Last week I compared the Competitiveness score evolution of five countries in the period 2010-2019: the Slovak Republic, Russia, Romania, Latvia and Bulgaria. This is the article, and this is the chart.

It was interesting to see that Romania and Bulgaria did not move as quickly as the other three countries. In particular, the evolution of Latvia was quite surprising: departing in 2010 from a lower level than Romania, both in score and rank, it achieved in 2019 the best position of the five in both categories.

I wanted to go a little deeper in the analysis, without entering in too much detail; the complete analysis measures 102 parameters and adds other considerations which would make a thorough check excesive.

The 102 parameters gather in 12 pillars which, in turn, are assorted in four clusters:

• Enabling environment: 
  • Pillar 1: Institutions
  • Pillar 2: Infrastructures
  • Pillar 3: ICT adoption
  • Pillar 4: Macro economic stability
• Human Capital
  • Health
  • Skills
• Markets
  • Product Market
  • Labour market
  • Financial system
  • Market size
• Innovation Ecosystems
  • Business dynamism
  • Innovation capability

For a first approach, I decided to observe the evolution of these 4 clusters and to drag conclusions from their scores.

This resolution was not as smooth as I expected. I felt quite lost when I realised that the global score in 2010 was not the average of pillar scores: Latvia had in general higher pillar scores than Romania, but the final note was lower. Why?

The response is in the 2010 report. Back then Competitiveness Index classified the countries according to their state of development:

Latvia, with a GDP per capita of 11.607 $ (18.032 $ in 2019), was considered an economy in transition from stage 2 (Efficiency driven) to stage 3 (Innovation driven), while Romania, with 7.542 $ per capita (12.285,2 $ in 2019), was without the shadow of a doubt a country in stage 2 (Efficiency driven)

Each category weighted differently in the computation of the final score: 

Romanian scores received the ponderation of 40% 50% and 10% while Latvian scores were pondered by some % between this and the one for the Innovation driven stage, 20% 50% and 30%.

The idea behind this discrimination relies on the ideas that economies in earlier states of economic development cannot have well-developed innovation factors, which means that their existence adds little gain to the economy. Therefore they can be underrated. The opposite applies to countries with higher degrees of progress which will underestimate the basic requirements . The result of this operation is that Latvia is, in 2010, penalised both in the score and in the rank.

Between 2010 and 2019 Latvia improved 93,91 points (13,23%) and Romania 73,83 points (10,57%). In the view of this unequal evolution, which results in quite different positions in the rank (Latvia from 70 to 41, Romania from 67 to 51) my question is: Where did they centre their efforts during this decade, and why did a small difference of 2,56 points make such a difference?

These are the detailed charts for the two countries:

The governments placed the effort in two main areas: Enabling Environment and Human Capital.

I wrote in other posts dedicated to analysing Institutions and Infrastructures, that Enabling Environments constitute the frame in which the economy of the country will develop. Without a proper structure capable of sustaining the activity, no progress is possible. 

A company cannot move forward without management, offices and production centres, a functional communication system and economic stability. The same happens in a country. When there are no proper institutions to coordinate the State and its relationships with the citizens; unless roads, harbours and airports suit the needs of users; with a deficient internal data transmission support; if public debt and deficit are not under control and inflation rocks up, then any growth attempt will fail. These elements are the key and should receive the utmost attention and priority. For comparison, please see the values in this regard of three other EU countries: The Netherlands (4), Germany (7) and Sweden (8).  

The three of them tend to score very high in the Enabling Environment categories.

The second area that condensed the improvement is Human Capital. This relies on two pillars which are Health and Skills. It is clear that without a healthy and well-skilled population, any growth will be lame. Besides the economic interest of having effective teams of workers, there is the human right to enjoy a healthy life and to receive the best possible education. And I want to stress this point because it is principle of what we consider a civilised world. They are concepts that should not be negotiable in any case. We are now seeing, in the middle of the Covid-19 pandemic, the importance of having well-prepared hospitals. I will, shortly, analyse the evolution of Spain in the index. I plan to be quite a critic with the development of my country despite the improvement in the rates. Something failed when a country that boasted of having one of the best health systems in the world has also had one of the highest mortalities.

I very much salute the improvements that both Latvia and Romania have shown in both areas and encourage them to go much further. We also know that the Health and the Education system are two of the main reasons that can push the population to emigrate. The states that permit their Health and Education systems to be corrupted, inoperative and discriminatory will see, at least in Europe, their populations decline.

I would dare to say that the further progress of Latvia results from a sharper focus on the four pillars in the Enabling Environment group. To gain further ground and improve the overall well-being of their population, I would urge them to do more in this regards, and to all other countries too. 

Let me conclude with a personal thought: In the last years, we have seen much instability in many European countries. Unfortunately, neither Romania nor Spain is an exception. This situation does not help. Government instability distracts attention from what matters and focuses on unnecessary bemusements. The society suffers very much from this. The wasted time, by non-operative governments, is financed with additional public debt that will only make things worse in the following years.

Confrontation of ideas in politics is the base for our democracies. The cooperation in the Parliament, too. If the system entitles the population to chose their representatives, these need to respect each other and work together. Each of them must contribute from their seats in the Institutions, performing the roles assigned. All together, with immense respect for the Law, the common good and the opponent. When respect is lost, the frame breaks. When the frame breaks, the State does too, and citizens are the main victims.