Globalization and Business

15-27

Authors: VLADIMER PAPAVA

The article analyzes the crisis in the economics, its primary causes and its manifestations. It shows how traditional economics “turns a blind eye” to many significant aspects of economic reality. Within this crisis, the economy lags behind the economic reality and so various economic theories are used to attempt to interpret the economic phenomena. Some of the clearest examples of economies falling outside of reality are seen in the transition economies of the post-Communist period on their way to a market economy as well as the events of the global financial and economic crisis in 2007-2009. The most recent example of the crisis in economics is cryptocurrency which has already spread over almost the entire world over the past several years but which has not yet become a topic of systematic study in economics. In order to overcome the crisis situation in economics, it will be of utmost importance as to how well the human factor is reflected in economic studies and to what extent it will be approximated to the behavior that is characteristic of human beings in reality. For this purpose, economists must apply the knowledge about human nature that has been amassed in the field of social sciences such as philosophy, psychology, law and political science. For the development of economics and for its relevant transformation, the conditions referred to in the traditionally used phrase “other things equal” (“ceritasparibas”) need to be minimized in economic studies. This will be possible if an economic study relies not only (and in certain cases not to a greater extent) on mathematics but also on philosophy, psychology, law, history,geography and political science. In this regard, economists need to conduct studies by expanding their scope;that is, along the lines set out by the above-mentioned fields of the social sciences. Given the variety of economic theories, seeking possible ways to synthesize them becomes of great importance and this will assist economists in perceiving a given economic reality in a comprehensive way.

36-42

Authors: GIORGI GAGANIDZE

Often in scientific circles, mistrust regarding the reliability of competitiveness or other indices is expressed. The definite part of the economists think that it is not advisable to form any serious strategies based on these indices. This mistrust is probably caused by less awareness in these issues, especially because of the absence of tangible, confirmed ties between these indices and the real economic figures. We often witness only superficial talks about indices, focusing on the place of the particular index of the country in certain rankings, which causes its politicization and the discussion of the fundamental issues is not taken into account. In this publication we will try to concentrate on the indices focusing on country’s competitiveness and trade support. Such a choice was determined by two important issues: the first is the direct connection of these indices with the competitiveness of the country’s exports and the second - both of these indices are made by the World Economic Forum and hence certain unified methodological approaches exist.

48-53

Authors: NODAR KHADURI

Despite the fact that Georgia has already been an independent country for 25 years and inculcates the principles of market economy, the issue of choosing the model of country’s economic development has not been resolved up to the present time. Georgia frequently chooses radical models not only at the theoretical level, but also at the political one and has ambitions of merging them by unique prescription. Unfortunately, frequently there are attempts to borrow ideologically inappropriate models without comprehending their essence that causes problems for maintaining achieved successes. In order to choose a correct model, it is imperative to analyse at least at the theoretical level all those threats and possible successes that can be caused by choosing this or that model and its implementation. It is important that the society achieve consensus on what political philosophy the Georgian state system should be based on, the organic or mechanical theories of state. According to the first one the state is a natural organism, each individual is a part of this organism, and the state itself is a heart of this organism. According to this ideology; the individual is important as a part of society and his/her wellbeing should be considered in the context of the well-being of society. As regards the mechanical theory, it is based on the notion that the state is not an organic part of society and humans devised it to achieve their own goals. The economic essence of the noted theories is clearly reflected in Adam Smith and John Maynard Keynes’s theoretical legacy. Smith was convinced that, if there are free markets and individuals act by their own interests, the whole economy works well. Smith claimed, that in the conditions of market economy the useful action of individuals’ own interests by the principle of “invisible hand” brings about maximization of the general well-being of society. According to Keynes, Smith’s “invisible hand” showed an utter irrelevance to the real developments that became a reason for formulating a new macroeconomic theory. Today our aim is to find that theoretical golden mean, which in case of its implementation, will enable Georgian economic model to be maximally effective and fair.

58-66

Authors: GIVI BEDIANASHVILI

In modern conditions it is important to develop a systemic and institutional concept of culture as a form of knowledge economy. In order to present a systemic concept of knowledge and culture in the formation of knowledge economy, I think the new meaning of paradigmatic and conceptual aspects of economic science is of particular importance. In addition, the systematic representation of the cognition process is particularly important. As shown by the practice of recent years, the main problems in the form of knowledge technology are solved, which will facilitate the improvement of the “cognitive” function of economic science and enhance its practical benefits. The modern stage of globalization is characterized by a number of specific peculiarities of post-dosystem development, which, in our view, is important to the development of knowledge-based economy (knowledge economy). It is noteworthy that globalization stems from adding global dimensional dimensions to the knowledge economy, such as resource-technological, informative, communicative and institutional structures. In addition, we think it is necessary to understand the knowledge of the knowledge economy. This makes it possible to develop culture with knowledge as a factor of forming a knowledge economy. According to the Postindustural Theory, the main resource of the post-denser economy is information and knowledge, the main type of manufacturing activity is the high level of automation of the production, the science of technologies used primarily from the main technologies, and various services are the most common types of economic activity. In industrial society, the field of agriculture, industry - Industry, Postindustry - determinants are already theoretical knowledge with universities, as a place of active and generating knowledge.

73-77

Authors: DAVIT NARMANIA

State Management and Public Administration Teaching is an actual matter of all civilized countries. Educated state officials who have profound knowledge in these subjects are more effective than public servants who have received the general education. Performance at work and decisions made by the effective public servants are directly reflected on country’s success. Thus, different countries more or less successfully teach State Management and Public Administration at various universities (or different public training centers). It is considered that the money spent by the state is much less than the impact received from learning. In this work we are trying to briefly over view the international experience and based on this reveal the effective teaching tools. Also, we present the possible ways to measure the efficiency of training. The work is focusing on the approaches and challenges of new public management, which require constant improvement in management. Therefore, it is necessary to update the teaching approaches to the State Management and Public Administration periodically. In addition, the work is analyzing the current condition of state management and public administration teaching in Georgia. Based on the public sector reform progress and produced analysis the tasks for improving the teaching approaches is introducing.

86-90

Authors: MURMAN KVARATSKHELIA

In most countries of the modern world, the problem of overcoming poverty is hanging like a sword of Damocles. The rich and poor exist from the very beginning of the mankind, having the open and hidden opposition towards each other. Namely, this can be named, one of the main reasons of outbreaks of revolutions in different countries, followed by the destruction and victims. Even the modern civilized world has not been able to solve this universal challenge, in spite of all the scientific and technological achievements. For Poverty alleviation all the States need to carry out the right and rational social and economic policy. Simultaneously, it is necessary to find ways to balance the uneven distribution of the World wealth, overcome the cultural barriers, and the most important thing is to undertake more effective measures for inclusive development of economics of the developing and backward countries.

97-104

Authors: MEDEA SHAPATAVA

Contemporary world admits and analyses the destroying results and consequences of the largest-ever bankruptsy of the Lehman Brothers Investment bank which lead to the mortgage crisis and turned into the global one. The recession continues up to present, i.e. almost for ten years. Leading economists forecast the further negative issues and confess that the economic figures would never go back to the ones we had back ten years ago. The extreme points of consideration the recession and the crisis issues are in contradiction with the economic theory which predicts further recession though may never provide consistent and exact figures and dates. The reflection of the crisis on to the economic theory and science may provide further materials for discussions and arguments against existence of the crisis, as the global economy development never interrupted. Moreover, the world faced the birth of an absolutely new and enigmatic product on the market – cryptocurrency. The question is: would the cryptocurrency bring the relief in terms of recession or would it lead to a new default of the market? The economic science estimates the pros and cons of the existing risks and market threats and hopefully will play its substantial role in eliminating them.

110-115

Authors: INGA BALARJISHVILI

The article analyzes the manifestations and causes of the paradigmatic crisis of the modern economic “mainstream”: the “monopolization” of economic theory and economic education by the neoclassical direction; Fragmentary nature of scientific research; The “fascination” of scientists with the problem of economic growth and ignoring other factors of social development. The emphasis is on the lack of interdisciplinary research, the “mathematization” of economic knowledge. It is noted that the role of mathematics in economic models is only instrumental, mathematically complex economic models make the world more incomprehensible than simplify, the connection with real life is lost. Unlike the «mainstream», technology and individual taste in the institutional economy are endogenous variables. Institutionalists focus on the boundaries in which the actual future can be predicted, in contrast to the prediction in the «model context»; Institutionalists approach the economy as an organic and evolving «whole», and not as a static mechanism; Other advantages of the institutional economy are: the use of methodological collectivism instead of methodological individualism; Study of the processes of adaptation and disequilibrium, a criticism of the «neoclassical search» for optimal and equilibrium solutions; Instead of technology, focus on ownership and transaction costs; Recognition of ideology as the determining factor in economic history, which contradicts the neoclassical vision of the world; The refutation of the Pareto optimality principle; Emphasis on economic and political power. The methodological orientation of the institutional economy and the possibility of practical application determine its potential for becoming a “new mainstream”.

121-130

Authors: MALKHAZ CHIKOBAVA

The study analyzes the essence of the modern capitalist system, attempts by the capitalists to ennoble the Western economic system, which is described by Aristotle as hrematics, a counterbalance to the economy or “house building”. The work emphasizes the absurdity of determining the market economy. It is emphasized that modern capitalism is, first of all, not an economic, but a spiritual phenomenon. It has all the religious symbols, it is an invisible religion in all its main directions, which diametrically contradict Christianity. It can be called a “monetary religion”. The paper also presents when, by whom and in what context the term “capitalism” is first mentioned in chronological order. The paper notes that, despite the “titanic efforts” of the “economic science”, the “progressive” approval of capitalism was difficult: this social and economic education largely discredited itself. The document also discusses the absurd idea of economic manipulation that banks “participate in the creation of public products.” It is worth noting that banks are not so-called financial intermediaries and they themselves create money from the air in the economy, which is the main reason for inflation. Unfortunately, in modern “economy” usurious credit is usually regarded as a historical precursor of a bank loan, which in itself is an absurd idea. The work briefly presents the ideas of Henry Ford, Henry George, Silvio Gezel, Emrey Sheldon and Michael Roobotem on the inefficiency of modern capitalism. It is noted that translating the works of these authors in modern conditions and ensuring their accessibility for students and young people is not an easy task. Unfortunately in our universities today do not offer the labor of Ford, George, (except for Ford). In addition, the same can be said about most professors who “train” students of mainstream. In the author’s opinion, the above authorization will become a good helper for the crisis in our country. For these purposes, we need to popularize these authors in our country.

136-143

Authors: NANA ASLAMAZISHVILI

What does the Balance of Payments deficit mean? The deficit of the balance of payments does not always mean economic downturn, or vice versa. However, achieving and maintaining the balance of international economic relations is an important macroeconomic task for any country. In this regard, the in-depth analysis of the balance of payments tendencies is extremely important, especially for Georgia. Unfortunately, in our country often approaches and methods of analysis are inadequate, communication with users is delayed, data transparency is insufficient, academic circles are less interested in external sector statistics problem. The purpose of this paper is to provoke designing of comprehensive foreign sector data analysis among appropriate specialists.

148-152

Authors: ELISO BERIDZE

Macro-prudential policy implies monitoring, evaluation and carrying out such a supervisory policy of financial stability which will be aimed at eradicating systemic risks and neutralizing pro-cyclic nature of the financial sector (growing to the cycle direction, pro-cyclical). To do this, it is necessary to carry out the supervisory policy: risk assessment; analysis of the activities of banking institutions and preparation of recommendations. Systemic risks include: exogenous shocks (economic fall, external shock, etc.), the second, so-called “contagious shocks” (contagion) that are due to the high integration of the financial sector internationally; the third category is the accumulation of financial imbalance that is the risk of endogenous nature and is often collected by the support of market participants. Against the background of the global crisis, Lehman Brothers’ bankruptcy in September 2009 clearly demonstrated those negative externalities which are linked to the bankruptcy of the systemic bank globally. Consequently, the macroprudential policy aims to reduce the probability of system banks’ bankruptcy and in case of bankruptcy to limit the system’s adverse effect. However, it is important to adequately implement the countercyclical fiscal and monetary policy.

159-164

Authors: GULNAZ ERKOMAISHVILI, DAVID ALUDAURI

The paper deals with one of the important legislative amendments in the Tax Code of Georgia, according to which the existing model of taxation was changed by the Estonian model. It was created in the agreement with Georgian legislation and with regard to Georgia’s socio-economic condition. The purpose of this model is to accelerate economic growth and create favorable conditions for starting and developing business. Based on the analysis of statistical data, the new tax system can be positively evaluated, as there is clearly visible improvement in the volume of investment and GDP, which will ultimately result in a country’s well-being.

169-174

Authors: TARIEL LOMIA

In the state the environmental policy faces three main issues, they are: The issue of internalization of external costs (i.e. the issue of transaction costs), informing issues and the issues of control. The issue of transaction costs must be overcome by effective and active environmental policy. This can only be done if the ways of efforts of environmental policies are used to create (the use of instruments) situations on the market that are not voluntarily established. There is a precondition for this fact if the environmental policy conductors have enough information about relationship between natural resources, production, technology and environmental impacts. In other ways how can we identify and determine the quantity of harmful substances that are allocated by different pollutants (e.g. setting limits of environmental pollution). So far, there is a huge deficit of the possibilities of obtaining and reacting to the information by the National Environmental Protection Service Officials all over the world. It is also unclear whether the state has the possibility to examine the legality of the environmental law by the economic subjects (control problem), the discussion on the size of radioactive irradiation is still relevant. In case of violation of legislative norms on environmental pollution by the economic subjects, the controlling system must have more effective sanctions (violators should pay higher cost of expenses than expected benefits). An effective implementation of the goals of environmental policy is only possible by combined usage of legal and market economic instruments. The natural environmental resources are characterized by the attractiveness of the social product, thus we can deal with the environmental problems by existing the decentralized market in the economy, for this purpose of environmental policy, it is necessary that the state fulfill its functions of regulation. The formation of environmental policies in Georgia also takes place in many international obligations. In order to be closer to the developed international community, Georgia tries to implement internationally recognized environmental approaches and regulations where it is possible. The EU and Georgia have signed an Association Agreement, and one of the main issues is the scope of environmental protection. The Agreement provides a wide range of measures in environmental issues, which will facilitate environmental conditions not only for human beings and ecosystems but also would improve environmental management and effective decision-making procedures. The process of converting the national legislation of environmental protection to EU legislation implies several interconnected stages, namely: 1. Analysis of EU environmental legislation to identify basic principles; 2. Analysis of national legislation to assess compliance with EU principles; 3. To conduct basic principles of the European Union in national legislation; 4. Implementation of relevant institutional changes.

184-187

Authors: DEMUR CHOMAKHIDZE

The report analyzes the role and importance of energy conservation for Georgia. Based on concrete materials, the effectiveness of social labor and energy savings on gross domestic product (GDP) is comparable to each other. It is said that the reduction of GDP energy efficiency by 1% is almost the same, and in more than a few years, the result of GDP increase is more than the same as the productivity of public labor. In this regard, the report describes the level and dynamics of major macroeconomic indicators of the economic development of Georgia for 2013-2016. Set up events to improve the situation.

194-198

Authors: USHANGI SAMADASHVILI

The historical fact is that a large-scale trade war led the United States to a “great depression” in the thirties of the last century. History also shows that when the trade between strategic countries is resolved, war begins. Given this, one of the most important conditions for global stability is the integration of the EU and the Eurasian Economic Union. Until recently, relations between the EU and Russia were short-lived. The relationship between the EU and the Eurasian Economic Union as an alternative should be based on equality and long-term consequences. The aim of the article is to contribute to the normalization and further development of the EU and the Eurasian Economic Union, which, in our view, will eventually complete a comprehensive integration agreement and will have a solid foundation for global stability.

206-210

Authors: LIA TOTLADZE

It is important to predict trends of economic development for any country. Researchers and practitioners use different ways for evaluation and forecasting economic activity. Identification of indicators, which change impact on the economy in general, is one of the widespread methods. The most appropriate tools to solve this problem are the leading indicators and indexes based on leading indicators. The selection of indicators depends on the specificity of the country’s economy. Among the leading economic indicators is the dynamics of applications for the Building permissions for private houses, and can also be successfully use residential transactions. Depending on the above, the paper deals the aspects of calculation of leading economic indicators. This paper analyses some aspects of the effectiveness of indicator for predicting economic activity and describes the methodological issues forward leading indicators. Particular attention is paid to analysis of residential transactions dynamics as a leading indicator as in theoretical as in practical terms. The article highlights the peculiarities of its implementation in Georgia.

218-225

Authors: QUJI BICHIA

The positive correlation between expected wages of workers and additional steps of education attainment has been studied extensively, as well as inverse relation between education level in the country and unemployment rate. Thus, it is important to analyze education and labor markets in relation, more so with the presence of imperfections in these markers. Coordination may fail on markets of asymmetric information when there are high and low quality products which are indistinguishable. This can cause degradation of the market. In order to avoid it, motivations of each side should be aligned correctly on education and labor markets. This can only be achieved if the education system is constructed with right motivators for both sides right from the base. Education cannot be a useful signal to employers if educational attainment cannot be used as a way of distinguishing employee’s skills from others’.

233-241

Authors: MURTAZ KVIRKVAIA, VASIL KIKUTADZE, DAVID SIKHARULIDZE, SHOTA SHABURISHVILI, VAKHTANG CHARAIA

The correct professional orientation is related to the problems of the society, which are quite difficult to solve. These problems include high rate of unemployment, low labor productivity, career advancement opportunities, etc. Therefore, the purpose of the present paper is to study the factors which affect the professional orientation of young people in Georgia and to determine how much they affect the decision about professional orientation. Graduate students of Georgian secondary schools participated in the present research. With the help of a special questionnaire, the schoolchildren have expressed their opinions and assessments regarding the factors affecting their professional choices. Research showed that professional orientation of the most people participating in the research is affected by the following factors: the prestige of a profession, future employment opportunities, the estimated level of income by profession, personal interests and direct relation of family members with the profession. The choice of profession by young people is largely influenced by their parents, while schools fail to provide proper assistance regarding professional orientation. For ensuring representativeness of the research results, the research limitations were identified. In particular, public and private, regional and central secondary education institutions of Georgia involved in the research were previously determined by territorial and ownership forms. The research was conducted based on a structured survey format through preliminary developed questionnaires. The questionnaire was completely filled out by 712 respondents from all around Georgia. In our opinion, taking the current limitations into consideration ensures representativeness of the research results. Identification of the factors affecting professional orientation in Georgia provides possibility to consider these factors while planning the activities of proper professional orientation. Wrong professional orientation of young people is related to a number of negative consequences. Youth support in professional orientation should be based on the study of the factors affecting the choice of future profession. Until now, in Georgia there were only assumptions about the factors considered by young people when choosing the profession. The purpose of the presented study is to find out which factors affect the professional orientation of young people in Georgia on a scientific basis. The analysis of the research results showed that professional orientation of young people in Georgia is affected by the following factors: prestige of a profession, possibility of future employment, estimated level of income to be received by profession, personal interests, academic performance at school and direct relation of family members with the profession. It should be noted that the factors affecting professional orientation revealed by the research, in turn, directly affect the level of motivation of individuals to study in higher education institutions and significantly determine the intensity of academic mobility processes, which also requires further researches. Based on the research, the following conclusions can be made regarding the factors affecting professional orientation of young people in Georgia:  When choosing a profession most of the 12th grade students of secondary schools pay special attention to prestige of a profession, possibility of future employment, estimated level of income by profession, personal interests, academic performance at school and direct relation of family members with the profession. The respondents consider that perspective of employment in chosen profession is the most important among the other factors, which can be positively evaluated from the perspective of making correct professional choice. However, the fact that most of the respondents consider that protection by friends and relatives is the main factor for being employed in chosen profession is an extremely negative factor for making correct professional choice. Such opinion can be considered as one of the main reasons of wrong professional orientation. In addition, the existence of the factor of protectionism in employment possibilities can be considered as one of the main reasons of low motivation of learning at higher education institutions.  Being informed about labor market is essential for correct professional orientation of young people. The research substantiates that even according to the respondents’ evaluation, their level of awareness of labor market in not sufficient. However, it is likely that the real level of their awareness of labor market is even lower. The empirical results of the research showed that the better an individual is informed about the chosen profession, the less likely he/she is to change his/her choice of profession.  An important part of the graduate students of secondary schools find it easy to choose a profession, they make decisions easily and spend very little time on making a decision on future profession; as a result, young people are not sure about the correctness of their professional choice. Empirical studies also showed that the probability that the individual is absolutely convinced in his professional choice and is not going to change it is about 20%, which is quite a low indicator.  Parents play an important role in making decisions on future professions by their children, while the involvement and support of schools (teachers) in correct professional orientation of young people is very low;  Family income considerably affects professional orientation of young people in Georgia as young people from low-income families are forced to focus on state-funded specialties rather than on their own professional interest;  Study of one’s own personal characteristics is quite an important factor. In particular, the better the individual has studied his/her personal characteristics, the more confident he/she is in the decision about the future profession.

247-251

Authors: NINO LETANDZE

In this Article we discuss environmental issues necessary for safe and sustainable development of tourism as an integral part of economic relations. We focus to examine the impact of anthropogenic effects on the environment, which manifests itself in organizing recreational utilization of nature. We refer here to the impact of ecological problems on human health in Kvemo Kartli region, which is very attractive tourist destination and has a great potential for tourism development as of its cultural and historic heritage.