Assessing sustainability of the Southeast European economies

Full text

http://ea.bg.ac.rs 519
ASSESSING SUSTAINABILITY OF THE SOUTHEAST EUROPEAN
ECONOMIES
Viktorija Petrov1 , Nada Trivić2 , Đorđe Ćelić3
*Corresponding author E-mail: viktorija.petrov@ef.uns.ac.rs
A R T I C L E I N F O
Original Article
Received: 15 February 2018
Accepted: 04 May 2018
doi:10.5937/ekoPolj1802519P
UDC 502.131.1:330(4-12)
A B S T R A C T
Sustainable development is development that meets the
needs of the present, without compromising the ability of
future generations to meet their own needs. Sustainability
indicators are based on the attempt to measure or
determine the path of development of the economy in
two directions: sustaining human wellbeing, or preserving
the capacity to provide wellbeing. The research has been
conducted to assess sustainability in the Southeast Europe,
represented with a group of 10 countries with the 15
multi-metric indicators. A cluster analysis was performed
on the set of indices to check the formation of distinctive
clusters. Albania, Bosnia and Herzegovina, Macedonia,
Montenegro and Serbia constitute rst cluster, proving
small differences among data. Second cluster consists of
Bulgaria, Croatia and Romania, while last cluster consists
of only Greece and Slovenia.
© 2018 EA. All rights reserved.
Keywords:
Sustainable Development,
Sustainability Indicators, Cluster
Analysis, Southeast Europe
JEL: Q01, Q56, P36
Introduction
Humanity is experiencing an unprecedented transformation of economic and social
system, predominantly driven by exponential population growth and overconsumption
of resources, enhanced by an increased demand for improved social conditions. Current
problems are seen as an undisputed requirement for more sustainable socio economic
system that is seen in the form of the sustainable development concept. The concept of
sustainability is comprehensible and is therefore a great obstacle to creating an adequate
sustainability indicator. Encompassing the complex reality, with simultaneous careful
and consistent implementation of mathematical or statistical models, for the purpose of
calculating the deviation of the current state from desired reality, is an extremely difcult
task for contemporary researchers. On the other hand, using the available indicators
of sustainable development and their use for the purpose of decision making entails
1 Viktorija Petrov, PhD, University of Novi Sad, Faculty of Economics, 9-11 Segedinski put,
24000 Subotica, Serbia; viktorija.petrov@ef.uns.ac.rs, +381214852940
2 Nada Trivić, Full Professor, University of Novi Sad, Faculty of Economics, 9-11 Segedinski
put, 24000 Subotica, Subotica, Serbia; ntrivic@ef.uns.ac.rs, +38124628050
3 Đorđe Ćelić, PhD, University of Novi Sad, Faculty of Technical Science, 3 Trg Dositeja
Obradovića, 21000 Novi Sad, Serbia; celic@uns.ac.rs

520 http://ea.bg.ac.rs
Economics of Agriculture, Year 65, No. 2, 2018, (pp. 519-529), Belgrade
the danger of oversight and uncritical belief in results that are a more than simplied
picture of reality and can be based on an insufcient number of data. Furthermore,
individual indicators may favor some of the aspects of sustainability, at the expense of
others that are absent or insufciently present in the composite index itself. Thus, it can
be argued whether it is reasonable at all to use any single composite index represented
by one number. Should one turn to the multitude of individual indicators of the state
of economy, environment and social progress and tailor individually acceptable
trajectories of future development based on such lists?
Theoretical Framework for Sustainability Research
Sustainable development represents a normative orientation providing a reference
framework for juxtaposing different perceptions, pursuits and understanding of authors
regarding the desired changes in the society (Loorbach, Frantzeskaki, and Thissen
2011). At the same time, dening sustainability features as one of the favorite pastimes
of the academic community (Kula 2001). It is a fact that there are an extremely large
number of denitions of this concept, and this number is probably equal to the number
of groups trying to precisely express the notion. More serious attempts at dening the
notion and concept date to the late 1980s and more signicant denitions, that is, those
that have established themselves in academic papers, have distinguished themselves
to date. Explaining the notion of sustainability, it could be concluded that the term
refers to something that is preserved, protected or managed, whereas development is
explained by progress or improvement (Bojović 2011).
As for the concept itself, the most often cited denition is that mankind has the
possibility to make development sustainable – to enable development that meets the
needs of present, without depriving the future generations of the possibility to meet
their own needs (World Commission on Environment and Development 1987). In
other words, sustainable development is seen as a harmonious relationship between
economy and ecology, so as to preserve the natural resources of our planet for the future
generations as well. Initiating the idea of the possibilities of achieving a more stable,
technologically more advanced, socially balanced and humane society, in accordance
with environmental principles (Đukić 2014) is the objective of contemporary economies
oriented towards sustainable development.
Although the denition accentuates the long-term pursuits and ethical aspects of the
concept, it does not give clear indications of the necessity to establish sustainable
environment, a society based on justice and equality, nor a healthy economy. A more
precise denition of sustainable development could therefore be required, which will
include these essential dimensions. Sustainable development encompasses the types
of economic and social development, protecting and fostering natural environment
and social equality (Danphy 2000), from which it clearly follows that sustainable
development, is to be regarded as a process of continuous enhancement and exibility.

http://ea.bg.ac.rs 521
Economics of Agriculture, Year 65, No. 2, 2018, (pp. 519-529), Belgrade
The concept of sustainable development raised the debate between advocates of
development and advocates of environmental protection proposing either a divorce
between the two trends based on establishing prosperity without growth (Jackson, 2010)
or a successful marriage with the adherents of new green consensus (Frantzeskaki,
Jhagroe and Howlett 2016) .
Taking into consideration standpoint from the aspect of dedication to the growing
problems of social welfare and equality and the aspect of environmental problems, the
existing paths of understanding sustainable development can be grouped to: adherents
of status quo, reformers and transformers (Hopwood, Mellor and O’Brien 2005). The
adherents of status quo appreciate the need for change, yet do not perceive insurmountable
problems neither on the side of the environment, nor from the aspect of society. The
adherents of this path of sustainable development believe that adjustments can be
made by means of appropriate decisions and agreements and represent the prevailing
opinion of current politicians and inuential governmental and non-governmental
organizations such as the European Union, the World Bank, the Organization for
Economic Cooperation and Development (OECD), the World Business Council for
Sustainable Development (WBCSD) etc. On this standpoint, development is implied
as a consequence of economic growth, while progressive taxation, reduction in salaries
and benets, privatization and deregulation are regarded as desirable.
The second group of participants in the debate on sustainable development are
reformers, who agree that there are serious, accumulated problems, which are the
consequence of the current approach to governance and leadership, although do
not believe that consequences can be detrimental, nor that fundamental changes are
necessary (Meadows 1972). Rather than in the current social system, they nd the
root of the problem in inequalities and lack of knowledge and information. They also
agree that obvious changes are necessary in state policies and lifestyle in a time period,
but argue that this can be achieved by gradual changes within the current social and
economic structures. The starting point is the belief that technology may contribute to
the environmental protection and it is necessary to increase energy efciency, that is,
opt for alternative energy sources.
The last group of participants in the debate on sustainable development, the transformers,
advocate deeper changes in the current system so as to respond appropriately to the
accumulated problems of society and environment. This group includes numerous
inuential players advocating reforms without close connection with sustainable
development, such as numerous socialist ideas dedicated to the issue of change of
the social system, but also players of deep ecology and ecofascism, focussing natural
values that should be placed before the interest of people.
Mere pointing to the shortcomings of the current model is much easier than proposing
a new model. The current economic model can be criticized because it fails to fulll
the objectives of sustainability in the following aspects (Islam, 2014):

522 http://ea.bg.ac.rs
Economics of Agriculture, Year 65, No. 2, 2018, (pp. 519-529), Belgrade
- Excessive consumption and exploitation of natural wealth;
- Inefcient and inappropriate in accomplishing development objectives
oriented to poverty eradication;
- Utterly helpless in environmental protection, in the sense of simultaneous
and sufciently rapid increase of the standard of living of the vulnerable, and
improvement of life satisfaction of those who already have the prerequisites.
There are opinions that the current obvious problems are not a consequence of recent
events, but can be viewed as a cumulative process that started with the industrial
revolution that resulted in enormous economic growth, which is not sustainable. One
of the direct consequences of industrial revolution is submission of society to economy
guided by personal interests. It is therefore necessary to return economy within the
framework of society and thus substitute personal interest with social welfare as the
basic motive of the economy. Aided by the commodity concept, the market mechanism
subordinates man and nature, that is, the very essence of society, to the laws of market
(Polanyi 2001, p. 45). Although this new version of the market turned out to be
extremely productive, it is accompanied by disastrous displacement of man, tearing his
links and endangering the natural habitat, with the threat of destruction. The solution to
the problem lies in re-establishing the control of society over economy, demolishing the
commodity-based approach to work, land and money, and reinstating them in the form
of people, nature and means of exchange (Polanyi 2001), which also represents a new
model suited to the concept of sustainable development.
Whichever orientation they belong to, all authors will represent sustainability as
something good and desirable for any society. The sustainability concept itself has
become like democracy, in the sense of universally desirable, diversely understood,
extremely difcult to apply and unceasing concept (Lafferty 2004). Some, however,
argue that the concept has become so convoluted and complex that it can no longer
feature as a guideline in a decision making, and therefore places itself in danger of
becoming irrelevant (Holden, Linnerud and Banister 2014).
Adopting a broader framework of socially responsible criteria in the research work
itself, such as: a stronger reection of ethical issues or social inuences on research can
make a favorable impact on science devoted to sustainable development, encompassing
transdisciplinary and interdisciplinary research (Daedlow et al. 2016).
Assessing sustainability in the Southeast Europe
Sustainability is a broad concept, attractive for policy makers and researchers alike,
which has led to the overwhelming number of indicators for assessing sustainability.
Indicators are intended to be a useful tool for policy making as they convey information
about the country’s performance regarding specic aspect of sustainability or
encompassing all three dimensions: economic, environmental and social.

http://ea.bg.ac.rs 523
Economics of Agriculture, Year 65, No. 2, 2018, (pp. 519-529), Belgrade
Sustainable development is dedicated to the complex problems of present, stemming
from the attempts to harmonize the frequently conicting demands of human
development, environmental protection and maintaining the possibilities of future
generation. Initiating the idea of the possibilities of a more stable, technologically more
advanced, socially balanced and humane society that is, additionally, in compliance
with environmental principles, is the objective of contemporary economies orientated to
sustainable development. Although consensus, in principle, has been reached in theory,
in practice it is extremely difcult to encompass all three aspects of sustainability in a
single indicator. Therefore, a serious analysis of sustainability of economies requires
analysis according to multiple criteria and thus expression through multiple scientically
founded indicators, implying, above all, a high-quality database.
Individual sustainability indicators have gained popularity owing to clear presentation
of conclusions or easy comprehension of results, whereas others are appealing because
they accentuate a certain social aspect of development. Despite being accepted as
representatives of sustainable development indicators, these are only a partial reection
of the complex issue of sustainable development and must be supplemented, adjusted
or serve as a basis for creating complex indicators. When the creation of complex,
all-embracing indices is attempted respecting the scientic basis of aggregation, the
problem remains of (non)existence and allocating weights to individual parameters,
which entails subjective judgment.
Assessing sustainability has been a daunting task even for developed countries, and
for developing countries t is especially delicate process. Burdened with economic and
social challenges developing countries are neglecting their natural resources and this is
generally the predominant reason why these countries are struggling with sustainability
progress. Countries of Southeast Europe are no exception. Representing a group of
10 countries, with ve countries currently in the European Union (Bulgaria, Croatia,
Greece, Romania and Slovenia), four candidate countries (Albania, The former
Yugoslav Republic of Macedonia, Montenegro and Serbia) and one being potential
candidate country (Bosnia and Herzegovina), this group has been chosen to represent
developing countries and their obstacles in assessing sustainability. Cluster analysis
proves to be the most suitable analysis, as it allows for a large set of indicators to
be employed and gives sound information as to how the economies have grouped
according to their sustainability levels.
Data and methodology
The 15 multi-metric indicators are chosen to represent development of Southeast
European economies in the light of sustainability. Four essential development indices
are presented: population, GDP growth, GDP per capita and minimal wage as to
give the perspective of the economic advancement of the economies. Afterwards, 15
indicators are chosen: adjusted net savings (ANS), corruption perception index (CPI),
ecological footprint (EF), education index (EI), environmental performance index
(EPI), environmental vulnerability index (EVI), GINI coefcient, global peace index

524 http://ea.bg.ac.rs
Economics of Agriculture, Year 65, No. 2, 2018, (pp. 519-529), Belgrade
(GPI), human development index (HDI), inclusive wealth (IW), poverty gap, rule of
law index (RLI), social progress indicator (SPI), sustainable society index (SSI), world
giving index (WGI). Indicators are chosen primarily to cover all three dimensions
of sustainability (economic welfare, social equity and environmental quality) fairly
equally such as: ANS, SPI, SSI and IW. Others are important in policy making and are
representing inevitable sustainability indices being in a constant use.
Effort has been made to represent the most recent data available using accessible
databases(WB - The World Bank, eurostat - European Statistics, Transparency
International, Global Footprint Network, United Nations Development Programme,
Yale University, United Nations Environmental Programme, Institute for Economics
and Peace, International Human Dimensions Programme (UNU-IHDP, 2014), The
World Justice Project, Social Progress Imperative, Sustainable Society Foundation
and Charities Aid Foundation, 2016). Presented indicators are mostly composite
indicators, comprising from two (EI) to up to 62 (SPI) different individual indicators,
usually gathered in sub-indices (ANS, EVI, WI, SPI, SSI), representing great power of
conveying information with one gauge or number. Contrary to composite indexes sole
indicators like poverty gap or GINI coefcient are used to accent depth of poverty or
income distribution inequalities and are used together with one or several composite
indicators.
Indices are presented with the metadata on different scales that required prior
standardization of the variables. A cluster analysis was performed on the set of indices
to check the formation of distinctive clusters. The squared Euclidean distance between
samples was used to assess the similarity or differences, thereby forming clusters of
integrated sustainability performance based upon the 15 multi-metric indicators. A
dendrogram was used to visually depict the clusters created via the hierarchical method.
The nal partition of the clusters was determined using dendrogram and the knee in the
similarity level of the clusters analysis. The selection of the nal number of the clusters
was dependent upon subjective interpretability of the solution (Odigie et al. 2017).
Results and Discussion
From the analysis it was concluded that all the data clusters nely in three groups.
Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia constitute rst
cluster, proving small differences among data. Second cluster consists of Bulgaria,
Croatia and Romania, while last cluster consists of only Greece and Slovenia. The
results are presented with Figure 1.

http://ea.bg.ac.rs 525
Economics of Agriculture, Year 65, No. 2, 2018, (pp. 519-529), Belgrade
Figure 1. Cluster Analysis results
From the analysis it is evident that the closest results concerning sustainability are
among Albania and Bosnia and Herzegovina, followed by Macedonia. Similar results
in sustainability assessments are between Bulgaria and Croatia. The rest of groupings
were not based on that close results.
First cluster is somewhat heterogeneous, as it comprises of three similarly performing
countries (Albania, Bosnia and Herzegovina and Macedonia) and two slightly off, being
Montenegro and Serbia. Those differences are not statistically signicant, however.
The common denominator for these countries is that they are candidate countries
and potential candidate countries. Understanding overwhelming issues for the single
country is possible by searching for commonalities among sustainability performance.
The Former Yugoslav Republic of Macedonia is having difculties combating
corruption and maintaining peace in the society with great income disparities. The
conclusion is imposed by the results of the considerably lower rank in GPI and CPI
indexes, followed by the highest GINI coefcient in the Southeast Europe. Currently
challenging issues in FYRO Macedonia are additionally validated by poorest score in
SSI in human dimension.
Other Southeast European countries do not have such a clear cut combating issues.
Albania has scored poorly in education that is directly transferred to poor HDI value
and is recording weak economic parameters, such as the lowest GDP per capita,
lowest minimal wage, low scores on economic dimension of SSI, and high perceived
corruption. It could be said that Albania has the greatest obstacle in sustainability
reected in poor economic base.

526 http://ea.bg.ac.rs
Economics of Agriculture, Year 65, No. 2, 2018, (pp. 519-529), Belgrade
Bosnia and Herzegovina, besides poor scores on human side, visible in low HDI
score followed by poor score in corruption perception index, has serious problems
with environment protection as it performed considerably worst then other Southeast
European countries in SSI environment dimension that is proven in EPI, leaving only
71 world country out of 178 behind.
Montenegro and Serbia are the closest to the group of weakest performers in the
Southeast Europe, and that is why they are in the same cluster. Montenegro and Serbia,
with common political heritage are performing almost the same in most aspects of
sustainability. The only difference is Serbia’s slight lag in terms of combating corruption
and slower economic growth compared to all analyzed countries.
Second cluster denotes the results of 3 EU member states (Bulgaria, Croatia and
Romania). No single country stands out to be performing signicantly worse than
any other, except Romania concerning the poverty depth (poverty gap indicator).
Bulgaria, Croatia and Romania are performing in all aspects moderately compared
to others. Similarity is the superior economic performance of these countries, visible
in considerably higher GDP growth rates and the highest scores in SSI economic
dimension, while the difference is Romania’s issues with deep poverty index, and
Bulgaria’s good peace performance.
Third cluster is made from Greece and Slovenia although those two could be considered
separately, as the difference in the results is considerable. Slovenia stands out in
numerous progress indicators, such as: education index, EPI, GPI, GINI, WGI, CPI
and IW outperforming other Southeast European countries and it could be attributed to
the higher standard of living - minimal wage indicator and GDP per capita are 5 times
higher than in Albania, while general peaceful conditions in the country facilitate stable
macroeconomic environment, unlike Greece or FYRO Macedonia.
Greece is combating economic issues, as the GDP growth is close to 0 that is visible
in the lowest score of SSI economic dimension of all Southeast European countries.
Aggravating poor economic conditions is the fact that Greece has high GPI and high
poverty gap ratio that will make it more difcult for Greece to enable fair and equal
possibilities for all its citizens. Although social and human dimension of its progress is
valued highly, with almost highest education index and HDI, the inability to manage
its natural resources soundly is visible (second lowest ANS, and EF bio capacity debt).
The good visual representation of the sustainability analysis of Southeast European
countries is provided with gure 2, where HDI score, as a representative of social
development, and minimal wage, as a representative of economic advancement, are
crossed at scatter plot. It is evident that countries from the rst cluster are distant from
countries forming third cluster by far. Those two indices are portraying vividly socio-
economic environment of Southeast European countries.

http://ea.bg.ac.rs 527
Economics of Agriculture, Year 65, No. 2, 2018, (pp. 519-529), Belgrade
Figure 2. Scatter plot of three clusters for HDI score and minimal wage
Conclusions
Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs. Keeping in
mind the possibilities of generations to come and responsibility of present generations
to facilitate this ability it is essential to manage wisely all capital at hand, i.e.: natural,
human and nancial. Assessment of the sustainability advancement of the Southeast
European countries has shown the difference of their individual socio-economic
environment. All countries are dealing with its specic economic problems differently.
However, it inuences the advancement of social and environmental dimension of
sustainability. The economic growth and prosperity enables the advancement of the
second two aspects. Said differently, the economic development is either the enabler or
the impediment of social and then eventually environmental advancement.
This paper has shown the clustering of Southeast European countries according to the
sustainability progress, capturing most procient and up to date indices of sustainability
at the same time.
Conict of interests
The authors declare no conict of interest.

528 http://ea.bg.ac.rs
Economics of Agriculture, Year 65, No. 2, 2018, (pp. 519-529), Belgrade
References
1. Bojović, V. (2011). Sustainable Development – Multiple meanings yet
unambiguous necessity. Economic Themes, 2, 175-192.
2. Charities Aid Foundation. (2016). CAF - World Giving Index 2016. CAF.
3. Daedlow, K., Podhora, A., Winkelmann, M., Kopfmüller, J., Walz, R., &
Helming, K. (2016). Socially responsible research processes for sustainability
transformation:an integrated assessment framework. Current Opinion in
Environmental Sustainability, 23, 1-11.
4. Danphy D., B. J. (2000). Sustainability: The Corporate Challenge of the 21st
Century. Allen & Unwin.
5. Đukić, P. (2014). Discussion of economic-nancial absurdities: In the mirror
of theory and reality. Finansije (1-6), 152-169. [in Sebian: Đukić, P. (2014).
Rasprava o ekonomsko-nansijskim apsurdima: U ogledalu teorije i stvarnosti.
Finansije (1-6), 152-169.]
6. Eurostat - European Statistics. (n.d.). European Statistics - Your key to European
statistics. Retrieved 2018, from http://ec.europa.eu/eurostat
7. Frantzeskaki, N., Jhagroe, S., & Howlett, M. (2016). Greening the state? The
framing of sustainability in Dutch infrastructure governance. Environmental
Science & Policy, 58, 123-130.
8. Global Footprint Network. (n.d.). Global Footprint Network Advancing the Science
of Sustainability. Retrieved 2018, from http://www.footprintnetwork.org/
9. Holden, E., Linnerud, K., & Banister, D. (2014). Sustainable development:
Our Common Future revisited. Global Environmental Change, 26, 130-139.
10. Hopwood, B., Mellor, M., & O’Brien, G. (2005). Sustainable Development:
Mapping Different Approaches. Sustainable Development, 13 (1), 38-52.
11. Institute for Economics and Peace. (n.d.). Global Peace Index A Vision of
Humanity. Retrieved fromhttp://static.visionofhumanity.org/#/page/indexes/
global-peace-index
12. Islam, N. (2014, September). Towards a sustainable social model: Implications
for the post-2015 agenda. DESA Working Paper No. 136 . ST/ESA/2014/
DWP/136.
13. Jackson, T. (2010). Prosperity without Growth: Economics for a Finite Planet.
Earthscan from Routledge.
14. Kula, E. (2001). History of Environmental Economic Thought. Routlege.
15. Lafferty, W. M. (2004). Governance for Sustainable Development. The
Challenge of Adapting Form to Function. Cheltenham: E.E. Elgar.
16. Loorbach, D., Frantzeskaki, N., & Thissen, W. (2011). A Transition Research
Perspective on Governance for Sustainability. In C. C. Jaeger, D. Tàbara, & J.
Jaeger, European Research on Sustainable Development (pp. 73-89). Berlin
Heidelberg: Springer .
17. Meadows DH, M. D. (1972). Limits to Growth: A Report for the Club of Rome’s
Project on the Predicament of Mankind. New York : Universe Books.

http://ea.bg.ac.rs 529
Economics of Agriculture, Year 65, No. 2, 2018, (pp. 519-529), Belgrade
18. Odigie, M. E., Badar, A., Sinn, J., Moayed, F., & Shahhosseini, M. (2017). An
optimal integrated QSMS model from cluster analysis. The TQM Journal, 29
(3), 438-466.
19. Polanyi, K. (2001). The Great Transformation: The Political and Economic
Origins of Our Time. Boston: Beacon Press Boston.
20. Social Progress Iperative. (n.d.). Social Progress Indicator. Retrieved from
http://www.socialprogressimperative.org/global-index/
21. Sustainable Society Foundation. (n.d.). Sustainable Society Index - your
compass to sustainability. Retrieved 2018, from http://www.ssndex.com/
22. The World Justice Project. (n.d.). World Justice Project. Retrieved 2018, from
http://worldjusticeproject.org/rule-of-law-index
23. Transparency International. (n.d.). Transparency International. Retrieved
2018, from http://www.transparency.org/whoweare/organisation/
24. United Nations Development Programme. (n.d.). Environmental Index.
Retrieved 2018, from http://hdr.undp.org/en/content/education-index
25. United Nations Environmental Programme. (n.d.). Environmental Vulnerability
Index. Retrieved 2017, from http://www.vulnerabilityindex.net/
26. UNU - IHDP and UNEP. (2014). Inclusive Wealth Report 2014. Measuring
progress toward sustainability. Cambridge : Cambridge University Press.
27. WB - The World Bank. (n.d.). World Bank, Development Research Group. .
Retrieved 2018, from : http://databank.worldbank.org/data/home.aspx
28. World Commission on Environment and Development. (1987). Our Common
Future. United Nations.
29. Yale University. Environmental Performance Index. http://epi.yale.edu/
reports/2016-report.