Transcript Economic instability

Albania’s Troubled
Economy
Justin Wise
[email protected]
Geography 308 (Russia and Eastern Europe)
Professor Zoltan Grossman
University of Wisconsin-Eau Claire
Spring 2005
Where in the World is Albania?
http://www.worldatlas.com/webimage/countrys/europe/al.htm
Influences on Albania’s Economy

Geography



Coastal boundary
Mountainous region
History




War
Transition from
Communist
government
Foreign assistance
Pyramid Schemes
http://www.factmonster.co
m/ipka/A0107268.html
Geography of Albania

Similar in size to the state of Maryland

Coast is along the Adriatic Sea

Two major regions:
Mountainous
 Coastal lowlands

http://www.grida.no/db/maps/prod/level3/id_1259.htm
Mountainous Region


http://www.geocities.com/Paris/Louvre/6820/PEI
SAZH2.JPG
70% of the
landmass is
mountainous
highlands
Highlands
located in the
North, East, and
South
Mountainous Land Use & Industry

Land Use




Mining
Timber
Livestock
Industry




Machining
Cement production
Textile
Metal goods
http://www.lib.utexas.edu/maps/atlas_east_europe/albaniaeconomy.jpg
Coastal Region

Densely
populated

Contains a
majority of the
country’s
agricultural
lands
http://www.geocities.com/Paris/Louvre/6820/
vlora8.jpg
Coastal Land Use & Industry

Land Use

Agriculture



Wheat, Grapes, Dairy, etc.
Pasture land
Industry




Petroleum refineries
Chemicals
Textiles
Food Processing
http://www.lib.utexas.edu/maps/atlas_east_europe/albania-landuse.jpg
History of Albania

Long history of involvement in war

Isolation from rest of world in Enver Hoxha
(communist) dictatorship

Dramatic shifts in government systems

Large amounts of foreign aid in recent years

Corrupted Pyramid business practices
Long history of involvement in war

Occupied during both World
Wars

WWI


WWII



Italy, Serbia, Greece, & France
Germany & later Soviet
Union
Pro-Nazi “Greater Albania”
included Kosovo and western
Macedonia
Kosovo Conflict

Large numbers of KosovarAlbanian refugees
www.msnbc.com/news/546910.asp&h=249
&w=330&sz=19&tbnid=8ThwmEGLh68J:
&tbnh=86&tbnw=114&start=17&prev=/i
mages%3Fq%3Dalbanian%2Bwar%26hl%3
Den%26lr%3D%26sa%3DG
Isolation from the rest of the world

Enver Hoxha



Albania’s 1st communist
chief of state
Ruled for 40 years
Albania became the most
tightly controlled country
in Europe


Restricted trade
Limited communication
with the rest of Europe
http://ciml.250x.com/gallery/enver.jpg
Shifts in governmental systems


Early 1900s-1948 – Socialist
1948-1991 – Communist
Soviet Communism
 Enver Hoxha dictatorship
 Chinese Communism



1991-1992 – Reformed Socialist
1992-Present – Emerging Democracy
Large amounts of Foreign Aid

Italy, under Mussolini, provides aid when he gained
Albania (1935-1939)

Communist partisan leader Enver Hoxha takes over

Albania joins Soviet-allied Council for Mutual
Economic Assistance “Comecon” (1949)

Hoxha signed agreement between Soviet Union and
Albania for economic assistance (1951)
Foreign Aid Continued…

Large amounts of economic aid from Soviet Union,
Eastern European countries, and China begin pouring
into Albania (1959)

Albania sides with China, Soviet economic support to
Albania stops, and Chinese aid is increased (1960)

China terminates all economic aid to Albania (1978),
and it becomes the poorest country in Europe
The Pyramids of Albania!

Albanians personal
savings soared


Equaling ~15% of the
nation’s GDP (1995)
Investors saw
opportunity

Introduction of the
pyramid scheme…
How the Pyramid System Works

High interest rates

Promise of 30%-50% return

Earliest depositors gain most return

Everyone investing benefits

Or do they…
Pyramids Gone Awry

All but few operated
honestly

Systems corrupted by
swindlers and pseudobusinesses

Many Albanians fooled
Effects of the Pyramid Schemes

50% of Albania’s GDP lost to the schemes
$1.2 billion
 ½ of nation’s money gone (only eight years ago!)


Albanian government blamed by the people
Trust in the government broken
 Judiciary and bureaucracy remain weak

Effects continued…

Massive rioting broke out

Foreign minister Tritan Shehu attacked and injured
after trying to calm the rioters

Police stations, town halls, court houses set on fire

US forces currently in Albania helped to control
crowds
Current Economic Status

Poorest country in Europe


Relatively high
unemployment rate



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Lowest European standard of
living
15.8% (closer estimates near
30%)
Organized crime flourishes in
chaotic circumstances
Remains a developing
country, even though it’s in
Europe
EU Membership? Not a
chance!
http://www1.tip.nl/~t100878/ALPI
X/jube.jpg
Currency & Exchange Rate
http://www1.tip.nl/~t100878/ALPIX/abb5lv.jpg

Leke or Lek

Current Exchange
Rate

http://www1.tip.nl/~t100878/ALPIX/abc1laa.gif
97.42 per US Dollar
Future Albanian Economy

Striving for a more openmarket economy

New chief of state Alfred
Moisiu (elected July 2002)
 Restored public order
 Increased economic
activity and trade

Remittances of workers
abroad help to supplement
the GDP
http://cp.settlement.org/english/albania/
images/alb17.jpg
References
1.
http://lcweb2.loc.gov/frd/cs/altoc.html
2.
http://www.loc.gov/rr/international/european/albania/al.html
3.
http://www.abacci.com/atlas/economy3.asp?countryID=121
4.
http://www.factmonster.com/ce6/world/A0856539.html
5.
http://www.factmonster.com/ipka/A0107268.html
6.
http://www.state.gov/p/eur/ci/al/c4069.htm
7.
http://www.worldbank.org/html/prddr/trans/so97/albania2.htm
8.
http://www.b-info.com/places/Bulgaria/news/97-01/jan28a.omri