The fable of the bees by Bernard Mandeville, published in 1723, is a good clue to elucidate the paradox of well-being that Malta has just experienced. Mandeville was an Anglo-Dutch philosopher, political economist and satirist.
The overall influence of the Fable on the fields of ethics and economics is, perhaps, one of the greatest and most provocative of all the early years of the 18th century.e works of the century. In his General theory, the famous economist Keynes, cited Mandeville as the source of his position in emphasizing the positive effects of aggregate demand. This contrasted with classical economics which believed that production (aggregate supply) was the engine of economic growth. Read another stylized chapter The Grumpy Hive; Mandeville describes a community of bees that thrives until the bees decide to live by honesty and virtue. As they abandon their desire for personal gain, their hive’s economy collapses and they continue to live simple “virtuous” lives in a hollow tree. Mandeville’s theory, which boldly predicts that vices create social benefits, caused a stir.
Mandeville implied that people were hypocrites for espousing rigorous ideas about virtue and vice when they did not act on those beliefs in their private lives. He observed that those who preached against vice had no qualms about benefiting from it in the form of the overall wealth of their society, which Mandeville viewed as the cumulative result of individual vices such as owning luxury yachts, smuggling and greed, which in the long run of lawsuits for redress has benefited lawyers and the justice system.
Another paradox states that an increase in autonomous savings and savings leads to a decrease in aggregate demand and therefore a decrease in production, which, in turn, will lower total effective savings. The conundrum can be explained by the fact that total savings can fall due to individuals’ attempts to increase their savings, and generally speaking, increasing savings can be detrimental to an economy. .
This theory has found critics claiming that exercising savings can be good for an individual by allowing individuals to save for a “rainy day”, and yet not be good for the economy as a whole. Naturally, this can be explained by analyzing the place and impact of increased savings in an economy. If a population decides to save more money at all income levels, total business revenues will decrease. Such a drop in demand leads to a contraction in production, which leads to lower incomes for employers and employees. So how can we apply Mandeville’s theories of economic success achieved during the extraordinary l-Aqwa Zmien in which the greed and avarice of certain sectors turned a decade of deficits into an unprecedented national surplus.
Meanwhile, the opposition demanded justice and argued in parliament against the sale of three hospitals to Vitals HealthCare and a secret pact signed with the Azeris for Electrogas (the jury for both tenders was led by a Nexia BT partner) . As the price of oil fell, this could not benefit the nation since the Electrogas deal had a fixed price for electricity spanning 18 years. Millions were lost following the bankruptcy of the Vitals group. This public-private partnership was paid 240 million euros over four years under a 30-year contract for the rehabilitation and operation of three major hospitals.
No such embellishment was made, while the opposition sued three ministers to account for the squandered millions. The coup de grace was given to four Panamanian companies mandated in 2014 by Nexia BT (the managing partner benefited from the patronage of the Ministry of Justice). It was a powerful scoop posted on a blog by a journalist killed in 2017.
Caruana Galizia revealed that two of these Panamanian structures belong to the director of cabinet and Dr. Konrad Mizzi, then Minister of Health. There is no doubt that several events, such as Castile’s intimate relationship with a prominent businessman (currently under arrest), are implicated to be the mastermind of the assassination plot to assassinate a journalist. . This suspicion of greed and others culminated in a flood of civil society protests that led to the voluntary resignation of Joseph Muscat as Prime Minister. May I apologize for this long introduction which in my opinion needs to be read in light of the fact that Malta ran an economy which, before the start of the pandemic, was the envy of all EU states . A multi-million euro property market has been building over the past nine years and Malta has never seen such grand projects in the pipeline.
Cases have arisen when public land worth millions has been granted at cut-off prices to encourage the promotion of high-end tourism or to build a new university owned by an obscure Jordanian construction contractor. Such affluence came delicately wrapped in a vice (see Mandeville’s theory), including the erection of soulless concrete structures that sent average rents payable skyrocketing. In fact, thanks to Muscat’s administration, the economy has turned the tide with a feel-good factor that has seen the nation throw caution to the wind. Let’s celebrate our fortune while migrants clean our streets and serve us in shops, hotels and restaurants. An artificial sense of promiscuity has blinded us that the party will never stop – but it does.
A recent study by Deloitte, funded by BOV, found that with existing beds and other permits approved for new hotels, the country needs five million visitors to occupy 80% of the sanctioned bed stock. Admittedly, this creed of galloping development required a Tsunami of visitors, which taking into account the size of the island, cannot face it. Another effect of the increase in demand has resulted in an acute shortage of workers which is solved by the recruitment of migrants. Then, after happy days, a contraction in demand occurred in 2020 as we faced a global pandemic followed this year by another crisis, this time caused by a Russian invasion war in Ukraine. All is not catastrophic – progress has been made on the reform of several institutions, but the experts did not mince their words, saying inter alia that Malta “clearly lacks a comprehensive strategy and a coherent approach based on the risks with regard to integrity standards for civil servants”. .
On a positive note, he said that for a country the size of Malta, it had an “impressive arsenal of public institutions involved in checks and balances, while the unemployment rate is low at 8,500 people. The resilience of the Maltese economy is something we should Malta’s annual GDP growth over the five-year pre-Covid period has been measured at an average of 8%, placing Malta consistently among the top countries in the world. EU with more than double the EU average growth of the Maltese economy has now confirmed itself after the pandemic period.
Finally, Mandeville’s theory cannot explain that, given that our political administration is not impeccable, the country has survived the pandemic and is well prepared to meet the challenges.
George M. Mangion is a partner of PKF, an audit and business consulting firm