Economic growth is the most powerful instrument for improving the quality of life. Sustained growth and employment opportunities advance human development which, in turn, promotes economic growth.

The extent to which economic growth is then translated into fairly distributed incomes and a reduction in poverty depends on the degree to which the poor and vulnerable participate in the growth process and share in its proceeds.

Of course, as development occurs, increasing attention needs to be paid to the environmental sustainability of future growth. This entails improved management of natural resources, coupled with movement towards low-carbon technologies.

Then there is the role of institutions. They provide the framework in which markets operate: the basis of the rule of law and enforcement of property rights. Institutions are often deeply rooted and are difficult to change, being ingrained in culture and historical development. But change is desirable and not impossible.

Against this backdrop, I was flabbergasted by John Vassallo’s description of Malta (‘The Republic of Light, Parts I and II, November 28 and December 3), as “a rotten apple”, being dominated by tax evaders, criminals, holders of ill-gained wealth, money launderers and crooks. This apocalyptic depiction is a gross, and dare I add a repugnant, exaggeration.

Let me enlighten Dr Vassallo about, for example, ethical Scandinavia.  I agree that that part of the world is among the best, but is he aware that, according to a 2017 study by Alstadsæter, Johannesen, Zucman, offshore Scandinavian wealth in all Swiss banks and in all tax havens has been estimated at between $48 billion and $109 billion, and that 1.5 per cent-3.3 per cent of all Scandinavian household wealth is stashed offshore?

I would think that the Republic of Light should shine in a lot of countries, but whether it should shine in Malta before it does in other countries is quite questionable. It might satisfy the purists, but I doubt that Dr Vassallo will find more than a handful of people who would make Malta shine the light while others continue to make hay.

Meanwhile, we had businessman Tony Zammit Cutajar accuse the Prime Minister of being addicted to economic growth, citing an inexistent “frenzy” in construction, and claiming that residential rents are “no longer affordable” by the Maltese.

The real GDP growth rate of 6.3 per cent between 2012 and 2016 is slightly below that achieved between 1970 and 1990 (6.9 per cent), though thankfully over the woeful 3.5 per cent between 1990 and 2012. Is this something we should be worried about? The share of construction in total gross value added averaged 4.7 per cent between 2006 and 2012 compared to 4.2 per cent between 2012-2016. So where is the frenzy?  Some 80 per cent of Malta’s population own their home, the rental sector share is only 19 per cent, and only 2.4 per cent pay a market price for their rented accommodation. So where does that leave the affordability argument?

I am flabbergasted by the junk that is daily being thrown at the average citizen who, compared with a diplomat like Dr Vassallo or a savvy businessman like Mr Zammit Cutajar, has little knowledge of how to find the real facts.

I find it particularly insensitive of them to propose reducing Malta’s GDP in a search for fiscal purity. And, pray, by how much would they be prepared to see it reduced, and what impact do they anticipate on the majority of people who earn, say, €13,570 or less per annum? Do they realise that Malta’s GDP per capita at current prices is still 11 per cent short of that in the eurozone?

A 10 per cent increase in a country’s average income will reduce the poverty rate by between 20 and 30 per cent

I, for one, believe that economic growth continues to be a must.  Cross-country studies reviewed by the OECD show that a 10 per cent increase in a country’s average income will reduce the poverty rate by between 20 and 30 per cent. Another flagship study of 14 countries found that poverty fell in the 11 countries that achieved significant growth while it rose in the three countries with low or stagnant growth.

When investments increase, job opportunities will also increase. If the employment rate rises, the government’s expenditure on paying people’s unemployment benefits or on social welfare will then decrease. The recent improvements in the female labour participation rate have also contributed to the government’s wherewithal to address other social welfare priorities.

The financial crisis and climate change have led more and more people to question the primacy of economic growth, leading to the emergence of a lobby that calls for degrowth. Proponents of degrowth advocate a totally different sort of economics and a complete change of mentality.

But, before we set off on the road back to the caves or the idyllic society that degrowth proponents conjure, it would be advisable if we were to ask ourselves whether economic growth and environmental protection are really incompatible, how realistic is the degrowth scenario, and whether the continued existence of a European Union would be conceivable were that Union to be comprised of member states which had renounced the primacy of economic growth.

I do not accept that economic growth is fundamentally about materialism.  A much more worthy person than I, Nobel laureate Amartya Sen, has described economic growth as a crucial means for expanding the substantive freedoms that people value, such as healthier lives, better education, the opportunity to travel, the better access to culture and leisure activities.

But, back to growth and economic development. These operate through two well-known channels. For a start, the macro link between them increases the country’s tax base and accordingly enables the government to spend more on key public services, such as health (rise from 5.5 per cent to 5.8 per cent of GDP) and education (rise from 5.2 per cent to 5.5 per cent of GDP) between 2007 and 2015.

The second channel is the micro link, through which growth increases the incomes of the less-well-off and thereby raises their ability to pay for goods and services that improve their living standard.

I do not, for a moment, think that economic growth is an end in itself. It always has to be put in the context of the evolutionary growth of people. That is, it must always include an analysis of how people have benefited from such growth in a holistic sense. It certainly is not how an individual (or group) benefits from such growth at the expense of others.

I have already referred to the environmental costs of economic growth.  The large quantity of raw materials needed to manufacture more goods and services can quicken the depletion of non-renewable resources, such as our stone. Another side effect is usually the large amount of waste that will be generated because of the high consumption – witness Magħtab. So yes, economic growth which damages the environment will then decrease the rate of sustainable growth.

So, let us debate, and revisit from time to time, which of these functions is the most critical at any given point in time, and hence which policies will need to introduced, which institutions will need to be created for these functions to be fulfilled, and in which sequence. But to go as far as saying “I want out of the economy” is baloney.