THE DEPENDENCY TRAP OF SUBSIDIES: LESSONS FROM ROME FOR MALTA
By Economist
In 73 BC, Rome distributed free or subsidised grain to about 40,000 citizens. By 46 BC the number had reached 320,000. Expansion came through incremental political competition: each widening of eligibility secured votes, normalised the next step, and locked in a constituency of recipients, administrators and suppliers. Reversal proved nearly impossible. Distributing benefits distributes dependency and the political power to defend it.
Malta’s energy subsidies follow the same pattern. Accelerated in 2022 to shield households and businesses from global shocks, the policy freezes electricity at roughly 13 cents per kWh, among the EU’s lowest, and stabilises fuel prices. The state compensates Enemalta and Enemed for the difference. Annual costs have ranged from around €150 million to potentially €300 million. Cumulative spending already exceeds €1 billion as air conditioners hum in every room and leisure craft roam the sea with subsidized energy. An emergency measure has become a cross-party political fixture that dulls efficiency incentives and adds to public debt.
Similar lock-in appears elsewhere. Bread and flour price supports have operated for decades through controls and repeated subsidy schemes, with crisis measures extended long after original shocks faded. COVID-era hazard and related allowances for nurses, recognising dangerous work, fed into lasting structural pay rises and conditions that remain after case numbers collapsed.
At Fort San Luċjan, public funding sustains aquaculture research. Laboratory breeding of sea urchins for restocking depleted waters continues despite the technical hopelessness of the species. Seahorse trials face setbacks yet the broader programme and staffing persist. Each sea urchin raised in San Luċjan costs the government over 360 Euros.
These are recent instances of a deeper historical pattern. White-elephant state enterprises such as the old Malta Shipbuilding and Malta Drydocks accumulated enormous losses sustained by continuous subsidies and guarantees. Over roughly four decades the dockyards alone cost taxpayers nearly €1 billion. By the early 2000s their combined debt stood in the hundreds of millions of euros; when the entities were dissolved and restructured, the liabilities transferred to the government. Air Malta followed a parallel trajectory of chronic losses, hundreds of millions of euros over successive periods, requiring repeated bailouts. Its eventual wind-down and replacement by a successor carrier imposed transition costs estimated up to 440 million on the taxpayer. These losses formed part of the public debt stock that continues to be serviced. Interest payments alone reached €261 million in a recent year, diverting resources that could otherwise fund productive investment.
In each case the original rationale, employment, national prestige, crisis response or strategic necessity, created organised interests that made withdrawal politically costly. Subsidies and guarantees became permanent features; failures did not end the funding. Malta’s experience shows that open-ended public support, whether for energy prices, staples, workforce allowances, research projects or loss-making enterprises, tends to ratchet upward, eventually hardened into lasting fiscal and behavioural dependency. The interest clock keeps ticking on the debts already incurred.
Modern Rome, still weighed down by the political weight of extensive subsidy regimes and the debt they help sustain, continues to offer us a living reminder of how we have failed to draw lessons from ancient Rome. As the ancient Romans forewarned us, “Qui non discit a praeterito, in futurum caecusest.” That is, “He who does not learn from the past is blind to the future.”