Tomass Urbelionis, F64
Reasons why Latvia does not perform better than Russia
Corrupt, non-transparent, run by oligarchs, authoritarian or semi-fascist – Russia usually does not prevail all that well in economic-political beauty contests but by some measures it is now richer than Latvia , this is in terms of GDP per capita adjusted for price differences.
That’s pathetic, isn’t it? OK, Russia has its vast natural resources some will say but we know that resource-endowed countries are seldom rich since these resources often lead to massive corruption plus a crowding-out of other economic activity (Dutch Disease). Latvia, being a market economy and benefiting from membership of the EU should do better, shouldn’t it? But it doesn’t so where are the reasons?
We know that GDP is a function of the accumulation of factors of production:
Physical capital
Labour
Labour’s skills (human capital)
Land
Natural resources
and the efficiency by which these factors ‘work together’ (Total Factor Productivity).
