ISSN 2409-7497
Role of social and economic interactions in territory development of Iceland Vera Boronenko, University of Rejeka (Croatia) Olga Lavrinenko, Daugavpils University (Latvia)
May 2016 DISCUSSION PAPER No. 6/2016
Role of social and economic interactions in territory development of Iceland Vera Boronenko, Olga Lavrinenko
[email protected];
[email protected] University of Rijeka, Croatia; Daugavpils University, Latvia
Acknowledgements. The research leading to these results has received funding from the ISCH COST Action IS1104 “The EU in the New Complex Geography Systems: Models, Tools and Policy Evaluation” as well as the European Union Seventh Framework Programme (FP7 2007-2013) under grant agreement n° 291823 Marie Curie FP7-PEOPLE-2011-COFUND (The new International Fellowship Mobility Programme for Experienced Researchers in Croatia - NEWFELPRO). This article has been worked out as a part of the project „Rethinking Territory Development in Global Comparative Researches (Rethink Development)" which has received funding through NEWFELPRO project under grant agreement n° 10. We are also thankful for the valuable feedback and comments received from our colleagues from the University of Akureyri Research Centre (UARC) located at the Northern Iceland – first of all, from Dr. Hjalti Johannesson. Views expressed in the article are solely those of the authorsand, as such, should not be attributed to other parties.
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Role of social and economic interactions in territory development of Iceland Vera Boronenko, Olga Lavrinenko Abstract Iceland was identified as a country with relatively high achieved competitiveness level and at the same time negative growth capacity, i.e. trend of relatively fast declining of this competitiveness. As a research hypothesis the authors suggest that Iceland's social and economic interactions - looking at the interconnection of this country with other “worlds-economies” - are not diversified enough. The analysis of export and import flows, flows of international migration as well as logistic interconnections (direct flights) of Iceland shows that “energy consumers with strong social infrastructure” (“the USA’s/the UK’s group”), i.e. a market-capitalist “world-economy”, is an absolute leader (80-90%) for Icelandic international trade and migration – both incoming and outgoing. The research hypothesis that Iceland’s territorial development (in particular, negative trend of territory development during the last 10 years) is greatly determined by intensity and direction of Iceland’s social and economic interactions, has been proved based on the analysis of Icelandic statistics as well as results of several researches – both Icelandic and global. As the outcomes of the research showed, Iceland is “on friendly terms” mainly with the representatives of its own “world-economy”. Also a kind of sub-“world-economy” is formed which can be referred to as a Northern-Atlantic one. Social and economic interactions with the representatives of its own “world-economy” mainly draw Iceland’s territory development in their direction, and, as the trends of their development are negative or stagnate, Iceland’s trend of competitiveness generally is also drawn after them. JEL codes: O11, O19, P51, R11. Key words: social and economic interactions, Iceland, world-economy, global economic space, territory development.
1. Introduction 1.1. Research framework and research questions The Human Development Report 2013 refers to the simultaneous functioning of many growth poles in the global economic space on the one hand, and the enhancement of the interconnection of this space notwithstanding the existing dramatic gap in the socio-economic development of the territories, on the other, as the main feature of modern territory development in the global world (UNDP, 2013).The following research questions arise: what is the role of interconnection between various parts of the global economic space in the position of one or another territory within the system of the world growth poles? What is the quantitative intensity and qualitative nature of these interactions? And finally, in what way do social and economic interactions influence the dynamics of territory development in specific cases? The authors have chosen Iceland for the research, the development of its territory within the global system and the role of social and economic interactions in this process. Why Iceland? Within the research project “Rethinking Territory Development in Global Comparative Researches” (2014-2016) managed by one of the authors and which was realized at the University of Rijeka (Croatia), Iceland was identified as a country with a relatively high achieved competitiveness level (measured by the Global Competitiveness Index (GCI) created by the World Economic Forum), and at the same time negative growth capacity, i.e. a trend of
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relatively fast declining of this competitiveness. The average annual change of the GCI of Iceland for the period 2005-2015 is -0.05 points on the scale from 1 to 7, and this decline is one of the highest in the world. According to the data of the Global Competitiveness Reports published by the World Economic Forum, in 2005 Iceland had 5.34 points of the GCI on the scale from 1 to 7 (Lopez-Claros et al., 2005), in 2006 – 5.40 points (Lopez-Claros, 2006), in 2007 – 5.02 points(Lopez-Claros, Schwab, 2007), in 2008 – 5.05 points (Schwab, 2008), in 2009 – 4.80 points (Schwab, 2009), in 2010 – 4.68 points (Schwab, 2010), in 2011 – 4.75 points (Schwab, 2011), in 2012 – 4.74 points (Schwab, 2012), in 2013 – 4.66 points (Schwab, 2013), in 2014 – 4.71 points (Schwab, 2014), in 2015 – 4.83 points (Schwab, 2015) (see Figure 1). Figure 1. Global Competitiveness Index of Iceland, scores by the scale from 1 to 7, 2005-2014
Source: IT application “Global Rating of Territory Development” http://cler.uniri.hr/rethinkdevelopment/web/
This general trend of dramatic decrease in competitiveness1 of a highlydeveloped and unique country generates a certain interest and requires explanations by means of searching for and analyzing those factors which promote this kind of recession in the territory development or vice versa accelerate it. Within the framework of this research, the emphasis will be put on the role of social and economic interactions in territory development of Iceland. Why this kind of emphasis? Because the present research will be carried out within the theoretical 1
As we can see from the data on Iceland’s competitiveness provided by the World Economic Forum, since 2014 the country’s trend on competitiveness has been changed in increasing direction, but at the moment of planning this case study in 2013 the decline was stable and serious enough.
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framework of classical spatial economics, which suggests that the state of territory development of a country depends not only on its own capacity but also on development of territories which are included in social and economic interactions of this country (within the framework of another approach of the spatial economics – depends on development of territories, which are located around the analyzed country) (Kuenne, 1963; Takayama, Judge, 1964). The main aim of this article is to define the role of social and economic interactions in territory development of Iceland. To achieve this aim the following objectives will be realized within the article: 1) the actual trends and specifics of territory development in Iceland will be analyzed; 2) current social and economic interactions of Iceland will be identified; 3) influence of existing social and economic interactions on territory development of Iceland will be analyzed. Conceptual basis for this analysis will be created looking at the interconnection of Iceland with other “worlds-economies”. So, the separate – contextual – chapter on the empirical identification of current “worlds-economies” in the global space and the place of Iceland within them will be included in the article. The main concept of the research which has to be precisely interpreted is social and economic interactions of a country. In modern scientific literature on economics there is an interpretation of social and economic interactions of a country as its trade, capital and migration flows (Barry, 2014), i.e. export and import, flows of emigrants and imigrants as well as foreign investments. Within this article also Iceland’s logistic interconnections (direct flights) will be investigated as the additional indicator of closest business and cultural interconnections of the country. Taking into consideration large disproportions in regional development of Iceland (Benediktsson, Karlsdóttir, 2011; Huijbens et al., 2014) as the specific feature of territory development in this country, the authors plan where it is technically possible to pay special attention to cross regional social and economic interactions, i.e. interactions within the country. 1.2. Research problem and hypothesis The research problem, which is being solved by the authors within the framework of this article, can be defined in the following way: we do not know whether the social and economic interactions which Iceland has promote its territory development (which is measured by the Global Competitiveness Index of the World Economic Forum here) or they restrain this development, i.e. what the role of Iceland’s social and economic interactionsin its territory development is. It is necessary to know it, so in case of identifying the significance of these interactions to effectively manage them, developing the ones which promote Iceland’s territory development, and limiting the ones which restrain its territory development. The above-mentioned Human Development Report 2013 states that to a casual observer, the state of affairs in 2013 may appear as a tale of two parts of the global world: the resurgent South – most visibly countries such as China and India, where there is much human development progress, growth appears to remain robust and the prospects for poverty reduction are encouraging - and the North in crisis – where austerity policies and the absence of economic growth are imposing hardship on millions of unemployed people and people deprived of benefits as social compacts come under intense pressure. At the same time it has been emphasized that the structure of the modern world is more complex than just the opposition “NorthSouth”. Instead of having a centre of industrialized countries and a periphery of less
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developed countries, there is now a more complex and dynamic environment (UNDP, 2013). The South has risen at an unprecedented speed and scale. For example, the current economic take offs in China and India began with about 1 billion people in each country and doubled output per capita in less than 20 years – an economic force affecting a much larger population than the Industrial Revolution did (UNDP, 2013). By 2050 Brazil, China and India combined are projected to account for 40% of world output in purchasing power parity terms. During these uncertain times, countries of the South are collectively bolstering world economic growth, lifting other developing economies, reducing poverty and increasing wealth on a grand scale. They still face formidable challenges and are home to many of the world’s poor. But they have demonstrated how pragmatic policies and a strong focus on human development can release the opportunities latent in their economies, facilitated by globalization. “The transition from growth to global equilibrium” (Meadows et al., 1972) becomes the strategic task and at the same time the source of territory development in the global world under these circumstances. Following the Human Development Report 2013 which argues that “the South needs the North, and increasingly the North needs the South” it could be suggested that one of the best source of further development for every country is interconnection with other “worlds-economies”. “Key drivers and principles of development begin to emerge from the diversity of development paths that include deepening the developmental role of states, dedication to human development and social welfare, and openness to trade and innovation” (UNDP, 2013). A “world-economy” is not a definite type of economy (socialist, capitalist etc.) which determines a type of society and civilization, but the economic activity is what leaves the most significant “imprints” on the history of mankind. On the results of the economic activity we can reconstruct the social structure of any society (Braudel, 1967). F.Braudel defines three characteristics of a “world-economy”: 1) a “worldeconomy” covers definite geographic space with natural, economic, cultural or mental borders; 2) a “world-economy” has a centre – capitalist city or country; this centre is not stable in a long-term period; 3) a “world-economy” has horizontal (spatial) and vertical (social) hierarchy (Braudel, 1967). In modern scientific literature the most frequent is the indication on two “worlds-economies” dominant in the global space: the first one with the centre in the United Kingdom-USA,2the second one – with the centre in China (Zoega, 2013; Kiva, 2014; Efremenko, Meleshkina, 2014; Delyagin, 2015), i.e. provisionally the North and the South if we use the concepts provided by the Human Development Report 2013. Possibly, Iceland’s social and economic interactions will also, especially in recent years, gravitate toward either the North or the South. However, as in scientific literature there are other definitions of smaller “worlds-economies”, for example, Atlantic economy (Barry, 2014), Tiger economy (Kirkby, 2012) etc., the authors hope to continue and specify their empirical interpretation of modern “worlds-economies” which they started in the article ”Rethinking Territory Development and Integration in the Global World” submitted for publishing in the Proceedings of the 10th International Conference “Economic Integrations, Competition and Cooperation:
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Here the authors do not separate the UK from the USA perceiving the USA as a historically established “subsidiary” of England, which is still “the heart” of market-capitalist “world-economy”.
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Accession of the Western Balkan Region to the European Union” organized by the Faculty of Economics of the University of Rijeka (EFRI) in Opatija (Croatia) in 2015. As a research hypothesis the authors suggest that Iceland's social and economic interactions possess a certain peculiarity – looking at the interconnection of this country with other “worlds-economies” - which can, at least, partially explain a dramatic decrease in the level of competitiveness in the highly developed Iceland which was observed in the 2000s. Based on the methodological approach of the spatial economics (see Chapter 1.1) it is possible to anticipate that challenges of Iceland’s territorial development are greatly determined by the fact that Iceland’s social and economic interactions are not efficient enough, i.e. “the country is on friendly terms either in the wrong way or not with those with whom it should be". 2. Actual trends and specifics of territory development in Iceland As it has been noted in the introduction devoted to the interpretation of basic concepts, the authors suggest empirically measuring territory development on the basis of an all-encompassing – both objective and subjective – well-being of the people residing in the territory, but not only on the basis of traditional and acknowledged Global Competitiveness Index (Schwab, 2014).At the same time, it is impossible not to recognizethe functional and information capacity of this index while studying territory development and its dynamics analysis enabled the authors to identify the trend of decrease in Iceland’s competitiveness, and therefore, the existence of problems with its territory development. However, recent studies on territory development have moved away from explaining average trends in long-term periods to study development accelerations and decelerations due to the great instability of annual changes of territory development. Very few countries have experienced consistently high growth rates over long periods. Rather, the more typical pattern is that countries experience phases of growth, stagnation, or decline of varying length. A study of these separate periods seems more revealing for a study of the determinants of growth than a long-period average (Pritchett, 2000). The trend of decreasing in Iceland’s competitiveness is not even either; in recent years this decrease has even stopped finishing the crisis period which was extremely acute in Iceland on the basis of the same reasons this country flourished before the global financial crisis “as a successful and prosperous model economy of a new type – financial capitalism” (Kuznecova, 2009), because of “Iceland’s financial sector turned into a dominant one becoming a locomotive of economic development” (Kuznecova, 2009).As the researchers of the University of Iceland in their work on Iceland’s economic crisis said, “the entire financial system had collapsed under its own weight” (Benediktsson, Karlsdóttir, 2011). However, besides the general trend of change or stabilization of the Global Competitiveness Index of Iceland there are also subindexes – three main pillars of competitiveness of a country (by the World Economic Forum): basic requirements (which determine 20% of overall competitiveness of Iceland, because it is at the innovation-driven stage of development), efficiency enhancers (which determine 50% of overall competitiveness of Iceland), innovation and sophistication factors enhancers (which determine 30% of overall competitiveness of Iceland). The dynamics of indexes according to these three integral parts of Iceland’s competitiveness in the last 10 years is shown in Table 1 and Figure 2.
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Table 1. Changes of the subindexes of the Global Competitiveness Index in Iceland, points by the scale from 1 till 7, 2005-2015 Year
Efficiency enhancers
Basic requirements
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
5.7 5.7 5.5 5.8 5.4 5.1 5.3 5.3 5.3 5.4 5.7
Innovation and sophistication factors 5.3 5.5 5.0 4.9 4.6 4.6 4.6 4.5 4.5 4.6 4.7
5.0 5.0 4.8 4.8 4.7 4.6 4.7 4.7 4.5 4.4 4.6
Source: elaborated by the authors using data of the Lopez-Claros et al., 2005; Lopez-Claros, 2006; Lopez-Claros, Schwab, 2007; Schwab, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015.
Figure 2. Trends of changes of the subindexes of the Global Competitiveness Index in Iceland, points by the scale from 1 till 7, 2005-2015
4 2005
2006
2007
Basic requirements
2008
2009
2010
Efficiency enhancers
2011
2012
2013
2014
2015
Innovation and sophistication factors
Source: elaborated by the authors using data of the Lopez-Claros et al., 2005; Lopez-Claros, 2006; Lopez-Claros, Schwab, 2007; Schwab, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015.
According to the data presented in Table 1 and Figure 2, the decrease in the subindex of basic requirements – from 5.8 points in 2008 till 5.1 points in 2010 had the most serious effect on the fall in Iceland’s overall competitiveness during the crisis, though final points of basic requirements during searched period are the same – 5.7. It means that after dramatic decreasing of the quality of basic requirmenets during the crisis, they were recovering till previous level in 2015. If we take into consideration the final points of the period under review – 2005 and 2015 – we can see that other subindexes of overall competitiveness in general fell more than basic requirements: efficiency enhancers – from 5.3 till 4.7 points, and in innovation and sophistication factors – from 5.0 till 4.6 points. The efficiency enhancers of Iceland fell most dramatically from 5.5 to 5.0 points even before the crisis in 2007. The quality of innovation and sophistication factors in its turn fell steadily and annually during the last 10 years, increasing just in 2015 from 4.4 till 4.6 points.
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The data of the World Economic Forum presented in its annual Global Competitiveness Reports allow identifying the “main contributors” to the decrease in the global competitiveness of Iceland also within subindexes (see Table 2). Table 2. Changes of the components of the Global Competitiveness Index in Iceland, points by the scale from 1 till 7, 2005-2015 Year GCI Inst Infr Mst H&E HeTr Gmar Lmar Fmar Tec Ms Bso Inn 2005 7.0 5.4 5.0 5.6 - 5.3 4.7 5.3 5.7 5.4 4.7 2006 6.9 5.6 5.3 5.6 - 5.4 4.5 5.4 6.0 5.4 4.5 2007 6.5 5.6 5.0 5.5 5.6 5.8 2.3 5.1 4.5 5.0 5.9 5.4 4.4 2008 6.5 5.7 4.9 5.4 5.3 5.7 2.4 5.0 4.6 5.0 5.9 5.6 5.2 2009 6.5 5.6 4.7 5.4 4.0 5.6 2.5 4.9 4.5 4.8 5.6 5.9 3.6 2010 6.7 5.7 4.7 5.4 3.3 6.0 2.4 4.7 4.5 4.7 5.3 5.7 2.6 2011 6.6 5.6 4.5 5.2 3.6 6.2 2.3 4.7 4.6 4.7 5.2 5.7 3.8 2012 6.6 5.6 4.5 5.1 3.7 6.0 2.4 4.7 4.7 4.7 5.1 5.7 3.7 2013 6.5 5.6 4.4 4.9 3.9 5.9 2.4 4.7 4.3 4.7 5.1 5.6 3.9 2014 6.5 5.6 4.5 4.9 4.0 6.0 2.4 4.7 4.2 4.7 5.1 5.5 4.4 2015 5.3 5.6 5.2 6.5 5.7 4.7 5.1 3.9 6.2 2.4 4.7 4.5 4.8 GCI – Global Competitiveness Index Basic requirements: Inst – Institutions Infr – Infrastructure Mst – Macroeconomic stability H&E – Health and primary education Efficiency enhancers: HeTr – Higher education and training Gmar – Goods market efficiency Lmar – Labour market efficiency Fmar – Financial market sophistication Tec – Technological readiness Ms – Market size Innovation and sophistication factors: Bso – Business sophistication Inn - Innovation Source: elaborated by the authors using data of the Lopez-Claros et al., 2005; Lopez-Claros, 2006; Lopez-Claros, Schwab, 2007; Schwab, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015.
According to the data in Table 2, such components of overall competitiveness as Financial market sophistication, Business sophistication, Health and primary education, Institutions suffered the most during the searched period of 2005-2015:3 index of Financial market sophistication fell from 5.0 points in 2005 till 3.9 points in 2015, index of Business sophistication – from 5.3 points in 2005 till 4.7 points in 2015, index of Health and primary education – from 7.0 points in 2005 till 6.5 points in 2015, and index of Institutions – from 5.7 points in 2005 till 5.3 points in 2015, with falling till 5.1 points in 2012-2014. Each of these components possesses its own periods of the most severe fall which do not coincide: Financial market sophistication 3
Though there are some components which quality has been increasing in general during the searched period of 2005-2015: Macroeconomic stability (with dramatic decline during the financial crisis in 2009-2010), Technological readiness (without any significant decline during the searched period), Higher education and training (also without any significant decline during the searched period). So, it is possible to consider that such components as Technological readiness and Higher education and training are those competitive advantages of Iceland which were working as the main mechanisms of the country’s recovering after the financial crisis.
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– 2009, Business sophistication – 2007 (before the financial crisis!), Health and primary education – 2007, Institutions – 2009-2010 (during the financial crisis). Therefore, it is possible to consider that sophisticated competitive and innovative business environment were at the most risk. Some reasons of this phenomenon in Iceland’s economy as well as in other innovative economies have been analyzed and described in the work by the Icelandic researcher from the Faculty of Economics of the University of Iceland Gylfi Zoega “The West As an (Almost) Exclusive Club” (2013): Edmund Phelps in his book on the emergence of innovative economies in the West describes how entrepreneurs constantly try new business ideas, most of which end up as failure, leaving only a few to become industry leaders (Phelps, 2013). Such an economy requires a set of institutions that reward success and penalize failure, a culture of risk taking and financiers who are willing to finance new entrepreneurial ventures, in addition to consumers who are willing to experiment with new products (Bhide, 2008). Such an economy benefits from the diversity of the outlook of entrepreneurs and its bankers and from urbanization and globalization which provide exposure to the discoveries and ideas of others (Zoega, 2013). According to Phelps, recent decades have seen a decline of dynamism due to the emergence corporatist institutions in many Western countries that have attempted to affect both the distribution of income and the allocation of the factors of production (Phelps, 2013). Unions, bureaucracies, red tape, the cost of starting a business, the cost of hiring and lobbyists, to take a few examples, and cultural changes in some Western countries are to blame for the lower levels of dynamism (Phelps, Zoega, 2013). There are examples of positive changes in institutions, such as Britain in the 17th and 18th centuries (Mokyr, 2005) and Singapore in the 20th century. But there are also examples of institutions deteriorating, which is one theme of Phelps’s recent book (Phelps, 2013). His main worry is the gradual strengthening of corporatist institutions in many Western countries, which is one example of society’s institutions deteriorating. In his „The Rise and Decline of Nations”, Mancur Olson describes how stable societies with unchanged boundaries tend to accumulate more collusions and organizations for collective action over time. Such groups reduce efficiency and economic growth and make political life more divisive (Olson, 1982). According to the data of the World Economic Forum, Iceland has stable relatively high indicators of the state of institutions (Lopez-Claros et al., 2005; LopezClaros, 2006; Lopez-Claros, Schwab, 2007; Schwab, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015).Some researchers also argue that Iceland has “one of the least corrupt public administrations in the world, according to Transparency International” (Wade, Sigurgeirsdottir, 2012). At the same time the Icelandic sociologist T.Logason in his book “Power Elites & Corruption” (2012) examined the influence of grand corruption as a possible cause leading to the Icelandic economic collapse in 2008. He argued that “the grand corruption that can find its way into the very core of society when the elites in politics, business and academia all join forces with the aim to deceive the general public is the most dangerous form of “grand corruption” western societies can be faced with and can lead to swift economic ruin” (Logason, 2012).The researchers of the University of Iceland K.Benediktsson and A.Karlsdottir give the same reasons explainingthe Icelandic economic collapse:“many have come to the following conclusion: a neoliberal political ideology that gained ascendancy in the early 1990s had nurtured a lethal mix of greed, hubris and political corruption that had
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been gnawing at the roots of society. The beginning of the 21st century saw the emergence of the super-rich in Iceland – a small elite that seemed to have appeared almost out of nowhere and that flaunted its wealth rather crassly at times” (Benediktsson, Karlsdottir, 2011). It is possible to say that there is really no deep antagonism in these opposing opinions on corruption in Iceland; the crisis itself just made researchers and experts pay more attention to institutional environment in Iceland having forced them to find the flaws in it which were not paid due attention during the economic growth. The authors find the confirmation of this viewpoint in the works by Icelandic researchers:“when social structures are stable and social systems yield expected anddesirable results, there is relatively less demand for institutional economics than during times of change” (Eggertsson, 2006). One more actual trend and specific feature of territory development in Iceland is its regional disproportions in economic performance and innovative activities. First of all, some simple and general statistical evidence proving this issue: 64.2% of total population lives in the capital region of Iceland in 2015 with the tendency of continuing increase of concentration - 63.3% in 2010, 63.6% in 2011, 63.7% in 2012, 64.0% in 2013, 64.2% in 2014 (Statistics Iceland, 2015a); 75% of all new registrations of limited liability companies in 2014 was in the capital region with the same slow, but stable tendency of continuing increase of concentration – 70% in 2010, 73% in 2011, 74% in 2012, 76% in 2013 (Statistics Iceland, 2015b). Even on the basis of these few data it is possible to estimate the size of regional disproportions in Iceland which, without any doubts, are of a geographic nature – the uninhabitedness of a significant part of the country’s territory, specific natural conditions, etc. However, notwithstanding the fact that Iceland is a country of so willingly and widely demonstrated model of financial capitalism and innovative economy, such circumstances as natural conditions, geographic remoteness and climate, in authors’ opinion, should not play an important role in an evenness of the country’s territory development. There is little regional statistics on the official website Statistics Iceland, but the issue of regional disproportions is really urgent in the publications by the Icelandic researchers. For instance, in the Scientific Report of the ESPON project “KITCASP: Key Indicators for Territorial Cohesion and Spatial Planning” 4has been argued that “Iceland faces a number of territorial development challenges, such as the changing settlement pattern (urbanisation) and differing economic development of the regions”(ESPON, 2013). This Report also stressed that Iceland is divided into two NUTS 3 regions: one of them is the capital area; the other region covering the rest of the country with predominantly small urban and rural settlements. The NUTS 3 classification has been considered too coarse to grasp various regional differences in Iceland. Spatial data in Iceland is, in some instances, not made available below the NUTS 3 level – which has been criticised by many users as not capturing regional differences where they exist. Data is instead often only issued for the capital area and the rest of the country (NUTS 3) or as a national dataset. This is partly due to the low population number and density. Some areas are too thinly populated for detailed data to be published; high data collection and publication costs may also be a supporting reason (ESPON, 2013). Many of Icelandic regions have suffered from sustained
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Researchers Hjalti Johannesson and Valtyr Sigurbjarnarson from the University of Akureyri Research Centre (Project Partner) realized case study on Iceland for this project.
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population decline, partly as a result of the restructuring of Iceland’s primary industries (fishing and fish processing) (Huijbens et al., 2014). Similar to the situation with the assessment of Iceland’s institutional environment, in particular, corruption, in the analysis of disproportions in regional development of Iceland there are also certain contradictions. For example, the situation with unemployment in Iceland’s regions is rather complex: “It is highest by far in the southwest, a region that has also had to cope with the sudden disappearance (in 2006) of the large US Air Force base at Keflavík. The capital region, which had benefited most from the impacts of the bloated financial sector, is also experiencing high unemployment. Localities with a high percentage of construction and servicebased jobs have fared badly. In the fisheries communities the situation is rather better. Commodity export sectors such as the fisheries are in fact performing quite well. ... The employment level in those regions most dependent on fisheries is much higher than elsewhere in the country, and there are examples of municipalities where the local income tax has increased after the crash, owing to the much higher incomes of both vessel owners and crews. During the banking bubble, the fisheries had been relegated to a back seat in the minds of many Icelanders” (Benediktsson, Karlsdottir, 2011). Figure 3. Average unemployment in the regions of Iceland, 2009
Source: Benediktsson, Karlsdóttir, 2011.
The data in Figure 3 show that soon after the crisis the regional disproportions in the level of unemployment were not flattering to the capital region reminding the situation when “the capital took the risk and lost, but regions remained loyal to traditions and stable”. The authors became interested in the issue of regional unemployment in its dynamics but they managed to find only comparative data on the capital region together with other regions (see Table 3 and Figure 4).
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Table 3. Unemployment rate in regions of Iceland, %, 1991-2014 Year
Capital region
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2.9 4.2 5.4 5.5 5.2 4.2 4.4 3.2 2.0 2.2 2.1 3.5 3.8 3.1 2.9 3.1 2.3 3.0 7.8 8.6 8.1 6.7 6.1 5.4
Reykjavik Capital 3.0 4.7 5.7 6.4 6.0 4.9 4.8 3.5 1.9 2.1 2.4 3.8 4.1 3.4 3.2 3.2 2.3 3.0 8.5 9.5 8.9 7.1 6.3 5.3
Surrounding Reykjavik 2.5 3.3 5.2 4.0 3.6 3.0 3.6 2.5 2.0 2.3 1.5 3.2 3.4 2.7 2.4 2.9 2.3 3.0 6.9 7.5 7.0 6.1 5.8 5.7
Other regions 2.1 4.4 4.9 5.1 4.4 3.0 3.1 2.1 2.1 2.6 2.6 2.7 2.5 2.9 2.1 2.5 2.3 2.9 6.2 5.5 5.0 4.8 4.1 4.1
Source: Statistics Iceland, 2015c.
According to the data in Table 3, graphically represented on Figure 4, the biggest regional differences in the level of unemployment revealed during the crisis period, i.e. after 2008 when Reykjavik, where the innovation financial sector of Iceland was booming, but not the regions with more traditional economy, suffered the most from unemployment. “The fishing villages and towns of the Westfjords, for example, found themselves in an advantageous situation at first, comparatively speaking, but as time has passed their employment situation has worsened also” (Benediktsson, Karlsdóttir, 2011)–at least, the gap between the level of unemployment in the regions and the capital of the country is decreasing slowly (see Table 3 and Figure 4).
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Figure 4. Unemployment rate in regions of Iceland, %, 1991-2014 Capital region
Reykjavik
Other regions
10 9 8 7 6 5 4 3 2 1 0
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Source: elaborated by the authors using data of the Statistics Iceland, 2015c.
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Specific feature of Icelandic regional development is also “large scale activities in small scale communities” (Johannesson, 2010a, 2010b; Johannesson et al., 2010): In 2003 contracts were signed on a large hydropower project, Kárahnjúkar and the Alcoa Fjarðaál aluminium plant in East Iceland, the single largest construction project in Iceland’s history. Estimated resources were 6,300 man years during the construction period and a cost of 2.5 billion USD. ... The aluminium plant was built just outside the town Reyðarfjörður in East Iceland with just over 600 inhabitants when the project commenced. At the height of the project there were around 1.700 workers on site, 17% of them were Icelandic and thus greatly outnumbered by the Polish who were 70% of the workers. ... During the construction period, the region of East Iceland witnessed huge changes but impacts were observed to be primarily confined to two municipalities where the projects are located. Sample surveys indicated positive attitude towards impacts on economic conditions in the area and increased diversity of jobs. Population in the area within less than 2 hours driving distance from the projects is 9,000 inhabitants and has increased by 1,300 since 2002. ... The structure of the local economy changed during the construction period and beginning of the operation period. Jobs decreased in fisheries and fish processing, even if this cannot be directly related to the advent of the aluminium plant but is more likely due to continued rationalization and automation. The relative size of the aluminium plant compared to the size of the local labour market makes it important for the social rhythm. ... The housing market and land use planning is where the most obvious mistakes were made during the construction period. Most striking was the excessive building of residential housing. This applied especially to apartment buildings but single family houses have traditionally been the most important building type in the area. ... Income of municipalities rose considerably but their economic condition did not change similarly due to costly investment in infrastructure and services. For the municipality Fjarðabyggð where the plant is located revenues continue to be high. There was much competition between the two main municipalities for new inhabitants and companies during the construction phase. During the construction phase, Icelandic society was in an unusual state of turmoil. Much expansion took place in the economy of the country with rising housing prices and a credit bubble which burst in October 2008. Also there were cuts in fishing quotas and other negative changes in the traditional economy. Taking this into account, cause and effect concerning the megaprojects becomes more blurred. ... Concerning the regional development, it appears that the construction has strengthened the main service centre of the region Egilsstaðir but the lack of a strong regional centre has been an Achilles heel of the region. The interests of the different communities of the central impact area appear to converge to a significant extent, and therefore it is possible that these communities will either continue to work closely, or even merge to form larger units. The large USA’s Air Force base at Keflavík is one more example of a megaproject which had a significant influence on the socio-economic development and, later, on the fall of one of Iceland’s regions, and a region has had to cope with the sudden disappearance (in 2006) of it (Benediktsson, Karlsdóttir, 2011). According to interregional migration, which very often in Iceland is perceived as “one-way flow” from regions to capital area, the analysis of Icelandic statistics for the period of 1986-2014 made by the authors shows that it is not true, and there are almost similar “two-tail flows” in reality (see Figure 5). 14
Figure 5. Internal migration between Icelandic regions, 1986-2014, % from total number of internal migrants
60
50
48
48
45
46
46
49
47 43
44
49
50
50
46
48 44
44
44
43
44 41 40
40
36 30
32 29
29
29
32
32
35
36 33
31
31
31
31
37
37
37
37
41 38
42 38
44
44
44
43
42 42
36
36
36
36
37 38
40
33
20
10
0
To capital area
From capital area
Source: Statistics Iceland, 2016
15
The main directions for interregional migration flow “from capital area” are closest regions – South and Southwest. Unit weight of interregional migrants from capital area to these two regions is 15-20% during the period of 1986-2014 (Statistics Iceland, 2016). In its turn, migration between Northern and Eastern regions of Iceland is not significant – just some percentages during the period of 1986-2014 (Statistics Iceland, 2016). Moreover, statistical data show that interregional migration flows as a whole cover just about 3% of Icelandic population, and this tendency is rather stable during the searched period (Statistics Iceland, 2016). So, regional disproportions in Iceland could be interpreted in different ways, basing on available statistics and researches. The authors would say that Iceland has more dynamic and developing capital and sub-capital area, as well as stable stagnation in periphery regions, i.e. Northern and Eastern ones. This situation looks like two economic regions in Latvia, described in Doctoral thesis of one of the authors (Boronenko, 2009) – Riga and subRiga as well as all remained territory of Latvia. In general, it is quite strange and interesting, that Iceland, having GDP per capita almost 3-4 times more than Croatia and Latvia (Schwab, 2015), has the same problems of regional disproportions. For Croatia and Latvia it means, for instance, that increase of GDP per capita even till the level of “high developed” countries will not guarantee that problems of regional disproportions will be solved, i.e. general economic well-being does not save a country from regional disproportions which retrieve territory development in the whole country. 3. Empirical interpretation of modern “worlds-economies” as current types of territory development The authors have chosen two key indicators as a methodological basis for identification and empirical interpretation of modern “worlds-economies”: the use of natural resources (within the framework of this research – use of energy), and the quality of social infrastructure. Why exactly these indicators? First of all, the challenging and recognized by the world scientific community limitation of natural resources which are not enough to provide comfort for all world population (to provide them not for everybody is inhuman and this is a permanent reason for conflicts and remodelling of the world) is a natural bound for the further increase in production and consumption, i.e. economic growth according to consumption-driven capitalist economy (Meadows et al., 1972, 2004; Lahart et al., 2008; Global Footprint Network, Mediterranean Ecological Footprint Initiative, 2015). Moreover, “the resource constraints foreseen by the Club of Rome are more evident today than at any time since the 1972 publication of the think tank's famous book, "The Limits of Growth" (Lahart et al., 2008). The classical option (in according to this limitation) offered by the Club of Rome is to encourage social and economic patterns that would satisfy the needs of people under the minimal use of natural resources (Meadows et al., 1972). Later some researchers argued that “recent economic research shows that the physical limits to natural resource supply do not cause any serious effects on economic growth. This is because growth depends more strongly on technical development, education, and economic policy” (Tahvonen, 1998). In their previous publications the authors of the article and other researchers proved consistently that this is true only for the countries which are – according to the classification worked out by the World Economic Forum (Lopez-Claros et al., 2005) - at the innovationdriven stage (Boronenko, 2007, 2009, 2014; Stankevics et al., 2014), including Finland. But for countries which are at the efficiency-driven stage and especially at
16
the factor-driven stage, exactly basic factor conditions such as low-cost labour and unprocessed natural resources are the dominant basis of competitive advantage and exports (Schwab, 2012). Therefore, the Club of Rome in their classical work "The Limits of Growth" stated that “it is possible to alter this growth trends andto establish a condition of ecological and economic stability that is sustainable far into the future. The state of global equilibrium could be designed so that the basic material needs of each person on the Earth are satisfied and each person has an equal opportunity to realize his individual human potential” (Meadows et al., 1972). How is it possible to achieve sustainable territory development not consuming much energy and other natural resources but at the same time striving for the well-being of the population, i.e. for the “production of qualitative people”? R.E.Hall and Ch.I.Jones in their article “Why Do Some Countries Produce So Much More Output per Worker than Others?” argue that the primary, fundamental determinant of a country’s long-run economic performance is its social infrastructure, i.e. institutions and government policies (Hall, Jones, 1998). Social infrastructure gives incentives for productive activities or predatory behaviour, and workers choose between production and diversion depending on existing quality of social infrastructure in their countries. Taking into consideration that territory development depends not only on the availability of resources as such but also on the possibility to use them efficiently (Pakholok, 2013; Boronenko, Drezgic, 2014), it has to be consider that such possibility is determined by institutional environment within the country, i.e. by the country’s social infrastructure which can either promote or impede a productive use of the resources available in the country. Individual achievements in health, education and income, while essential, do not guarantee in human development if social conditions constrain individual achievements (UNDP, 2013). The World Economic Forum also argues that the importance of a sound and fair institutional environment has become all the more apparent during the recent economic and financial crisis and is especially crucial for further solidifying the fragile recovery, given the increasing role played by the state at the international level and for the economies of many countries. The quality of institutions has a strong bearing on competitiveness and growth. It influences investment decisions and the organization of production and plays a key role in the ways in which societies distribute the benefits and bear the costs of development strategies and policies (Schwab, 2014). So, further empirical analysis is realized taking into consideration these two dimensions – energy use (“nature-friendly” dimension) and social infrastructure (“human-friendly” dimension). The data on 124 world countries are the basis for the revised empirical interpretation of modern “worlds-economies”, the information on whose resource consumption was available, in particular, on energy consumption as the empirical indicator “Energy use per capita (kg of oil equivalent)” (World Bank, 2015) – average meaning for the period of 2007-2011, as well as the second indicator – the index of social infrastructure as the empirical indicator “Institutions (score by the scale 1-7)” (Schwab, 2014) – average meaning for the period of 2009-2013. So, the latest available data on energy consumption and social infrastructure published in the reports by the World Bank and the World Economic Forum have been used for the analysis. First, the average indicators of energy use per capita and overall index of social infrastructure (the world countries’ social infrastructure is measured according
17
to 21 indicators in annual reports by the World Economic Forum) (Schwab, 2014) in the analysed set of 124 world countries have been identified. The average energy consumption per capita for the period of 2007-2011 in the world is 2700.00 kg of oil equivalent with the scatter from 195 kg in Bangladesh (the minimal level of energy consumption) to 17419 kg in Qatar (the maximal level of energy consumption). The average index of social infrastructure for the period of 2009-2013 on a 7-point scale comprises 4.05 with the scatter from 2.33 in Venezuela (minimal, i.e. the worst value of the index) to 6.07 in Singapore (maximal, i.e. the best value of the index). Five countries with the highest and lowest indicators of energy use per capita and social infrastructure are represented in the Table 4. Table 4. Five countries with the highest and lowest indicators of energy use per capita (average meanings for the period of 2007-2011) and social infrastructure (average meanings for the period of 2009-2013) Energy use per capita, kg of oil equivalent
Social infrastructure, score by the scale 1-7 Lowest indicators
“Good” situation Bangladesh Senegal Haiti Myanmar Cambodia “Bad” situation Qatar Iceland Trinidad and Tobago Kuwait Brunei Darussalam
“Bad” situation 195 258 282 283 313
Venezuela Haiti Yemen Myanmar Argentina Highest indicators
2.33 2.63 2.70 2.80 2.87 “Good” situation
17419 16828 15499 10623 8564
Singapore New Zealand Finland Sweden Norway
6.07 6.04 6.03 5.81 5.73
Source: authors’ calculations by the data of The World Bank, 2015; Schwab, 2010, 2011, 2012, 2013, 2014.
The whole set of 124 investigated countries has been divided into groups in relation to the average values of energy consumption and social infrastructure (see Table 5): 1) Energy use per capita is higher than average meaning – 2700.00 kg of oil equivalent – within the set of investigated countries, but the index of social infrastructure is lower than average meaning – 4.05 points – within the set of investigated countries, i.e. the bad situation in terms of both indicators; 2) Energy use per capita is lower than average meaning – 2700.00 kg of oil equivalent – within the set of investigated countries, and the index of social infrastructure is lower than average meaning – 4.05 points – within the set of investigated countries, i.e. the good situation in terms of energy use, but the bad one in terms of social infrastructure; 3) Energy use per capita is higher than average meaning – 2700.00 kg of oil equivalent – within the set of investigated countries, and the index of social infrastructure is higher than average meaning – 4.05 points – within the set of investigated countries, i.e. the bad situation in terms of energy use, but the good one in terms of social infrastructure;
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4) Energy use per capita is lower than average meaning – 2700.00 kg of oil equivalent – within the set of investigated countries, but the index of social infrastructure is higher than average meaning – 4.05 points – within the set of investigated countries, i.e. the good situation in terms of both indicators. Table 5. Methodical matrix of countries’ groups classified by energy use per capita and index of social infrastructure Energy use
Higher than average (“bad” situation)
Lower than average (“good” situation)
Lower than average (“bad” situation)
“Energy consumers with poor social infrastructure” (1st group)
“Ecologists with poor social infrastructure” (2nd group)
Higher than average (“good” situation)
“Energy consumers with strong social infrastructure” (3rd group)
“Ecologists with strong social infrastructure” (4th group)
Social infrastructure
Source: elaborated by the authors.
The outcomes of the authors’ calculations demonstrated the following distribution of the 124 investigated countries into the following groups which claim for the status of “worlds-economies”: 1) “energy consumers with poor social infrastructure” – Czech Republic, Iran, Italy, Kazakhstan, Libya, Russian Federation, Slovak Republic, Slovenia, South Korea, Trinidad and Tobago, Ukraine (11 countries); 2) “ecologists with poor social infrastructure” – Albania, Algeria, Angola, Argentina, Armenia, Azerbaijan, Bangladesh, Benin, Bolivia, Bosnia and Herzegovina, Brazil, Bulgaria, Cambodia, Cameroon, Colombia, Cote d’Ivoire, Croatia, Dominican Republic, Ecuador, Egypt, El Salvador, Ethiopia, Gabon, Georgia, Ghana, Greece, Guatemala, Haiti, Honduras, Hungary, India, Indonesia, Jamaica, Kenya, Kyrgyz Republic, Latvia, Lebanon, Lithuania, Macedonia, Mexico, Moldova, Mongolia, Mozambique, Myanmar, Nepal, Nicaragua, Nigeria, Pakistan, Panama, Paraguay, Peru, Philippines, Romania, Senegal, Serbia, Syria, Tajikistan, Tanzania, Thailand, Turkey, Venezuela, Vietnam, Yemen, Zambia, Zimbabwe (65 countries); 3) “energy consumers with strong social infrastructure” – Australia, Austria, Bahrain, Belgium, Brunei Darussalam, Canada, Denmark, Estonia, Finland, France, Germany, Iceland, Ireland, Israel, Japan, Kuwait, Luxembourg, Netherlands, New Zealand, Norway, Oman, Poland, Qatar, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, UAE, United Kingdom, USA (32 countries); 4) “ecologists with strong social infrastructure” – Botswana, Chile, China, Costa Rica, Cyprus, Hong Kong, Jordan, Malaysia, Malta, Montenegro, Morocco, Namibia, Portugal, Sri Lanka, Tunisia, Uruguay (16 countries); The largest group – practically a half – in the set of investigated countries (most likely also in the world) is comprised of the countries – “ecologists with poor social infrastructure”. The main feature of this “world-economy” is a relatively low energy use per capita, although the development level of social infrastructure does not allow the countries of this “world-economy” to achieve the main aim of territory 19
development – human well-being, as the available country’s resources cannot be used at their utmost for the territory development in general, but just for the development of certain privileged layers of society due to high level of crime, corruption, favouritism, etc. The second largest group (32 countries) is comprised of the countries opposite to the first group in terms of both indicators – “energy consumers with strong social infrastructure”. They are mainly the economically developed countries of Western Europe, Scandinavia and North America, as well as oil Muslim countries which consume quite a lot of energy, but – surprisingly for the authors - they have a strong social infrastructure favourable for a person which enables the efficient distribution and use of the resources available and, therefore, the achievement of the main aim of any territory development (according to the authors of the article) – development of a person residing on this territory. These two “worlds-economies” – “ecologists with poor social infrastructure” and “energy consumers with strong social infrastructure” – mainly correspond to developed and developing countries in the usual understanding of territory development within the framework of the evolutionary (quantitative) paradigm. The countries of former communist block in Central and Eastern Europe, Africa and South America which inherited from their authoritarian political regimes poor social infrastructure with crime, corruption, favouritism, etc. as well as relatively low level of energy use per capita, which can be explained by various reasons such as insufficient development of the real sector of economy, a relatively low level of consumption in the economy in general, warm climate in many of these countries, etc. – belong to the group of countries “ecologists with poor social infrastructure”. What concerns the group of countries “energy consumers with strong social infrastructure” as it has already been mentioned above, these are mainly economically highlydeveloped capitalist countries with a rather interesting “touch” of the group of “oil capital” countries. This is a group of Arabian monarchies supporting a peculiar way of development and then later the autonomy of the “Islamic world” from the capitalist system, in fact is orientated not to the separation from this system but to the inclusion into the system as a more equal of it (Avdiyev, 1990). The analysis of the data shows that on the background of the above mentioned relatively large “worlds-economies” – “ecologists with poor social infrastructure” and “energy consumers with strong social infrastructure” – there appear the beginnings of new “worlds-economies” which most probably are new centres of the future dominant “worlds-economies”. These two groups of countries – “energy consumers with poor social infrastructure” and “ecologists with strong social infrastructure” – from the viewpoint of territory development are the examples of complete opposites: the first group of countries is characterized by poor situation in terms of energy use as well as social infrastructure (they are, first of all, the countries with “resources’ economies”, which have not established a strong social infrastructure, e.g. Russia); the second group of countries is vice versa characterized by a good situation in the sphere of energy use as well as social infrastructure (they are the groups of countries overspread around the world such as the groups of countries in South Asia, including China as the most significant part of this “world-economy”, in South-East Africa, Latin America and Mediterranean area). The authors single out provisional leaders – politically and economically important and large countries of the identified “worlds-economies” (which enables to more easily perceive and identify the nature of each “world-economy” in the run of scientific debates):
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1) the leader of the “energy consumers with poor social infrastructure” – Russia; 2) the leaders of the “ecologists with poor social infrastructure” – Brazil and India; 3) the leaders of the “energy consumers with strong social infrastructure” – USA and UK; 4) the leader of the “ecologists with strong social infrastructure” – China. The authors’ quantitative analysis made for the above-mentioned (in the Chapter 1.2) 10th International Conference “Economic Integrations, Competition and Cooperation: Accession of the Western Balkan Region to the European Union” in Opatija (Croatia) in 2015 shows main features of these emerging new “worldseconomies”. Firstly, the countries –“ecologists with strong social infrastructure” (“China’s group”) do not focus on intensive energy use but on the quality of social infrastructure, and they have already achieved good results in this field: they have quite high growth of population, average Human Development Index, one of the lowest “energetic price” of 1 dollar of GDP (spent energy per 1 dollar of GDP), low energy use per capita, and quite high level of competitiveness, which is increasing every year. In these countries there is no increase in GDP per capita, but on the basis of such a high level of development of social infrastructure and Human Development Index it is possible to conclude that the countries-“ecologists with strong social infrastructure” have set a course for human development by means of improving the institutional environment but not by means of increasing standard of living at the expense of environment. The countries-“energy consumers with poor social infrastructure” (“Russia’s group”), in their turn, have a relatively high Human Development Index and standard of living, but it happens because of the intensive and inefficient use of energy under a relatively low level of development of social infrastructure, i.e. natural resources are used actively but inefficiently, and it is much more convenient to steal than to work in these countries – this is due to their institutional environment which impedes territory development. In order to reduce the distrust of scientific community of the way of empirical identification of “worlds-economies” implemented by the authors, it is useful to compare differences in the average GDP between these four above described “worldseconomies” for statistical significance. Results of multiple comparisons’ procedure made in SPSS showed that there are statistically significant differences in economic performance of the “worlds-economies” traditionally measured by the GDP per capita (Hanks, 2009; Sala-i-Martin et al., 2013; Stankevics et al., 2014; Simpson, 2015). Table 6. Statistically significant differences between average GDP per capita(during the period of 2009-2013) in identified “worlds-economies” “Worldseconomies” “Energy consumers with poor social infrastructure”
“Energy consumers with poor social infrastructure” Average GDP per capita is 15661 USD
“Ecologists with poor social infrastructure” There is statistically significant difference (p=0.007)
“Energy consumers with strong social infrastructure” There is statistically significant difference (p=0.000)
“Ecologists with strong social infrastructure” There is no statistically significant difference (p=0.420)
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“Ecologists with poor social infrastructure” “Energy consumers with strong social infrastructure” “Ecologists with strong social infrastructure”
There is statistically significant difference (p=0.007) There is statistically significant difference (p=0.007) There is no statistically significant difference (p=0.420)
Average GDP per capita is 4686 USD There is statistically significant difference (p=0.000) There is statistically significant difference (p=0.033)
There is statistically significant difference (p=0.000) Average GDP per capita is 46337 USD There is statistically significant difference (p=0.000)
There is statistically significant difference (p=0.033) There is statistically significant difference (p=0.000) Average GDP per capita is11839 USD
Source: elaborated by the authors using SPSS software and data of the Schwab 2009, 2010, 2011, 2012, 2013.
According to the data in Table6, the countries of traditional capitalist “worldeconomy” into which, as it has been discussed above, a group of Arabia oil monarchies has been added (“USA’s/UK’s group”) has the highest average GDP per capita, and in this way it is statistically significantly different from all other “worldseconomies”. Its opposite - “ecologists with poor social infrastructure” (“Brasil’s/India’s group”) – have the lowest average GDP per capita, which is also statistically significantly different from all other “worlds-economies”. There are no any statistically significant differences in the economic performance between two new emerging “worldseconomies”: “energy consumers with poor social infrastructure” (“Russia’s group”)
and “ecologists with strong social infrastructure” (“China’s group”) – both “worldseconomies” have approximately the same average GDP per capita. This is achieved mainly whether by means of intensive use of resources (in the first case), or by means of creating a social infrastructure which promotes a productive activity of economic actors (in the second case). Therefore, the authors showed that the “worldseconomies” which they identified empirically have not only a different combination of two characteristics chosen by the authors (scientific feasibility of these can be subjected to criticism and can be the topic for debate) but in the majority cases statistically significantly different level of economic performance measured by the average GDP per capita for the period of 5 years. At the moment the world is undergoing an active transformation, when it is extremely important to understand into which “worlds-economies” the world is divided today and what the essence and role of each of them are. In the 2 nd part of the article the opinion of the Human Development Report 2013 on the presence of two “worlds-economies” in the modern global world – the growing South and the crisis North has been discussed (UNDP, 2013). The Russian economist M.Delyagin, Director of the Problems Issued by Globalization Institute, in his report at the scientific-practical conference “China and Russia in a Changing World” (Beijing, May 4, 2015) states that “in the economy a shaping division of a global financial market into the dollar, euro and yuan zones is already evident. In politics it is a restoration of a bipolar confrontation in the form of the USA and China competition, with Russia, the EU, Japan, and India functioning as "second grade powers" (Delyagin, 2015). In general, M.Delyagin is inclined to divide the global world into the western-northern and eastern-southern “worlds-economies”. Taking into consideration the arguments of the above mentioned approaches towards a provisional 22
division of the global economic environment into “worlds-economies”, the authors suggest their own the above described approach trying to find more or less stable “worlds-economies” on the basis of two essential characteristics – energy use and social infrastructure, i.e. to what extent modern countries are nature-friendly and human-friendly. Therefore, the authors make their contribution to scientific discussion about methodology and empirical results of identification of modern “worlds-economies” in order to better understand the system of world poles of growth. The above mentioned report by M.Delyagin is titled: “The Familiar World has Crumbled: Russia and China Must Create a New One” (Delyagin, 2015). Probably, in the future China and Russia will become the centres of new global “worlds-economies”, although, even now the progressiveness of the “world-economy” of a “Chinese” type 5 (“ecologists with strong social infrastructure”, the growth centres of which are located in Asia, Africa, Latin America and Mediterranean area) – for both nature and human – is evident. Iceland belongs to the group of “energy consumers with strong social infrastructure” (“USA’s/UK’s group”) within the system of “worlds-economies” identified by the authors. Moreover, the average level of use of energy resources per capita for the period under review in Iceland is one of the highest (second place after Qatar – see Table 4) among 124 countries under review. Probably, it can be partially explained by nothern climate, and partially by the excessive involvement of Iceland into huge industrial megaprojects which was mentioned in the Chapter 2. When it comes to institutional environment, notwithstanding the above mentioned opinions and arguments by Icelandic researchers on corruption as a significant reason of Icelandic economic collapse (Benediktsson, Karlsdóttir, 2011; Logason, 2012), Iceland has a relatively strong social infrastructure, although the average indicator of the quality of social infrastructure in the country is considerably lower than in its Scandinavian neighbors - Norway, Sweden and Finland, and it is also lower than in Singapore, New Zealand, Western Europe and Arabian oil monarchies, but it is higher than in the USA (the authors’ calculations of average meaning by the data of Schwab 2009, 2010, 2011, 2012, 2013). Therefore, the authors think that the main reason of a dramatic decrease in Iceland’s competitiveness in the last 10 years is the deterioration of its social infrastructure. The authors base their assumptions on the arguments provided by Icelandic researchers and their own results of analysis of statistics and data of the World Economic Forum’s surveys. What concerns the possible ways for the improvement of the quality of social infrastructure and increase in Iceland’s competitiveness, then coming back to the arguments of the Human Development Report 2013, which have been presented in the Introduction to the article. It could be suggested that one of the best source of further development for every country is efficiency interactions with other “worlds-economies”. 4. Social and economic interactions of Iceland with other “world-economies” Further analysis discussed within this article is devoted to the empirical study of social and economic interactions of Iceland – in this case, its trade and migration flows as well as logistic interconnections (see Interpretation of main concepts in the Introduction) – within the context of “worlds-economies” identified by the authors. 5
“… currently Chinese state capitalism is supposed to make China the most powerful nation in the world” (Zoega, 2013).
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4.1. Trade flows between Iceland and “worlds-economies” According to the researchers who study the history of Iceland, trade has always been crucial for this society (Boyer, 2009). Besides that, Icelanders have always lived in a close contact with the people who were their clients and suppliers, and, therefore, they have always been affected by them and copied them (Boyer, 2009). Therefore, the analysis of international trade flows – export and import – within the context of “world-economies” identified by the authors would be the most relevant way for studying social and economic interactions of Iceland in a relatively long time perspective, for which we have statistical data available. Figure 6. Export in goods from Iceland, in % to each “world-economy”, 1988-2015 100%
80%
60%
40%
20%
0%
Others Ecologists with strong social infrastructure Energy consumers with strong social infrastructure Ecologists with poor social infrastructure Energy consumers with poor social infrastructure
Year 1988 1989 1990 1991 1992 1993 1994 1995 1996
1* 6.16 6.50 5.51 4.34 3.22 2.67 3.14 3.12 3.47
“Worlds-economies” 2 3 1.63 78.91 2.07 80.89 2.11 85.41 1.85 86.49 2.18 88.71 2.10 90.35 1.84 91.86 1.93 89.61 2.15 85.93
4 9.95 6.06 3.90 4.97 3.29 2.04 1.54 2.26 3.14
Other countries** 3.35 4.48 3.07 2.35 2.60 2.84 1.62 3.08 5.31
Total 100 100 100 100 100 100 100 100 100
24
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
3.83 3.00 2.22 2.21 2.01 2.16 2.20 2.59 2,83 3.28 2.78 2.84 2.97 4.45 6.18 6.97 7.66 7.39 4.01
3.04 2.57 1.81 1.95 2.81 3.50 3.92 4.48 4.14 4.48 3.34 3.75 4.11 4.85 5.47 5.54 6.15 6.96 5.51
86.33 88.04 87.25 85.94 85.13 85.79 85.98 85.33 83.34 85.59 85.87 86.52 85.65 85.80 82.42 80.33 79.98 78.86 84.98
3.64 4.63 6.00 7.02 7.07 6.09 5.51 5.52 5.97 4.68 4.24 5.32 5.65 3.51 4.24 4.71 4.21 3.52 4.26
3.16 1.76 2.72 2.88 2.98 2.46 2.39 2.08 3.72 1.97 3.77 1.57 1.62 1.39 1.69 2.45 2.00 3.27 1.24
100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
* 1 - Energy consumers with poor social infrastructure (Russia’s group) 2 - Ecologists with poor social infrastructure (Brasil’s/India’s group) 3 - Energy consumers with strong social infrastructure (USA’s/UK’s group) 4 - Ecologists with strong social infrastructure (China’s group) ** Countries, which had no data about energy use or/and social infrastructure Source: the authors’ calculations by the Statistics Iceland, 2015d.
As the data from Figure 6 show, the “world-economy” to which Iceland belongs itself – “energy consumers with strong social infrastructure”, i.e. a marketcapitalist “world-economy” – has the absolute advantage as a receiver of Icelandic export goods. Since 1988 the share of the market-capitalist “world-economy” has never gone down lower than 80% within the export structure of Iceland, but in 19931994 it even exceeded 90%. In 2013-2014 there was a slight “shift” towards such “world-economies” as “energy consumers with poor social infrastructure” and “ecologists with poor social infrastructure”, but it was an insignificant and short episode which hardly changed virtually absolute export orientation of Iceland towards its own “world-economy”. Within the framework of this research the authors did not analyze in detail the export structure and main partners (countries), as in order to achieve the aim of this research the authors were interested only in the “worlds-economies” context. It should be shortly pointed out that the peculiarity of directions and export structure in Iceland is its “peg” – in recent years – to one country and one product, namely, the Netherlands (Statistics Iceland, 2015d) and aluminum (Statistics Iceland, 2011), which has become one of the leaders of Icelandic export along with the implementation of industrial “large scale projects” or “megaprojects” (Johannesson, 2010a, 2010b; Johannesson et al., 2010) on the east of the country in 2004 (see Figure 7). Figure 7. Export in goods from Iceland to Netherlands, in % from total export, 1988-2015
25
40 35 30 25 20 15 10 5 0
Source: Statistics Iceland, 2015d.
Figure 8 shows the data on the import of goods to Iceland for the last 27 years, also within the context of “world-economies” identified by the authors. Figure 8. Import in goods to Iceland, in % from each “world-economy”, 1988-2015 100%
80%
60%
40%
20%
0%
Others Ecologists with strong social infrastructure Energy consumers with strong social infrastructure Ecologists with poor social infrastructure Energy consumers with poor social infrastructure
Year 1988 1989 1990 1991
1* 8.80 8.24 8.96 7.56
“World-economies” 2 3 1.02 85.57 1.12 84.69 1.05 85.47 1.32 86.83
4 3.63 3.93 3.50 3.03
Other countries** 0.98 2.02 1.02 1.26
Total 100 100 100 100
26
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
6.15 7.21 6.86 7.25 7.27 7.29 7.12 7.06 6.14 5.88 8.23 9.23 6.87 6.35 5.60 6.74 4.90 4.62 4.85 5.57 5.71 6.22 6.19 5.65
1.69 1.82 1.92 2.18 1.84 1.97 2.61 2.49 2.86 3.68 4.15 5.36 5.97 6.65 5.98 5.37 6.07 9.76 15.95 11.36 12.78 13.11 11.95 13.58
86.99 85.77 86.09 84.53 84.80 85.64 83.88 84.08 83.22 80.81 79.61 76.67 78.36 77.23 78.82 78.53 77.47 75.51 68.66 70.53 68.80 68.50 69.84 60.85
3.05 3.66 3.91 4.50 4.97 3.71 4.42 4.17 5.44 6.68 5.01 6.14 5.79 7.82 7.54 7.92 9.40 7.34 8.53 10.26 11.48 10.69 10.78 10.01
2.12 1.54 1.22 1.54 1.12 1.39 1.97 2.20 2.34 2.95 3.00 2.60 3.01 1.95 2.06 1.44 2.16 2.77 2.01 2.28 1.23 1.48 1,24 9,91
100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
* 1 - Energy consumers with poor social infrastructure (Russia’s group) 2 - Ecologists with poor social infrastructure (Brasil’s/India’s group) 3 - Energy consumers with strong social infrastructure (USA’s/UK’s group) 4 - Ecologists with strong social infrastructure (China’s group) ** Countries, which had no data about energy use or/and social infrastructure Source: the authors’ calculations by the Statistics Iceland, 2015e.
According to the data summarized and presented by the authors in Figure 8, the import of goods to Iceland is more diversified in relation to “worlds-economies” supplying these goods as compared to the export. The market-capitalist “worldeconomy” – “energy consumers with strong social infrastructure” (USA’s/UK’s group) – is an absolute leader, although with an increasingly declining share within the general structure of import of goods to Iceland. If in 1988 the share of goods by the market-capitalist “world-economy” comprised more than 85% within the structure of Icelandic goods import, since the beginning of the 2000s it has never exceeded 80%, sharply decreased after the crisis and reached 60% in 2015. In its turn, after the 2008 crisis, the share of goods import from “ecologists with poor social infrastructure” (Brasil’s/India’s group) has increased significantly. It should be reminded that for a short period of time – in 2013-2014 – the share of export to Iceland of goods from this “world-economy” increased, but still the increased share of import from “ecologists with poor social infrastructure” to Iceland remains the established trend. Not analyzing the reasons for a such trend (as it goes beyond the scope of this research), it should be noted down that the expansion of interactions with other “world-economies” in the post-crisis period happens mainly in the process of importing goods, not exporting (possibly, because of the difference in the price level on goods produced in “energy consumers with strong social infrastructure” and in “ecologists with poor social infrastructure”). But the most
27
important thing is that the expansion of economic and social interactions through trade flows happens anyway. It should also be pointed out that in Iceland’s import-export practice, as well as in its industry there are “large scale projects” (related mainly to offshore zones) which really sharply but for a short period of time change the structure of export and import of goods. For example, 2.02% of total export in 1996 was from Cayman Islands (with the population of a little more than 56 thousand), 2.17% of total export in 2007 – from Virgin Islands (Statistics Iceland, 2015d), in 2015 the goods from Bermuda6 (with the population of a little more than 64 thousands) comprised 6.58% of total import (Statistics Iceland, 2015e). 4.2. Migration flows between Iceland and “world-economies” The authors begin the analysis of the migration flows to and from Iceland with the comparison of the absolute meanings of international emigration and immigration in order to qualitatively compare these two flows in the period since 1986.
6
All these islands are overseas territories of a market-capitalist “world-economy”, and the authors admit that to relate these islands to the group “other countries” might be considered not fully correct.
28
Figure 9. International emigration and immigration of Iceland, absolute meanings, 1986-2014 4348 3400 3932 3175 2827 4066 2754 4135 2988 4340 3392 4851
2014 2013 2012 2011 2010 2009 2008
7471
3294
2007
9318
3395
2006
7070
3042
2005
2975 2512 3276
2004 1353
2003
4680
2964
1855
2002
3380 2515 2959 2462 2679 1918 2709 1774 3021 1406 3158 1258 3444 938 3566 880 2657 949 2016 979 1775 1708 1995 1111 2806 1020 2883 1756 1856 1018 1916 662 2479
2001 2000 1999 1998 1997 1996 1995
1994 1993 1992 1991 1990 1989 1988 1987 1986 0
2000
4000 Immigration 6000 Emigration 8000
10000
Source: Statistics Iceland, 2015f.
29
As the data on Figure 9 demonstrate, the dominance of one or another process – emigration or immigration has repeatedly changed during the last 30 years. 4 such periods can be singled out: 1) 1986-2004 – the intensity of the emigration process of Icelanders from the country quantitatively exceeded the immigration indexes, and during some periods within this time interval – dramatically (for example, in 1995 the flow of emigration 4 times exceeded the immigration flow); 2) 2005-2008 – the period of boom in the Icelandic financial economy, when the immigration to the country significantly exceeded the emigration (in 2007 almost 3 times); 3) 2009-2012 – the period of financial and economic recession, when the emigration flow again quantitatively exceeded the immigration flow to Iceland; 4) 2013-2014 – the period of slow revival of economy after the crisis; the dominant of migration flows changed again in favour of immigration to the country, i.e. there were considerably more immigrants than Icelanders who were leaving the country, and, the chances are that this tendency exists now. From the viewpoint of the main emphasis of this research on “worldeconomies”, the peculiarity of the process of emigration from Iceland is its absolute orientation on the same “world-economy” which Iceland itself belongs to, i.e. on “energy consumers with strong social infrastructure” (the USA’s/the UK’s group). Denmark, Norway, Sweden, the UK and the USA receive the main flow of Icelanders-immigrants (see Figure 10). In 2012 these 5 countries received 83.1% of the general number of Icelandic emigrants, in 2013 – 81.7%, in 2014 – 80.8%. If the UK and the USA during the period under research attracted a persistently small number of emigrants from Iceland, three Scandinavian states Denmark, Norway and Sweden – have the periods which were especially attractive for Icelandic emigrants. For example, in Sweden the period 1989-1990 was the most attractive when more than 45% of all Icelandic emigrants chose this country. Later, in 2004-2007 Denmark became the most popular, when almost half of Icelandic emigrants left for it (let us remember that this was the period of boom in Iceland, when the emigration flow was lower than usual). Icelanders started to choose Norway as the target country for their emigration – 30 % and more from the total number of emigrants after 2009. It still remains the main direction for emigration flow from Iceland. Taking into consideration the peculiarities of direction and intensity of Icelandic emigration, it can be rather referred to as cultural-economic not just economic as it happens in Eastern European countries, for example in Latvia, Lithuania, Poland, etc.
30
Figure 10. Main countries-destinations of emigration of Icelandic citizens, % of all emigrants with Icelandic citizenship 100% 90%
80% 70% 60% 50% 40% 30% 20% 10%
0% 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Others
USA
UK
Sweden
Norway
Denmark
Source: the authors’ calculations by the Statistics Iceland, 2015f.
31
Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Denmark
Norway
Sweden
UK
USA
Other countries
28.56 32.31 28.88 20.60 23.52 27.12 29.46 31.60 36.85 47.28 47.44 41.26 36.97 41.45 39.98 39.41 44.85 47.84 49.91 49.08 49.90 49.51 46.39 29.42 24.95 19.93 23.34 22.55 24.38
26.78 23.07 18.86 7.84 9.59 12.13 13.80 13.84 21.49 16.26 18.87 22.48 28.40 15.54 17.81 15.95 16.42 11.57 7.57 8.13 7.40 7.92 8.44 30.63 33.62 36.47 34.31 31.37 29.53
23.72 21.97 28.45 45.33 45.72 26.87 24.90 22.62 17.58 14.44 11.35 8.99 8.51 10.56 12.58 11.90 11.92 13.33 10.13 12.61 12.59 10.69 13.72 13.05 14.82 16.69 16.50 16.85 16.56
1.94 2.66 1.62 1.98 2.89 3.76 2.25 2.23 1.69 2.72 4.41 5.03 4.40 5.46 6.20 5.81 5.00 5.30 6.07 5.85 5.29 5.01 6.13 4.47 3.16 3.26 3.34 4.85 4.24
7.14 7.46 8.84 11.00 6.59 12.73 12.23 11.11 8.62 6.37 6.36 7.79 7.35 9.19 7.13 9.80 7.01 7.35 8.79 6.96 6.84 9.72 6.65 4.29 6.18 4.43 5.61 6.05 6,12
11.86 12.53 13.35 13.25 11.69 17.39 17.36 18.60 13.77 12.93 11.57 14.45 14.37 17.80 16.30 17.13 14.80 14.61 17.53 17.37 17.98 17.15 18.67 18.14 17.27 19.22 16.90 18.33 19,17
As data on Figure 11 show Icelandic immigration flows are more diversified than emigration ones, but there is a dominant here too, namely, 5 countries (and virtually all of them belong to “energy consumers with strong social infrastructure” (the USA’s/the UK’s group)), the immigration flow from which comprises almost half of all Icelandic immigration flow - 49.35% in 2012, 52.00% in 2013, 49.45% in 2014. The immigrants from Poland, who now comprise one third of the immigration flow to Iceland but in the period of boom in Icelandic financial economy their number exceeded 60%, occupy a special place. The immigrant flow from Germany comprised 4-6% of all immigration flow to Iceland during the whole period 1986-2014. The flow of immigrants from the USA, rather intensive in the end of the 1980s, weakened later and now it comprises 4-6% of all immigrant flow to Iceland. Therefore, if the authors referred to Icelandic emigration as culturaleconomic, the immigration has a clearly economic character – mainly for the people from Poland.7 7
On the basis of te results of the empiric analysis Poland was referred to the same “world-economy” as Iceland, - “energy consumers with strong social infrastructure” (“the USA’s/the UK’s group”), but it should be noted that it is also very close to other “worlds-economies” since its use of energy is a bit lower than average in the set of 124 investigated countries, but its index of social infrastructure is a bit
32
Figure 11. Main immigration sources for Iceland, % of all immigrants 100% 90% 80% 70% 60% 50% 40% 30%
20% 10% 0% 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Others
Lithuania
USA
Spain
Germany
Poland
Source: the authors’ calculations by the Statistics Iceland, 2015g.
34
Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Poland
Germany
Spain
USA
Lithuania*
Other countries
0.76 2.06 2.39 5.88 13.14 19.85 5.52 5.69 5.91 12.90 15.66 21.05 23.06 13.30 14.34 15.31 14.34 10.79 9.79 32.88 47.07 60.62 52.00 36.26 27.18 27.89 31.34 33.34 32.04
4.53 5.01 4.33 6.37 3.87 3.81 5.01 6.85 4.43 5.01 3.10 4.55 2.87 4.22 6.78 7.08 7.87 5.25 5.37 6.41 4.46 3.23 4.20 5.90 6.39 5.59 3.86 5.54 4.76
1.1 1.18 1.14 1.27 0.54 0.82 0.41 0.32 0.80 1.39 0.72 1.28 1.18 0.73 1.26 1.15 2.16 0.59 0.84 0.60 0.33 0.44 0.74 1.86 2.84 2.03 2.33 3.94 4.62
17.07 12.18 9.91 9.12 7.29 9.02 9.60 7.90 7.95 6.93 7.15 5.97 5.24 5.16 4.26 4.14 5.01 4.73 3.82 2.99 2.94 1.58 1.95 4.01 4.42 4.39 6.90 5.19 4.12
0.20 0.53 0.68 0.43 0.32 0.78 0.90 1.72 4.10 6.72 4.91 3.10 2.55 4.29 5.71 6.17 5.70 6.93 8.40 6.10 4.92 3.99 3.91
76.44 79.57 82.23 77.35 75.16 66.51 79.26 78.71 80.23 73.35 73.05 66.36 66.74 74.87 69.25 65.61 65.71 75.54 77.63 52.82 39.49 27.96 35.40 45.05 50.77 53.99 50.65 47.99 50.55
* Till 1991 Lithuania was included in the USSR, and there was not separate statistics on Lithuania.
The data from Figures 12, 13, 14 and 15 show in a comparative format the flows of Icelandic emigration and immigration in relation to every one of four “worlds-economies” identified by the authors during the whole period 1986-2004 under research. The first “world-economy” – “energy consumers with poor social infrastructure” (“Russia’s group”) which such countries as the Czech Republic, Iran, Italy, Kazakhstan, Libya, the Russian Federation, the Slovak Republic, Slovenia, South Korea, Trinidad and Tobago, Ukraine belong to, during the period under research had only the relations of immigration with Iceland, as the flow of Icelandic emigration to the countries of this “world-economy” rarely exceeded 1% of the total number of Icelanders-emigrants. Whereas, the flow of immigration from the countries of this “world-economy” sometimes exceeded even 10% of the total number of immigrants to Iceland (see Figure 12).
35
Figure 12. International emigration and immigration from/to Iceland to/from the 1st “world-economy”,* % of all emigrants/immigrants, 1986-2014
2014
7.69
0.21
2013
6.53
1.9
2012
0.54
2011
0.51
2010
0.42
6.86 6.21
2009
0.58
2008
0.66
2007
6.52
6.02 5.83
4.58
1.28
2006
6.03
0.75
2005
4.24
0.6
2004
10.95
0.88
2003
0.47
2002
0.59
2001
0.7
2000
0.34
1999
0.45
1998
6.73 5.06 5.09
5.8 6.25 3.67
0.69
1997
0.54
1996
0.55
1995
0.34
1994
0.38
1993
0.51
1992
0.62
3.47 5.09 3.85 2.95 4.54 2.66 2.11
1991
0.35
1990
0.25 0.88 0.62 1.14 0.27 0.98 0.31 1.36 0.28
1989 1988
1987 1986 0
2
2.79
4
6 Immigration
8Emigration10
12
* Energy consumers with poor social infrastructure (“Russia’s group”) Source: the authors’ calculations by the Statistics Iceland, 2015f, 2015g.
36
Figure 13. International emigration and immigration from/to Iceland to/from the 2nd “world-economy”,* % of all emigrants/immigrants, 1986-2014 20.47
2014
1.07
2013
1.39
2012
1.48
2011
1.55
2010
1.52
20.06
2009
2.06
2008
1.68
2007
1.4
2006
1.53
2005
1.35
2004
1.41
2003
21.98 22.86 24.8 22.01 17.83 14.37 17.77 19.85 18.03 26.02
0.85
2002
1.26
2001
1
2000
1.25
1999
0.9
1998
0.63
29.52 27.91 21.56
1997
1.11
1996
1.04
1995
26.89
18.83 17.38 18.89 13.89
1.66
1994
1.22
1993
1.24
1992
1.13
13.54 9.27 11.09
1991
0.6
1990
0.69
1989
0.65
1988
0.44
1987
0.21
1986
0.36 0
18.04
12.69 12.27 6.32 6.41
2.86 5
10
15 20 Immigration
25 30 Emigration
35
* Ecologists with poor social infrastructure (“Brazil’s/India’s group”) Source: the authors’ calculations by the Statistics Iceland, 2015f, 2015g.
37
Iceland’s emigration-immigration flows in relation to the second “worldeconomy” identified by the authors – “ecologists with poor social infrastructure” (“Brazil’s/India’s group”),8 have the same character as in relation to the first one (see Figure 13). Running ahead, it should be noted that the relations between Iceland and the fourth “world-economy” – “ecologists with strong social infrastructure” (“China’s group”),9 have the same immigration dominant, the immigration flow from which in 2004 reached a quarter of the total number of immigrants in Iceland (see Figure 15). As the data on Figure 14 show, a capitalist “world-economy” which Iceland itself belongs to - “energy consumers with strong social infrastructure” (the USA’s/the UK’s group)10 is the leading direction for emigration-immigration (especially emigration) flows of Iceland, as well as in the case with Icelandic international trade (see Chapter 4.1). The vast majority of Icelandic emigrants – more than 90% of the total number of them – during the period 1986-2014 chose (and still choose) the countries of Iceland’s own “world-economy” as the direction for emigration. Whereas, the immigration flow to Iceland as well as the flow of goods import (see Chapter 4.1) – is more diversified, although the share of immigrants to Iceland from its own “world-economy” dropped below 50% only once, in 2004, always being dominant 11 also in the immigration flow of Iceland. Therefore, the same as in the case with the flows of Iceland’s international trade (see Chapter 4.1), the authors have to conclude that the capitalist “worldeconomy” which Iceland itself belongs to and whose socio-economic character is clearer and more acceptable for Icelanders is the absolute dominant in the flows of Iceland’s international migration.
8
It includes such countries as Albania, Algeria, Angola, Argentina, Armenia, Azerbaijan, Bangladesh, Benin, Bolivia, Bosnia and Herzegovina, Brazil, Bulgaria, Cambodia, Cameroon, Colombia, Cote d’Ivoire, Croatia, Dominican Republic, Ecuador, Egypt, El Salvador, Ethiopia, Gabon, Georgia, Ghana, Greece, Guatemala, Haiti, Honduras, Hungary, India, Indonesia, Jamaica, Kenya, the Kyrgyz Republic, Latvia, Lebanon, Lithuania, Macedonia, Mexico, Moldova, Mongolia, Mozambique, Myanmar, Nepal, Nicaragua, Nigeria, Pakistan, Panama, Paraguay, Peru, the Philippines, Romania, Senegal, Serbia, Syria, Tajikistan, Tanzania, Thailand, Turkey, Venezuela, Vietnam, Yemen, Zambia, Zimbabwe. 9 It includes such countries as Botswana, Chile, China, Costa Rica, Cyprus, Hong Kong, Jordan, Malaysia, Malta, Montenegro, Morocco, Namibia, Portugal, Sri Lanka, Tunisia, and Uruguay. 10 It includes such countries as Australia, Austria, Bahrain, Belgium, Brunei Darussalam, Canada, Denmark, Estonia, Finland, France, Germany, Iceland, Ireland, Israel, Japan, Kuwait, Luxembourg, the Netherlands, New Zealand, Norway, Oman, Poland, Qatar, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, the UAE, the United Kingdom, and the USA. 11 The dominant is rather provisional taking account Poland’s boundary location within the system of “world-economies” identified by the authors, and the fact that Poland has been the main “provider” of immigrants to Iceland for the last 10 years.
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Figure 14. International emigration and immigration from/to Iceland to/from the 3rd “world-economy”,* % of all emigrants/immigrants, 1986-2014 64.27
2014
93.96
66.12
2013
94.61
63.95
2012 2011
62.45
2010
61.97
94.52 94.67 93.95
65.11
2009
93.58
69.44
2008
93.49
75.87
2007 65.8
2006
93.35 94.05
57.38
2005
95.54
40.59
2004
95.87 52.99
2003
95.77
57.85
2002 2001
53.7
2000
53.21
1999
55.2
95.91 96.23 96.78 96.6
63.41
1998
96.95
67.66
1997
95.91
64.65
1996
96.95
69.74
1995
96.38
59.99
1994
96.92
62.81
1993
94.95
69.89
1992 1991
71.54
1990
70.29
96.05 96.12 97.77
75.49
1989
95.99
1988
83.95
1987
84.37
95.53
95.36 89.11 94.3
1986 0
20
40
60 80Emigration 100 Immigration
120
* Energy consumers with strong social infrastructure (“USA’s/UK’s group”) Source: the authors’ calculations by the Statistics Iceland, 2015f, 2015g.
39
Figure 15. International emigration and immigration from/to Iceland to/from the 4th “world-economy”,* % of all emigrants/immigrants, 1986-2014
2014
0.68
2013
0.49
2012
0.92
2011
0.61
2010
1.02
2009
0.76
2008
0.78
2007
0.89
2006
0.79
2005
0.57
2004
0.45
2003
0.63
2002
0.63
2001
0.68
2000
0.34
1999
0.36
1998
0.6
1997
4.59
3.92 4.23 4.16 4.14 4.32 5.29 4.01 8.47 14.77 25.28 6.79 3.94 4.66 4.99 4.3 3.77 4.84
1.07
1996
4.7
0.53
5.65 0.52 2.37 0.84 3.38 1.74 2.75 0.68 3.28 0.35 4.59 0.25 3.43 0.28 1.93 0.05 0.89 0 1.65 0.08
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 0
5
10
15 Immigration
20 Emigration 25
30
*
Ecologists with strong social infrastructure (“China’s group”) Source: the authors’ calculations by the Statistics Iceland, 2015f, 2015g.
40
4.3. Logistical interactions between Iceland and other countries In addition to two previously analysed types of Iceland’s interactions with other countries and regions in the world, the authors propose to take into consideration such type of logistical interactions as direct flights. The authors pay special attention to this type of interactions, as the availability of direct flights encourages a tighter and more frequent economic, social and cultural interaction between the related countries. The analysis of the website for selling flight tickets www.skyscanner.com, and the airport information desk at Reykjavik International Airport allowed the authors identifying 11 countries, to which Iceland is connected by direct flights all the year round (not only during summer seasons). These countries are Canada, the United States, the United Kingdom, the Netherlands, Denmark, Norway, Sweden, Finland, Germany, France and Belgium. All together these countries could be identified as part of capitalist “world-economy” (“the USA’s /the UK’s group”) - Northern-Atlantic sub-“world-economy” (see Figure 16).
41
Figure 16. Northern-Atlantic sub-“world-economy” identified on the basis of direct flights, 2015
Source: the authors’ elaborated by the data of airport information desk at Reykjavik International Airport.
42
Conclusions Taking into consideration the increasing importance of limitation of natural resources in the global world, as well as a science-founded determinant role of social infrastructure in the process of use of resources, the authors emphasize two key drivers of countries’ long-term development: the low use of resources (within the framework of this research – the use of energy), and a high quality of social infrastructure. Using these two indicators, the identification of qualitatively different but equally existent and capable in the global economic space the so-called “worldseconomies” (which from the viewpoint of a pluralistic (qualitative) paradigm of territory development cannot be considered by “developed” or “underdeveloped” – they are just essentially different but equally functional “developments”) is possible. The analysis of the empirical data on 124 world countries according to the indicators of the energy use per capita and quality of social infrastructure allowed the authors to single out two established and rather big and two emerging “worldseconomies”. “Ecologists with poor social infrastructure” (“Brazil’s/India’s group”) and “energy consumers with strong social infrastructure” (“the USA’s/the UK’s group”, where Iceland is also included) refer to the first ones, “ecologists with strong social infrastructure” (“China’s group”) and “energy consumers with poor social infrastructure” (“Russia’s group”) refer to the second ones. Despite the fact that within the framework of a pluralistic paradigm of territory development all existed “world-economies” are functional, capable and have their own “mission” in the global world, the “world-economy” which is comprised of the countries-“ecologists with strong social infrastructure” (China’s group) is considered to be more progressive but not more developed from the viewpoint of a evolutionary (quantitative) paradigm of territory development. For the case study the authors have chosen Iceland, the development of its territory within the global system and the role of social and economic interactions in this process. Iceland was identified as a country with a relatively high achieved competitiveness level and at the same time negative growth capacity, i.e. a trend of relatively fast declining of this competitiveness. The average annual change of the GCI of Iceland for the period 2005-2015 is -0.05 points on the scale from 1 to 7, and this decline is one of the highest in the world. The analysis of the trends of changes of subindexes of the Index of Global Competitiveness of Iceland carried out by the authors within the framework of the present research showed that in the crisis period Iceland’s social infrastructure suffered the most, having once more proved the fact that a relatively honest distribution of resources “according to one’s abilities but not by pulling strings” in any world country (even in such a country as Iceland with its high level of development of institutions and social infrastructure) can be implemented only during the periods of stability and growth, but not crisis. Besides that, the sophisticated competitive and innovative business environment (the pride and engine for Iceland’s territory development in the pre-crisis period) also became at risk as a result of the crisis – most likely it is directly related to the above mentioned deterioration in the quality of social infrastructure. A possible way for the improvement of Iceland’s competitiveness, suggested in the Human Development Report 2013 for all world’s countries, could be the social and economic interactions with other “worlds-economies”. The authors suggest that Iceland's social and economic interactions possess a certain peculiarity – looking at the interconnection of this country with other “worldseconomies” - which can, at least, partially explain a dramatic decrease in the level of
43
competitiveness in the highly developed Iceland which was observed in the 2000s. Based on the methodological approach of the spatial economics it is possible to anticipate that challenges of Iceland’s territorial development are greatly determined by the fact that Iceland’s social and economic interactions are not efficient enough, i.e. “the country is on friendly terms either in the wrong way or not with those with whom it should be". The analysis of trade flows – export and import of goods – of Iceland shows that “energy consumers with strong social infrastructure” (“the USA’s/the UK’s group”), i.e. a market-capitalist “world-economy”, has the absolute advantage as a receiver of Icelandic export goods. Since 1988 the share of the market-capitalist “world-economy” has never gone down lower than 80% within the export structure of Iceland, but in 1993-1994 it even exceeded 90%. Import of goods to Iceland is more diversified in relation to “worlds-economies” supplying these goods as compared to the export. The market-capitalist “world-economy” – “energy consumers with strong social infrastructure” (“the USA’s/the UK’s group”) – is an absolute leader also here, although with an increasingly declining share within the general structure of import of goods to Iceland. As far as processes of international migration are concerned, there is also the absolute dominance of a capitalist “world-economy” that can be observed. Only five countries – the representatives of “energy consumers with strong social infrastructure” (“the USA’s/the UK’s group”), i.e. Denmark, Norway, Sweden, the UK and the USA, accepted from 88% of Icelandic emigrants in 1988 to 80% - in 2014. In its turn, immigration flows are more
diversified than emigration ones, but also there are five countries (all of them belong to “energy consumers with strong social infrastructure” (“the USA’s/the UK’s group”)), the immigration flow from which comprises almost half of all Icelandic immigration flow - 49.35% in 2012, 52.00% in 2013, 49.45% in 2014. The study of the direct flights also showed that Iceland is connected by air all the year round only with the representatives of its own “world-economy” – namely, with 11 of them (Belgium, Canada, Denmark, Finland, France, Netherlands, Norway, Spain, Sweden, UK, USA). The research hypothesis that Iceland’s territorial development (in particular, negative trend of territory development during the last 10 years) is greatly determined by intensity and direction of Iceland’s social and economic interactions, has been proved. As the outcomes of the research showed: 1) Iceland is “on friendly terms” mainly with the representatives of its own “worldeconomy”, i.e. the countries-representatives of “the USA’s/the UK’s group” are Iceland’s main partners in international trade, migration, and air logistics. A kind of sub-“world-economy” is formed which can be referred to as a Northern-Atlantic one; 2) these social and economic interactions (with the representatives of its own “worldeconomy”) mainly draw Iceland’s territory development in their direction, and, as the trends of their development are negative or stagnate, Iceland’s trend of competitiveness generally is also drawn after them. References Аvdiyev, I.М. (1990), Actual Problems of Islam in Economy. [in Russian] Barry, F. (2014), Diversifying External Linkages: The Exercise of Irish Economic Sovereignty in Long-Term Perspective. IIIS Discussion Paper No. 448. Retrieved from https://www.tcd.ie/iiis/documents/discussion/pdfs/iiisdp448.pdf
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GECOMPLEXITY DISCUSSION PAPERS: The purpose of this series is to promote the circulation of discussion papers prepared by participants to the ISCH ACTION IS1104 “The EU in the new economic complex geography” with the aim of stimulating comments and suggestions within the Action and outside.
Editorial Board: Gian Italo Bischi, Spiros Bougheas, Pasquale Commendatore, Alan Kirman, Ingrid Kubin, Michael Kopel, Tönu Puu, Luis Miguel Varela Cabo, Florian Wagener. Managing Editors: Pasquale Commendatore, Declan Jordan, Carmelo Petraglia.
