*By John P. Calamos Sr.
In the spring of 2013, I shared with you some insights from my recent trip to Greece, where I had met with global business leaders, economists, academics, investors, and politicians, including Greece’s Prime Minister Antonis Samaras. I wrote that “I came away feeling more positive about Greece’s future than I have been for many years.” In large measure, this was due to the sincere commitment that the government was making to encouraging free enterprise and foreign investment in Greece, including— to use a resonating metaphor of Prime Minister Samaras—replacing the red tape of bureaucracy with a red carpet for investors.
Politics, the markets, and economic prosperity are intertwined. And in a global economy, the cause and effect relationships are also global because “capital goes to where it is treated best.” Businesses, economies, and individuals are most likely to flourish in places where regulation and taxes are not overly onerous, where there is clear and credible rule of law, private property rights, and reasonable levels of protection for foreign investors.
A year later, my optimism about Greece has further strengthened. The Greek people made considerable sacrifices to help strengthen their national economy, while also finding ways to apply entrepreneurial spirit to the changing landscape. These efforts, as well as the commitment of Prime Minister Samaras’ government to more business-friendly policies and reasonable regulations, have allowed Greece to move beyond the worst days of its economic crisis. In fact, the European Commission stated that it expected Greek economic expansion of 0.6% in 2014, rising to 2.9% in 2015. The global markets have welcomed Greece’s improved health, with investors enthusiastically snapping up more than $4 billion of five-year government bonds this April. We’ve also seen increased interest from global corporations and institutional investors in a range of privatization activities, including airports, ports and railways.
While recent events in Greece underscore the impact that a supportive political backdrop can have on market performance, Greece is far from an isolated example. In 2013, we saw markets embrace Abenomics, the pro-growth policies that Prime Minster Shinzo Abe introduced to combat decades of economic malaise in Japan.
More recently, markets cheered election results in India that ushered in Narendra Modi as prime minister. Prime Minister Modi’s party amassed support with a pro-growth platform that stood in marked contrast to the policies of previous leadership, which he summed up when he declared, “You have made me a warrior of development.”
In recent years, much attention has been given to the role of monetary policy—such as quantitative easing in the U.S.— as the primary engine of economic growth. In this debate, the impact of fiscal policy and politics on prosperity has often been overlooked. Yet, individual entrepreneurship will always be the driving force behind prosperity and the creation of wealth—and by extension, economic growth.
One of the most significant challenges faced by investors and entrepreneurs alike is that politics are impossible to predict, especially over the short term. Yet, it is important to remember that human ingenuity has solved unprecedented problems. In the darkest days of the euro zone crisis, many predicted that Greece would open the door to the union’s collapse. This did not come to pass, as the Greek people and euro zone member nations refused to accept this outcome.
There are always hurdles to progress, but the global economy has marched forward through the decades, supported by the perseverance and hard work of individuals seeking a better life for themselves, their families and communities. This determination is what gave rise to the American Dream and the rise of the middle class in the United States; today, it is also reshaping economies around the world. Entrepreneurship drives economic progress. When governments make a commitment to growth, as Greece has, this fosters opportunities for local businesses as well as higher levels of foreign investor interest, which in turn provides market liquidity, stimulates growth, and opens the door to increased prosperity. This formula is not unique to Greece, but a road map that most governments can follow to success. Amid uncertainty and challenges, there is also opportunity— for innovation, growth and progress. I wish you the best in pursuing it.
*John P. Calamos, Sr. is founder, chairman, chief executive officer and global co-chief investment officer of Calamos Investments.