Today's Hardtalk on BBC World News (link) discussed the political, economic and social aspects of communism versus liberal capitalism with Slavoj Zizek ,a philosopher and professor at European Graduate School.
Mr. Zizek discussed the role of liberal capitalism in the modern age. He condemned communism as a failure of the mankind and reaffirmed the liberal capitalism as the greatest invention of the mankind. The topic discussed was the future of liberal capitalism. In arguable words of Mr. Zizek, liberal capitalism, although dynamic and powerful in delivering ends of political and economic freedom, is doomed to fail and it thus requires new politico-economic alternative, divisible at the intersection of market and the state. Despite the interactive debate, I would like to add some points to the discussion which were, in my opinion, either mismatched or misinterpretated.
The evolution of liberal capitalism throughout the course of human history has been emphasized by the expansion of economic, political and human freedom. The greatest inventions in human history were not conducted under dictatorial political regimes. But they were conducted during the age of limited government and free innovation environment. Anytime the powerful wit of government was enforced, innovation and discoveries suffered. Although Mr. Zizek recognizes the failure of totalitarian regimes to stimulate intellectual creativity, his analysis of liberal capitalism inherently neglects its role.
The ability of individuals and firms to pursue their own goals in liberal capitalism is enabled not because of the design of desirable goals but because the free-market capitalism evolved as an undesigned system of ideas under strong rule of law. If liberal capitalism, as Mr. Zizek argues, would be doomed to fail, the individuals never witnessed an unparalleled increase in prosperity and in the 20th and 21st century.
What has distinguished communist political regimes from liberal democracies are the institutions of economic freedom. There is a clear and remarkably positive empirical relationship between economic freedom and standard of living. The experience has shown that political liberty is a neccesary but not sufficient condition for prosperity. Both, the neccesary and sufficient condition for the pursuit of prosperity is economic freedom. Without economic freedom, when governments replace the rule of law with the rule of man, and heavily interfere with free-enterprise activity, these countries are doomed to stagnate. Totalitarian political ideology, claiming to create heaven on earth, has always turned towards the hell on earth.
During the interview, Mr. Zizek argued several times that liberal capitalism can eat itself and fail in a similar vain as communism did. The Soviet Union and the communist block certainly hadn't failed because of the lack of technological investment, but because communist political ideology erased the system of incentives. Even today, when several politically totalitarian countries sustained high growth rates, the superiority of liberal capitalism is even more obvious. The motion behind the economic miracle of Gulf countries, such as UAE, Bahrain and Qatar, is the institutional arrangement that promotes solid economic performance under robust system of law, market economy and incentives that allocate scarce resources into the most appropriate uses. In the interview, Mr. Zizek described Dubai's miserable labor conditions as "labor concentration camps" where workers from other countries reside. Although this view sounds very compelling to Marxist philosophers and political thinkers, no government agency forced foreign workers to go to Dubai and work there.
In fact, the economy of United Arab Emirates went through a remarkable restructuring with the creation of the robust financial and service sectors. As productivity growth and capital investment soared in recent decade, wage rates in Dubai are much higher than in other Arab countries. Still in doubt? Ask foreign workers in Dubai how many of them would leave the place and returned to work in their home countries; and why they don't do that. In addition, in Mr. Zizek's home country, labor conditions for foreign physical workers mostly from ex-Yugoslavia are not the envy of the world despite the most regulated labor market in the world.
There is also a wide array of case studies from recent economic history that show how economic freedom crucially determines the wealth of nations. In 1955, Hong Kong was a miserable place flooded with refugees from the mainland China. In 1960, Hong Kong's average income per capita was 28 percent of that in Great Britain. In 1996, it rose to 137 percent of that in Britain. Neither the dictatorial political regimes led to the economic boom in Hong Kong, nor the desire to create heaven on earth. It was a set of strong rule of law of British origin, limited government spending and free markets that propelled Hong Kong to the climb up the ladder.
Mr Zizek arguably enforced the proposition that global financial crisis led to the crisis of liberal capitalism. Although the global financial crisis led to the recession, high unemployment and deflating prices, it certainly has not put the existence of liberal capitalism into doubts.
The origins of the last year's financial crisis go back to the New Deal and presidential time of Jimmy Carter and Bill Clinton whose administrations, as benevolent social engineers, enforced numerous acts to boost home ownership. Back in 1996, president Clinton signed Community Reinvestment Act which forced banks to allocate housing borrowings to low-income neighborhoods. In the aftermath, Fannie Mae and Freddie Mac securitized risky sub-prime mortgage loans to save banks from default. Meanwhile, they inflated debt-to-equity ratio to 60:1. It means that for deposit of USD, there were 60 USD behind in debt that nobody was willing to bear.
In addition, the monetary policy of the Greenspan era kept low interest rates for too long which causeed an asset bubble and led to the decrease of mortgage values It led to the federal bailout of Bear Sternes and the failure of Lehman Brothers. It also triggered innumerable quests for federal bailout of financial institutions. Thus, it would be foolish to speak about the crisis of liberal capitalism after the financial meltdown. Is liberal capitalism to blame? Of course not. It is rather the greedy political apetite for destructive policies that compromised the stability of the world economy for the sake of short-term political goals.
Mr. Zizek wisely avoided the question of the post-communist politico-economic status of Slovenia after the collapse of Tito's Yugoslavia. True, Slovenia's superior economic performance in Yugoslavia was mainly due to its export orientation and higher growth compared to the rest of Yugoslavia. At the beginning of the independence in 1991, Slovenia was, by all measures, the most developed former communist country; far ahead of countries such as Czech Republic, Slovakia and Estonia. Today, Czech Republic virtually caught-up Slovenia's level of standard of living. In 2008, Czech Republic's GDP per capita was 94 percent of that in Slovenia. In 1991, it was merely of 60 percent of that in Slovenia. The politicians, of the same "market socialist" politico-economic beliefs as Mr. Zizek, designed the statist economic policy based on high tax rates, state-owned enterprises, weak rule of law and rigid market structures. Today, Slovenia's economic and political system more closely resembles Russia's mafia state than a liberal society based on economic freedom, rule of law and limited government. In a great part, thanks to the political ideology of "market socialism."
Showing posts with label Classical Liberalism. Show all posts
Showing posts with label Classical Liberalism. Show all posts
Tuesday, November 24, 2009
Wednesday, March 19, 2008
ECONOMICS AND THE RULE OF LAW
Last week, The Economist posted an article (link) describing the relationship between economics and the rule of law. Until recently, the rule of law has been regarded as a matter of political and moral philosophy while neoclassical economists paid little or no attention to the rule of law in the course of economic analysis. Thanks to the contributors of Austrian school of economic thought and institutional economists, the rule of law was shown as an influential motherhood in economic development. Douglass C. North, a distinguished recipient of the Nobel prize in economics back in 1993, demonstrated the significance of the rule of law in his book "Institutions, Institutional Change and Economic Performance" where he wrote that the inability of societies to develop low-cost effective institutions being able to reduce transaction costs is the very reason of economic stagnation in both, historical and current perspective.
Seriously, is there a thing such as market failure?
In the course of economic thought, the rule of law emerged as an issue together with the collapse of the socialist economies of the Eastern block. After the fall of the Soviet empire,
Learning from Hayek and Locke
In economics, the idea of the rule of law was initiated by two distinguished economists. In his book, The Constitution of Liberty, Friedrich August von Hayek wrote that the aim of the rule of law is to set a basic framework of general rules perceived without coercive action. Simply, the more specific the law becomes, higher the magnitude of coercion. In 1690, enlightenment philosopher John Locke captured the essence of the rule in a brilliant sentence: "Wherever law ends, tyranny begins."
Current economic issues confirm that Hayek and Locke were right. When Asian crisis (1997-1998) deflated the expectations of the right policies, the essence of the rule of became obvious. Without a low-cost institutional setting of policymaking based on the rules rather than discretionary action, no macroeconomic reasoning (whether it is intuitive or analytical) may give desirable results.
Effort in the short run, 300 percent dividend in the long run
The first lesson I met when I opened my first economics textbook was that resources are scarce and therefore the optimal allocation of resources together with a given budget constraint is the precise mechanism that solves the basic economic problem displaying the limits of allocation for particular desires. However, it seems that modern postulates of political reasoning seem to neglect the first and very basic principle of economics. Thus, without a high-quality governance and the rule of law, the great divide between different countries is about to start. Economists Daniel Kaufmann and Aart Kray published a challenging working paper called "Growth without Governance" (link). What they showed is a 300 percent dividend, meaning that in the long run, country's income per head rises by about 300 percent, if its governance is improved by one standard deviation point.
Discretion returns discretion
The indices of the unruly law are the object of discretion settled deeply into the institutional framework. By itself, executing discretion among economic agents is more fatal than obviously perceived. In a more technical economic terminology, discretion leads to suboptimal allocation of scarce resources and into a more rigid institutional framework. Thus, discretion is the first step to the point where the law ends. There has been a lot of discussion about discretion (link) but honestly what discretion really means. Three economists, Vishny, Schleifer and Murphy (link) showed how rent-seeking negatively affects economic growth. The outcome of the institutional chaos when private agents seek anticipated benefits via public means. For example, using Nash Equilibrium, the outcome of the bargaining between two agents depends on the type of strategies. A dominant strategy undertaken by one agent is based on the setting of infinite utility given the information, status and unique preferences derived from the lack of the rule of law.
Rent-seeking and infinite demand for private wants by public means
In a rent-seeking model, the demand for public goods in mostly infinite while the supply is limited as shown by a fixed supply curve in a given space and time. The infinite demand is derived from incentives and preferences of the interest groups targeting the maximization of benefits at any price, given the monopoly status that enables the control and access to information needed to bargain a desirable slice. The comparative difference between market outcome and bargaining outcome is the rent, and the interest groups hindering the quality of the rule tend to change their behavioral responses to maximize the differential between market rate and bargaining outcome.
The long run consequences of the lack of the rule of law, meaning rigid and unchangeable institutions, are lower economic growth and structural defects such as corruption and rent-seeking incentives to abuse the rule of law and attain the outcome unavailable in the market with an unchanged productivity performance.
There is no such thing as growth without economic freedom
The question is why economic growth soared in places without changeable institutions and quality governance. The answer can partly be explained by the fundamental laws of macroeconomics such as the law of diminishing return or/and catch-up effects. A country Y with low per capita GDP attains higher growth rate than a country X with higher GDP per capita. In the long run, growth differential gradually disappears. The quality of governance and institutions cannot be neglected. The answer to the question why
Paying the price of the status-quo
As the first former communist economy which recently adopted Euro as a single currency,
Rok SPRUK is an economist.
Copyright 2008 by Rok SPRUK
Sunday, September 23, 2007
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)
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)
Monday, September 17, 2007
HALL OF FAME
Here is how I voted for the favorite free-market economist, journalist, business leader and think tank leader on the Free-Market Hall of Fame:
Favorite academic economist (past): Milton Friedman
Favorite academic economist (present): Gregory Mankiw
Favorite writer and journalist (past): Ayn Rand
Favorite writer and journalist (present): John Stossel
Favorite business leader and entrepreneur (past): Andrew Carneige
Favorite business leader and entrepreneur (present): Charles Koch
Favorite freedom organization and think-thank (past): Leonard Read
Favorite freedom organization and think-thank (present): Edward Crane III.
Favorite government official (past): Thomas Jefferson
Favorite government official (present): Vaclav Klaus
Hall of Shame (past): Karl Marx
Hall of Shame (present): Hugo Chavez
Favorite academic economist (past): Milton Friedman
Favorite academic economist (present): Gregory Mankiw
Favorite writer and journalist (past): Ayn Rand
Favorite writer and journalist (present): John Stossel
Favorite business leader and entrepreneur (past): Andrew Carneige
Favorite business leader and entrepreneur (present): Charles Koch
Favorite freedom organization and think-thank (past): Leonard Read
Favorite freedom organization and think-thank (present): Edward Crane III.
Favorite government official (past): Thomas Jefferson
Favorite government official (present): Vaclav Klaus
Hall of Shame (past): Karl Marx
Hall of Shame (present): Hugo Chavez
Tuesday, September 04, 2007
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.
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.
Tuesday, August 21, 2007
THE BEST QUOTE EVER
"In the name of the best within you, do not sacrifice this world to those who are its worst. In the name of the values that keep you alive, do not let your vision of man be distorted by the ugly, the cowardly, the mindless in those who have never achieved his title. Do not lose your knowledge that man's proper estate is an upright posture, an intransigent mind and a step that travels unlimited roads. Do not let your fire go out, spark by irreplaceable spark, in the hopeless swamps of the approximate, the not-quite, the not-yet, the not-at-all. Do not let the hero in your soul perish, in lonely frustration for the life you deserved, but have never been able to reach. Check your road and the nature of your battle. The world you desired can be won, it exists, it is real, it is possible, it's yours."
Ayn Rand
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