Society, Environment andSustainability of Business

2nd Annual International Conference ofThe Latvian Economic Association

Akad. Raita Karnīte

Riga, 4 March 2011

What

Three dimensions and six questions for discussionFrom the economist’s point of view – all are interrelated

Society – people and relations

Environment – quality of life, resources: availability, use, economic megastrategy

Sustainability of business – what to produce and how

Society

How big is society?

Is number of population important?

Who we are, what is our motivation?

Population age structure – males and females, begining of 1992

120000 70000 20000 30000 80000

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-

Vīrieši Sievietes

Population age structure – males and females, begining of 2010

120000 70000 20000 30000 80000

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-

Vīrieši Sievietes

Population age structure – males and females, begining of year2009 2060

20000 15000 10000 5000 0 5000 10000 15000 20000

0

4

8

12

16

20

24

28

32

36

40

44

48

52

56

60

64

68

72

76

80

Vīrieši Sievietes 80+ 62372

20000 15000 10000 5000 0 5000 10000 15000 20000

0

4

8

12

16

20

24

28

32

36

40

44

48

52

56

60

64

68

72

76

80

Vīrieši SievietesGrupa 80+ 71983 Grupa 80+ 128154

Demographic profile of Latvia – Eurostat forecasts (2009 - 2061) – % change

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

BU LT RO LV SI PL SL DK EE CZ HU IT GR ES MT ES27 NL PT AT FI DK BE CH FR SE NO UK IE LU CY

2061/2050

2061/2009

Population structure in Tajikistan on January 1, 2009, thsd people.Total 7373.8 thsd people, 3698.9 thsd males 3674.9 thsd females)

vīrieši sievietes

020000400006000080000100000

0

4

8

12

16

20

24

28

32

36

40

44

48

52

56

60

64

68

72

76

80

84

88

92

96

10

0 20000 40000 60000 80000 100000

0

4

8

12

16

20

24

28

32

36

40

44

48

52

56

60

64

68

72

76

80

84

88

92

96

10

GDP per head (2009) (%, EU-27=100) and average population density (2007), people per 1 km2

Blīvums (2007), cilv vidēji uz 1 km2

UK

AT

BE

BG

CZ DKES27FRGR

EEIE

IT

CY

LV LT

LU

MT

NL

PL PTRO SISK

FI

ESHU

DE

SE0

200

400

600

800

1000

1200

1400

0 50 100 150 200 250 300

GDP (2009) in market prices per 1 km2 and population density (2007), average per 1 km2

IKP EUR tirgus cenās 2009. gadā uz 1 km2

SE

DE

HU

ES

FI

SKSI

RO

PTPL

NL

MT

LU

LTLV

CY

IT

IE

EE

GR

FRES27

DK

CZ

BG

BE

AT

UK

0.00

5000.00

10000.00

15000.00

20000.00

25000.00

0 200 400 600 800 1000 1200 1400

Government expenditure (2009) in market prices per 1 km2 and population density (2007), average per 1 km2

Valdības budžeta izdevumi, EUR tirgus cenās uz 1 km2

SE

DE

HU

ES

FISK

SI

RO

PTPL

NL

MT

LU

LTLV

CY

IT

IE

EE

GR

FRES27

DK

CZ

BG

BE

AT

UK

0.00

2000.00

4000.00

6000.00

8000.00

10000.00

12000.00

0 200 400 600 800 1000 1200 1400

Relations – social choice and individual preferences

Preferences: what people want:

Young people: to have good education, to have good job and carrier opportunities to live in prosperity

Latvia – other country – who knows?

Relations – social choice and individual preferences

Adult: to live better now to be honest if others are, if the government is not able to change things.

Latvia – other countries – who knows?

Individual pereferences dominate

Organisation of the society – political parties – civil society – collective pressure deminishes

Relations – social choice and individual preferences

What remains for social choice:

Low tax discipline – low social quaranties – essential needs are threatened

Irrelevance to the state – somebody will come and do for me – emigration – lack of workforce – who are left should be highly effective

These simple facts should be taken into account in economic policy

Consolidation should be subbordinated – not main issue

The quality - education

Formal educationLife-long learningLot of theories and reform proposals

Major goal - to make people economically independent

But also – to get value added from the spent money

Society

Economy as if people matter: provocative issue - kind of “should be” what it is? – how much people may expect to

receive - how much should they pay sustainable consumption – yes, but how who is supervisor – the state, traditions,

ethics, material goals

Items of concern regarding “society” dimension

The size – population policy

The motivation - relations with the state

The quality – education

The organisation – civil organisations

The expectations – what may I receive and what should I pay

Environment – issues for consideration

Economy as a subsystem of nature – or nature as a factor in competition

Economic use of resources (wood, sea)

Compromise between economic activities and environment – dilemma of economic growth

Competition of resources (land is also resource)

Green economy – environment protection or mega business project

Sustainability of business

In search of new business philosophy – lifestyle business, intrapreneurship, EFP

What is needed for business to be sustainable: market stable business environment scale (other businesses around) effective business structure (sectors, size of

companies) smart and creative people who are in Latvia trust to future living conditions – schools, roads, home

Sustainability of business – current trends - macro

GDP growth – Baltic countries

Industry growth

Foreign trade, mln. LVL

Foreign trade - structure

Exports/Imports 2009 2010 2009 2010

Capital goods 10.6 8.4 10.7 11.7

Intermediate goods

55.8 58.5 46.1 47.5

Consumer goods

25.8 25.2 30.9 26.4

Other 4.1 5.1 7.8 10.1

Cars 3.1 2.7 2.1 2.6

Foreign trade

Most important goods:

Agriculture and food - 17.5%Timber and products – 18%Metal – 14% (steel and 8.4%)Mechanisms and appliances – 14.6% Total 64.1%) Oil and mineral fuel – 5.6%Chemical industry – 7.5%, of which pharmacy 4 percent pointsTransport vehicles and their parts – 5.6% of which surface transport

means – 5 percent pionts

Issues for consideration

Sustainable consumptionMarket, the state external economic policy,

theoretical explanationsEconomic policy – development versus

consolidationEnvironment – helps ar harmsBusiness education – theory, practice,

intersystemsMotivation