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Addendum on Albania

I'll go back to the Latvian miracle for a moment. I told you here that the Eurostat website does not allow you to analyze the Albanian GDP from the income side, but only from that of production and spending. In other words, it is not possible, by consulting Eurostat, to analyze the evolution of this identity:

Y = W + GOS + TS

the one that breaks down GDP Y into the sum of income from work W (compensation of employees), plus income from capital/enterprise (the gross operating surplus, to which is added the mixed income, which is the result of the economic activity carried out by families: I indicated them with GOS ), plus the balance between taxes paid on production and imports and subsidies received ( TS ).

Fortunately, however, there is the INSTAT website. While working on it a bit, I came up with this table:

(you must excuse me if I didn't fill in the part with income accounts from 2013 to 2015 but it had to be done number by number and it would have taken too long: the picture is still clear and stable), which has the same structure as that of the Latvian miracle:

I won't make it that long because I have little battery and little field. Let's say that the Albanian miracle is very similar to the "pre-miracle" Latvia of 2008: a country with an almost zero propensity to save (that is, with an out-of-scale propensity to consume, in the Albanian case over 90%), which has a sustained investment rate (over 20% of GDP), and which therefore relies on foreign capital, importing capital for over 10% of GDP per year. In the Albanian case these dynamics are evident and exaggerated.

Note well: the fact of saving little, that is, of consuming a lot, is obviously linked to the fact of earning little, that is, of having wages very close to the subsistence level. Thus you understand what is the secret behind the famous -248% (note however that in terms of distribution the share of wages on the total income increases).

As you know, the beautiful game of living off other people's money cannot last forever (and it is already strange that it now continues at a similar pace: but the explanation for this anomaly lies on the one hand in the negligible size of Albania, which attenuates the systemic riskiness of recklessly lending her money, and on the other in the obvious geopolitical drive towards the annexation of the Balkan brothers to the European "project"). I think you also know that first a currency link will be offered to the Albanian eagles, boasting it as an element of progress and social promotion ("we too have big coins"!). Thus obtained the certainty of being repaid in "hard" currency, the euro, then the bill will be asked. At that point the table of the Albanian miracle will become superimposable on that of the Latvian miracle: collapse of the propensity to consume, of the propensity to invest, and reduction of the foreign deficit, accompanied by a reduction in the wage quota.

We see the only positive side of all this beautiful story: it doesn't concern us too much (even if every now and then I know some entrepreneurs attracted by this new Eldorado: and it's good to go there, to intercept the money of piddini willing to pay -248%, as long as I know when to come back!).

It will remain a QED of a not too near future, but not too distant. Provided, of course, that more relevant factors do not intervene in more relevant countries. I am referring, of course, to dimensional terms! Do not be offended by any Albanian brothers present here, to whom I absolutely do not want to bring bad luck or give advice. I smile just thinking about the singular idiocy of those who, after having beaten us for years with the story that the giant Staten would have allowed us to be competitive and to defend our standard of living, in order to be able to afford a vacation, as proud citizens of the giant Staten, they have to go to the tiniest of European states worthy of the name (thus excluding the "city-states"), which therefore finds itself more competitive than the gigantic State.

But both to them, as to others, it doesn't enter the head. The case of Germany, however, demonstrates that history knows how to find its own paths. Keep in touch.

This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2023/08/addendum-sullalbania.html on Sun, 20 Aug 2023 17:56:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.