Monday, September 03, 2007

ECONOMIST'S VIEW ON SLOVENIA'S PRESIDENTIAL ELECTION

I'm not used to write posts associated with politics and parliamentary or presidential election. Despite the notion of politics as an untouchable prism, it is noteworthy that political market is a contemporary chapter of modern economic analysis. James Buchanan, the Nobel-winning economist, pioneered the public choice and constitutional economics and demonstrated how effective the application of economic analysis to the state of political market can be. In fact, the political strategies seen and observed everyday behave as normally as a typical market governed by the rule of public choice. When the aspects of game theory are added and variable multiple choice attached, the observation of the political market becomes highly interactive.

When functionally illiterate vote the chairmanship

When a classical liberal economist observes the public choice in Slovenia, he or she does not actually know where the magnitude of political compass is situated. Mischiefed by the ideology of national interest, staunch Keynesian economic perspective and the mixture of conservative and statist views regarding the issues of personal and economic liberty, Slovenian politics is a valuable tool when it comes to populist assertions delivered to the population which is 85 percent functionally illiterate (see: OECD, Literacy in the Information Age). The dictionary of pro-growth policy proposals is replaced by the revealed political preferences against the completion of privatization, the enforcement of competitive law and the reform of the old Gaulist-styled government intervention and populism added-up with the preaching of communist revolution and slogans of Karl Marx notably assessed by trade unions and the derivates of old-socialist ideology.

Slovenia's economic record - losing growth momentums

Slovenia emerged as an independent sovereign country in 1991 when it nominally diverged from a unique system of socialist self-management and stepped on the path of a presumable transformation to market economy, political democracy and the rule of law. Before the shift towards the policies of state intervention and socialist mismanagement, Slovenia had a higher income per capita than neighboring Austria adjusted for inflation and international price comparison. Before the communist revolution swept the country, compared to Greece, Slovenia had been a powerhouse of wealth with a far greater income per capita and advanced output performance. In 1945, the tool of central planning mainstreamed the economic policy. The industrial assets had been confiscated and the institute of private property abolished. The confiscation of property negatively affected all the wealth which markets had created. The redistribution of wealth and income accelerated at the full gas. The sum of created wealth in the next period had been low and the absence of market entrepreneurship, replaced by the political decisions about investment and allocation of resources in the real sector, resulted in the weakly conducted investment of the real economy. The overall coefficient of investment had been high in average, depending on the separate sectors of the economy. Meanwhile, Spain and Greece had merely the same GDP per capita with much less investment inputs and capital formation as a share of the GDP. If the coefficient of investment efficiency had been as high as in Spain or Greece, than Slovenia's GDP would increase 2,5 times over the period of 25 years. Low score on overall efficiency of investment prolonged the economic crisis and brought the upward inflationary pressures after serial currency devaluation. The stocks of capital formation were empty and the industrial competitiveness was low as much as the export performance of Slovenian enterprises. In 1990, 4 years after the start of continued output decline subject to a spiral of hyperinflationary pressures, Slovenia enjoyed the highest standard of living and the highest GDP per capita in the socialist world. However, from 1986 to 1992, Slovenia accounted a significant negative GDP growth converted into overall output loss. The macroeconomic framework in a newborn state had been far away from growth-friendly. The agony of high public spending, high tax burden and structural backlash worsened Slovenia's relative competitive regional and global position.

When Estonia matures and Slovenia fails

What about Estonia, Slovenia's hot rival and the Eastern European Baltic tiger? Despite the severe economic crisis, Estonia's visionary leader Mart Laar pursued what he learned from Milton and Rose Friedman's Free to Choose. The elimination of tariffs, the reduction of public spending, the monetary reform, structural liberalization and a radical tax reform returned a rapid GDP growth and structural advancement, an incredible metamorphosis from Soviet-styled economy into free-market economic powerhouse. Today, macroeconomic estimates for Slovenia respectively express concerns over the long-term stability of the public finance. The risk, involving the sustainability of the generational accounts, seriously threatens output performance and structural advancement. Today, Slovenia is still recovering from decades of socialist mismanagement. The basic infrastructure such as highway system, is incomplete and the public spending on infrastructure is expanded at the expense of higher public debt in the future.

Risk management and taxes - who cares?

At the same time, Slovenia is one of those countries which are ought to face a significant demographic crisis regarding the sustainability of the public-funded health-care system, pension system and welfare services. The macroeconomic policymakers, however, never considered the course of macroeconomic policy aimed to avoid the structural risk through the establishment of pension funds covering the current expenses of the demographic crossover which could be easily funded through the sale of state-owned assets. Thus, Slovenia generational accounts are funded through punitive taxation of productive behavior such as enormously high employee contribution rates to health-care schemes. It is thus hardly surprising that Slovenia is the most taxed country in the world according to the "take-home" income residual after taxes.

How can a communist president claim to be a democrat?

The intellectual fathers of government failure in during transition to cut taxes and promote foreign direct investment to accelerate enterprise restructuring of the lagging backlashed socialist economy, are the old guards firmly consolidated in the prism of staunch socialist ideology and Orto-Keynesian perspective when it comes to the issues of economic policy. Slovenia's first president, Milan Kucan, had been the president of central committee of the Communist Party. When dr. Ljubo Sirc, classical liberal, economist, the president of CRCE and the Slovenian immigrant living in Edinburgh, ran for a president, Slovenes prefered to vote for an old communist guard Milan Kucan. The attitude of his political presidential chairmanship roared the government intervention in the economy through the political establishment of elitistic corporate oligarchies (Forum 21). An open calls against the privatization of state-owned enterprises, lobbying against the entry of foreign direct investors in Slovenia, the leadership designed through the style of old communist populism, are just a few item describing the agony of communist presidents in post-communist Slovenia.

Let the candidates show their knowledge of economics, maths and statistics

The public choice between the candidates for the president of Slovenia is poor. The promotion of the ideology of the chauvinistic nationalism and socialism is a deadly drift which had been undertaken by the cruelest dictators in the world. Calling for bigger government and thus even more corrupted government through statist ideology is what the headline of presidential candidates proposes. I suggest that presidential candidates pass the mathematical, statistical, logic and economic literacy test and than we'll see who's the most competent presidential candidate in the round.

Sadly, this year's election again demonstrate how deeply rooted is the nationalist and socialist mentality in Slovenian society regarding the attitudes toward open society, free economy and personal liberty. As a voter I'd expect from a president to openly promote the fight against monopolies and cartelized structures, to call for school choice, tax reform, deregulation, the enforcement of competitive law, competitiveness efforts, and especially to act and behave like a statesmen, not a politician.

Slovenia: WASP - Wrecked Archaic Socialist Pond

Unfortunately, Slovenia is still a socialist society and all it can realistically be expected from the future president is populism an further protection of big government. It'd be completely out-of-date to expect a free-market enthusiasm, visionary attitude and ambitiously geared desire for change. In a dysfunctional sub-Alpine cesspoll of lies and deception, where anti-Americanism and the nationalistic sequels governed nearly all walks of society, the president is like a leader of the tribe suffering from shocking historical truths about its genocide leaders who lived through corruption, manipulation and lies over the pond of local self-sighted, envy-inflated, brainwashed community called Slovenia.

2 comments:

denis bider said...

For what it's worth, most of the world is much like that. There's no such a thing as an enlightened median voter. If we are to improve the state of things, we're going to need to improve democracy.

Rocks said...

In these days I read Hayek's masterful "The Constitution of Liberty". I especially like the way in which Hayek defines the difference between democrats and classical liberals. The ace of the first is the majority rule, the ace of the second is the extent of coercion. It is always so silly to listen how the Euro-American advocates of democracy dream about the utopia which democracy shall carry. It is true that democracy carries many external advantages regarding the governance of institutions and the rule of law, elected representatives but in a larger sense, democracy itself inclines towards collectivism in several aspects, most notably in terms of disposable powers to exercise. Even empirical evidence has shown that "the overall effect of democracy on growth is weakly negative." (http://www.nber.org/papers/w4909).

Regards,
Rocks