Table of Contents

  • During the 1960s and 1970s, increased interest was shown by some international organisations, such as the United Nations and the Commonwealth Secretariat, in small states, notably small island states, and the development challenges they faced during the decolonisation period. The Secretariat, with over one-third of Commonwealth members classified as small economies, is committed to the study of small states. The issue of their vulnerability was first given formal expression within the Commonwealth at the 1977 Commonwealth Finance Ministers Meeting in Barbados. Having noted the special characteristics of small states, in particular their reliance on trade, high dependence on capital inflows and, in some cases, their lack of natural resources, ministers urged the international community to adopt a more flexible approach to their requirements, as well as special measures to assist them. In response, the Secretariat designed a programme to assist in overcoming ‘the disadvantages of small size, isolation and scarce resources which severely limit the capacity of such countries to achieve their development objectives or to pursue their national interests in a wider international context’.

  • Malta as a small island state is described as a success story, not only in terms of the development and economic growth it has witnessed, especially since independence, but also in the social realm, where everyone appears to enjoy a good standard of living. This growth not only mirrored that of its neighbours, but the island even surpassed its European counterparts. In fact, between 1960 and 1990, with an average annual 5.4 per cent growth rate, Malta ‘had the highest growth rate in Europe’ (Alesina, 2002: 308). Coupled with this, over the years an ever-increasing web of social services has provided free health and education to all the population (irrespective of income) and social assistance and benefits, including housing, to earners on low incomes. However, abuse of the social security system, an inadequate tax collection structure and fiercer competition following the opening up of the economy have led to increased pressure on social benefits and led to questions about the sustainability of this enveloping social security system.

  • This section presents the vicissitudes of Malta’s economic and political history from the period before its independence from Britain in the early 1960s to its recent accession to European Union (EU) membership in 2004. It attempts to explain breaks in trends and to discover the inherent characteristics that have shaped the island’s policies over the years. During its difficult years, Malta has also had to deal with the characteristics of a small island developing state, which make it more vulnerable than bigger countries. (For a more extensive analysis of the vulnerability of SIDS and how deliberate economic development policies can provide resilience, see Briguglio (2003).) The section is divided into two parts: the first presents the political background, while the second provides data on economic variables (gross national product (GDP), economic growth and trade) and the economic strategies adopted by the country since 1959.

  • This section is subdivided into three parts, each discussing important social indicators in the areas of health, education, and income levels and poverty. At first glance, the social environment appears in good shape, since it is inclusive of all Maltese citizens. A few have fallen through the social net, as access thresholds have become more stringent; although the number of homeless people may be increasing, changes in the social fabric, such as family break-up, may be partially responsible for this, leading to a new form of relative poverty, although the numbers involved are still small. Whether current social security provision can be sustained in the future is, however, debatable and figures indicate that new measures will have to be taken to cater for these new realities.

  • The social security system in Malta dates back to the Knights of St John, who provided assistance to the poor and in the mid-seventeenth century set up charitable institutions to continue this work. Later, in 1885, members of the Malta police force (followed by the Malta civil service) were the first beneficiaries of a pension scheme. In 1921 Malta was granted self-government and the foundations of a basic social security system were laid down. Table 4.1 summarises the introduction of basic social policy and security concepts and legislation in the twentieth century.

  • In every decade in the history of a country there is some significant event that impinges on its socio-economic environment. For a small state, these normally emanate from the international sphere. Thus for Malta the 1960s meant a transformation of the economy due to the British decision to decolonise; the 1970s were hit by big price hikes in commodities and fuel; the 1980s saw a slow-down, turbulence and uncertainty in global economic activity; the 1990s witnessed sluggish growth in Europe, international financial crises and the information technology revolution; and the twenty-first century is increasingly volatile with harsher global competitive forces, new price fluctuations in fuel and certain commodities, and a wave of recession which may yet offer some surprises.

  • The following four paragraphs analyse Malta’s development strategies in the context of the thematic papers by Bertram (forthcoming) on the welfare state and Jenson (2010) on social cohesion. Jurisdictional capacity has helped all governments take tough decisions, for example, when ‘strange’ allies were sought or price and wage controls were put into place or when the decision to apply for EU membership was taken. In the context of Malta, the analysis so far shows that this jurisdictional resourcefulness dates back a long way, as Malta has long counted on its strategic location on a major transport route, which has been exploited for centuries. As in many other small states, natural resources have been limited; in particular, Malta lacks a significant agricultural sector. However, the island has relied on a number of other strategies to foster development. Baldacchino (forthcoming) describes how Malta succeeded in moving on from its dependence on a British naval base by implementing policies that provided manufacturing incentives, such as tax holidays, subsidies and exemption from customs duties, as well as promoting the tourism industry and niche markets, for example in decorative glass. In addition, migration has been used as a strategy to alleviate the pressures of excess labour. Lastly, Malta has exploited its colonial ties with the UK, as well as diversifying international relationships to ensure sufficient financial support. Overall, Malta’s strategy has always been to utilise the resources made available by outsiders to compensate for its lack of domestic resources.

  • Welfare states start modestly, then commence growing in the size and the range of benefits they provide. However, social and political reasons create a ratchet effect which prevents substantial reductions or withdrawal of benefits once introduced. (Delia, 1998: 8)

  • Malta’s role as a strategic hub in the Mediterranean was by and large the cause of its success during its colourful history under foreign dominion. Its independent life over four decades, with sometimes a resemblance to a roller-coaster ride with quick changes in policy and strategies, must also be viewed as something of a miracle. Sedate growth at certain periods of its young life and spectacular progress at others have put Malta in the high-income group of developed countries. Changes in government and ideology have all impacted on the road to development followed by this small island state.