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Economic growth and common good

At the end of last week the annual meeting of the World Economic Forum was held in Davos. This meeting, in one of Switzerland’s most popular ski resorts, is normally a showcase for the world’s business and political leaders to talk about their ideas on how to save the world from itself and, at times, even from themselves.

What we need is not economic growth for its own sake, but growth that leaves a positive impact on all strata of society
- Lawrence Zammit

The meeting was held against a backdrop of faltering economic growth at best and negative growth at worst, high unemployment in the major economies with the possible exception of Germany, unsustainable government debt in a number of countries, and increasing income inequality both within individual countries and between different countries. One of the more important speeches was given by Mario Draghi, president of the European Central Bank.

He claimed that 2012 was the year of the relaunch of the euro and that the interventions of the ECB in the financial markets and its decision to cut interest rates three times have helped to avoid dramatic problems. This has left a positive impact on the markets even if this impact is still notbeing felt in the real economy – hence the negative growth and high unemployment. In Draghi’s opinion, governments did the right thing to raise taxes to make their respective fiscal deficit more sustainable, as it was an emergency situation.

Now that the emergency seems to be over, he expects governments to lower taxes and cut public expenditure, while using investment in the infrastructure in a targeted and focused approach.

Cutting public expenditure means implementing structural economic reforms to remove rigidities (introduced at a time when the overbearing presence of the government in the economy was seen to be a good thing) that are hindering the growth of private enterprise. Draghi pushed governments to pursue growth, not through tax and spend policies, but through reforms that encourage private enterprise to invest.

Also at the end of last week, Cardinal Angelo Bagnasco published the book La porta stretta, whose name translated literally is the narrow doorway. This book has also been written against the backdrop of the international economic crisis of the last five years, and which has mutated itself a number of times, such that one forgets from where it all started.

The book is in fact a collection of the cardinal’s interventions at a number of meetings of Italian bishops. It addresses the involvement of Catholics in the various aspects of public life, even in the economy, and their role in searching for solutions that uphold the common good.

The publication of the book of Cardinal Bagnasco and the holding of the Davos Summit on the same days may look like a sheer coincidence. Moreover, there may not seem to be an apparent link between the key message of the book, whose name implies that governments need to take tough decisions in the name of the common good, and the key message of Draghi’s speech which is to go for economic growth. The coincidence or otherwise is not worth wasting one’s time on. However, there is a very clear connection between what Draghi said and what Cardinal Bagnasco wrote.

The growth policies that Draghi is urging governments to adopt are not meant to please any one particular lobby group; but are meant to be policies that leave the most positive impact possible across society such that everyone becomes better off.

The common good promoted by Cardinal Bagnasco reflects the need for such growth policies that are meant to benefit the more vulnerable segments of society. It is indeed unfortunate that several business and political leaders around the world seem to be incapable of creating a synergy between economic growth policies with the common good.

This issue should also interest us Maltese. Economic growth is something that any Maltese would subscribe to. However, what we need is not economic growth for its own sake, but growth that leaves a positive impact on all strata of society.

To go back to what Cardinal Bagnasco wrote, it may not be so surprising to note that he claims that education needs tobe placed at the top of any public policy agenda. It is education that ­creates the synergy between economic growth and the common good.

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