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Transition complete?: Differences between Latvian and Belarusian path (1991-2010)
To compare the economic transition for certain country, analyzing the economic factors such as unemployment (Percentage of people who don't have jobs out of total population), GDP per capita (Average income for each person) etc are necessary. Some country like Latvia, they completely finished their economic transition (change of economic system from command economy to free market economy) but they are having some economic depression or recession (when the economic growth rate goes down). If we just look at economic transition, Latvian economic transition is much successful than economic transition of Belarus. Even though progress of Latvian economic transition is faster than economic transition in Belarus, there is a huge problem in Latvian Economy.

When Latvia got an independence from U.S.S.R, Latvia government changed economy to Free Market Economy (There is no government intervention. People can produce and consume the product as much as they want). Unfortunately, this rapid transition of economy caused a huge problem. Major problem in Latvia is that there is no domestic capital which brings 100% profit to their own country. For example, major banks in Latvia are from other countries such as Sweden (Swedish bank) this shows Latvia is dependent to other country. As a result, unemployment in Latvia is 22.3% which is extremely high. Superficially, Latvia is trying their best to trade with western European countries but there is a close relationship with Russia. In 1998 when there was financial crisis in Russia, there was no GDP growth in Latvia. Until now, the economic growth in Latvia is -17.8%. As economic system changed to Free Market Economy, labors are more used in services (72.4%) than agriculture (3.6%).

On the other hand Belarus didn't change economy to free market economy since the independence. Belarus has the slowest progress of economic transition among countries which got independence from Russia. In Belarus, more than half of economy of Belarus is owned by the government which is centrally planned economy (Government plans the amount of product which will be produced and consumed by people) as result unemployment in Belarus is 1% and economic growth in Belarus is 0.2%. Unlike Latvia, Belarus officially relies to Russia (50% of foreign trade) which tells they are still socialized government. Unfortunately, there is huge debt in Belarus. Beginning of the economic crisis (1991) Most of the labors in Belarus was agriculture. It was about 30%. There was huge problem in Belarus agriculture in 1986. The Chernobyl nuclear power in Ukraine released radiation which effected Belarus agricultural land (23%). Due to this incident, the major labor sector which was agriculture had a problem.

Just answering the question, economic transition in Latvia was much successful than economic transition in Belarus. Unfortunately, both countries have a severe economic problem. Latvia has a huge unemployment rate due to rapid economic transition and low economic growth due to the dependent of foreign companies. On the Belarus’ side, due to central planned economic, economic growth is low. It is hard to say whether central planned economic is better or free market economic is better. Each economic has their own advantage but as well each economic has their own problem. For example, free market economic will bring rapid improvement of their economy but the gap between the poor and rich will be increased. On the other hand, central planned economy might reduce the unemployment but the economic development will be slow. Referring to those benefits and disadvantage, I would recommend government to wisely use both of the economic system to develop their economy.

Information from
1. http://www.nationsencyclopedia.com/economies/Europe/Latvia-OVERVIEW-OF-ECONOMY.html

2. http://www.nationsencyclopedia.com/economies/Europe/Belarus-OVERVIEW-OF-ECONOMY.html

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Category: IB1 Economics | Views: 297 | Added by: BJ | Rating: 0.0/0
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