Palgrave Studies in Economic History Series Editor Kent Deng London School of Economics London, United Kingdom
Palgrave Studies in Economic History is designed to illuminate and enrich our understanding of economies and economic phenomena of the past. The series covers a vast range of topics including financial history, labour history, development economics, commercialisation, urbanisation, industrialisation, modernisation, globalisation, and changes in world economic orders. More information about this series at http://www.springer.com/series/14632
Paul Caruana Galizia The Economy of Modern Malta From the Nineteenth to the Twenty-First Century
Paul Caruana Galizia Institute of Economic History Humboldt-University of Berlin Berlin, Germany Palgrave Studies in Economic History ISBN 978-1-137-56597-6 ISBN 978-1-137-56598-3 (ebook) DOI 10.1057/978-1-137-56598-3 Library of Congress Control Number: 2016960961 The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Cover illustration: Armand Sciberras, Vetta/Getty Images Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Nature America Inc. The registered company address is: 1 New York Plaza, New York, NY 10004, U.S.A.
Acknowledgements I wrote this book as a fellow in the Institute of Economic History at the Humboldt University of Berlin. My first debt is to Nikolaus Wolf, the Institute s Chair, for his support throughout two wunderbare Jahre in Berlin. At Humboldt, I received excellent research assistance from Felix Kersting, Oliver Salzmann, and André Wiesner. Over the past few years, staff at the National Archives of Malta, the National Statistics Office of Malta, the International Monetary Fund publications team, the London School of Economics Archives, the Cambridge University Library Commonwealth Room, and the National Archives at Kew helped me locate the material that formed the basis of this book. My editors at Palgrave Macmillan, Sarah Lawrence and Allison Neuburger, were efficient and helpful over the course of this project. Comments from Kent Deng, who edits Palgrave s Studies in Economic History series, and from Brian Blouet and Alexander Apostolides helped me to improve the manuscript. It was my family Daphne, Peter, Matthew, and Andrew who encouraged me to write an economic history of Malta, and who then listened to me patiently about it for a year. That I was able to finish this book rather than spend my afternoons cycling around Berlin and drinking weissbier is a credit to Jessica, whose resolve and whose dedication to Malta represent how, against all odds, the Maltese turned a barren rock into a country so weird and wonderful that it has no parallel. This is her book. Any errors in it are mine. Paul Caruana Galizia, Bidnija, July 2016 v
vi ACKNOWLEDGEMENTS Map of Malta
Contents 1 Introduction: Development in the Long Run 1 2 Agriculture, 1800 1964 39 3 Industry and Trade, 1800 1938 127 4 The State and the Economy, 1939 1986 225 5 The Liberal Age, 1987 2008 305 6 Final Remarks 367 Index 379 vii
List of Figures Fig. 1.1 A century of pay: real wages for workers in trades and agriculture, 1836 1938 16 Fig. 1.2 Maltese real wages relative to London and Milanese real wages, 1836 1913 17 Fig. 2.1 Map of agricultural areas in Malta, 1957 1961 40 Fig. 2.2 Agricultural output quantity index, 1828 1938 46 Fig. 2.3 Yields of wheat, vegetables/fruit, and barley, 1839 1938 48 Fig. 2.4 Livestock yields, 1839 1938 51 Fig. 2.5 Government expenditure on agriculture, 1920 1938 59 Fig. 2.6 Salm of imported wheat released for consumption per capita, 1824 1899 61 Fig. 2.7 Wheat prices in Malta and England, 1781 1885 66 Fig. 2.8 Wheat duty as a proportion of wheat price per salm, 1800 1885 68 Fig. 2.9 The Rothbarth Habakkuk thesis 75 Fig. 2.10 Wheat yields in Malta as proportion of Food and Agriculture Organization of the United Nations (FAO) ideal wheat yield, 1828 1938 82 Fig. 2.11 Distribution of labour between Malta and North 89 Fig. 2.12 Inflation and the price of bread, 1843 1938 93 Fig. 3.1 Government education expenditure/total government expenditure, 1827 1938 131 Fig. 3.2 Government expenditure on public works/total government expenditure, 1831 1931 135 Fig. 3.3 Cotton lint output quantity index, 1828 1938 141 Fig. 3.4 Protection from imports, customs and import duties/imports, 1825 1938 147 ix
x List of Figures Fig. 3.5 Employment shares in commerce and manufacturing and the terms of trade, 1851 1910 152 Fig. 3.6 Real wages for tradesmen and real military expenditure in 1938, 1836 1938 155 Fig. 3.7 The harbour and dockyard area 157 Fig. 3.8 Reexports as proportion of total exports, 1875 1907 165 Fig. 3.9 Ship tonnage and number of vessels cleared at Malta, 1826 1938 178 Fig. 3.10 Total net tonnage and transit through the Suez Canal, 1870 1913 184 Fig. 3.11 Externalities and sectoral change 193 Fig. 4.1 Government-imposed price ceiling 227 Fig. 4.2 Export-promotion effects 235 Fig. 4.3 Export growth, 1948 1970 238 Fig. 4.4 Real GDP growth (%), 1959 1971 246 Fig. 4.5 Net inflow of official development assistance and aid, 1960 1986 252 Fig. 4.6 Foreign Direct Investment Inflows, 1970 1987 257 Fig. 4.7 Domestic credit to the private sector, 1970 1986 259 Fig. 4.8 Import tariff effects 261 Fig. 4.9 Import quota effects 262 Fig. 4.10 Proportion of imports in domestic absorption 264 Fig. 4.11 Inflation rate (%), 1954 1986 265 Fig. 4.12 Demand for cash and income tax, 1960 1989 268 Fig. 4.13 Government total expenditure on education, 1971 1986 276 Fig. 4.14 Household inequality, 1963 1986 278 Fig. 5.1 Real GDP growth (%) in Malta and the other 2004 EU Accession countries 306 Fig. 5.2 The industrial protection game 311 Fig. 5.3 Production possibility frontiers 317 Fig. 5.4 International trade 318 Fig. 5.5 Real GDP per capita, 1987 2008 320 Fig. 5.6 The labour share of national income, 1974 2008 322 Fig. 5.7 Household income inequality index, 1987 2007 323 Fig. 5.8 Government expenditure on education, 1971 2008 324 Fig. 5.9 Trade ratio, 1986 2008 326 Fig. 5.10 Ratio of services exports to merchandise exports, 1986 2008 328 Fig. 5.11 From tourism to finance exports, 1990 2008 330 Fig. 5.12 Foreign direct investment, 1900 2008 331 Fig. 5.13 Employment in the public sector and government services, 1987 2008 335 Fig. 5.14 Structural change, 1971 2008 338 Fig. 6.1 Fiscal Surplus/GDP ratio and corruption perceptions index in the euro zone, 1998 2014 368
List of Tables Table 1.1 Summary of demographic statistics, 1823 2010 4 Table 1.2 Aggregate growth in Malta and Britain, 1921 2008 5 Table 1.3 Family consumption basket based on 1938 Royal Commission report 15 Table 1.4 Subsistence basket for Malta 19 Table 1.5 Welfare ratios in Malta and around the world, 1850 1930 21 Table 2.1 Rainfall of Malta 44 Table 2.2 Potato exports, 1880 1938 50 Table 2.3 Domestic versus imported wheat prices in 1938 per salm, 1860 1910 84 Table 3.1 Employment in the cotton economy, 1861 1871 143 Table 3.2 Dockyard employment, 1896 1939 161 Table 3.3 Revenue from port activity, 1825 1935 168 Table 3.4 Table 3.5 Statement of cargoes from Malta, 1 January 1808 to 31 July 1812 177 Sail/steam break-even distance and global net tonnage, 1850 1895 186 Table 3.6 Domestic export diversification, 1917 1938 190 Table 4.1 Sectoral employment shares (%), 1954 1962 232 Table 4.2 Sectoral GDP shares (%), 1955 1962 233 Table 4.3 Employment in manufacturing excluding the dockyard, 1959 1969 239 Table 4.4 Sectoral employment, 1958 1969 241 Table 4.5 Gross emigration and unemployment, 1961 1971 242 Table 4.6 Real deposit rates (%), 1977 1998 255 xi
xii List of Tables Table 4.7 Estimated currency demand in total and shadow economy, 1970 1987 269 Table 4.8 National minimum wage and cost of living, 1974 1986 272 Table 5.1 Sectoral employment, 1997 2008 338 Table 6.1 Perceptions of corruption in different public services in Malta and the EU, 2013 369