Despite the declining global poverty rate, many countries are still struggling with poverty. During the last decades, for example, Georgia has been praised internationally for its economic reforms. However, about 17.5% of the population of Georgia lived below the subsistence minimum in 2017.
It is puzzling to see a country being praised for its successful reforms and still being faced with economic backwardness, said doctoral student of Estonian Business School, Givi Kupatadze who recently defended his doctoral thesis (1) about the question how rich countries became rich and why Georgia stays backward economy after regaining independence from the Soviet Union.
To achieve the research goal, Kupatadze answered four research questions: which development strategy domains are key determinants of successful economic transformation? How economic policies under each development strategy domain should be coordinated during different stages of economic development? How can the persistent underdevelopment of backward economies be explained? Why Georgia remains a backward economy?
Therefore, Kupatadze selected strategic management of economic development on the country level as the research object of the dissertation. “While strategic management on an organizational level is a well-researched area, strategic management of economic development on a country level lacked an overarching framework and represented a gap in management research, which is filled by this dissertation”, he said.
Kupatadze noted that the doctoral thesis was focused to develop a theoretical framework which could help backward economies to design and implement development strategy which will lead successful economic transformations.
“The main contribution of the doctoral thesis is the policy matrix of development strategy that gives specific development strategy domains, economic policies and defines how to coordinate economic policies within each development strategy domain during low-income and middle-income economies in order to support successful economic transformation into a high-income economy”, he explained.
What is more, the policy matrix is an evidence-based solution that takes into account the complex nature of economic development. “It explains why a good economic policy of yesterday can be a bad economic policy of today. The policy matrix is a useful tool to understand how economic policies in different strategy domains affect each other. Finally, it is a useful tool to understand that without taking a systemic approach to economic development strategy, it will be hard if not impossible for any low- or middle-income economy to achieve successful economic transformation”, Kupatadze mentioned.
Using Matrix Helps to Develop It
The dissertation demonstrates that when backward economies place too much confidence in the dominant growth models while crafting a development strategy, they risk sustained underdevelopment by specialising in non-productive and vulnerable economic activities. The bottom line is that the chances of transforming Georgia into a high-income economy will be improved only as far and as deeply as the country implements economic policies prescribed by the policy matrix.
So, one way to apply the results of the doctoral thesis is to implement its recommendations in Georgia, Kupatadze said and added that another way is to explain the main reasons behind economic backwardness of any poor countries which try to get out of the poverty trap.
In his opinion, further research would be helpful to test wider applicability of the policy matrix. “It would be interesting to see how well the policy matrix can explain the economic backwardness of other low- and middle-income economies. Application of the policy matrix to explain a number of different cases of economic backwardness will create a better understanding of how well it performs and, if needed, in which direction it can be further refined”, he brought out.
But in the near future, Kupatadze’s main plan is to devote himself to private sector development, to develop an executive level education module in managerial decision- making and he is thinking about possibilities of writing a book.
Written by Marii Kangur, Estonian Public Broadcasting radionews reporter
This article was funded by the European Regional Development Fund through Estonian Research Council.