Central and Eastern European Countries Value Added Analysis

Transcription

1 American Journal of Business and Society Vol. 3, No. 2, 2018, pp Central and Eastern European Countries Value Added Analysis Lembo Tanning *, Toivo Tanning Marcelius Trade Limited Liability Company, Tallinn, Estonia Abstract The purpose of this article is a comparative analysis added value of the EU countries with special attention to the postsocialist countries of Central Europe and the Baltic States. The objective is to analyze the added value of non-financial business economy enterprises. They are mainly the sectors of industry, construction and distributive trades and services on basis of the NACE Rev. 2 sections. The economy and living standards of the new EU Member States in Central and Eastern Europe (CEE- 8 and the Baltic countries), despite improvement, are significantly lower than in Western European countries. What to do? An example should be taken the most successful industries in the rich countries, where the differences are greatest. Often called advanced economies or rich countries to industrialized countries. As industry has been the basis of their wealth, then we will analyse the main indicators of industrial development. The emphasis is on the comparative analysis of economic reasons. What are the lessons learned? Where are the bigger differences? The gap has dropped by a dozen years ago. But still the topical question is: why is it? Why? To conclude and discuss, there are a series of authors' reflections on how the CEE countries could improve their economic situation, which could be taken as an example. Looking at the progress, made at the time of EU membership, CEE countries should take a more thorough and self-critical analysis of the country's economy, the factors, that hinder its development, and the more efficient use of better Western countries' knowledge and experience, especially in the less developed CEE countries. Keywords Added Value, Post-Socialist Countries, Baltic, Central and Eastern European Countries, Big Differences, Economic Lessons Received: July 30, 2018 / Accepted: August 15, 2018 / Published online: August 31, 2018 The Authors. Published by American Institute of Science. This Open Access article is under the CC BY license Introduction The Soviet Bloc countries the Soviet Union (SU) existed between 1922 and 1991; the government and economy of the 15 multinational Soviet Republics were highly centralized. The SU established the Eastern Bloc (Soviet satellite states) in much of Central and Eastern Europe and emerged as one of the world s two superpowers after the war. The German Soviet Non-Aggression Pact, MRP (1939) made the Soviet occupation of Lithuania, Latvia, Estonia, Bessarabia, northern Bukovina, and eastern Poland possible. In 1940, the SU annexed the Baltic States Estonia, Latvia and Lithuania. In the late 1980s, the constituent republics of the SU started legal movements towards potentially declaring sovereignty over their territories. On April 7, 1990, a law was passed allowing a republic to secede if more than 2/3 of its residents voted for it in a referendum. Lithuania, Latvia and Estonia immediately declared the restoration of their full independence, while the other 12 republics continued discussing new, increasingly looser, models of the Union. The remaining republics were recognized as independent with the Soviet Union s final dissolution on December 26, The dissolution of the SU was a process of systematic disintegration, which occurred in economy, social structure and political structure. [1, 2] The Eastern Bloc was the group of socialist states of Central * Corresponding author address:

2 American Journal of Business and Society Vol. 3, No. 2, 2018, pp and Eastern Europe, generally the SU and the countries of the Warsaw Pact. Central and Eastern Europe (CEE) is a term encompassing the countries in Central Europe (the Visegrád Group), the Baltic States, and Southeastern Europe, usually meaning former communist states from the Eastern bloc (Warsaw Pact) in Europe. The term CEE includes the Eastern bloc countries west of the post-ww II border with the former SU; the independent states in former Yugoslavia (which were not considered part of the Eastern bloc); and the three Baltic States. The CEE countries are further subdivided by their accession status to the EU: the eight first-wave accession countries that joined the EU on 1 May 2004 (Estonia, Latvia, Lithuania, Czech Republic, Slovakia, Poland, Hungary and Slovenia), the two second-wave accession countries that joined on 1 January 2007 (Romania and Bulgaria) and the third-wave accession country on 1 July 2013 (Croatia). [1, 2, 3] The countries of CEE include states located east of Germany and south of the Baltic Sea to the borders with Greece. The former the SU republics: Latvia, Lithuania and Estoniamodern researchers include in the CEE countries on the basis of entry into the EU. The CEE countries which have undergone a transition from a planned economy to a market economy in the 1990s. According to the OECD, CEE Countries is an OECD term for the group of countries comprising Albania, Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, the Slovak Republic, Slovenia, and the three Baltic States: Estonia, Latvia and Lithuania."[29-30] The Baltic States are in the shores of the Baltic Sea Estonia, Latvia and Lithuania. In 1940, the Soviet Union annexed the Baltic States. They regained its freedom in 1991 with the collapse of the Soviet Union. Repressions, executions and mass deportations followed after that in the Baltics. They were a half century of Soviet-bloc countries. This will help to understand better the economic backwardness of the Western European countries. On 11 March 1990, year before the collapse of the Soviet Union, Lithuania became the first Soviet republic to declare independence. The independence of Latvia and Estonia was restored on August After the Baltic countries had restored independence, integration with Western Europe was chosen as the main strategic goal. The Baltic States are now members of the EU, the euro zone, NATO, WTO, OECD and IMF. Estonia adopted the euro on 1 January They have a modern market-based economy. Today they are liberal democracies and their market economies in recent years have undergone rapid expansion in the early 2000s. They are classified as high-income economies by the World Bank and maintain high HDI. [1-3, 4-28, 31] 2. Methodology and Theoretical Bases 2.1. Methodology The methodology is based on international organizations (Eurostat [32], CIA [33], WB [34], OECD [35]), and the authors books [1-3], but also partly the authors of the methodology used in previous publications [4-28]. The techniques definitions used by the authors have been specified in Eurostat [36-37]. The System of National Accounts (SNA) is an international standard system of national accounts, the first international standard being published in Handbooks have been released for the 1968 revision, the 1993 revision, and the 2008 revision. [38] The gross domestic product (GDP) is an indicator for a nation s economic situation and a measure of the economic activity. It reflects the total value of all goods and services produced less the value of goods and services used for intermediate consumption in their production. Expressing GDP in PPS (purchasing power standards) eliminates differences in price levels between countries, and calculations on a per head basis allows for the comparison of economies significantly different in absolute size. [39] GDP (purchasing power parity) compares the GDP or value of all final goods and services produced within a nation in a given year. A nation's GDP at purchasing power parity (PPP) exchange rates is the sum value of all goods and services produced in the country valued at prices prevailing in the United States. [39] Expressing GDP in PPS (purchasing power standards) eliminates differences in price levels between countries, and calculations on a per head basis allows for the comparison of economies significantly different in absolute size. [39] GDP per capita in constant prices constant prices GDP is found and the ratio of the average population. Often used in constant prices GDP as an indicator of the wealth of nations, as it reflects the average real income in this country. [39] Value added (Net products)-an indicator that characterizes the volume of production in the enterprise in value terms over a certain period [40-41]. Net production, in contrast to gross output, better reflects the volume of production of this enterprise due to the fact that it does not take into account the double count of raw materials, materials, fuel, energy consumed in the process of production, as well as depreciation of fixed assets. Net products can be defined in two ways: As gross production minus material costs and depreciation charges;

3 40 Lembo Tanning and Toivo Tanning: Central and Eastern European Countries Value Added Analysis As the amount of wages of workers, whose labor is spent on the creation of products, and the profits of the enterprise from the sale of the goods produced. [40-41] Added Value = Price that the product or service is sold atcost of producing the product [42-43]. Definition: value added at factor cost is the gross income from operating activities after adjusting for operating subsidies and indirect taxes. It is an indicator in the domain of structural business statistics. [44] Context: It can be calculated from turnover, plus capitalised production, plus other operating income, plus or minus the changes in stocks, minus the purchases of goods and services, minus other taxes on products which are linked to turnover but not deductible, minus the duties and taxes linked to production. Alternatively it can be calculated from gross operating surplus by adding personnel costs. Income and expenditure classified as financial or extraordinary in company accounts is excluded from value-added. Valueadded at factor costs is calculated gross as value adjustments (such as depreciation) are not subtracted. [44] Gross value added (GVA) at market prices is output at market prices minus intermediate consumption at purchaser prices; it is a balancing item of the national accounts' production account: 1. GVA at producer prices is output at producer prices minus intermediate consumption at purchaser prices. The producer price is the amount receivable by the producer from the purchaser for a unit of a product minus value added tax (VAT), or similar deductible tax, invoiced to the purchaser. 2. GVA at basic prices is output at basic prices minus intermediate consumption at purchaser prices. The basic price is the amount receivable by the producer from the purchaser for a unit of a product minus any tax on the product plus any subsidy on the product. GVA can be broken down by industry. The sum of GVA at basic prices over all industries plus taxes on products minus subsidies on products gives gross domestic product. Gross value added of the total economy usually accounts for more than 90% of GDP. [44] Structural business statistics and global business activities cover industry, construction, trade and services. Presented according to the NACE activity classification, they describe the structure, conduct and performance of businesses across the EU and it the Member States. [47] Data and methodology are primarily of Statistical classification of economic activities in the European Community, abbreviated as NACE, is the nomenclature of economic activities in the EU; the term NACE is derived from the French Nomenclature statistique des activités économiques dans la Communauté européenne. Various NACE versions have been developed since NACE is a four-digit classification providing the framework for collecting and presenting a large range of statistical data according to economic activity in the fields of economic statistics. NACE Rev. 2, a revised classification, was adopted at the end of 2006 and, in 2007, its implementation was begun. [44] The online Eurostat publication Business economy by sector- NACE Rev. 2 presents an overview of structural business statistics analysed per activity sector of the NACE Rev. 2 classification. Business economy by sector-nace Rev. 2. [48] The non-financial business economy includes the sectors of industry, construction, distributive trades and services. This refers to economic activities covered by sections B to J and L to N including S95 of NACE Rev. 2 and the enterprises or its legal units, that carry out those activities. [37] B: Mining and quarrying C: Manufacturing D: Electricity, gas, steam and air-conditioning supply E: Water supply; sewerage, waste management and remediation activities F: Construction G: Wholesale and retail trade; repair of motor vehicles and motorcycles H: Transportation and storage I: Accommodation and food service activities J: Information and communication L: Real estate activities M: Professional, scientific and technical activities N: Administrative and support service activities 2.2. Theoretical Bases The theoretical bases have been brought partly on international organizations [32-35], in more detail in the authors book [1-3] and partlyin authors earlier publications [4-28]. Value-added theory (also known as social strain theory) was first proposed by Neil Smelser and is based on the assumption that certain conditions are needed for the development of a social movement. Smelser saw social movements as side-effects of rapid social change. [50-51] Value added at factor cost can be calculated as the total sum

4 American Journal of Business and Society Vol. 3, No. 2, 2018, pp of items to be added (+) or subtracted (-): turnover (+); capitalized production (+); other operating income (+); increases (+) or decreases (-) of stocks; purchases of goods and services (-); other taxes on products which are linked to turnover but not deductible (-); duties and taxes linked to production (-). Alternatively, it can be calculated from the gross operating surplus by adding personnel costs. [43] This article presents structural business statistics (SBS). These data describe the structure, main characteristics and performance of economic activities across the EU. While the statistics presented are generally analysed at the level of NACE sections readers should note that structural business statistics are available at a much more detailed level (for several hundred activities). Structural business statistics can provide answers to questions on the wealth creation (value added), investment and labour input of different economic activities. The data can be used to analyse structural shifts, for example between industry and services, country specialisations in particular activities, sectoral productivity and profitability, as well as a range of other topics. Because they are available with an analysis by enterprise size class, structural business statistics also illustrate the relative role of large enterprises and small and medium-sized enterprises (SMEs), which is of particular use to EU policymakers and analysts wishing to focus on entrepreneurship and the role of SMEs and large enterprises in stimulating economic performance and job creation. Furthermore, structural business statistics provide useful background information on which to base an interpretation of short-term statistics and the business cycle. [44] 3. Analysis of Gross Domestic Product At first we analyze as basic indicator gross domestic product (GDP) at market prices in current and in purchasing power standards (PPS) prices total and GDP per capita. GDP is an indicator for a nation s economic situation. It reflects the total value of all goods and services produced less the value of goods and services used for intermediate consumption in their production. Expressing GDP in PPS eliminates differences in price levels between countries, and calculations on a per head basis allows for the comparison of economies significantly different in absolute size. [39] In detal was analysed GDP of the great powers in Europe in [39]. At current market prices, Germany was a strong leader and the UK was ahead of France. In 2017 was Germany 21.3% of EU. Are there any lessons learned from these great powers in Europe, how did they become so powerful? Table 1. GDP at current prices, million euro [39] Bulgaria 37,200 38,230 41,947 42,762 48,128 50,430 Czech Rep 161, , , , , ,642 Estonia 16,517 14,716 17,934 19,766 21,098 23,002 Croatia 48,138 45,155 43,982 43,431 46,639 48,989 Latvia 24,354 17,788 22,058 23,618 24,925 26,856 Lithuania 32,696 28,027 33,348 36,568 38,668 41,857 Hungary 108,121 98,826 99, , , ,494 Poland 366, , , , , ,604 Romania 146, , , , , ,939 Slovenia 37,951 36,252 36,076 37,614 40,418 43,278 Slovakia 66,002 67,577 72,703 76,087 81,154 84,985 In the following, we compare the level of European powers with the world economy, including Russia, which is also a postsocialist country, the Soviet Union's core country and legal successor. Table 2. GDP at current prices, billion US dollars [45] EU 19,220 17,174 18,374 18,034 16,423 16,502 17,318 Euro area 14,167 12,956 13,640 13,196 11,671 11,942 12,620 Germany 3,767 3,431 3,762 3,753 3,376 3,480 3,686 Spain 1,641 1,505 1,490 1,362 1,198 1,238 1,314 France 2,930 2,700 2,865 2,811 2,439 2,466 2,588

5 42 Lembo Tanning and Toivo Tanning: Central and Eastern European Countries Value Added Analysis Italy 2,400 2,193 2,279 2,131 1,833 1,860 1,939 UK 2,918 2,406 2,637 2,754 2,897 2,660 2,629 Russia 1,795 1,320 2,052 2,294 1,356 1,284 1,469 U. S. 14,718 14,418 15,517 16,691 18,120 18,624 19,360 China 4,596 5,110 7,571 9,682 10,963 11,194 11,340 Japan 5,023 5,238 6,164 5,153 4,394 4,958 4,884 Here is China with Hong Kong and in the Euro area are 19 countries. Is there anything to learn about them? Both good and bad? Table 3. GDP at current prices, million US dollars [45] Bulgaria 54,713 52,050 57, ,795 50,245 53,273 56,970 Czech Rep 237, , , , , , ,498 Estonia 24,293 19,730 23,201 25,144 22,575 23,353 25,985 Croatia 70,802 62,968 62,397 58,143 49,490 51,625 55,343 Latvia 35,821 26,151 28,121 30,319 26,983 27,590 30,339 Lithuania 48,089 37,568 43,535 46,429 41,524 42,802 47,285 Hungary 159, , , , , , ,511 Poland 538, , , , , , ,993 Romania 214, , , , , , ,315 Slovenia 55,818 50,444 51,359 48,129 43,089 44,738 48,891 Slovakia 97,076 89,299 98,313 98,505 87,535 89,829 96,007 The economic crisis was in both years When Germany and France already exceeded the crisis level in 2010 and Italy in 2011, then the UK started to decline already a year earlier, the pre-crisis level was exceeded only in On the other countries after a crisis the economy continued to grow, but in 2016 the GDP of the UK decreased again by EUR 213 billion euro or 8.26%. While in the years France was stronger than in the UK economy, with UK GDP accounted for only 75.5% from the Germany. In the years , the UK was firmly better than France. The share of the UK in 2016 was 16.1% of the EU-28 total. Table 4. GDP at current prices, euro per capita [39] Germany 28,300 31,700 32,100 35,000 37,300 38,100 39,500 Spain 21,300 24,300 23,200 22,000 23,300 24,100 25,000 France 28,100 31,000 30,800 32,100 33,000 33,300 34,200 Italy 25,600 27,600 26,800 26,500 27,200 27,700 28,400 UK 33,600 31,900 29,300 32,200 40,000 36,500 35,200 In the case of the EU's big powers, UK GDP per capita was the largest in the years and In other years, Germany was superior to the great powers. Trend line (6th grade polynom) shows that the GDP per capita of these countries has not even grown steadily, but has become pulsating. GDP per capita of UK is larger than France, Italy and Spain, but less than Germany, other Central European and Nordic countries; 1.6 times smaller than Ireland. The average of the new EU member states and the EU-28 GDP per capita is lower than the UK. The UK was ranked 10th in the 2016 EU ranking. In GDP per capita of the UK decreased by 4800 euros or 12%. As a whole, the UK economy (GDP) shares with France the second-third place in the EU, with in 2016 the UK was better than France and in 2017 on the contrary-on the contrary was better. On the basis of the GDP the UK is not decisive for the EU. The share of the UK in the EU-28 (UK/EU): by PPS = 13.9% or 1/7 and at current prices 16.06% or 1/6 (2016). [39] Table 5. GDP at current prices, euro per capita [39] EU-28 26,100 24,500 26,100 26,800 29,000 29,200 29,900 Bulgaria 4,900 4,900 5,600 5,800 6,300 6,800 7,100

6 American Journal of Business and Society Vol. 3, No. 2, 2018, pp Czech Rep 15,500 14,200 15,600 15,000 16,000 16,700 18,100 Estonia 12,300 10,600 12,500 14,300 15,500 16,000 17,500 Croatia 11,200 10,500 10,500 10,300 10,600 11,200 11,800 Latvia 11,200 8,800 9,800 11,300 12,300 12,700 13,900 Lithuania 10,200 8,500 10,300 11,800 12,900 13,500 14,800 Hungary 10,800 9,400 10,200 10,300 11,200 11,600 12,600 Poland 9,600 8,200 9,900 10,300 11,200 11,100 12,100 Romania 7,100 6,100 6,600 7,200 8,100 8,700 9,600 Slovenia 18,800 17,700 18,000 17,600 18,800 19,600 21,000 Slovakia 12,200 11,800 13,100 13,700 14,600 14,900 15,600 In 2017 were GDP per capita in current prices in Estonia 58.5%; Latvia 46.5%; Lithuania 49.5% and Poland 40.5% of EU-28. It was higher in Slovenia 70.2% and in Czech Republic 60.5%. Table 6. GDP at current prices, PPS per capita [39] EU-28 26,100 24,500 26,100 26,800 29,000 29,200 29,900 Bulgaria 11,100 10,600 11,800 12,200 13,700 14,200 14,700 Czech Rep 21,900 20,900 21,700 22,400 25,300 25,500 26,400 Estonia 17,900 15,600 18,500 20,200 21,700 21,900 23,100 Croatia 16,500 15,200 15,600 16,000 17,200 17,600 18,400 Latvia 15,400 12,800 14,900 16,700 18,500 18,800 20,100 Lithuania 16,400 13,800 17,200 19,600 21,700 22,000 23,400 Hungary 16,300 15,700 17,200 18,000 19,700 19,700 20,400 Poland 14,500 14,500 17,000 17,900 19,800 19,900 20,900 Romania 13,200 12,500 13,600 14,500 16,300 17,100 18,700 Slovenia 23,400 20,900 21,700 21,900 23,800 24,100 25,400 Slovakia 18,600 17,400 19,500 20,500 22,300 22,400 23,000 In 2017 were GDP per capita in PPS from EU 28: Lithuania 78.26%; Estonia 77.26%; Poland 69.90% and Latvia 67.22%. It was higher in Czech Republic 88.3% and in Slovenia 84.9%. Difference with EU-28 the new Member States will decrease, so it was beneficial for them to join the EU. The goal of this chapter is to analyze how has total nonfinancial companies go out of the economic crisis, what should enterprises do to increase their economic competitiveness? The aim is to analyse the lessons learned during the economic crisis in the European countries. This chapter focuses on the total non-financial business economy and belongs to sectors of manufacturing, construction and transportation which analyse the structure and characteristics of the economic activities these enterprises economy of the European Economic Area (EEA): the EU and the European Free Trade Association (EFTA) countries. From them, in turn, with special focus to new EU Member States, or CEE-8 and the Baltic countries. 4. Analysis of Gross Value Added 4.1. Analysis of Gross Value Added by Countries Let's look at the beginning of the world and the Euroops super countries in gross value added (GVA) in US dollars and in euros. Their economic potential determines, in addition to economic, political and military influence. Figure 1. GDP per capita, PPS, 2017 [39].

7 44 Lembo Tanning and Toivo Tanning: Central and Eastern European Countries Value Added Analysis Table 7. GVA current prices, billion US dollars [45] EU ,262 15,484 16,453 16,150 14,696 14,755 15,479 Euro (19) 12,752 11,698 12,262 11,861 10,482 10,714 11,315 Germany 3,389 3,078 3,379 3,376 3,040 3,134 3,322 Spain 1,508 1,403 1,369 1,242 1,087 1,123 1,191 France 2,636 2,441 2,573 2,523 2,182 2,204 2,306 Italy 2,166 1,982 2,046 1,917 1,647 1,669 1,737 UK 2,640 2,191 2,355 2,460 2,586 2,371 2,344 Russia 1,550 1,166 1,773 2,003 1,218 1,157 : USA 14,246 13,990 15,037 16,152 17,550 18,050 : China 4,596 5,110 7,571 9,682 10,963 11,194 : Japan 5,015 5,232 6,134 5,122 4,357 4,920 : Russia was by GVA former socialist (communist) countries 2.5 times bigger than Poland, 6 times bigger than Czech Republic and Romania. However, nearly 3 times smaller than Germany; 2 times smaller than United Kingdom and France; 1.5 times smaller than Italy and practically equal with Spain. China incl. Hong Kong, was nearly 10 times and USA nearly 16 times bigger than Russia by GVA. However, if we analyze this GVA per capita, differences in European countries are even greater than by GDP per capita. Table 8. GVA current prices, million US dollars [45] Bulgaria 46,018 45,185 50,265 48,057 43,423 45,965 49,336 Czech R 215, , , , , , ,286 Estonia 21,648 17,129 20,346 22,034 19,538 20,054 22,437 Croatia 59,783 53,708 53,278 48,615 41,080 42,810 45,643 Latvia 32,232 23,517 24,984 26,708 23,700 24,003 26,490 Lithuania 43,166 33,894 39,198 42,087 37,400 38,508 42,465 Hungary 136, , , , , , ,028 Poland 470, , , , , , ,625 Romania 192, , , , , , ,366 Slovenia 48,874 44,129 44,690 41,561 37,255 38,752 42,526 Slovakia 88,048 80,944 89,062 89,675 79,001 81,204 86,564 Table 9. GVA, current prices, billion euro [45] EU-28 11,737 11,101 11,820 12,160 12,573 13,246 13,330 13,702 Euro (19) 8,670 8,387 8,809 8,931 9,125 9,447 9,679 10,016 Germany 2,304 2,207 2,428 2,542 2,639 2,740 2,831 2,941 Spain 1,025 1, ,014 1,054 France 1,792 1,750 1,848 1,899 1,927 1,967 1,991 2,042 Italy 1,473 1,421 1,470 1,444 1,457 1,485 1,508 1,537 UK 1,795 1,571 1,691 1,852 2,041 2,331 2,142 2,075 Russia 1, ,273 1,508 1,352 1,098 1,045 : USA 9,685 10,030 10,802 12,162 12,698 15,818 16,306 : China 3,125 3,663 5,439 7,290 7,867 9,881 10,113 : Japan 3,409 3,751 4,406 3,857 3,634 3,927 4,445 : Table 10. GVA, current prices, million euro [45] Bulgaria 31,2 32,395 36,110 36,185 39,138 41,526 43,671 Czech R 146,2 134, , , , , ,980 Estonia 14,7 12,281 14,616 16,590 17,610 18,118 19,861 Croatia 40,6 38,506 38,274 36,605 37,026 38,676 40,403 Latvia 21,9 16,861 17,948 20,109 21,361 21,685 23,449 Lithuania 29,3 24,300 28,160 31,690 33,709 34,789 37,589 Hungary 92,6 80,116 86,116 85,961 92,978 96, ,478

8 American Journal of Business and Society Vol. 3, No. 2, 2018, pp Poland 319, , , , , , ,511 Romania 130, , , , , , ,281 Slovenia 33,229 31,638 32,105 31,294 33,578 35,009 37,644 Slovakia 59,864 58,032 63,981 67,521 71,204 73,361 76,625 Table 11. GVA per capita calculations, 2016 [45]. Popul, mln GVA, bn EUR GVA per capita, EUR GVA, bn USD GVA per capita, USD Russia USA China Japan Table 12. GVA per capita calculations, 2017 [45]. Popul, mln GVA, mln EUR GVA per capita, EUR GVA, mln USD GVA per capita, USD Germany ,941,282 35,826 3,322,766 40,472 Spain ,054,863 22,783 1,191,678 25,738 France ,042,082 31,417 2,306,940 35,491 Italy ,537,868 25,890 1,737,330 29,248 UK ,075,757 31,631 2,344,982 35,731 The United States per capita was 7 times and 3 to 5 times of the West great powers bigger, than per capita of Russia and China. Quite a big difference in the five biggest EU countries. However, considering the ranking of large countries per capita and country ranking, you must take into account, that there are a number of micro-countries from above which, however, have a symbolic effect in the world. Table 13. GVA per capita calculations, 2017 [45]. Popul, mln GVA, mln EUR GVA per capita, EUR GVA, mln USD GVA per capita, USD Poland ,512 10, ,625 12,111 Czech Rep ,981 16, ,286 18,329 Bulgaria ,672 6,151 49,336 6,949 Estonia ,861 15,278 22,437 17,259 Croatia ,403 9,620 45,643 10,867 Latvia ,449 12,341 26,491 13,943 Lithuania ,590 12,962 42,465 14,643 Hungary ,478 10, ,029 12,168 Romania ,281 8, ,367 9,765 Slovenia ,644 17,926 42,526 20,250 Slovakia ,626 14,190 86,564 16,030 Figure 3. GVA of the Europe great powers, in current prices, billion euro [39, 45]. Figure 2. GDP and GVA (v a), in current prices, million euro [39, 45]. For all former post-socialist countries, now EU Member States, GVA per capita is bigger than Russia and China per capita, with the exception of Bulgaria. Slovenia per capita

9 46 Lembo Tanning and Toivo Tanning: Central and Eastern European Countries Value Added Analysis was 2.5 times and Czech and Estonia 2 times bigger, than Russia. 4.2 Analysis of Gross Value Added by Branches of Economy We start review of non-financial economy with sectoral (structure), size class of the country (business demographics) and foreign-controlled enterprises analysis, and we will continue with number of enterprises, turnover, value added, gross operating surplus and with others. In 2010 highest share by value added from non-financial business economy of EU-27 were distributive trades (37%), manufacturing (27%), construction (7%), and transportation and storage (5%). Basis of persons employed were highest share distributive trades (25%), manufacturing (23%), construction (10%), and transportation and storage (7%). On the basis of number of enterprises were highest share distributive trades (28%), construction (15%), manufacturing (10%), and transportation and storage (5%). [46] In 2012 highest share on the basis of number of enterprises were distributive trades (28%), construction (15%), manufacturing (9%), and transportation and storage (5%). The total number of enterprises in the EU-28 non-financial business economy was 22.4 million. [46] In 2015 the EU-28 s non-financial business economy (industry, construction, distributive trades and non-financial services), when analysed at the NACE Rev. 2 section level, were 26.4% of the 23.5 million enterprises in the EU s nonfinancial business economy were classified to distributive trades and 18.6% were in professional, scientific and technical activities. [52] In 2015, total of EUR billion of gross value added at factor cost was generated in the EU-28 s non-financial business economy. The non-financial business economy workforce reached million persons employed, it was 59.9% of the total number of persons employed across all NACE activities within the EU-28. Among the NACE Rev. 2 sections in the non-financial business economy, manufacturing was the largest in terms of value added: almost 2.1 million manufacturing enterprises in the EU-28 generated ca EUR 1900 billion of VA in 2015, while providing employment to 30 million persons. Distributive trades enterprises had the largest share of employment: these enterprises provided employment to 33 million persons and generated EUR billion of VA. Professional, scientific and technical activities had the third highest VA (EUR 717 billion), but only the fourth largest workforce (12.6 million persons), behind administrative and support services (14.7 million persons). [52] The following is structural business statistics (SBS), that describes the structure, main characteristics, and performance of an economic activity. It is generally analysed at the level of the NACE sections, but structural business statistics are available at a much more detailed level (several hundred fields of activity). It can answer questions about creating wealth (value-added), investments and labor resources of various economic activities. It can be used to analyze structural shifts, for example, between industry and services, specific activities for national industries, industry productivity and profitability, and a variety of other topics. As they are available in an enterprise size class analysis, structural business statistics also illustrate the relative role of large and small and medium-sized enterprises (SMEs), which is especially useful for the state policy makers and analysts who want to focus on entrepreneurship and the role of SMEs and large companies in stimulating economic performance and job creation. [52] Structural business statistics can be analysed by enterprise size class. The overwhelming majority (99.8%) of enterprises active within the EU-28 s non-financial business economy in 2015 were SMEs some 23.5 million together they contributed 56.5% of the value added generated within the EU s non-financial business economy. 92.8% enterprises in the EU- 28 were micro enterprises and their share of value added within the non-financial business economy was 19.9%. [54] Table 14. VA of EU countries, billion EUR, 201 [46] C F G H J M EU Belgium Bulgaria Czech Rep Denmark Germany Estonia Ireland France Croatia Italy Latvia

10 American Journal of Business and Society Vol. 3, No. 2, 2018, pp C F G H J M Lithuania , Hungary Poland Romania Slovenia Slovakia UK Table 15. Value added by NACE Rev. 2. of EU and EFTA countries, million EUR [46] N M L J I H G F D C EU (28) 527, , , , , ,014 1,314, , ,000 1,900,000 Belgium 18, , , , , , ,929 16,427 5, ,931 Bulgaria , , , ,028 1, , ,213 Czech Rep 3, , , , , , ,238 6, , ,823 Denmark 7, , , , , ,584 26,400 10, , ,518 Germany 107, ,852 67, ,777 39, , ,118 94,088 37, ,931 Estonia , , ,693 Ireland 13,862 9, , , , , ,213 6, ,287 89,205 Spain 32, ,239 13, , ,896 44, ,535 34, , ,928 France 74, , , , , , ,421 82, , ,141 Croatia , , , , ,164 1,711 1, ,924 Italy 36, ,351 17, , , , ,568 47,419 24, ,949 Latvia , , ,073 Lithuania , ,796 1, ,033 Hungary 2, , , ,058 1, , ,160 3, , ,918 Netherland 27, , , , ,052 29,657 75,597 25, , ,067 Austria 10, , , , , , ,312 15, , ,585 Poland 7, , ,099 12,717 2, , ,308 12, , ,897 Romania 2, , , , , , ,273 3, ,272 15,357 Slovenia , , , ,620 1, ,159 Slovakia 1, , , , ,641 2, , ,758 Sweden 12, , , , , , ,414 21, , ,332 UK 150, ,494 53, ,290 59, , , ,704 30, ,265 Norway 8, , , , , , ,406 17, , ,986 Switzerland 17, ,592 7, , , , ,323 29,459 8, ,885 In 2015 were higher higher: C (manufacturing) = 1 900; G (wholesale and retail or distributive trade) = 1 315; F (construction) = 535; H (transportation and storage) = 556; M (professional, scientific and technical activities) = 717; N (administrative and support service activities) = 527 and J (information and communication) = 600 billion EUR. For comparison, that in 2012 were higher: C = 1 620; G = 1 155; F = 493; H = 488; M = 600; N = 423 and J = 517 billion EUR. For all seven had increased with value growth, more manufacturing. The smaller were: E-water supply; sewerage, waste management and remediation activities (108 bn); D- electricity, gas, steam and air conditioning supply; I- accommodation and food service activities; L-real estate activities and B-mining and quarrying (63 bn). In 2015 (in 2012) added value of manufacturing was higher in Germany 535 (in 2012 = 482), Italy 213 (199), France 208 (193) and UK 222 (180) billion EUR. Added value of construction were higher in United Kingdom 125 (87), France 82 (86), Germany 94 (79) and Italy 47 (53) billion EUR; of transportation and storage in Germany 102 (92), France 83 (80), UK 106 (78), and Italy 57 (52); and of distributive trades in Germany 288 (249), France 172 (171), UK 246 (166), and Italy 126 (115) billion EUR. From these, the new EU member states could learn, how to get rich. At the same time, they are also four countries with bigger populations, so their total quantity will be high. Next is about this in-depth analysis. Let's look at these indicators per employee and per person employed by activity sector. In the following, we will analyze (compare) in more detail, on the one hand, the three major European powers and with eight best GVA indicators Western Europe countries; and on the other side of the new EU member states CEE-8 + three Baltic States by GVA.

11 48 Lembo Tanning and Toivo Tanning: Central and Eastern European Countries Value Added Analysis 4.3. Gross Value Added per Person Employed and per Employee Table 16. Gross value added per employee of total business economy, thousand euro [46] Belgium 79.9 : Bulgaria 9.7 : Czech Republic Denmark Germany Estonia Ireland : : Spain France Croatia Italy Latvia Lithuania Luxembourg Hungary Netherlands Austria Poland : : Romania Slovenia Slovakia Finland Sweden United Kingdom Norway : Table 17. GVA per person employed, thousand euro. Total business economy; except financial activities. [46] Bulgaria 8.7 : Czech Rep Estonia Croatia Latvia Lithuania Hungary Poland : : Romania Slovenia Slovakia Table 18. GVA per person employed, thousand euro. [46] Belgium Denmark Germany Ireland : : France : Luxembourg Netherlands Austria Finland Sweden UK

12 American Journal of Business and Society Vol. 3, No. 2, 2018, pp Considerably higher is gross value added per person employed of total business economy in Ireland, with the six years has grown by 1.8 times. This is more than two times higher than in Germany and France; 1.9 times higher than in United Kingdom. Following Luxembourg and Denmark. The same trend is also by gross value added per employee of total business economy, by the way Ireland exceeds twice the size of the three major powers in Europe. We will have a better picture if we analyze it by field of activity. Let's look at GVA per employee in 2015, which industry has given the main part. By total business economy, except financial and insurance activities of GVA per employee (B N) were better Ireland and Norway, with and thousand euro. They followed Belgium (94.4 thousand), Luxembourg (92.4 thousand), Denmark (86.4 thousand) and Sweden (84.8 thousand). Big countries had United Kingdom (75.9 thousand), France (68.5 thousand) and Germany (60.5 thousand). However, Finland (67.7 thousand) was better than Germany and was just under France. Figure 4. GVA per employee, thousand euro, 2015 [46]. The figure illustrates well the relationship between the four major European powers and eight best by GVA indicators Western Europe countries; and the new EU member states CEE-8 + three Baltic States by GVA per employee. The relationship between Ireland and Bulgaria is 11.2, and between Germany and Slovenia 1.6. Thus, the new EU Member States have the best chance to learn from more successful countries. By non-financial knowledge-intensive activities-business industries were higher GVA Luxembourg (126.1 thousand), Belgium (115.5 thousand), Norway (109.8 thousand) and United Kingdom (100.1 thousand). However, in all West top- 11 was over 70 thousand euros. By knowledge-intensive market services were better GVA Norway (126.3 thousand), Luxembourg (115.5 thousand), Denmark (113.0 thousand), Belgium (93.0 thousand) and Sweden (92.6 thousand per employee). By mining and quarrying (B) had higher values: Denmark

13 50 Lembo Tanning and Toivo Tanning: Central and Eastern European Countries Value Added Analysis ( thousand), Norway (859.8 thousand), Netherlands (729.7 thousand), United Kingdom (296.4 thousand) and Sweden (1782 thousand per employee). Electricity, gas, steam and air conditioning supply (D) were all West top-11 countries extra large, over 167 thousand per employee. Better were Norway (859.8 thousand), Ireland (373.2 thousand) and Luxembourg (332.8 thousand per employee). By water supply; sewerage, waste management and remediation activities (E) were large Denmark (157.4 thousand) and United Kingdom (155.0 thousand per employee). Construction (F) indicators were much smaller, less than 100 thousand in all, of whom was the lowest in Germany (49.7 thousand). The best was the UK with 97.9 thousand per employee. Wholesale and retail trade (G) indicators were also much smaller, less than 100 thousand in all, of whom was the lowest in Germany (49.2 thousand). The best was Luxembourg with 95.8 thousand per employee. Transportation and storage (H) indicators were a bit better. Higher GVA values were in Norway (125.5 thousand) and Ireland (105.6 thousand), but in Germany only 48.0 thousand per employee. Real estate activities were all West top-11 countries extra large, over 90 thousand per employee. Better were Denmark (415.6 thousand), Norway (389.4 thousand) and Luxembourg (326.1 thousand per employee)), but in Ireland only 92.0 thousand per employee. Information and communication (J) GVA indicators were all relatively big. Better was Ireland with thousand per employee. Over 100 thousand were these also in the great powers. Professional, scientific and technical activities (M) indicators were also all relatively high. Better were Belgium (153.6 thousand), Luxembourg (143.4 thousand), Norway (104.0 thousand), UK (95.9 thousand) and Ireland (95.3 thousand per employee). Administrative and support service activities were relatively modest, with the exception of Ireland (120.3 thousand per employee). Information and Communication Technology (ICT) indicators were only for some countries and they were large. Higher values were in Belgium (153.5 thousand), in Norway (133.9 thousand) and in the UK (125.0 thousand per employee). ICT services were all very big: Ireland (296.4 thousand), Luxembourg (210.6 thousand), Belgium (156.5 thousand), Norway (134.6 thousand), UK (126.8 thousand) and Sweden (117.8 thousand per employee). ICT manufacturing indicators were only for some countries and they were smaller: Norway (118.5 thousand), Belgium (113.1 thousand) and Austria (108.1 thousand per employee). Information sector were relatively high indicators. Higher GVA per employee values were in the UK (134.6 thousand), in Belgium (133.7 thousand), in Luxembourg (111.7 thousand per employee). Computer related services indicators were also all relatively high. Better were Ireland (345.3 thousand), Belgium (130.4 thousand), UK (116.5 thousand), Norway (112.5 thousand), Sweden (107.1 thousand) and Finland (100.2 thousand per employee). And finally, we look at the most important, with greater GVA manufacturing (C). Relatively high GVA per employee and, even more importantly, the large number of companies, guarantees the maximum GVA in absolute terms. Better were Ireland (462.3 thousand), Belgium (110.9 thousand), Sweden (99.6 thousand), Netherlands (99.2 thousand), Norway (98.5 thousand) and from major European powers the UK (90.3 thousand). Also, Germany (75.3 thousand), France (73.9 thousand) and Italy (66.8 thousand) had high GVA per employee. Table 19. GVA per employee of business economy-thousand euro [46]. Total Mining Manufacturing Electricity, Water Wholesale and Transportation Construction gas, steam supply retail trade and storage Belgium Denmark , Germany Ireland France Luxembourg Netherlands Austria Finland Sweden United Kingdom Norway

14 American Journal of Business and Society Vol. 3, No. 2, 2018, pp Table 20. Gross value added per employee of business economy-thousand euro [46]. Non-financial knowledgeintensive activities Knowledgeintensive market services J L M ICT Total ICT manufacturing ICT services Belgium Denmark : :(c) :(c) Germany Ireland :(c) :(c) :(c) France Luxembourg :(c) :(c) :(c) Netherlands :(c) :(c) :(c) :(c) :(c) :(c) :(c) Austria Finland Sweden :(c) :(c) :(c) United Kingdom Norway Next, we will look selection of the new EU member countries by GVA indicators. Table 21. GVA per employee of business economy-thousand euro [46]. Total Mining Manufacturing Electricity, Water Wholesale and Transportation Construction gas, steam supply retail trade and storage Bulgaria Czech Republic Estonia Croatia Latvia Lithuania Hungary Poland Romania Slovenia Slovakia Non-financial knowledgeintensive activities Table 22. Gross value added per employee of business economy-thousand euro [46]. Knowledgeintensive market services J L M ICT Total ICT manufacturing ICT services Bulgaria Czech Rep :(c) Estonia Croatia 30.7 : Latvia Lithuania : Hungary Poland Romania Slovenia Slovakia INF INF CRA CRA Total business economy; repair of computers, personal and household goods; except financial and insurance activities and manufacturing indicators almost fall together, so we can analyze them together. The successful state, Slovenia, has already risen to almost 2/3 of Germany and 1/3 of Norway's level. However, Slovenia towards greater At the same time, Slovenia is twice as high GVA per employee in the majority of new EU member states. At the same time, Slovenia is twice as high by GVA per employee majority of new EU member states and Romania and Bulgaria, even more than three times. Without exception, also other the new EU member states areas of activity are considerably smaller GVA per employee, than the successful 12 Western European countries. See tables 19 and 20 vs tables 21 and 22. It could be raised in 2015 on the data again Slovenia and the Czech Republic; and, on the basis of some indicators, also Poland and Estonia.