Have you ever heard the term “knowledge-based economy?“ And about how much knowledge, ideas and skills matter for economic competitiveness - a precondition for economic growth and prosperity? If you are reading this blog you probably have, and probably more than once. Yet what is a knowledge-based economy really? And are the Central and Eastern European countries on their way from brawn-based to brain-based economies?
According to the World Bank’s Knowledge Economy Index 2007, Sweden is the most knowledge-based economy out of some 140 economies ranked. From the countries of Central and Eastern Europe (CEE), Slovenia occupies the 23rd rank, followed closely by Estonia (25th), Hungary (28th), and the Czech Republic (29th). Lithuania, Latvia, Poland and Slovakia did not make it into the first thirty, but are close. What is more, both these Baltic countries made an impressive jump since 1995, according to the index. Romania and Bulgaria rank only behind countries like Barbados, Chile or Malaysia. Slovakia has been the only country out of the CEEs which backslid. index definition, out of the CEEs, Slovenia has the most conducive environment for knowledge to be used effectively for economic (and social) development. This means that its economic and institutional regime provides incentives for efficient use of existing and new knowledge. It has an educated and skilled population that can create, share and use knowledge well. It has an efficient innovation system of firms, research centers, universities or consultants that can tap into the stock of global knowledge and assimilate and adapt it to local needs or create new knowledge. And, last but not least, it has information and communication technology that facilitates creation, dissemination and processing of information. Again, in the CEE environment.
Without going into the nitty-gritty of this index, I used it because it shows a variation in the performance of the countries in the region of my interest. It also indicates that there are interesting stories of change over time. In my blog entries, I would like to tell something more about these stories and about the individual elements of which the Knowledge Economy Index consists. I will write about the skill- and knowledge-formation policies in the countries of the Central and Eastern European region. These include education and R&D policies and reforms but also broader measures targeting the labor market and enterprise support, which foster skill acquisition and utilization in the economy.
However, (and at the same time), my understanding and interpretation of all the above-mentioned issues goes beyond the notion of a high skills economy. Rising productivity in the twenty-first century does not only depend on new technologies, research and development, or the level of funding devoted to education and training, but also on how these are embedded in ´institutional´ and social relations. In line with Brown et al (2001), therefore, I prefer and adopt the concept of high skill society.
Katka Svickova
May 13, 2008
From brawn to brain-based economies? Welcome to the Knowledge and Skills section
May 12, 2008
Coping with the energy import dependence - Problems of economic security in Czech Republic, Hungary and Slovakia
By Andrej Nosko
Decade after the Cold War ended, the first three post-communist countries join North Atlantic Treaty Alliance, epitome of their former enemy. Ceremony in the city of Independence , Missouri was not only to mark the end of the bipolar world, but also the regaining of political independence of the post-socialist countries. The first three forth-runners were joined by others and not long after the EU15 have grown to EU27, with all but two of the new member states remembering COMECON .
Nonetheless, Independence is a bit more than a name of a city in the Midwest United States. It is also bit more than political declarations. Although nobody doubts that EU8 are politically independent, their common historical legacies are haunting them where their economies are sensitive the most. They all share almost complete dependence on the imports of energy supplies. To add to the seriousness of their situation, they are all dependent on the imports of these crucial resources from their eastern neighbor, under whose patronage they lived well over half of the century.
In this blog section, you are invited to follow stories of coping with energy import dependence in the three landlocked countries of Czech Republic, Hungary and Slovakia, which have all started their transition paths in relatively comparable situation, but since have gone a long way in different, but often replicating directions – sometimes learning from each other, sometimes replicating the same mistakes.
The goal of this blog is to offer theory-informed commentary, focusing on the current events, asking tough questions, formulating hypotheses, and putting them into the historical perspective. The sources are listed with each post, some of the general sources will include company and local news, primarily from ISI Emerging Markets, LexisNexis® Academic Country specific news will be derived from Slovak economic weekly Trend with its excellent energy specialist Karel Hirman and his blog, in the Czech republic, the news will be followed from the Portal of Economic Daily iHNed.cz, the Hungarian news will be processed from international and domestic English sources like Budapest Sun and Caboodle . The stories from the EU will be followed in general news, official institution websites and Euractive.com website. The sources for the theoretical aspects of the blog will be elaborated in a separate post.
by Andrej Nosko
Sharing the pie in CEE: Welcome to the Welfare and Inequality section
The transitions that took place in the postcommunist countries of Central and Eastern Europe (CEE) brought about significant changes in all aspects of these societies and in the lives of the people living in them. Yet the challenges and struggles of transition were not evenly distributed. Here is a space for reflection on welfare in the societies of CEE. Among other questions, we will ask:
• Which groups and people face substantial welfare struggles?
• What approaches improve welfare and who benefits?
• What is the state’s role in welfare provision in these societies and amidst these struggles?
• What are the welfare issues that matter today in the societies of CEE?
The transitions that took place in the postcommunist countries of Central and Eastern Europe (CEE) brought about significant changes in all aspects of these societies and in the lives of the people living in them. Yet the challenges and struggles of transition were not evenly distributed. Here is a space for reflection on welfare in the societies of CEE. Among other questions, we will ask:
• Which groups and people face substantial welfare struggles?
• What approaches improve welfare and who benefits?
• What is the state’s role in welfare provision in these societies and amidst these struggles?
• What are the welfare issues that matter today in the societies of CEE?
For some, the struggles of transition inspired an incomplete, but nevertheless real nostalgia for the old system. This type of nostalgia can be seen in this quotation from a Romani woman from a village in Western Ukraine: “In the old system, we had money, but there was no bread to buy. Now the store shelves are filled with bread, but we have no money to buy it.” The questions re-emerge:
• Who can and cannot afford ‘bread’ in the new system?
• How can more ‘bread’ be provided or how can the ‘bread’ be distributed differently?
• What is the state’s role as a provider of ‘bread’?
In some ways, the struggles causing and caused by poverty and inequality are similar around the world, from the most developed to the least developed countries. In other ways, the struggles and approaches to poverty are unique to their context. The historical legacies from pre-communist and communist times create distinct perspectives of and approaches to poverty and inequality. For example, the role of the state in the previous system sets expectations and limitations for the role of the state in contemporary society. The political and economic dynamics of transition present unique challenges for poverty and unique conditions for welfare provision. Decisions made in transition do matter, whether those decisions were made by domestic politicians, international advisors, voting citizens, or others. This blog looks at issues of poverty and inequality in CEE with a particular emphasis on how the state’s involvement in these issues matters and varies from country to country. The key question is: who decides and what determines outcomes of poverty and inequality in CEE?
By looking at the faces of poverty and inequality in this region, reviewing publications and reports on these topics, and accessing the current debates about welfare reform in various countries in CEE, we will have a glimpse the great social struggles that remain in these societies and the various proposed solutions.
Kristin Nickel Makszin
nickel_kristin@phd.ceu.hu
May 9, 2008
Welcome to Regional Development section
Were you ever gazing through the window of a train observing the changing landscape, which, like a giant conveyor belt, kept bringing you still images of villages, towns and cities, remote places and densely populated ones? Did you have an impression that in the end all of this merged into a colourful order of roads, buildings, factories and agricultural lands scattered among rivers and lakes, fields and forests, hills, mountains and lowlands? In short, did you ever notice how human activity varies across geographical space?
Were you ever gazing through the window of a train observing the changing landscape, which, like a giant conveyor belt, kept bringing you still images of villages, towns and cities, remote places and densely populated ones? Did you have an impression that in the end all of this merged into a colourful order of roads, buildings, factories and agricultural lands scattered among rivers and lakes, fields and forests, hills, mountains and lowlands? In short, did you ever notice how human activity varies across geographical space? I am pretty sure that you did. If so, then most probably you also noticed the sometimes really striking differences between the levels of development of two different locations. If you think of your home country, it is very likely that you already have a clear idea about which part of it is well-developed and which is lagging behind.
It is quite common to compare and analyze cross-country differences but it makes a lot of sense to go one level deeper and observe regional disparities as well within a given country. By giving it a further twist, one may also analyze cross-country regional differences of development. This is what regional scientists do and this is also what I am especially interested in. What makes a particular region develop while its neighbour may experience crisis at the same time? What causes the patterns of regional development within one country and what could account for cross-country regional differences? Is this related to the diverse local endowments, state-level development policies, historical and cultural traditions, local entrepreneurial and innovative skills or are there external, transnational forces that have crucial impact on the local level? Most probably all of these factors exert substantial influence on regional and local development but the above list is still far from exhaustive.
Those who study regional development tend to claim that development patterns demonstrate a path-dependent character. This implies that historical legacies and certain crucial events in the past influence the choices made in the present. Briefly, already existing regional disparities are more often being reinforced over time than not. In Central and Eastern Europe (CEE) this issue may be even more salient than in some Western European countries. The experience after the change of regime suggests that the location choices of foreign investors have to a great extent reinforced regional disparities in CEE countries and laggard regions are less and less able to catch up.
However, I am not convinced at all by such arguments. Be it wishful thinking or not, I would like to see regions that are able to overcome their inherited disadvantageous positions. I would like to understand what makes a region successful and what the reasons are for eventual failures. How do local, national and transnational forces interact at the local level and how do they influence regional development? What is the potential role of local governments and their associations in this process? How do national and EU-level development policies contribute to success stories or breakdowns? Ultimately, is it possible to beat path-dependent trajectories?
In this blog, I am going to discuss these issues, focusing on the Central and Eastern European countries, while paying particular attention to the Visegrad group, to Poland, the Czech Republic, Slovakia and Hungary. Special attention will also be devoted to local cross-border cooperations and other initiatives that are “bottom-up” movements aiming at overcoming regional disparities. Given the highly complex nature of the problem, the blog is also intended to be complex and I will attempt to address the above issues from several perspectives. In sum, I invite you, dear reader, for an exciting adventure into regional science!
Gergő Medve-Bálint
Talent on the move : Welcome to EU Migration section
If you are a young Central European, there is a high chance that you have worked abroad, perhaps even higher than the chance that you have worked in your home country. If you are a young Pole, Slovak, Latvian and Lithuanian, the chances that I am right in my guess are much higher than if you are Czech, Slovenian, Hungarian or Estonian. Contrary to traditional concept of migrant, a young Central European migrant tends to stay and work abroad short-term and temporarily. And in spite of relatively good education – most of the time higher secondary or tertiary – tends to get employed in low skilled, low-qualified, or “3D” (dirty, dangerous and dull) jobs.
Why do (some) people move to work abroad - that is - what are the causes of migration – is a question which has occupied academics and policy-makers already for few decades, most of the scholarship being developed on the case of the US. Then, once we (somewhat) understand the causes, a further pressing question to ask is one of the effects of migration, both on host and home countries and communities. Clearly, understanding the causes can better inform us about the effects and it can also help us to understand why – still – majority of people in the world and in the EU does not move. These will be the issues discussed at this blog, looked at from various angles in order to understand what exactly is going on in the EU27 mobility-wise, how to estimate the magnitude, under what conditions to worry or to rejoice of the dynamics we see, which benefits and which problems have we already reaped and what have the firms, individuals and governments been doing and plan to do about it. The lens of my enquiries will come from and will be set on the region of Central and Eastern Europe, which in spite of the ‘demise of transition’ keeps posing puzzles and challenges for the theories developed elsewhere.
So, if you are interested to learn more about the role that Central and Eastern Europe has been playing in the global war on talent (note this down: a catch phrase of this and the coming eras!), why do Slovaks migrate and Czechs much less so, how to understand the role of industrial, education or social policy played out in the context of (not-only) post-EU enlargement migration flows, and about many other issues, please keep coming back. I will offer a cross-country and cross-discipline approach, in a language accessible to everyone (yes, even to economists :)
Lucia Kurekova
Wecome to Banking and Finance Section
Finance is important for economic development. Economists of all stripes and colors consistently find support for this thesis, although they argue loudly on what makes finance work and prevents them form collapsing in a spectacular crises. The EU10 experience in last 20 years actually support this view; finance were key to successful transformations in new Europe, but it has also seen its share of systemic meltdowns almost in every single country.
In EU10 finance means banks. Although financial markets keep developing, they are dominated by banks themselves and this is unlikely to change. The EU10 banking sectors developed towards the universal banking model that will keep banks in the center of economic affairs.
EU10 banking sectors are rather unique. Between 60 and 90 percent of banking sector assets are controlled by a few foreign strategic owners. Although other emerging markets are catching up, nowhere else is the role of transnational banks so profound. This brings a host of questions worth exploring. Does it matter that banks are foreign controlled? Probably not, but the first crisis will test this proposition. Do banks contribute towards economic development? They do, but less than traditional national banks used to; they increasingly finance mortgages and consumer loans, whereas investments are FDI financed (or come as cross-border intra-firm finance).
Is the contagion form the current financial crisis going to get EU10 banks into troubles? Probably not. Can local (host-country) regulators ensure prudential behavior of transnational banks? Probably not; although they remain responsible for safety and integrity of banks in their jurisdiction, they have little leverage over large banks and their home-country supervisors in other EU countries. Then, should the banking regulatory regime switch to supra-national EU level? Probably yes.
These are just some question in the development - finance - regulation&governance nexus, that I explore in my research and thus would explore in this blog. Looking forward to your comments.
Zdenek Kudrna
views since October 22, 2008.