Jacovs Pliners: 8 cornerstones of Latvian economy

According to the deputy of Latvian Seym Mr. Pliners during last two years Latvian Economy lost nearly one forth of its value. The numbers say by themselves: they spend 3,4% of GDP on health, while an average rate in Europe is of 6,7%,  9.5% on social aid, an average rate in Europe is of 18,5%, about 4% on education, while the necessity is two times more. Meanwhile the Latvian Economy remains ineffective. There are too many misbalances there, as one can see from the 8 cornerstones indicated by the deputy.

1. Import exceeds export
The country looses a lot of money. It is necessary either to increase export or to diminish import. In order to increase export it is vital to carry out effective industrialization of the country. It is logical that export production will lead to new jobs, decrease unemployment, which now is nearly 15% of the economically active part of the population.

2. The Bank of Latvia keeps insisting it is impossible to low lat’s value
While the exporters are sure that solid lat continues destroying the country’s economy. There is no unanimous opinion whether it is necessary to devaluate it or not. Probably they had to initiate the devaluation process earlier when the import was more expensive and local products were cheaper. The population would buy locally produced goods leaving the currency at home. It could help to pay out the international loan.

3. The Latvian Economy’s structure is below any criticism
According to the deputy it is necessary to support pharmacy, high technologies development, not forest devastations & sales.

4. Oversized state machinery
Probably it is one of the major problems of unskillful financing. Recently state bodies’ employees gained about 20% of the GDP, while an average rate in Europe is just 7-10%. There are 1, 8 more officials in Latvia than In Lithuania & Estonia. If they reduce two times the total number of the ministers & officers nothing will go worse in the country but state treasury will save 100 million lats a year. Some economists think that it is necessary to leave only 30 000 officers against actual 130 000. While business in Latvia diminished during the last two years 30% the state machinery reduced only 5%.

5. Latvia holds the last place in Europe for science financing.
Legal nihilism reins. According to the legislation 0,15% more than previous  year should be granted to the science development but the government  acts just the reverse. In 2009 science was granted 21 975 015 lat, in 2010 it was only 16 532 657 lat. While Latvia intends  to be like Europe or Scandinavian states it doesn’t take into account that Sweden & Finland assign nearly 20 times more funds for science than in Latvia.

6. A country can’t be prosperous without good education, therefore there cannot be any wealth of the population without it too.
Till nowadays there is no determined social demand for the education in Latvia & there ‘s no demand for universities. A big number of lawyers & economists who studied in Latvia go to Spain to gather strawberry or work at construction sites in England & Ireland. Besides, the quality of the education given in these universities is affected as well. Among 1500 best European universities there is no Latvian one, although the total number of universities & colleges in Latvia is 61, where 112 thousand students are studying (18 are state universities).

Government & business should form demand for the education. It should become a priority for the state policy.

7. Elementary economic theory instructs to low taxes during a crisis, but insure everybody pays them
We are living with a system of wild capitalism of the beginning of the past century. First, taxes are high, second – the Latvian tax system doesn’t stimulate their payment & leads to shade economy, unofficial salaries. According to some economists the country looses about 3 billion lats  a year because of that, the shade economy is of 50%. Another task is to gradually low VAT & income tax. But in order to insure that everybody pays taxes it is necessary to have at least a strong will to do that.

8. Investments are economy’s blood
It is necessary to maintain friendly mutually profitable relations with Russia & other CIS countries. It means investments accompanied with new jobs & taxes payments. Besides, it means transportation, logistics, tourism, gas conservation plant construction in Dobel & possibly return of unpurified oil transit. All these factors together will gain Latvia not millions but billions.