Investigation of Development Indicators in the Balkan Countries for the Post-Socialist Period

Abstract

Since the collapse of central economic planning in the world, former Iron Curtain Countries have been changing as social, economic and political structures. Some former socialist countries (such as Bulgaria, Slovenia and Romania) and Greece became full members of the EU. Some Balkan countries (such as Serbia, Montenegro, Croatia, Bosnia-Herzegovina, and Macedonia) lived through difficult war years. After the wars, they have started to struggle for the economic, social and political reconstruction process. Each country in the Balkan Peninsula wants bigger real per capita income, a better welfare level, and generally to become a developed country. But these countries have some political, economic and social problems in the development process. The aim of this paper is to analyze Balkan countries in terms of development indicators such as per capita GDP, population growth, life expectancy, consumption potential, education, national income and income distribution in the period of the 2000's. In addition, new suggestions for accelerating the development process will be discussed at the end of the study.

Full text

Volume 1 Number 1 January 2011
111
Journal of Economic and Social Studies
ABSTRACT
Since the collapse of central economic planning in the world, former Iron Curtain Countries
have been changing as social, economic and political structures. Some former socialist countries
(such as Bulgaria, Slovenia and Romania) and Greece became full members of the EU. Some
Balkan countries (such as Serbia, Montenegro, Croatia, Bosnia-Herzegovina, and Macedonia)
lived through dicult war years. After the wars, they have started to struggle for the economic,
social and political reconstruction process. Each country in the Balkan Peninsula wants bigger
real per capita income, a better welfare level, and generally to become a developed country. But
these countries have some political, economic and social problems in the development process.
e aim of this paper is to analyze Balkan countries in terms of development indicators such as
per capita GDP, population growth, life expectancy, consumption potential, education, national
income and income distribution in the period of the 2000’s. In addition, new suggestions for
accelerating the development process will be discussed at the end of the study.
Keywords: Balkan Countries, Development, Development Indicators
Investigation of Development Indicators in the
Balkan Countries for the Post-Socialist Period
Fatih ÇELEBİOĞLU
Dumlupınar University, Faculty of Economics and Administrative Sciences,
Department of Economics, Kütahya, TURKEY
fcelebi@dumlupinar.edu.tr

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Introduction
e Balkan Peninsula is an important area, having witnessed important historical and political
experiences and incidents for ages. But it has been living through a historical alteration in recent
decades. Although some Balkan countries (such as Turkey and Greece) were relatively stable in the
1990’s, there was war in Serbia, Montenegro, Croatia, Bosnia-Herzegovina, and Macedonia. Some
former socialist countries (Bulgaria, Slovenia and Romania) and Greece became full members of
the EU. e others have been struggling toward this goal. Although Kosovo declared independence
in 2008, many countries have not accepted this situation. Nevertheless the Balkan Peninsula is in
a relatively stable condition nowadays, compared with the last ten years. All the Balkan Countries,
especially those which have gained independence in recent decades, want to become rapidly developed.
But all Balkan countries have some political, economic and social problems in this process.
After a long war and an unstable political period, the Balkans has now seized the opportunity for
their development process. is region has been gaining stable structures over time and this stable
period has been supporting development indicators. In this paper, the Balkan countries will be
analyzed in terms of development indicators such as education, population, national income and
income distribution in the 2000’s.
Conceptual Analysis of Development
1
Since World War II, one of the important discussion subjects has been development. However,
generally the development concept is accepted as a problem of underdeveloped countries.
Underdeveloped countries which have not gone through the industrial revolution do not experience
the evolution process that it brings, and do not fulll the necessities of the development process.
Development is used sometimes instead of concepts such as improvement, modernization, structural
changing, and industrialization. is semantic shift complicates the denition of the development
concept. According to Peet and Hartwick (2009:1), development as a better life for most people
means, essentially, meeting basic needs: sucient food to maintain good health; a safe, healthy place
in which to live; aordable services available to everyone; and being treated with dignity and respect.
Anther denition of development is innovative changes resultant in the socio-economic structure
of a country. It can be understood from these denitions that development is related not only to
economic paradigms but also social life, health systems, educational and vocational structures,
democracy, freedoms, human rights etc. For this reason, it is multidimensional and it extends over
a very long time.
Development is also related to economic growth. A stable economic growth process is very important
for development. Unstable economic conditions negatively aect this process. On this point, a stable
economic structure comes into question. When there is a stable economic structure, economic
growth supports the development process. is concept is more important for developing countries.
For example, Turkey had big problems with unstable economic and political structures in the 1970’s
and 1990’s. Also, almost all the Balkans experienced unstable political and economic periods in the
1990’s.

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Investigation of Development Indicators in the Balkan Countries for the Post-Socialist Period
Source: http://hdr.undp.org/en/, 25.04.2010
ere are also new approaches to the development concept. e most important of these belongs
to Amartya Sen, who won the Nobel Economics Prize in 1998. Amartya Sen (1993:3) denes
development “as a process of expanding the real freedoms that people enjoy”. Again according to
SEN, development requires the removal of major sources of unfreedom: poverty as well as tyranny,
poor economic opportunities as well as systematic social deprivation, neglect of public facilities as
well as intolerance or overactivity of repressive states (Sen, 1993:3). e approach of Sen combines
two important concepts: freedoms and development. Also he recommends developing freedoms
before other indicators.
Main Development Indicators
For years, many indicators have been used by economists in order to explain dierent levels of
development among countries. However, which indicators are the best explanatory indicators of
development levels? We need to investigate indicators that are being used to explain the development
process by international institutions such as the World Bank (especially World Development
Indicators-WDI Online Database) and the UN (United Nations, especially UNDP-United Nations
Development Programme, 2010a).
e World Bank uses more than 331 indicators from the World Development Indicators (WDI)
covering 209 countries. ese indicators fall under 16 headings such as Agriculture & Rural
Development, Infrastructure, Aid Eectiveness, Labor & Social Protection, Economic Policy and
External Debt, Poverty, Education, Private Sector, Energy & Mining, Public Sector, Environment,
Science & Technology, Financial Sector, Social Development, Health, and Urban Development (for
details look at e World Bank, WDI Online Database).
UNDP calculates the Human Development Index (HDI). HDI includes some special data such as
life expectancy at birth, adult literacy rates, gross primary-secondary and tertiary enrolment, and
GDP (gross domestic product) per capita (PPP - Purchasing Power Parity). HDI distinguishes three
subgroups as developed (high development), developing (middle development), and underdeveloped
(low development) countries. According to Map 1, Africa, Middle East, South Asia and some South
American countries have big problems in terms of the level of human development. Especially in
Africa, the level of human development is lower than other regions of the world.
Map 1. World Map Indicating the Human Development Index Based On 2007 Data, Published
On October 2009

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Fatih ÇELEBİOĞLU
Again UNDP (United Nations Development Programme, 2010b) uses eight topics to determine
the development level of each country (particularly developing countries): eradicate extreme
poverty and hunger, achieve universal primary education, promote gender equality and empower,
reduce child mortality, improve maternal health, combat HIV/AIDS, malaria and other diseases,
ensure environmental sustainability, and develop a global partnership for development in scope of
Millennium Development Goals (for details look at UN - Millennium Development Goals 2009
Report).
Also, each country collects some data on development by using international standards. Hundreds
of variables are used by ocial statistical institutions for this purpose. Some of these variables are
per capita GDP, literacy rate, tertiary education, unemployment rate, urban population, population
growth rate, public expenditure on education, number of doctor, electric power consumption,
number of computer and internet users, nal consumption expenditure, daily newspaper, fertility
rate, foreign direct investment, life expectancy at birth, etc. Also the Human Development Index
and Democracy Index
2
are used to determine the level of development in a country. e next section
oers an analysis of development indicators in the Balkan countries by using some of these variables.
Analysis of Development Indicators for Balkan Countries
In this section, the situation of Balkan countries in terms of some indicators of development will
be investigated. But due to the wars and unstable political period in the Balkans, not all Balkan
countries reached full independence in the same year. For this reason, we have data that has a dierent
initial year for each country (especially in the 1990’s). is problem has been almost solved in the
2000’s. But Kosovo’s independence is not accepted by many countries. is situation complicates
the comparison all Balkan countries.
According to UNDP statistics, all Balkan counties (excluding Slovenia and Greece) are within the
High Human Development classication. Slovenia and Greece are within the Very High Human
Development classication (UN, 2009). According to current economic development literature, the
best indicator of development is value of per capita GDP (Gross Domestic Product) in a country.
Mostly Balkan countries have low per capita GDP. For example Albania had $1677 per capita
GDP in 2007; Bosnia and Herzegovina had $2044; Bulgaria had $2401; Macedonia had $2061;
Montenegro had $2269; Romania had $2595 and Serbia had $1780. Exclusively Greece ($15052),
Croatia ($5794), Slovenia ($13333) and Turkey ($5053) had relatively bigger per capita GDP than
the aforementioned countries’ (see Chart 1). It is possible that the global crisis in 2008-2009 and the
nancial crisis in Greece have changed these gures.
e other important indicator of development is nal consumption expenditure (% of GDP).
High levels of nal consumption expenditure (% of GDP) refer low level or intermediate product
expenditure, capital goods (% of GDP) in a country. According to Chart 2, we can say that especially
Bosnia & Herzegovina, Montenegro, Serbia and partially Albania have high level nal consumption
expenditures. ese countries also have low level saving rates. For this reason the investment amount

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Investigation of Development Indicators in the Balkan Countries for the Post-Socialist Period
in these countries is lower than in the other Balkan countries.
Education
3
level is a very eective indicator of development. Literacy rates are very close to percent
100% (excluding Turkey). Turkey has 88.66%. is gure shows that Turkey is the worst country
in terms of literacy rate in the Balkans (see Chart 3). Another important variable is life expectancy
at birth. According to Chart 4, Greece has the best gures with 79.7 years. Turkey has the lowest
number with 71.8 years. Life expectancy level in the Balkans is on average lower than in the Euro area
(80.4 years) and higher than the world average (68.7 years).
Population growth rate is very slow in the Balkans. Especially Bosnia & Herzegovina (-0.14), Bulgaria
(-0.48), Croatia (-0.04), Romania (-0.16) and Serbia (-0.43) have negative level population growth
gures (see Chart 5). Others (excluding Turkey and Slovenia) have gures very close to zero. is
situation is dangerous for the coming years. e demographic structure will be very old in the next
decades. is can bring social security problems similar to those of Germany and the other Western
European countries.
Nowadays foreign direct investment (FDI)
4
has been accepted by many countries as a fact of the
development process. When Chart 6 is investigated, we can see that Serbia (3.95) and Slovenia (3.34)
have the best gures of foreign direct investment (FDI). Macedonia has the lowest FDI with (-0.01).
e lowest value of per capita electric power consumption is in Albania with 976.1 kWh. e highest
value is in Slovenia (7123.5 kWh). Greece has the second highest value of per capita electricity power
consumption with 5372.1 kWh (see Chart 7). In order to comprehend the relation between electric
consumption and development, Yuan et al. (2007) can be consulted.
Unemployment
5
, as a percentage of the total labor force, is an important indicator of economic
development. Macedonia (36.02%) and Bosnia & Herzegovina (31.09%) had very high
unemployment gures in 2006. e third highest unemployment gure is in Serbia with 20.84%.
But the global crisis may have changed these gures in the Balkan countries as it has in the world
generally. For example, the unemployment gure is 14% in Turkey in 2009 (see Chart 8).
Income distribution
6
is another considerable variable of development. e highest value of the GINI
index is in Turkey with 43.2. Macedonia (39.0), Bosnia & Herzegovina (35.8) and Greece (34.3)
respectively follow Turkey. Croatia has the lowest value of the GINI Index with (29.0). e share of
the poorest 10% of population in the GDP is in Turkey with 1.9%. Again Turkey has the highest
value in terms of the share of the richest 10% of the population in the GDP with 33.2%. e highest
share of income in the poorest 10% is in Croatia (3.6%) and the lowest share of income in the richest
10% is also in Croatia with (23.1%). We can say that Croatia has the best gures in the Balkans in
terms of income equality (see Table 1).

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Table 1. Share of Income or Expenditure (%) and Inequality Measures in Balkan Countries in 2007

Share of income or
expenditure (%)
Inequality measures

Poorest
10%
Richest 10%
Richest 10% to
poorest 10%
Gini Index
Greece 2.5 26.0 10.2 34.3
Slovenia 3.4 24.6 7.3 31.2
Croatia 3.6 23.1 6.4 29.0
Bulgaria 3.5 23.8 6.9 29.2
Romania 3.3 25.3 7.6 31.5
Albania 3.2 25.9 8.0 33.0
Macedonia 2.4 29.5 12.4 39.0
Bosnia & Herz. 2.8 27.4 9.9 35.8
Turkey 1.9 33.2 17.4 43.2
Note 1: e GINI index lies between 0 and 100. A value of 0 represents absolute equality and
100 absolute inequalities.
Note 2: Data was compiled from UNDP Human Development Index
Industrial production index is frequently used an indicator of development. When the industrial
production index values of Balkan countries are investigated, Romania (120.6) has the highest value
of industrial production index and Greece (101.1) has the lowest value (see Table 2). It is interesting
that Serbia has lost industrial production capacity, because Serbia had 113.1 index values in 1998,
but Serbia had a 108.6 score in 2007. Also Greece has lost production capacity. Besides, we haven’t
got Albania’s index value.
Table 2. Industrial Production index (2005=100) in Balkan countries
 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Albania 97.0 111.5 124.8 100.0 110.7 86.6 81.9 .. .. ..
Bosnia & Herz. 53.7 59.3 64.8 72.8 79.6 83.3 94.4 100.0 107.4 117.3
Bulgaria .. .. 68.6 70.0 73.3 82.9 93.5 100.0 106.0 116.2
Croatia 80.5 79.5 80.7 85.5 89.7 92.7 95.6 100.0 104.1 109.3
Greece 95.1 95.1 100.8 98.7 99.3 99.8 100.8 100.0 100.8 103.4
Montenegro 91.4 84.4 87.6 87.0 87.5 89.6 101.9 100.0 101.0 101.1
Romania 76.3 74.4 97.0 100.8 100.9 100.5 102.9 100.0 109.3 120.6
Serbia 113.1 84.1 93.7 93.8 95.5 92.6 99.2 100.0 104.7 108.6
Slovenia 81.6 81.1 86.2 88.7 90.9 92.1 96.6 100.0 105.7 113.3
Turkey 77.8 74.9 79.4 72.5 79.4 86.3 94.7 100.0 105.8 110.6
Explanation: Data comes from UNECE Statistical Division Database, compiled from national
and international (CIS, EUROSTAT, IMF, OECD) ocial sources.

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Economic indicators are necessary, but not by themselves sucient for the comparison of all the
Balkan countries. For this reason we need other pointers. We investigate Human Development Index
values and Democracy Index values for Balkan countries.
Table 3 shows HDI ranks and values for Balkan countries in 2003 and 2009. e highest value
belongs to Greece with 0.892 and its rank in HDI was 24 in 2003. Again Greece has the highest values
of human development index with 0.942 and its rank is 25 in the world in 2009. Turkey (0.806) has
the lowest value of HDI in 2009 and its HDI rank was 79. When 2009 ranks are compared with
2003, Greece, Bulgaria, Macedonia, Bosnia & Herzegovina lost their former positions. But Croatia,
Romania, Albania and Turkey obtained better positions.
Table 3. Situation of Balkan countries in Human Development Index Values
Country Name
HDI rank
in 2003
Human
development
index value
2003
HDI
rank in
2009
Human
development
index value 2009
Greece 24 0.892 25 0.942
Slovenia 29 0.881 29 0.929
Croatia 47 0.818 45 0.871
Bulgaria 57 0.795 61 0.840
Romania 72 0.773 63 0.837
Montenegro - - 65 0.834
Serbia - - 67 0.826
Albania 95 0.735 70 0.818
Macedonia 60 0.784 72 0.817
Bosnia & Herz. 66 0.777 76 0.812
Turkey 96 0.734 79 0.806
Explanation: Data was compiled from UNDP Human Development Report 2009 (calculating
with 2007 values) and UNDP Human Development Report 2003 (calculating with 2001
values)
Another important subject for development is the democracy level in country. We can investigate the
democracy index to understand this relation. e Democracy Index is calculated by e Economist
Intelligence Unit based on the answers to 60 questions for 167 countries (EIU, 2008). According
to Table 4, Greece is the strongest democracy in the Balkans. According to Table 4, the weakest
democracy in the Balkans belongs to Turkey. While Greece and Slovenia have full democracy;
Albania, Bosnia & Herzegovina and Turkey have hybrid regimes. is situation is generally parallel
to economic development levels.

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Table 4. Democracy Index (2008)
Country Name Rank in the Index Kind of Democracy Score
Greece 22 Full Democracy 8.13
Slovenia 30 Full Democracy 7.96
Romania 50 Flawed Democracy 7.06
Croatia 51 Flawed Democracy 7.04
Bulgaria 52 Flawed Democracy 7.02
Serbia 63 Flawed Democracy 6.49
Montenegro 65 Flawed Democracy 6.43
Macedonia 72 Flawed Democracy 6.21
Albania 81 Hybrid Regime 5.91
Bosnia & Herz. 86 Hybrid Regime 5.70
Turkey 87 Hybrid Regime 5.69
Explanation: Data comes from e Economist, Economist Intelligence Unit
When Democracy Index (2008) values are accommodated in the Map 2 for each country, lighter
colors show more democratic countries and darker areas represent authoritarian countries. Especially
North America and West Europe have lighter colors. Africa, the Middle East, and Asian countries
have mostly darker colors. Balkan countries have average values. After analysis of indicators in Balkan
countries, we discuss how can accelerate the development process of Balkan countries in the next
section.
Map 2. World Map Indicating the Democracy Index (2008).
Look at http://en.wikipedia.org/wiki/Democracy_Index, 01.05.2010

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Discussion of the Development Process in Balkan Countries
When the special position of the Balkans (multicultural, multi-religious and multi-ethnic) is
considered, it is quite dicult to oer new suggestions. Even so, we explain some ideas for the
Balkan countries below. e Balkans has had important problems throughout its history. Especially
after the Ottoman Empire, an unstable politic and economic life began in all the Balkan Peninsula.
With socialism, there came a relatively stable political and economic life. However, after the collapse
of socialism, war, blood, tears, and unstable politic and economic life came back to the Balkans.
Nowadays the Balkans has been living more stable days. We know that development is closely related
to stable politic and economic structures. For this reason, the rst and the most important stage are
strengthening of the stabilization process. To strengthen the stabilization process, rst of all, the
European Union’s full membership process should be accelerated for Balkan countries that are not
members of the EU. Secondly, by considering the ethnic, religious and cultural structures of the
region, bilateral goodwill (bona des) agreements should be signed among countries. irdly, some
countries in the region should play a part in this process as mediators. For example, Turkey invited
the presidents of Bosnia & Herzegovina and Serbia to talk about the problems between the two
countries last April. After that, all Balkan countries should be invited to international institutions.
For example, Bosnia & Herzegovina was invited to NATO last April, 2010. e invitation of Bosnia
& Herzegovina is necessary, but it is not enough by itself. For this reason, all Balkan countries that are
not members of NATO should be invited. And by protecting cultural, ethnic and religion diversity,
an interior peace law agreeable to dierent parts of society should be composed.
EU trade policy should be accepted by all Balkan countries. Free trade should also be improved
in the Balkans. Taris and other arrangements should be reciprocally dropped. Visa applications
should be facilitated to improve trade among Balkan countries, especially for businessman and
scientists. Bilateral trade agreements should be improved. Collective science, education and R&D
agreements should be signed. A Balkan Commonwealth that includes all Balkan countries should
be established in the near future. A substructure of information and communication technologies
should be developed.
Manufacture and service sectors should be supported by governments. Productivity levels of industry
should be accrued. To support industrial production, transfer of technology should be allowed.
Barriers to foreign direct investment should be decreased. A tax system with progressive rates should
be established to decreasing GINI Index and social benets for poor populations should be improved.
A banking system should be developed and its trustworthiness level should be boosted. Barriers to
touristic travel should be diminished. Especially visa application should be facilitated. Countries
that have insucient capital for investment need foreign direct investment to accelerate economic
development. For this, foreign direct investment for whole sectors should be allowed. Democratic
reforms such as human rights, constitutional state, economic freedoms, and freedom of thought
should be carried out, particularly in Turkey, Albania, and Bosnia & Herzegovina. A bigger part of
budgets should go to education and productive investment.

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When compared with developed countries, Balkan countries (excluding some full members of the EU
such as Greece and Slovenia) have important problems in economic development. Many countries
in this region have less level GDP gures. Also human development and democratic levels are not
sucient. Nowadays, the Balkan Peninsula has some opportunities related to the development process
after the war and an unstable politic and economic life. ese opportunities can be realized in the
forthcoming periods. But this is depends on better orientation and management of economic, politic
and social processes. Also, protecting and improving the stabilization process will be important in
the next decades. It is a reality that war and unstable politic and economic conditions encourage
backwardness, poverty and anti-democratic applications of governments. Conversely, peace, trade,
and stable politic and economic life will cause better conditions for all nations in the Balkans.
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Endnotes
Note 1: According to the Online Etymology Dictionary, Development concept was used for the rst
time in 1756, “an unfolding, from develop + -ment). Of property, with the sense “bringing out the
latent possibilities” is from 1885. e meaning “state of economic advancement” is from 1902. e
meaning “advancement through progressive stages” is from 1836.
Note 2: See Przeworski et al. (2000). ey investigate relations between democracy and development.
Note 3: Self and Grabowski (2003) examine the relationship between education and long-term
development.
Note 4: See Chen C, Chang L., Zhang Y. (1995). ey examine the role of FDI in China’s economic
development process.
Note 5: Özay (1995) analyzes the job-creating development concept. Also Saviotti and Pyka (2004)
investigate the relationship between employment and development.
Note 6: For detailed information about income inequality, see Foster and Sen (1997). In this study,
Foster and Sen investigate measures of inequality.