Sunday, August 19, 2007


Which has been most important in reducing poverty over time?

a) taxes
b) economic growth
c) international trade
d) government regulation

It's awesome to be in the last teenage year after four years of high school of economics and nearly a month before entering the university. Despite the government intervention, dishonest institutions and high government spending, living in a post-communist country is sometimes even amusing. The pariahs of rent-seeking, capturing government's ability to curb high spending and low taxes on productive behavior, seem to be dodging the real issue of economic (il)literacy when politicians make decisions over spending, mandatory legislation and budget consumption sometimes completely faulty.

Slovenia is no exception to "live" economic illiteracy. Slovenian parliament, unflushed by socialists of all parties, frequently updates the very symptoms of economically illiterate decision-making. One such issue is the attitude toward poverty reduction. It is sometimes very frustrating that politicians gamble compassion and thus higher government spending and consequently higher taxes, to be the basis of parliamentary decision-making. When parliamentarians discuss the macroeconomic performance of Slovenia, they notably expose the need to accelerate GDP growth. On the other hand, most of them avoid to discuss the REAL (!) obstacles to growth since they repeatedly quote out-chewed socialist slogans such as: growth is not everything, profit should no be aimed at any price, poor and disabled hardly benefit from profit...

So if Slovenian politicians attained the national economics test, and if their answer to abovementioned question was "government regulation" or notably "high taxes", they'd prove themselves as economically illiterate. For instance, 53 percent of twelfth graders in the U.S. answered "b" while 79% of twelfth graders passed this first-ever national economics test. It'd be interesting to test politicians about the knowledge of applying cost-benefit analysis to budgetary analysis, inefficient public consumption and spending on unneccesary areas such as agricultural subsidies, culture and interest groups.

It appears that high school seniors outperform politicians in the area of economic literacy. When Slovenian politicians discuss social transfers, they often get trapped by the contradictions of themselves. For example, the voice of transfer aid to the poor, is notably heared all over the parliamentary discussion with a growing spending on the social aid. The already unsustainable pillars of the pension fund, with unfunded net financial liabilities exceeding 190 percent of the GDP, is due to greater spending outlays by introducing new duties on various consumption, most notably electricity.

Instead of discussing the need the cut taxes and unpenalize the productive activities, the politicians in Slovenian parliament, squeeze themselves when it comes to see how economically literate they are in practice. Nevertheless, I think the broadband economic literacy test should be a part of Slovenia's constitution regarding public employees. In fact, it is a little bit irresponsible if collected revenue is allocated by the official figures who possibly disregard innumerable negative effects of inefficient government spending which is, in Slovenia, mostly allocated by law and the legal requirements of statutory spending which fulfills the demands of rent-seekers and interest groups.

The Kids Are All Right, Opinion Journal (link)


B said...

Good evening!
It is striking to me that virtually noone in the public sector thinks things should work in a way similar to a company's. At least virtually noone important (there might be a tiny exception). That there is nothing wrong in being cost-effective. That it is all right to earn more than to spend. That efficient management should be in place. That things are supposed to be done easily. Instead there is paperwork and when something goes wrong, more paperwork is installed to prevent further mistakes but opens ways to new ones. According to Webber - if my memory serves me right - this is a never-ending story. I think we should say "Halt!" and rethink in what kind of society we wish to live, work and do business. If too many people find it inappropriate to live in Slovenia, who will be left to pay taxes at all?

Rocks said...

Besides, Slovenia has very high individual and corporate income tax rate and dozens of complexity entailed in the tax system. Slovenia also has one of the youngest retired population and a pay-as-you-go pension system. Unemployment benefits are very high as well.

In Slovenia, especially the youth (myself included) realizes that if you're inspired to have many ambitious and go for a successful career, Slovenia is the wrong country for us who want to achieve something in our life through hard work, effort and productive behavior.

BTW, in Slovenia, 80 percent of the population is functionally illiterate as perceived by OECD which means that the majority of population does not know how to live in a modern knowledge-driven world.