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Ian Goldin: Brain drain itself has negative effect, but it can give a beneficial effect for the country.

Ian Goldin and The Chairperson of the Board of Baltic International Bank Ilona Gulchak.
Baltic International Bank organised one of the events of its 20th anniversary – a meeting of journalists with Prof. Ian Goldin - Professor at the University of Oxford and the Director of the Oxford Research School, also known as the Oxford Martin School, advisor for the World Economic Forum in Davos, former Vice President of the World Bank, EBRD economist, advisor to President Nelson Mandela and the author of numerous books and publications, in order to enable a discussion regarding the trends of development in the global economy.

Latvia will join Euro area in 2014. Does it make sense for Latvia to join Eurozone right now, in the next year?
I’m not an expert of Latvian economy, so my comparative advantages are out of European and world. I believe we are moving on two-speed road in the Europe, may be even three-speed – Euro area, other EU members and countries as the UK, which are even more disconnected then the other part of European Union. I hope that UK stays in the second stream, but referendum isn’t near. In that context Latvia needs to ask itself: do we want to be in the core or on the periphery? It is a critical question. In my view, there a lots of benefits of being in the core of Eurozone. Of course, there are not only benefits, but costs too, like more complains of European rules in whole range of areas. But I think that benefits for investment flows, business certainty and stability and for acceleration of the development, more healthy standards of it, is worthy of their price. On micro and macroeconomic level effect will be positive. I don’t believe in grim future and dissappearance of euro, in my view, it is stable and Eurozone will grow.

You said about growing equality between countries, but there is high level of financial disparity in Latvia. And our country is poor against a European background. Does EU do something to solve this problem?
About economic disparity as one of the greatest challenges of the modern world is talking Christine Lagarde, head of the IMF. It’s interesting because IMF hasn’t used such a language before. So it’s a new theme which goes to a very conservative organisation, top of the agenda.

Of course, all crisises, not only economic, make an equality worse. The poorest people suffer first in wars, in all calamities. Inequality means different opportunities in education and future career. Even good food affects man’s health and capacity for work. So you not only building inequality for now, it be passed to the future. That’s why investment in primary education, in early education, in skills is so important.

Latvia has very high level of emigration. Government is formulating strategy how to get back these people because we need labour force. Is it possible or only words and dreams?
As I understand, emigration is a serious problem for small country, especially because educated skilled people are leaving Latvia. There are many things that can be said about this.The first is the some evidence from other places where are very large diaspores. Brain drain itself has negative effect, but it can give a beneficial effect for the country. As example may serve Taiwan, Israel, which have very significant population abroad and it is a source for investment, for technological exchange, also even a political stability. So diaspore communities in key places like the USA and Western Europe can help you, make bridge for investment and for growth in the future. Another good example is Bangalore. There are lot of evidence that Indian IT-industry’s extremely fast growth in Bangalore wouldn’t exist without people going abroad. They went abroad for studies and for work. Ironically, if the USA be more welcoming of Indian people would Bangalore be developed?

Your people abroad become the gate to two ways, transfers – not only bring new technologies and investment back home, but also find new opportunities for your goods and services im other countries. So they become your best marketing agents, the core of your networks abroad, which can create booming opportunities for domestic industry.

The second is that people come home, not everyone but some do. Migration is a circle process, people come and go. XX century create people with transnational identity, multiple identity, they are Latvian but may be American Latvian, British Latvian, and that’s absolutely fine. So people can come back at different stages of life, they can come back to retire or because the Latvian economy is growing stronger, or because of Latvia becomes gate to Eurozone, for different reasons. I don’t think that government should plan or Latvian community should plan how to encourage people come back. The main task for government is economic stability and growth.

Some societies make a whole business around exporting people. The Philippines may be the best example, it is exporter of nurses and careworkers. But the Philippines has a good birth rate so it doesn’t harm to population that people leaving. In countries with weak demography it may be a problem – lack of skilled people. The state spend money to put them into university, to get skills, and now we are subsidising another economy with skill transfer. How may address it? I believe there are some ways, but it needs to be done with respect to human rights and freedom of movement. You can say to people: if you study at tax money you have to work in our country for number of years. Many countries do this. Or you can change your financing system, the government loan money for education and people have to return it during 5-10 years. So you can design your investment in different ways and the government has to think about it.

Bigger question is fertility and it is dramatic questiom not only for Latvia but for Russia as well. I think flows of migration will change and people come here in the next 20-25 years. It’s hard to believe seeing level of unemployment over 10% that Latvia can be attractive for immigrants, but it’ll be.

In soviet time many Russians were sent here, and locals aren’t happy about it.

I’m not saying that it will be Russians coming here. Latvia may choose. There are tens of millions pensioners in Europe who living in dirty cities but they want spend their life playing golf, laying on the beach and having good time. You can attract them. People migrates for different reasons you may attract not for work but for health, for leisure. But you might attract some people to do some jobs for you which Latvians don’t want to do.

People need jobs and opportunities and they come when see them. For example, flow into Poland now is bigger than out of Poland, and it is very rapid change. In short period of time many people go to live in Poland, not only Polish returning, also Italians and Spaniard go to Poland. They go here, not in Germany. Estonia isn’t very nice place but it is more attractive than many other countries, I think Latvia with euro also be more attractive. Question for Latvia is which workers do you want to see and what do you do for it? Do you want Italians? Do you want Spaniards? I think you have choise in that.

What will be if some Latvians leave and some other people come here? So the society becomes more ethnically and language mixed. May be it is problem for Latvia where majority of people think about it as a challenge. But question is how quick will process be. Other question – will people who come take Latvian jobs or not. And some details in different spheres like education. But there are some benefits too.

London is now with 35% immigrants, Toronto with 50% immigrants and it is reputed as the best city in the world for living. So people don’t think that mixing society is so bad problem. But politics have to manage this process.


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