LATVIA AND THE KNOWLEDGE SOCIETY: DEVELOPMENT, UNDERDEVELOPMENT AND MACROECONOMIC PERFORMANCE

Development differs from growth, which is related only to the improvement of economic indicators; in other words, a country's economy may grow in a stationary way without real development that is dependent on innovation. Also, there is a relationship between development and growth. This study looks at the current development of Latvia and concludes that there is growth but not development. The author suggests that only a profound change in the local political culture, along with policies for attracting foreign direct investment and directing local savings to strategic sectors, can change the current socio-economic situation in Latvia. The main challenge is to direct these changes in a way that shapes structures based on the knowledge society. That would ensure a non-subordinated insertion of the country into the international division of labour, stabilise the economy, improve its macroeconomic performance and develop the country.