Reveries

Hi guys! This is one of my articles, this time to the Baltic Times.

“It is commonly believed that the Chinese word for ‘crisis’ (Wei-Ji) is the combination of ‘danger’ (Wei) with ‘opportunity’ (Ji). Another interpretation is that the meaning of Ji in Wei-Ji is closer to the ‘crucial point.’ Whatever the correct meaning is, a time of crisis represents both ideas. It is a ‘crucial point’ in the sense that something is wrong and thus must be changed; at the same time it represents the opportunity to change.”

Buy the print edition or read more at http://www.baltictimes.com/news/articles/24254/

Popularity: 11% [?]

One Saturday, after hearing a conference at SSE Riga, Jānis Ošlējs and I started to talk how would be great to have a conference discussing economic development beyond the ideological approaches common to Latvia. So, we started working on it, we added Jānis Grēviņš to the team, and here we are. The conference’s speakers are high level academics in the field of economic development, with practical experience working with developing countries. As Latvia is intellectually very hermetic and monotonic, it is a great chance to hear other opinions about what is going on in Latvia and in the world, and possible solutions. The speakers are (in alphabetical order):

Conference’s Speakers

Andrejs Berdņikovs
University of Latvia
PhD candidate – University of Latvia
MSc – University of Latvia
BA – University of Latvia

Andrejs Berdnikovs is a Ph.D. candidate in Political Science at the University of Latvia. He is an editor for Eastern Europe and coordinator for Eastern European group at the journal “Interface: a journal for and about social movements”. During 2008-2009 he was a Fulbright Research Scholar at the University of Washington, Seattle.

Jānis Bērziņš
Riga Stradins University/University of Latvia
PhD candidate – University of Latvia
MSc Oec cum laude – FCLAR/UNESP (State University of Sao Paulo, Brazil)
BA – UFSC (Federal University of Santa Catarina, Brazil)

Jānis Bērziņš teaches Political Economy, International Political Economy, and Economic Aspects of Globalization at Riga Stradins University’s Faculty of European Studies. His research is mainly focused in social and economic development problems, the relationship between economics and politics, and the role of ideology as determinant of economic mainstream, i.e., the process of masking agent interests to make them to appear to be “science” and/or part of a natural process, influencing the process of social and economic development.
His education in Brazil had a fundamental influence in his intellectual formation, forging his view of Economics essentially as multidisciplinary discipline. In both bachelor and master he has enrolled in top academic research groups, financed by the Brazilian Ministry of Ecucation.
He has worked in the University of Santa Catarina’s Far South in the Departments of Economics, History and Law and as a visiting scholar to Santa Catarina’s South University MBA in Internatonal Relations. He was also head of the UNESC Consulting’s Economic Department, leading several projects on regional economic development.
His last scientific publications deal with Latvia’s structural economic and political problems, and their role in the current crisis.

Jānis Ošlejs
Primekss/University of Latvia
PhD candidate – University of Latvia
MBA – SSE Riga
BA – University of Latvia

Jānis Ošlejs is an entrepreneur and economist, based in Riga, Latvia. He is chairman and co-owner of Primekss, a European group of high-tech composite concrete contractors. Headquartered in Riga, Latvia, Primekss has subsidiaries in Sweden, Finland, Norway, Poland and Baltic States. Other ventures include molport.com, an online database and marketplace for scientists working for drug discovery, PrimeTeh –a R&D company created to pursue green concrete construction through better material science and PrimeThermos – a venture to exploit a patent in energy-efficient housing.
As economist Jānis Ošlejs has written articles on employment, tax policy and issues on economic growth as well as took part in international conferences, worked on Latvia 2030 government strategy and as a consultant to political parties and organizations in Latvia and EU. His other public service roles include membership in the industry technical committees, such as Swedish Standards Institute SIS group “Design of fibre concrete”,  American Concrete Institute Technical Committee “Fibre Concrete”, as well as serving as board member of Latvian Contractors Association and Latvian Concrete Society.

Erik Reinert
Tallinn University of Technology, Norwegian Institute of Strategic Studies, Other Canon
PhD – Cornell University
MBA – Harvard University
BA – Hochschule St. Gallen, Switzerland

Erik S. Reinert is Professor of Technology Governance and Development Strategies at Tallinn University of Technology. His research area is the theory of uneven growth, i.e. the factors which – contrary to the predictions of standard economic theory – cause world economic development to be such an uneven process. The outlines of the particular framework of evolutionary economic theory to which Reinert subscribes can be found at www.othercanon.org . Reinert holds a He has worked as managing director of a multinational manufacturing firm with production plants in four European countries. The last fifteen years Reinert has dedicated to teaching and researching in the theory and history of uneven development, with particular attention to innovation and its absence and to the History of Economic Policy as an under-researched area, i.e. what kind of economic policy nations have actually carried out historically as opposed to what reigning theories told them to do. Reinert has worked as a consultant to various European Union organizations on innovation theory and policy. His book How Rich Nations got Rich and why Poor Countries Stay Poor (London, Constable & Robinson, 2007) was on Financial Times’ bestseller list. His edited books include Globalization, Economic Development and Inequality: An Alternative Perspective (Cheltenham, Elgar 2004) and (with Jomo K.S.) The Origins of Economic Development, How Schools of Economic Thought have Addressed Development (London, Zed 2005). His works have been translated into 12 languages.

Elmar Rompczyk
Freelance consultant for Sustainable Development
PhD – University of Bielefeld
since 2009 freelance consultant for Sustainable Development

2004-2008 Coordinator of the Friedrich Ebert Foundation for the Baltic states of Estonia, Latvia, Lithuania, established in Riga
2004-2007 Lecturer at the University Stradina Riga (Social Sciences)
2000-2003 Head of various environmental projects of the GTZ in Colombia
2001-2003 Lecturer at the Universidad Nacional de Colombia (Political Science)
1993-1999 Commissioner for Environmental Policy in the Department of International Cooperation of the Friedrich Ebert Foundation, Bonn
1994-1998 Lecturer for Political Science at the University of Bonn
1989-1993 Head Office of the Friedrich Ebert Foundation in Santiago de Chile
1987-1989 lecturer at the Department of Sociology at the University of Bonn
1981-1982 freelance consultant on the Africa-Asia office, Cologne, for project developments for the EU in Haiti
1979-1981 DED Representative in Peru
1976-1979 Latin American speaker at the Ev. Corporation for Development (EZE), Bonn
1975-1976 Dissertation “International Environmental Policy and North-South relations,” University of Bielefeld (Department of Sociology)
1973-1974 Junior Expert of UNESCO in Peru (Cuzco and Trujillo)1973-1974 UNESCO Junior Expert in Peru (Cusco und Trujillo)

Alfredo Saad Filho
Professor of Political Economy Department of Development Studies
School of Oriental and African Studies, University of London
PhD, University of London
MSc, National University of Brasilia
BA, National University of Brasilia

Professor Alfredo Saad-Filho has taught and researched in universities in Brazil and Mozambique as well as the UK. He has published widely on the political economy of development, industrial policy, Latin American political and economic development, inflation and stabilisation. He held the position of head of department of Development Studies at SOAS between January 2007 and December 2009.

Jeffrey Sommers
Visiting faculty at SSE Riga
PhD, History, World History Center, Northeastern University
MA, History, University of Wisconsin-Milwaukee
BA, History, University of Wisconsin-Milwaukee

Jeffrey Sommers is visiting lecturer at SSE Riga. He is the co-director of the Silk Roads Project at SSE Riga, and creator and curator of the Andre Gunder Frank Memorial Library at the school. His research centers on economic history, global studies, global governance, and hegemonic transitions. Embedded within this work is research on European Studies, with emphasis on labor migration in Europe within the framework of a wider political economy and regulatory regimes. Recent empirical studies have been on Baltic labor migration from new EU Member States in the context of European integration. Publications are both solo and collaborative interdisciplinary monographs, along with international peer-reviewed journal articles, published and in progress. Interdisciplinary methodological research consists of employing qualitative approaches (interviews and archival work) while making use of extant quantitative data sets. He divides is primarily based in the US, but has several years experience in the Baltics on Fulbright and other grants.

Jan Toporowski
Reader of Economics
Department of Economics School of Oriental and African Studies, University of London
PhD University of Birmingham
MSc Birkbeck College London
BA Birkbeck College London

Jan Toporowski worked in fund management and international banking before becoming and academic at the end of the 1980s. In 2003-2004, he was an Official Visitor in the Faculty of Economics and Politics at Cambridge University. In 2005 he was a Visiting Research Fellow at the Bank of Finland. He currently teaches in the Economics Department of the School of Oriental and African Studies, University of London, and is a Research Associate in the Research Centre for the History and Methodology of Economics at the University of Amsterdam. Jan Toporowski has published widely on financial and monetary economics and is currently engaged on a study of the economist Michal Kalecki.

Alessandro Vercelli
Department of Political Economy, Faculty of Economics, University of Siena

1969: Laurea in Economics, University of Torino.
1969: Junior Research Fellowship, St. Antony’s College, Oxford, U.K.
1976: Full professor of Economics, Faculty of Economics and Banking, University of Siena.
1981-84: Director of the Institute of Economics, University of Siena.
1982 : Fulbright-SSRC AWARD on the co-ordination of economic policies.
1988 : St. Vincent Prize for the best essay in economics.
1988-93: Director of the Ph.D. in Economics organised by the Universities of Siena, Firenze and Pisa.
1994-95: Chairman of the Department of Political Economy of the University of Siena.
1996: British Council Senior Visiting fellow in Italian Studies, St Antony’s College, Oxford.

Alessandro Vercelli is Full Professor of Economics at the University of Siena, Italy. He is Vice President of the Executive Committee of the International Economic Association. He is author and editor of several books and articles in the fields of economic policy, economic methodology, cycle theory and environmental economics.

Conference Program

Latvia at Crossroads: Scenarios and Strategies for Socio-Economic Development

When: Friday, January 15, 2010 at 9.00

Where: RTU Riga Business School, Skolas iela 11

Organizers: RTU Riga Business School and RBS Alumni Association

Supported by: European Commission in Latvia

Program

8:30 – 9:00 – Registration

9:00 – 9:20-  Opening remarks

• Jānis Grēviņš, Director, RTU Riga Business School
• Representative of European Commission

9:20 – 10:50 Development Crossroads: Development of Underdevelopment

• Erik Reinert (Tallinn University of Technology, Norwegian Institute of Strategic Studies)

“Neoclassical Economics: a Trail of Economic Destruction Since the 1970s”

• Alfredo Saad-Filho (School of Oriental and African Studies, University of London)

“”Neoliberalism, Crisis, and Prospects for Development”

• Jānis Bērziņš (Riga Stradins University/University of Latvia)

“Neoliberalism and the Development of Underdevelopment in Latvia: perspectives for the future”

10:50 – 11:10 Coffee Break

11:10 – 12:40 Sustainable Development: Society and Economics (moderator: Jānis Grēviņš)

• Jeffrey Sommers (Raritan Valley College/SSE Riga)

“Latvia’s development: past, present, and future directions”

• Elmar Römpczyk (Freelance consultant for sustainable development)

“Challenges to Sustainable Development in Latvia”

• Andrejs Berdņikovs (University of Latvia)

“Crisis, Social Movements and Alternative Knowledge Production: an International Comparison with Latvia”

12:40 – 13:00 Coffee Break

13:00 – 14:30 Development vs. Postponed Capitalism (moderator:  Mihails Hazāns)

• Jan Toporowski (School of Oriental and African Studies, University of London)

“’Capitalism Postponed: Eastern Europe after Communism”

• Alessandro Vercelli (University of Siena)

“A Perspective on Minsky Moments: The Core of the Financial Instability Hypothesis in Light of the Subprime Crisis”

• Jānis Ošlējs (University of Latvia)

“Strategies for development: winning the crisis in Latvia”

To register: e-mail: ilze.arklina [at] rbs.lv

Participation fee: Ls 20, payable to “Rīgas Biznesa skolas Absolventu asociācija”

Registration No. 40008061874; A/s “Swedbanka”

Account No.:LV51HABA0551007259646

NO participation fee for active students and academic staff (of any institution), politicians and press!

Popularity: 15% [?]

One of my papers will be published on the next issue of the Journal Humanities and Social Sciences. There I analyse the term Knowledge Society refering to a peculiar form assumed by the capitalist system in the last forty years, also representing its specific social, economic, ideological, and political systems.

Although there is a strong rhetoric denying it, it is quite obvious that politics and economics are interconnected, at the same time their relationship influences the social dynamics, establishing specific patterns of ideological dominance. One characteristic of the knowledge society is the negation of any form of connection between these variables, denying at the same time its ideological character. The alleged separation of the political from the economic and the social forms the base to Schumpeterian democracy to becoming Knowledge Society’s political model, which is based on neoliberalism by the economic side.

Want to read more? CLICK HERE to download the full paper.

Popularity: 18% [?]

Tautas Partija and its leader Andris Šķēle represent what is wrong with Latvia. Šķēle, Segliņš, Rozentāle, Demakova, Slakteris, Kalvītis, Veldre, just to cite a few, are very responsible for Latvia being in the situation it is nowadays. Of course the other parties also have their share of guilty. But none never united such a big quantity of people only thinking about capture the state to enrich themselves than Tautas Partija. The biggest favour these people could do for Latvia is to get out from public life. But they can’t.

My life is a money racing.
I feel that it’s the end of the road,
but I want to get more for myself.
My influence is weakening, new people are coming,
They will find something, for sure they will find…
But what?

The next will change our people,
They will look for truth about everything…
Will they judge me? Can I buy them?
Most important is to know in the right time,
while it’s possible to change something.

I was chosen when I was born
I don’t have place among beggars,
They vote for me, for us,
Because they believe we’ll introduce changes.

I’m the schemes’ king,
My schemes in this country embraces everything -
construction, education, sports or health care.
Everywhere there are things in course, which must go on,
Everybody is involved, does someone not?
Give notice! If someone is not involved,
That’s a risk, please, become involved!!!
I pay.

I don’t know how this is going to end. This is not a simple lottery,
here the rates are higher…
Big money. Very big…
For how long it has been growing?
Why did I decide to come back?
Because if I won’t be a player,
Soon I’ll be hounded,
because of what I did in previous years.

I don’t differentiate friends from enemies anymore,
If before I was paying, now they ask me to pay,
This is blackmail, bet what can I do?
I know some things about them,
But I don’t know, how much they know about me.
It’s better to be present and to control all by myself….
Until the end… until the very end.

Ah, how I would like to have only one free day,
as in that time,
when I used to live, not
when my life turned to be a money racing.

Popularity: 11% [?]

Hi everybody! As you know, I am very busy writing my doctoral dissertation to write an exclusive post to the blog right now. Anyway, as I am discussing the ideological question in the postmodern approach, I just found this debate between Noam Chomsky and Michel Foucault, which I would like to share with you. Have a nice time hearing the men.

Popularity: 22% [?]

During the academic year 2009/2010 the Stockholm School of Economics in Riga in cooperation with the Embassy of Finland and the Embassy of Sweden intend to offer a series of lectures on various aspects of the ”Nordic Model” and its eventual relevance for the Baltic countries.

The first lecture in this series focuses on: The lecture discusses how Finland has developed as a state, society and culture between the 1910s and the turn of the millennium. How were the international threats handled? How have values and the national identity been formed in a sometimes rapidly changing world, and how this has dictated the construction of the Finnish society?

The lecture will be given by Professor Henrik Meinander, University of Helsinki.

The lecture will take place on Tuesday, November 10, 16.00 – 18.00 at the Stockholm School of Economics in Riga, Strelnieku iela 4a. Please register for the lecture at: http://www.sseriga.edu.lv/node/681

Popularity: 9% [?]

Dear all, I know it’s more than one month I’m not writing. I’m writing my PhD dissertation with a great dedication. I really need to end it soon. However, as usual, I’ve been thinking about economic development. One of nowadays most interesting thinkers is Ha-Joon Chang from Cambridge. He has been in Riga talking about his book “Bad Samaritans”. Below you may watch him speaking about his book. Highly recommended.

Popularity: 14% [?]

Usually, I refuse to make any kind of advertisement on my sites. However, I liked so much the Book Depository’s idea, that I’m advertising them. The deal is they have very competitive prices and they delivery for free, practically worldwide. As usually delivery rates are very expensive (Amazon is outrageous), shipping and handle may be the book’s price. In this case, with free delivery, the book’s price is the same as if buying it in the UK. It’s really OK. Take a look:

Of course, a good alternative is to buy used books on Ebay. Also very recommended!

Popularity: 13% [?]

This is the English version of the article published in Latvian on Diena.

Devaluation in Latvia and the fallacy of socio-economic development

Jānis Bērziņš1

A lot has been discussed about the desirability of a devaluation in Latvia. The main idea is that through devaluation Latvian products are going to be more competitive in the international market, resulting in boosting exports. It also would assure economic development and would help to solve the imbalances of the Balance of Payments. Although this idea is theoretically correct, in Latvia’s case it’s not so simple.

By the macroeconomic side, Latvia’s economy has passed through a process of restructurization with the establishment of unsustainable sectors that amounted for about half of the GDP in 2008 (speculation with real estate actives, consumption of durable goods, financial intermediation and transports and storage). This was the consequence of years of equivocated economic policy and predatory behavior by politicians and civil servants,  which has resulted in the establishment of a system that discourage investment in the real sectors of the economy.

By the microeconomic side, Latvia has one of the worst levels of productivity in relation to the European Union. There are problems of standardization, quality and losses in the productive process, as there is also a lack of investment in new equipments, technology and development. Of course there are exceptions. Besides, some of Latvia’s businessmen still have the Soviet culture of “We don’t do business. We settle things”, what’s different from the Western logic. Also, most of the Latvian firms are small, what results in diseconomies of scale.

It’s true that the real exchange rate is over-evaluated2 and that almost fixed exchange rate never should be adopted by the Bank of Latvia, as it always results in crisis.3 It’s also true that an over-evaluated exchange rate decrease exports, therefore, reduces the level of economic activity. However, due to Latvia’s economy lack of sustainable development, a direct devaluation would rather have the following consequences:

a) Latvia imports most of what is consumed in the country. A devaluation would immediately result in inflation, deepening recession. Inflation results in smaller real salaries. The consequence is the increase of assaults, robbery, alcoholism, suicide, etc. Also, it would increase immigrations, leaving the country without qualified workers, making very difficult to start some business due to the lack of qualified workforce and/or the high costs of labor.

b) As most of the inputs are imported, a devaluation would increase a significant part of the costs of most of the inputs of the productive and services sectors, considerably reducing or even neutralizing the artificial competitiveness gained with the devaluation.

c) The productivity of Latvia is one of the lowest in EU affecting the competitiveness of the Latvian exports. The experience of other countries suggests that strong devaluations  results in the decline of private sector investments. In this case, devaluation would rather act as a disincentive to innovation and investments. Also, as there is a significant difference between the costs of electricity, water and wages between the EU and Latvia, low levels of competitiveness are the result of inefficiency or high profit rates. Competitiveness must be gained by real productivity gains and reduction of the profits margins.

d) Latvia’s private sector foreign currency exposure is around 70% of GDP, with the corporate sector’s foreign currency open position practically double that of the household sector.  A devaluation of 15% – to remain under the limits of the Maastricht criteria – would increase private sector net foreign currency exposure by 11 percent of the GDP of 2008, two thirds in the corporate sector and one third in the household sector. Private consumption would fall, house prices decline, debt service costs increase, and consumer confidence deteriorates.

Due the problems above, a devaluation would be desirable only as part of a strong policy to promote sustainable economic development. However, the truth is that a devaluation is already occurring in Latvia through the recession, deflation and increase of unemployment of the last months, and that tends to be worse after the summer. Deflation and economic recession are reducing our relative prices in the international market.

That’s the same effect of a direct devaluation and that’s exactly what the IMF and Latvia’s government have agreed to do. In the IMF’s own words, “(…) real exchange rate overvaluation would need to be addressed through (…) a recession in the short run, and slow growth for several years to come”. However, Latvia needs to develop its economy and not to face years of slow economic growth. That’s why a new model of development is necessary.

The first thing to be done is to change the tax system. Latvia’s tax system is inverted. It must be changed, simplifying and reducing the taxes of the real sector and people, while imposing taxes to Real Estate business and property, financial capital gains and natural monopolies. Also, a special regime of tax exception to new business in innovative sectors or using innovative methods should be established. Also, all bureaucracy related not only to start a business but to maintain it must be reduced, including a “grāmatvedības reforma”. The third point is that the state must provide physical space and infra-structure, by donating or allowing investors to use state-owned land to form technological and industrial parks for free.

After the nationalisation of Parex Bank, Latvia now has two state-owned banks; thus, it is desirable to concentrate commercial operations in one bank, preferably Parex, and to turn the Hipotēku Banka into an investment bank committed to socio-economic development. As a development bank, it must establish a strong program of credit directed to the establishment and development of companies producing or using innovative products or technologies. This credit must be given at the lowest possible interest rates through a transparent process supervised by the Latvian Chamber of Commerce and Industry, by the Employer’s Confederation of Latvia and by the unions. Finally, like Slovakia and Slovenia, Latvia must initiate a special program of incentives to attract foreign direct investments, like Slovakia, Slovenia and even Finland.

These are only some examples of possible policies and not a closed system. The  Latvian politicians that captured the state still don’t understand that their survival depends on the reforms to promote real economic development, which are dependent of the establishment of successful competitive business. It’s important to understand that the politicians and civil-servants are responsible for what happen in the country. Also, that Latvia’s problems are the result of the wrong application of the neoliberal policies of the last years. That’s why the solution depends of a new political pact to promote growth, together with the development of a more realistic and sophisticated view of economic development policies, breaking with the ideological neoliberal populism of the last two decades.

1) Riga Stradins University.
2) Near 20% in comparison to 2005. The real exchange rate is the nominal exchange rate taking in consideration inflation. It’s a more accurate indicator than the nominal exchange rate. In this sense, in relation to 2005, the Latvian Lats would be devaluated about 20% against the euro in a free exchange rate mechanism.
3) Concrete examples of countries who adopted a fixed exchange rate and faced serious crisis include Argentina, Brazil and Thailand in the nineties.

Popularity: 25% [?]

As I have no time to write now, I give you Quino, the excellent Argentinian cartoonist, and a day in the life of a Latvia’s civil-servant. Or of most of Latvia’s universities…

Popularity: 12% [?]