Small states are mostly acted upon by much more powerful states and institutions … Vulnerabilities rather than opportunities … come through as the most striking

manifestations of the consequences of smallness in globalpolitics.

(Payne 2004, p.634)1. Economic security versus Economic vulnerability

The title of this article is inspired by a concern and a

reality of the XXI century. Of course, treating the subject take

into account the environment in which analyzed states exist, the

economic situation, which may have some influence on the policy

of the development of small states.

All human beings need a sense of security, to give a sense

of belonging, a sense of stability and a sense of direction.

People who feel lack of basic security in their families, their

jobs and their community tend to become socially irresponsible.

They tend to behave opportunistic and tend to lose a sense of

moderation. In addition, the periods and the areas of mass

insecurity, these regions have historically always intolerance,

extremism and violence.

Understanding the concept of "economic security" requires a

prior understanding of the term "security", so we will start by

explaining the most important meanings of the latter.

According to the Penguin Dictionary of Psychology, security

is "a feeling of confidence, lack of fear or anxiety, especially

in connection with the fulfillment of needs present (or future)

of a person". The definition can be expanded through the listing

of other agents of insecurity, danger, such as espionage, theft,

sabotage, unauthorized use, etc. or it may be generalized to the

form of DEX ("the fact of being sheltered from any danger, sense

of confidence and tranquility that you give someone the absence

of harm; protection, defense "). Political science dictionary

"Blackwell" mentions that security is a concept used in

discussions about foreign policy, but which lend themselves to

situations concerning individuals or states. Security is both a

matter of perception, as well as one of the circumstances.

Another necessary indication is bringing the dictionary of

international relations "Penguin": security must not be

considered in absolute terms, but also in relative terms (more

or less). [1, p. 30]

First approaches about economic security as a separate

notion arose after the breakup of the socialist bloc and

misbalanced power in the global market. At the initial stage of

this concept was initially more of a political than an economic

issue. Gradually the economic aspect of the concept of state

security began to prevail over politics. This reason led to that

approaches were made by scholars of Russian economic school.

For example, Russian scientist V. Tambovţev said that "the

economic security of one or another system is understood as the

sub-system of State production that ensures the ability to

achieve the purpose of the whole system." This definition being

very general underline the role of production potential and

cannot be transposed to the economy in general.

According to economist V. Senceagov "the essence of economic

security can be defined as a situation of the economy and the

state institutions that ensure the safeguarding of national

interests protection, development of social-oriented State,

sufficient military potential, even in case of less favorable

development of order process internally and externally".

The Economist V. Savin continues the development of the

concept and its implementation within the limits of a state,

whereas "economic security is a system to defend the vital

interests of the State. As defense objects can be: the national

economy in general, a region of the country, a branch of the

economy, legal and physical persons as subjects of economic

activity ". This approach is contradictory because it involves

the same principles that apply to both State security and the

region, and branch, and what is interesting, a physical person

and legal entities. Referring only to the defense of interests

he believes only a static situation and leaving in the shade

look dynamic development.

The famous academician L. Abalkin has eliminated this

deficiency by the definition that “economic security is the

economic system that allows effective and dynamic development,

solving problems that the State has the ability to design and

implement an independent economic policy." Giving a

comprehensive and valuable enough, the scholar, in the same time

sees economic security of the State isolated from the processes

of globalization and regional economic integration.

Proceeding from the above and considered above the author

proposes a new definition: economic security is the appropriation of a

country and involves the reduction of economic vulnerability and increase the

capacity for adaptation, where any subject (economic agent or individual) is in

complete safety and protection, being shielded from the influence of certain

negative factors.

Economic security has a fairly complex internal structure

where we can group three important elements:

1. Economic independence , which does not have an

absolute nature because the world international division of

labor makes national economies be interdependent. Under these

circumstances, economic independence means the ability to

control national resources. It is important to get out to a

level of production quality and efficiency, which would ensure

competitive advantage and would allow you to participate on an

equal level in world trade, and the exchange of scientific and

technical results.

2. The stability and security of the national economy , I

assume the defense of property in all her forms, creating safe

conditions and guarantees for entrepreneurial activity, reducing

the factors that could destabilize the situation (fighting with

criminal structures in the economy, limiting the distribution of

income discrepancies, which would initiate social crises, etc.)

3. The ability of development and progress , which is

particularly important in the contemporary world that is

developing with dynamism. Creating a favorable environment for

investments and innovations, permanent modernization of

production, increasing the level of professional, educational

and cultural employees becomes an important and obligatory

condition for stability and security of the national economy.

It is important to analyze in detail the connection between

the concepts of development and stability of the national

economy.

The development is one of the components of economic

security. If the economy doesn't grow, then the chances of her

survival, resilience and ability to adapt to internal and

external dangers are reduced to a minimum. Stability and

security are the main characteristics of the economy as a single

system. They may not be overlapped, each of which corresponds in

some way the State of the national economy.

1. The stability of the economy shows the soundness and safety

elements that provide resistance to internal and external

pressures.

2. Security is the state of an object within the system of

relationships in terms of survival and development capacity in

terms of internal and external pressures, as well as unforeseen

factors and hard to forecast. The more stable the economic

system, the relationship between productive capital and banking

and finance, etc., the more viable it's economy, and therefore

point out the security assessment will be high enough. Violation

of proportions and relationships between various components of

the system leading to destabilization and represents a

transition of the economy from the security crisis.

3. The concept of national security will be meaningless

without evaluating the vitality and sustainability of the economy under

the influence of external and internal threats.

Such economic security is the totality of the conditions and

factors that ensure the independence of the national economy,

the stability and the safety of her ability to regenerate and

improve. The deep crisis that has gripped our society

considerably complicates the resolution of problems related to

coverage of the dangers of economic security.

Large, developed states feel pressure from the market

(competition, demand, access to factors of production, etc.) but

the core of the state and the social security system remains

strong and immune to threats of economic security. While the

small ones do not have sufficient mechanisms or protective

Government offices, becoming more insecure.

Globalization is a fashionable topic, omnipresent in the

media discourse, in the literature, but also in everyday

conversations. The opinions expressed on this set of processes

that marks every aspect of our lives are often antagonistic, and

therefore, for a better understanding of globalization, we felt

the need of a personal and objective analysis. The worry is

that, as we see, globalization may create rich countries with

poor people.

Of course, those who are discontented with economic

globalization generally do not object to the greater access to

global markets or to the spread of global knowledge, which

allows the developing world to take advantage of the discoveries

and innovation made in developed countries. Rather, they raise

five concerns:

- The rules of the game that govern globalization are

unfair, specifically designed to benefit the advanced

industrial countries. In fact, some recent changes are so

unfair that they have made some of the poorest countries

actually worse off.

- Globalization advances material values over other values,

such as a concern for the environment or for life itself.

- The way globalization has been managed has taken away

much of the developing countries’ sovereignty, and their

ability to make decisions themselves in key areas that

affect their citizens’ well-being. In this sense, it has

undermined democracy.

- While the advocates of globalization have claimed that

everyone will benefit economically, there is plenty of

evidence from both big developed and small developing

states that there are many losers in both.

- Perhaps most important, the economic system that has been

pressed upon the developing countries – in some cases

essentially forced upon them- is inappropriate and often

grossly damaging. Globalization should not mean

Americanization of either economic policy or culture, but

often it does – and that has caused resentment. 1

Economic analysis is not about the velocity of the money

supply or derivative valuation in financial markets, or any

other technical calculation. It’s about people: people who make

decisions in a condition of scarcity, and the incentives,

resources, and constraints that drive them. Whether talking

about the marketplace for goods and services, or in political

life played out on the world stage, individuals, not

institutions, make the decisions. The United States didn’t

decide to walk out on the Soviet Union at the 1986 Reykjavik

Summit; Ronald Reagan walked away. Saddam Hussein, not a

political entity called Iraq, made the choice to invade Kuwait

in 1990. It was Commander-in-Chief Bill Clinton who decided to

launch cruise missiles toward Sudan, Bosnia, and Iraq. In

statecraft, the stakes are not always this high, but individual

people make the choices. Someone chooses from limited options.

Economic instruments of security policy employ economic analysis

to understand what those options are and how the decisions are

made.

A thorough examination of decision-making in conditions of

both democracy and autocracy is essential for those who chart

foreign policy, participate in international affairs, or want to

peel back the layers of both. This book analyzes the economic

tools of national security by dissecting the decision-making

process along the spectrum of political systems.

The idea of economic security is probably one of the oldest

and the controversial among other parts of national security. 2

Economic security as an economic content of national security1 J. E. Stiglitz “Making globalization work”2009, p.9

and means for military state’s security could be traced since

from the end of the middle ages, when economic capabilities

corresponded to power and a state’s perception in the world

arena. At the moment, the threats to economic security were

wars, piracy and trade policies3, while later, as Roubini and

Mihm depict, capitalism, a functioning global financial system

and its crises, starting from the speculation of the “tulips’

mania” in the 16304, commenced to affect the economic landscape.

Economic security of small states is a concept presented by

Lino Briguglio in his "Economic Vulnerability and Resilience of Small States."

He examines the economic vulnerability, as in the case of small

states, we cannot refer to an assurance of economic security –

as a strategy, but a reduction in vulnerability of the economy.

This vector should prevail in the objectives of the economic

diplomacy of small states. "Energy supply, science and

technology, food security and natural resources" are major

economic components of the general security, underlying the case

of Latvia, Lithuania and the Republic of Moldova is vital for a

stable development of the economy.

In Greek „securitas” means to keep control of the situation.

Concerning this, we’ll analyze the concept as a process and in

no way it can be treated as static/accountant.

• Economic security of a country is determined by the

resources and level of development. (a perception too small on

the concept)

2 Barry Buzan and Lene Hansen “The evolution of international security studies” (New York: Bambridge University Press 2009), p. 2,393 Barry Buzan and Lene Hansen “The evolution of international security studies” (New York: Bambridge University Press 2009), p. 2504 Schultze, Joseph S. Jr. Nye “collective economic Security”, International affairs, p. 85,216

• Economic security can be defined as a situation where any

topic (company or individual) is in complete safety and

protection, being shielded from the influence of certain

factors.

• Broadly, economic security requires protection need for

obvious physiological, socio-economic, spiritual and situational

resources, technologies, information and moral ideals, vital and

necessary activity for development of a society.

2. Historic approach

Up to now there appear two fundamental directions of

approach of the notion "economic security":

- Anglo-Saxon - high standards of living for citizens;

- Asian – national economic empowerment.

A number of comments on the subject of economic security

describe two approaches. We can identify that in the Middle Ages

there was a vague perception of economic security, the economic

components were subordinate to general security. Economic

security features at that time corresponded with the power and

the state's perception of the world arena (arena the world

because was seen as a battle field both among states and among

barbarian tribes, pirates, etc). During World War II, economic

security perception was seen as state policy in the field of

trade, monetary and fiscal policy. These tools were used to

promote the interests of the State. In a world divided into two

groups of countries that were ideologically and diametrically

opposed political systems (cold war) – part saving a priority of

national security. Namely in this period economic security was

understood as a process for maintaining the stability of the

economy (suppliers and avoiding exaggerated prices). Analyzing

the evolution of economic security noted that in fact the Asian

approach, coinciding with the period of cold war.

The reality of the moment is evoked by the Anglo-Saxon

approach, which is shifting from the macro-economic level to the

individual, because in the annual report “Global Risks”,

published by the world Economic Forum, quotes for 2013, the main

global risks are massive inequality between income, huge public

debt of some countries and greenhouse gas emissions (global

warming). Today economic security requires stable incomes and

other sources in order to maintain a standard of living in the

present and in the foreseeable future which involves: continued

solvency, predictable cash flows, the effective use of human

capital.

3. Actual risks of the economic security

Starting from conceptual approaches, we can identify and

explain some of the threats to economic security, which in fact

they knew and they developed over the course of history.

It is found that the transformations and developments of the

risks presented above do not demonstrate that certain risks that

have been in the middle ages, we don’t feel them today. Of

course, in a different form, but they remain in the attention of

economists and affect the well-being of society.

The said truth, however, is that today’s biggest risk is

poverty. The world is in a race between economic growth and

population growth, and so far population growth is winning. Even

as the percentages of people living in poverty are falling, the

absolute number is rising. The World Bank defines pverty as

living on less than $2 a day, absolute or extreme poverty as

living on less than $1 a day.5

5 http://www.worldbank.org/en/topic/poverty/overview

Figure 1: Economic security risks

Source: Elaborated by the author on the base of: Florea L.

„Globalizare si securitate economica”, Iasi, 2008

Think for a minute what it means to live on one or

two dollars a day.6 Childhood malnutrition is endemic, life

expectancy is often below fifty years and medical care is

scarce. Hours are spent each day searching for fuel and

drinkable water and eking out miserable livelihood, planting

cotton on a semi-arid plot of land and hoping that this year

rainswill not fail, or in the backbreaking toil of growing rice

in a meager half acre, knowing that no matter how hard one works

there will be barely enough to feed one’s family.

The collapse of the Soviet economic system in the countries

of Central and Eastern Europe marked the transition to

restructuring and to a market economy in this region.

The priorities of these countries in terms of economic

reform were the removal of the administrative system of control

of the economy and society and the proximity with the highest

possible speed of Western European markets. Thanks to the policy

6 Even the $2-a-day standard is less than a fifth of the poverty standard usedin the US and Western Europe

of isolation and autarky for a long time, the vulnerability of

the economy became too high. Thus, in the Republic of Moldova

continues an operation or slightly inferior performance of the

mechanisms and economic instruments, while in the Baltic States

(Latvia, Lithuania) the exceedance of this stage and engage in

achieving the following objectives: liberalizing the retail

price and the wholesale elimination of subsidies to the consumer

and manufacturer; opening borders to imports and foreign

capital; local convertibility of the national currency for the

current and subsequent transactions; sale and/or liquidation of

State enterprises; reduction of redundant labour force;

abolishment of business policy and industry.

4. Quantification of economic security

In the XXI century, when the interdependence of States

becomes inevitable, the states can no longer be self-reliant,

each State is obliged to open its economy. The more open an

economy is, the it is more vulnerable and more exposed to

external shocks.

What makes countries economically vulnerable?

Economic vulnerability stems from a number of inherent and

permanent economic features, including:

- A high degree of economic openness rendering these states

particularly susceptible to economic conditions in the rest

of the world;

- Dependence on a narrow range of exports, giving rise to

risks associated with lack of diversification;

- Dependence on strategic imports, in particular energy and

industrial supplies, exacerbated by limited import

substitution possibilities;

- Insularity, peripherality and remoteness, leading to high

transport costs and marginalization from the main

commercial centers.

The vulnerability poses economic sensitivity characteristics

found in the academic literature. Even L. Briguglio in the

latest edition of the "Vulnerability Index" claims that only

these three characteristics identified above, should be

reviewed, especially for small States, to have a small number of

variables and simple, easy to understand for comparison.

Figure 2: Quantification of economic vulnerability

Source: Elaborated by the author on the base - Lino Briguglio„Economic Vulnerability and Resilience of Small States”, pag.52-60

Since many indices for the measurement of economic

vulnerability were proposed, the framework here also follows the

same lines and includes all three components/variables found in

all previoous studies: economic openness, dependence on

strategic imports and export concentration as equally important.

Thus, in the construction of th vulnerability index each part

has the same weightening value and the final value of economic

vulnerability index is a simple average of all three components.7 To summirize, the value of the index, measured by the formula

7 Monika Kokstaite “The Economic security of small states: The cases of Iceland, Latvia and Lithuania”, 2011, p. 24

Economic Vulnerability

Dependence on strategic imports

Exports concentration

Openness index

shall be measured with a report of international trade and GDPtakes values between 0 and 1, where 1 means that only one product is exported to a countryas a percentage of imports of strategic goods in the total import.

EV=(EO+DI+EC)/3, indicates the level of economic vulnerability8

and helps assess its symptoms.

The articulation of a ‘vulnerability’ agenda coincided with

the dominance of the dependency lament around the new

international economic order (NIEO) debate. During the debate,

‘new’ states in the South – the Third World – could together

impact the two Norths: East and West. Vulnerability as both

actuality and ideology was refined and advanced for the small

island developmental states (SIDS), a process aided in

particular by the still-new Commonwealth Secretariat with

academic and methodological support from Lino Briguglio and his

colleagues at the University of Malta.

The need for different lenses to examine small states has

animated many of the contributors to this book. Godfrey

Baldacchino highlights the deficiencies in understandings of

small states in his pivotal contribution. It is no longer good

enough to simply present small isolated states as weak. The

notion of a collective ganging up of an assembly of Lilliputians

– the so-called ‘tyranny of the weak’ – also remains inadequate.

Naren Prasad builds on his own body of work (2004: 45),

suggesting that ‘most small islands distort international trade

rules … most of these successful strategies are based on rent-

seeking activities which are generally considered

unconventional.’ Prasad goes on to identify some established and

more recent strategies to exploit globalization for small

states: ‘[Export Processing Zone] EPZs, offshore financial

centers, remittances, aid and rent-seeking and deriving other

unconventional sources of income – go against mainstream

thinking in economics.’ Prasad proceeds to identify other8 UNCTAD Handbook of Statistics

current ‘unconventional strategies’: selling sovereignty,

military bases, fishing rights, shipping registries, passport

sales, philately, trust funds, telephone country codes, domain

names, satellite businesses, and peacekeeping operations.

However, this model excludes various factors. Thus, to more

complex problems in the safety analysis, the factors that appear

in the equation cannot be measured quantitatively but it is to

be analyzed related policies and the effectiveness of the

reforms promotion.

Figure 3: The main factors of economic security

Source: Elaborated by the author on the base - Lino Briguglio„Economic Vulnerability and Resilience of Small States”, pag.52-79

Economic resilience, in contrast to economic vulnerability,

is defined as shock-counteraction and shock-absorption having

the same weighting value in the resilience index. Briguglio

proposed resilience measurement to associate with economic

growth and checking the variables of resilience with impact for

GDP.

ResilienceEconomic vulnerability

Openness index

Exports concentra

tion

Dependence on

strategic imports

Crisis prevention

Shock absorption

Fiscal position Inflation rateUnemployment rate External account

Market efficiency Government efficiencyHuman development Sustainability

Economic security

Shock-counteraction, representing macroeconomic stability,

is suggested here to be measured by 5 criteria, which best

indicate macroeconomic government regulation:

Government expenditures is measured by part of the

„Index of Economic Freedom” named „government

spendings”, showing the portion of GDP spent by

governments. The component’s range is from 0-100. Of

course, as even authors of the index point out, the

interpretation of this score depends on a chosen

country, because there is no ideal level of government

expenditure suitable for all countries worldwide.

Buget balance – the percentage of budget deficit or

surplus of the GDP reveals the efficiency of financial

governance. Ideally, there should always be a surplus

budget that in case of an external shock the

government could quickly react by giving money

injection into the affected area.

Inflation – the rate of inflation of consumer prices

the general health of economy and a low level of it

points to a stable economy. This component could be

positive or negative and generate values from zero to

infinity.

Unemployment – the level of unemployment provides

essential information about the stability of the

economy and a low level of it refers to the

maximization of labour force and a state’s capacity to

overcome shocks. The rate is between zero and one

hundred in percentage.

External debt – this variable indicates the total

economic governance of the country. The lower

percentage of external debt to GDPnot only points to

good general economic governance, but in the case of

crisisallows an affected country to get support from

international financial institutions with lower costs.

The level of external debt could obtain values of zero

to infinity.

The other part of resilience, reffering to shock-absorption

capabilities, - the so-called flexibility or regulation – is

much more complex. It consists of numerous variables,

corresponding to four basic groups of regulation: market

efficiency, governance efficiency, social human development and

sustainability. Each of these measures is indicated below.

Microeconomic market efficency is divided into three

sections: capital, labour and goods. First, capital section is

measured by two components of the „Index of Economic Freedom”:

business freedom and financial freedom. The business freedom

score shows the „overall burden of regulation as well as the

efficiency of government in the regulatory process”. Freer

business environment allows a market to adjust after crisis and

very stronglyrefers to market flexibility. Financial freedom

indicates governments’ control and interference in the country’s

financial system. The financial freedom score also reflects

financial competitiveness in the country and its atraction for

foreign actors, allowing to predict to what extent foreign

entreprises participate in a country. As all components of the

„Index of Economic Freedom”, both indices account for values

from 0 to 100.

Labour market is measured also by two indices from the

„Index of Economic Freedom” – fiscal freedom and labor freedom.

The evaluation of tax burden on individuals and entreprises,

represented by fiscal freedom and labor freedom, providing the

quantitative measurement of „various aspects of the legal and

regulatory framework of a country’s labor market”, expose a

country’s labour market flexibility to overcome the effects of

exogenous shocks. Goods market regulation here is analysed via

trade freedom and monetary freedom. Trade freedom presents the

evaluation of policies towards exports and imports and at this

case directly measures how countries, especially small ones,

manage to overcome their inherent vulnerabilitiesby choosing

necessary policies. The monetary freedom score adds information

about governments’ intervention in setting prices. Agreeing with

authors, „price stability without microeconomic intervention is

the ideal state for the free market”.

Good governance or governance efficiency is analysed by

looking at three important areas of governance: rule of law, the

security of property rights and the level of corruption. The

rule of lawaggregate indicator, composed by D. Kaufmann is used

for the measurement of the legal framework because it captures a

full range of aspects important in measuring a country’s good

governance. Ideally a country’s score for this indicator should

be 2,5 and worst case -2,5.

The security of property rights is measured by the index of

property rights in the „Index of Economic Freedom”. The score if

it indicates to what extent the legal framework protects private

property and how laws are enforced by a state. Ideally, in order

for a country to be resilient, it should obtaina score as near

as possible to 100.

The level of corruption shows the level of insecurity and

uncertainty in a country. This component is based on

Transparency International’s corruption Perceptions Index, but

in order to have more or less the similar range of data, the

scores are obtained from the freedom from corruption index.

Meanwhile, the other data could be derived from D. Kaufmann

aggregate data, but the computed data by the Heritage Foundation

covers a longer period and a result helps to spot better the

changes over time here.

5. Economic vulnerability of Latvia, Lithuania, Republic of Moldova

The term economic security has two meanings in the European

Union. The first meaning relates to the EU’s position in the

world economic system. The official website of the EU,

europa.eu, contains valuable resources concerning the economic

goals of the EU and their understanding of the term economic

security. The EU dictates the importance of European integration in

order to compete in the ever globalizing world. Nations in

Europe tend to have smaller available natural resources and

employed populations in relation to other developing nations or

the United States. Through the cross-sharing of resources,

companies in Europe will be able to match, and in some instances

surpass, the economic prowess of competing countries.

The second meaning revolves around the issue of economic

equality and solidarity in Europe.The EU and the European

Investment Bank (EIB) commit large portions of their respective

budgets towards natural disaster relief, infrastructure

development, and economic development in all parts of Europe.

This act is carried out due to the EU’s drive towards equality

amongst its members, both in the urban and rural environments.

The final goal for the EU will be a fully integrated Europe

where the standard of living will be found equal throughout all

parts of the continent (Europa:2009).

Why would the EU strive to attain such a lofty goal? The EU

describes its focus in the

21st century as to, “provide peace, prosperity and stability for

its peoples” and “uphold the values that Europeans share, such

as sustainable development and a sound environment, respect for

human rights and the social market economy” (Europa:2009). These

two goals dictate the EU’s drive towards economic equality

amongst its member states. The first phrase states that the EU

will provide stability for its peoples. Europe is a continent on

which many bloody battles have taken place throughout the

centuries. The EU has effectively proclaimed how this will no

longer be the case in the future, and instead of the

nationalistic tendencies of sovereign states, the EU affirms

that all members belong to one European people, and from this

notion, each group is entitled to the same equal rights and

ability to improve their economic status without any barriers.

The second phrase then adds onto this idea by describing certain

aspects of EU policy. Of this phrase, perhaps the most essential

concept comes at the conclusion when it states the EU will be

committed to a social market economy model. Unlike the laissez-

faire system of the United States in which the government plays,

for the most part, a small role in determining a course of

action with regard to the economy, the European social market

system approaches the role of the government differently. In

this model, the government takes a more profound role in the

decision-making process and imposes many regulations and taxes

on commercial institutions.

The social market model arrived from a compilation of both

capitalist and socialist theories regarding economic policy.

While the EU and its member states approve of capitalism and the

free market system, they are also wary of the economic

inequality and environmental deprivation which often accompany

this model. To solve this problem, the EU and its members

adopted a system of implementing socialist policies, such as

government direction and subsidies in key industries, to

maintain a government voice in the decision-making process and

this to promote economic equality (Europa:2009).

This sense of economic security may sound strange to

American ears. Those in the United States may picture economic

security as being a quaint home on a one acre lot with the

perimeter marked off by a white picket fence. In this home, all

children have their own bedroom, in which there is a television

or computer, and in the garage sit at least two vehicles.

There is also the idea of ‘keeping up with the Joneses’ in

American society where materialistic and individualistic wants

trump societal and communal needs. The EU and its member states

have set themselves apart from Americans by their focus on the

community and tradition. The phrase, “uphold the values that

Europeans share,” is an excellent example of this focus. In it,

the EU claims the community over the individual and demonstrates

that the EU will work for a collective goal. In terms of

economic security, this means the EU will strive to ensure

equality between competing industries and institutions in

Europe. In additions, the EU and its members choose to levy

taxes and impose regulations such as a uniform measurement

system and an environmental standard. By doing this, the EU is

then able to achieve a sense of stability in sustainable

development, an increase in the standard of living, and more

equality amongst its members, therefore fulfilling its economic

goals.

For small states, taking into account the international

economic relations, multilateral treaties, complex in terms of

commitments, economic vulnerability should be seen through the

prism of harmonised economic policies and a mix of policies

imposed by the main vector of development – integration into the

EU family.

What causes economic vulnerability?

- high dependence on imports, the endowment with natural

resources limited and limited

diversification possibilities;

- high dependency on exports because of the limited size of the

market

No State has 100% resources and can’t be fully independent,

so every country is forced to participate in international trade

to obtain essential materials for its national development.

Small States have always been forced to participate in trade

relations, allowing foreigners to play an important role for

their survival and, at the same time, they become vulnerable,

because they are weaker economically and have lower internal

markets, they do not have any control over the larger powers,

but if not to open they do not have possibility to become

competitive.

Diagram 1: Openness index 2007-2011

Sursa: UNCTAD Book of Statistics (http://unctadstat.unctad.org/TableViewer/tableView.aspx?ReportId=16419)

Note that the Baltic States have a higher degree of

openness, which leads to an increase in vulnerability. There is

the fact that in Moldova there is a tendency to open the

economy, but what is positive is that this process is not overly

sped up and gives us the opportunity to have immunity against

external risks.

Two other factors that also indicates the vulnerability are

two types of dependency. Addiction can be seen like a coin with

two sides, where it is not necessarily a relationship between

the parties. From one side, the vulnerability of a country,

especially a small one, stemming from dependence on imports. In

the case of imports as well as food, industrial or energy

(resources) play a crucial role in the economic life of a

country, are not derived from the inside, a State of dependence

on outsiders influence significantly the exposure in terms of

the availability and price of goods.

Diagram 2: Dependency on strategic imports (Republic of

Moldova) 2007-2011

Source: http://www.statistica.md/category.php?l=ro&idc=336&

On the other hand, a State might be dependent on exports.

Such dependency could be a result of the large volumes of

imports, but could also be an effect of other structural

economic factors, forcing the country to stand passive in terms

of commercial policy. In this case, smaller States have fewer

capabilities to diversify exports because they are constrained

by their small economies on the one hand, they tend to have more

of their exports of beneficiary countries.

Diagram 3: Export concentration 2007-2011

Source: UNCTAD Book of Statistics (http://unctadstat.unctad.org/TableViewer/tableView.aspx?ReportId=121)

In this presentation of the concentration of exports have

managed to capture the exports of three countries and special

attention is turning to Lithuania, in comparison, has a higher

gauge than the other countries included in the analysis. Thus,

this is more because of the power plant Electronuclear

"Ignalina" (2370 MWați) – 1st place in the world. Also a

compelling factor is numbness of the port "Klaipeda", which in

Soviet times ensure 90% of transit towards Europe, with over 200

connections to other ports.

Conclusion: In an analysis of the security environment in which we

cannot minimize the national interests of the Republic of

Moldova it is necessary to address the economic security

strategy in the light of the increase in labour productivity and

the quality of the exported products. Obviously this schedule

will retrieve the reforms in the field of:

1. Avoid large external deficits and external financing focus

on development programmes;

2. Reforming the conditions imposed on the Governments of small

States in international financial organizations, central public

administration obținănd a freedom in the promotion of reforms

and the implementation of projects;

3. To attract productive capital flows and direct remittances in

productive sectors. Diminishing speculative capital.

Economic security must be ensured first and foremost through

effectiveness. Since the primary interest of the Republic of

Moldova – European integration, strategic efforts should be

directed to minimize the threats coming from the East, but also

the analysis of the experience of States that have already gone

on the path that Moldova will, since we are at the eastern

border of the EU.