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(Илустрација:
Новица Коцић)
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Here in Serbia, we are great funs of
fairs for common folk and one such event is just about to begin. The talk of the town are EUR 1.6 billion
from the National Investment Plan and how much will go to which
municipality - the adrenalin is pumping, life is getting
interesting.
And it seems that everyone will get a slice of the cake. For instance,
in the township of Blace they will build a
swimming pool worth half a million euros. A hefty number of local
swimmers will certainly gratify the confidence which
the Government of Serbia has selflessly put in them. And three times more
money the Government will
allocate to itself for attracting foreign investment (when you come to
think of it, though, maybe they would be better off with building
another three swimming pools). For “incentives for creating
innovations”, whatever that may mean, they intend to set aside two and
a half million euros. And that is peanuts compared to “incentives for
improving the quality of supply in the catering industry” at a price of
a full ten million euros, which then really gives a meaning to all the
above mentioned swimming pools, incentives and innovations, doesn’t it?
If someone went carefully
through other items of the National Investment Plan, he would probably
find many more exotic examples. What is more, even the coordinator of
the National Investment Plan complained to the citizens that a large
number of project proposals were unprofessionally prepared. Which, to
be fair, was anticipated by nearly all who know a thing or two about
economics and economic policies – from the IMF, to the World Bank, to
foreign and domestic professors of economics. They said even more –
that it was a wrong way to go, as it would generate inflation and
further increase trade deficit, interest rates and the exchange rate,
accompanied with new impetus to voluntarism and corruption in the
public administration. Alas, the only “critic carrying some weight”,
the IMF, was neutralized in a timely manner, by not entering into a new
arrangement, so that now nobody can prevent the Government from this
latest fiscal adventure. The opinions of all other critics can hardly
fill a quarter of a smallish ballot-box, and are rightfully dismissed
for reasons of being irrelevant. Just think for yourselves: if Evita
Peron had asked the IMF what to do, what would have ever become of her?
Then the Irish model
somehow crept into the story, but only as of late. I suppose this is
because Ireland simply did not exist before 2006, hence the Government
did not have time to incorporate its experiences in one of 13 or 14
strategies designed in the past three years (while at the same time
everybody is wringing their hands over Serbia’s having no strategy).
Nevertheless, we should add that some of the subsequently discovered
features of the Irish model could make its (both governmental and
non-governmental) proponents to give it up for good. For instance, that
part of the Irish model in which public spending was to be cut from 55
to 35 percent of GDP in just ten or so years. Thus
one would have to learn and announce that Ireland implemented a very severe
neoliberal shock therapy! And in Serbia, where the Irish model is
kept on the pedestal as a symbol of the “win-win combination”, the
exact opposite thing has been done: the public spending has been
increased by another 13 percent. I wonder if any proponent of the Irish
scenario has even noticed that lethal detail.
Although wrapped in noisy
silence, the key to all the problems of the Serbian economy remained
the same – it lies in the non-privatized sector of large socially owned
and public enterprises and that without a radical break in this field Serbia is doomed to high and
rising unemployment and despair. Serbia is being eaten up by
unearned, but paid wages – a thing that has not happened in Ireland since the early 1980s.
And that was the second crucial reform step in Ireland, that freeze
on growth in nominal wages. Is there any chance to do something like
that in Serbia? I doubt it, although
this is precisely the way to attract foreign investors. This is how it
was done in Ireland, which resulted in a fall
in unemployment rate from 16 to 4.5 percent and where at present 87
percent of exports is now carried out by US multinatonals, which definitely do it
better than anybody else. It would be difficult to
even imagine a better outcome, but one must remember that it took a lot
of energy and courage to do it. And if we take a moment to look a bit
more closely at all these stories about tigers and dragons – Celtic,
Asian, you name it, we shall see that all these stories are about
saving and sacrificing, about gradually growing wages and fast rising
profits. It is the only way to have any wage growth while creating new
jobs. Economics has not yet invented any other miracle.
And as for Serbia, what does the future
hold for us over there? First the National Investment Plan, and then
the elections. In the meantime, inflationary pressures will rise, which
is
the last thing we need, bearing in mind our unemployment rate of more
than twenty-five percent. Still, one can trace two safeguards to rising
inflation – one is embodied in the person of the governor, who is quite
resolute to contain inflation, which is possible, in principle, but at
the price of higher interest rates and even stronger appreciation of
the exchange rate, yet there is no other way: getting sober was always
much less enjoyable than getting drunk. The second barrier to reckless
spending are the upcoming elections, which creates space for the next
prime minister and his future ministers to start seriously thinking
about the Irish model, but this time using brains more generously than
before.
In the meantime, we in Serbia can actually have a sigh
or relief. None of these things things has to be done right now, for
presently there are three nice and easy “reform” steps ahead of us:
first to make a toast, then to share the money from the National
Investment Plan, and finally to vote. And all these things are things
we know and like to do.
Danica Popoviæ
Professor at the Belgrade
Faculty of Economics
and a member of the Center for Liberal-Democratic Studies
[published in daily
magazine Politika, 5 October 2006]
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