Research and publications on the world economy

Azerbaijan prefers a leap into the group of leaders rather than catch-up development

In today's world, there are several processes there are several process of crucial importance for national economies. This primarily relates to globalization and related processes.
In the 21st century, globalization is a logical extension of another process - the internationalization of national economies, which has been actively developing since the second half of the 20th century. Its essence is that through production and scientific - technical cooperation and international division of labor, national economies are becoming intertwined in closer relations. National borders have receded into the background under pressure from a powerful force - economic benefits. After all, in an economic context, national borders have a completely different meaning: they are seen not as attributes of national sovereignty, but as an obstacle to transnational economic cooperation and international competition, although for countries lagging behind in economic development, they can be a life-saving haven. National differences in this context are justified only as prerequisites for the international division of labor and cooperation. In other respects, they should be smoothed over, so as not to interfere with the free movement of goods, workforce and capital. Such is the logic of internationalization. Ultimately, this process leads to the formation of a single global economic system in which individual national economies will be its constituent parts.
No matter how we define globalization, it is clear that it brings about fundamentally new challenges. In the structure of the global economy, we can clearly highlight two large blocs: the economic vanguard and all the others.

The vanguard includes no more than three dozen countries that have managed to build a high-tech post-industrial economy. They are the backbone of the world economy and the driving force of globalization, setting "technological, socioeconomic and organizational-managerial standards, which form the global economic order, the general conditions and rules of the game." It is their foreign economic policy that has a decisive influence on the development trends of the global economy.

The countries of the economic vanguard are, of course, interested in growing globalization, because it gives them obvious advantages. High-tech production requires large sales markets. And the competition that a developed economy is fully capable of withstanding serves as an incentive for development. As for developing countries and countries with transitional economies, globalization is not so fertile for them. Of course, the economic periphery will receive some benefits connected with information technology and cultural exchange. But we must not forget that the transformation of the global economy into a unified system will entail the functionalization of all components, i.e. national economies. To put it simply, national economies will take their functional positions in this system according to their competitive advantages and potential for development. And since in this scenario, economic periphery countries are likely to become sources or transport corridors, globalization can preserve their economic backwardness. It is possible in a single world economy, the raw material orientation of the economy of developing countries will be almost impossible to overcome.

In parallel with globalization, a process of regional integration is under way. It can be seen as a subprocess of globalization, yet it has its own salient features. Regional integration or regionalization means an economic union of countries at the same level of development.

This process leads to the formation of three centers of gravity in the structure of the world economy: European, Pan-American and Asia-Pacific. All trade and economic life will be concentrated around these centers of economic power. Their core will be made up by the same countries of the economic vanguard. And the remaining countries, apparently, will have to play their rules, manoeuvring in line with the policy of the regional centers.
A significant threat to immature economies comes from the prospect of growth in the openness of markets. A single world market will mean all-out competition, in which the countries that do not have a developed market economy will have little chance of success. Here, the economic diplomacy of Azerbaijan is of particular importance. With skilled and highly professional state management, Azerbaijan managed to increase its economic potential and consistently put into circulation, thus turning the country into a regional leader in the South Caucasus.

The intensification of scientific and technological development is another important process that determines the situation in the world. The global reality is rapidly changing. Every day, there appear new organizational structures, knowledge, tools and technologies. New systems and activities are created. The development of science and technology opens up new possibilities, but only for those who are keeping pace with it. Laggards are becoming even more backward in these conditions because of the increased technical, scientific and technological margin with the leaders. It is not by chance that in scientific literature there is a term "catch-up development". It accurately describes the situation in which most countries are forced to chase a group of leaders (more precisely, to trail along at their back), mastering the knowledge, tools and technologies they produce. The cruelty of the race is that because of its technical and technological backwardness, the outsider will be doomed to lagging behind more and more, since development is gaining momentum but there is no time and money for re-equipment.

The dynamic change in the global political and socioeconomic reality the issue of self-determination and adaptation relevant for all subjects of international life. In itself, the definition by a state of its position in the international arena, objectives, strategies and policies is not new. But today, these activities have become a necessity and require constant attention, because every day can bring a dramatic change in the situation. Self-determination and adaptation are thus becoming another global process that actively shapes the world reality. This process creates an independent artificial development plan, which greatly complicates the analysis of the international situation.

Azerbaijan,s economic policy is a vector for the dynamics and active management of the regional economic development programme. Obviously, the government cannot ensure its security and sustainable development today through a policy of maintaining the status quo. This passive "drifting" in the global processes will only preserve the backwardness of the state and delay the integration of its economic resources in the economic structures of other subjects of international life. A good example is Armenia.

Another option is "catch-up development". This paradigm has convinced us that it is possible to "catch-up with the global economic vanguard only by creating similar institutions and economic mechanisms." This is a way of borrowing. Unfortunately, it does not give a fundamental answer to the question of how to keep up with the leaders when the time and costs of borrowing increases (due to the complexity of institutions and mechanisms), and the duration of their efficiency is reduced (due to the increasing pace of technological development). In other words, the rate of borrowing is below the rate of innovation. This means that to catch up with the countries of the economic vanguard is like chasing train that is gaining speed.

The analysis shows that Azerbaijani President Ilham Aliyev seeks to make the development of the country outstripping. The sense of outstripping development is that instead of trailing along at the back of the group leaders, we determine the trajectory of the movement of the system and invent a way of jump directly to the desired point. Outstripping development is a super challenge. However, it is probably the only realistic alternative to stagnation in the periphery of world development.

The paradigm of outstripping development requires a clear understanding of the current situation and trends in the global economy, its problems, and actual and potential strengths and weaknesses of national economies in the global context. All these are strategic issues. Therefore, to implement of a policy of outstripping development, the state must be equipped with a powerful mechanism for strategic management. This mechanism shall provide the country's leadership with adequate knowledge of the situation in the global economy, its prospects, determine the strategic competitive advantages of the national economy, threats and opportunities for development, thus contributing to the formulation of the strategic goals for national economic development, and to develop strategies and programs to achieve these objectives in the decades ahead.

In the context of globalization, the problem of competition between state mechanisms is becoming particularly topical. The fact is that in the emerging world economic system, capital, both material and intellectual, tends to areas where conditions are most favorable. The competitiveness of goods and services also depends on the level of transaction costs in a given country. In other words, the countries in which the state mechanism is more efficient, will prosper and conquer the world market, while those in which the state is ineffective, will become poorer and be ousted.

The outflow of capital and the "brain drain" will inevitably occur in the favour of countries with good governance. This is the trend. Therefore, the ideology of "the state as a service center" providing public services is becoming more and more entrenched today. And in services, as we know, the most important thing is quality, efficiency and affordability. That,s why Azerbaijan bets on improving the efficiency of public administration and minimizing the administrative burden on business. This is a mandatory condition for development regardless of which strategy we choose.