system to weather the global financial storm; its fatal threats are bred locally. Our productive economy was scathed by the global crisis but it too could have been worse.

Over 2010, the challenges for our society and economy will not change much. And they may be aggravated if the government persists with its flawed economic strategy and mismanagement.

Anaemic international growth will not pull our economy out of the recession in the immediate future. It is equally unlikely that the necessary stimulus will come from domestic activity. Any pent-up demand that could have helped kickstart our economy is being wiped out by the hike in water and electricity tariffs. This will also hurt the competitiveness of our enterprises.

Will Enemalta once again prove to be the albatross that breaks the government's neck?

What Malta really needs is productive investment that generates sustainable jobs. It is unfortunate that, in such testing moments, our government's efforts are being hampered by too much internal bickering. This year's L-Istrina confirmed that, even when the odds are against us, we Maltese can meet any challenge. This provided that we have good leadership. Thanks President George Abela for proving this to us all.

fms18@onvol.net