The role of government in economic growth and development : a comparative study of Malta and Iceland 1960-2000

Abstract

This is a comparative study of the two small island states of Iceland and Malta over the last four decades of the twentieth century. More specifically, the focus of the research is on the role of the two governments as they enacted macroeconomic, trade and industrial policies, structural reforms and all-embracing growth policies, intervened in the functioning of and supported principal economic activities, invested in infrastructure facilities and commercial enterprises, enhanced human capital and social policies and developed welfare states. The research will engender a broader context than a study of one national economy would do and stimulate reciprocal enquiries – different economic structures, industrial and labour market problems and challenges, dissimilar political realities and solutions and unique imperial histories and geographies. Perennial economic, industrial or political problems in one state may have been less pronounced or amicably solved in the other state. The study period captures the characteristics of an era that bridges the span between the immediate post-war economic reconstruction phase of Europe of the late 1940s and the 1950s, and the new political and economic paradigm of the twenty-first century. The new paradigm consists of an expanding Europe-wide economic cooperation, free movements of labour, capital, goods and services between 12 EU states from 1993 and 25 EU states from 2004, as well as three EFTA states from 1994, advancing globalisation, growing international tourism, expanding crossborder capital flows and global financial services. The first two decades of the twenty-first century were a major growth period until hit by Covid in 2020, except for the short-lived financial crisis of 2008-2009. The post-war era has been ascertained by political and economic turbulences and transformations in Europe. A mismatch in the timing of turning points in the political and economic history of Iceland and Malta, and the availability of internationally comparable data, made the choice of the timeline delicate; another study period might have required a different research strategy. The research will analyse and compare the economic growth and development of Iceland and Malta and the main growth factors – labour, capital, institutions and exports. The role of the two governments in economic growth and development will be compared through five different realms of policies, instruments and programmes: 1. Trade and foreign relations; 2. Macroeconomic, i.e. fiscal, monetary and foreign exchange policies; 3. Industrial, i.e. aiming to improve structurally the performance of business sectors; 4. Capital investments in infrastructure and commercial enterprises; and 5. Structural reforms. The growth policies refer to a domain of policies that target several objectives and rely on different policies, instruments and programmes, including macroeconomic, foreign trade, industrial, structural reforms and capital investments. Capital investments will in this thesis be examined as distinct policy instruments and programmes while they overlap with fiscal policies. Structural reform policies do also overlap with industrial and trade policies. The comparative method employed is based on a point-by-point organisational scheme. The study will alternate comparative points about Iceland and Malta, but not cover all themes on one state first and then switch to the other. The main principles behind the structure and content of the thesis call attention to particular concepts, scholarly works and policy objectives, instruments and institutions, elucidating the pivotal research theme. As suggested by the title, The Role of Government in Economic Growth and Development: A Comparative Study of Iceland and Malta 1960-2000, the research questions of the thesis are as follows: 1. How did the evolving political economies of Iceland and Malta compare in terms of political systems, party politics, forms of government, political ideologies and public policies and by what means did politics influence the economy, industries and trade? 2. In what way were economic growth and development engendered and influenced by burgeoning, but capricious export incomes, cross-border capital flows, trade policies and participation in the expanding European economic cooperation? 3. How did the two island states contrast and compare in their pursuance and effectiveness of macroeconomic policies, i.e., fiscal, monetary and foreign exchange? 4. What was the nature of and the political rationale for the growth policies, plans and programmes adopted by the two governments? What were the key similarities and differences in the policies and their enmeshed institutions and the main political changes in emphasis from the 1960s and 1970s to the 1980s and 1990s? […]