The free market theory suggests a somewhat natural balance ensuing from the opposite forces of demand and supply. The famous notion of an invisible hand, introduced by Adam Smith, almost gave the idea a mystic touch.
In the way this theory developed over the years made state intervention in any market seem like a nuisance and an outright distorting force. Reality slightly departs from this theory in that economic crises, old and recent, show there is nothing natural about the market which is made and organised by people and which frequently only subside due to the intervention of the state.
It is true that many societies subject to free markets have over the years, thrived on innovation – the topmost benefit of competing market players and interests.
Unguided and unbridled, markets may thrive on their own steam but the goals they seek may not necessarily be public interest. When the characteristics of the market are such that completely meet the goals of the players therein, it is often innovation the first to make way.
The banking sector lies at the very core of Malta’s property market. The strong homeownership rate (80%) is vastly sustained by local banks which fork out loan facilities to meet ever increasing demand for accommodation with the best possible security of tenure. The sector has imposed on itself the requisite of a life insurance policy for a client to be able to access a home loan facility.
In the small, restricted Maltese market of life insurance, demand is high enough for the providers to settle and avoid the slightest of risks even if this meant expanding their client base.
It is a fact that increasing numbers are being refused insurance due to a medical condition which they suffered in the past or a physical impairment which by today’s standards of medicine may not be life threatening.
Increasing numbers are being refused insurance due to a medical condition which they suffered in the past.
Avoiding risk, in this case, may be translated to failing to consider thirty years’ worth of new medical knowledge, technological progress and innovation.
It may be deemed a market gap. However, when a market does not provide for a growing pool of clients failing to acknowledge scientific progress, it must be deemed a market failure. In a free market economy that is meant to thrive on innovation, a market which remains short of acknowledging progress and innovation, must be seen for what it is.
These are the instances which assert the need for the state to intervene. Guised by the comfort of insatiable demand, the market fails to provide for people in the margins whose future is being prejudiced by their past when science today confirms their risk is significantly reduced.
The State in Malta intervenes on many a front in the property market. It acted to regulate a frantic rental market; it provides affordable access to adequate accommodation to cohorts on limited income; and it is bound to intervene here to provide a solution to persons who simply cannot be made to suffer their past medical trauma for the remainder of their lives.
These are the instances which assert the need for the state to intervene.
Among these are persons who suffered illness in their childhood, healed and are fully recovered and who are made to relive the whole experience every time they are refused an insurance based on some old foreign country’s calculations. The truth is that medicine made important headways and more than a handful of medical issues which used to be life threatening in the 1990s, simply aren’t today.
In a country that intends to look forward not backwards, any market should be constantly ready to adapt its products according to the updated scientific knowledge available. Limiting people’s future based on the assumptions of the past is equal to unfounded discrimination.
Markets are not natural phenomena but manmade creations. When guided by science, good faith and long-term vision, state intervention is its only suitable antidote and there is nothing unnatural about it.