As usual the end of one year and the start of a new one encourages us to do two things. One is to create a wish list of things that one would like to see happening (we often refer to them as new year resolutions) and the second is to forecast what may happen in the current 12 months.
Let me start with the second one and then move on to the first. What will happen in 2017? One thing we may be certain of is that when we look back at the events of 2016, there were things we would have considered impossible to happen. This is likely to happen again in 2017.
From an economic/political perspective we can think of the worst happening in relation to Europe. There could be another terrorist attack in a major capital.
This would strengthen the populist vote in a number of countries and we could end up with France, Italy and the Netherlands all being led by persons whose political agenda would be to exit the euro, abolish the Schengen Agreement and seek to redraw the rules of the European Union.
Angela Merkel’s position would be severely weakened, Turkey would allow refugees to flow into Europe, and Greece would declare a default on its loans. The economic implication of such a scenario would be disastrous and it would throw Europe into a 21st century version of the Dark Ages.
The best scenario would be a strong Angela Merkel, waning electoral support for populist politicians, Turkey still believing that working with the EU was better than working against it, and the EU economy gradually moving out of the doldrums, while maintaining the fundamental fabric of its social model.
This would strengthen the eurozone and could set the path for future economic growth. What will eventually happen is difficult to tell now as there are too many “ifs’ and “buts” and “mights” and “coulds”.
Addressing these issues requires a national mindset that breaks down the barriers placed by traditional approaches. We might as well make good use of the coming year to put that mindset in place
What is the wish list for the Maltese economy for 2017? It is certainly to maintain the growth path that it has had in recent years. However, we need to address five issues.
First, we need to address the issue of poverty. The current performance of the Maltese economy is a window of opportunity to use the resources we have to eradicate poverty once and for all from this country. This does not necessarily mean welfare handouts – in fact I doubt if welfare handouts are effective in addressing poverty. We need innovative solutions suitable for a small island like ours to maintain social cohesion in support of our economy.
Second, we need to stimulate start-ups. I strongly believe that start-ups will provide another growth spurt to our economy and will eventually develop into companies that will form an important pillar of our economy. Innovative approaches are required also in this regard as we need to sustain the economic performance of the past 30 years.
Third, we need to address certain market failures as it is leading to unnecessary inflation and social/income inequalities. The main issue that we need to address is the price of property. We have to accept that the market has failed in this area with the result that we have had an overinvestment and an unnatural increase in prices, and a situation where young people are finding it increasingly difficult to get on to the property ladder.
This could end up being a bubble that will explode in our face.
Fourth in the conflict that has arisen between the environment (and by environment, let us not just talk of the countryside – let us also think of the residential environment) and building development, the environment must be given priority.
If we do not give priority to the environment, we run the risk of driving the economy into the ground.
Fifth, and most importantly, ethics needs to be given its rightful place in business affairs and economic management.
We often think of ethics only in relation to the management of public affairs, implying that the private sector has nothing to do with it. In reality both the private sector and the public sector need to manage their affairs ethically.
Addressing these issues requires a national mindset that breaks down the barriers placed by traditional approaches. We might as well make good use of the coming year to put that mind set in place.