The economy of a country grows when the internal consumption grows (public and private, both consumption and investments), when the trade balance grows (the export of products and services produced in a country minus the imports), or when money comes from the outside (foreign investments or remittances from emigrants), which are then transformed into an increase of savings or an increase in internal expenditure through consumption or investments.
The Gross Domestic Product (GDP) is the most used indicator to measure the economy of a country. The GDP measures the monetary value of all goods and services produces in a country over a specific time period, usually one year.
But the GDP may increase nominally and have not influence at all on the lives of the citizens, that is, on the real economy of the country.
If under economic growth we understand the growth of the economic welfare of the population, the economy grows when the population in general has more money to spend, for consumption, investments, or savings, that is, possible spending in the future, and therefore economic security.
Even the most creative economists and the most imaginative ministers of finance in the world have not managed to come up with anything else, but they’re often busy finding accountancy tricks to increase the GDP in order to create optimism, which itself is an accelerator of economic growth, or at least a large component of moral well-being.
But in the long run, the increase of optimism at a certain moment in history is no solution unless it is turned into an increase in the factors listed above.
For example, announcing new foreign investments may create optimism, convincing people to spend their savings because they believe that they will be able to replenish them in the future, thus reigniting internal demand.
But when there is no economic growth, when the optimism has come to an end (and the savings), the general effect will be a decrease in spending and a further lowering of the optimism and therefore less economic growth.
Or, when a well-known economist states that we can take on a public debt to open up a big hole in the ground in order to fill it later, and if the hole indeed has some use, we will have more progress than when the hole serves little else than increasing public spending.
To us a current example. If we spend money on palm trees, and those suffice to increase tourism, then we have spent our money well. But if tourism does not increase (commensurate with our investment), we have wasted money. As is clear in the case of Albania, there are other headaches than the absence of palm trees that would obstruct the increase of tourism. So it would be favorable to invest in other things first before spending money on these palm trees.
But whatever the manner of investment, it will be judged by measuring the final result. The selected economic policies will be judged more or less favorably if they have brought, after a necessary period, the expected result, so have improved the welfare of the population, or at least the welfare of those who profited from them.
This is where the evaluations differ, because a policy can be considered good by some beneficiaries and less good by others: who sells palm trees is happy, who pay taxes to buy palm trees may be a bit less happy, whereas the pensioner that walks underneath them next to sea may consider this a compensation for their low pension.
In the same way, the increase of public debt may cause more unhappiness in a young person (which has to pay that debt, in one way or the other, in the future) than in a pensioner (who knows that the debt won’t affect them).
Unfortunately, citizens are not always rational and not always understand or are sufficiently informed to appreciate the mechanism of the economy, and it may also happen that a young person is happy that there are palm trees, without thinking that sooner or later they’ll have to pay for them, while an older economist may fear for the future of his children and grandchildren. In these case the difference is precisely culture (the ability to understand the effects of appearances) and information (the ability to secure the necessary data to evaluate the effects of political choices).
Therefore a cultivated ignorance, misinformation, and political propaganda are very useful for the distortion of neutral discussion and the risk of unhappy people.
To finish and to give an answer to our initial question: official data provided by public institutions that are controlled by the government (INSTAT, Ministry of Finance) show that the consumption (of the population and the government) have increased only as much as half of the declared growth of the GDP, while bank deposits have hardly increased. Even within this increase in consumption, only the consumption of luxury products by the ruling class of the country has increased, while there has been a decrease in consumption of basic household items. At the same time, only large bank deposits have grown while the smaller ones have shrunken.
These data may “show” the increase of the welfare of the people only if the desire of the people that of having a full stomach, or having a wal underneath the palm trees.