Remittances show us the defects of governments, yesterday and today

In general, when considering the impact of remittance flows on the economy, it is important to take into account the positive effects and, alongside them, the negative effects that remittances carry over time in the form of transfers for basic consumption and crediting of household and business expenses. their little ones.

In the analysis that can be done in the case of the history of remittances coming from abroad to families, individuals and small businesses, we cannot use the same influences that have in one country as the same influences for Albania. The main reason is based on the differences of the economy, the culture of the society, history and culture, as well as the traditions and the status that the country lives in the context of the global society and the geostrategic changes of the last decade.

The increase in the flow of remittances has fueled a long debate on the positive and negative consequences.

Among the positive effects that fall are those influences that:

– can increase the well-being of families by reducing consumption and improving living conditions.

– they can facilitate the accumulation of human capital by making it possible to improve hygienic conditions, healthier lifestyles, better health care and better education.

– can ease credit restrictions for poor families, those with banking difficulties in poor rural areas, facilitates the purchase and accumulation of assets, investments for small businesses, and affects the vocational training of classes that have little ability to pay by reducing a part of poverty

The increase in the flow of remittances has ignited a long debate on the positive and negative consequences.

Among the positive effects that fall are those influences that:

– can increase the welfare of families by reducing consumption and improving living conditions.

– they can facilitate the accumulation of human capital by enabling improved hygienic conditions, healthier lifestyles, better health care and better education.

– can ease credit constraints for poor families, those with banking difficulties in poor rural areas, facilitate the purchase and accumulation of assets, investments for small businesses and influence the vocational training of classes that have little ability to pay by reducing a part of poverty.

Even if cash flows can be considered to improve moments of the lives of the beneficiary individuals and families, they have on the other hand been shown to cause diseases of various economies, appearing more in the form of what can be translated as a notion like “Dutch disease”[1]. In addition, the impacts of remittances can change over time within a given time being influenced both by the development policies of the country, the trends of money laundering and the attempt to penetrate the economy, but also by the changes that occur in the characteristics of immigrants, who over the years cool their relations with the country of origin, due to the change of status quo from immigrants to citizens who are assimilated year after year from the country where they immigrated.

Entering the discussion on the causal impact of remittances, any analysis remains a challenge given concerns about their endogeneity[2], where the difficulty of separating the impacts of migration from those of remittances as a whole, as well as the full inclusion of immigrants related to the amount of remittances is impossible to distinguish.

Due to the size and consistency of remittances coming in from abroad, they have the potential to help the country in a number of ways, from improving economic stability in a period of economic and social hardship and recovery to fostering credit opportunities for attracting funds in the development of individual/family assets and strengthening and supporting the initial bases in human capital. The main challenge of Albanian governments in the first years of remittances (the first decade and half of the second decade after the 90s) was to design policies that would promote these flows to be used productively, taking into account the country’s particularities at that time. certain time periods, such as: the missing financial culture, the need for basic consumption, the need for transfers to improve living conditions and many other features that were dictated by the inability of the economy to generate more welfare after a period of isolated and anemic economy.

However, over the years, it seems that the continuity of remittances still at high levels prove to us the myopic, wrong policy and based on a rather dubious political will, i.e. not in function of the long-term and sustainable development of the economy and strengthening of the welfare of families.

This finding is substantiated by the fact and realities of how the responsible, uncorrupted and visionary policy has influenced those countries where remittances have functioned as a valuable aid in the initial moments, but then they have not served as the main source in financing the needs consumption and poverty.

Policies can affect the size, stability and destination of remittance inflows (and vice versa) and because of their many potentially important impacts, analyzes of their economic impact are often sought to inform policy design to improve the economic environment and social for effective channeling of new cash inflows. However, where there is a prevalence of government corruption and a low offer in public services, starting from the social economic reality, it is easy to see why remittances are still seen by governments as a financial source that fulfills their unfulfilled promises for welfare, standard of living and quality public services.

The increased presence of remittances is even considered as a credit to the needy classes but without giving in return the immigrants at least the facility to vote on policies from their country of residence, a weighty factor that apparently does not coincide with the stubbornness of politicians Albanians to remain in power.

Building the argument from this logic, a fact that proves precisely the orientation of remittances based on the lack of income to meet the cost of living in the years 2022 and 2023 (6-m.I) is the added value of these remittances oriented by the growth of the price of oil, of food, of health, of education and those expenses that bear the lack of family income and small businesses that are competed every day by the strengthened oligopolies in the sector of trade, production and public services given by concession.

In this context, the inflows of money are strong evidence that remittances further promote corruption based on political patronage, as they avoid confronting the beneficiary individuals with the demand of accounting to the government for the non-fulfillment of the rights that citizens pay to them through taxes and tariffs, so this policy of bringing in as much cash flows as possible has eased public pressure on governments to provide public services.

Although the analysis is not based simply on a governance model, but on the entirety of governance models in these three decades, daily life and evidence on the economy and society show us that governments in countries with weak democratic politics also build institutions that can act by disputed the potential and beneficial effects of policies.

As such, the current model of financing logic still based on remittances is not considered a success of economic and social policies, because this fact is related to the totality of capital flows that entered and exited Albania in the form of grants, loans and tax collection of citizens, but also immigrants, not yet recovering the investments declared through the sale of natural resources in international markets, as well as the investments that seem to never end in the infrastructure that has absorbed 1.8 trillion lek for at least three decades[3].

The incoming flows of foreign aid (as well as the incoming flows of grants and loans, as well as remittances), i.e. as a whole, together with tax revenues, do not seem to have been effective towards the development of the economy, since obviously a part of them has been instrumentalized by also helped political corruption and the unstable development of the country’s economy.

[1] Dutch disease is a concept that describes an economic phenomenon where the rapid development of one sector of the economy (especially natural resources) precipitates a decline in other sectors. It is also often characterized by a significant appreciation of the local currency.
[2] Endogeneity refers to the case where the effect of an independent variable on a dependent variable cannot be interpreted as random because it involves unaccounted for causes leading to bias.
[3] http://financa.gov.al/raporte-dhe-statistika-fiskale/