Working day to day in close contact with policymakers and various state institutions, a question keeps coming up – why are decisions so often not geared towards Latvia's growth, particularly in the long term?

One theoretical explanation might be that decision-makers do not wish the country well and want to hand aggressor states grounds for their propaganda about a "failed state". Yet, knowing a great many politicians and officials, I do not really believe that is likely. The overwhelming majority, in my view, are entirely loyal to Latvia.

A second explanation might be that decision-makers have not looked into the matter deeply enough and do not really grasp the substance of the issue at hand, or have defined the problem wrongly. This is a far more plausible version, and it does seem that this is often precisely what happens.

At the same time, various institutions and the non-governmental sector usually enter the decision-making process with arguments of their own, so in most cases decision-makers have at least heard about the undesirable consequences and are aware of them. Despite that, decisions that hold back Latvia's growth still follow, and the question is – why, if there is no ill intent and the negative consequences are understood?

I once spoke with the now former head of a state institution about a situation in which that institution, on finding a breach, immediately imposed the largest possible penalty on a company that manufactures high value-added goods, exports most of them and pays millions in taxes. Even though it could have refrained from doing so and issued a warning, as one does on a first occasion, or imposed a measured and proportionate penalty (which, incidentally, is exactly what the administrative court said in that particular case). I tried to explain to the institution's head at the time that in such a situation the company would most likely make no further large-scale investments in Latvia (at that point the investor in question was considering moving its holding company's R&D operation to Latvia from Turkey), so that in the medium and long term Latvia could lose both substantial tax revenue and well-paid new jobs. More than that – a foreign investor will certainly share their experience with their fellow business owners, doing nothing whatsoever for the appeal of Latvia's investment climate. Since these considerations did not strike the institution as significant, I asked about the reasons for such a decision, and the answer, frankly, left me dumbfounded – "Jānis, how will it look if we impose a small penalty or none at all?"

Another example. A step of great importance to Latvia's energy sector (and to our overall security and independence, particularly in today's geopolitical circumstances) has just been taken, long in preparation, unambiguously right and to be welcomed – disconnection from the BRELL ring and connection to Europe's single power grid. Unlike the correct decision to disconnect from the BRELL network, the mechanism envisaged for covering the balancing costs that arise as a result is unfortunately not the friendliest towards electricity consumers (businesses and households). Let me explain why. It is logical that the newly arising balancing costs should be paid by all electricity consumers. It also has to be borne in mind that these costs cannot be determined precisely, because electricity prices fluctuate. In this case the more consumer-friendly approach would be to put the grid balancing costs on electricity users' bills as a separate cost line. And then, a year later, once the actual balancing costs are known precisely, the regulator would recalculate and adjust the following year's tariff. In that way all electricity consumers would pay exactly what grid balancing actually costs. Decision-makers have chosen a different route, namely obliging balancing costs to be built into the price offers of electricity traders, as a result of which electricity consumers will pay more overall, because traders will self-evidently have priced the price risk into their offers (they too do not know precisely what electricity will cost in future). Or is the decision-making strategy here too – how will it look? Shortly before the municipal elections due in June it would not look good if an extra cost line were now to appear on the bill. The voter would immediately think the government was to blame and draw conclusions. As things now stand, the voter will not even notice that they are overpaying. It is also striking that the new arrangement will take effect on 1 July (a few weeks after the municipal elections), with AS "Augstsprieguma tīkls" covering the balancing costs out of its own pocket until then.

One more topical example. Six months before the elections, politicians have come forward with a very appealing initiative – to reduce food prices and boost sales of local producers' goods in the shops. Both aims look good. In the current economic situation, when most people in Latvia are not well off and many are struggling hard to make ends meet, it would be important for shops to stock products at lower prices. The aim of getting more locally produced goods sold in the shops looks just as good. So where is the problem? These two genuinely good aims are in fact mutually exclusive. Why? Because at present, in most cases, the production costs of food goods made in Latvia are higher than those of comparable foreign products. It follows that if there is to be some super-cheap product on the shop shelf, it will most likely be an imported product that is already sold cheaply to the retailer, on which the retailer will then place a minimal mark-up, no mark-up at all, or which it will even subsidise. At the same time, it has to be understood that in such a case, for the retailer to stay in business, it will mark other products up more. Which means the ones made in Latvia too. And now the second aim, the one that looks good. If the wish is to ensure that food goods produced in Latvia cannot carry higher mark-ups than comparable imported goods, then the voter has to be told honestly that prices for the cheaper end of the range will rise, because mark-ups will not be able to be differentiated, as set out above. I think you will agree – the publicly stated aims look splendid.

And finally – at a time when there is no idea how to finance the railway's main line, is the building of track from Rīga Central Station to "Rīga" airport, whose justification is, at least in public, tied more to current security concerns than to economic benefit, not also more a question of how will it look? That is, how will the unfinished station construction in the heart of Rīga and at the airport look to voters, or that currently rather odd cycle path with its free fall, or the lone pile in the Daugava?

Some time after the conversation mentioned at the start of this article, and while analysing other situations, I began to wonder whether this might in fact be the main problem – for many decision-makers and institutions the most important question is how it will look (to some supervisor, superior or voters at the next elections), and they are fairly indifferent to the long-term consequences for Latvia's growth and for the prosperity of its people that flows from it. Only recently, in an interview, one politician said: "Let us think a little bit at the level of the state, not just the party." Perhaps it was simply an awkwardly phrased sentence, but then again perhaps not.

In the end I have to agree after all – the most important question really is: "How will it look?", only not to the party's voter before the next elections, or to the current superior or supervisor, but to our children and grandchildren some time from now.