What caused the Greek export surge?
The regular reader of this blog has for quite some time been aware of the spectacular surge in Greek export. At this moment, people start to pose the question ‘what caused this surge?’. Low wages? Of all (average) EU wages Greek wages declined the most by a long shot (also on this blog). Or was it caused in a ‘modern’ way (well, modern – let’s say the post 1830 way), by investments in technology and production and organization and markets and people – a strategy favoured on this blog by commentors as well as bloggers? The verdict is out and could not be clearer – at least if the data are dependable. Ronald Janssen investigated the composition of Greek exports. And the surge is led by ‘Mineral fuels, lubricants and related materials’, about the most capital intensive sector you can think of. What we need, in the Eurozone, is not savings and cuts – but investment. Savers are afraid of the future. Investors create it.
Caveats: Ronald Janssen mentions the possibility that the data are not dependable, due to revisions. Total Greek goods exports are still very low, comparatively. They have to quintuple or something like that to pull Greece out of the crisis. That’s not impossible – but will require one or two decades. And the recent (August) surge in Irish exports is also enabled by capital and technology intensive production processes, not by low wages. Despite the surge and a large decrease in imports, Greece still has a sizeable deficit on the trade balance, though the services balance (tourism!) compensates for this, to an extent.
That dotted green line looks like pure fantasy. There needs to be infrastructure in place to “sextuple” commodity exports in two years! Where did it come from and what are the commodities? This is must be the graph plotter’s silly season?
Indeed, I’ll keep watching this and will publish something whenever anything turns up.
Maybe exports intra-Eu went down accordingly?
No. Lower domestic consumption might have contributed a little. But I’ll check it.
Being just a fool, what I find disturbing is the massive loss of wealth of Greece just to pay their debt to their lenders. Trading their resources for currency to pay debt.
Do they have enought to remain free?
I’m skeptical about the conclusion that growth in exports of “mineral fuels, lubricants, and related materials” indicates successful capital formation.
The sector should include mainly petrochemicals. Greece doesn’t extract significant amounts of oil or gas. It has some brown coal and a couple of refineries. If it relates to fuel, the blip may not be true growth but a shift in demand from a faltering domestic market to exports.
More likely, the sector also includes quarried minerals such as baryte used by the oil industry. Greece has been extracting and exporting those profitably for decades. This industry is very scalable with demand, and not really capital intensive. If you have the mineral deposits (at the surface) you just need earth moving equipment and some very basic processing plant to export the product.
Because of this I think the blip is more likely a surge in quarrying exports, perhaps fuelled by low labor costs and/or high demand, and not the result of any kind of capital investment in Greece. It’s literally an extractive industry.
More data about the breakdown of exports would readily show if that’s the case.
The rise of oil-related products exports is artificial and caused by the heavy taxation of oil fuel. This creates immense incentives for smuggling. Refineries evade taxing by exporting fuel to nearby countries, which due to lack of sufficient controls allow the same fuel to be smuggled back to Greece, tax-free.
Should have thought of that
I mean – I checked if I could find anything about a mayor new refinery: nought. Which left an almost complete demise of domestic consumption as only ‘rational’ but not plausible explanation. Yours is rational and plausible.