A new economic model

The environment protest organised by a number of NGOs the day before this contribution is published calls for ‘a new economic model’ that enhances quality of life and leads to policy reforms in environment, planning and land use.

This is a correct call. I have long insisted that environmental NGOs were criticising the current building frenzy without considering the current economic model as part of a very important background. One cannot decide to halt all physical development if our economic state of affairs is one that entices citizens to invest in property. To add insult to injury, some PA policies introduced relatively recently continued to entice investors to build or rent premises.

The problem is that the current administration cannot think of a new economic model and seems to be sticking to the one fashioned by the Joseph Muscat administration over 10 years ago. In the long run this is not sustainable, even though it was successful for some 10 years.

People who think positively of Joseph Muscat and shut their eyes to the abuses and corruption that took place on his watch do not realise that his economic model is now quite past its sell by date.

The economic model pushed by Joseph Muscat has led to an extraordinary increase in the number of foreign people living permanently in our two small islands; and it has led to many better lives and the resulting increase of the expectations of all Maltese citizens. Now we have to think afresh.

Robert Abela’s administration seems oblivious to this situation. The only voice of warning coming from the administration is that of Finance Minister Clyde Caruana but all his peers carry on relentlesly as if the Joseph Muscat model can be applied for ever.

Clyde Caruana has become a voice in the desert because the majority of the members currently in Cabinet seem to be in drunken stupor and ignore his warnings.

In short, the current administration is not even thinking about the possibility of introducing a new economic model, let alone working on defining it.

This is a great opportunity for the party in Opposition, the PN. It needs to work on this in the years left before the next general election so that it could flesh it out in the run-up.

There is ample time for this to be organised. The PN needs to seek the help of economists and businessmen who realise the need for this economic model. It should nominate a small group of not more than six people to work on this quietly while the empty political rhetoric goes on. But it should be ready for the new economic model to be the main thrust of the PN’s next electoral manifesto.

Just attacking Labour because of corruption the country has experienced under its watch is not enough. Neither does attacking the powers that be by referring to their inefficiency. I do not believe that potholes make people switch their political allegiances.

The PN needs to have an important positive thrust in its electoral promises. People vote for a change in government because they want to be better and attacking the government for its wrong-doings is not enough, no matter how wrong their doings are.

This new model should crucially respect the political principles of the PN and not be based on some obsolete left-wing ideas that could make matters worse. It is therefore important that this has to be the PN’s concept and nobody else’s.

Among those protesting, I suspect, will be some who would be advocating for the old-fashioned socialist model that Joseph Muscat discarded. That is why the new economic model has to be owned by the PN.

I am not expecting Bernard Grech to sit down with some friends and work it out. Things do not happen this way. But the leader of the PN - whoever they might be - must take immediate action to see who is to work on this task. It is not an easy task but I am sure that there are experienced economists who are prepared to work under the radar to flesh out a new economic policy that Malta sorely needs.

The PN needs to start working in this direction. This work should not be publicised at this stage. But it should be ready in time to serve as the party’s biggest electoral thrust.

Everybody is fed up with the present situation but it must be the PN that shows the way. It must be ready to show how all that is bothering so many people can be shaken off.

What is it about China?

A recent issue of The Economist dedicated its cover, an editorial, a six-page briefing and the Asian columnist’s contribution to China.

China is no longer the most populous country in the world, having been overtaken by India, but it is an economic giant. The editorial in The Economist, however, claims that China’s economy will neither collapse nor overtake that of the USA by much. At the same time, the briefing explains why China’s military might is nowhere near its peak and that there is room for it to become even stronger.

‘Let China Sleep, for when she wakes, she will shake the world,’ says a quote often attributed to Napoleon Bonaparte. The giant has indeed wakened up.

With Europe under pressure from Washington to toughen its export approach to China, EU trade ministers meeting last Thursday had to wrestle with the bloc’s relationship with Beijing. In next week’s EU-US Trade and Technology Council in Sweden, the allies will seek to align their approaches for outbound investment screening particularly for China.

And next month, European Commission President Ursula von der Leyen plans to unveil an economic security strategy aimed at reducing dependencies on third countries. At a high level, EU members have talked about “de-risking” their relationship with the world’s second-largest economy.

In reality, that effort has made little progress, and German companies are openly pushing back, saying they want to separate business from politics.

This follows a double-digit drop in German exports to China that has rattled Europe’s biggest economy, triggering debate over why its vast manufacturing sector has fallen behind rivals benefiting from a rebound in Chinese demand.

According to economists, the 11.3% drop in German exports to China in the first four months of the year, compared with the same period a year ago, highlights a unique set of challenges for Germany.

Things will eventually settle down, with China becoming stronger and stronger.