Contemporary Economic Growth and the Consumption of Energy Raw Materials (the Case of Slovenia)

By Krizanic, France; Oplotnik, Zan | East European Quarterly, Summer 2006 | Go to article overview

Contemporary Economic Growth and the Consumption of Energy Raw Materials (the Case of Slovenia)


Krizanic, France, Oplotnik, Zan, East European Quarterly


1. Introduction

In a given economic frame a dynamic process is defined by two economic laws: the law of diminishing returns of labour and capital, and the law of decreasing utility of goods. The first one creates tendencies of capacity limits, regardless of the accumulation of capital and the growth of population, while the second law causes market saturation. Their interrelated influence leads to periodical leaping changes in the economic conditions, named by the evolutionary school of economic thought (Nelson, Winter, 1982) as 'the changing techno-economic paradigms' (Perez, 1983). In the present situation, the economic growth depends on the development of information technologies and their application to all products and services (Freeman, Perez, 1988). The gross domestic product per capita has reached the level where the demand for agricultural products ceases to increase, and the demand for industrial products increases slower than the growth of gross domestic product. More rapidly increases only the demand for services (Syrquin, 1989). Due to high flexibility and a constant increase in the efficiency of the production with new technologies, and because of the lag of the industrial products consumption growth behind the growth in gross domestic product, the economic growth depends less and less on the increased consumption of raw materials, including the energy ones. In a contemporary mode of production, energy is no longer a superior good. Its consumption is growing slower than the value added. Still, it is needed to a certain extent, the same as food (Bernot, 1996). When the world economy is thriving and the energy suppliers are organized in a cartel, the unsteady supply of energy can become (at least for some economies that are highly dependant on the import of energy) a restraint to the economic growth. In such a case the economy can encounter a crisis, similar to stagflation (the declining in the economic activity and employment, while the prices are rising) or to a more contemporary form of a financial crisis (the outflow of capital, a steep fall in the value of the domestic currency in the foreign exchange market and a temporary recession-followed by a recovery, which due to the growth in the export demand, following the law of the so-called J curve). (1) Taking into account the reasoning, outlined above, the long term planning of maintenance and construction of the energy capacities in a given national economy is reasonable, if not inevitable, also in the modern globalise world.

In the transition from the former techno-economic paradigm (based on standardized technologies, economies of scale, linkage of salaries and profits, and the influence of the state on a continuous growth of demand) to a modern techno-economic paradigm, which is based on flexible technologies, entrepreneurship and integral marketing, the producers of certain energy raw materials (particularly of electric power), whose character was once infrastructural, were forced to transform to the market oriented activities. The transformation was and is still going on in three more or less interrelated processes: deregulation or a diminished regulative role of the state (particularly in the field of price setting and the state's influence on investments), liberalization or freer trade with a given energy raw material within and beyond the state borders (especially with the natural gas and electric power), and privatisation or incorporation of private capital into this area (Krizanic. 2001). The three processes are progressing slowly and in the case of an inconsiderate sectoral reform lead to an energy crises or the unbalance between the supply and demand for the energy raw materials, particularly for electric energy. The major source of problems, encountered by this sector during transition from the infrastructural to a market oriented activity, is the specific nature of the energy raw materials market, with a long time-lag between a change in the demand dynamics and the capacity of suppliers to adapt their production potential to this change. …

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