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Why is someone better off at producing hi-tech and why Latvia only seems to be good at digging holes?

Morten Hansen is rightly pinpointing the disadvantages of the Latvian economic design: the lack of modern skills, inadequate supply of physical capital and the burden of an inflated public sector.

Continuing the same logic, poor skills cut off hi-tech ambitions not only because no one is there to implement but first of all because Latvian turf is extremely short of these ambitions per se. No one is there to come up with an idea of a daring high value-added rocket-science production. And the scarce physical capital—of the local origin—available for the deprived Latvian economy appears invested, if not in shady deals, then at best in a hotel or a parking lot or a grocery store.

There is nothing wrong with investing in hotels or grocery stores of course. Still, in our situation it does little to boost Latvia’s competitiveness and hedge the economy from plummeting and our country from, for instance, killing health care in a time of crisis. To add more gloom: in the hotel and retail businesses, few would argue that we are not behind our neighbours.

No, you can’t dictate where the investors should invest. True. What you could do is to support a good idea, to support your intellectuals. Say, what’s good for the intellectuals generating new hi-tech ideas is good for the country. It doesn’t cost much. It’s not necessarily about business but it’s always about attitude.

The question is why on earth should someone already cosily filling a chair at a top official desk support intellectuals, ideas and stuff? The question is in fact not at all rhetorical.

We love to look at Estonia, a sickness as it is. [These traditional comparisons are basically for us to check what we looked like, should we have right attitude to things. A sickness because we love to check but never synchronise.] Estonia was, for instance, the first in the region to introduce a digital ID card. Estonia is No 13 in the UN e-gov readiness index, ahead of countries like Finland, Ireland, Germany (and of course Latvia, which is No 36). Estonia has been the first country to introduce voting online at general elections.

Fine, we all know that. It deserves a closer look because it got materialised with no quick buck in sight. It’s about something else, hardly tangible, a very thin substance, a spirit that obviously works wonders—the attitude, the longing for success, the understanding that my success is a success of my country and a success of my country may as well contribute to my success in the future.

We, small young countries with no lengthy sovereignty traditions, need this metaphysical stuff, a “third eye” (if the regular ones are not really open yet) to see where to invest physical capital, what competences to develop, etc.

At a company level, you would define it as corporate loyalty, as you are supposed to contribute to your employer’s success that may (and may not) make your happy self better off.

What would you call it at a country level? Patriotism, I guess. Extremely old-fashioned, isn’t it? Basically, it’s not compulsory, you don’t have to contribute anything more than your taxes and respect to law. And yet, if a young country’s citizens have no such metaphysical spirit of patriotism, you’ll see this country fail, just like a business project lacking employee loyalty.

A corporate to enhance loyalty would use role-modelling, when the top management produce a loyalty pattern for other employees to follow. Just the same again at a country level. The role-modelling produced by the top management in the project Latvia could and did produce an effect adverse to loyalty and trust.

No, in this situation, the country is left with no chances for shifting to hi-tech value-added production any time soon. Latvian business would not have high-flying ambitions, Latvian youth would not have serious motivation for acquiring modern engineering skills and Latvia would not be good at anything until the Latvian political elite gets to role-modelling, mastering the old-fashioned spirit of patriotism.
If it’s not mandatory to practice patriotism for regular taxpayers, it is very much so for those in power, distributing taxes. We all know from the organisational theory and practice that proper motivation opens up a hidden potential.

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