PRIVATIZATION OF STATE ENTERPRISES: THE CASE OF SLOVENIA

Dr. Joze P. Damijan, the professor of economics at Vienna University of Economics and Business Administration, recently wrote an article about the need to accelerate the privatization of state enterprises in Slovenia. The article can be read here and here.

In Slovenia, 65 percent of the GDP is composed of private sector while public sector is extensive, accounting for about 35 percent of the GDP. There is a numerous empirical evidence in favor of privatization. In fact, the allocation of scarce resources is the key argument for privatization. Managers in state enterprises have different interests than private investors. That's why, private enterprises are more risk-taking in particular investment opportunities. Thus, as an empirical matter, private investors usuallly sustain higher rates of return on equity than managers in state companies.

In Slovenia, the government has been controlling the economy by extensive ownership participation in all major enterprises, ranging from insurance companies (Triglav), pharmaceutical industry (Krka), manufacturing sector (Gorenje) to retail industry (Mercator), banking sector (Nova Ljubljanska Banka, NKBM) and even telecommunication sector (Telekom Slovenije, Mobitel).

There is also a proof that sizeable state entrepreneurship reduces growth and distorts capital allocation nevertheless. In China, there is an average estimate that a decrease in state-owned enterprise share of industrial production increases real GDP growth by 1,14 percent (Phillips, Kunrong 2003).

In Slovenia, political and popular attitude toward the privatization is somehow negative. Yet, the privatzation is urgent. Some privatization is already taking place. Unfortunately, it is taking place very slowly and non-transparently. The withdrawl of government ownership of enterprises is essential to sound economic performance and economic liberty nevertheless.

FRANCE'S STREET RIOT SHOWDOWN

Weak property rights, excessive government burden and the lack of rule of law have led to street riots in France. The Economist has published an article describing how French rioters are destroying private property and public means (link).

DEMOCRACY IN SLOVENIA - A GRAVEYARD SLUT

by Rado PEZDIR

In the fall filled with two national referendas regarding whether Triglav, Slovenia's largest government-owned insurance company should be privatized, and the epilogue of collective bargaining between trade unions and the federation of employers which reminds us on the last sequel of South-American soap-opera, someone could think that Slovenia is a climax of world democracy. It could be thought that this idyllic sub-Alpine landscape is a paradise dreamed by the premise of enlightenment thinkers; a paradise where the wisdom of the citizens tactically paves the road on which society's development takes its own walk. Unfortunately, the reality is completely different and it can be admitted that all sparks of hope for democratization of post-communist society are nothing else but a nostalgic stupidity. In Slovenia, for a long time, the individual does not vote for anything in the elections.

ELECTORAL JUNK

Let's have a look on presidential elections. I think that everyone who wants to explain why we need this junk will face big troubles. Why?

First, in Slovenia, the president has no authorized means of decision-making which would justify the existence of this particular instance. Of course, I assume that institutions are created to have legitimate authorization and not vice-versa.

Second, Slovenia's chaotic institution requires the intersection of legitimacies of democratic institutions, and consequently, there is an inherent probability of institutional conflicts. Mostly because Slovenian policymakers do not actually know which particular legitimacies are ought to be authorized to justify the existence of the institute of the president.

What this means in practical terms, is clearly demonstrated by the latest selection of future governor of the Bank of Slovenia; a situation in which prime minister and the president had an electoral mandate to appoint the governor. At the end, the technical dilemma turned out into an insensible political battle.

Third, some claim that the presidential function is necessary due to its role in representing Slovenia abroad in a remarkable flash. The truth is that the presidential function distorts the other branch of government, the Ministry of Finance, and thus it creates a splash of institutional conflicts. Just think of president Drnovsek's inspirations to solve the Darfur crisis. Was it necessary? At last, if Slovenians want a representative abroad, then gather some money, hire the little boy who knows how to recite the sonnets of William Shakespeare in thirty languages, lock him into the cage, and show him into the international arena. There is no need to waste taxpayers' money.

And at last, a large majority of Slovenians is evinced that the presidential function is necessary because of the need to have a discretionary moral authority such as Plato, Indian gurus, Vatican's cardinal or anti-globalist Joschka Fischer, to morally regulate our lives. Are they serious? Do they suggest voting the highest moral highlight? Excuse me, but this particular construct is a replica of a theocratic state where Ayatollahs are elected and then they submit their opinion on immoral youth and inadequacy of loud music. To exculpate the existence of particular institution with the assistance of an absolute morality is, in a normal democratic state, nothing else but an unrestrained absurdity. In effect, the presidential function is unnecessary and that's why, let's avoid further institutional crash of the splash. My colleague Mićo Mrkaić has thoroughly abstracted the irrelevance of presidential elections in Slovenia: ignorant people need an idol to command from emperor's rooms, the way it was conducted by Kaiser Franz, Maria Theresa, and Josip Broz.

NON-ELECTIONS

The second redundancy is the elections in the State Council this fall. State Council is the remaining creature of fascistic corporate system. Let's summarize how these elections go through. At the end of the mandate, interest groups get together and select a dedicated person who is then authorized to delegate our lives from Ljubljana. Then, the illuminant is sitting in the chamber of State Council by making decisions regarding our everyday lives; without being authorized to do so. How democratically. Suppose that a group of voters proposes a law bill to the parliament and democratically elected parliament passes the bill by a slight margin of votes. In a normal country, this would mean the end of the process, but in Slovenia, the story is going forward. If any of numerous interest groups with representatives in the State Council is not likely to embrace the law bill, it can use the veto and stop the entire process. And then, we're the one who should deal with elections and democratic institutions. The madness such as the undemocratically established body has shown its worth in the initiative of the State Council, suggesting the referendum whether Triglav, the largest asset-holding insurance company in Slovenia, should be privatized or not. Funny; the answer tp the technical question ought to be solved by democratically elected government is proposed by the unelected instance. We already decided to transmit the mandate to solve such a situation to the government, haven't we? I personally think that the State Council exists because a fraction of voters cannot embrace the fact that they're responsible for their lives on their own, while a share of voters would like to regulate the lives of other citizens through the power exercised by the interest groups represented in the fascist-styled State Council.

INTEREST GROUPS CONTROL THE ENTIRE COUNTRY

The fact that interest groups have their own debate luncheons at the expense of taxpayers' money and do whatever they want at any time, is simply a blockade of decisions approved by democratically elected institutions. And even more: it is a blockade that disables the functioning of a democratic system. An ability that interest groups without the approval of taxpayers, are dealing about the way of living that citizens will simply have to embrace and live with it, is coming from the constitutionally approved status of the State Council and collective bargaining. A procedure, in which workers' monthly salary is not determined by his output and productivity, but by the bargaining decisions approved by trade unions; the latter call social justice. As a side-effect, entrepreneurs must give up a fraction of profit due to decisions passed by non-elected institutions, namely trade unions. You're not wrong if you think that such process is a restitution of the situation once common in the Soviet Union. In Soviet Union, wages and salaries had no feedback measures to the output and labor productivity, but instead, salaries were determined collectively subject to central planning. As a matter of fact, what you produce in Slovenia has no effect on your monthly earning but the productivity of labor supply is restricted by the means of collective decisions of trade unions. In addition, there is always no study on how artificially determined salaries affect the economic performance of Slovenian economy. Instead, trade union leaders propagate the ideas that entrepreneurs should give up their own profit. By its means of collective power, trade unions aggressively aim to regulate and flip into the private property of entrepreneurs. It is interesting why trade unions do not invest in particular companies and then give up their profit for the benefit of the labor force. Whether you are asking, when you authorized trade unions to allocate your resources and boost income redistribution, your questioning has no effect since State Council and trade unions collectively make decisions about your lives without a check-up of their proposals in the general elections.

A DEMOCRACY OF WAR MASSACRES

In addition, there are two non-elected representatives in Slovenian parliament approved on the basis of their nationality. What a democracy - a democracy on the basis of Slovenian shame, such as the genocide of Italian, German and Jewish community. Thus, Slovenians have collectively admitted not to aggravate if they have bloody conscience about their own past. Instead, for them it is admirable to have a handicapped democracy which places two non-elected representatives of minorities in the national parliament. If you perceive that as a hang of overdoing, think about suspicious role of those two representatives several times respectively. And if everyone is treated equally, where are the Roma, Serbian and German representatives? Shall we rather dissolve the entire parliament and put in suitable representatives? In case if anyone doesn't know - parliament is a democratic institution whose members are elected on the basis of individual preferences and not on the basis of individual ethical origin. To protect the human rights, there is a judicial system that defends individuals against violations of human rights of all the citizens, including ethnic minorities. It is simply not a seat in the parliament which protects the rights of the minorities.

So if you attend the elections, the impact of your vote will be the same as in the period of socialism - none. That is because of institutional chaos based on Slovenia's constitution. From this point of view, presidential elections are nothing else but a typical junk and wasting of taxpayer's money. In sum, democracy in Slovenia is like a a graveyard slut (also a song sung by Norwegian black-metal band Darkthrone) - it can be bought cheaply by anyone whereas no one cares whether it works or not.

Rado PEZDIR is an economist.

© Copyright 2007 by Rado Pezdir

*An article was translated in English by Rok SPRUK, an economist and the owner of the web log Capitalism & Freedom

NORWAY'S FISCAL TERRORISM

Wall Street Journal investigates recent tax hikes imposed on Norwegian shipping industry by Norway's left leaning socialist government. In particular, Norwegian Minister of finance, Kristin Halvorsen's budget plan suggests the retroactive taxation of reinvested profits. Due to the impact of shipping industry on the competitiveness of the Norwegian economy in a global arena, it is doubtful whether such tax hike are grounded on the basis of detailed analysis.

Perhaps, there is only a quest for higher public spending and Norwegian government is desperately seeking new revenue source to fund a growing public expenditure. In fact, the relationship between equity and efficiency is one out of many trade-off case studies in economic analysis and higher government spending causes distortions and reduces incentives to work, save and invest as marginal tax burden (a portion of the added burden relative to tax burden in a previous period) is a penetrating source of inefficiency since firms and individuals are discouraged from further engagement in productive behavior. And shipping industry is no exception.

The overall effect of imposed taxation will affect the attractiveness of Norwegian shipping centers and, nevertheless, ship owners could reflag the vessel to nearby locations where the tax treatment of shipping industry is more favorable relative to Norwegian jursidiction, and also where created profits are not subject to discretionary taxation.

Here is a part of the abovementioned article:

"Over the past seven years, as the regime took effect, maritime employment in Norway has climbed almost 20% to about 100,000 and the number of ships on order by Norwegian fleets has risen more than threefold — keeping pace with rapid international shipping growth since the turn of the century. That boom has attracted the attention of Norway’s finance minister, Kristin Halvorsen, a member of the country’s Socialist-Left Party. Under her budget plan, all profits reinvested by the industry since 1996 would be subject to a retroactive tax. Many ship owners are considering reflagging their vessels in nearby countries, such as the U.K. and Denmark. Moving could mitigate their future liabilities, but that will be little consolation to firms that remained in Norway over the past decade and invested in their fleets, only to be betrayed by politicians."

Source: Shipping Blues, Wall Street Journal (link)

THIS IS HOW BELARUS WOULD BE BETTER OFF

Nearly a week ago, I came across an interesting website entitled Economy.by, presenting the project "The Community of Young Economists and Entrepreneurs" which was organized as a reaction to the lowest level of education in Belarus. The project aims to give opportunities to young students in Belarus to support their scientific work. This particular initiative is very ambitious indeed. In fact, Belarus is croaching in Soviet-styled political dictatorship together with poor track on the respect of human rights, civil and personal liberties. Doing business is difficult and the economic environment is embroiled by government involvement, protectionism and widespread corruption. Also, the education system is instilled by staunch ideological propaganda (here and here).

Regarding the practicing of human rights in Belarus, State Department reports:

"Prison conditions remained austere and were marked by occasional shortages of food and medicine and the spread of diseases such as tuberculosis and HIV/AIDS. Leila Zerrougui, chairperson of a UN working group on arbitrary detention who visited the country in 2004, reported that conditions in detention centers were worse than those in prisons because of poor sanitary and living conditions and restrictions on visitation, phone, and mail privileges. According to human rights monitors, conditions in prison hospitals also were poor...The government restricted access to the Internet. Credible reports indicated that the government monitored e-mail and Internet chatrooms. Many individuals and groups could not engage in peaceful expression of views via the Internet, including by electronic mail. During the March 19 presidential election, there were numerous credible reports that the government blocked several opposition campaign and independent media Web sites. Many opposition groups and independent newspapers have switched to Internet domains operated outside the country because of the government's campaign against Internet freedom. There also were credible reports that authorities attempted to block Radio Liberty's Web site in the country during the March presidential elections. On November 7, the NGO Reporters Without Borders again included the country on its annual list of "enemies of the internet," countries that censor independent news sites and opposition publications and monitor the Internet to stifle dissident voices."

Disclaimer: Capitalism & Freedom strongly supports "The Community of Young Economists and Entrepreneurs" in their efforts to pursue the ideas of individual and economic liberty, human rights, international awareness and knowledge development in Belarus.

DEMOCRACY: THE ENEMY OF ITSELF

One of the most strinking thins which can be observed around the world is the misguided connecting of liberty with democracy. Empirically, the effect of full democracy on economic growth is weakly negative.

In political terms, democracy means voting. It means the ability of the voters to elect representatives. There are many dubious side-effects of what is referred to as the "real democracy". In the state of democracy, there are few things that are contradictory to civil, human, political and economic freedom.

Coercion and constraints

1. Coercion. If political leaders are elected democratically through voting, it means that they have a full ability to pursue a particular political philosophy. As Friedrich August von Hayek wrote in The Constitution of Liberty, each extensive political philosophy supposes that the lives of individuals mismanaged by themselves, and thus they should be controlled through any means of coercion and constraint whether it be the taxation of individual income, information-sharing or the government force to agree and respect the disagreeable. Hence, the main determinator in the state of democracy is not the market where wants and goods are compensated by value exchange, but is the majority that casts the demands imposed on political bodies. Depending on the extent of majority rule, the demands will be suited only if they suit the political support over the term. The sum effect of majority rule is thus guided by the sources of political power which is close to the oligarchic rule. Thus, in many particular items, democracy is a self-contradiction governed by the seed of collectivism and by the tyranny of the majority rule as Alexis de Tocqueville wrote brilliantly in his work Democracy in America.

2. Interest groups: to gain support, the political rivals compete on getting votes from particular interest groups such as trade unions and agricultural lobbies to receive private interests on behalf of public good. In the free market, demand and supply are matched and taken as given. The ability to meet the market needs of individuals is determined by the freedom of choice, given the total utility impact. In political market, the ability to meet the needs of voters is determined by the concentration of power in the hands of most influential groups and formations in public whom the priority is given. This is another proof that democracy is perhaps the most notable hidden evidence of discrimination since "everyone-is-treated-equally" is rambled by "you-are-treated-equally-if-you-belong-to-majority".

3. Extensive government: Great Britain was free way before it became democratic. A country can be free and prosperous even without being dichotomously democratic. Singapore has a high degree of economic freedom and is treated as politically hybrid regime. Estonia is among the freest economies in Europe and the world, but its grade in democratic performance is likely marked by the label of flawed democracy. On the other hand, Sweden is known as "full democracy" but its 81,3 percent economically free relative to Hong Kong which is known as the economically freest place in the world.

Democracy - a self-contradiction

Democracy is treated as an untouchable dogma which is supposed to be in the interest of all. Failed and falsified as it is, democracy is neither close to liberty nor minimal state. Classical liberalism is based on the grounds of negative liberty of non-interference as well as on the absence of government coercion. Fundamentally, democracy mischiefs the extent of government coercion. Classical liberal/libertarian pursuit always predicts the individual and political action to reduce (or possibly eliminate) the extent of government coercion while the dogma of democracy takes no notice on the extent of government coercion, but only on the action which is governed by the rule of majority.

Democracy - the slavery of positive liberty

That is why government based on the principle of the minimal state, providing only the fundamental general framework of interaction (the-rule-of-law), functions efficiently and contributes a significant share to the future creation wealth in going for growth and prosperity. Minimal government is the best friend of individual initiative accompanied by the degree of being free to choose, live and create.

Read also:
Denis Bider: Robert J. Barro's Democracy and Growth (link),
Libertarec: Socializem ustvarja vojne (Socialism creates wars) (link)
Libertarec: Zgodba o dveh vased (A tale of two villages) (link)
Greg Mankiw: A question for democrats (link)
Robert Nozick: A tale of the slave (link)

BATTLING WELFARE LEGACY IN SWEDEN

In Wall Street Journal there is a good article outlining the implementation of economic and structural reforms on the road to recovery from a typical generous experiment of the welfare state (link).

MEXICO'S ANTI-GROWTH TAX POLICY

The USAToday has published an article describing the populist assertions of Mexican president Felipe Calderon who recently annoucned the launch of aggresive tax hike to raise tax revenue.

Enhanced through the rethorics of populism, Mexian president wants to increase Mexico's tax revenue by one third, roughly $35 billion a year. Among fresh tax policy proposals an extensive corporate income tax based on firm's income from corporate activity can be traced as well as giving tax breaks to state enterprises (Pemex), 5,5 percent gasoline tax and government requirement levied on banks, claiming to deduct 2 percent tax on desposits exceeding the amount of $1,800 USD monthly.

One could claim that despite a relatively low fiscal burden in the share of the GDP and particularly low government spending, Mexico's overall tax revenue equals 10 percent of the GDP, and thus concluding that reducing the aggregate tax burden does not make any sense. However, this particular assertion hardly entails any sufficient arguments and data analysis.

First, corruption in Mexico is perceived as significant. The cost attached to corruptive officials, institutions and politicians negatively affects economic performance and openly enables seeking ways and channels to adopt tax evasion. The negative-side effect of corrupted tax system is that a mantling establishment of the bureaucracy inclines towards seeking additional revenue via loopholes, deductions, exemptions and tax breaks.

Second, despite a moderate degree of economic liberty, Mexico weakly performs in the areas which are essential to sound framework of economic peformance such as the extensive corruption net and discriminatory investment framework. According to World Bank, paying taxes takes 552 hours in Mexico compared to the OECD average of 202,9 hours. This particular indicators purely reflects the complexity and failure of Mexican tax system. Under such conditions, numerous investors prefer to avoid taxes since getting rid of government regulation and directives is less costly than complying with inefficient and onerous tax system.

Here is a brief data on Mexican macroeconomic performance.

The assumption that additional tax revenue measures would induce government's ability to pursue fair redistribution to reduce poverty is false regarding the empirical aspects of income redistribution and research observations on the growth-correlated tax system. Fighting poverty through the prism of government intervention usually returns the opposite results. Instead, there has been much empirical outcome saying that trade liberalization and openness induce poverty reduction. In addition, deregulated labor market and growth-friendly entrepreneurial framework also boost productive behavior which is the ultimate way to avoid and reduce poverty instead of relying on rent-seeking government and tax bureaucracy.

THE OPPOSITE EFFECTS OF PROTECTIONISM AND STATISM

"France should work for a much more offensive policy of protection, solidarity and regulation," says the French minister of foreign affairs.

The failure of protectionism

Contrary to popular asserted beliefs, the policy goals aimed at the enforcement of protective trade policy results the opposite effects. At the government level, extensive intervention in the form of company ownership reduces the competitive ability of the owned companies to compete in the open world markets.

Government officials have in fact different objectives than strategic investors. In terms of international trade, the restriction of imports from abroad, impairs the ability of gains from free trade and open exchange. In larger terms, even investment can be hampered as capital and technology may not be openly availible in the domestic market. If high tariffs and quotas are imposed on certain imports, the effect is three-fold. First, the enterprises and the economy are forced to pay an extra price for goods that are vitally needed to be purchased as estimated by the firm.

Practically, if a global economic environment of the firm is sourced by cutting-edge technology that could rapidly improve the productivity of the firm per unit of output, but the competitive and productivity potential is swiftly reduced as a possible 10% tariff on high-tech products from India causes an increase in firm's costs.

Second, assume that customers demand improved tech products which can be purchased in the firm which imports those products from India. Then tariff's mark-up on the price would inevitably result in the higher final customer retail or wholesale prices.

And third, high tariffs rate and protectionist trade policy with a bulk of formal and informal barriers, distort the general equilibrium and in this particular case, the only way to match supply and demand is the so called product smuggling resulted in the rise of informal economy which, ceteris paribus, reduces the overall output of the economy.

The anti-social effect of solidarity

Labor unions often expose how labor solidarity should remain an untouchable social value. In the rethorics and slogans of Karl Marx and contemporary socialist terminology, the leaders of the labor unions compose threats such as collective strikes in case if wage-increase demands are not fully accomplished. In macroeconomic terms, the spiral of unparalled wage growth boosts inflation pressures and diminishes the effect of benefits derived from the productivity growth. In effective terms, assume that trade unions achieve the periodic wage increase through collective demands.

After a sudden increase in the growth of real wages, the growth of productivity is negative while the union pressure on wage growth continues. Reasonably, the manager of the company will be forced to cut the exceeding labor quantity by firing to prevent the company's collapse.

Collectivism's Road to Serfdom

In the global economic environment where the regulatory burden and protectionism turn out into comparatively advantageous competitive environment of the firm, the outcome of strict enforcement of protectionism and collective union demands would, as demonstrated above, result in a lagging and stagnating economy facing low output growth rate, rachitic productivity growth and the spiral of upward inflationary pressures.

In fact, as the history has demonstrated many times, collectivism produces anti-social effects.

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.

SLOVENIA, THE MOST TAXED COUNTRY IN THE WORLD

According to Forbes, Slovenia is the most taxed country in the world; way ahead of high-tax jurisdictions.

HOW HISTORY IS REPEATING ITSELF

Yesterday, I came across the link, a collection of famous historical quotes. Interestingly, there is also an excerpt from Nazi political program (see: quote 336):

"We ask that the government undertake the obligation above all of providing citizens with adequate opportunity for employment and earning a living. The activities of the individual must not be allowed to clash with the interests of the community, but must take place within its confines and be for the good of all. Therefore, we demand: … an end to the power of the financial interests. We demand profit sharing in big business. We demand a broad extension of care for the aged. We demand … the greatest possible consideration of small business in the purchases of national, state, and municipal governments. In order to make possible to every capable and industrious [citizen] the attainment of higher education and thus the achievement of a post of leadership, the government must provide an all-around enlargement of our entire system of public education … We demand the education at government expense of gifted children of poor parents … The government must undertake the improvement of public health ... – by the greatest possible support for all clubs concerned with the physical education of youth. We combat the … materialistic spirit within and without us, and are convinced that a permanent recovery of our people can only proceed from within on the foundation of the common good before the individual good."
– From the political program of the Nazi Party, adopted in Munich, February 24, 1920

Nowdays, there is a memory on the victims of hollocaust and Nazi executions. Every year, one of the most tragic events in human history is remembered around the world. History has given many lessons of how to avoid future holocaust and prevent totalitarian regimes to rise again.

However, it seems that politicians quickly forget the historical lessons when it comes to the issue of economic policy. Keynesian economic theory failed when the aggregate demand ended in results contrary to its assertion. As we can see from abovecited program of the Nazi party, the economic policy of Nazi Germany heavily relied on rent-seeking pressure groups (trade unions, interest groups), extensive government intervention and high welfare expenditures which are important features of today's stagnating welfare states with low growth rate and particularly high unemployment rate.