Positive economic news has been flowing at regular intervals this year. GDP growth in Malta compares favourably with that in the rest of the EU countries, fiscal targets are being achieved without much difficulty (apparently), while the European Commission, the International Monetary Fund and the various credit rating agencies have expressed positive opinions about the country’s economic performance.
Undoubtedly, sound policymaking, a depreciating euro, low interest rates, relatively low oil prices and a bit of luck are all contributing to this (the order of importance being hard to establish).
This positive economic scenario should, however, pave the way for greater focus on genuine development.
Economies exist to meet the expectations and well-being of their citizens. In this respect there needs to be a more holistic evaluation of the country’s performance. As the OECD puts it “there is more to life than the cold numbers of GDP and economic statistics”. Indeed the OECD produces a Better Life Index which attributes well-being to a multitude of components beyond the narrow focus on GDP. This follows similar initiatives, with the Human Development Index compiled by the United Nations, being the most popular.
Well-being is supported by economic growth, as this makes available a larger set of goods and services for consumption by the population. However, we must not be misled by the arithmetic. Take, for example, an oil spill in the sea, which in turn requires the use of specialised resources to clean it up. This work effort gives rise to a paid service which thus increases GDP. But is society better off than if the oil spill had never occurred in the first place? The answer is clearly no – this simple example makes it clear that an increase in GDP should not automatically be associated with the impression of being better off.
Boasting about GDP growth makes headlines but does not improve directly people’s well-being
Furthermore we have to keep in mind that economic well-being depends on productivity (the quantity of output produced per unit of time) and not necessarily on total output.
Countries which produce more because the average working week is higher are not necessarily better off than those countries which produce less but work less. Indeed, as part of economic progress, the average working week had tended to decline over time as technology has enabled workers to become more efficient.
Other elements which can be associated with a better quality of life are likewise missing from GDP. For example, the quality of housing, the extent of job security, the quality of the social support network, educational attainment, environmental preservation, civic engagement and a healthy life are largely alien to GDP statistics.
Similarly, it is important to go beyond the mere adherence to fiscal targets.
Malta has traditionally enjoyed a strong centralised government, which facilitates the attaining of budget targets. Indeed, a revenue shortfall can easily be addressed by expenditure restraint – for example, by delaying some capital expenditure project, reducing road maintenance works or reducing the quality of the service provided.
Lower quality public services, such as the notorious waiting lists associated with healthcare, or educational institutions which do not have access to the right amount of resources, or inadequate police services, impact negatively on people’s welfare.
While official statistics classify Malta as a developed country, in order to state convincingly that Malta is indeed developed, we must address other factors which indicate a certain degree of backwardness, such as for example public gardens which are not well maintained, unsightly buildings, lack of proper control over egoistic lobby groups, lack of proper control of air and noise pollution, and low educational attainment, just to mention a few.
The country must thus use the current time window offered by the positive economic developments to address its areas of backwardness.
In the end, boasting about GDP growth makes headlines but does not improve directly people’s well-being. A cleaner environment, ensuring the respect of the law, and upgrading the country’s health and educational systems are closer to the people’s understanding of what improved standard of living really means.