The Future of the Greek Economy: Economic Development Through 2035 3031268717, 9783031268717

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THE POLITICAL ECONOMY OF GREEK GROWTH UP TO 2030

The Future of the Greek Economy Economic Development Through 2035 Panagiotis E. Petrakis · Pantelis C. Kostis · Kyriaki I. Kafka · Anna-Maria Kanzola

The Political Economy of Greek Growth up to 2030

Series Editor Panagiotis E. Petrakis, Department of Economics, National and Kapodistrian University of Athens, Athens, Greece

This book series analyzes the medium to long-term prospects of Greece’s political economy by studying concepts such as sustainability, sustainable governance and political functioning, economic inclusivity, cultural behaviors, and economic dynamic growth through an evolutionary approach. This series also publishes policy-oriented books outlining steps for increased economic growth and a sustainable future for the Greek economy. This series stands out in that the books depict the conditions that must prevail for the Greek economy to escape the economic stagnation that has lingered from persistent economic recession. Using Greece as a lens to discuss pressing questions, this series will be of interest to economists interested in Eurozone policies, economic growth, evolutionary economics, and more.

Panagiotis E. Petrakis · Pantelis C. Kostis · Kyriaki I. Kafka · Anna-Maria Kanzola

The Future of the Greek Economy Economic Development Through 2035

Panagiotis E. Petrakis Department of Economics National and Kapodistrian University of Athens Athens, Greece

Pantelis C. Kostis Department of Economics National and Kapodistrian University of Athens Athens, Greece

Kyriaki I. Kafka Department of Economics National and Kapodistrian University of Athens Athens, Greece

Anna-Maria Kanzola Department of Economics National and Kapodistrian University of Athens Athens, Greece

ISSN 2662-7248 ISSN 2662-7256 (electronic) The Political Economy of Greek Growth up to 2030 ISBN 978-3-031-26871-7 ISBN 978-3-031-26872-4 (eBook) https://doi.org/10.1007/978-3-031-26872-4 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: © Tetra Images This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface

The series of books with the general title of “The Political Economy of Greek Growth up to 2030” analyze the medium- to long-term prospects of the Greek reality—including the COVID-19 pandemic—in view of the political economy. They combine the notions of sustainability, sustainable governance and political operation, the inclusivity of the economic system, and cultural behavior, with the requirements of economic dynamic growth. The concurrent influence from those five areas, through suitable structural reforms, is a necessary prerequisite to change the production prototype of the Greek economy, which will ensure a medium- and long-term economic development and growth. This viewpoint has an evolutionary foundation. The view supported is that conditions can be created for the Greek economy, after the 2008 depression, to avoid losing another decade due to COVID-19 and to create the necessary conditions for a great growth transformation in the future. The target of this book series, presented in successive volumes, is to assess the current situation of the Greek economy and detect future potential for development and growth, particularly on a medium- to longterm horizon. It represents the next step in a series of books: The Greek Economy and the Crisis, Challenges and Responses, P. E. Petrakis (2011), New York and Heidelberg, Springer; and A New Growth Model for the Greek Economy, Requirements for the Long-Term Sustainability, P. E. Petrakis (2016), New York, Palgrave Macmillan. These books marked v

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PREFACE

the conditions in which the Greek economy entered Great Depression (2008–2018) and put forth initial thoughts on exiting the crisis. In this current book series, conditions for the exit of the economy from the crisis are analyzed, along with its entry into a new period of development and growth. Athens, Greece

Panagiotis E. Petrakis Pantelis C. Kostis Kyriaki I. Kafka Anna-Maria Kanzola

Acknowledgments

We would like to thank the main collaborator Mrs. E. Giouli, as well as the other collaborators in the office, who offered us the opportunity to deal with the completion of our research. National and Kapodistrian University of Athens offered its support. Our families offered us their patience. Panagiotis E. Petrakis Pantelis C. Kostis Kyriaki I. Kafka Anna-Maria Kanzola

vii

Contents

Part I Alternative Futures Analysis 1

2

Setting the Scenery: Factors Affecting the Future 1.1 Introduction 1.2 Tales from the Past Shaping the Future: Theory, Economic Crises, and Political Behaviors 1.2.1 Theory 1.2.2 The Recent Economic Crises and Political Behaviors 1.3 Connecting the Present with the Future: The Megatrends 1.4 Conclusions: Use of History, Scenario Building, and Foresight References Building Scenarios: The Four Economic Scenarios for Greek Alternative Economic Futures 2.1 Introduction 2.2 Step-By-Step Scenario Building: Theoretical and Practical Guide 2.3 The Oxford Global Economic Model (GEM) and Details for the Scenarios’ Projections 2.4 The Two Versions of the Growth Scenario

3 3 5 5 6 9 11 13 17 17 19 24 27

ix

x

CONTENTS

2.5

The Three Scenarios Left: The Unsustainable Growth, the Transformation, and the Falldown 2.6 A Scenarios’ Summary and Some Insights References 3

Scenarios and Contextual Factors: Addressing the Implications 3.1 Introduction 3.2 Culture: An Indicator for the Future 3.3 Handling Uncertainty: Myopic or Forward-Looking Expectations? 3.4 In Place of Conclusions: Is There a Prevailing Scenario? References

28 31 34 37 37 38 41 43 44

Part II The Past and the Present of the Greek economy 4

5

6

Sustainable Development 4.1 Introduction 4.2 The Evolution of Population and the Aging Problem 4.3 Environment Protection and the Ecological Footprint 4.4 Renewable Energy as a Source of Sustainable Development 4.5 The Rich Natural Resources of Greece References

49 49 50 54

Sustainable Governance 5.1 Introduction 5.2 The Evolution of Governance Indicators: Divergence and Convergence During the Last Two Decades 5.3 The Improvement of Corruptions Perceptions During the Crisis of 2008 5.4 The Recrudescence of Economic Freedom 5.5 Confronting Terrorism and Money Laundering Reference

59 59

Inclusive Growth 6.1 Introduction 6.2 Labor Market Conditions and Inclusivity 6.3 Participating in Education and Educational Quality

77 77 78 85

55 57 58

60 64 66 69 75

CONTENTS

Personal Finance: Disposable Income and Household Conditions 6.5 People at Risk of Poverty and Social Protection Expenditure 6.6 Inequality, Material, and Social Deprivation in the Greek Economy 6.7 Health, Infant Mortality, and Healthcare Expenditure References

xi

6.4

7

8

89 90 95 96 98

Cultural Change and Development and Growth 7.1 Introduction 7.2 How Greeks Judge the Current Situation 7.3 Expectations about the Next 12 Months in the Greek Economy 7.4 The Low Institutional Trust in the Greek Society 7.5 Insecurity Hypothesis and Post-Materialism References

99 99 100

The Dynamism of the Economy 8.1 Introduction 8.2 The Output Gap of the Greek Economy 8.3 The External Sector: Exports, Imports, and Current Account Balance 8.4 The Neuralgic Role of Consumption 8.5 Private vs. Public Investments and the FDIs 8.6 The Unsatisfactory Return of Savings 8.7 The Troubled Housing Market 8.8 PMI and Production in Manufacturing 8.9 Public Deficits, Debt, Revenues, and Expenditures in the Greek economy 8.10 Labor Productivity Growth Reference

115 115 116

102 108 110 113

117 119 120 123 125 126 129 132 132

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CONTENTS

Part III Alternative Futures for Greece: The Five Scenarios Under the Five Pillars of Economic Development 9

10

11

12

Alternative Economic Futures and Sustainable Development 9.1 Introduction 9.2 Population Dynamics: The Aging Problem in the Future 9.3 Environmental Issues as a Cornerstone 9.4 Renewable Energy Sources are the Key to Sustainable Development References Sustainable Governance and Alternative Economic Futures 10.1 Introduction 10.2 The Future of the Greek Governance Indicators 10.3 Corruptions Perceptions: A Way to a “Cleaner” Economy 10.4 Is There a Chance for a More Free Economy? References The Impact of Alternative Economic Futures on Inclusive Growth 11.1 Introduction 11.2 Labor Market Conditions and the Greek Economy in the Future 11.3 Human Capital and Education: Qualitative Characteristics 11.4 Household Conditions Under Different Scenarios 11.5 Poverty and Inequalities in the Greek Economy’s Future 11.6 Inclusiveness and the Health of the Greeks References Cultural Change and Alternative Futures 12.1 Introduction 12.2 How Are Greeks About to Judge Their Current Situation in the Future 12.3 The Formation of Expectations in the Future

135 135 136 138 140 143 145 145 146 151 152 153 155 155 156 158 161 161 163 165 167 167 168 170

CONTENTS

12.4 Trust in European and Government Institutions References 13

The Dynamism of the Economy and the Alternative Futures 13.1 Introduction 13.2 How Far from the Potential Output Will the Greek Economy Be in the Future? 13.3 The Greek External Sector in the Future 13.4 The Consumption-Based Greek Model 13.5 Investments as a Key for the Future Outcomes 13.6 The Future of Housing in the Greek Economy 13.7 Manufacturing Production and Challenges 13.8 Public Economics and Alternative Futures 13.9 Productivity up to 2035 References

Index

xiii

172 175 177 177 178 179 182 183 184 185 186 189 190 193

Introduction

The scope of the present book is to introduce the Political Economy of Alternative Economic Futures, using as a case study the Greek economy. We refer to this attempt as “political economy” since foresight and alternative futures analysis “bridges” microeconomics, macroeconomics, and social and cultural aspects with the reality of human reactions under uncertainty of what lies ahead. At the microeconomic level, the individual’s need to predict the future arises from the desire for a better life. At the macroeconomic level, the prediction of the future concerns the mapping of the basic economic variables in order to speculate regarding economic, social, and technological developments. Consequently, the analysis is not restricted to the presentation of a series of forecasts for the Greek economy up to 2035, but aims to develop a comprehensive framework of its future. The prediction of the alternative futures requires analytical capacity, multidisciplinary outlook, and creativity in order to map the several plausible developments at the social and economic level. To predict the future developments in complex systems, we use scenario building exercises and foresight because they address inherited uncertainties and allow for the preparation of individuals and policymakers to achieve collective goals. Foresight techniques are grounded in the collective need of human beings to prepare for the future under the uncertainty of many alternatives due to systematic and random shocks. In other words, foresight incorporates the realization of past and present experiences along with anxiety and xv

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INTRODUCTION

hopes for the course of the future. Scenarios do not describe certainties, but possibilities regarding the future. Nevertheless, they have the ability to influence the formation of expectations. That is why optimism must be a component of scenario building, even in a relatively bleak future, to avoid self-fulfilling prophecies and negative confirmation. Scenarios in the present book do not only aim to predict the future but are also heuristic tools for the preparation of society and political systems to utilize resources if they want to achieve a sustainable future. In that regard, we need to think “big”, covering a series of conceptual spaces. Thus, there are five realms that compose our thinking regarding alternative economic futures, which outline the political economy of Greece. These are sustainable development; sustainable governance; inclusive growth; evolution of human behaviors; and—last but probably first in prioritization—dynamic growth and development. Hence, the realization of alternative economic futures concerns the generation of scenarios in each of these conceptual spaces. Initially, we use a baseline scenario that describes the course of the future economy—unless fundamental differentiating factors force another series of developments—and modify its assumptions to produce four scenarios. For the generated scenarios, we mark as key-factor uncertainties climate change and the geopolitical landscape. We generate a growth scenario, an unsustainable growth scenario, a transformation scenario, and a downfall scenario based on the severity of the key uncertainty factors’ effects. Each scenario describes a different course of the future depending on its individual hypotheses. Essentially, we generate a scenario matrix for twenty-five realms because the four scenarios are analyzed with respect to the five aforementioned realms. To that end, the present book is organized into three parts. In Part I, we develop the methodology used for scenario building and alternative futures analysis. In Part II, we analyze the past and the present of the Greek with respect to the five realms mentioned above. Lastly, in Part III, we present the four alternative economic scenarios for Greece up to 2035 according to the above five realms.

Abbreviations

EU-27 FDI GDP GEM GWh HICP M PIAAC PISA PMI TFP X

European Union of 27 Members Foreign Direct Investments Gross Domestic Product Oxford Global Economic Model Gigawatt hours Harmonized Index Of Consumer Prices IMPORTS Programme for the International Assessment of Adult Competencies Programme for International Student Assessment Purchasing Managers’ Index Total Factor Productivity Exports

xvii

List of Figures

Fig. 1.1

Fig. 2.1

Fig. 2.2

Fig. 2.3

Fig. 2.4

Fig. 2.5

What connects us with the future? (Source Authors’ creation. Note The consequences of past events, the interpretation of past events in the present, and the unavoidable forces of change—which are dynamic in nature—contribute to the construction of the future. In sum, the future is built from received information, hopes, and speculation) The scenario matrix for the generated scenarios (Source Authors’ creation. Note The four scenarios are placed in the matrix depending on the critical uncertainty events) Baseline Scenario—annual GDP growth rate projection (Source Own calculations based on Global Economic Model of Oxford Economics) Growth scenario—annual GDP growth rate projection for Greece (2021–2035) (Source Own calculations based on Global Economic Model of Oxford Economics) Growth scenario I—annual GDP growth rate projection for Greece and EU (2021–2035) (Source Own calculations based on Global Economic Model of Oxford Economics) The unsustainable growth, transformation, and Falldown scenarios for Greece (2021–2035) (Source Own calculations based on Global Economic Model of Oxford Economics)

12

23

26

28

29

31

xix

xx

LIST OF FIGURES

Fig. 2.6

Fig. 2.7

Fig. 3.1

Fig. 4.1 Fig. 4.2

Fig. 4.3

Fig. 4.4 Fig. 4.5

Fig. 4.6

Fig. 4.7

The unsustainable growth, transformation, and Falldown scenarios for selected EU countries (2021–2035) (Source Own calculations based on Global Economic Model of Oxford Economics) Real annual GDP growth rates per scenario in Greece (2021–2035) (Source Own calculations based on Global Economic Model of Oxford Economics) Complex dynamics, scenarios, and the future (Source Authors’ creation. Note The future could meet any of the four scenarios or fall in between some of the scenarios. However, there is always the possibility that it will not resemble any of the scenarios due to unpredictable black-swan events) Life expectancy at birth (Source Eurostat [SDG_03_10 database]) Proportion of population aged 65 years and over (Source United Nations [ISO 3166-1 numeric code 900 about Greece and 300 about World]) The Natural Balance in the Greek Society (1960–2020) (persons) (Source Eurostat [demo_fmonth, demo_magec] and own calculations. Note The natural balance is calculated as the difference between births and deaths each year) Population growth rate (%) (Source United Nations—world population prospects 2022 revision) CO2 emissions (Source IEA—greenhouse gas emissions from energy data explorer. Note Million tons of CO2 about Greece (left axis) and Million tons of CO2 about World [right axis]) Greenhouse gas emissions (1990 = 100) (Source Eurostat (SDG_13_10). Note The indicator measures total national emissions [from both ESD and ETS sectors], including international aviation of the so-called “Kyoto basket” of greenhouse gases, including carbon dioxide (CO2 ), methane (CH4 ), nitrous oxide (N2 O), and the so-called F-gases [hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride (NF3) and sulfur hexafluoride (SF6)] from all sectors of the GHG emission inventories [including international aviation and indirect CO2 ]) Renewable share in final energy consumption (%) (Source IEA—renewables 2021 data explorer)

32

34

43 51

52

53 53

54

55 56

LIST OF FIGURES

Fig. 4.8

Fig. 5.1 Fig. 5.2 Fig. 5.3 Fig. 5.4 Fig. 5.5 Fig. 5.6 Fig. 5.7

Fig. 5.8

Total natural resources rents (% of GDP) (Source World Bank [NY.GDP.TOTL.RT.ZS]. Note Total natural resources rents are the sum of oil rents, natural gas rents, coal rents [hard and soft], mineral rents, and forest rents) Voice and accountability index (Source World Bank—World Governance Indicators) Political Stability and Absence of Violence/Terrorism index (Source World Bank—World Governance Indicators) Government effectiveness index (Source World Bank—World Governance Indicators) Regulatory quality index (Source World Bank—World Governance Indicators) Rule of law index (Source World Bank—World Governance Indicators) Control of corruption perceptions index (Source World Bank—World Governance Indicators) Corruption Perceptions Index score (Source Transparency International. Note 0 = highly corrupt, 100 = very clean. The Corruption Perceptions Index [CPI] aggregates data from several different sources that provide perceptions by business people and country experts of the level of corruption in the public sector) Index of economic freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, economic freedom is about much more than a business environment in which entrepreneurship and prosperity can flourish. With its far-reaching impacts on various aspects of human development, economic freedom empowers people, unleashes powerful forces of choice and opportunity, nourishes other liberties, and improves the overall quality of life)

xxi

57 61 61 62 63 63 64

65

66

xxii

LIST OF FIGURES

Fig. 5.9

Fig. 5.10

Fig. 5.11

Fig. 5.12

Property rights (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, secure property rights give citizens the confidence to undertake entrepreneurial activity, save their income, and make long-term plans because they know that their income, savings, and property (both real and intellectual) are safe from unfair expropriation or theft. Property rights are a primary factor in capital accumulation for production and investment) Judicial effectiveness (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, judicial effectiveness requires efficient and fair judicial systems to ensure that laws are fully respected and that appropriate legal actions are taken against violations) Government integrity (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, in a world characterized by social and cultural diversity, practices regarded as corrupt in one place may reflect traditional interactions in another. The systemic corruption of government institutions by such practices as bribery, nepotism, cronyism, patronage, embezzlement, and graft is of great concern) Tax burden (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, a tax burden is a fiscal burden imposed by Governments on economic activity through taxation and borrowing. However, governments permit individuals and businesses to keep and manage a larger share of their income and wealth for their benefit and maximize economic freedom)

67

68

69

70

LIST OF FIGURES

Fig. 5.13

Fig. 5.14

Fig. 5.15

Fig. 5.16

Fig. 5.17

Fig. 5.18

Fiscal health (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage foundation, widening deficits and a growing debt burden, which are direct consequences of poor government budget management, lead to the erosion of a country’s overall fiscal health. Deviations from sound fiscal positions often disturb macroeconomic stability, induce economic uncertainty, and thus limit economic freedom) Business freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, business freedom is an individual’s ability to establish and run an enterprise without undue interference from the state) Labor freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, labor freedom is the ability of individuals to find employment opportunities and work) Monetary freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, monetary freedom requires a stable currency and market-determined prices. Whether acting as entrepreneurs or as consumers, economically free people need a steady and reliable currency as a medium of exchange, a unit of account, and a store of value. Without monetary freedom, creating long-term value or amassing capital is difficult) Trade freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, trade freedom is about the degree to which government hinders the free flow of foreign commerce and directly affects individuals’ ability to pursue their economic goals and maximize their productivity and well-being) Investment freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, a free and open investment environment provides maximum entrepreneurial opportunities and incentives for expanded economic activity, greater productivity, and job creation)

xxiii

71

71

72

72

73

73

xxiv

LIST OF FIGURES

Fig. 5.19

Fig. 5.20

Fig. 6.1

Fig. 6.2

Fig. 6.3 Fig. 6.4 Fig. 6.5

Fig. 6.6

Fig. 6.7 Fig. 6.8

Fig. 6.9 Fig. 6.10

Financial freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, financial freedom is described as the case in which an accessible and efficiently functioning formal financial system ensures the availability of diversified savings, credit, payment, and investment services to individuals and businesses) Basel Institute AML index (Source Basel Institute on Governance. Note 10 indicates the highest risk level. The index provides risk scores covering five domains that contribute to a high risk of ML/TF: Quality of AML/CFT Framework, Bribery, and Corruption, Financial Transparency and Standards, Public Transparency and Accountability, and Legal and Political Risks) Change in employment (% annual change) (Source Editing data from the Global Economic Model of Oxford Economics) Change in unemployment (% annual change) (Source Editing data from the Global Economic Model of Oxford Economics) Total employment (resident population—LFS) (thousands of people) (Source Eurostat [LFSI_EMP_A]) Youth employment rate (%, 15–24 years) (Source Eurostat [yth_empl_020]) Unemployment rate (% of the population in the labor force) (Source Editing data from the Global Economic Model of Oxford Economics) Earnings gross total (% annual change of quarterly total, Gross—euro per employee) (Source Editing data from the Global Economic Model of Oxford Economics) Labor supply (% annual change) (Source Editing data from the Global Economic Model of Oxford Economics) Population of Working Age (% annual change) (Source Editing data from the Global Economic Model of Oxford Economics) Monthly minimum wages (euros) (Source Eurostat [EARN_MW_CUR Database]) Average annual wages (In 2021 constant prices at 2021 USD PPPs) (Source OECD)

74

74

78

79 79 80

81

81 82

83 83 84

LIST OF FIGURES

Fig. 6.11

Fig. 6.12

Fig. 6.13

Fig. 6.14

Fig. 6.15

Gender Employment Gap (Source Eurostat [LFSI_EMP_A]. Note It is calculated as the difference between the male and female participation in employment as a percentage of the total population) Expected years of schooling (Source United Nations—School register or school census for enrollment data by age. UNPD population estimates for the school-age population. Note Total number of years of schooling that a person of a certain age can expect to receive in the future, assuming that the probability of his or her being enrolled in school at any age is equal to the current enrollment ratio for that age) Mean years of schooling (Source United Nations—National population censuses, household, or labor force surveys. Note Average number of completed years of education of a country’s population aged 25 years and older, excluding years spent repeating individual grades) (a) Population by educational attainment level—Less than primary, primary, and lower secondary education (levels 0–2) (percentage %). (b) Population by educational attainment level—Upper secondary, post-secondary non-tertiary, and tertiary education (levels 3–8) (percentage %) (Source Eurostat [EDAT_LFSE_03]) PISA score in reading (Source OECD—Programme for International Student Assessment’s [PISA]. Note Reading performance, for PISA, measures the capacity to understand, use and reflect on written texts in order to achieve goals, develop knowledge and potential, and participate in society. The mean score is the measure)

xxv

84

85

86

87

88

xxvi

LIST OF FIGURES

Fig. 6.16

Fig. 6.17

Fig. 6.18

Fig. 6.19

PISA score in mathematics (Source OECD—Programme for International Student Assessment’s (PISA). Note Mathematical performance, for PISA, measures the mathematical literacy of a 15-year-old to formulate, employ, and interpret mathematics in a variety of contexts to describe, predict, and explain phenomena, recognizing the role that mathematics plays in the world. The mean score is the measure. A mathematically literate student recognizes the role that mathematics plays in the world in order to make well-founded judgments and decisions needed by constructive, engaged, and reflective citizens) PISA Score in science (Source OECD - Programme for International Student Assessment’s [PISA]. Note Scientific performance, for PISA, measures the scientific literacy of a 15-year-old in the use of scientific knowledge to identify questions, acquire new knowledge, explain scientific phenomena, and draw evidence-based conclusions about science-related issues. The mean score is the measure) PIAAC literacy, numeracy, and problem-solving (Source OECD—Programme for the International Assessment of Adult Competencies—PIAAC. Note The Survey of Adult Skills (PIAAC) assesses the proficiency of adults in three information-processing skills essential for full participation in the knowledge-based economies and societies of the twenty-first century: literacy, numeracy, and problem-solving in technology-rich environments. These are competencies that are essential for functioning in the modern world, for realizing the myriad tasks adults must undertake in the various life contexts) Index of using skills at work (2016) (Source OECD—Programme for the International Assessment of Adult Competencies—PIAAC. Note The Survey of Adult Skills (PIAAC) includes detailed questions about the frequency with which respondents perform specific tasks in their jobs. Based on this information, the survey measures the use of a wide range of skills, including both information-processing skills, which are also measured in the direct assessment, and generic skills, for which only self-reported use at work is available)

88

89

90

91

LIST OF FIGURES

Fig. 6.20 Fig. 6.21 Fig. 6.22

Fig. 6.23 Fig. 6.24

Fig. 6.25

Fig. 6.26 Fig. 6.27 Fig. 6.28 Fig. 6.29 Fig. 7.1

Fig. 7.2

Fig. 7.3

Fig. 7.4

Personal disposable income (euros) (Source Editing data from the Global Economic Model of Oxford Economics) Distribution of population aged 18 and over (Source Eurostat [ilc_lvhl11]) People living in households with very low work intensity (percentage of the total population aged less than 60) (Source Eurostat [ilc_lvhl13]) At-risk-of-poverty rate (percentage of the total population) (Source Eurostat [ILC_PEPS01]) Impact of social transfers (excluding pensions) on poverty reduction (percentage of the total population) (Source Eurostat [TESPM050]) Social protection expenditure (euro per inhabitant [at constant 2010 prices]) (Source Eurostat [SPR_EXP_SUM]) Income quintile share ratio S80/S20 for disposable income (ratio) (Source Eurostat [ILC_DI11]) Material and social deprivation (percentage of employed persons 16 years or over) (Source Eurostat [ilc_mdsd01]) Infant mortality, deaths per 1000 live births (Source World Bank) Healthcare expenditure (euro per inhabitant) (Source Eurostat [HLTH_SHA11_HF]) Judge the current situation in your country as good (% of the population) (Source Standard Eurobarometer. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”) Judge the current situation in your national economy as good (% of the population) (Source Standard Eurobarometer. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”) Judge the financial situation of your household as good (% of the population) (Source Standard Eurobarometer. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”) What do you think are the two most important issues facing (OUR COUNTRY) now? (Source Standard Eurobarometer)

xxvii

92 92

93 93

94

94 95 96 97 97

101

101

102

103

xxviii

LIST OF FIGURES

Fig. 7.5 Fig. 7.6 Fig. 7.7 Fig. 7.8 Fig. 7.9 Fig. 7.10 Fig. 7.11 Fig. 7.12 Fig. 7.13 Fig. 7.14 Fig. 7.15

Fig. 8.1

Fig. 8.2

Fig. 8.3

Fig. 8.4

Fig. 8.5

Fig. 8.6

Consumers surveys—financial situation over the next 12 months (Source Eurostat—Business and consumer survey) General economic situation over the next 12 months (Source Eurostat—Business and consumer survey) Price trends over the next 12 months (Source Eurostat—Business and consumer survey) Unemployment expectations over the next 12 months (Source Eurostat—Business and consumer survey) Major purchases over the next 12 months (Source Eurostat—Business and consumer survey) Savings over the next 12 months (Source Eurostat—Business and consumer survey) Trust in political parties (% of the population that tends to trust) (Source Standard Eurobarometer) Trust in national government (% of the population that tends to trust) (Source Standard Eurobarometer) Trust in national parliament (% of the population that tends to trust) (Source Standard Eurobarometer) Trust in the European commission (% of the population that tends to trust) (Source Standard Eurobarometer) What is your opinion on EMU with one single currency, the euro (% of the population that answer “for”) (Source Standard Eurobarometer) Output gap as a percentage of potential output (%) (Source Editing data from the Global Economic Model of Oxford Economics) Exports of goods and services (% GDP) (Source Editing data from the Global Economic Model of Oxford Economics) Imports of goods and services (% GDP) (Source Editing data from the Global Economic Model of Oxford Economics) Current account balance of payments (share of GDP) (Source Editing data from the Global Economic Model of Oxford Economics) Private consumption annual rate of change (%) (Source Editing data from the Global Economic Model of Oxford Economics) Public consumption annual rate of change (%) (Source Editing data from the Global Economic Model of Oxford Economics)

104 105 105 106 107 107 108 109 109 110

111

116

117

118

118

119

120

LIST OF FIGURES

Fig. 8.7 Fig. 8.8

Fig. 8.9

Fig. 8.10 Fig. 8.11

Fig. 8.12 Fig. 8.13 Fig. 8.14 Fig. 8.15 Fig. 8.16 Fig. 8.17 Fig. 8.18 Fig. 8.19

Fig. 8.20

Fig. 8.21

Fig. 8.22 Fig. 8.23

Domestic motor vehicle sales (2005 = 100) (Source Bank of Greece (Bulleting of Conjunctural Indicators) Total investments rate of change (%) (Source Editing data from the Global Economic Model of Oxford Economics) Private investments rate of change (%) (Source Editing data from the Global Economic Model of Oxford Economics) Capital goods (2015 = 100) (Source Bank of Greece [Bulleting of Conjunctural Indicators]) Foreign direct investment in cement production in Greece, inward, the share of GDP (Source Editing data from the Global Economic Model of Oxford Economics) Total deposits and repos (million Euros) (Source Bank of Greece) Deposits of non-financial institutions (million Euros) (Source Bank of Greece) Deposits of households and private non-profit institutions (million Euros) (Source Bank of Greece) House price index (2015 = 100) (Source Editing data from the Global Economic Model of Oxford Economics) PMI manufacturing (Source IHS Markit, Bank of Greece [Bulleting of Conjunctural Indicators]) Electricity generation (2015 = 100) (Source Bank of Greece [Bulleting of Conjunctural Indicators]) Cement production (volume in tons) (Source Bank of Greece [Bulleting of Conjunctural Indicators]) Government balance, Maastricht definition (share of GDP) (Source Editing data from the Global Economic Model of Oxford Economics) Government primary balance (share of GDP) (Source Editing data from the Global Economic Model of Oxford Economics) Gross government debt Maastricht definition (share of GDP) (Source Editing data from the Global Economic Model of Oxford Economics) Government revenue (% GDP) (Source Editing data from the Global Economic Model of Oxford Economics) Government expenditures (% GDP) (Source Editing data from the Global Economic Model of Oxford Economics)

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123 124 124 125 126 127 128 128

129

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130 131 131

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LIST OF FIGURES

Fig. 8.24 Fig. 9.1 Fig. 9.2

Fig. 9.3

Fig. 9.4

Fig. 9.5

Fig. 9.6

Fig. 9.7

Fig. 9.8

Fig. 10.1

Fig. 10.2

Fig. 10.3

Fig. 10.4

Labor productivity growth (GDP per hour worked) (Source OECD) Population (2020–2035) (millions) (Source Editing data from the Global Economic Model of Oxford Economics) Population 65+ (2020–2035) (millions) (Source Editing data from the Global Economic Model of Oxford Economics) Carbon dioxide emissions (2020–2035) (tones millions) (Source Editing data from the Global Economic Model of Oxford Economics) Carbon emissions (2020–2035) (tones millions) (Source Editing data from the Global Economic Model of Oxford Economics) Household energy consumption (2020–2035) (GWh) (Source Editing data from the Global Economic Model of Oxford Economics) Industry energy consumption (2020–2035) (GWh) (Source Editing data from the Global Economic Model of Oxford Economics) Renewable electricity output, the share of total (%) (Source Editing data from the Global Economic Model of Oxford Economics) Total electricity output from renewable sources (GWh) (Source Editing data from the Global Economic Model of Oxford Economics) Voice and Accountability—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations) Political Stability and Absence of Violence/Terrorism—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations) Government Effectiveness—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations) Regulatory Quality—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations)

132 137

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LIST OF FIGURES

Fig. 10.5

Fig. 10.6

Fig. 10.7

Fig. 10.8

Fig. 11.1

Fig. 11.2

Fig. 11.3

Fig. 11.4

Fig. 11.5

Fig. 11.6

Fig. 11.7

Fig. 11.8

Rule of Law—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations) Control of Corruption—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations) Corruption Perceptions Index—5 Scenarios (2020–2035) (Source Transparency International, Global Economic Model—Oxford Economics, and own calculations. Note 0 = highly corrupt, 100 = very clean) Index of Economic Freedom—5 Scenarios (Source The Heritage Foundation, Global Economic Model—Oxford Economics, and own calculations) Employment (2020–2035)—5 scenarios (Source Own calculations based on the Global Economic Model of Oxford Economics) Unemployment rate (2020–2035)—5 scenarios (Source Own calculations based on the Global Economic Model of Oxford Economics) Earnings Gross Total, Gross - euro per employee (2020–2035)—5 scenarios (Source Own calculations based on the Global Economic Model of Oxford Economics) Labor Supply (2020–2035)—5 scenarios (Source Own calculations based on the Global Economic Model of Oxford Economics) Expected years of schooling (years) (2020–2035)—5 scenarios (Source United Nations and own calculations based on the Global Economic Model of Oxford Economics) Mean years of schooling (years) (2020–2035)—5 scenarios (Source United Nations and own calculations based on the Global Economic Model of Oxford Economics) Personal Disposable income, euros (2020–2035)—5 scenarios (Source Own calculations based on the Global Economic Model of Oxford Economics) Persons at risk of poverty or social exclusion (percentage of the total population) (2020–2035)—5 scenarios (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics)

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LIST OF FIGURES

Fig. 11.9

Fig. 11.10

Fig. 11.11

Fig. 11.12

Fig. 12.1

Fig. 12.2

Fig. 12.3

Fig. 12.4

Fig. 12.5

Income Quintile Share Ratio S80/S20 for Disposable Income (ratio) (2020–2035)—5 scenarios (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics) Social Protection Expenditure, Euro per inhabitant, at constant 2010 prices (2020–2035)—5 scenarios (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics) Infant mortality, Deaths per 1000 live births (2020–2035)—5 scenarios (Source World Bank and own calculations based on the Global Economic Model of Oxford Economics) Health care expenditure (euro per inhabitant) (2020–2035)—5 scenarios (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics) Judge Current Situation in your country as good (% of the population) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”) Judge the current situation in your national economy as good (% of the population) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”) Judge the financial situation of your household as good (% of the population) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”) General economic situation over the next 12 months (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics) Price trends over the next 12 months (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics)

162

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164

164

169

169

170

171

171

LIST OF FIGURES

Fig. 12.6

Fig. 12.7

Fig. 12.8

Fig. 12.9

Fig. 12.10

Fig. 13.1

Fig. 13.2

Fig. 13.3

Fig. 13.4

Fig. 13.5

Fig. 13.6

Fig. 13.7

Trust in National Parliament (% of the population that tends to trust) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics) Trust in National Government (% of the population that tends to trust) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics) Trust in political parties (% of the population that tends to trust) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics) What is your opinion on EMU with one single currency, the euro (% of the population that answer “for”) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics) Trust in the European Commission (% of the population that tends to trust) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics) Output gap as a percentage of potential output (%) (Source Own calculations based on the Global Economic Model of Oxford Economics) Exports of Goods and Services (bn euros) (Source Own calculations based on the Global Economic Model of Oxford Economics) Imports of Goods and Services (bn euros) (Source Own calculations based on the Global Economic Model of Oxford Economics) Current account balance of payments (share of GDP) (Source Own calculations based on the Global Economic Model of Oxford Economics) Private Consumption (bn euros) (Source Own calculations based on the Global Economic Model of Oxford Economics) Total Investments (bn euros) (Source Own calculations based on the Global Economic Model of Oxford Economics) House Price Index (2015 = 100) (Source Own calculations based on the Global Economic Model of Oxford Economics)

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184

185

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LIST OF FIGURES

Fig. 13.8

Fig. 13.9

Fig. 13.10

Fig. 13.11

Fig. 13.12

Fig. 13.13

GDP in Manufacturing (bn euros) (Source Own calculations based on the Global Economic Model of Oxford Economics) Government balance, Maastricht definition (share of GDP) (Source Own calculations based on the Global Economic Model of Oxford Economics) Government primary balance (share of GDP) (Source Own calculations based on the Global Economic Model of Oxford Economics) Gross government debt Maastricht definition (share of GDP) (Source Own calculations based on the Global Economic Model of Oxford Economics) Government Expenditures (% GDP) (Source Own calculations based on the Global Economic Model of Oxford Economics) GDP per hour worked (Source Own calculations based on the Global Economic Model of Oxford Economics)

186

187

188

188

189 190

List of Tables

Table 2.1 Table 2.2 Table 2.3 Table 2.4

The economic measures used for the scenarios’ projections Specific hypotheses of the first version of the Growth Scenario Specific hypotheses for the unsustainable growth, transformation, and Falldown scenarios Hypotheses of each scenario

25 27 30 33

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PART I

Alternative Futures Analysis

In Part I of the present book, we introduce the reader to the methodology used for scenario building and alternative futures analysis. First, we discuss how historical path-dependence and the presence of megatrends “shape” the future (Chapter 1). We use a multidirectional approach through pastcasting and backcasting to highlight how the past, the present, and the future are connected through history and the dynamic presence of economic, social, and political megatrends. Second, we explore the “art” of forecasting, which is a combination of analytical skills, creativity, and a multidisciplinary outlook (Chapter 2). Essentially, we provide a step-by-step guide for scenario building analysis and generate the four possible scenarios for Greece in the next decade. Third, we highlight the importance of a series of contextual or “swinging” factors for the future (Chapter 3). Such factors concern the social and political settings, cultural values, and the effects of irreducible uncertainty. The analysis of the swinging factors is crucial because it facilitates speculation regarding which scenario is more likely to prevail.1 1 Let it be noted that the chapters from Part I draw from the following: (i) Alternative Futures of Capitalist Economy by Petrakis, P.E. and Kanzola, A.-M. which was presented in the 33rd Annual Meeting of the Society for the Advancement of Socio-Economics, July 2-5, 2021; (ii) Environmental Behavioral Perceptions on Alternative Economic Futures by Kanzola, A.-M, Papaioannou, K., and Petrakis, P.E. which was presented and awarded in the 16th Academy of Innovation, Entrepreneurship, and Knowledge Conference, June 28– 30, 2022; and (iii) The Political Economy of Alternative Economic Futures by Petrakis E.P. in The Routledge Handbook of Comparative Economic Systems, Dallago, B. & Casagrande, S. (Eds.), forthcoming.

CHAPTER 1

Setting the Scenery: Factors Affecting the Future

1.1

Introduction

The future is a fluid state which is constructed by the past, the present, and the expectations—and hopes—for what lies ahead. Thus, history is important. The importance of history has been acknowledged since ancient times. In his play “Antiope”, Euripides, the famous ancient tragedian of Classical Athens, expresses the opinion that “happy [is] the man who has gained knowledge through inquiry” (Ôλβιoς Óστις τÁς ƒστoρ…ας eσχε μ£θησιν). In addition, according to the Italian

This chapter draws from the following: (i) Alternative futures of capitalist economy by Petrakis, P. E., & Kanzola, A.-M. which was presented in the 33rd annual meeting of the society for the advancement of socio-economics, July 2–5, 2021; (ii) Environmental behavioral perceptions on alternative economic futures by Kanzola, A.-M., Papaioannou, K., & Petrakis, P. E. which was presented and awarded in the 16th academy of innovation, entrepreneurship, and knowledge conference, June 28–30, 2022; and (iii) The political economy of alternative economic futures by Petrakis E. P. in The Routledge Handbook of comparative economic systems, Dallago, B., & Casagrande, S. (Eds.), forthcoming. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_1

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philosopher Benedetto Croce (1923/2007), “all history is contemporary history” (storia contemporanea) because through historical events we can interpret, at some point, the present. In essence, to understand how the future may evolve, it is necessary to understand how we arrived at the present (Bradfield et al., 2016), because historical analysis brings about causality dynamics. In that regard, a greater emphasis on history can enhance the efficiency of scenario building by highlighting the causality of future change (Bradfield et al., 2016). However, the relationship between the past, the present, and the future is complex. History often offers insights into the future, but it can also mislead planners since past trends and dynamics wane (Schoemaker, 2020). The main question that arises is: how much should we focus on the past when trying to predict the (short) future? Let it be noted that we use the adjective “short” because, contrary to scenario building exercises, in historical terms, ten years is a very small timeframe. In the present chapter, we aim to answer this question by focusing on recent economic and political historical events and trends that will shape the future. This is necessary in order to meet one of the most difficult challenges in predicting the future, which is to design efficient and insightful scenarios for future-fit policies. Moreover, scenario building and foresight are interdisciplinary tasks combining the three main characteristics of the future to which we have alluded: history, present events, and key uncertainty factors. The current chapter provides a comprehensive examination of the significance of history in scenario building, which serves as a means for forecasting the future. Given that history connects the past with the present, we focus on the recent historical events that shaped the economic future for the next ten years (Sect. 1.2). The connectors of the present with the future are the several economic and social drivers in the form of megatrends—which, in many cases, are being accelerated by economic shocks. Hence, we explore how such drivers generate new realities in the economic, social, and political realms (Sect. 1.3). Following this reasoning process, we are able to answer the question posed regarding which historical events are essential when envisioning the future (Sect. 1.4).

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5

1.2 Tales from the Past Shaping the Future: Theory, Economic Crises, and Political Behaviors As stated earlier, it is essential to understand the relationship between the past, the present, and the future with respect to scenario building. To that end, the present part is divided into two sub-sections, where SubSect. 1.2.1 concerns a critical literature review on the subject and SubSect. 1.2.2 discusses the importance of the three most recent economic crises and the role of political and social behaviors in shaping the future. 1.2.1

Theory

Scenario building and foresight, in general, concentrate on the prediction of the future which—unavoidably—originates in the past, meaning that we are unable to imagine the future without invoking past occurrences (Bendor et al., 2021). Scenarios are heuristic narratives exploring plausible alternatives of the future and, methodologically, they rely on the same techniques that historians use when writing about the past (Staley, 2002). Thus, historians and scenario planners can learn from each other (Schoemaker, 2020). One of the most difficult challenges to overcome in predicting the future is designing efficient and insightful scenarios. To that end, according to Deal et al. (2017), scenario planners should not only focus on forecasting—which concerns the exploration of future possibilities (Bendor et al., 2021)—but also on three other properties. These properties are (a) recasting, which is the ability to analyze a situation from a point in time in the past to the current condition; (b) pastcasting, which is the ability to analyze a situation from the current condition to a point in time in the past; and (c) backcasting, which is the ability to analyze a situation from a point in time in the future to the current condition (Deal et al., 2017). Such a multidirectional approach, (Deal et al., 2017), corresponds to the nature of scenario building which is an interdisciplinary task that combines history, present events, and key uncertainty factors. According to Bendor et al. (2021), there are three main reasons for incorporating historical analysis into scenario building: first, for the illumination of the relationships between the past and the future; second, as a means to challenge deterministic perceptions of the past as a single, linear, inevitable set of events; third, as a way of enriching the futuring processes by enriching their timeframe.

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In essence, we can examine history during the primary stages of scenario building exercises where we are just “setting the scenery” and trying to locate the predetermined elements1 (Wack, 1985) of the future. Discussing the past and why the expectations of contemporary people were not born out in the past, provides the following information: first, we receive insights into the impact of social values and collective needs that affect human behavior and expectations; second, we understand the reasons why some expectations did not come true; third, we are able to evaluate the ways in which a “surprise” impacts expectations and consider how to mitigate them. Such conclusions relate to the fact that humans make decisions using predictions that are subjective and originate from their past experiences (Pillin, 2020). Nevertheless, we should use “learning from the past” in a balanced way, employing creative imagination and with due consideration of how the future may differ from the past (Bradfield et al., 2016). 1.2.2

The Recent Economic Crises and Political Behaviors

Economic crises affect economic organizations and the growth rate of economies. The severity, periodicity, and extent of their consequences affect future prospects of economic growth and individual and social wellbeing. Broadly, economic shocks reshape the expectations of individuals, which eventually lead them to modify their goals and, in turn, drastically reshape the future. A severe economic shock could lead to a shift from post-materialism to materialism, meaning that society is backlashing (Norris & Inglehart, 2019). Such an outcome is mainly attributed to the inefficiency of formal institutions in adapting and providing sustainable solutions during a shock. On the other hand, the effects of cultural backlash have negative implications, marking an era of political change and offsetting important post-materialistic goals such as sustainability.2 In parallel, policymakers and formal institutions are unable to generate social trust, exacerbating the social trend and leading to an increase in uncertainty. Under such 1 For a step-by-step guide to scenario building and the use of the terms mentioned in the present chapter, please refer to Chapter 2 of this book. 2 For example, the rise of populism may limit progressive change in conservation governance, leading to a decline in biological diversity accompanied by a worsening of climate change (Manfredo et al., 2017).

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7

complex conditions, the future seems extremely uncertain due to the increased level of interconnections and the powerful forces inducing change (Wilikinson et al., 2013). Hence, economic crises affect the mapping of the future and constitute phenomena worth examining. By and large, economic shocks are drivers for change and generators of uncertainty affecting future prospects. As of today, global economies are experiencing the effects of three back-to-back crises: The Great Recession of 2008; the coronavirus disease 2019, and the energy crisis of 2022, due to the geopolitical tensions in Eastern Europe when Russia invaded Ukraine. Each of the three crises has certain unique characteristics but they share in common their severe impact on the global economy due to the increased level of interconnections. In addition to their socio-economic impact, in the long term, they will affect the ideological basis for policymaking. Therefore, they are decisive factors when we attempt to predict the future. The Great Recession of 2008 occurred in the financial sector and was characterized by a sharp decline in economic activity, resulting in high levels of unemployment (Atkinson et al., 2013; Papapetrou & Tsalaporta, 2021). As a result, the Great Recession of 2008 led to an increase in economic and job uncertainty (Born et al., 2017). To mitigate the crisis, governments used quantitative easing and made significant structural changes for the consolidation of the banking system (Arslan & Upper, 2018; Cortes et al., 2022; Danielsson, 2015). Nevertheless, in terms of policymaking, there was an underestimation in the realization of bank risk, the effect of which was more severe for the Eurozone due to its structural characteristics (Petrakis et al., 2013). The severity of the economic decline and the rise of economic uncertainty favored support for populist parties3 (Gozgor, 2022) offsetting progressive change. In the aftermath of the Great Recession of 2008, the global economy experienced the consequences of the COVID-19 pandemic, emerging at the end of January 2020, in the form of a public health crisis. One of the most significant aspects of the COVID-19 is the fact that employment and economic activity collapsed in a very short period of time (mere weeks) and this impacted every individual around the globe regardless of social class (Scanni, 2021). The COVID-19 pandemic caused a 3 In general, populism is triggered by crises (and triggers crises itself), but it does not appear in all economic and political settings, making predictions for the future extremely difficult (European Strategy and Policy Analysis System, 2019).

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sudden halt of economic activity, impacting both the demand and supply side (Novy & Jary, 2021). Governmental response was inclusive and concerned (a) social distancing measures and the support of the health system, (b) unconventional economic policies characterized by state intervention and fiscal stimulus packages (IMF, 2021), and (c) central banks’ intervention in cooperation with governments to stabilize the financial markets (IMF, 2020). Regarding policymaking, the COVID-19 pandemic highlighted the fact that unconventional economic policies should be added to the policy toolkit of the central banks (Bernanke, 2020). An important consequence of the COVID-19 pandemic was the increase in existential uncertainty paired with economic and job uncertainty (Petrakis, 2020), as well as the increased levels of governmental debt, which poses structural questions in terms of the organization of global economies (Beetsma, 2022; Regling, 2022). In parallel, the COVID-19 pandemic increased social costs (Pereznieto & Oehler, 2021) due to the increased inequality at a global level (Sidik, 2022; Stiglitz, 2022) and the effects on entrepreneurship and the labor market (Yeyati & Filippini, 2021). In addition, it demonstrated the importance of robust and resilient institutions. On the other hand, the energy crisis of 20224 is the latest and most severe in a series of cyclical energy shortages of the last 50 years. Broadly, energy crises are cyclical events that emerge as a result of regional shortages, armed conflicts, and market manipulation (Coyle & Simmons, 2014). The economic consequences of an energy crisis negatively impact all macroeconomic variables due to the vital role of energy in economic processes (Kilian, 2008). The energy crisis of 2022 differs from past energy crises because it emerged in the middle of a perfect storm as the global economy is trying to get back on track and recover from the COVID-19 pandemic. Regarding Europe—which does not possess energy alternatives (Ghilès, 2022)—the geopolitical conflict in Eastern Europe brought to the fore the negative implications of an extremely interconnected world that was dependent on Russia’s energy supply lines. The governmental response to mitigating the energy crisis concerned the shift back to coal (Frost, 2022). 4 It should be noted that this chapter was authored in the middle of October 2022, when the long-term consequences and geopolitical developments were, yet, uncertain and in progress. For this reason, we identify the geopolitical landscape as one of the key-factor uncertainties in Chapter 2.

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SETTING THE SCENERY: FACTORS AFFECTING THE FUTURE

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However, such a shift in energy supply will undermine efforts to mitigate climate change, which is a top priority for social well-being globally. In addition, the geopolitical conflict resulted in geopolitical, existential, climate, and policy uncertainties (Anayi et al., 2022; Nygaard, 2022), which are going to impact and shape the mapping of the future. Hitherto, we have discussed the main characteristics of the three back-to-back crises, but we have not focused on their main implications for the future. First, the three aforementioned crises bequeathed severe and different levels of uncertainty to the global economy, which significantly impacts economic activity (Bloom, 2014). Second, the three crises impacted consumers’ behavior and expectations, making them more shortsighted as individuals tend to panic (Loxton et al., 2020). Following the increased demand and the inflation caused by the expansionary policies and the energy crisis, supply did not meet the increased demand (Canuto, 2022). Third, economic shocks and crises test the resilience of formal institutions and governments, and in case the latter fail to mitigate them, economic shocks undermine societal trust and disorganize the system (Algan et al., 2017). In addition, as stated earlier, crisisdriven economic insecurity is a substantial driver of populism and political distrust (Algan et al., 2017). In sum, the consequences of the three economic crises extend into the realms of economic, social, and political life, literally “shaping” human behavior and, hence, the future.

1.3 Connecting the Present with the Future: The Megatrends The analysis of megatrends is one of the most important tools used in foresight because they provide information regarding the present (Malik & Janowska, 2018). In essence, we use them as “starting points” to define the most important drivers for change in the present (Slaughter, 1993). By the term “megatrends”, we refer to those powerful and interconnected forces that transform society and shape the future (Naisbitt, 1988). Many megatrends manifest within society as a result of technological change, social, political, and economic tendencies (Jeflea et al., 2021). Let it be noted that megatrends occur all at once and are heavily interconnected. Hence, each megatrend is connected to all of the aforementioned realms. Megatrends are of an economic, social, and political nature (Retief et al., 2016; Watson, 2010). The most important megatrends concern

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the transforming role of technology, the climate crisis, economic multipolarity, demographical changes, changing human behaviors that allot a central place to individual empowerment, and the macro-socio-economic goal of embracing sustainability (Kanzola et al., 2022; Petrakis & Kanzola, 2021). Technological change exerts effects at a microeconomic and macroeconomic levels. These effects are both positive and negative. For example, new technologies make access to information easier than ever, but they generate information anxiety and might lead to adverse selection (Watson, 2010). Additionally, new technologies alter the nature of occupations, generating job uncertainty and challenging the labor market’s resilience. In the political realm, big tech companies act as perfect monopolists with growing economic power over information at a time when the protection of personal information and intellectual rights is important for the maintenance of entrepreneurship (Petrakis & Kanzola, 2022). Moreover, social media platforms, in light of individual empowerment, can be used to manipulate public opinion and political agendas, making the role of governmental and formal institutions more complex. Economic multipolarity, as a result of geopolitical and economic tensions, highlights de-globalization trends and the vulnerability of interconnected economies. Such tendencies are accompanied by power-shifts and population transfers, which in turn reinforce urbanization and the weakening of the primary sector of economic activity. Regarding demographical changes, we should also note that in advanced economies, the population is aging, generating several economic and social problems. Finally, climate change affects all aspects of natural, social, political, and economic life and it requires drastic, efficient, and sustainable measures for its mitigation. However, one of the most significant challenges in the mitigation of climate change is to properly mobilize individuals, governments, and societies (Kanzola et al., 2022). Broadly, climate change has the following consequences: loss of biodiversity; decline of individuals’ quality of life; water shortages; destruction of infrastructures; increase in poverty; armed conflicts for the control of non-renewable resources, and others (Artuso & Guijt, 2020). Given the importance of climate change for the future of our species, it is the catalyst in the game and the second of the key-factor uncertainties when we try to imagine the future.5

5 Please refer to Chapter 2.

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11

1.4 Conclusions: Use of History, Scenario Building, and Foresight At the beginning of this chapter, we questioned how much we could rely on the past to predict the future. Of course, by “relying on the past” we mean the study of the past and the consequences it bequeaths to the future. The answer to this question depends on the nature of past events because their severity and periodicity are going to determine the range and impact of their consequences. For instance, in Sub-Sect. 1.2.2 we discussed the main characteristics of the three back-to-back crises because they are going to have long-term effects at microeconomic and macroeconomic levels. The main reason for this lies in the fact that they occurred after the Great Moderation period of the 1980s, which was characterized by macroeconomic stability and prosperity. After a long period of stability, three significant fluctuations reshape human behavior. Having said that, the three almost simultaneous crises that were characterized by high and different degrees of uncertainty, are going to change the way we think about the future, our expectations and hopes. In parallel, the accelerated global trends—discussed in Sect. 1.3—already present as of the beginning of the 2000s, are drivers for change. Some of these drivers, such as climate change, are extremely forceful and bequeath ever higher uncertainty to the system. Hence, to build realistic and efficient scenarios for the future, the futurist should account for historical path-dependence, social behaviors, and the presence of megatrends. Figure 1.1 summarizes the aforementioned points.

Fig. 1.1 What connects us with the future? (Source Authors’ creation. Note The consequences of past events, the interpretation of past events in the present, and the unavoidable forces of change—which are dynamic in nature— contribute to the construction of the future. In sum, the future is built from received information, hopes, and speculation)

12 P. E. PETRAKIS ET AL.

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References Algan, Y., Guriev, S., Papaioannou, E., & Passari, E. (2017). The European trust crisis and the rise of populism. Brookings Papers on Economic Activity, 309– 389. Anayi, L., Bloom, N., Bunn, P., Paul Mizen, P., Thwaites, G., & Yotzov I. (2022). The impact of the war in Ukraine on economic uncertainty. Vox CEPR. Arslan, Y., & Upper, C. (2018). Macroprudential frameworks: Implementation and effectiveness. BIS Papers, No. 94. Artuso, F., & Guijt, I. (2020). Global megatrends. Mapping the forces that affect us all. Oxfam Discussion Papers. https://doi.org/10.21201/2020.5648 Atkinson, T., Luttrell, D., & Rosenblum, H. (2013). How bad was it? The costs and consequences of the 2007–2009 financial crisis. Staff Papers of the Federal Reserve Bank of Dallas, No 20. Beetsma, R. (2022). The economics of fiscal rules and debt sustainability. Intereconomics, 57 (1), 11–15. Bendor, R., Eriksson, E., & Pargman, D. (2021). Looking backward to the future: On past-facing approaches to futuring. Futures, 125, 102666. https:// doi.org/10.1016/j.futures.2020.102666 Bernanke, B. S. (2020). The new tools of monetary policy. American Economic Review, 110, 943–983. Bloom, N. (2014). Fluctuations in uncertainty. Journal of Economic Perspectives, 28(2), 153–176. http://www.jstor.org/stable/23723489 Born, B., Breuer, S., & Elstner, S. (2017). Uncertainty and the great recession. Oxford Bulletin of Economics and Statistics, 80(5), 951–971. Bradfield, R., Derbyshine, J., & Wright, G. (2016). The critical role of history in scenario thinking: Augmenting causal analysis within the intuitive logics scenario development methodology. Futures, 77 , 56–66. https://doi.org/10. 1016/j.futures.2016.02.002 Canuto, O. (2022). War in Ukraine and risks of stagflation. Policy Center for the New South Policy Brief No 18/22 Cortes, G. S., Gao, G. P., Silva, F. B. G., & Song, Z. (2022). Unconventional monetary policy and disaster risk: Evidence from the subprime and COVID– 19 crises. Journal of International Money and Finance, 122, 102543. Coyle, E. D., & Simmons, R. A. (2014). Understanding the global energy crisis. Purdue University Press. Croce, B. (1923/2007). Teoria e storia della storiografia. Bibliolife, Rari Cious Laterza & Frigli. ISBN 978-8870884463. Danielsson, J. (Ed.). (2015). Post-crisis banking regulation. CEPR Press. Deal, B., Pan, H., Timm, S., & Pallathucheril, V. (2017). The role of multidirectional temporal analysis in scenario planning exercises and Planning Support Systems. Computers, Environment and Urban Systems, 64, 91–102. https:// doi.org/10.1016/j.compenvurbsys.2017.01.004

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European Strategy and Policy Analysis System. (2019). Global trends to 2030. Challenges and choices for the Europe. An Inter-Institutional EU Project. Frost, R. (2022). All the European countries returning to ‘dirty’ coal as Russia threatens to turn off the gas tap. Euronews Green. Ghilès, F. (2022). War in Ukraine and the gas crisis force a rethink of EU foreign policy. CIDOB notes internacionals, 268. Gozgor, G. (2022). The role of economic uncertainty in the rise of EU populism. Public Choice, 90, 229–246. https://doi.org/10.1007/s11127-021-00933-7 International Monetary Fund—IMF. (2020). Central Bank support to financial markets in the coronavirus pandemic, special series on COVID-19. International Monetary Fund—IMF. (2021). Policy responses to COVID-19. IMF Policy Tracker. Jeflea, F. V., Danciulescu, D., Sitnikov, C. S., Filipeanu, D., Park, J. O., & Tugui, A. (2021). Societal technological megatrends: A bibliometric analysis from 1982 to 2021. Sustainability, 14, 1543. https://doi.org/10.3390/su1403 1543 Kanzola, A. M., Papaioannou, K., & Petrakis, P. E. (2022). Environmental behavioral perceptions under uncertainty of alternative economic futures. Presented at the 16th academy of innovation, entrepreneurship, and knowledge conference in Seville, June 28–30 [Awarded as one of the best research papers of the conference]. Kilian, L. (2008). The economic effects of energy price shocks. Journal of Economic Literature, 46(4), 871–909. Loxton, M., Truskett, R., Scarf, B., Sindone, L., Baldry, G., & Zhao, Y. (2020). Consumer behaviour during crises: Preliminary research on how coronavirus has manifested consumer panic buying, Herd mentality, changing discretionary spending and the role of the media in influencing behaviour. Journal of Risk and Financial Management, 13(8), 166. https://doi.org/10.3390/ jrfm13080166 Malik, R., & Janowska, A. A. (2018). Megatrends and their use in economic analyses of contemporary challenges in the world economy. Research Papers of Wroclaw University of Economics No. 523. Manfredo, M. J., Teel, T. L., Sullivan, L., & Dietsch, A. M. (2017). Values, trust, and cultural backlash in conservation governance: The case of wildlife management in the United States. Biological Conservation, 214, 303–311. https://doi.org/10.1016/j.biocon.2017.07.032 Naisbitt, N. (1988). Megatrends. Warner Books, New York, USA. ISBN 0-44632922-3. Norris, P., & Inglehart, R. (2019). Cultural backlash: Trump, Brexit, and authoritarian populism. Cambridge University Press, UK. SBN-13: 9781108444422.

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Novy, M., & Jary, C. (2021). Economic and social impacts of COVID 19 on National Economies from the point of view of economic theory. SHS Web of Conf., 92, 01036. Nygaard, A. (2022). The geopolitical risk and strategic uncertainty of green growth after the Ukraine invasion: How the circular economy can decrease the market power of and resource dependency on critical minerals. Circular Economy and Sustainability. https://doi.org/10.1007/s43615-022-00181-x Papapetrou, E., & Tsalaporta, P. (2021). The Greek labor market during the crisis: New evidence on the evolution of wages, employment, and unemployment. In V. Vlachos, A. Bitzenis & B. S. Sergi (Eds.), Modeling economic growth in contemporary Greece (Entrepreneurship and global economic growth) (pp. 131–154). Emerald Publishing Limited, Bingley. https://doi.org/10. 1108/978-1-80071-122-820211010 Pereznieto, P., & Oehler, I. (2021). Social costs of the COVID-19 pandemic. Commissioned by The Independent Panel for Pandemic Preparedness and Response Background paper 9. Petrakis, P. E. (2020). Theoretical approaches to economic growth and development. An interdisciplinary perspective. Palgrave Macmillan, Springer Nature, Cham, Switzerland. https://doi.org/10.1007/978-3-030-50068-9 Petrakis, P. E., & Kanzola, A.-M. (2021). Alternative futures of capitalist economy. 33rd Annual Meeting of the Society for the Advancement of SocioEconomics (SASE). 2–5 July, 2021. After Covid? Critical Conjunctures and Contingent Pathways of Contemporary Capitalism. Petrakis, P. E., & Kanzola, A. M. (2022). On the micro-foundations of creative economy: Life satisfaction and social identity. Sustainability, 14(9), 4878. https://doi.org/10.3390/su14094878 Petrakis, P. E., Kostis, P. C., & Valsamis D. G. (2013). European economics and politics in the midst of the crisis; From the outbreak of the crisis to the fragmented European Federation (p. 274). Springer. ISBN 978-3-642-41343-8. Pillin, M. A. (2020). The past of predicting the future: A review of the multidisciplinary history of affective forecasting. History of the Human Sciences, 34(3–4), 1–16. https://doi.org/10.1177/0952695120976330 Regling, K. (2022). EU fiscal rules: A look back and the way forward. Intereconomics, 57 (1), 8–10. Retief, F., Bond, A., Pope, J., Morison-Saunders, A., & King, N. (2016). Global megatrends and their implications for environmental assessment practice. Environmental Impact Assessment Review, 61, 52–60. https://doi.org/ 10.1016/j.eiar.2016.07.002 Scanni, G. (2021). The great recession vs the covid-19 pandemic: Unemployment and implications for public policy. Thesis Submitted to Levy Economics Institute of Bard College.

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Schoemaker, P. J. H. (2020). How historical analysis can enrich scenario planning. Futures & Foresight Science, 2(3–4), e35. https://doi.org/10.1002/ffo 2.35 Sidik, S. M. (2022). How COVID has deepened inequality—in six stark graphics. Nature, 606(7915), 638–639. Slaughter, R. A. (1993). Looking for the real “megatrends.” Futures, 25(8), 827–849. https://doi.org/10.1016/0016-3287(93)90033-P Staley, D. T. (2002). A history of the future. History and Theory, 41(4), 72–89. Stiglitz, J. E. (2022). Inequality got much worse. Scientific American, 326(3), 52–53. Wack, P. (1985). Scenarios: Uncharted waters ahead. Harvard Business Review, 63(5), 73–89. Watson, R. (2010). Future files. A brief history of the next 50 years. Nicholas Brealey Publishing, London-Boston, printed in the UK by Clays Ltd. ISBN: 978-1-85788-534-7. Wilkinson, A., Kupers, R., & Mangalagiu, D. (2013). How plausibility-based scenario practices are grappling with complexity to appreciate and address 21st century challenges. Technological Forecasting and Social Change, 80(4), 699–710. https://doi.org/10.1016/j.techfore.2012.10.031 Yeyati, E. L., & Filippini, F. (2021). Social and economic impact of COVID-19. Brookings Global Working Paper No. 158.

CHAPTER 2

Building Scenarios: The Four Economic Scenarios for Greek Alternative Economic Futures

2.1

Introduction

Scenarios are not reality but a means to represent the future with the aim of clarifying actions required in the present, in the light of possible and desired futures (Durance & Godet, 2010). In this regard, foresight needs to heed the constraints of the present. By definition, the future is shaped by a range of present actions and trends as well as their consequences

This chapter draws from the following: (i) Alternative Futures of Capitalist Economy by Petrakis, P.E. and Kanzola, A.-M. which was presented in the 33rd Annual Meeting of the Society for the Advancement of Socio-Economics, July 2–5, 2021; (ii) Environmental Behavioral Perceptions on Alternative Economic Futures by Kanzola, A-M, Papaioannou, K., and Petrakis, P.E which was presented and awarded in the 16th Academy of Innovation, Entrepreneurship, and Knowledge Conference, June 28–30, 2022; and (iii) The Political Economy of Alternative Economic Futures by Petrakis E.P. in The Routledge Handbook of Comparative Economic Systems, Dallago, B. & Casagrande, S. (Eds.), forthcoming. The projections of the annual GDP growth rate by means of the Global Economic Model by Oxford Economics were made by Asst. Prof. P. Kostis. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_2

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and implications. Scenario building addresses information as a dynamic structure by envisioning its impact on the future. Nevertheless, there is a plethora of uncertain circumstances and imponderables which might alter the significance of the generated scenarios. Scenario building is often considered an “art” (Godet, 2000; Tetlock & Gardner, 2015; van der Heijden, 2005) because it combines analytical skills, creativity, a certain degree of subjectivity, and an interdisciplinary outlook. A scenario describes hypothetical events set in the future, constructed to clarify a possible chain of causal events as well as their decision points (Kahn & Wiener, 1967). Thus, the approach of Kahn and Wiener focuses on the causalities brought about by amply interconnected events. Broadly, there is no single approach to scenario planning because there are simply no statistics for the future (Durance & Godet, 2010). However, for scenario building and scenario assessment to produce valuable information, there is a critical assumption at work: the future is predictable even if it is somehow uncertain (Wack, 1985a). The purpose of a scenario is not simply to predict the future but to shape future-fit action as well. In essence, each scenario should be reasonably designed to cover a wide range of possible futures (Wack, 1985a). Having obtained insights about the future, the most important step is to identify the predetermined shaping factors which drive economic and social systems, and their connections (Wack, 1985a). For Wack, it is crucial for scenario building, to focus on the predetermined elements of the future, which will be part of all scenarios on account of their mandatory nature (Wright & Cairns, 2011). Thus, the “art” of forecasting is complex and requires the realization of some steps. To that end, the present chapter theoretically and practically debates a step-by-step process in scenario building with the aim of generating four possible scenarios for Greece in the next decade. First, we discuss the theoretical implications and assumptions involved in scenario planning (Sect. 2.2). For the practical illustration of the four scenarios, we use the Oxford Global Economic Model (GEM) and we describe its basic characteristics and baseline scenario (Sect. 2.3). The subsequent parts of this chapter present the four generated scenarios. Following that, Sect. 2.4 regards the growth scenario into two versions, while Sect. 2.5 concerns the three scenarios left; the transformation, the unsustainable growth scenario, and the Falldown. Lastly, Sect. 2.6 concludes the present chapter with a synopsis of the four scenarios and a brief note on certain insights regarding scenario building.

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2.2 Step-By-Step Scenario Building: Theoretical and Practical Guide Hitherto, we have mentioned the complex nature of scenario building given that designing scenarios requires creativity and a multidisciplinary outlook. This part focuses on how we design a scenario and aspires to provide a step-by-step guide for scenario building using insights from the existing bibliography and scientific intuition. Step 1. Set the Purpose and Type1 of the Scenario The first step in designing a scenario is to clarify its purpose. Firstgeneration explorative scenarios aim at understanding rather than action (Wack, 1985a). Such scenarios are useful to understand the operative mechanics of a system and distinguish between what events are predetermined and what are uncertain. Second-generation scenarios focus on facilitating the decision process (Wack, 1985a). In that respect, secondgeneration scenarios—which are also called decision-scenarios—are not merely outcome-oriented but elaborate on the various alternatives (Wack, 1985a). Let it be noted that the first-generation scenarios are simple but mandatory for the generation of the decision-scenarios because they point us to the certainties and uncertainties of the system. It is, thus, clear that scenarios balance between reality and possibility guided by uncertainty (Wack, 1985b). Strategic management (or alternative futures) scenarios are the most comprehensive and are used to generate strategy given the forces and uncertainties outside of the control of the system (Thomas, 2012). Such scenarios allow for creative and analytical integration. In addition, they are developed to describe the macro-forces of the future and refer to an extended timeline (Thomas, 2012). Alternative future scenarios are the most flexible and they have application in several fields (Thomas, 2012). In these scenarios, the goals are not absolute but, rather, target variables are defined (Börjeson et al., 2005).

1 According to Börjeson et al. (2005), there are three main types of scenarios: (a) predictive, which are distinguished as (i) forecast and (ii) what-if scenarios; (b) explorative, which are divided into (i) external and (ii) strategic; and (c) normative, which are approached as (i) preserving and (ii) transforming.

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All the aforementioned scenarios are explorative because they correspond to the question “What can happen?” and aim to explore several alternatives in order to locate a wide scope of developments (Börjeson et al., 2005). In the present chapter, we choose to employ alternative futures scenarios because they account for both internal and external factors (Börjeson et al., 2005). Furthermore, because the scope of the present chapter is to discuss how scenario building influences policymaking, explorative scenarios are the most appropriate since they describe how the consequences of a decision can vary depending on which future development unfolds (Börjeson et al., 2005). Hence, in order to choose the most appropriate method to approach foresight one should consider: (a) the nature of the problems posed; (b) the question a scenario answers; and (c) the way one intends to evaluate the outcomes and apply the solutions (Durance & Godet, 2010). Step 2. Identify the Forces of Change and Other “Certainties” After choosing which type of scenario best serves the stated goal, it is vital to identify the prevailing forces for change. These are the predetermined elements that will be present in all of the generated scenarios (Chermack & Coons, 2015). Such forces are called “certain” because they are already established and their generic consequences are visible in the operation of the system. Let it be noted that during this stage we simply acknowledge their presence and do not evaluate the extent of their impact on future developments. As mentioned earlier, the predetermined elements have already occurred or are occurring. Such elements are, for example, (a) the role of technology and industrial 4.0 in economic organization; (b) the aging of the population and demographic changes; (c) the impact of climate change on our ecosystems and economies; (d) economic multipolarity and de-globalization; (e) geopolitical conflicts, and others. Indeed, these are the so-called megatrends discussed in detail in Chapter 1. To identify the predetermined elements, we should understand the environment under examination (Burt, 2006). In that respect, the most reliable approach to their identification is to educate and inform ourselves regarding: (a) the emerging trends; and (b) the historical evolution of certain procyclical variables. When a trend is visible, it means that it is

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already generating change and has a significant impact on the system. On the other hand, historical path-dependence allows for comparisons between the past and the present, resulting in some “fixed” conclusions in terms of the evolution of some variables. For instance, it is well established that gross domestic product’s growth declines in the case of a recession. Thus, we search for stylized facts that correspond to the question/problem posed. Step 3. Add “Creative” Uncertainty (in a Moderate Manner) Engaging in scenario building and foresight means that we accept uncertainty and understand its driving forces (Wack, 1985b). The driving forces of uncertainty are (a) the lack of apparent relationships between the predetermined and uncertain elements in the system; (b) the lack of resilience and reliable deference mechanisms during an unpredicted shock; (c) the changing nature of human behaviors; and, of course, (d) high uncertainty itself. In essence, the third step involves acknowledging the driving forces of uncertainty and properly contextualizing them in the scenario process. This is one of the most important steps in the scenario process because adding different levels of uncertainty is what diversifies the generated scenarios and hence the structure of the future developments. Nevertheless, one should consider the impact of the generated scenarios on human behavior and attitudes. As previously stated, a scenario does not describe specific events but rather the possibility of their occurrence. However, a scenario has the power to subsequently modify human behavior, leading to its confirmation in the manner of a selffulfilling prophecy. In other words, we should always be aware of how our scenarios affect the expectations of individuals since they could be manipulated to make, for example, the worst-case scenario come true. Such a statement is based on the collective need of individuals for hope (Durance & Godet, 2010). Hence, to avoid adverse outcomes, always add uncertainty in a moderate manner, otherwise it could be game-changing for the future.

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Step 4. Generating the scenario matrix In essence, after identifying the predetermined elements and adding uncertainty, typical scenario building results in four scenarios describing quite different futures based on the severity of future developments and level of uncertainty (Phillips, 2019). However, before we explicitly describe each of the four scenarios, we should generate the scenario matrix (or scenario-axes technique), which is one of the most popular scenario planning approaches (Brands et al., 2013; van der Haijden, 2005; Wright & Cairns, 2011). The scenario matrix is at the core of scenario identification and it is based on two key uncertainty factors (Brands et al., 2013). Establishing correctly the placement of each scenario in the scenario matrix is of paramount importance since it produces the logical rationale and framework for the scenarios and captures their dynamics (Ratcliffe, 2017). In the present chapter the generated scenarios are (i) a Growth scenario, (ii) a Transformation scenario, (iii) an Unsustainable growth scenario, and (iv) a Falldown scenario.2 The growth scenario describes a guaranteed steady and significant future growth rate. The unsustainable growth scenario regards a future where steady growth is attainable but unsustainable, accompanied by rising uncertainty. The transformation scenario concerns drastic technological and behavioral change toward a sustainable transformation of economic structures. Finally, the Falldown scenario is characterized by disruptive conditions that radically impact the economy in a negative manner. Provided these scenarios, we generate the scenario matrix as follows (Fig. 2.1). As the two most critical uncertainties, we identify climate change and geopolitical conflict. The reason behind this choice is that such notions cannot be easily quantified and, at present, they constitute the biggest sources of uncertainty in terms of outcomes. Traditionally, after the scenario matrix, the detailed hypotheses of each scenario are presented. For the sake of the present chapter’s organization, the detailed hypotheses of the scenarios are presented in subsequent parts (Sects. 2.4 and 2.5) along with their projections for the future.

2 Let it be noted that the names of the scenarios should be relevant to their content in order to enable the reader to intuitively understand what the scenarios describe (Brands et al., 2013).

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Fig. 2.1 The scenario matrix for the generated scenarios (Source Authors’ creation. Note The four scenarios are placed in the matrix depending on the critical uncertainty events)

Step 5. Evaluation; how “insightful” are your scenarios? The last step of scenario building is to evaluate each scenario in terms of its structure and whether it corresponds to the problem posed. For the evaluation of the generated scenarios, consider the following: First, scenarios should be simple in order to be understandable by non-experts (Mercer, 1995). In addition, the more minimalistic a scenario is, the simpler it is to construct it (Mercer, 1995) and trace significant omissions. Second, even if they are simple, scenarios should be planned as “an organizational nervous system” (Wack, 1985a, 1985b) incorporating global dynamics, case-fit dynamics, and strategic vision (Chermack & Coons, 2015). Such construction accounts for all critical information and the interconnections within the system. Lastly, good scenarios produce

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valuable knowledge, policymaking, and decision-making insights (Wack, 1985a). That being said, one should be able to imagine how the generated scenarios affect policymaking and produce new knowledge. Evidently, “If you are just doing scenarios, you are missing the point” (Wack, 1982), because by definition, scenario building and forecasting refer to being able to predict the future in the service of improving it.

2.3

The Oxford Global Economic Model (GEM) and Details for the Scenarios’ Projections

For the practical representation of the four aforementioned scenarios, we use the Oxford Global Economic Model (GEM). In general, GEM aims to provide an optimizing inter-temporal framework capable of addressing basic policy questions involving the international transmission of policy and structural shocks, while reproducing key elements of macroeconomic interdependence among countries and regional blocs (Pesenti, 2008). The design of the model combines the long-run properties of real business cycle models with short-run “Keynesian” dynamics originating in nominal rigidities and inertia in the inflation process (Pesenti, 2008). Its structural characteristics are behavioral equations, policy rules (such as the Taylor rule), and identities. Such a structure provides robust estimations and allows for scenario analysis exercises. All of the GEM’s estimates are transparent and well justified. At the same time, it allows for adjustments of the basic economic variables as well as the addition of new variables and equations in order to create new estimations. In the present book, we enter the hypotheses and parameters of the four scenarios into the GEM and project the four scenarios in terms of important economic indices. Such a choice was dictated due to the longterm use of the GEM by the present research team as well as its reputation among important economic agents around the globe, such as the International Monetary Fund, the World Bank, and others. The projections presented here up to 2035 are based on data retrieved at the end of September of the year 2022. Let it be noted that during this phase, the prospects of economic growth declined compared to the other months of 2022. A key factor behind deteriorating growth prospects was high inflation. The GEM provides a baseline scenario given the circumstances. The key features of this baseline scenario are the increase in inflation due to

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the energy crisis of 2022 and the tight monetary policy, with the central banks targeting inflation. These features line up with a high likelihood of a decline in global output. For the projection of the baseline—and the other generated scenarios—we use five basic economic variables that describe critical aspects of the economy. These are (a) the Total Factor of Productivity (TFP); (b) the annual Gross Domestic Product’s (GDP) growth rate; (c) the levels of imports and exports; (d) debt’s development; and (e) the Harmonized Index of Consumer Prices (HICP) for energy. The definitions of the aforementioned economic variables are given in Table 2.1. However, for reasons of this chapter’s organization, we only present the annual GDP growth rate. Hence, the GEM’s projections for the baseline scenario regarding the annual GDP growth rate are presented in the Fig. 2.2. In general, the baseline scenario refers to economic developments based on what holds true up to the present day. Table 2.1 The economic measures used for the scenarios’ projections Variable

Definition

tfp

It is calculated as the algorithm of the potential output minus 0.4 times the log(labor supply ∗ weekly hours of work) minus 0.3 times the log (

Annual gdp growth rate

Exports (x) Imports (m) Debt

hicp energy

Source Authors’ creation

schooling years per population ) minus 0.3 times the population

log(capital stock) The annual average rate of change of the gross domestic product (GDP) at market prices based on constant local currency, for a given national economy, during a specified period of time The volume of goods and services exported in local currency at the set base year divided by the real GDP The volume of goods and services imported in local currency at the set base year divided by the real GDP The total outstanding borrowing of central and local governments expressed in local currency according to the convergence criteria set out by the Maastricht Treaty It is an indicator of inflation and price stability for the European Central Bank. In essence, it is a consumer-price index regarding energy products which is harmonized across the European Union’s countries

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9 8 7 6 5 4 3 2 1 0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Baseline Scenario for GR

Baseline Scenario for Selected EU Countries

Fig. 2.2 Baseline Scenario—annual GDP growth rate projection (Source Own calculations based on Global Economic Model of Oxford Economics)

The projections—for all of the scenarios—regard Greece and selected countries3 from the Eurozone from 2021 to 2035. This way, we can observe the evolution of the annual GDP growth rate and compare the two regions. According to the GEM’s estimations, ceteris paribus, Greece from 2023 up to 2025 is going to converge with the average of the selected countries from the Eurozone in terms of annual GDP growth. However, from the end of 2025 up to 2030, estimations reveal that Greece’s growth rate will be higher than the average growth rate of the selected Eurozone countries. From 2030 up to 2035, we observe that the annual growth rate of Greece will slightly decline, with marking point the year 2035 when Greece and the Eurozone converge.

3 The selected countries from the Eurozone region are Germany, France, Italy, Spain, and the Netherlands and the final results are the averages of these five countries. The specific hypotheses of the four generated scenarios (growth, unsustainable growth, transformation, and collapse scenarios) remain the same for the selected countries.

2

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The Two Versions of the Growth Scenario

As mentioned earlier, the growth scenario describes a guaranteed steady and significant future growth rate. In this chapter, we project two versions of the growth scenario. The hypotheses of the first version of the growth scenario are presented in Table 2.2. The second version of the growth scenario is constructed in order to provide the same results as the first version, but it relies on a different driver: investments. In essence, the second version of the growth scenario relies on the progressive increase of investments from 2bn euro in 2022 to 27.98bn euro up to 2035. That being said, the projections of the annual GDP growth rate for Greece corresponding to the two versions of the growth scenario are presented in Fig. 2.3. We observe that the main difference between the first and the second versions of the growth scenarios concerns the case where the factors producing growth take off. Reasonably, the second version of the growth scenario, which depends on investment, requires time to produce a higher growth rate (from the end of 2027 up to 2035, excluding a slight convergence in 2031). In terms of the baseline scenario, both versions are better. At this point, it is of interest to see how the first version of the growth scenario evolves in Greece and in the Eurozone (Fig. 2.4). Evidently, in Fig. 2.4, we observe fluctuations in the annual GDP growth rate of Table 2.2 Specific hypotheses of the first version of the Growth Scenario Scenario Economic variable

Growth version I

TFP

Progressive increase from 0.1 to 0.7% up to 2035 Normal Progressive increase of exports from 0.5 to 7% from 2024 to 2035 and correspondingly decrease of imports Normal Climate stabilization and geopolitical stabilization

Debt International trade

Energy prices Climate change and geopolitical landscape Source Authors’ creation

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9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Growth I

Growth II

Baseline

Fig. 2.3 Growth scenario—annual GDP growth rate projection for Greece (2021–2035) (Source Own calculations based on Global Economic Model of Oxford Economics)

the selected EU countries compared to Greece. Such an observation reveals the different dynamics when we compare a single country with an economic region such as the Eurozone.

2.5 The Three Scenarios Left: The Unsustainable Growth, the Transformation, and the Falldown In the present part, we discuss the three remaining scenarios along with their specific hypotheses. Let us recall that the unsustainable growth scenario describes a future where steady growth is attainable but unsustainable, accompanied by rising uncertainty. By contrast, the transformation scenario concerns drastic technological and behavioral change toward a sustainable transformation of economic structures. Finally, the Falldown scenario is characterized by disruptive conditions that radically impact the economy in a negative manner. The specific hypotheses for each scenario are presented in Table 2.3. In all cases, each scenario is modified according to its specific hypotheses, guided by the two key uncertainty factors (climate change

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9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Growth Scenario for GR

Growth Scenario for Selected EU Countries

Fig. 2.4 Growth scenario I—annual GDP growth rate projection for Greece and EU (2021–2035) (Source Own calculations based on Global Economic Model of Oxford Economics)

and geopolitical landscape). Different developments regarding the two aforementioned key uncertainty factors will subsequently favor the prevalence of one or another scenario. For the aforementioned hypotheses, we project the annual GDP growth rate for Greece from 2021 to 2035 in Fig. 2.5 for the above scenarios and the baseline scenario. The Falldown scenario, as expected, describes the lowest expected annual GDP growth rate guided by its specific hypotheses and the extreme uncertainty caused by climate change and geopolitical conflict. On the other hand, for the unsustainable growth scenario, we observe that its expected annual GDP growth rate presents similarities with the baseline scenario. Reasonably, this is correct provided that the unsustainable growth scenario relies on traditional ways of generating growth and does not account for new technologies and/or sustainability maintaining growth. Finally, the transformation scenario illustrates the best expected annual growth GDP rate among the three. Such a scenario relies on the sustainable integration of production processes with climate change mitigation by means of new technological advancements. However, due to

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Table 2.3 Specific hypotheses for the unsustainable growth, transformation, and Falldown scenarios Scenario

Unsustainable

Transformation

Normal

Progressive increase from 0.03 to 0.35% up to 2035 Normal

Falldown

Economic variable TFP

Debt

International trade

Energy prices

Climate change and geopolitical landscape

Progressive decrease from 0.05 to 0.7% up to 2035 Progressive Progressive increase Increase from 1 to from 1 to 14% up 14% up to 2035 to 2035 Normal Progressive Increase Progressive decrease of Exports from 0.25 of exports from 0.5 to 4% up to 2035 to 7% up to 2035 and correspondingly and correspondingly decrease of imports increase of imports Normal Normal Progressive increase from 2 to 28% up to 2035 Climate Climate stabilization Catastrophic climate deterioration and but (probably) deterioration (probably) geopolitical conflicts and/or geopolitical geopolitical conflicts stabilization

Source Authors’ creation

the uncertainty infused in the geopolitical landscape, the first version of the optimistic growth scenario is better than the transformation scenario. Figure 2.6 concerns the projections of the annual GDP growth rate for the three scenarios and the baseline for the selected countries of the Eurozone from 2021 to 2035. For the selected countries from the Eurozone, we observe greater fluctuations in the expected average annual GDP growth rate, similar to those in Fig. 2.4. In general, when applied to Greece, the four scenarios present similar relationships to those. The transformation scenario is better than the unsustainable, which follows the baseline after 2024. All of them are better than the Falldown. However, due to the fluctuations, we notice that the four scenarios converge and diverge more often, implying that the real business cycle—ceteris paribus—will follow a similar trajectory. In this case, back-to-back fluctuations will shunt the growth and transformation scenarios because of the economic and social implications of the fluctuations (such as increased public spending in the recessions, inconsistency

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9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Unsustainable

Transformation

Falldown

Baseline

Fig. 2.5 The unsustainable growth, transformation, and Falldown scenarios for Greece (2021–2035) (Source Own calculations based on Global Economic Model of Oxford Economics)

of expectations, reduction of productivity, and increased energy prices due to the developments in the geopolitical landscape and the increased inflation).

2.6

A Scenarios’ Summary and Some Insights

In the present chapter, we have argued for the importance, and steps, of scenario building using the methodology of alternative futures. Table 2.4 is a summary of the hypotheses used to generate the four scenarios (first version of growth, unsustainable growth, transformation, and Falldown scenarios). Thus, for Greece, we present the four scenarios as long-term projections of real annual GDP growth rates from 2021 to 2035. To this end, we used the Global Economic Model (GEM) from Oxford Economics, a tool for scenario building to assess the impact of many economic factors under specific hypotheses. Figure 2.7 presents the real annual GDP growth rates according to each scenario given the aforementioned

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6.0

5.0

4.0

3.0

2.0

1.0

0.0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 -1.0 Unsustainable

Transformation

Falldown

Baseline

Fig. 2.6 The unsustainable growth, transformation, and Falldown scenarios for selected EU countries (2021–2035) (Source Own calculations based on Global Economic Model of Oxford Economics)

hypotheses. Obviously, each scenario is represented by a different real GDP growth rate equivalent to the severity of its effects on the economy. By definition, individuals are characterized by the collective need to predict the future and plan forward (Henderson, 1978). In that respect, scenarios allow for the activation of individuals’ and societies’ analytical skills because they address inherited uncertainty. However, scenarios do not describe certainties but, rather, possibilities. An intriguing part of scenario building and scenario analysis is the fact that, because the future is fluid, it might fall between some of those scenarios (Phillips, 2019). Yet, this does not imply a failure on the part of the futurist because scenarios prepare policymakers, individuals, and societies to predict the future. Scenarios inform policymakers of the shaping forces of the future. Nonetheless, as stated earlier, scenario building is characterized by an interdisciplinary outlook, which means that besides setting the scenarios, we should account for the contextual factors within the system, such as the importance of collective and individual behaviors, as drivers of social and economic change (Berkhout et al., 2002). In that regard, we

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Table 2.4 Hypotheses of each scenario Scenario Economic variable

Growth version I Unsustainable

Transformation

Falldown

Total factor of productivity

Progressive increase from 0.1 to 0.7% up to 2035 Normal

Progressive increase from 0.03 to 0.35% up to 2035 Normal

Progressive decrease from 0.05 to 0.7% up to 2035 Progressive increase from 1 to 14% up to 2035 Progressive decrease of exports from 0.5 to 7% up to 2035 and correspondingly increase of imports

Debt

International trade

Energy prices

Climate change and geopolitical landscape

Progressive increase of exports from 0.5 to 7% from 2024 to 2035 and correspondingly decrease of imports Normal

Normal

Progressive Increase from 1 to 14 up to 2035 Normal

Normal

Climate Climate stabilization and deterioration geopolitical and (probably) stabilization geopolitical stabilization

Progressive Increase of Exports from 0.25 to 4% up to 2035 and correspondingly decrease of imports Normal

Climate stabilization but (probably) geopolitical conflicts

Progressive increase from 2 to 28% up to 2035 Catastrophic climate deterioration and/or geopolitical conflicts

Source Authors’ creation

could set an analytical framework which emphasizes behavioral factors and alternative futures in order to discuss which scenario is more likely to prevail. Such an exercise and how we could incorporate alternative futures, social behaviors through social identity theory, and uncertainties like climate change are provided in Kanzola et al. (2022), and bear significant policymaking implications.

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9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Growth I

Unsustainable

Transformation

Falldown

Baseline

Fig. 2.7 Real annual GDP growth rates per scenario in Greece (2021– 2035) (Source Own calculations based on Global Economic Model of Oxford Economics)

References Berkhout, F., Hertin, J., & Jordan, A. (2002). Socio-economic futures in climate change impact assessment: Using scenarios as “learning machines.” Global Environmental Change, 12(2), 83–95. https://doi.org/10.1016/S0959-378 0(02)00006-7 Börjeson, L., Höjer, M., Dreborg, K. H., Ekvall, T., & Finnveden, G. (2005). Towards a user’s guide to scenarios - a report on scenario types and scenario techniques. Futures, 38(7), 723–739. https://doi.org/10.1016/j. futures.2005.12.002 Brands, C., Wulf, T., & Meissner, P. (2013). Six tools for scenario-based strategic planning and their application. In Schwenker, B., & Wulf, T. (Eds.) Scenariobased strategic planning: Developing strategies in an uncertain world. Springer Gabler. https://doi.org/10.1007/978-3-658-02875-6_4 Burt, G. (2006). Pre-determined elements in the business environment: Reflecting on the legacy of Pierre Wack. Futures, 38(7), 830–840. https:// doi.org/10.1016/j.futures.2005.12.006 Chermack, T. J., & Coons, L. M. (2015). Scenario planning, Pierre Wack’s hidden messages. Futures, 73, 187–193. https://doi.org/10.1016/j.futures. 2015.08.012

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Durance, P., & Godet, M. (2010). Scenario building: Uses and abuses. Technological Forecasting and Social Change, 77 (9), 1488–1492. https://doi.org/ 10.1016/j.techfore.2010.06.007 Godet, M. (2000). The art of scenarios and strategic planning: Tools and Pitfalls. Technological Forecasting and Social Change, 60, 3–22. Henderson, H. (1978). Risk, uncertainty and economic futures. The Geneva Papers on Risk and Insurance (pp. 3–17). Kahn, H., & Wiener, A. J. (1967). Year 2000; a framework for speculation on the next thirty-three years. Palgrave Macmillan. Kanzola, A.M., Papaioannou, K. & Petrakis, P.E. (2022). Environmental behavioral perceptions under uncertainty of alternative economic futures. In Presented at the 16th Academy of Innovation, Entrepreneurship, and Knowledge Conference in Seville, June 28–30 (Awarded as one of the best research papers of the conference). Mercer, D. (1995). Scenarios made easy. Long Range Planning, 28(4), 7–8, 81–86. https://doi.org/10.1016/0024-6301(95)00015-B Pesenti, P. (2008). The global economy model (GEM) theoretical framework (Working Paper). Phillips, F. (2019). What about the future? New perspectives on planning, forecasting and complexity. Springer, New York. https://doi.org/10.1007/9783-030-26165-8 Ratcliffe, J. (2017). Forecasting alternative scenarios. Hillbrake. Tetlock, P. & Gardner, D. (2015). Superforcasting: The art and science of prediction. Penguin Random House. Thomas, C. (2012). Types of scenario planning: Futures strategy group. van der Heijden, K. (2005). Scenarios: The art of strategic conversation (2nd edn.). John Wiley & Sons Ltd. Wack, P. (1982). Presentation to the manufacturing function in shell (K. van der Heijden, Trans). Presented to Shell Oil. Wack, P. (1985a). Scenarios: Uncharted waters ahead. Harvard Business Review, 63(5), 73–89. Wack, P. (1985b). Scenarios: Shooting the rapids. Harvard Business Review. Wright, G., & Cairns, G. (2011). Scenario thinking practical approaches to the future. Palgrave Macmillan.

CHAPTER 3

Scenarios and Contextual Factors: Addressing the Implications

3.1

Introduction

Scenario building is a planning tool for the future, due to its ability to capture a range of possibilities in rich detail (Shoemaker, 1995). Essentially, scenarios address inherited uncertainty and offer a glimpse into the future by simplifying the available data into a limited number of possible states (Shoemaker, 1995). Each scenario lays out a different story for the future and prepares individuals, policymakers, and societies for plausible,

This chapter draws from the following: (i) Alternative Futures of Capitalist Economy by Petrakis, P.E. and Kanzola, A.-M. which was presented in the 33rd Annual Meeting of the Society for the Advancement of Socio-Economics, July 2–5, 2021; (ii) Environmental Behavioral Perceptions on Alternative Economic Futures by Kanzola, A.-M., Papaioannou, K., and Petrakis, P.E which was presented and awarded in the 16th Academy of Innovation, Entrepreneurship, and Knowledge Conference, June 28–30, 2022; and (iii) The Political Economy of Alternative Economic Futures by Petrakis E.P. in The Routledge Handbook of Comparative Economic Systems, Dallago, B. & Casagrande, S. (Eds.), forthcoming. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_3

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diverse outcomes. Thus, scenarios encourage a system to become flexible and resilient in order to meet any of the four scenarios or to meet a future that turns out to fall in between some of the scenarios or a future that does not resemble any of the scenarios (Phillips, 2019). In the latter case, we refer to a future where catastrophic circumstances—such as a nuclear war—could trigger a “collapse” scenario. In short, scenarios do not describe certainties but possibilities. Given that global causality dynamics are complex and often unpredictable, describing the future is a difficult task. High interconnectivity and irreducible uncertainty make for great complexity and, hence, for uncertain outcomes (Wilkinson et al., 2013). As a result, scenarios might fail to come true due to this increasing complexity and the interconnectivity of global dynamics. Thus, contextual factors matter when making decisions and predictions for the future (Jenkins & Hsu, 2017). By “contextual factors” we refer to a wide umbrella of terms that shape system dynamics (Mills & Wilner, 2022). Some of these factors evolve dynamically but others are the product of shocks in the system. We also call these “swinging factors” because, despite their importance, it is difficult to incorporate them into a scenario by quantifying their effects (Kanzola et al., 2022). The study of swinging factors facilitates speculation regarding which scenario is more likely to prevail. The aim of this chapter is to highlight the importance of a series of contextual factors for the future and provide a critical analysis of the matter. To that end, we focus on factors which affect human action in a dynamic way, such as culture, collective social values, goals, and priorities (Sect. 3.1). Additionally, we refer to the impact of high and irreducible uncertainty on individuals’ expectations (Sect. 3.2). Lastly, rather than offering concluding remarks, we attempt to speculate on which scenario is more probable to prevail provided that catastrophic developments will not take place (Sect. 3.3).

3.2

Culture: An Indicator for the Future

Capitalism is an economic system funded by private ownership and investment, profit-maximization motives, minimal governmental intervention, and competition. It is also characterized by many ambiguities, such as the fact that it generates a great amount of wealth while at the same time, it causes great inequalities. Such circumstances lead the system to disorganization, with economic booms and bursts affecting social welfare.

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The question that arises is whether the same “traditional” forces will still drive capitalism in the future. In Chapter 1, we discussed some of the factors that affect the future of capitalism. For instance, placing sustainability and sustainable integration of economies at the center of macrosocio-economic goals is incompatible with strict profit maximization. In other words, when we set sustainability as the main goal of economic activity, profit and utility maximization goals, which are founded on monetary incentives, are being (at least partially) supplanted (Petrakis & Kanzola, 2022). Furthermore, given the severity of the COVID-19 pandemic and the measures required to stabilize the economy, the role of formal institutions—such as governments—is evolving toward a “rules and discretion” approach. At the same time, the rise of nationalism, populism, and protectionism significantly reduces the prospects for improved global coordination (Boston, 2021), favoring the deglobalization trends. On the other hand, climate deterioration leads to non-renewable-resource shortages with the market unable to produce sufficient alternatives to those resources (Park, 2015). The future of capitalism and whether it will take more “sustainable” forms depends on the prevailing social values and the realization of human needs. Broadly, human needs and actions are highly interrelated due to the reciprocal relationship between personal values and identities and social values and identities. Individuals form their sense of self-esteem and personal identity based on their desires (Allport, 1937). However, due to interactive processes—such as socialization—individual values blend in with social values and de-personalization occurs (Schwartz & Bilsky, 1987, 1990). According to Schwartz and Bilsky (1987), values are cognitive representations of three universal requirements: biological needs, interactional requirements for interpersonal coordination, and societal demands for group welfare and survival. Focusing on the latter element, the present part aims to answer the following question: How do prevailing social values shape the future? Thinking about the future involves thinking about the future of society (Király et al., 2013). During scenario building exercises, the futurist should consider how society operates at present and how it will operate in the future (Király et al., 2013; Wangel, 2011). To that end, values can be used as “scanning” tools during the early stages of foresight to provide insight into complex system dynamics (Mills & Wilner, 2022). In addition, social values are crucial to detecting change in the form of development or backlash (Mills & Wilner, 2022). The reason for this lies in the

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fact that social values are relatively stable in the short term but change over the course of time. Hence, given that values are the foundation of economic, political, and cultural organizations, they are also an important aspect of the future because they impart to societies an underlying portfolio of socially acceptable and unacceptable behavior, contributing to the social shaping of the future (Bachika & Schulz, 2011). Although cultural differences and styles are difficult to quantify (Andersen & Rasmussen, 2014) we may approach their impact theoretically. From Hofstede’s measurements of national culture (Hofstede, 1980)1 the most useful dimensions affecting the context of scenarios are power distance, individualism, and uncertainty avoidance. The power distance dimension has implications regarding society’s preferences in the distribution of power. For instance, societies with lower power distance scores will favor inclusive governance and a reduction of inequalities. In parallel, individualistic cultures tend to create a demand for democracy and minimal state intervention because equality before the law and the limited governmental intervention provided under democracy, help safeguard individual freedom (Gorodnichenko & Roland, 2015). The uncertainty avoidance dimension and its implications will be discussed in the following Sect. 3.3. By contrast, Inglehart and Welzel (2010) argue that much of the variation in social values falls into two broad dimensions. The first dimension concerns traditional versus secular-rational values and the second dimension regards survival versus self-expression values. Modernization has brought about a shift from traditional to secular-rational values and from survival to self-expression values (Inglehart & Welzel, 2010). Regarding the second dimension of cross-cultural variation, it is linked to the debate over materialistic versus post-materialistic backgrounds. In a postmaterialistic background, social emphasis is put on subjective well-being, self-expression, quality of life, and environmental preservation. Consequently, post-materialistic values help the transition from “traditional” forms of capitalism to more “sustainable” ones (Isham et al., 2022). Culture as the complex system of knowledge, beliefs, arts, tradition, and institutions is a bonding mechanism for individuals and societies (Schhafer, 1991). Culture and social values impact the shaping of 1 Let it be noted that Hofstede refers to culture per its definition in anthropology. Hence, culture concerns the sum total of beliefs and attitudes that dynamically evolve and generate behavioral patterns and action.

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the future through the channels of expectations and human behavior. Through the analysis of prevalent social values and cultural background, we gain valuable insights into the reaction mechanisms of the system in the case of the plausible alternative futures.

3.3 Handling Uncertainty: Myopic or Forward-Looking Expectations? Through scenario building and foresight exercises, we try to mitigate uncertainty; otherwise, we would be completely ignorant and unprepared for the future (Oehmen et al., 2020).2 Foresight exercises aim to facilitate decision-making processes about alternative futures under uncertainty. To that end, they consider individuals as the “players” in the generated scenarios, whose beliefs and expectations impact the mapping of the future given the levels of uncertainty. In the economic context, uncertainty is recognized as one of the major global megatrends and it is inherited in any decision (Magruk, 2017), a fact which has several implications. In situations of high inherited and irreducible system uncertainty, individuals tend to be more shortsighted due to their limited ability to evaluate the distant future (Tversky & Kahneman, 1974). Subjective assessments of probabilities regarding the future are based on heuristic rules (Tversky & Kahneman, 1974). Heuristics are cognitive simplification mechanisms used by individuals in order to interpret a given set of stimuli (Schirrmeister et al., 2020). In general, heuristics facilitate everyday-life decisions but, in cases of high uncertainty, they can lead to systematic errors (biases) due to erroneous perceptions (Tversky & Kahneman, 1974). Systematic errors and cognitive biases tend to get accentuated when individuals are intolerant of uncertainty. Overall, societies with a higher tolerance for uncertainty are more resilient and adaptable to the consequences of economic and other shocks. On the other hand, societies that

2 Let it be noted that, regardless of our efforts to predict the future, there is always

the possibility of black-swans (Taleb, 2010) which subsequently affect and modify human behavior. In general, a black swan is a highly improbable event with three principal characteristics: it is unpredictable; it has a massive impact; and, after the event, we concoct an explanation that makes it appear less random and more predictable than it was (Taleb, 2010).

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are affected by uncertainty at large, might panic and act myopically.3 This type of behavior combined with uncertainty avoidance means that short- and medium-term scheduling and planning receive more attention (Andersen & Rasmussen, 2014). This causal effect generates the idea that policymakers must immediately resolve short-term issues while long-term ones can be left for the future (MacKenzie, 2021). Political short-termism prioritizes the needs of current voters over those of future voters, with the latter being electorally powerless (Boston, 2021). This political phenomenon puts at risk individuals’ long-term interests, such as the mitigation of the climate crisis, because short-term emergencies distract governments from long-term policy challenges (Boston, 2021). Future decision-making, on the other hand, involves very long-term planning, concerns for future generations of humans and other species, principles of social and ecological sustainability, and “big” questions like humanity’s destiny and the meaning of life on earth (Tonn, 2003). Typically, individuals who are characterized by forward-looking expectations and future decision-making, are more concerned with “long-term” issues. Such concerns are reflected in their actions as they plan forward, accounting for sustainability as the main macro-socio-economic goal. Additionally, due to their future orientation, these individuals are more uncertainty-resilient (Yang et al., 2021). An obvious connection is thus established between a society’s time orientation and decision-making, which influences the mapping of the future. Clearly, ideas about the future and short- and long-term strategies interact with governmental structures (Van Assche et al., 2021). Therefore, government strategies should consider how formal institutions, networks, organizations, and communities can cooperate to focus on long-term goals regardless of the rising uncertainty (Underdal, 2010; Van Assche et al., 2021).

3 This fact brings us back to Chapter 2, where we highlighted the importance of hope in scenario building and the need for moderation in implicating uncertainty factors.

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3.4 In Place of Conclusions: Is There a Prevailing Scenario? At this point, let us recall the four scenarios from Chapter 2. The growth scenario describes a guaranteed steady and significant future growth rate. The unsustainable growth scenario describes a future where steady growth is attainable but unsustainable, accompanied by rising uncertainty. By contrast, the transformation scenario concerns drastic technological and behavioral change toward a sustainable transformation of economic structures. Lastly, the collapse scenario is made up of disruptive conditions that radically impact the economy in a negative manner. The future of global economies depends on the priorities set by societies. In the case where profit maximization and short-term orientation are the drivers of capitalism, the future will vary among the growth scenario, the unsustainable growth scenario, and the collapse scenario, depending on the impact and degree of shortsightedness in policymaking and the tolerance or otherwise of uncertainty. On the other hand, actively regulating economies to adopt “sustainable” forms of capitalism

Fig. 3.1 Complex dynamics, scenarios, and the future (Source Authors’ creation. Note The future could meet any of the four scenarios or fall in between some of the scenarios. However, there is always the possibility that it will not resemble any of the scenarios due to unpredictable black-swan events)

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will be closer to the future developments described by the transformation scenario. Consequently, we cannot decisively answer which scenario will prevail because we can only speculate given the contextual factors analyzed above and the two key-factor uncertainties (i.e., climate change and geopolitical landscape). Figure 3.1 captures the complex dynamics brought about the aforementioned contextual factors.

References Allport, G. W. (1937). Personality: A psychological interpretation. Holt. Andersen, P. D., & Rasmussen, L. B. (2014). The impact of national traditions and cultures on national foresight processes. Futures, 59, 5–17. Bachika, R., & Schulz, M. S. (2011). Values and culture in the social shaping of the future. Current Sociology, 59(2), 107–118. Boston, J. (2021). Assessing the options for combatting democratic myopia and safeguarding long-term interests. Futures, 125, 102668. Gorodnichenko, Y., & Roland, G. (2015). Are there cultural obstacles to democratisation? Vox Eu CEPR. Hofstede, G. (1980). Culture’s Consequences: International differences in Workrelated Values. Sage Publications. Inglehart, R., & Welzel, C. (2010). Changing mass priorities: The link between modernization and democracy. Perspectives on Politics, 8(2), 551–567. Isham, A., Verfuerth, C., Armstrong, A., Elf, P., Gatersleben, B., & Jackson, T. (2022). The problematic role of materialistic values in the pursuit of sustainable well-being. International Journal of Environmental Research and Public Health, 19, 3673. https://doi.org/10.3390/ijerph19063673 Jenkins, A.C., & Hsu, M. (2017). Dissociable contributions of imagination and willpower to the malleability of human patience. Psychological Science, 28(7). Kanzola, A.M., Papaioannou, K. & Petrakis, P.E. (2022). Environmental behavioral perceptions under uncertainty of alternative economic futures. In Presented at the 16th Academy of Innovation, Entrepreneurship, and Knowledge Conference in Seville, June 28–30 (Awarded as one of the best research papers of the conference). Király, G., Pataki, G., Köves, A., & Balázs, B. (2013). Models of (future) society: Bringing social theories back in backcasting. Futures, 51, 19–30. https://doi. org/10.1016/j.futures.2013.05.001 MacKenzie, M. K. (2021). There is no such thing as a short-term issue. Futures, 125, 102652. https://doi.org/10.1016/j.futures.2020.102652 Magruk, A. (2017). Concept of uncertainty in relation to the foresight research. Engineering Management in Production and Services, 9(1), 46–55.

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Mills, B., & Wilner, A. (2022). The science behind “values”: Applying moral foundations theory to strategic foresight. Futures and Foresight Science, e145. https://doi.org/10.1002/ffo2.145 Oehmen, J., Locatelli, G., Wied, M., & Willumsen, P. (2020). Risk, uncertainty, ignorance and myopia: Their managerial implications for B2B firms. Industrial Marketing and Management, 88. Park, T. J. (2015). Climate Change and Capitalism. Consilience, 14, 189–206. Petrakis, P. E., & Kanzola, A. M. (2022). On the micro-foundations of creative economy: Life satisfaction and social identity. Sustainability, 14(9), 4878. https://doi.org/10.3390/su14094878 Phillips, F. (2019). What about the future? New perspectives on planning, forecasting and complexity. Springer. https://doi.org/10.1007/978-3-030-261 65-8 Schhafer, D.P. (1991). Culture: Beacon of the future. Razvoj Development International, 6(2–3). Schirrmeister, E., Göhring, A. L., & Warnke, P. (2020). Psychological biases and heuristics in the context of foresight and scenario processes. Futures & Foresight Science, 2(2), e31. https://doi.org/10.1002/ffo2.31 Schwartz, S. H., & Bilsky, W. (1987). Toward a universal psychological structure of human values. Journal of Personality and Social Psychology, 53(3), 550–562. Schwartz, S. H., & Bilsky, W. (1990). Toward a theory of the universal content and structure of values: Extensions and cross-cultural replications. Journal of Personality and Social Psychology, 58(5), 878–891. https://doi.org/10.1037/ 0022-3514.58.5.878 Shoemaker, P. (1995). Scenario planning: A tool for strategic thinking. Sloan Management Review, 36(2), 25–40. Taleb, N. N. (2010). The black swan: The impact of the highly improbable. Random House Trade Paperbacks. Tonn, B. E. (2003). The future of futures decision. Futures, 35(6), 673–688. https://doi.org/10.1016/S0016-3287(02)00106-4 Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases: Biases in judgments reveal some heuristics of thinking under uncertainty. Science, 185(4157), 1124–1131. Underdal, A. (2010). Complexity and challenges of long-term governance. Global Environmental Change, 20(3), 386–393. https://doi.org/10.1016/ j.gloenvcha.2010.02.005 Van Assche, K., Verschraegen, G., & Gruezmacher, M. (2021). Strategy for collectives and common goods: Coordinating strategy, long-term perspectives and policy domains in governance. Futures, 128, 102716. https://doi.org/ 10.1016/j.futures.2021.102716

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Wangel, J. (2011). Exploring social structures and agency in backcasting studies for sustainable development. Technological Forecasting & Social Change, 78, 872–882. Wilkinson, A., Kupers, R., & Mangalangiu, D. (2013). How plausibility-based scenario practices are grappling with complexity to appreciate and address 21st century challenges. Technological Forecasting and Social Change, 80(4), 699–710. https://doi.org/10.1016/j.techfore.2012.10.031 Yang, Q., van de Bos, K., & Li, Y. (2021). Intolerance of uncertainty, future time perspective, and self-control. Personality and Individual Differences, 177 , 110810. https://doi.org/10.1016/j.paid.2021.110810

PART II

The Past and the Present of the Greek economy

The central issue of this book is to present a medium- to the long-term projection of the developments of the Greek economy under five different scenarios (presented in Part I and analyzed in Part III). Therefore, it is a central issue in this book to demonstrate the realism of the present state and how the Greek economy reached the present state. Thus, this part presents the Greek economy’s past and present in five notions that determine economic development. Thus, the analysis realized is a combination of the notions of sustainable development, sustainable governance, the inclusivity of the economic system, cultural behavior that promotes development and growth, and the requirements for dynamic economic growth since development is human and interdisciplinary. These five notions are vital areas of action in human economic and social activity. Chapter 4 focuses on sustainable development and, more specifically, on matters concerning the environment, renewable energy sources, natural resources, and formerly on population evolution, highlighting opportunities and threats. Chapter 5 presents the quality and sustainability of governance in Greece, highlighting many of its weaknesses. The quality of political institutions has a significant impact on economic growth. Chapter 6 presents issues related to the issue of inclusivity in Greek society compared to the EU-28 average, which relates to labor market conditions, issues related to income distribution and observed inequalities, the level of poverty, and the quality of education. In Chapter 7, the behaviors of Greek society are presented. Finally,

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THE PAST AND THE PRESENT OF THE GREEK …

Chapter 8 presents a clear picture of how the Greek economy has developed up to 2022. The analysis includes critical issues that have severely affected the Greek economy, such as the internal and external balances, investments, savings, the credit system, the issue of debt, etc. These developments are expected to significantly change the image of growth in the Greek economy and the image of growth accounting up to 2035.

CHAPTER 4

Sustainable Development

4.1

Introduction

Sustainable development requires a series of developments related to adequate population growth, environmental sustainability, renewable energy sources that can provide an opportunity to boost the economy significantly, and the existence and utilization of natural resources. In this chapter, importance is given to issues on population evolution, environment, renewable energy sources, and natural resources for the case of Greece, highlighting the opportunities and threats observed for a sustainable development path. Despite significant weaknesses, Greece has significantly improved its sustainable development status over the past decades. The structure of the chapter is as follows: Sect. 4.2 presents the demographic developments in Greece. Next (Sect. 4.3), the state of the environment is presented, while the next part (Sect. 4.4) presents the use of renewable energy sources. Finally, Sect. 4.5 analyzes the natural resources available in the Greek area that either already provides or are expected to provide significant comparative advantages in the future.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_4

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4.2

The Evolution of Population and the Aging Problem

After 1960, as happened in the developed world, the Greek population increased significantly. The development and formation of current trends regarding the population of Greece are the results of developments concerning women’s fertility, life expectancy at birth, and migration balance. The change in lifestyle in modern economies and the changes related to the role of women in Greek society and the economy are conditions that have significantly limited women’s fertility in recent decades. Women are now actively participating in education and the labor market, negatively related to fertility. A direct effect of the decline in fertility is the limitation of births. The higher the level of a woman’s educational attainment, the fewer the number of children she is likely to bear (Götmark & Andersson, 2020). Moreover, women’s labor supply negatively impacts fertility (Aaronson et al., 2017). However, a recent analysis (Doepke et al., 2022) shows that these relationships are no longer universally true since these still hold for low-income countries but have disappeared mainly within and across high-income countries. These conditions are expected to result in an even smaller number of children expected to be borne by women born after 1985. More specifically, in 1960, each mother gave birth to an average of 2.23 children; the corresponding size for 2020 was 1.3 children (World Bank data—Database: SP.DYN.TFRT.IN). Women who were born after the end of the nineteenth century are having fewer and fewer children, while the current conditions of intense uncertainty, linked to factors such as the global financial crisis of 2008, the COVID-19 pandemic, the Russia–Ukraine war, the energy crisis, leads to postponement of births until later. This situation will likely lead to an acceleration of the decline in the number of children due to the reduction of both the available reproductive time and the biological capacity to conceive (Petrakis & Kostis, 2021). Another critical issue concerning Greek society is the phenomenon of aging. Aging is an issue related to reduced fertility, the lengthening of life expectancy, and, therefore, the increase in the average age of the population. A characteristic of the Greek population is that it is progressively aging, as the average age of the population was 31.2 years in 1960 and reached

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45.5 years in 2021 (Eurostat data - demo_pjanind database). It should be noted that the average age increased by four years from 2011 to 2021, the third most significant increase in the EU-27 after Spain (an increase of 4.4 years) and Portugal (an increase of 4.1 years). In addition, life expectancy at birth has increased significantly, from 69 years in 1960 to 80.3 years in 2021 (Eurostat data). Life expectancy at birth is consistently at a higher level than the corresponding level for the EU-27 (Fig. 4.1). The result of the above developments is that the natural balance (births minus deaths) has become a deficit. Therefore the population of Greek society has been decreasing since 2011 onwards, while at the same time, the problem of demographic dependency is magnified, a development that is expected to bring a significant burden to the Greek insurance system soon. Certainly, indicative of the decline in population and the increase in life expectancy is Fig. 4.2 which shows the significant increase expected in the percentage of the population over 65 years of age in Greece; it was around 10% in 1950 and is around 33% today. Figure 4.3 presents the natural balance and the individual evolution of births and deaths in Greek society. The long-term limitation of births and the increase in deaths has led to a situation where from 2011 onwards, the annual deaths are more than the annual births. Therefore, the natural balance in Greek society becomes negative. 83 82 81 80 79 78 77

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Regarding the immigration balance, it should be noted that after the Second World War, the Greek population was characterized as homogeneous, as the number of immigrants living in Greece was minimal, an image that changed significantly along the way. A large part of the immigrants who came to Greece, mainly from the beginning of the 90 s and for about 20 years, was from developing or underdeveloped world economies. To a large extent, they had even entered illegally and without a residence permit. At the same time, the migration of Greeks to foreign countries is also intense. This is a phenomenon that was particularly intense during the first 30 years or so after the end of the Second World War as Greeks left abroad to find work opportunities, while a corresponding phenomenon called "brain drain" was observed during the years of the global financial crisis of 2008, as mainly graduates of higher education left abroad in search of work and opportunities that were limited in Greece during the crisis. As a result of the above developments: (a) aging of the population, (b) low fertility, (c) an increase in the number of immigrants, the total population of Greece has been decreasing over time in recent years. Estimates for the future indicate a trend expected to continue for the next few years. The population is expected to continue its downward trend in Greece, decreasing yearly by approximately 0.5%. In contrast, globally, the population is expected to continue to increase until 2100 but with a lower rate of growth each year, expected to reach almost zero growth in 2100 (Fig. 4.4).

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4.3 Environment Protection and the Ecological Footprint In Greece’s case, the state of the environment has improved significantly over the past decades, with the country having reduced its ecological footprint. The conditions of both terrestrial and marine ecosystems are considered satisfactory. However, there are, of course, issues for improvement for both ecosystems, such as the phenomenon of overfishing in the marine ecosystem. Progress has also been made in the ability to monitor and protect both ecosystems. Concerning greenhouse gas emissions in Greece, these are increasing at an incredible rate, just like in the world (Fig. 4.5). In Greece, this upward trend was halted after 2008. Besides economic recession, one main reason this clearly positive development occurred is that after 2007 cleaner electricity production began to be used intensively as well as vehicles with new technology and cleaner engines. The picture is similar concerning greenhouse gas emissions, which for Greece were increasing until 2008 and have been decreasing since then, reaching the average of the EU-27 countries in 2020 (Fig. 4.6). For the world as a whole, greenhouse gas emissions decrease over time, unlike carbon dioxide emissions. The reason is the gradual transition of 40 000

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the energy system to a low-emission system and the reduced activity due to the economic crisis. For Greece, between 2015 and 2016, the fourth most significant decrease in the EU was observed after the UK, Spain, and Italy with EEA data.

4.4

Renewable Energy as a Source of Sustainable Development

The Greek economy has limited energy potential since, in practice, it is almost entirely an energy importer. However, it functions as a transit point for energy, especially from the Caspian Sea to Europe. However, Greece has unique characteristics that enable it to use renewable energy sources from the sun, the wind, and the water that enables the use and production of solar, wind, and hydroelectric power, respectively. In fact, in recent years, Greece has turned significantly toward the use of renewable energy sources, with the result that—according to the

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Report on the Global Situation in the Renewable Sources Sector of the REN21 (GSR) network—Greece is for 2018 one of the nine countries in the world (along with Denmark, Uruguay, Ireland, Germany, Portugal, Spain, United Kingdom, Honduras) that generate more than 20% of their electricity from solar and wind energy. As shown in Fig. 4.7, after 2010, Greece significantly exceeded the average of the rest of Europe regarding the share of renewable energy sources in the final energy consumption. In addition, renewable energy sources are a way of attracting investment for the Greek economy either domestically or from abroad. From the coronavirus pandemic to supply chain problems, inflation, the energy crisis, and the war in Ukraine, governments worldwide are trying to deal with the “perfect storm” of economic crises, and the shift to renewable energy seems to be a solution. In fact, for the Greek economy, according to the Energy Institute of SE Europe (IENE 2019), the total investment potential for wind farms until 2027 amounts to e8.2 billion, for photovoltaics to e5.5 billion, and all the other forms of Renewable Energy Sources at 1.4 billion euros.

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Fig. 4.7 Renewable share in final energy consumption (%) (Source IEA— renewables 2021 data explorer)

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The Rich Natural Resources of Greece

Nowadays, Greece maintains many natural resources, making it one of the wealthiest places in the broader region of South-Eastern Europe. This natural wealth includes reserves of energy mineral resources, industrial minerals and rocks, metallic minerals, energy mineral raw materials, oil reserves, and natural gas. Greece is one of the world’s leading producers of nickel and bauxite, while lignite, iron ore, lead, zinc, magnesite, marble, and salt are also produced. In addition to these natural resources, the prevailing climate, as well as the geographical location of the country, allows growing products such as cotton (the only country that produces it in the European Union), grapes, olives, tobacco, and various types of cereals, such as corn, wheat and barley and products such as feta, sugar beets, tomatoes, wine, tobacco, potatoes, beef, and dairy products. Although Greece is a rich country in terms of natural resources, the revenues from natural resources as a percentage of GDP remain at shallow levels over time compared to the corresponding global average (Fig. 4.8). 7 6

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References Aaronson, D., Dehejia, R., Jordan, A., Pop-Eleches, C., Samii, C., & Schulze, K. (2017). The effect of fertility on mothers’ labor supply over the last two centuries (NBER Working Paper no 23717). Doepke, M., Hannusch, A., Kindermann, F., & Tertilt, M. (2022). The economics of fertility: A new era (CEPR Discussion Paper 17212). Centre for Economic Policy Research. Götmark, F., & Andersson, M. (2020). Human fertility in relation to education, economy, religion, contraception, and family planning programs. BMC Public Health, 20, 265. https://doi.org/10.1186/s12889-020-8331-7 IENE. (2019). The Greek energy sector. Available at: https://www.iene.gr/articl efiles/file/meletes/iene-meleti-2019.pdf Petrakis, P. E., & Kostis, P. C. (2020). The evolution of the Greek economy: Past challenges and future approaches. Palgrave Macmillan.

CHAPTER 5

Sustainable Governance

5.1

Introduction

The effectiveness of governance is a particularly critical issue related to the policy implemented and the development trajectory followed by any economy. In fact, given that geostrategic and economic developments at the global level have changed how governments now intervene in the formation of economies, the state’s role in economies and societies has been significantly redefined. Thus, conditions such as the global financial crisis of 2008, the crisis of the COVID-19 pandemic, the Russia–Ukraine war, and the recent energy crisis are crucial reasons why state interventions come to play a more critical role in facing them. The concept of sustainable governance promotes a long-term view of public policy in such a way as to take into account the interests of future generations. Some approaches facilitate more than others the design and implementation of long-term policies with positive results in the future. Aiming at the sustainability of policies and taking into account the interests of future generations stems from the international community’s admission that the current economic development should not hinder the future, just as it should not transfer debts and problems to future societies.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_5

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The structure of the chapter is as follows: Sect. 5.2 presents the evolution over time of the governance quality indicators as compiled and presented by the World Bank. Section 5.3 presents the issue of corruption and Greece’s performance on it, and Sect. 5.4 presents economic freedom and Greece’s performance on the various sub-indicators used to calculate it. Finally, in Sect. 5.5, the terrorism and money laundering issue is presented.

5.2 The Evolution of Governance Indicators: Divergence and Convergence During the Last Two Decades The World Bank has been monitoring the evolution of governance quality for most countries for many years. The indicators it uses for this purpose are “voice and accountability” which measures the degree to which the citizens of a country participate in the process of choosing the government, as well as the degree of freedom of expression of association and the press, the indicator of “political stability” which measures the likelihood that the government will be destabilized by constitutional or violent means, including terrorism, the “state effectiveness” index which measures the quality of public services, the ability of politicians to deliver services and independence from political pressure, the “regulatory interventions index which measures the government’s ability to design and implement reforms and policies that empower and promote private sector development, the “rule of law” index which measures the extent to which citizens trust the laws of society, including quality property rights, police and justice and captures perceptions of the extent to which government officials trust and conform to society’s rules and the “corruption” index which measures the extent to which public authority is exercised toward self-interest and the country’s ability to control any kind of corruption, and the extent to which the public sector is controlled by private interests, making the exercise of power ineffective and inefficient. In the “Voice and Accountability” index, Greece converged to the average of the OECD countries until 2004; since then and until 2014, it has deviated significantly, while in 2015 and 2018, there was a significant recovery effort (Fig. 5.1). Regarding the “Political Stability and Absence of Violence/Terrorism” index, Greece is identical to the average of the OECD countries until

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Fig. 5.1 Voice and accountability index (Source World Bank—World Governance Indicators) 90 80 70 60 50 40 30 20 10 0

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Fig. 5.2 Political Stability and Absence of Violence/Terrorism index (Source World Bank—World Governance Indicators)

2002. Since then—with a peak in 2009—it has deviated significantly and shows relative stability. Indeed, the overall performance of around 40 points throughout the great recession is considered particularly low when the corresponding average of the OECD countries is around 70 points (Fig. 5.2).

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Especially in the case of Greece, political risk fluctuates over time at a high level. Most surveys concerning the most significant risks to the Greek economy conclude that political instability and risk are the most significant threats. More specifically, according to a survey carried out by the research company ALCO in 2018, in collaboration with the consulting firm Fidel & Fortis Management Consultants, political instability is recorded as the greatest risk for the executives of large Greek companies, while the conclusions move in the same direction of Allianz’s Global Risk Barometer for 2019 as political risk is among the ten biggest risks for the Greek economy and especially for Greek businesses. In the “Government Effectiveness” index, Greece falls significantly short of the average of the OECD countries in all years, while after 2004, the deviating course is magnified with a peak in the years 2012 and 2016 (Fig. 5.3). As in the governance effectiveness index, so also in the “Regulatory Quality” index, Greece in all years is significantly below the average of the OECD countries, while, after 2004, the deviating course is magnified with a peak in 2016 (Fig. 5.4). Then, and until 2020, there was an attempt to converge with the OECD countries, but in 2021, the Greek economy moved away. 100 90 80 70 60 50 40 30 20 10 0

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Fig. 5.3 Government effectiveness index (Source World Bank—World Governance Indicators)

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Fig. 5.5 Rule of law index (Source World Bank—World Governance Indicators)

Furthermore, in the “Rule of Law index, Greece’s performance is consistently relatively poor and seems to deviate significantly from the average of the OECD countries during the period under review. While in 1996, the score was precisely at the average of the OECD countries (close to 84 points), since then, a continuous deterioration has been observed,

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Fig. 5.6 Control of corruption perceptions index (Source World Bank—World Governance Indicators)

with the result that in 2017 the lowest value for Greece was observed over time (score of 56.73) (Fig. 5.5). Finally, Greece’s performance has been quite problematic in the “Control of Corruption Perceptions” index. It seems to deviate significantly from the average of the OECD countries during the period under review from 1998 onwards. Relative stability has been observed since 2012, while in 2018, there was a slight improvement (Fig. 5.6).

5.3 The Improvement of Corruptions Perceptions During the Crisis of 2008 Corruption is a transaction cost in the financial system (unrecorded cost). In the international literature, several studies analyze the phenomenon of corruption. It is challenging to choose a definition that fully conveys the concept. Corruption is generally defined as the abuse of public power for private gains. Journalists and politicians use it as a general concept that includes all forms of abuse of power, either in the public or private sector. It also includes nepotism or self-interested policies that allow companies, politicians, civil servants, or business executives to avoid accountability.

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In recent decades, significant efforts have been made worldwide to limit and fight corruption by national governments and international organizations. Establishing a specialized anti-corruption knowledge center, the rapid creation of transparency committees in all countries, nationwide investigations, and a unique international anti-corruption committee are critical tools in the global strategy for highlighting and combating the phenomenon. However, the achievement of this goal necessarily presupposes its measurement to diagnose the problems and evaluate the results. Questionnaire surveys mainly measure corruption. It is easy to see that any attempt to measure corruption cannot be accurate and successful. However, as it results from anonymous questionnaires, it can provide an approximate picture of the phenomenon in each country. The existence of the phenomenon of corruption requires the presence of specific conditions. For the existence of corruption phenomena, there must be, on the one hand, the need in society to carry out such acts. On the other hand, the conditions either encourage or allow such manifestations. For example, when bureaucracy creates delays and high costs for citizens, while the institutional framework for control and punishment 60 50 40 30 20

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is not strict and effective, citizens are easily incentivized to find extrainstitutional methods of settling their obligations/tasks. The absence of effective sanctions in the event that violations are found, as well as the cases of generalized lawlessness in the functioning of the state, are both at the expense of the citizen’s rights and the expense of the public interest. The Corruption Perceptions Index shows an improvement trend over time for the case of Greece (Fig. 5.7).

5.4

The Recrudescence of Economic Freedom

In the index of economic freedom, Greece showed a massive deterioration after 2010, which is much lower than the world average until today. This happened even before the outbreak of the crisis, and even earlier, Greece received a much higher rating or a rating at a similar level to the global average (Fig. 5.8). 66 64 62

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Fig. 5.8 Index of economic freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, economic freedom is about much more than a business environment in which entrepreneurship and prosperity can flourish. With its far-reaching impacts on various aspects of human development, economic freedom empowers people, unleashes powerful forces of choice and opportunity, nourishes other liberties, and improves the overall quality of life)

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In the property rights index, Greece was above the global average over time, but after 2013 it fell below it, and after 2018, it fully converged with it (Fig. 5.9). The effectiveness of the judicial system in Greece is consistently higher than the global average from 2017 to 2020, although this difference has decreased considerably in the last two years (Fig. 5.10). Government integrity in Greece has historically been above the world average, which changed after the onset of the global financial crisis. Greece returned to a higher level of government integrity in 2020 (Fig. 5.11). Although generally considered high, Greece’s tax burden is below the corresponding global average throughout the analysis period (Fig. 5.12). The health of fiscal sizes was lower than the global average in 2017. However, this picture changed from 2018 onwards (Fig. 5.13). Greece is consistently characterized by a higher degree of freedom in the business sector than the corresponding global average (Fig. 5.14). However, the same is not the case with freedom in the labor market (Fig. 5.15). 80 70

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Fig. 5.9 Property rights (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, secure property rights give citizens the confidence to undertake entrepreneurial activity, save their income, and make long-term plans because they know that their income, savings, and property (both real and intellectual) are safe from unfair expropriation or theft. Property rights are a primary factor in capital accumulation for production and investment)

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Fig. 5.10 Judicial effectiveness (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, judicial effectiveness requires efficient and fair judicial systems to ensure that laws are fully respected and that appropriate legal actions are taken against violations)

In terms of monetary figures and trade, the freedoms in Greece vary at a level above the global average (Fig. 5.16). The only exceptions are the relative freedoms in monetary figures in 2012 and 2013 (Fig. 5.17). Investment freedoms are consistently higher in Greece compared to the world average, with the main exception of 2002–2008, where there was complete convergence (Fig. 5.18). Accordingly, financial freedoms in Greece are below the world average, except for the period from 2010–2012 and some other years when Greece and the world average are very close (Fig. 5.19).

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Fig. 5.11 Government integrity (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, in a world characterized by social and cultural diversity, practices regarded as corrupt in one place may reflect traditional interactions in another. The systemic corruption of government institutions by such practices as bribery, nepotism, cronyism, patronage, embezzlement, and graft is of great concern)

5.5

Confronting Terrorism and Money Laundering

In recent years there has been a significant increase in terrorist incidents worldwide. These incidents are usually related to domestic political problems, although recently, incidents related to international geopolitical disputes have been recorded. Greece has experienced terrorist incidents since 1974, despite its relative political stability (Samitas et al., 2018). Over the years, Greece has faced serious security challenges from domestic and transnational terrorist activity. With the implementation of Law 2928/2001, Greece has fulfilled its contractual obligation by signing the Palermo Convention and has become a strong supporter of the global effort to combat organized crime.

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Fig. 5.12 Tax burden (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, a tax burden is a fiscal burden imposed by Governments on economic activity through taxation and borrowing. However, governments permit individuals and businesses to keep and manage a larger share of their income and wealth for their benefit and maximize economic freedom)

The indicator related to money laundering shows a significant performance for Greece since 2012. The gray line shows Greece’s performance on that indicator, and the columns show Greece’s ranking among all countries included in the analysis. A lower ranking is preferable, and it seems that there has been a significant effort in combating money laundering in the last decade, as while Greece was ranked 29th among 144 countries in 2012, it was ranked 127th among 141 countries in 2020, significantly reducing its degree of exposure (Fig. 5.20).

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Fig. 5.13 Fiscal health (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage foundation, widening deficits and a growing debt burden, which are direct consequences of poor government budget management, lead to the erosion of a country’s overall fiscal health. Deviations from sound fiscal positions often disturb macroeconomic stability, induce economic uncertainty, and thus limit economic freedom) 90 80

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Fig. 5.14 Business freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, business freedom is an individual’s ability to establish and run an enterprise without undue interference from the state)

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Fig. 5.15 Labor freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, labor freedom is the ability of individuals to find employment opportunities and work) 90 80

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1997

1996

0

1995

10

World

Fig. 5.16 Monetary freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, monetary freedom requires a stable currency and market-determined prices. Whether acting as entrepreneurs or as consumers, economically free people need a steady and reliable currency as a medium of exchange, a unit of account, and a store of value. Without monetary freedom, creating long-term value or amassing capital is difficult)

5

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90 80

index score

70 60 50 40 30 20

2020

2019

2018

2016

2017

2015

2014

2013

2011

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Greece

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World

Fig. 5.17 Trade freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, trade freedom is about the degree to which government hinders the free flow of foreign commerce and directly affects individuals’ ability to pursue their economic goals and maximize their productivity and well-being) 80 70

INDEX SCORE

60 50 40 30 20

Greece

2020

2019

2018

2017

2016

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2013

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2009

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10

World

Fig. 5.18 Investment freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, a free and open investment environment provides maximum entrepreneurial opportunities and incentives for expanded economic activity, greater productivity, and job creation)

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70 60

index score

50 40 30 20

Greece

2019

2020

2018

2017

2015

2016

2013

2014

2011

2012

2009

2010

2008

2007

2006

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2004

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World

Fig. 5.19 Financial freedom (Source Heritage Foundation—Index of Economic Freedom 2022. Note According to the Heritage Foundation, financial freedom is described as the case in which an accessible and efficiently functioning formal financial system ensures the availability of diversified savings, credit, payment, and investment services to individuals and businesses) 8

127/141

7

120

105/146 6

96/129

5

140

100

75/152

80

4

2

60

51/149

3

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29/144

20

1 0

0 2012

2013

2015

2016

2017

2018

2020

Fig. 5.20 Basel Institute AML index (Source Basel Institute on Governance. Note 10 indicates the highest risk level. The index provides risk scores covering five domains that contribute to a high risk of ML/TF: Quality of AML/CFT Framework, Bribery, and Corruption, Financial Transparency and Standards, Public Transparency and Accountability, and Legal and Political Risks)

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75

Reference Samitas, A., Asteriou, D., Polyzos, S., & Kenourgios, D. (2018). Terrorist incidents and tourism demand: Evidence from Greece. Tourism Management Perspectives, 25, 23–28, 35(4), 437–463.

CHAPTER 6

Inclusive Growth

6.1

Introduction

Inclusive Growth is a more restrictive concept than Sustainable Development and quite different from Sustainable Governance since it focuses on social cohesion. It mainly refers to issues of income inequality, inequality of opportunities and social mobility, and health and education issues. Adopting Inclusive Growth, this chapter focuses on factors that affect access to opportunities with implications for social organization, social convergence, and individual agency. These factors play a decisive role in economies moving into a sustainable period of Growth. The need to shift to a model of economic development that does not undermine social cohesion is now universally recognized (Petrakis & Kostis, 2020; Petrakis et al., 2020). This happens as the well-being of citizens that fuels economic growth is shaped to a great extent by non-income factors that are nevertheless necessary for the exploitation and creation of economic opportunities. The structure of the chapter is as follows: initially (Sect. 6.2) presents the situation of the labor market and the opportunities associated with it, Sect. 6.3 with the case of education, and Sect. 6.4 with the situation of households and the more specific economic conditions that economic actors experience. Two of the most critical issues related to inclusive © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_6

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Growth are presented: in Sect. 6.5, the issue of poverty, and in Sect. 6.6, the issue of inequalities. Finally, the analysis concludes with a description of the state of health of the Greek population.

6.2

Labor Market Conditions and Inclusivity

The labor market is one of the important sectors of economies that reflect the broader economic conditions prevailing in an economy. At the same time, the labor market includes particularly strongly the issues with which the question of inclusivity touches. Indicative of the labor market picture are the two figures that show the percentage change in employment and unemployment for Greece and the Eurozone (Figs. 6.1 and 6.2). In general, employment followed a similar course, with much more significant fluctuations in the case of Greece. However, after 2010 and until 2012, the much more significant decrease in employment and the increase in unemployment in Greece is clear. In addition, the crisis of the COVID-19 pandemic has had more significant effects in the case of the Greek economy than the average of the Eurozone economies. Employment decreased significantly during the crisis in the Greek economy and EU-27. After 2014, in both cases, there was a recovery trend. The difference is that in Greece, until 2021, employment had not 8 6 4 2 0 -2 -4 -6 -8

Greece

2022

2018

2020

2016

2012

2014

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1980

1982

-10

Eurozone

Fig. 6.1 Change in employment (% annual change) (Source Editing data from the Global Economic Model of Oxford Economics)

6

79

INCLUSIVE GROWTH

50 40 30 20 10 0 -10 -20 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

-30

Greece

Eurozone

Fig. 6.2 Change in unemployment (% annual change) (Source Editing data from the Global Economic Model of Oxford Economics)

Greece

4,400 190,000

4,200 4,000

EU-27

195,000

4,600

185,000

3,800 180,000

3,600 3,400

175,000

3,200 3,000

170,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Greece

EU-27

Fig. 6.3 Total employment (resident population—LFS) (thousands of people) (Source Eurostat [LFSI_EMP_A])

risen to the level before the crisis, while in the EU-27, employment has increased considerably above the level it had in 2008 as of 2015 (Fig. 6.3). Also, it should be noted that in the Greek economy, the flows of salaried employment in the private sector show strong seasonality, which is related to the increase in employment during the summer months. Employment for young people has been consistently lower than the corresponding Eurozone average since 2000. However, since the

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outbreak of the debt crisis, this difference has grown significantly, with a peak in 2013, due to a large reduction in the employment rate in Greece. Since then, a significant recovery effort has been observed without, to date, a return to the level of employment that was valid before the crisis (Fig. 6.4). The significant difference between Greece and the EU-27 regarding the labor market (can be seen in Fig. 6.5) which shows the evolution of the unemployment rate. In Greece, after the outbreak of the crisis, the unemployment rate almost tripled, in contrast to the EU-27, which increased much less. After 2014 it decreases in both cases. In Greece, until 2020, it has yet to approach the level it was before the crisis, while in the EU-27, it has fallen even lower than this level. Additionally, the gross wages of the employed in the Eurozone are considerably higher (more than twice) compared to Greece. However, the increase in gross wages from 1980 to 2009 is more remarkable for the Greek economy to converge with the Eurozone economy (Fig. 6.6). Since the outbreak of the crisis, however, the gross wages of the employed began to decrease in Greece, and the upward trend was halted, while in the Eurozone, they remain at a stable level of Growth. 40 35 30 25 20 15 10 5

European Union - 27 countries

Fig. 6.4 Youth employment [yth_empl_020])

rate

(%,

2021

2019

2020

2018

2017

2016

2015

2014

2013

2011

2012

2010

2008

2009

2007

2006

2005

2004

2003

2002

0

Greece

15–24

years)

(Source

Eurostat

6

INCLUSIVE GROWTH

81

30 25 20 15 10 5 2022

2020

2018

2016

2014

2012

2008

2010

2006

2002

Greece

2004

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

0

Eurozone

Fig. 6.5 Unemployment rate (% of the population in the labor force) (Source Editing data from the Global Economic Model of Oxford Economics)

As can be seen from Fig. 6.7, until the beginning of the debt crisis of 2010, the change in labor supply fluctuated at corresponding levels for Greece and the Eurozone. After 2010, and for a decade, the rate of change became negative for the Greek economy, culminating in 2020 35 30 25 20 15 10 5 0 -5

Greece

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

-10

Eurozone

Fig. 6.6 Earnings gross total (% annual change of quarterly total, Gross—euro per employee) (Source Editing data from the Global Economic Model of Oxford Economics)

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when there was the shock of the pandemic and lockdowns in Greece and the Eurozone. The working-age population declined until 2022 for Greece and the Eurozone, and the decline is higher for the Greek economy (Fig. 6.8). The minimum monthly wage has historically been higher in Greece than in the EU-27, showing a continuous increase. The picture was reversed after 2012 when the salary in Greece stabilized in contrast to the case of the EU-27, which continued its upward trend (Fig. 6.9). With the latest improvement in the minimum wage in the first half of 2022, the Greek economy is entering a phase of convergence with the European average. The average annual salary in Greece is consistently much lower than the equivalent of the OECD countries (Fig. 6.10). While the size in question increases yearly in the OECD countries from 1995 to the present, in Greece, it decreased after 2010 and from 2013 and then shows relative stability. At the same time, Greece has a much more significant employment gap between the two sexes than the EU-27 average. Of course, from 2000 to 2014, this gap is significantly reduced, however reaching the level of the EU-27. From 2015 to 2018 and also in 2021, the index for Greece increased again (Fig. 6.11).

3 2 1 0 -1 -2 -3 -4 -5

Greece

2022

2020

2018

2016

2014

2012

2008

2010

2006

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2000

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1996

1992

1994

1990

1988

1986

1982

1984

1980

-6

Eurozone

Fig. 6.7 Labor supply (% annual change) (Source Editing data from the Global Economic Model of Oxford Economics)

6

INCLUSIVE GROWTH

83

2 1.5 1 0.5 0 -0.5 -1

Greece

2022

2020

2016

2018

2014

2012

2010

2008

2006

2004

2002

1998

2000

1994

1996

1992

1990

1988

1986

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1980

-1.5

Eurozone

Fig. 6.8 Population of Working Age (% annual change) (Source Editing data from the Global Economic Model of Oxford Economics) 1,200 1,000 800 600 400 200

EU-27

Fig. 6.9 Monthly minimum [EARN_MW_CUR Database])

wages

2022-S1

2021-S1

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2018-S1

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2001-S1

2000-S1

1999-S1

0

Greece

(euros)

(Source

Eurostat

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60,000 50,000 40,000 30,000 20,000 10,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

0

Greece

OECD countries

Fig. 6.10 Average annual wages (In 2021 constant prices at 2021 USD PPPs) (Source OECD) 30 25 20 15 10 5

European Union - 27 countries

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

0

Greece

Fig. 6.11 Gender Employment Gap (Source Eurostat [LFSI_EMP_A]. Note It is calculated as the difference between the male and female participation in employment as a percentage of the total population)

6

6.3

INCLUSIVE GROWTH

85

Participating in Education and Educational Quality

The years of expected participation in education are increasing yearly for Greece and the world. In Greece, from approximately 12.5, the expected years someone will be in education in 1990 reached 20 years in 2021 (Fig. 6.12). At the same time, the global average has increased from about 9.5 years in 1990 to about 13 years in 2021. The index is the average years of schooling (adults) and expected years of schooling (children). Greece has consistently received significantly higher values than the corresponding world average, with the index improving continuously and at a relatively stable rate since 1990. The picture is similar to the average years of education received by people aged 25 and over (Fig. 6.13). At the same time, as seen from Figs. 6.14a and b, there is a tendency to increase access to higher education in Greece, surpassing the global average in 2019 and falling to a lower level by 2021. 25 20 15 10 5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

0

Greece

World

Fig. 6.12 Expected years of schooling (Source United Nations—School register or school census for enrollment data by age. UNPD population estimates for the school-age population. Note Total number of years of schooling that a person of a certain age can expect to receive in the future, assuming that the probability of his or her being enrolled in school at any age is equal to the current enrollment ratio for that age)

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12 10 8 6 4 2

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

0

Greece

World

Fig. 6.13 Mean years of schooling (Source United Nations—National population censuses, household, or labor force surveys. Note Average number of completed years of education of a country’s population aged 25 years and older, excluding years spent repeating individual grades)

Figures 6.15, 6.16, and 6.17 show the performance of Greek students in the PISA tests concerning the average of the OECD countries. From the observation of these figures, Greek students lag behind these OECD countries in reading, mathematics, and science. Also, in the last decade, there has been a decrease in the relative scores for both Greece and the OECD countries. Accordingly, the respective performances of Greece in the PIAAC survey tests in reading, numeracy, and problem-solving are presented below. Greece’s rating falls short of that of the OECD countries in all these ratings (Fig. 6.18). Additionally, Greeks seem to use their skills at work to a lesser extent than workers in OECD countries (Fig. 6.19).

6

INCLUSIVE GROWTH

87

(a) 70 60 50 40 30 20

0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

10

European Union - 27 countries

Greece

(b) 90 80 70 60 50 40 30 20 10 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

0

European Union - 27 countries

Greece

Fig. 6.14 (a) Population by educational attainment level—Less than primary, primary, and lower secondary education (levels 0–2) (percentage %). (b) Population by educational attainment level—Upper secondary, post-secondary nontertiary, and tertiary education (levels 3–8) (percentage %) (Source Eurostat [EDAT_LFSE_03])

88

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Mean Score

480 470 460 450 440

Greece

2018

2015

2012

2009

2006

2003

2000

430

OECD-Average

Fig. 6.15 PISA score in reading (Source OECD—Programme for International Student Assessment’s [PISA]. Note Reading performance, for PISA, measures the capacity to understand, use and reflect on written texts in order to achieve goals, develop knowledge and potential, and participate in society. The mean score is the measure) 500 490

Mean Score

480 470 460 450 440 430 420 2003

2006

2009 Greece

2012

2015

2018

OECD-Average

Fig. 6.16 PISA score in mathematics (Source OECD—Programme for International Student Assessment’s (PISA). Note Mathematical performance, for PISA, measures the mathematical literacy of a 15-year-old to formulate, employ, and interpret mathematics in a variety of contexts to describe, predict, and explain phenomena, recognizing the role that mathematics plays in the world. The mean score is the measure. A mathematically literate student recognizes the role that mathematics plays in the world in order to make well-founded judgments and decisions needed by constructive, engaged, and reflective citizens)

6

INCLUSIVE GROWTH

89

510 500

Mean Score

490 480 470 460 450 440 430 420 2006

2009

2012 Greece

2015

2018

OECD-Average

Fig. 6.17 PISA Score in science (Source OECD - Programme for International Student Assessment’s [PISA]. Note Scientific performance, for PISA, measures the scientific literacy of a 15-year-old in the use of scientific knowledge to identify questions, acquire new knowledge, explain scientific phenomena, and draw evidence-based conclusions about science-related issues. The mean score is the measure)

6.4 Personal Finance: Disposable Income and Household Conditions The recent financial crisis of 2008 and the subsequent economic upheavals with the COVID-19 pandemic and the energy crisis play a vital role in households’ personal finances. Greece’s per capita disposable income has consistently and significantly fallen short of the Eurozone. It reached its peak in 2007 when a period of economic prosperity in Greece ended. Since then, and on the occasion of the 2008 crisis, it decreased significantly until 2012, and since then, it has stabilized at close to 30 billion euros per quarter. While the difference to the Eurozone was not very large before the 2010 crisis, it has grown (Fig. 6.20). The comparison of Greece with the Eurozone regarding the change in disposable income shows that in the Eurozone, there is much greater stability in its change. In the Greek economy, the considerable increase that occurred in 2007 and the significant decreases in 2008 and 2010– 2016 are indicative.

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300 254

266

252

262

250 200 150 100 50

30 14

0 Literacy (mean score)

Numeracy (mean score)

Greece

Problem Solving (% at level 2 or 3)

OECD

Fig. 6.18 PIAAC literacy, numeracy, and problem-solving (Source OECD— Programme for the International Assessment of Adult Competencies—PIAAC. Note The Survey of Adult Skills (PIAAC) assesses the proficiency of adults in three information-processing skills essential for full participation in the knowledge-based economies and societies of the twenty-first century: literacy, numeracy, and problem-solving in technology-rich environments. These are competencies that are essential for functioning in the modern world, for realizing the myriad tasks adults must undertake in the various life contexts)

Regarding households, it is observed that in Greece, the percentage of adults within households is much higher than the corresponding average of the EU-27 countries (Fig. 6.21). The percentage of people living in households characterized by low work intensity is higher in Greece than the corresponding average of the EU-27 countries (Fig. 6.22).

6.5 People at Risk of Poverty and Social Protection Expenditure The risk of impoverishment is exceptionally high for Greece and, indeed, considerably higher than the corresponding risk for the EU-27 countries. This size decreased from 2003 to 2010, but the financial debt crisis led to a significant increase in the percentage of the population living at risk of

6

INCLUSIVE GROWTH

91

3.5 2.9

3 2.41

2.5 2

2.16

2.74 2.8

2.71 2.49 2.51

2.31

1.94

1.5 1 0.5 0 Index of Using Index of Using ICT skills at work writing skills at work

Index of Using Index of Using Index of Using reading skills at numeracy skills problem solving work at work skills at work Greece

OECD

Fig. 6.19 Index of using skills at work (2016) (Source OECD—Programme for the International Assessment of Adult Competencies—PIAAC. Note The Survey of Adult Skills (PIAAC) includes detailed questions about the frequency with which respondents perform specific tasks in their jobs. Based on this information, the survey measures the use of a wide range of skills, including both informationprocessing skills, which are also measured in the direct assessment, and generic skills, for which only self-reported use at work is available)

poverty (Fig. 6.23). After 2017, there is a reduction in the risk of poverty in Greece, just as a reduction is also observed in the case of the EU-27 since 2014. Evaluating the corresponding picture after the transfer payments, there is a continuous upward trend in the risk of poverty in Greece. Of course, the risk of poverty is significantly lower in Greece after transfer payments than in the EU-27 (Fig. 6.24). Regarding social protection expenditures per capita (Fig. 6.25), they are significantly higher in the Eurozone than in Greece (about twice as high in 2019).

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35000 30000 25000 20000 15000 10000 5000 0

Greece

Eurozone

Fig. 6.20 Personal disposable income (euros) (Source Editing data from the Global Economic Model of Oxford Economics)

Percentage (%) of total households and household members

80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Greece

European Union - 27 countries (from 2020)

Fig. 6.21 Distribution of population aged 18 and over (Source Eurostat [ilc_lvhl11])

6

INCLUSIVE GROWTH

93

20 18 16 14 12 10 8 6 4

European Union - 27 countries

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

0

2003

2

Greece

Fig. 6.22 People living in households with very low work intensity (percentage of the total population aged less than 60) (Source Eurostat [ilc_lvhl13]) 40 35 30 25 20 15 10

European Union - 27 countries (from 2020)

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

0

2003

5

Greece

Fig. 6.23 At-risk-of-poverty rate (percentage of the total population) (Source Eurostat [ILC_PEPS01])

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40 35 30 25 20 15 10 5

European Union - 27 countries

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

0

Greece

Fig. 6.24 Impact of social transfers (excluding pensions) on poverty reduction (percentage of the total population) (Source Eurostat [TESPM050]) 9000 8000 7000 6000 5000 4000 3000 2000

European Union - 27 countries

2018

2019

2017

2016

2015

2014

2013

2012

2011

2010

2008

2009

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

0

1995

1000

Greece

Fig. 6.25 Social protection expenditure (euro per inhabitant [at constant 2010 prices]) (Source Eurostat [SPR_EXP_SUM])

6

INCLUSIVE GROWTH

95

6.6 Inequality, Material, and Social Deprivation in the Greek Economy The income share index, or the S80/S20 ratio, is a measure of the inequality of income distribution. It is calculated as the ratio of the total income received by the 20% of the population with the highest income to that received by the 20% of the population with the lowest income (the bottom quintile). Based on the evolution of the S80/S20 index for disposable income, Fig. 6.26 shows that in Greece, the inequalities observed are more significant over time than the corresponding ones in the EU-27. Although from 2017 to 2019, this difference closed, from 2020 onwards, the inequalities observed in Greece are again greater than the corresponding ones in the EU-27, resulting in the two economies diverging again. At the same time, it should be noted that material and social deprivation for working people is much higher in Greece than in the EU-27 countries (almost three times the size). Of course, from 2018 onwards, a decrease in the said percentage is observed (Fig. 6.27).

7.00 6.00 5.00 4.00 3.00 2.00

European Union - 27 countries

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

0.00

2003

1.00

Greece

Fig. 6.26 Income quintile share ratio S80/S20 for disposable income (ratio) (Source Eurostat [ILC_DI11])

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35 30 25 20 15 10 5 0 2014

2015

2016

2017

European Union - 27 countries

2018

2019

2020

2021

Greece

Fig. 6.27 Material and social deprivation (percentage of employed persons 16 years or over) (Source Eurostat [ilc_mdsd01])

6.7 Health, Infant Mortality, and Healthcare Expenditure Another critical issue related to the inclusiveness of economies is the population’s health. As can be seen from Fig. 6.28, child mortality during childbirth has improved particularly significantly in recent decades in Greece. While in 1960, about 39.4 children died per 1000 births, in 2020, the corresponding Figure was only 3.6 children, following the general trend of high-income countries and even performing better. However, health expenditures are at considerably lower levels in Greece compared to the average of the EU-27 countries. This size decreased significantly in Greece during the crisis and after. In 2014 it remained relatively stable, showing small upward trends in the years 2019–2020, while in the rest of the EU-27, it has been increasing over time since 2014 (Fig. 6.29).

6

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70 60 50 40 30 20 10

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

0

Greece

High income

World

Fig. 6.28 Infant mortality, deaths per 1000 live births (Source World Bank)

3500 3000 2500 2000 1500 1000 500

European Union - 27 countries

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

0

Greece

Fig. 6.29 Healthcare expenditure (euro per inhabitant) (Source Eurostat [HLTH_SHA11_HF])

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References Petrakis, P. E., & Kostis, P. C. (2020). The evolution of the Greek economy: Past challenges and future approaches. Palgrave Macmillan, ISBN 978-3-03047209-2. Petrakis, P. E., Valsamis, D. G., & Kafka, K. I. (2020). Economic growth and development policy. Palgrave Macmillan, ISBN 978-3-030-43180-8.

CHAPTER 7

Cultural Change and Development and Growth

7.1

Introduction

The psychology of people changes in periods of crisis and change, and these periods particularly strongly characterize the modern reality around the world. The effects of such pressures on societies can be traced to social trends and attitudes for many years afterward (Kafka & Kostis, 2021). These changes can be parodic, but in many cases, they can be permanent with uncertain forms and manifestations. Crises and recoveries from them create traumas that accompany how decisions are made in the future (Petrakis & Kostis, 2020a). Greek society was particularly affected by the recessionary conditions that affected the economy during the last decade but also by the intense conditions of uncertainty, such as the 2008 debt crisis, political instability, the Covid-19 pandemic, and the energy crisis that exacerbated it. These conditions influenced and continue to influence not only the Greek social environment but also the political trends of the society and economic attitudes, shaping in this way the cultural evolution of Greek society. The chapter’s purpose is to present Greek society’s attitudes and behaviors. For this purpose, Sect. 7.2 presents how Greek society judges the current situation they are experiencing; Sect. 7.3 presents society’s expectations for the coming months. Section 7.4 presents the degree of trust © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_7

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in various institutions. Finally, in Sect. 7.5, two issues are presented: insecurity and the emergence of post-materialist tendencies in Greek society.

7.2

How Greeks Judge the Current Situation

An essential element related to the behaviors of society is what society judges to be the current situation in the environment in which it lives. Greek society presents the same picture in all three cases presented below regarding how it judges the current state of the country, the national economy, and the household. The attitude of Greeks toward the current state of the country, the national economy, and the household’s financial situation are significantly below the corresponding average of the EU-27 countries throughout the analysis. In the case of how the Greek society judges the situation in the country as a whole, a significant increase is observed from 2018 to 2020, at the same time as a symmetrical deterioration is observed for the EU-27 (Fig. 7.1). The result is that Greek society converges significantly toward the EU-27. However, in 2021 and 2022, it is observed that the indicator for Greek society worsens again. Figure 7.2 indicates how Greek society judges the situation in its national economy. Given that the Greek economy has not recovered to pre-crisis levels, the percentage of the population that considers the state of the Greek economy to be good is deficient. After 2018 and until 2021, there is a tendency to increase this index, to decrease again in 2022 due to the complications from the COVID-19 pandemic and the energy crisis. Regarding how Greek society judges the state of households, Fig. 7.3 is indicative. It is evident that from 2015 to 2022, there is a trend of convergence toward the EU-27 average, which remains relatively stable at a level close to 70%. As for the two most important problems facing the country at the moment, throughout time (from 2011 onwards), Greek society has been concerned with issues related to the economic situation, unemployment, and public debt. Also, there has been a significant increase in concern about immigration and health and social security issues in recent years. In 2020 and 2021, the issue of health as a problem is decisive. However, after 2021 three more essential issues appear; rising prices and inflation, energy supply, and the state of the international economy.

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Fig. 7.1 Judge the current situation in your country as good (% of the population) (Source Standard Eurobarometer. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”) 60 50 40 30 20 10

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Fig. 7.2 Judge the current situation in your national economy as good (% of the population) (Source Standard Eurobarometer. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”)

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Fig. 7.3 Judge the financial situation of your household as good (% of the population) (Source Standard Eurobarometer. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”)

Accordingly, in the EU-27, the issues of concern to individuals are much more evenly distributed. Of course, the main issue of concern is unemployment, followed by the economic situation and the level of inflation. At the same time, in recent years, there has been a significant increase in concern about immigration and health and social security issues, and in the last two years, the issues of rising prices, energy supply, and the state of the international economy (Fig. 7.4).

7.3 Expectations about the Next 12 Months in the Greek Economy A particularly critical issue that determines the behavior of members of society is that of expectations for the future. How expectations are formed is one of the leading “carriers” of cultural elements in economic behavior (Petrakis & Kostis, 2020a, b). The way expectations are formed is one of the most critical issues of the organization of economic theory itself, by extending the possibilities of interpreting and predicting reality and, by extension, the perspective of the organization of the exit from a crisis. It is this predictability that creates expectations. Moreover, expectations, in turn, lead to human action.

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Fig. 7.4 What do you think are the two most important issues facing (OUR COUNTRY) now? (Source Standard Eurobarometer)

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Thus, below is the development of expectations for the next 12 months for critical macroeconomic figures from the consumer side. Consumer expectations for the financial and economic situation in the next 12 months are much worse in Greece compared to the EU-27 during the 2020 pandemic, during the 2008 crisis, and in previous periods (Figs. 7.5 and 7.6). Indeed, a significant improvement in expectations was observed during the period from 2016 to 2020. However, since then and on the occasion of the COVID-19 pandemic and also the energy crisis in 2022, further deterioration of expectations has been observed. Correspondingly, the expectations of Greek consumers regarding the level of prices, the unemployment rate, and the expectation of large purchases and savings are also worse (Figs. 7.7 to 7.10). More specifically, regarding the level of prices for the next 12 months, expectations have been consistently above the EU-27 average up to 2010. Since then, expectations have been for lower prices in Greece, except for some periods in 2015 and 2016. In the case of Greek society, expectancies for unemployment in the next 12 months are also consistently higher than the corresponding ones in the EU-27 (Fig. 7.8). Impressive is the reduction in expectations for

BALANCE (% OF TOTAL ANSWERS)

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Fig. 7.5 Consumers surveys—financial situation over the next 12 months (Source Eurostat—Business and consumer survey)

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Fig. 7.7 Price trends over the next 12 months (Source Eurostat—Business and consumer survey)

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high unemployment in Greece from 2017 to 2020, a trend that was sharply reversed after the emergence of the COVID-19 pandemic. Regarding society’s expectations to make large purchases in the next 12 months, Greeks’ expectations are consistently negative and lower than the EU-27 average (Fig. 7.9). Positive exceptions are the years 2000 and 2003, but more generally, the period from 1996 to 2004 when expectations range above the EU-27 average. After 2013 and 2019, a significant convergence with the EU-27 was observed, which was disrupted again due to the pandemic and the energy crisis. Finally, regarding savings expectations for the next 12 months, Fig. 7.10 indicates that the expectations for Greek society are significantly lower than those of the EU-27 for the entire period from 1985 to the present. In fact, during the financial crisis of 2008, this difference widened significantly, and expectations remained significantly negative for Greece, while in the EU-27, they became positive for 2020 and 2021.

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Fig. 7.8 Unemployment expectations over the next 12 months (Source Eurostat—Business and consumer survey)

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7.4 The Low Institutional Trust in the Greek Society Trust in various institutions ranges at considerably lower levels in Greece compared to the EU-27 average. This is something that started to happen after 2011, as until then, the development in Greece and EU-27 was similar. Thus, in Greece, trust in institutions such as political parties, the National Government, the National Parliament, and the European Commission is lower than in the EU-27. Figure 7.11 presents trust in political parties. The advent and management of the financial crisis by the political parties and the fiscal adjustment programs are the main reason why the image of trust between Greece and the EU-27, which until then were in harmony, is changing significantly. At the same time, political instability set back the convergence efforts of the 2013–2017 period. From 2018 to 2021, Greece’s trust in political parties started to improve again. Trust in the National Government in Greece is observed to have several fluctuations from 2003 to today, also a consequence of the intense political instability that prevails (Fig. 7.12). Greece generally moves below the European average, except for 2015. The trust of Greek society almost reached the EU-27 average in 2020 but again moved away from it in the 30 25 20 15 10 5 Nov-03 Oct-04 Jun-05 Oct-05 Apr-06 Sep-06 Oct-07 Apr-08 Oct-08 Jun-09 Nov-09 Jun-10 Nov-11 May-12 Nov-12 May-13 Nov-13 Jun-14 Nov-14 May-15 Spring 2016 Autumn 2016 Spring 2017 Autumn 2017 Spring 2018 Autumn 2018 Spring 2019 Autumn 2019 Spring 2020 Winter 2021 Summer 2022

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Fig. 7.11 Trust in political parties (% of the population that tends to trust) (Source Standard Eurobarometer)

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Nov-03 Oct-04 Jun-05 Oct-05 Apr-06 Sep-06 May-07 Oct-07 Apr-08 Oct-08 Jun-09 Nov-09 Jun-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 Jun-14 Nov-14 May-15 Spring 2016 Autumn 2016 Spring 2017 Autumn 2017 Spring 2018 Autumn 2018 Spring 2019 Autumn 2019 Spring 2020 Winter 2021 Summer 2022

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years 2021 and 2022. Correspondingly, trust in the National Government is also the development regarding trust in the National Parliament (Fig. 7.13). 60

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Fig. 7.13 Trust in national parliament (% of the population that tends to trust) (Source Standard Eurobarometer)

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Trust in European institutions, such as the European Commission, was particularly shaken after the first fiscal adjustment program and has since remained considerably lower than the EU-27 average (Fig. 7.14). On the contrary, before the emergence of the crisis, the trust of the Greek economy in the institution of the European Commission was much higher than that of the EU-27. Thus, during the period of economic prosperity, the pro-European trend in Greek society was significantly stimulated, but the recession that accompanied the debt crisis created much more intense Euroscepticism. This image does not apply to Greek society’s trust in the euro. Except for 2010, the trust shown by Greek society in the euro fluctuates at higher levels than the corresponding average of the EU-27 countries (Fig. 7.15).

7.5

Insecurity Hypothesis and Post-Materialism

The theory of “economic insecurity” emphasizes the consequences of profound changes transforming the workforce and society in postindustrial economies (Inglehart, 1997). Socioeconomic development directly affects people’s sense of existential security, determining whether physical survival seems uncertain or can be taken for granted. Modernization changes the prevailing sense of existential security, and increasing 80 70 60 50 40 30 20 10 0

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Fig. 7.14 Trust in the European commission (% of the population that tends to trust) (Source Standard Eurobarometer)

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Fig. 7.15 What is your opinion on EMU with one single currency, the euro (% of the population that answer “for”) (Source Standard Eurobarometer)

levels of existential security allow people to become more open to strangers and new ideas. There are two dimensions of insecurity: economic and existential (Immerzeel & Tubergen, 2013). Another distinction is between past and present insecurities. Norris and Inglehart (2004) stress that religious values are acquired early in life, during childhood, as part of the socialization process. Petrakis et al. (2021) seek to examine a series of attitudes in Greek society that can be signs of insecurity but also signs of a transition toward a more post-materialistic society. Thus, as they note, for Greek society, the evolution of health seems to be stable over time, with a slight improvement in 2008. However, then it slightly deteriorated to increase again in 2019 but decreased again after the onset of the pandemic of COVID-19. Another attitude of society concerns how likely members of society think a terrorist attack will occur. While in 2008, 17% of the population thought it was very likely that a terrorist attack would occur in Greece and 50.6% that it was likely, the corresponding picture in 2019 and 2020 has been reversed. In 2020, only 3.4% of the population thought that it was very likely that a terrorist attack would happen in Greece and 14.8% that it was likely. Additionally, the degree of satisfaction with the economy depends on economic developments and prevailing conditions. During the financial

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crisis that broke out in 2008, the lowest degree of satisfaction with the economy is observed. In 2019 the degree of satisfaction is higher than that of 2002 and 2004, perhaps because Greeks appear satisfied with the recovery of the period 2017–2019 after eight recessionary years. For 2020 the degree of satisfaction is slightly lower than in 2019, while we would expect a much lower degree of satisfaction due to the onset of the pandemic and the lockdowns. The reason is that the research of Petrakis et al. (2021) was conducted shortly before the emergence of the second wave of the pandemic. Thus Greeks still expressed satisfaction not expecting the second wave and the upcoming second global lockdown of the economy in the fourth quarter of 2020. Moreover, during the last decades, developments have been observed—mainly in the developed economies of the Western world— which led to a gradual change in the cultural background of these societies from traditional to post-materialistic values. It is a “silent revolution” of social behaviors (Inglehart, 1990; Norris & Inglehart, 2019) and is based on developments such as generational replacement, increased access to higher education, urbanization, increasing gender equality, and an increase in national diversity. This development has also been observed in Greek society in recent decades, up to and including the appearance of the 2008 crisis. The last decade has seen an increase in those who agree that gay men and women should be free to live as they choose, and this percentage increased from 2002 to 2008 and from 2010 to 2019. It is also observed that Greek society slightly reduces the degree of agreement with the above proposition during crises, notably higher at younger ages. Additionally, it is a rate that is considerably higher in urban centers (58.2% vs. 45% in rural areas), for graduates of higher education (65% vs. 31.7% for graduates of basic education), for those who position themselves politically on the left (71.3% vs. 37.8% for right-wing political self-positioning) and for higher income brackets (64.6% for people with a monthly income of more than 1500 euros and 49% for people with a monthly income of fewer than 1000 euros). Also, most of the population considers that cultural life is degraded due to the presence of immigrants. This is an attitude that worsened in the period from 2004 to 2010 (as the average score fell from 3.8 to 3.2) while it changed slightly from 2010 to 2019 and 2020 (the average score increased from 3.2 to 3.5).

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At the same time, since 2017, the percentages of sentences showing a negative attitude toward immigrants (increased crime and unemployment) and those showing a positive attitude toward immigrants have decreased.

References Immerzeel, T., & Tubergen, F. (2013). Religion as reassurance? Testing the insecurity theory in 26 European countries. European Sociological Review, 29(2), 359–372. Inglehart, R. (1990). Culture shift in advanced industrial society. Princeton University Press. Inglehart, R. (1997). Modernization and postmodernization: Cultural, economic, and political change in 43 societies. Princeton University Press. Kafka, K. I., & Kostis, P. C. (2021). Post-materialism and economic growth: Cultural backlash, 1981–2019. Journal of Comparative Economics, 49(4), 901–917. https://doi.org/10.1016/j.jce.2021.04.001 Norris, P., & Inglehart, R. (2004). Sacred and secular: Religion and politics worldwide. Cambridge University Press. Norris, P., & Inglehart, R. (2019). Cultural backlash: Trump, Brexit, and authoritarian populism. Cambridge University Press. https://doi.org/10.1017/978 1108595841 Petrakis P. E., Kafka K. I., Kostis P. C., & Valsamis, D. G. (2021). Greek culture after the financial crisis and the COVID-19 crisis: An economic analysis. Palgrave Macmillan, ISBN 978–3–030–81017–7. Petrakis P. E., & Kostis, P. C. (2020a). The evolution of the Greek economy: Past challenges and future approaches. Palgrave Macmillan, ISBN 978–3–030– 47209–2. Petrakis, P. E., & Kostis, P. C. (2020b). Policies for a stronger Greek economy: Actions for the next decade. Palgrave Macmillan, ISBN 978–3–030–47078–4.

CHAPTER 8

The Dynamism of the Economy

8.1

Introduction

The economic reality in Greece appears as the “image” of a peculiar production model, which should be judged more as the result of an evolutionary process over the years. This chapter describes the evolution of crucial figures for the Greek economy and, through this analysis, captures a clear picture of how the Greek economy has been led to the state it was in at the end of 2022. The purpose is to highlight the dynamism of the economy so that to be able to clarify the need for structural changes so that the economy not only creates more jobs but also creates more opportunities for members of society, with the focus being on people and the exploitation of the advantages of the economy. The structure of the chapter is as follows: First, Sect. 8.2 presents the issue of the output gap for the economy. The second Sect. (8.3) presents the external sector of the economy, followed by the third Sect. (8.4) with the evolution of consumption, the fourth Sect. (8.5) with the evolution of investments, and the fifth Sect (8.6) with the evolution of savings. Then (Sect. 8.7), the picture of the real estate market is presented, but also of the production of the manufacturing sector

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_8

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(Sect. 8.8). In addition, the situation in public finances and public debt is described (Sect. 8.9). Finally, the question of the economy’s productivity is presented (Sect. 8.10).

8.2

The Output Gap of the Greek Economy

One of the critical questions that concern economies is whether the utilization of production factors is fully efficient or not (Petrakis & Kostis, 2020). In other words, if the output produced (GDP) is above or below the potential product (potential GDP). The difference between an economy’s actual and potential output is its output gap. A negative output gap means that actual output is below the economy’s full potential for production, and a positive output gap is the opposite, meaning that the economy is producing above the long-run average output or producing to satisfy the demand of other economies as well. As far as the Greek economy is concerned, from 1980 to the present, the productive gap takes negative values in most years. Exceptions are 1980, 1989 to 1992, 1998, and 2003 to 2010, when the production gap received positive values. Of course, the recent global financial crisis highlighted the Greek economy’s structural weaknesses, resulting in the production gap falling to significantly negative values and has remained there. 8 6 4 2 0 -2 -4 -6 -8 -10

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Fig. 8.1 Output gap as a percentage of potential output (%) (Source Editing data from the Global Economic Model of Oxford Economics)

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Furthermore, efforts to close the production gap were faced with the crisis of the COVID-19 pandemic. Thus, the production gap between the Greek and European economies appears particularly harmful in 2020 (Fig. 8.1).

8.3 The External Sector: Exports, Imports, and Current Account Balance The performance of the Greek economy regarding its relations with other economies in terms of trade is not characterized by maximum efficiency. Exports of goods and services in the Greek economy are consistently lower than those of the EU-27, with no convergence trend observed between the two cases (Fig. 8.2). As shown in the Figure below, in terms of imports of goods and services, while in 2000 and 2001 they were at a similar level as a percentage of GDP for Greece and the Eurozone, since then the evolution of the size has diverged for the two economies (Fig. 8.3). Also, the large reduction in the size of imports due to the debt crisis is evident, as is the effect of the great instability of 2015 on the Greek economy, but also the effects of the COVID-19 pandemic, which appear to be greater for the Eurozone than for Greece. 0.6 0.5 0.4 0.3 0.2 0.1

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Fig. 8.2 Exports of goods and services (% GDP) (Source Editing data from the Global Economic Model of Oxford Economics)

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0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05

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Fig. 8.4 Current account balance of payments (share of GDP) (Source Editing data from the Global Economic Model of Oxford Economics)

The current account balance in Greece is expected to remain in deficit until 2050. Despite the improvement noted from 2008 to 2015, the deficit has been managed annually until 2022 (Fig. 8.4).

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The Neuralgic Role of Consumption

The rate of change in private and public consumption is generally positive for the Greek economy except for some specific periods of economic turmoil. The culmination of such periods is the first years of the debt crisis of 2010 and the year 2020 when the crisis of the COVID-19 pandemic appeared. Thus, the rate of change in private and public consumption has been consistently positive for the Greek economy; however, after 2008, significant adverse changes appeared, which are considerably larger both in size and time period compared to the corresponding change in the Eurozone. Of course, after 2013, a significant recovery effort was observed, and consumption was significantly stimulated again until the outbreak of the COVID-19 pandemic (Figs. 8.5 and 8.6). Indicative of how consumption in the Greek economy was affected by the debt crisis of 2008 is the development of motor vehicle sales at the domestic level and the production of durable consumer goods (Fig. 8.7). From 2009 to the first quarter of 2013, there was a significant decrease in both figures, while since then, there has been a significant recovery, except for the year 2020 and from the third quarter of 2021 to the first quarter of 2022 with the outbreak of the energy crisis.

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Fig. 8.5 Private consumption annual rate of change (%) (Source Editing data from the Global Economic Model of Oxford Economics)

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Fig. 8.7 Domestic motor vehicle sales (2005 = 100) (Source Bank of Greece (Bulleting of Conjunctural Indicators)

8.5

Private vs. Public Investments and the FDIs

Like consumption, investments fluctuate over time at positive levels for the Greek economy. From the change in investment in Greece and the Eurozone (Fig. 8.8), it is evident the much greater fluctuations that the change in investment in Greece presents, as well as the fact that especially

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during the period from 1995 to 2007, there were many periods when the investment growth was much higher in Greece. At the same time, the much greater reduction of investments in Greece after the outbreak of the crisis in 2008 and also in 2020 can be seen. The picture for private investments (Fig. 8.9) is similar. The Eurozone shows relative stability, except for 2008, 2013, and 2020 when a decrease was observed due to the debt crisis and the crisis of the COVID-19 pandemic. On the other hand, in Greece, the reduction observed during the debt crisis was particularly prolonged (from 2008 to 2015, except for some quarters of 2010). The difference concerning total investments is that for the Greek economy, a significant rise in private investments is expected only for 2022. Since then, stabilization at low levels but positively close to the positive rate of change expected for the entire Eurozone. Based on the evolution of the capital goods production index in the Greek economy, it is observed that until 2013 the production of capital goods steadily decreased, while from the end of 2013 until today, their production has recovered significantly (Fig. 8.10). Foreign Direct Investments (FDI) fluctuated at very high levels during the 80s but with decreasing trends until the 2000s when they were almost 30 20 10 0 -10 -20

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Fig. 8.8 Total investments rate of change (%) (Source Editing data from the Global Economic Model of Oxford Economics)

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zero. Since then, some recovery efforts have been observed, but the general trend is toward a low development of FDI. After a steady upward trend from 2010 onwards, they are expected to decrease as a percentage of GDP in Greece until 2023 (Fig. 8.11).

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8.6

The Unsatisfactory Return of Savings

Deposits and repos in the Greek economy show continuous growth until 2009, while the effects of the 2008 crisis are evident as since then, the size of deposits and repos has been continuously decreasing. A return of deposits is observed from 2020 onwards, where deposits and repos reached the level they fluctuated in 2012–2014 (Fig. 8.12). A significant return of deposits is still needed to reach the level they were in 2007. Non-financial corporations significantly increased their deposits from 2008 until April 2009, and from then until 2015, they returned to the low level of the 2000s. However, the recovery after 2016 was significant, reaching a relatively high level in March 2021 (Fig. 8.13). Figure 8.14 isolates the evolution of household deposits. There was a significant decrease in deposits from 2001 to 2003 and then a gradual increase until 2010. The crisis led to a further decrease in household deposits until 2015 and a gradual increase.

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8.7

The Troubled Housing Market

After a continuous increase in housing prices in urban areas, in Greece, from 1997 to 2008, the outbreak of the crisis mainly affected the real estate market, resulting in a significant decrease in the house price index (Fig. 8.15). Signs of recovery started to be seen from 2019 onwards. It is noteworthy that from 1997 to 2012, real estate prices in Greece showed a more significant increase than those in the Eurozone. Correspondingly, in the Eurozone, the upward trend in real estate prices stopped in 2008 without a price reduction but stabilization. From 2015 onwards, prices continued their upward trend. Greece’s real estate price index was already higher than the corresponding index in the Eurozone since 1990, and this difference widened until 2007 and decreased significantly from 2008 to 2019.

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8.8

PMI and Production in Manufacturing

The manufacturing PMI for the Greek economy is consistently at a lower level than the Eurozone counterpart. Exceptions are some months in 2013 and the period 2018–2019 when the opposite happens. Prices below 50 are a harbinger of bad prospects for the next six months or so, and conversely, prices above 50 are a harbinger of good prospects. From the beginning of the crisis until 2022, the periods when the Greek PMI index in manufacturing had values above 50 are only some months of 2013 and the period from the end of 2017 until the beginning of 2020. During the energy crisis, the PMI values, until the summer of 2022, show a deterioration in the manufacturing sector’s health in both Greece and the Eurozone (Fig. 8.16). More specifically, the Purchasing Managers’ Index for the manufacturing sector in Greece (Purchasing Managers’ Index—PMI) closed at 48.8 units in August 2022, a value lower than 49.1 units in June, indicating a further deterioration in the health of the Greek manufacturing sector. This is the fastest deterioration in the health of the Greek manufacturing sector since December 2020. This deterioration appears to be due to the sharp reduction in production and weak demand that characterizes the manufacturing sector, especially during August. As a result of weaker

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demand, the sector’s headcount fell for the first time since December 2020. At the same time, customer purchasing power weakened at the second-fastest pace in 18 months due to substantial price increases and energy costs. The corresponding index for the Eurozone fell to 49.6 points from 49.8 points in the previous month (this is the fourth consecutive month of worsening of the index). This is the second month in a row that the index has fallen below 50 points, highlighting the worsening conditions in the manufacturing sector for just over two years. So output fell at a similar pace to July, which was the strongest since May 2020, while new orders fell sharply again. Concerning manufacturing, a significant decline was observed from 2008 to 2012, and this is supported by the evolution of electricity production (Fig. 8.17) and cement production (Fig. 8.18). Of course, electricity production has shown an upward trend since 2013, but not cement production, which has remained relatively stable after the decline mentioned above.

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8.9 Public Deficits, Debt, Revenues, and Expenditures in the Greek economy The government balance in Greece is chronically in deficit, except for the period from 2016 to 2019. The government balance deficit widened sharply in the crisis years and 2020, while after 2028, it is expected to stabilize close to −1.6% (Fig. 8.19). Chronic deficits are observed in the Eurozone and are much more limited than those of the Greek economy. The picture is different concerning the primary balance, which was in surplus from 1990 to 2001 for the Greek economy, but has since turned negative and deteriorated significantly during the debt crisis. The primary balance recovered after 2017 for the Greek economy until the onset of the COVID-19 pandemic. Accordingly, in the case of the Eurozone, the primary balance became negative for a much shorter period (from 2009 to 2014) but also with a much smaller depth of deficit. Thus, the primary balance in the case of Greece shows much more significant fluctuations compared to the Eurozone (Fig. 8.20). As far as the public debt is concerned, its course for the Greek economy is remarkable. The debt of the General Government has been increasing over time and steadily from 1980 to the present, with a unique moment of reduction in 2012 when the PSI was implemented but also some efforts in 2015 and 2017. The comparison of the debt of the General Government as a percentage of the GDP between Greece and the Eurozone is indicative

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of the significant rise of public debt in the Greek economy since, after the outbreak of the debt crisis of 2008, the increase in public debt is much greater for the Greek economy, while for the Eurozone economy it remains below 100% of GDP (Fig. 8.21). Regarding government revenues and government expenditures, after their particularly important role in the economy in the 80s, they returned to levels close to (government expenditures) and below (government

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revenues) the corresponding figures for the entire Eurozone from the beginning of 1990 until the beginning of the crisis of 2008. Since then, due to the implementation of the fiscal adjustment programs, their role in the Greek economy has been significantly strengthened (Figs. 8.22 and 8.23).

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60 50 40 30 20 10 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

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8.10

Labor Productivity Growth

Until the beginning of the debt crisis, labor productivity developed in Greece at the same rate as in the Eurozone. However, the GDP per working hour fluctuated at lower levels than the OECD countries’ average. However, the debt crisis significantly changed this pace for the Greek economy. Labor productivity decreased and stabilized at a reasonably low level, in contrast to the Eurozone, which continued its upward trend (Fig. 8.24).

Reference Petrakis P. E., & Kostis, P. C. (2020). Policies for a stronger Greek economy: Actions for the next decade. Palgrave Macmillan, ISBN 978–3–030–47078–4.

PART III

Alternative Futures for Greece: The Five Scenarios Under the Five Pillars of Economic Development

After the presentation made in Part II about how the Greek economy has evolved to date in the five development pillars adopted in this book (sustainable development, sustainable governance, inclusive growth, behaviors that promote economic development and growth, and a dynamic economy for the economic development and growth), this part presents the five scenarios presented in Part I for the Greek economy until 2035. As presented in Part I, the implementation of the scenarios was carried out using the Global Economic Model of Oxford Economics, based on the assumptions presented and related to the economic climate and geopolitical developments. Most of the variables, the evolution of which until 2035 in the five scenarios is presented in the chapters of this part, are offered by the said model. For the variables presented and not included in the Global Economic Model, firstly, the historical average of the annual change of each variable is calculated (based on the availability of data that characterizes each variable), and then the average of these annual changes in order to obtain the trend line. This trend outlines the evolution of the Basic Scenario until 2035 for the respective variable. Then, using the Global Economic Model, the evolution of the real GDP and/or the evolution of the price level of the Greek economy is observed from 2022 to 2035 for the basic scenario, and it is calculated how the other four scenarios are related to this evolution up to in 2035. Then, using this calculation and the evolution of the basic scenario calculated using

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the historical average annual change, an estimate is made of how the remaining four scenarios are expected to evolve. It should be noted that the Basic Scenario presented in this part is the Growth Version I Scenario and not the Growth Version II Scenario which is exclusively based on the economy’s investments. At the same time, the medium- and long-term evolution of the variables presented in this part has not been carried out again in the past for the case of the Greek economy in the relevant literature. In addition, the methodology followed for the evolution until 2035 in the five scenarios for the variables not derived from the Global Economic Model of Oxford Economics is characterized by weaknesses related to the two main assumptions accompanying these estimates. The first hypothesis concerns the path-dependence analysis regarding the evolution of each variable until 2035. The other hypothesis is that the expected evolution of real GDP and/or the level of prices in the economy in the five scenarios is strongly related to the variables that the Global Economic Model does not monitor. We calculated the correlations between those variables and the real GDP, and these are really high and positive in most cases (above 0.5). However, these weaknesses are significant. From a theoretical perspective, one would want to use something other than real GDP per se as a comprehensive measure of aggregate economic well-being or government effectiveness. Those concepts have significant conceptual differences (Dynan & Sheiner, 2018). However, they are the best possible approach based on the available information we currently have regarding the future of these variables and offer the possibility for a foresight analysis regarding the future of the Greek economy. Because the formation of alternative futures aims at preparing the present and not at predicting the future, the exercise we do for future scenarios has a particular social utility. Because the formation of alternative futures aims to prepare the present and not predict the future, the exercise we do for future scenarios for the Greek economy has a particular social utility.

References Dynan K., Sheiner L. (2018). GDP as a Measure of Economic Well-being, Hutchins Center Working Paper 43.

CHAPTER 9

Alternative Economic Futures and Sustainable Development

9.1

introduction

Sustainable development for the future describes a world in which policy takes an integrated approach to economic, social, and environmental goals and significant institutional changes occur. The overall goal of development is to meet the needs of the present without compromising the ability of future generations to meet their own needs. This situation heralds new economic structures, a different allocation of capital and investment between the public and private sectors, and the cooperative management of common resources at global and national levels. In other words, it is a world where a decent quality of life is ensured for all people. Of course, how the conditions for sustainable development at the global level will develop cannot be accurately predicted. The same is, of course, true for the case of the Greek economy. As a continuation of Chapter 7, which described how the Greek economy has developed up to today in issues related to sustainable development, this chapter aims to present the basic scenario in contrast to the four other scenarios (growth, unsustainable, transformation, and falldown scenario) regarding issues of sustainable development in Greek society and economy until 2035. The structure of the chapter is as follows: First, in Sect. 9.2, the trends related to population dynamics are presented, and the problem of aging © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_9

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that Greek society is expected to face in the coming years and which poses obstacles to the process of sustainable development is described. Section 9.3 presents how the critical issue of environmental protection is expected to develop in the various scenarios, and in Sect. 9.4, the critical issue of using renewable energy sources, which is one of the determining factors of the path toward a more sustainable development path.

9.2 Population Dynamics: The Aging Problem in the Future As with many economic and other phenomena, scholars make projections and try to predict the future based on the trends observed in the present. So do demographers today: they show continued population growth (but with a steady decline in the annual growth rate), with the world population reaching about 8 billion in 2023, 8.5 billion in 2030, and 10.4 billion in 2100, as the mortality rate slows (UN, 2022). Which projections for the population’s possible developments will be verified? We will know in a few decades. It is, however, evident that spectacular developments (such as a third world war, an uncontrollable pandemic, or massive environmental disasters) will decisively affect the height of the world population. However, such unpredictable developments are more suggestive of “chaos theory”, which studies “discontinuities” instead of projections based on continuous, smooth, albeit at varying rates, processes. However, what will happen to the world population largely depends on developments in the most populous countries on the planet. At the same time, population developments are closely related to economic developments and the broader prevailing conditions of societies and economies (Cervellati & Sunde, 2005; Maddison, 2013). Factors that influence the way the population develops are, among others, the rate of economic growth, social stability and cohesion, the cost of education, the participation of women in the labor market, social norms and cultural values around the size of families, net immigration, the quality of health care but also government policies and incentives or barriers around fertility. Economic (Smith & Haddad, 2002; Vollmer et al., 2014), technological (Kremer, 1993; Leukhina & Turnovsky, 2016), and social (Richerson et al., 2009; Shennan, 2001) developments play a crucial role. Thus, in the case of Greek society, how the population will evolve depends on factors such as the above. Consequently, the five scenarios

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under analysis indicate various projections of how we would expect the Greek population to evolve. The population in the country (Fig. 9.1) based on the Basic scenario seems to follow a downward path from 2023 onwards. A similar course seems to be followed with the Transformation, Unsustainable and Falldown scenarios, with the latter registering the most remarkable downward trend. At the opposite end is the Growth scenario in which the population appears to be on an upward trajectory, with a population for the country closing to 11 million by 2035. Figure 9.2 presents the evolution of the population over 65 years of age and is indicative of the aging problem. Confirming the issue of population aging, in all scenarios, the country’s population over 65 is expected to increase significantly. The Growth scenario in 2035 estimates the population over 65 years at 3.3 million, with the Transformation scenario recording the next highest population in this age group (3 million). In the Falldown scenario, the corresponding population is recorded at 2.6 million, while in the Basic scenario at 2.8 million.

11500.0 11000.0 10500.0 10000.0 9500.0 9000.0 8500.0 8000.0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 9.1 Population (2020–2035) (millions) (Source Editing data from the Global Economic Model of Oxford Economics)

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Fig. 9.2 Population 65+ (2020–2035) (millions) (Source Editing data from the Global Economic Model of Oxford Economics)

9.3

Environmental Issues as a Cornerstone

If global society continues to rely on fossil fuels to the extent it does today, then atmospheric concentrations of carbon dioxide (CO2 ) are expected to double by about 2050 and triple by about 2100 (Australian Academy of Science, 2015). This, combined with increases in other greenhouse gasses, is expected to increase global warming by around 4.5 °C by 2100. A low-emissions direction based on a rapid shift away from fossil fuel use in the coming decades would significantly limit the consequences for the following years (IPCC, 2022) and lead to more sustainable development. In the case of Greece, significant progress has been made in recent years regarding the emissions of hazardous gasses into the atmosphere (see Chapter 4). As a result, carbon dioxide emissions (Fig. 9.3) show a downward trend from 2023 onwards based on all five scenarios. Lower carbon dioxide emissions are noted in the Falldown scenario, where from 2025 onwards, the scenario softens even more than the remaining four. This is a development that is, of course, also related to the lower levels of production in the economy. In 2023–2035, 32.8 tones million of carbon dioxide emissions are recorded with the Basic and Unsustainable scenarios and slightly higher (35.6 and 40 tonnes million, respectively). On the

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Fig. 9.4 Carbon emissions (2020–2035) (tones millions) (Source Editing data from the Global Economic Model of Oxford Economics)

contrary, in the Growth scenario, 38.8 tones, millions are recorded in 2035.

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The same picture is found regarding Carbon emissions (Fig. 9.4). Lower carbon emissions are noted in the Falldown scenario (9 tonnes million) in 2035. The Basic and Unsustainable scenarios are slightly higher, and it follows the Transformation scenario where carbon emissions in tons and millions reach 10.1. The Growth scenario recorded the highest emissions (10.6 tonnes million) in 2035.

9.4 Renewable Energy Sources are the Key to Sustainable Development Modern economies are looking for methods to ensure a sustainable healthy environment (Akbar et al., 2020; Chaabouni & Saidi, 2017). For this purpose, the more critical use of renewable energy sources is deemed necessary to offset the rate of climate change (Apergis & Payne, 2010; Jebli et al., 2016). Gielen et al. (2019) point out that by the end of 2050, renewable energy sources and energy efficiency technologies will be the leading indicators for tracking economies. Additionally, as noted in the International Energy Outlook of the US Energy Information Administration (EIA, 2019), global energy consumption is expected to increase by almost 50% between 2018 and 2050. Most of this increase will come from non-OECD countries and is concentrated in regions where solid economic growth drives energy consumption, particularly in Asia. Figure 9.5 presents the household energy consumption for the case of the Greek economy for the five scenarios. From 2023 to 2027, a decrease in household energy consumption is recorded in all scenarios. From 2027 onwards, an increase is observed, with the Growth scenario again recording the highest values for this consumption. An exception is the Falldown scenario, where household energy consumption continues to decline even after 2027. Regarding the industry energy consumption until 2035, based on the five scenarios (Fig. 9.6), a downward trend is observed. The Growth, Transformation, and Unsustainable scenarios follow this path until 2031, when consumption appears to increase temporarily, only to return to the same downward path a year later. Falldown and Basic follow a downward course, with the former recording a noticeable reduction in industrial energy consumption until 2023. Figures 9.7 and 9.8 present the renewable electricity output and the total electricity output from renewable sources, respectively, and record

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50000 49000 48000 47000 46000 45000 44000 43000 42000 41000 40000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 9.6 Industry energy consumption (2020–2035) (GWh) (Source Editing data from the Global Economic Model of Oxford Economics)

their upward trend until 2035. They indicate the shift that has already taken place in the last years in the Greek economy toward renewable energy sources. In both cases, a convergence of the scenarios is

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Fig. 9.8 Total electricity output from renewable sources (GWh) (Source Editing data from the Global Economic Model of Oxford Economics)

observed from 2023 to 2026, except for the Falldown scenario. From 2027 onwards, the scenarios diverge with the Growth scenario again, recording the highest values in renewable electricity output (63.5%) and

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total electricity output from renewable sources. In the Falldown scenario, the lowest renewable electricity output values (54%) and total electricity output from renewable sources are recorded for 2035. The Basic and the Unsustainable scenario follow an identical upward path in both variables until 2035 between the extreme scenarios (Growth and Falldown).

References Akbar, M., Hussain, A., Akbar, A., & Ullah, I. (2020). The dynamic association between healthcare spending, CO 2 emissions, and human development index in OECD countries: Evidence from panel VAR model. Environment Development Sustainability, 23(7), 10470–10489. https://doi.org/10.1007/ s10668-020-01066-5 Apergis, N., & Payne, J. E. (2010). Renewable energy consumption and growth in Eurasia. Energy Economics, 32(6), 1392–1397. https://doi.org/10.1016/ j.eneco.2010.06.001 Australian Academy of Science. (2015). The science of climate change. Questions and Answers. Cervellati, M., & Sunde, U. (2005). Human capital formation, life expectancy, and the process of development. American Economic Review, 95(5), 1653– 1672. Chaabouni, S., & Saidi, K. (2017). The dynamic links between carbon dioxide (CO2) emissions, health spending and GDP growth: A case study for 51 countries. Environmental Research, 158, 137–144. https://doi.org/10. 1016/j.envres.2017.05.041 EIA. (2019). International energy outlook—US energy information administration. Gielen, D., Boshell, F., Saygin, D., Bazilian, M. D., Wagner, N., & Gorini, R. (2019). The role of renewable energy in the global energy transformation. Energy Strategy Reviews, 24, 38–50. https://doi.org/10.1016/j.esr. 2019.01.006 IPCC. (2022). The working group III contribution, climate change 2022: Mitigation of climate change was released on 4 April 2022. Jebli Ben, M., Ben Youssef, S., & Ozturk, I. (2016). Testing environmental kuznets curve hypothesis: The role of renewable and non-renewable energy consumption and trade in OECD countries. Ecological Indicators, 60, 824– 831. https://doi.org/10.1016/j.ecolind.2015.08.031 Kremer, M. (1993). Population growth and technological change: One million BC to 1990. The Quarterly Journal of Economics, 108, 681–716.

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Leukhina, O., & Turnovsky. S. (2016). “Push, pull, and population size effects in structural development.” Journal of Demographic Economics, 82(4), pp. 423– 457. Maddison, A. (2013). The maddison-project, http://www.ggdc.net/maddison/ maddison-project/home.htm, 2013 version. Richerson, P. J., Boyd, R., Bettinger, R. L. (2009). Cultural innovations and demographic change. Human Biology, 81, 211–235. Shennan, S. J. (2001). Demography and cultural innovation: A model and some implications for the emergence of modern human culture. Cambridge Archaeological Journal, 11, 5–16. Smith, L. C., & Haddad, L. (2002). How potent is economic growth in reducing undernutrition? What are the pathways of impact? New crosscountry evidence. Economic Development and Cultural Change, 51, 55–76. UN. (2022). World population prospects 2022. Vollmer, S., Harttgen, K., & Subramanyam, M. A., et al. (2014). Association between economic growth and early childhood undernutrition: Evidence from 121 demographic and health surveys from 36 low-income and middle-income countries. The Lancet Global Health, 2, 225–234.

CHAPTER 10

Sustainable Governance and Alternative Economic Futures

10.1

Introduction

Globally, economies are facing the consequences of three different forms of crisis: the crisis of the COVID-19 pandemic, the economic and fiscal crises (see Chapter 3), and the environmental crisis that has prompted climate change with the potentially existential threat to the planet. With this wave of uncertainty shocks experienced by economies around the world, some to a lesser extent and others to a greater extent, it is clear that the world is now at a turning point. It is still being determined whether the world will eventually be able to recover or whether the current situation will manage to perpetuate itself (World Bank, 2022). This chapter presents five possible scenarios for how the future of the Greek economy will evolve until 2035. The structure of the chapter is as follows: Part 10.2 presents the predicted course of the Greek economy’s performance in global governance indicators of the World Bank until 2035. In Part 10.3, the corresponding situation for the corruption index of the Greek economy is described, and in Part 10.4, the estimated evolution regarding economic freedom.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_10

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10.2

The Future of the Greek Governance Indicators

Future governance could be characterized by sustainability if governance is carried out in a way that has a clear vision of its role, responds to citizens’ demands, can influence, and deliver to society, and is reliable, productive, and resilient to coping with future disruptions associated with uncertain situations (UNDP, 2014). The role of governance is decisive, whatever the future development (World Bank, 2022). If the economies manage to recover, this will be due to a significant extent to the progress they will have made in terms of their governance and, more specifically, if they will have managed to ensure security in terms of their livelihood, that prosperity will be shared among all members of society, that poverty will be reduced, that the planet’s natural resources are used sustainably, and that global warming will have begun to be reversed (FMG, 2021). If they fail to do so, a significant share of responsibility will lie with the governance of economies that have failed to lead to crisis management in a future characterized by increased uncertainty, inequality, poverty, and suffering exacerbated by global health challenges, climate change, and economic, political, and geostrategic conflicts. Figure 10.1 presents Greece’s evolution of the Voice and Accountability index for the five scenarios from 2020 to 2035. Based on all scenarios except Falldown, it follows a steady upward trend until 2035. In the Basic scenario, although the Voice and Accountability of society follows an upward trend, it lags behind the other scenarios significantly from 2023 onwards. In the Falldown scenario, the Voice and Accountability of society decrease over time from 2023 onwards, which means that if this scenario prevails, the degree to which citizens participate in the process of choosing the government and the degree of freedom of expression of association and the press will be at its lowest level in 2035. Figure 10.2 presents the evolution of Greece’s Political Stability and Absence of Violence/Terrorism index for the five scenarios from 2020 to 2035. From 2023 onwards, all scenarios follow a downward path in this index. Exceptions are the Growth scenario, where from 2025 onwards, it shows an upward trend until 2035, as well as the Transformation scenario,

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Fig. 10.2 Political Stability and Absence of Violence/Terrorism—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations)

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where the Political Stability and Absence of Violence/Terrorism indicator remains almost at a constant level over time (2023–2035). Figure 10.3 presents the evolution of the Government Effectiveness index for Greece for the five scenarios from 2020 to 2035. From 2023 onwards, all scenarios follow a downward path; an exception is the Growth scenario, where from 2025 onwards. This indicator shows the lowest values in the Falldown scenario, which means that if this prevails, the quality of public services, the ability of politicians to provide services will deteriorate over time (from 2023 to 2035). Figure 10.4 presents the evolution of the Regulatory Quality index for Greece for the five scenarios from 2020 to 2035. Observing the evolution of the Regulatory Quality index for all five scenarios, it becomes clear that all scenarios except Falldown show an upward trend of the index from 2023 onwards. In fact, in 2023, a sharp increase in the index is observed. The Falldown scenario presents a downward trajectory of the index throughout 2023–2035. If the Falldown scenario prevails, the government’s ability to plan and implement reforms and policies that empower and promote private sector development will be reduced at the worst of all scenario levels. 69 67 65 63 61 59 57 55 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 10.3 Government Effectiveness—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations)

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Fig. 10.4 Regulatory Quality—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations)

Figure 10.5 presents the evolution of the Rule of Law index for Greece for the five scenarios from 2020 to 2035. In all scenarios, it becomes clear that during the period 2022–2035, the degree to which citizens trust their society’s laws and the extent to which governing bodies trust and conform to society’s rules and adhere to conventions. The Growth scenario shows a greater trust in the laws and the behavior of the administration bodies than the other four scenarios. Next comes the Transformation and Unsustainable scenarios, which show an identical path to the Basic scenario. Finally, the Falldown scenario has a steeper downward path reaching the value of 49.4 for the index in 2035 when the corresponding size for 2035 in the Growth scenario is 58.5. Figure 10.6 presents the evolution of the Control of Corruption index for the five scenarios from 2020 to 2035. Based on the Growth and Transformation scenario, the index follows an upward path, with the first scenario reaching higher levels over time (2022–2035). The perception of corruption is decreasing from 2022 to 2025, where it will remain at stable levels after that, based on the Unsustainable scenario. The baseline scenario throughout 2022–2035 remains stable in contrast to the Falldown scenario. If this scenario prevails, the

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65 63 61 59 57 55 53 51 49 47 45 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 10.5 Rule of Law—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations) 67 65 63 61 59 57 55 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 10.6 Control of Corruption—5 Scenarios (2020–2035) (Source World Bank—World Governance Indicators, Global Economic Model—Oxford Economics, and own calculations)

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value of the index will fall particularly sharply in the period 2022–2035, which demonstrates the increasing lack of the country’s ability to control any corruption and the higher degree to which private interests control the public sector, making the exercise of power ineffective and inefficient.

10.3 Corruptions Perceptions: A Way to a “Cleaner” Economy Achieving economic growth and social and economic well-being in a nation requires public sector interventions in several areas (IBRD, 2020), yet the phenomenon of corruption often undermines these efforts. In practice, more than the following anti-corruption policies are needed to overcome deep-rooted corruption and society’s perceptions of corruption. In recent decades, significant efforts have been made to reduce corruption, especially in the world’s most developed economies. The number of countries adopting right-to-information laws has expanded, the quality of these laws has improved, international standards for transparency have been strengthened, accountability systems are more robust, and understanding of the phenomenon of corruption has also advanced (Anderson, 2020). These developments concern only some of the world’s economies, which is why the phenomenon of corruption is not limited to a global level, and the phenomenon’s future seems promising. In many parts of the world, corruption remains an intractable and significant problem that hinders the growth and potential of the next generation. It drives inequality, punishing those who are already the most vulnerable (McCarthy, 2015). The citizens’ perception of corruption, as determined by the “Transparency International” organization, is presented with the Corruption Perceptions Index. Figure 10.7 presents the evolution of the Corruption Perceptions Index for the Greek economy for the five scenarios from 2020 to 2035. Citizens’ perception of the existence of corruption is predicted to improve over time, whichever scenario prevails. More specifically, based on the Growth scenario, the index reaches higher points than the other scenarios in 2022–2035. Next is the index with the Transformation scenario, which again shows high values, the Unsustainable and Basic scenarios follow an almost identical path. At the same time, the Falldown scenario records the lowest values, although it also follows an increasing path from 2025 onwards.

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Fig. 10.7 Corruption Perceptions Index—5 Scenarios (2020–2035) (Source Transparency International, Global Economic Model—Oxford Economics, and own calculations. Note 0 = highly corrupt, 100 = very clean)

10.4 Is There a Chance for a More Free Economy? A large body of literature has found positive associations between economic freedom and income, growth, and various other issues (Grubel, 2013; Lawson et al., 2020). Some key findings of the relevant literature are that current levels of economic freedom are strongly correlated with past levels of freedom, free countries have a harder time continuing to improve their economic freedom, democracy, and political freedom are positively related to economic freedom, and inequality is negatively related. The economic freedom index for the Greek economy until 2035 is presented in Fig. 10.8 for all five scenarios. Based on the Growth and Transformation scenario, the index follows an upward path, with the Growth scenario reaching higher levels over time (2022–2035). Based on the Unsustainable scenario, the index decreases from 2022 to 2025, where it remains at stable levels after that, and the Basic scenario throughout 2022–2035 remains stable. In the Falldown scenario, the index price falls particularly sharply in 2022–2035, demonstrating ever-decreasing economic freedom.

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Fig. 10.8 Index of Economic Freedom—5 Scenarios (Source The Heritage Foundation, Global Economic Model—Oxford Economics, and own calculations)

References Anderson, J. (2020). What can we learn from trends in corruption and anticorruption? Governance for Development, World Bank Blogs. FMG. (2021). The FMG Future Governance Report. Future-Moves Group. Grubel, H. (2013). The determinants of economic freedom. A Case Study of Greece. https://doi.org/10.2139/ssrn.2350323 IBRD. (2020). Enhancing government effectiveness and transparency. The fight against corruption. International Bank for Reconstruction and Development/The World Bank. Lawson, R., Murphy, R., & Powell, B. (2020). The determinants of economic freedom: A survey. Contemporary Economic Policy, 38(4), 622–642. McCarthy, L. (2015). 3 insights on the future of corruption. World Economic Forum. UNDP. (2014). Governance for the future. Democracy and development in the least developed countries. United Nations Development Programme. World Bank. (2022). The Future of Government: Reimagining Government for Good, Governance Global Practice. International Bank for Reconstruction and Development/The World Bank.

CHAPTER 11

The Impact of Alternative Economic Futures on Inclusive Growth

11.1

Introduction

Over the decades, remarkable progress has been made on inclusiveness issues in the global economy, notably thanks to the 2030 Agenda for Sustainable Development. However, gaps and challenges remain. Many individuals are still trapped in a vicious cycle of marginalization in economic, social, and political life. Many children are significantly behind in education, young people and adults with disabilities do worse than their non-disabled peers, etc. If in the future new technologies are well developed, following an inclusive approach for all, they could be significant factors that benefit all people. However, the digital divide and other technological gaps still exist, excluding rather than including people with disabilities. In this chapter, an outline of the conditions surrounding inclusiveness in Greek society and economy until 2035 is made with the presentation of the five scenarios monitored in this book. The chapter structure is as follows: First, Part 11.2 presents the expected state of the labor market and its associated opportunities. Part 11.3 describes the case of education, and Part 11.4 with the situation of households and the more specific economic conditions experienced by economic actors. Then the issue of poverty and inequalities are presented © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_11

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in Part 11.5. Finally, the analysis concludes with a description of the expected evolution of the health status of the Greek population (Part 11.6).

11.2 Labor Market Conditions and the Greek Economy in the Future Work markets worldwide are changing significantly, driven by the effects of the COVID-19 pandemic, which has led to more and more workers working remotely (McKinsey, 2021) and longer-term trends such as technological progress (Deloitte, 2021), globalization, and the aging population. At the same time, new organizational business models and evolving employee preferences contribute to the emergence of new forms of work (OECD, 2019). As the OECD (2019) notes, significant job destruction due to technological change and globalization should be expected globally. However, a sharp decline in total employment seems unlikely as while some jobs and tasks disappear, others appear, and total employment increases. An important issue is managing the transition of workers in the various industries and regions that are being hit hard by the significant trends toward new opportunities opening up. At the same time, there are growing concerns about job quality. Employment in the Greek Economy (Fig. 11.1), based on all five scenarios adopted in this book, is following a downward path. The most significant reduction in employment occurs in the Falldown scenario. If this scenario prevails, a dramatic drop in employment is expected, which will reach approximately 3800 thousand people in 2035. Basic and Unsustainable appear slightly more satisfactory for the employment path. Although employment decreases significantly over time in Unsustainable and Growth scenarios, they remain more optimistic. Significant differentiation is recorded between the extreme scenarios (Growth and Falldown), observing Fig. 11.2 presents the evolution of the unemployment rate (2020–2035). In the Falldown scenario, we should expect the unemployment rate to increase until 2025 (probably in the wake of the energy crisis and the Covid-19 crisis), where from then on, it seems to maintain an almost constant path close to 13%. The Basic scenario follows a relatively similar path at a lower level until 2025 but from 2027 onwards, the unemployment rate decreases and reaches 11.8% in 2035. The exact path as the

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Fig. 11.1 Employment (2020–2035)—5 scenarios (Source Own calculations based on the Global Economic Model of Oxford Economics) 18 17 16 15 14 13 12 11 10 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 11.2 Unemployment rate (2020–2035)—5 scenarios (Source Own calculations based on the Global Economic Model of Oxford Economics)

Basic scenario is recorded by the Unsustainable scenario in the lower level reaching 11.6% in 2035. The Transformation and Growth scenarios remain more optimistic. If one of them prevails, we should expect a decrease in the unemployment rate over time, with the latter reaching 10% in 2035.

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6800 6300 5800 5300 4800 4300 3800 3300 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 11.3 Earnings Gross Total, Gross - euro per employee (2020–2035)— 5 scenarios (Source Own calculations based on the Global Economic Model of Oxford Economics)

The gross wages of the employed based on the five scenarios are presented in the following Figure (Fig. 11.3). After 2022 and until 2035, gross wages in the Greek economy are expected to increase considering all five scenarios. In the Falldown scenario, over time until 2034, the wages of the employed are at higher levels than in the other scenarios. This fact is probably because if this scenario prevails, the number of employed people (Fig. 11.1) and the labor supply (Fig. 11.4) are expected to have shrunk significantly, resulting in higher wages. In the Growth scenario, wages will be high due to the booming economy and the possibility of businesses taking on higher costs. The Basic scenario is the most conservative regarding the evolution of employee wages until 2035.

11.3

Human Capital and Education: Qualitative Characteristics

Education is at a crossroads, and the pandemic has further exacerbated the sense of disorientation about where education will be heading in the future (McLaughlin, 2022). There are doubts about the future of educational institutions as we know them today. Education is about investing

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Fig. 11.4 Labor Supply (2020–2035)—5 scenarios (Source Own calculations based on the Global Economic Model of Oxford Economics)

in and believing in the future, and despair and pessimism are its worst enemies (OECD, 2022). On the one hand, young people are less likely to invest in better education if it seems irrelevant to the demands of the “real” world, while on the other hand, businesses are less likely to invest in the lifelong learning of their employees if those employees are expected to leave in search of a better job (Deloitte, 2022). In the case of Greece, years of expected participation in education increase every year until 2035 in all scenarios (Fig. 11.5). Due to the economic boom, which characterizes the Growth scenario, it is expected that if this scenario prevails, from approximately 18.4 years which are predicted to be the expected years someone will be in education in 2023, in 2035, the corresponding number is expected to be 22, 6 years (Fig. 11.5). On the contrary, in the Falldown scenario where, if this scenario prevails, the increase will be much smaller. From 18 years in 2023, it is expected to reach 19.1 years, estimated to be someone in education in 2035. The picture is similar to the average years of education received by people aged 25 and over (Fig. 11.6).

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23 22 21 20 19 18 17 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 11.5 Expected years of schooling (years) (2020–2035)—5 scenarios (Source United Nations and own calculations based on the Global Economic Model of Oxford Economics) 14 13.5 13 12.5 12 11.5 11 10.5 10 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 11.6 Mean years of schooling (years) (2020–2035)—5 scenarios (Source United Nations and own calculations based on the Global Economic Model of Oxford Economics)

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Fig. 11.7 Personal Disposable income, euros (2020–2035)—5 scenarios (Source Own calculations based on the Global Economic Model of Oxford Economics)

11.4 Household Conditions Under Different Scenarios Per capita disposable income in the country after 2023 follows an upward trajectory in all scenarios (Fig. 11.7), with the Growth scenario outperforming the other scenarios over time. From 2026 this upward trajectory becomes smoother in all scenarios. The Unsustainable and Basic scenarios have an identical course but are less optimistic than the Transformation scenario. The Falldown scenario significantly lags the rest and deviates significantly from their upward trend, especially from 2026 onwards.

11.5 Poverty and Inequalities in the Greek Economy’s Future The risk of impoverishment (Fig. 11.8) increases for the country from 2022 to 2025 based on the Falldown scenario. From 2025 to 2030, it is maintained at stable levels close to 28.6%, while from 2030 onwards, it follows a decreasing course. The risk of impoverishment decreases noticeably in all other scenarios while as expected, the risk of impoverishment reaches the lowest levels in the Growth scenario (24% in 2035).

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30.00 29.00 28.00 27.00 26.00 25.00 24.00 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 11.8 Persons at risk of poverty or social exclusion (percentage of the total population) (2020–2035)—5 scenarios (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics) 6.00 5.90 5.80 5.70 5.60 5.50 5.40 5.30 5.20 5.10 5.00 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 11.9 Income Quintile Share Ratio S80/S20 for Disposable Income (ratio) (2020–2035)—5 scenarios (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics)

The income share index or the ratio S80 / S20 (Fig. 11.9), a measure of the inequality of income distribution, follows an increasing trend in

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Fig. 11.10 Social Protection Expenditure, Euro per inhabitant, at constant 2010 prices (2020–2035)—5 scenarios (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics)

the Falldown scenario in contrast to the remaining four scenarios, with the Growth scenario remaining at the lowest levels showing a reduction in inequality in the distribution of income until 2035 if this scenario prevails. Accordingly, concerning social protection expenditures per capita (Fig. 11.10), a significant increase is expected, whichever of the five scenarios prevails, with the Growth scenario significantly outperforming and the Falldown falling short over time compared to the other scenarios.

11.6

Inclusiveness and the Health of the Greeks

COVID-19 has revealed how vulnerable the healthcare industry is to change and its need for structural and technological transformation of the healthcare industry globally. In the future of health, we should expect six key areas (data sharing, interoperability, equitable access, empowered consumers, behavior change, and scientific discovery) to collectively transform the existing health system from reactive care to one based on treatment in prevention and well-being (Deloitte, 2021). And while the disease will never be completely eradicated, through science, data, and technology, in the future, it is expected that we will be able to detect it earlier, intervene proactively, and better understand its evolution to help consumers more effectively and actively maintain their well-being.

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Fig. 11.11 Infant mortality, Deaths per 1000 live births (2020–2035)— 5 scenarios (Source World Bank and own calculations based on the Global Economic Model of Oxford Economics) 2300.00 2200.00 2100.00 2000.00 1900.00 1800.00 1700.00 1600.00 1500.00 1400.00 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 11.12 Health care expenditure (euro per inhabitant) (2020–2035)—5 scenarios (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics)

The question of the evolution of the health of the population in Greece can be seen from Figs. 11.11 and 11.12, which present child mortality and health expenditures until 2035 for the five scenarios.

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Child mortality during childbirth is expected to decrease particularly significantly by 2035 in Greece in all scenarios. In 2035, approximately 2 children per 1000 births are expected not to survive based on the Falldown scenario, while based on the Growth scenario, this number is expected to correspond to fewer children due to the general well-being that results in better living conditions for the population, the related technological progress, the progress of science as well as the highest expenditure on health reaching 2256 euro per inhabitant (in contrast to the Falldown scenario where the corresponding expenditure amounts to 1906 euro per inhabitant, Fig. 11.2).

References Deloitte. (2021). The Future of Health. Innovation is blurring traditional health care boundaries. Available at: https://www2.deloitte.com/us/en/pages/lifesciences-and-health-care/articles/future-of-health.html Deloitte. (2022). Global Human Capital Trends: Special Report. McKinsey (2021). The future of work after Covid-19. McKinsey Global Institute. McLaughlin, T. (2022). The future of learning and teaching: Big changes ahead. RMIT University. OECD. (2019). OECD employment outlook 2019: The future of work. https:// doi.org/10.1787/19991266. OECD. OECD. (2022). Building the future of education. OECD.

CHAPTER 12

Cultural Change and Alternative Futures

12.1

Introduction

Cultural change can be modeled as a Darwinian evolutionary process in which some cultural values become more common and others decline (Boyd & Richerson, 2005). When individuals encounter conditions and behaviors that differ from those they consider acceptable based on their cultural background, they follow a process called cultural eclecticism, in which they accept and adopt certain behaviors, reject others and partially adopt others (Petrakis et al., 2020). The significance of cultural changes is not always the same, as change may occur, for example, because adopting a behavior is considered necessary for human survival or, in other cases, to meet specific social needs. It should also be emphasized that cultural change is usually cumulative, in the sense that after each change, much is added, and little is lost. At the same time, changes in the cultural background usually lead to the need for new changes to supplement or complement the original change. A fundamental characteristic of human behavior is its response to environmental conditions. The most significant differentiation in an individual’s personality occurs during adolescence (Borghans et al., 2008). However, traits change occurs, albeit to a lesser extent, later in life

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_12

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(Roberts et al., 2006). The above changes in the cultural background are gradual and could, as such, be described as incremental changes. Nevertheless, there are also significant changes in the cultural background after an external shock (Kafka & Kostis, 2021; Petrakis et al., 2021). Such shocks can be considered situations of uncertainty and crisis, such as the global financial crisis of 2008, the crisis of the COVID-19 pandemic, and the energy crisis. A crisis tends to produce or accelerate cultural changes; furthermore, when changes are accepted because of the crisis, they tend to persist. Changes of this type can cause high stress in individuals (Eschbach et al., 2001), affecting their psychological adaptation to new conditions. They can cause—depending on the intensity of the change—a strong shock in the context of cultural values. The result is a change in the cultural background that is much more rapid than the gradual change previously described (Magee et al., 2013; Sargent-Cox et al., 2011). This chapter aims to present the expected evolution of the attitudes and beliefs of Greek society until 2035. We cannot know how these trends will be shaped; however, through the five scenarios presented in this book, we can, to some extent, outline the possible developments of attitudes in the future. The structure of the chapter is as follows: Initially, Part 12.2 presents the expected evolution of the attitudes of Greek society regarding the more comprehensive conditions prevailing in Greek society. Part 12.3 describes how the expectations of the economies are expected to be shaped until 2025, and Part 12.4 the expected developments regarding the trust of the members of the Greek society toward domestic and European institutions.

12.2 How Are Greeks About to Judge Their Current Situation in the Future How the members of Greek society judge the current situation is an issue that depends to a significant extent on economic development. Figures 12.1, 12.2, and 12.3 present the attitude of Greeks regarding the current state of the country, the national economy, and their household, respectively, up to 2035 for the five possible future scenarios. The expected development in the five scenarios is the same in all three cases above. In the basic scenario, an improvement is expected

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21 20 19 18 17 16 15 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Basic

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Fig. 12.1 Judge Current Situation in your country as good (% of the population) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”) 12 11.5 11 10.5 10 9.5 9 8.5 8 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Basic

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Fig. 12.2 Judge the current situation in your national economy as good (% of the population) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”)

in the Greeks’ view of the current situation until 2035. In the Growth scenario, the relative improvement is the maximum possible among the five scenarios. Between the Growth and the Basic scenario, the Transformation and the Unsustainable scenario are placed. In the Falldown scenario, a relatively stable situation is expected until 2025, while from

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62 60 58 56 54 52 50 48 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Basic

Growth

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Fig. 12.3 Judge the financial situation of your household as good (% of the population) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics. Note Those responding “very good” or “rather good”, while the rest possible responses are “rather bad” and “very bad”)

2026 to 2035, an improvement in attitudes is expected in all three cases. However, this improvement is the smallest compared to the other scenarios.

12.3 The Formation of Expectations in the Future The importance of expectations about the future is decisive for human action and is influenced by economic developments occurring in the present, current information, and past experiences. Figure 12.4 presents the expected evolution of expectations for the next 12 months regarding the economic situation of the members of society. After the sharp drop in expectations for the economic situation in the next 12 months in 2022 in all scenarios, a recovery is expected from 2023 to 2035. Indeed, this recovery will be much more critical for the Growth scenario and less important for the Falldown scenario, in which a stabilization situation should be expected until 2027. Accordingly, Fig. 12.5 presents the expected evolution of expectations for the next 12 months regarding the price level. After the significant increase in 2022 regarding the level of prices in the Greek economy, from 2023 onwards, expectations for the next 12 months

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-30 -31

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

-32 -33 -34 -35 -36 -37 -38 -39 Basic

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Fig. 12.4 General economic situation over the next 12 months (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics) 45 43 41 39 37 35 33 31 29 27 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Basic

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Fig. 12.5 Price trends over the next 12 months (Source Eurostat and own calculations based on the Global Economic Model of Oxford Economics)

are expected to be lower in price levels in all scenarios. Expectations for falling prices by 2035 are more significant in the Growth scenario and less in the Falldown scenario, with the remaining scenarios varying between these two scenarios.

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12.4 Trust in European and Government Institutions The level of institutional trust in Greek society is also a quantity that is influenced by the broader social, economic, and political conditions that prevail. Figures 12.6, 12.7, and 12.8 present the percentage of members of Greek society who report that they tend to trust the national parliament, the national government, and political parties by 2035 for the five scenarios In all three Figures above, the same changes related to the five scenarios emerge from the analysis. In all three cases, trust in the basic scenario moves upward until 2035. The other scenarios also move accordingly, with the Growth scenario, as well as Transformation and Unsustainable, moving at higher levels than Basic and Falldown moving at lower levels. The expected evolution of the support for the euro until 2035 is similar (Fig. 12.9). The only difference, in this case, is that the Falldown scenario, 31 30 29 28 27 26 25 24 23 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Basic

Growth

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Fig. 12.6 Trust in National Parliament (% of the population that tends to trust) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics)

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28 27 26 25 24 23 22 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Basic

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Fig. 12.7 Trust in National Government (% of the population that tends to trust) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics) 13.5 13 12.5 12 11.5 11 10.5 10 9.5 9 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Basic

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Fig. 12.8 Trust in political parties (% of the population that tends to trust) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics)

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although following the trend of the Basic scenario, is more detached than in the previous three Figures. Figure 12.10 presents the trust toward a key European institution, the European Commission. The evolution of the five scenarios in this Figure indicates pro-European attitudes in times of prosperity and the rise of Euroscepticism in times of uncertainty.

95 90 85 80 75 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Basic

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Fig. 12.9 What is your opinion on EMU with one single currency, the euro (% of the population that answer “for”) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics) 33 32 31 30 29 28 27 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Basic

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Fig. 12.10 Trust in the European Commission (% of the population that tends to trust) (Source Standard Eurobarometer and own calculations based on the Global Economic Model of Oxford Economics)

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In the basic scenario, a decrease in trust in the European Commission is expected until 2035. The biggest decrease in trust should be expected for the Falldown scenario, while a decrease is also expected for the unsustainable and a small decrease for the Transformation scenario. The only scenario in which confidence is expected to improve for the European Commission is none other than the Growth scenario.

References Borghans, L., Duckworth, A. L., Heckman, J. J., & ter Weel, B. (2008). The economics and psychology of personal traits. Journal of Human Resources, 43(4), 972–1059. Boyd, R., & Richerson, P. J. (2005). The origin and evolution of cultures. Oxford University Press. Eschbach, K., Hagan, J. M., & Rodriguez, N. (2001). Causes and trends in migrant deaths along the US–Mexico border, 1985–1998. The University of Houston, Center for Immigration Research. Kafka, K. I., & Kostis, P. C. (2021). Post-materialism and economic growth: Cultural backlash, 1981–2019. Journal of Comparative Economics, 49(4), 901–917. https://doi.org/10.1016/j.jce.2021.04.001 Magee, L., Scerri, A., James, P., Thom, J. A., Padgham, L., Hickmott, S., et al. (2013). Reframing sustainability reporting: Towards an engaged approach. Environment, Development, and Sustainability, 15(1), 225–243. Petrakis P. E., Kafka K. I., Kostis P. C., & Valsamis D. G. (2021). Greek culture after the financial crisis and the Covid-19 crisis: An economic analysis. Palgrave MacMillan, ISBN 978-3-030-81017-7. Petrakis P. E., Valsamis D. G., & Kafka K. I. (2020). Economic growth and development policy. Palgrave MacMillan, ISBN 978-3-030-43180-8. Roberts, B. W., Walton, K. ϒ, & Viechtbauer, W. (2006). Patterns of meanlevel change in personality traits across the life course: A meta-analysis of longitudinal studies. Psychological Bulletin, 132(1), 1–25. Sargent-Cox, K., Butterworth, P., & Anstey, K. J. (2011). The global financial crisis and psychological health in a sample of Australian older adults: A longitudinal study. Social Science & Medicine, 73(7), 1105–1112.

CHAPTER 13

The Dynamism of the Economy and the Alternative Futures

13.1

Introduction

The current era is characterized by unprecedented economic change and transformation, with many new technologies disrupting economic activity. At the same time, the COVID-19 pandemic has accelerated demographic challenges, pushing population growth and immigration to historic lows. To overcome these challenges, countries must be ready to renew the forces of competition, entrepreneurship, and adaptability that have weakened dramatically in recent decades. This chapter attempts to outline the possible outcomes of the future regarding the course of the dynamic development of the Greek economy. For this purpose, the possible developments until 2035 are presented through the five scenarios considered in this book. The structure of the chapter is as follows: Initially (Sect. 13.2), the issue of the output gap for the economy is presented. The second part (Sect. 13.3) presents the external sector of the economy, followed by the third part (Sect. 13.4) with the evolution of consumption, and the fourth part (Sect. 13.5) with the evolution of investments. Then (Sect. 13.6), the picture of the real estate market is presented, but also of the production of

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4_13

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the manufacturing sector (Sect. 13.7). In addition, the situation in public finances and public debt is presented (Sect. 13.8). Finally, the economy’s productivity question is described (Sect. 13.9).

13.2 How Far from the Potential Output Will the Greek Economy Be in the Future? The assessment of the output gap is a critical measurement that affects how economic policy (developmental, monetary, and fiscal policy) is implemented. As reported by Kangur et al. (2019), the output gap informs central banks and fiscal authorities about the appropriateness of their policy. Of course, the output gap is difficult to measure since potential output—usually defined as the maximum level of output that can be achieved without inducing inflationary pressures (Okun, 1962)—is unobservable. The output gap estimation methods can be categorized into three groups (Citu & Twaddle, 2002). The first group tries to infer the observed trend based on the evolution of an economy’s real output. The second group attempts to isolate the effects of structural and cyclical effects on output using economic theory. Furthermore, finally, in the third group, survey data can be used to infer the extent of excess demand or supply in the economy. Therefore, the calculation of the output gap, even for the current situation or past moments, is an estimate because it is based on the concept of potential output. Therefore, the scenarios for how the production gap will evolve in the future should be treated with caution. Indeed, the assumptions of the five scenarios adopted for the Greek economy until 2035 have been described in Chapter 3. Based on them, Fig. 13.1 presents the possible outcomes of the production gap until 2035 for the Greek economy. From the observation of the figure, it becomes clear that the output gap increases until 2028 in all scenarios. In the Growth and Transformation scenarios, this increase continues after 2028 at a lower rate, while from 2024 onwards, the production gap becomes favorable for the Growth scenario and from 2025 onwards for the Transformation scenario. In the Unsustainable scenario, the production gap also becomes a positive event, which means that the real GDP exceeds the potential from 2027 onwards while from 2029 onwards. However, it remains at favorable levels; it starts to decrease and converge with the Basic scenario.

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4.0 3.0 2.0 1.0 0.0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

-1.0 -2.0 -3.0 -4.0 Basic

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Fig. 13.1 Output gap as a percentage of potential output (%) (Source Own calculations based on the Global Economic Model of Oxford Economics)

In the Falldown scenario, the productive gap remains chronically negative. Although an improvement is seen from 2023 to 2028, it appears to worsen again from 2028 onwards until the output gap in 2035 is close to 2023.

13.3

The Greek External Sector in the Future

GDP plays a crucial role in international trade, as when more capital is available in the global economy, more trade can result (DIT, 2021). The global economy is projected to increase its total output significantly in the coming decades (expected to double by 2050), even though the pace of global growth has declined over the decades. This is mainly due to technology-driven productivity improvements (PWC, 2017). Emerging economies are growing at twice the rate of developed economies, with the result that by 2050 six of the seven largest economies in the world are projected to be emerging economies. Simultaneously, world trade in the coming years is not affected by several conditions such as (DIT, 2021): (a) change in trade patterns (growth in the Indo-Pacific region explains why trade patterns have been shifting East gradually over the past two decades), (b) matters regarding economic power distribution (a slow shift of economic power away from the G7 to the most significant emerging economies), (c) the slower population growth in advanced economies,

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99 94 89 84 79 74 69 64 59 54 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 13.2 Exports of Goods and Services (bn euros) (Source Own calculations based on the Global Economic Model of Oxford Economics) 115 110 105 100 95 90 85 80 75 70 65 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Growth

Unsustainable

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Falldown

Fig. 13.3 Imports of Goods and Services (bn euros) (Source Own calculations based on the Global Economic Model of Oxford Economics)

and rapid growth in developing economies, (d) aging populations (thus both consumers and the workforce are getting older in average), and (e) increase in income levels (high-income countries are projected to increase next decade). The trade of the Greek economy is also expected to show increasing trends until 2035, whichever of the five scenarios adopted in this book

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prevails. Figures 13.2 and 13.3 are characteristic, which present the estimated volume of exports and imports of the Greek economy until 2035 for the five scenarios. In the Growth scenario, exports prevail over the other four scenarios, with the transformation and the Unsustainable scenario following. Exports, although on an upward trend in the Falldown scenario, deviate significantly from the trend from 2024 onwards. Accordingly, these are increasing in all scenarios concerning imports, with the worst scenario (Falldown) recording an enormous volume of imports due to reduced production activity and the inability to meet domestic demand. According to the Growth scenario, an increasing trend of imports is again observed in a much smaller size compared to the “bad” scenario, but closing with a surplus trade balance from 2034 onwards compared to imports. The current account balance is closely related to the observed trends in the previous two Figures. Figure 13.4 presents the estimated evolution of the current account balance as a percentage of GDP for the Greek economy until 2035. 4 2 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

-2 -4 -6 -8 -10 Basic

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Unsustainable

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Falldown

Fig. 13.4 Current account balance of payments (share of GDP) (Source Own calculations based on the Global Economic Model of Oxford Economics)

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The said balance reaches the highest levels in the best scenario (Growth, 3.8% in 2035) following an increasing path from 2024 onwards, while from 2029 onwards, it becomes surplus. The Transformation scenario has a similar path but becomes surplus from 2034 onwards. The remaining three scenarios follow an increasing course until 2031. From then on, they diverge with the Basic scenario continuing to increase the balance and the Unsustainable and Falldown being identified following a more negative course.

13.4

The Consumption-Based Greek Model

By 2030, the global middle class, also called the consumer class, is expected to reach 4.8 billion people—that is 1.3 billion more people than today (European Commission, 2022). These people are characterized by increased purchasing power, and this rise in the middle class is expected mainly from emerging economies. Consumer behavior and choices are of great importance to the global economy. They have changed over the last decade, with the focus of consumption becoming significantly toward sustainable consumption and welfare products (European Commission, 2022). At the same time, modern consumers do not seek to consume only to satisfy their needs and desires but also see consumption as an opportunity to face global challenges, considering that the choices made can help shape our society and economy according to important values. Additionally, new technologies and the increasing amount of time consumers spend online allow businesses to offer personalized shopping experiences quickly. The Fourth Industrial Revolution is changing the consumer landscape by creating opportunities for value through new technologies (WEF, 2022). Of course, it should be noted that developments such as the COVID19 pandemic have slowed the consumption of such goods and services. It should also be noted that this increased consumption projected for the future is expected to raise questions about the adequacy of available resources. The Greek economy has always relied heavily on consumption (see Chapter 8). This trend is expected to continue to a greater extent (Growth scenario) or a lesser extent (Falldown scenario), depending on the scenario that will prevail for the future development of the Greek economy until 2035. Figure 13.5 presents the private and public consumption in the five scenarios.

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115 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 13.5 Private Consumption (bn euros) (Source Own calculations based on the Global Economic Model of Oxford Economics)

13.5 Investments as a Key for the Future Outcomes The recovery of the global economy in terms of the level of investment after the advent of the COVID-19 pandemic has already begun (UNCTAD, 2021). The European Investment Bank (2022) states that to prevent an asymmetric recovery in investment activity and increase longterm growth prospects, economies should (a) focus on high-quality public investment, avoiding sharp fiscal adjustments that may hinder recovery, (b) facilitate and protect private investment against uncertain situations (through risk-sharing instruments), (c) facilitate the digital transformation of economies with appropriate infrastructure, data and information security, appropriate training and skills acquisition, and (d) to promote actions that protect the environment and are based on renewable energy sources. The expected development of the investment activity of the Greek economy in the five scenarios is presented in Fig. 13.6. In all scenarios from 2027 onwards, a strong upward trend in investments is observed, with the Growth scenario consistently exceeding the other four. However, from 2032 onwards, the Unsustainable scenario

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35 33 31 29 27 25 23 21 19 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 13.6 Total Investments (bn euros) (Source Own calculations based on the Global Economic Model of Oxford Economics)

is converging toward it. The Falldown scenario remains the most pessimistic, with increasing trends over time (except for 2027).

13.6 The Future of Housing in the Greek Economy Globally the housing market appears to be evolving rapidly as house prices continue to rise after the 2008 financial crisis (Campisi & Witkowski, 2022). As more signs show that the housing market is on a fast upward trajectory, many are beginning to wonder if the global economy is at risk of a new housing bubble. Campisi and Witkowski (2022) note that this upward trend in housing prices is due to three leading causes. Firstly, the real estate market is robust, and the housing market is increasingly turning to younger people. This is a good sign that demand will remain strong, especially as housing stock is at historic lows. Second, there is a low supply of new housing (compared to the past), and as a result, this strengthens the demand for existing housing and pushes up their prices, which also strengthens the market outlook going forward. Third, unlike what happened and caused the crisis of 2008, now mortgage credit is granted with stricter solvency criteria established on the occasion of the crisis of 2008. This makes borrowers less likely to go bankrupt.

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370 320 270 220 170 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 13.7 House Price Index (2015 = 100) (Source Own calculations based on the Global Economic Model of Oxford Economics)

Figure 13.7 presents the expected evolution of the real estate market in the Greek economy until 2035 for the five scenarios under analysis, with the Growth scenario following a particularly upward trend due to the economic boom from 2030 onwards. Again the Falldown scenario lags significantly with Unsustainable following.

13.7

Manufacturing Production and Challenges

Manufacturing is at the heart of the fourth industrial revolution and has changed rapidly since 2020 (CBInsights, 2022). Better quality manufacturing products, advanced products, and processes that offer higher profit margins are leading faster to a state of continuous innovation in the manufacturing industry worldwide. At the same time, modern information and communication technologies are revolutionizing many aspects of production operations, including real-time production monitoring, measurement accuracy, and production efficiency (EY, 2022). Certainly, entrepreneurs and manufacturing workers must be able to integrate into their production new technologies that will fundamentally change the organization, operation, and production of manufacturing in the future (Deloitte, 2022). Changes in consumer demand, the nature of products, production economics, and supply chain economics have led to a fundamental shift in how manufacturing companies operate and what trends shape that operation (Walker, 2022).

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26 25 24 23 22 21 20 19 18 17 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Basic

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Fig. 13.8 GDP in Manufacturing (bn euros) (Source Own calculations based on the Global Economic Model of Oxford Economics)

Figure 13.8 indicates the image that the manufacturing sector is expected to play in the Greek economy until 2035, and it presents the generated GDP of the sector in five different scenarios. All the scenarios show an upward trajectory, although the Falldown scenario deviates noticeably, and from 2033 onwards, the generated GDP of the manufacturing sector begins to decline. On the contrary, the best scenarios for the course of the economy, Growth (25.4 bn euros) and Transformation (24.2 bn euros) scenario, record the highest values in 2035.

13.8

Public Economics and Alternative Futures

Modern states are constantly faced with challenges and threats. The top challenges for every state (including the Greek economy) are (KPMG, 2022) the digitizing of government business, the rising client expectations within resource-constrained environments, the low economic growth, the recent pandemic of COVID-19, and climate change. In the present and the future, modern governments are expected to be faced with providing answers to questions related to the satisfaction of citizens’ expectations, improving the effectiveness and efficiency of the state apparatus, and adapting the state to the demands of the new era, by strengthening trust toward members of society, by strengthening security and by increasing the skills required.

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There is an enlarged public sector in Greece, although efforts have been made to reduce it in the last decade. At the same time, the efforts made in the last decade to restructure the operation of the state apparatus are also significant. In the future, Greece should take advantage of the funding opportunities that exist (Multiannual Financial Framework, Next Generation EU, National Strategic Reference Framework (ESPA) 2021– 2027, and Greece 2.0) so that the country’s public finances are more sustainable and push to a dynamic process of economic development. Figure 13.9 presents the evolution of the government balance as a percentage of GDP up to 2035 for the five scenarios. According to the base scenario, from 2024 onwards, the balance in question remains permanently at a constant deficit level of –1%. In the Growth and Transformation scenarios, the balance from 2024 onwards becomes surplus with increasing trends. The opposite picture is presented by the government balance as a percentage of GDP in the Unsustainable and Falldown scenarios, which remain in deficit with the deficit increasing. The image in Fig. 13.10 presents the evolution of the primary balance. Regarding the public debt of the Greek economy until 2035 as a percentage of GDP, this is shown in Fig. 13.11. All scenarios show a downward trend, and the public debt decreases noticeably in the Growth scenario, while the highest debt appears over time in the Unsustainable scenario. 4 2 0 -2 -4 -6 -8 -10 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 13.9 Government balance, Maastricht definition (share of GDP) (Source Own calculations based on the Global Economic Model of Oxford Economics)

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8 6 4 2 0 -2 -4 -6 -8 -10 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 13.10 Government primary balance (share of GDP) (Source Own calculations based on the Global Economic Model of Oxford Economics) 210 190 170 150 130 110 90 70 50 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 13.11 Gross government debt Maastricht definition (share of GDP) (Source Own calculations based on the Global Economic Model of Oxford Economics)

Finally, Fig. 13.12 presents the expected evolution of public expenditure as a percentage of GDP for the period up to 2035 for all five scenarios under analysis. In the Growth scenario, the lowest public spending should be expected since the economy works efficiently. Conversely, the highest levels of public spending should be expected in the Falldown scenario.

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60 55 50 45 40 35 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Fig. 13.12 Government Expenditures (% GDP) (Source Own calculations based on the Global Economic Model of Oxford Economics)

13.9

Productivity up to 2035

Productivity is the ultimate driver of growth in the global economy; therefore, increasing productivity is a fundamental challenge for countries in the future (OECD, 2015). However, productivity growth slowed in many OECD countries even before the 2008 crisis. The slowdown in knowledge-based capital accumulation and the decline in new firms during this period also raises concerns about a structural slowdown in productivity growth. It is one-tenth of what it was 40 years ago in advanced economies, and even emerging economies are struggling to replicate the growth of the past (McKibbin & Triggs, 2020). As the OECD (2015) notes, three policy areas appear to be vital in sustaining productivity growth: (i) encouraging innovation and facilitating the diffusion of new technologies, (ii) markets that allow the most productive firms to thrive, and (iii) more efficient allocation of resources, particularly in terms of skill mismatches. In the case of the Greek economy, productivity is expected to evolve as shown in Fig. 13.13, which presents the generated GDP of the economy per working hour up to 2035 for the five scenarios under analysis. Labor productivity shows increasing trends in all five scenarios, with the Growth scenario significantly exceeding the rest over time and the Falldown scenario falling short.

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0.13 0.125 0.12 0.115 0.11 0.105 0.1 0.095 0.09 0.085 0.08 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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Falldown

Fig. 13.13 GDP per hour worked (Source Own calculations based on the Global Economic Model of Oxford Economics)

References Campisi, N., & Witkowski, R. (2022). Will the housing market crash? Experts give 5-year predictions. Forbes Advisor. CBInsights. (2022). The future of the factory: How technology is transforming manufacturing. Research Brief. Citu, F., & Twaddle, J. (2002). The output gap and its role in monetary policy decision-making. Reserve Bank of New Zealand: Bulletin, 66(1) Deloitte. (2022). The future of manufacturing. Making things in a changing world. Deloitte. DIT. (2021). Global Trade Outlook report. Trade Finance Global. Eϒ. (2022). Future of manufacturing. European Commission. (2022). Growing consumption. Megatrends Hub. European Investment Bank. (2022). Investment Report 2021/2022, recovery as a Springboard for change. Kangur A., Kirabaeva K., Natal J. M., & Voigts S. (2019). How informative are real time output gap estimates in Europe? (IMF Working Paper, WP/19/200). KPMG. (2022). The future of government & public sector, trends & developments in the Greek market. Available at: https://assets.kpmg.com/content/dam/ kpmg/gr/pdf/2022/04/gr-future-of-public-sector-survey-12042022.pdf McKibbin, W., & Triggs, A. (2020). The future will be shaped by what global productivity growth does next. Brookings Institute. OECD. (2015). The future of productivity. OECD.

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Okun, A. M. (1962). Potential GNP: Its measurement and significance. In Proceedings of the Business and Economic Statistics Section of the American Statistical Association, American Statistical Association (pp. 89–104). PWC. (2017). The World in 2050. The long view: how will the global economic order change by 2050? PWC UNCTAD. (2021). World Investment Report 2021. Investing in sustainable recovery. United Nations Conference on Trade and Development. Walker, J. (2022). 14 Trends shaping the future of manufacturing in 2022. Locus Robotics. WEF. (2022). Shaping the future of consumption. World Economic Forum.

Index

A Alternative futures, xv, xvi, 19, 20, 31, 33, 41 B Backcasting, 5 Business freedom, 71 C Capitalism, 38–40, 43 Carbon emissions, 139, 140 Climate change, xvi, 6, 9–11, 20, 22, 28, 29, 33, 44, 140, 145, 146, 186 Consumer expectations, 104 Consumption, 56, 115, 119, 120, 140, 177, 182 Coronavirus, 7, 56 Corruption, 60, 64, 65, 69, 74, 145, 149, 151 COVID-19, 7, 8, 39, 50, 59, 78, 89, 100, 104, 106, 111, 117, 119,

121, 129, 145, 156, 163, 168, 177, 182, 183, 186 Cultural elements, 102 Cultural evolution, 99 Current account balance, 118, 181 D Deposits, 123 Dynamic growth, xvi E Earnings gross, 81, 158 Ecological footprint, 54 Economic freedom, 60, 66, 70, 71, 145, 152 Economic insecurity, 9, 110 Ecosystem, 20, 54 Electricity output, 140, 142, 143 Emerging trends, 20 Energy crisis, 7–9, 25, 50, 56, 59, 89, 100, 104, 106, 119, 126, 156, 168

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. E. Petrakis et al., The Future of the Greek Economy, The Political Economy of Greek Growth up to 2030, https://doi.org/10.1007/978-3-031-26872-4

193

194

INDEX

Environmental sustainability, 49 Existential security, 110, 111 Expectations, xvi, 3, 6, 9, 11, 21, 31, 38, 41, 42, 102, 104, 106, 168, 170, 171, 186 External shock, 168 F Fertility, 50, 52, 136 Financial freedom, 68, 74 Fiscal health, 71 Forecasting, 4, 5, 18, 24 Foreign Direct Investments (FDI), 121–123 Foresight, xv, 4, 5, 9, 17, 20, 21, 39, 41 Formal institutions, 6, 9, 10, 39, 42 Fossil fuels, 138 Future generations, 42, 59, 135 G Gender Employment Gap, 84 Global financial crisis, 50, 52, 59, 67, 116, 168 Globalization, 156 Governance indicators, 145 Government balance, 129, 187 Government debt, 130, 188 Government expenditures, 130, 131, 189 Government integrity, 67, 69 Government primary balance, 130, 188 Government revenue, 130, 131 Greenhouse gas emissions, 54, 55 Gross wages, 80, 158 Growth scenario, xvi, 18, 22, 27–30, 43, 137, 139, 140, 142, 146, 148, 149, 151, 152, 156–159, 161, 163, 165, 169–172, 175, 178, 181–183, 185, 187–189

H Healthcare expenditure, 97 High-income countries, 50, 96, 180 House price index, 125, 126, 185

I Impoverishment, 90, 161 Inclusive governance, 40 Inclusive growth, xvi, 77, 78 Inclusiveness, 96, 155 Income share index, 95, 162 Industrial 4.0, 20 Infant mortality, 97, 164 Inflation, 9, 24, 25, 31, 56, 100, 102 Investment, 27, 38, 56, 67, 68, 73, 74, 115, 120, 121, 135, 177, 183 Investment freedom, 73

J Judge current situation, 169 Judicial effectiveness, 68

L Labor freedom, 72 Labor market, 8, 10, 50, 67, 77, 78, 80, 136, 155 Labor supply, 50, 81, 82, 158, 159 Labour productivity, 132 Life expectancy at birth, 50, 51 Lifelong learning, 159

M Manufacturing, 115, 126, 127, 178, 185, 186 Material and social deprivation, 95, 96 Megatrends, 4, 9, 11, 20, 41 Migration balance, 50 Modernization, 40, 110

INDEX

Monetary freedom, 72 Money laundering, 60, 70 Monthly minimum wages, 83

N Natural balance, 51, 53 Natural resources, 49, 57, 146 Next 12 months, 104–107, 170

O Output gap, 115, 116, 177–179

P Pastcasting, 5 Personal disposable income, 92, 161 Policymaking, 7, 8, 20, 24, 33, 43 Political instability, 62, 108 Political stability, 60, 61, 69, 148 Population growth, 49, 136, 177, 179 Post-materialistic, 6, 40, 111, 112 Potential output, 25, 116, 178 Poverty, 10, 78, 91, 146, 155, 162 Programme for International Student Assessment (PISA), 86, 88, 89 Programme for the International Assessment of Adult Competencies (PIAAC), 86, 90, 91 Property rights, 60, 67 Purchasing Managers’ Index (PMI), 126

R Recasting, 5 Regulatory interventions, 60 Renewable energy, 49, 55, 56, 136, 140, 141, 183 Repos, 123 Rule of Law, 60, 63, 149

195

S S80/S20, 95 Savings, 67, 74, 104, 106, 115 Scenario building, xv, xvi, 4–6, 18–24, 31, 32, 37, 39, 41, 42 Social cohesion, 77 Social exclusion, 162 Social protection, 91, 163 Social transfers, 94 State effectiveness, 60 Strategic management, 19 Subjective well-being, 40 Sustainability, 6, 10, 29, 39, 42, 59, 146 Sustainable development, xvi, 49, 77, 135, 136, 138 T Tax burden, 67, 70 Technological change, 9, 10, 156 Terrorism, 60, 61, 146–148 The euro, 110, 111, 172, 174 Trade freedom, 73 Transformation scenario, xvi, 22, 28–30, 43, 44, 137, 140, 146, 149, 151, 152, 161, 175, 178, 182, 187 U Uncertainty, xv, 4–11, 19, 21–23, 28–30, 32, 37, 38, 41–43, 50, 71, 145, 146, 168, 174 Uncertainty avoidance, 40, 42 Unemployment rate, 80, 104, 156, 157 Unsustainable growth, xvi, 18, 22, 26, 28–32, 43 V Voice and Accountability, 60, 146, 147