From dependency to viability : changes in the Maltese economy between 1959-1988 (Doctoral dissertation).

Abstract

The objective of this study is to test the hypothesis that a small country size with no significant natural resources but with human ability in mastering the economic environment can, in time, become economically viable. The reason is that there are other key factors which contribute to a country's economic viability. Human resources development is an extremely important consideration. Small states are generally poorly endowed with physical resources. They depend heavily on human resources to generate economic activity. Furthermore, since their domestic market is very limited they can attain economic viability only through participation in international trade. To test the overall hypothesis of the thesis, five economic indicators deemed to be contributory factors towards the economic viability of the Maltese economy were chosen, namely, real growth, capital formation and savings, economic diversification, balance of payments and aid and government finance. Real growth was further classified as follows: GNP growth, GNP per capita and employment. The balance of payments was again classified as follows: import and export trade, tourism and international reserves. Public Finance was also classified under investment, foreign and local loans and public debt. Each and everyone of these economic indicators was fully tested and to avoid one-off occurrences, the variables that were chosen were measured over a time-span of thirty years. It was shown that the physical and institutional infrastructural changes made in the Maltese economic base succeeded by the end of the planning era to sow the seeds for growth and development as a result of which the island reached that stage of development at which further development could occur independently of any foreign aid, direction or control. The chapter following the introduction gave an overview of the literature on the overall theme of this thesis. Four principal areas were considered, namely, economic development, dependency theory, structural change and economic viability. The third chapter gave a brief overview of the Maltese economy between 1959 and 1988 during which six economic development plans were published. It traced the island's transformation from a naval and military based-colony to a modern industrial state. Another chapter discussed the meaning of economic viability. It was argued that the traditional meaning of the term is related to self-sufficiency with autarkic implications. An alternative approach to the definition was proposed. It is based on the ability of small states to produce and sell goods and services both at home and abroad by generating enough income to satisfy domestic needs and enough foreign exchange earnings to meet import bills. It implies a condition of non-dependence on foreign financial handouts. The final chapter presents quantitative results of the components of economic viability and discussed the macroeconomic trends leading to it. Wherever possible, international comparisons with other developing countries in different parts of the world were also made.