Money circulates and produces euphoria
The forecasts of analysts of international organizations for the course of the global economy in 2023 were wrong. The interest rate hikes certainly had a negative impact on economic growth but they did not force the US economy to make a “bumpy landing,” nor did they plunge the European economy into recession. If the forecasts for 2024 do not prove equally inaccurate, things will be better in the new year. Much will depend on the outcome of the two major wars.
The war in Gaza: If it doesn’t expand and if its effect on the world economy is limited to rising freight rates and the sky-high profits that Houthi rockets bring to shipping.
The war in Ukraine: If Western fatigue is not accompanied by heavy political and social side effects and if its effect on economic growth is only long-term, through the “destruction” of capital for armaments – which is soaring, hence the Ecofin decision to exclude military spending from the calculation of the budget deficit.
In this environment, the Greek economy, as a field of risk-free profit-making, high and easy, will continue to improve several indicators. There is already an incredible amount of money circulating in the country – luxury consumption is evident everywhere you look. It is not due to the successful efforts of some of the business community but – mainly – to the inflationary gains of greed, the revenue left by foreign tourists, the “golden age” of shipping, the money from the (peculiarly clientelistic) distribution of the Recovery Fund resources and, of course, tax evasion.
When money circulates, this generates euphoria – and sometimes arrogance. This euphoria might have had a positive effect. It might, for example, facilitate a reform effort that would allow the Greek economy to move away from its long-term average growth rate, which is no more than a paltry 0.9%, and to claim strong and sustainable growth in order to move up in the international division of labor. This does not seem to be the case. Possibly because much of the gains are derived not from the growth of capitalism but from collateral practices – something like sky-high bank profits, you say, from the chaotic interest rate differential.
In any case, in 2024, business profits in general will rise, there will continue to be a lot of money in circulation, too – the cuts in various benefits will affect the poorest strata – there will be fertile ground for Greek businesses to strengthen through mergers and acquisitions, and tourism will probably set a new record. If, however, we are thinking of something broader, to accelerate the change of the economic model, to recover the lost ground in productivity, to stop the competitiveness of Greek products depending on cheap labor, to create sufficient jobs with good wages, let us keep our hopes in check. Because this is a matter of big politics, not charm offensives (on the herd) by funds.
