Sooner or later, everything turns to shit

There is a wonderfully irreverent line from Woody Allen that author Parag Khanna uses in an essay on the entropy of the international order: “Sooner or later, everything turns to shit.”

Behind the humour sits one of the most profound laws of physics. The Second Law of Thermodynamics tells us that entropy increases, energy becomes progressively dispersed, ordered systems tend towards disorder, and maintaining organisation requires a continuous input of energy. Khanna uses the concept to describe a world in which power and authority are becoming more fragmented. Yet the more I have thought about entropy, the more I have wondered whether it also provides an unusually powerful way of understanding Malta.

This thinking was reinforced recently when I returned to Jeremy Rifkin’s Entropy: A New World View. Rifkin remains one of my favourite authors precisely because he has always been willing to take ideas from science and ask what they mean for economics and society. The First Law of Thermodynamics tells us that energy cannot be created or destroyed, merely transformed. The Second Law introduces the uncomfortable qualification: Although the quantity of energy remains, its capacity to perform useful work diminishes as it becomes more dispersed. A hot cup of coffee cools, buildings deteriorate, machines wear down and maintaining order requires continuous effort. Rifkin’s insight was to ask what this means for economies that constantly transform concentrated energy and resources into economic activity while simultaneously producing waste, pollution and disorder.

Countries are obviously not literal thermodynamic systems. Human beings can innovate, reorganise and build institutions that improve efficiency. But entropy provides a particularly useful lens for Malta because we lack something larger countries possess in abundance—space to absorb disorder. On little more than 300sq.km, almost every additional activity interacts with everything else. Another development affects roads, electricity, drainage and neighbouring communities. Another car affects everybody else’s journey. Another hotel requires workers, water, energy, waste capacity and transport. Another resident needs housing and public services. The externalities of growth are compressed geographically, meaning the consequences of inefficient organisation become visible remarkably quickly. Perhaps, in practical economic terms, entropy simply feels faster on a small island.

When more starts producing less

Cars provide perhaps the clearest illustration. At the end of the first quarter of 2023 Malta had 426,720 licensed vehicles. By the end of the second quarter of 2026, that number had reached 463,734. That is roughly 37,000 additional vehicles in little more than three years, an increase approaching 9%. Passenger cars alone now number more than 339,000. Yet the road network did not become 9% larger during that period. Malta did not acquire additional territory. We simply added substantially more machinery attempting to move through essentially the same confined system.

The individual decision to buy a car remains perfectly rational, particularly given the structure of Malta’s transport system. Yet hundreds of thousands of individually rational decisions can produce a collectively irrational outcome. Every additional vehicle increases mobility for its owner while marginally reducing mobility for everybody else through congestion and competition for road space. We add capacity at individual level while potentially reducing efficiency at system level. That is an important characteristic of entropy— more energy enters the system, yet an increasing amount is dissipated through friction.

Population growth creates a similar dynamic. Malta’s rapid expansion has supported employment, consumption, government revenue and economic growth. Migration in particular allowed businesses to expand when domestic labour supply could not meet demand. These are genuine economic benefits. Yet additional population also requires housing, roads, electricity, water, healthcare, schools, waste management and public infrastructure. The relevant question is therefore no longer simply whether additional people generate GDP. Clearly, they do. It is whether the marginal economic value created exceeds the additional pressure imposed upon an increasingly constrained system.

Tourism presents the same dilemma. Malta’s success in attracting millions of visitors represents a remarkable commercial achievement, but a small island should increasingly evaluate tourism through value rather than volume. The meaningful question is not simply how many visitors arrive but how much value is generated relative to the scarce resources consumed.

The same reasoning applies to hotels, supermarkets and property development. Each new project can make perfect economic sense when assessed individually. Another hotel creates beds and employment. Another supermarket creates retail capacity. Another apartment block creates housing and financial returns. Yet what is rational at project level is not automatically optimal at national level. The cumulative effects emerge elsewhere through delivery vehicles, additional workers, greater electricity demand, more waste, higher land values and increased pressure on roads and public services. Malta’s challenge is that these externalities increasingly collide within an exceptionally confined space.

We get the entropy we incentivise

This is where incentives become central to the argument. Markets respond extraordinarily well to the signals we give them. If developing property offers a safer and more attractive return than financing an innovative company, capital will flow towards property. If recruiting another worker remains cheaper than reorganising a business around technology and productivity, firms will recruit. If increasing visitor numbers remains more profitable than extracting greater value from each visitor, tourism volumes will rise. If driving remains substantially more convenient than the alternatives, households will continue buying cars.

We then become frustrated by the aggregate outcome while continuing to reward the individual behaviour producing it.

Seen this way, many of Malta’s supposedly separate problems are manifestations of the same underlying system. Traffic, construction, tourism intensity, migration, electricity distribution, waste, property prices and weak productivity growth interact continuously. We keep adding inputs to sustain expansion while paying insufficient attention to how much value is being lost through the friction those additional inputs create.

This is also why GDP can provide an incomplete picture of progress. Congestion can generate economic activity. Repairing overstretched infrastructure generates expenditure. Building additional roads adds investment. None of this makes GDP wrong; it simply reminds us that GDP measures economic production rather than the efficiency with which society converts scarce resources into wellbeing. An economy can therefore become larger while simultaneously becoming more cumbersome to live and operate within.

Entropy offers an interesting way of reframing productivity. Productivity is normally defined as generating more output from a given quantity of inputs. For Malta, perhaps we should also think about it as losing less value between input and outcome. An hour not spent unnecessarily in traffic is recovered productive or personal time. A genuinely digital public service reduces administrative friction. Better buildings consume less energy. Better education allows human potential to migrate towards higher-value activities. Better capital allocation directs savings towards productive investment rather than merely inflating existing assets.

This is not an argument for stopping growth, closing hotels, preventing development or rejecting migration. It is an argument for becoming considerably more sophisticated about the quality and organisation of growth. Malta’s next development model must increasingly extract greater value from every scarce input rather than assume prosperity can indefinitely be generated by adding more inputs.

A small island should think differently

There is another lesson from entropy that is particularly relevant to policymaking. Order requires continuous investment. Infrastructure deteriorates unless maintained. Electricity networks require upgrading. Skills depreciate. Institutions become bureaucratic. Urban environments degrade. Preventive maintenance is less visible than emergency repair, just as educational reform is less immediately rewarding than recruiting another cohort of workers. Yet allowing disorder to accumulate eventually makes restoration considerably more expensive.

Perhaps Malta’s greatest strategic advantage is that we are small enough to see the system as a whole. We should be capable of connecting planning to transport, transport to housing, housing to migration, migration to education, education to productivity, tourism to infrastructure and investment to capital allocation. Instead, we too often manage these as separate policy files. A small state cannot afford that luxury because the consequences of one decision travel rapidly across the entire system.

This is ultimately why Rifkin’s interpretation of entropy remains so relevant. Industrial societies have often confused greater throughput with greater progress. Malta risks developing its own version of that confusion. More people, more cars, more tourists, more hotel beds, more buildings, more supermarkets and more consumption certainly generate more economic activity. But beyond a certain point, more throughput does not necessarily mean more progress.

The alternative is not less ambition. It is greater intelligence. Malta should aspire to higher wages through productivity rather than simply more labour, greater tourism value rather than relentlessly higher visitor numbers, better mobility rather than more cars, better use of existing buildings rather than treating construction as the default investment, and more innovation rather than assuming capital should continue flowing towards whatever produced the safest returns yesterday.

Entropy gives these debates a common language. It reminds us that systems accumulate friction unless we continuously reorganise them and that solving one problem by simply adding more energy can create disorder somewhere else. We have spent much of the past decade proving how much economic activity can be squeezed onto a very small island. The next decade should be about something considerably more ambitious: proving how much more value we can create while reducing the pressure required to create it.

Woody Allen’s line may be funny, but the Second Law behind it is rather less forgiving. Sooner or later, everything tends towards disorder. For a small island, where the consequences accumulate quickly and space for error is limited, the real measure of progress may therefore be not how much more we can add, but how intelligently we organise what we already have.