EKIP– Expert Club for Economics and Politics A Different Opinion
On the trail of a politically useless past
The politically useless past is ugly and does not inspire national pride or enthusiasm among voters. That is why it is left to rest in peace in archives and libraries. When told meaningfully and honestly, it functions as a vaccine against social diseases such as populism, demagogy, corruption, the use of the state machine to benefit a small elite, and the like.
The present presentation is an attempt at Bulgarian development of such a vaccine. It has not been approved by an authorized agency, and vaccination is voluntary. A basic prerequisite for the development is freedom of speech, which fuels suspicions among the suspicious that dangerous foreign forces with (un)clear interests may be hiding behind it. But the vaccine is entirely domestically produced. It consists of several doses, the content of which is distilled from political life in the late 19th and early 20th centuries.
First needle: protecting local producers harms local consumers
In 1894, a long-awaited change took place in the Principality of Bulgaria. The government of Stefan Stambolov fell from power, parliamentary elections were held, which were won by his opponents. Konstantin Stoilov became Prime Minister - a lawyer with a doctorate in law from the famous Heidelberg University in Germany and a one-year specialization in French civil law. The Minister of Finance was Ivan Evstratiev Geshov - a graduate of England, where he was a student of one of the most influential economists in the world, William Stanley Jevons. The "A team" in the government of the then Bulgaria became the initiator of an economic policy that reformed the tax system and, at least at first glance, promoted local industry and agriculture.
The specific actions to implement the common intentions generate more bewilderment than enthusiasm. For example: by a special regulatory act, salt consumed in the country is taxed with an excise tax of 6 leva per 100 kilograms, and an additional duty of 3 leva per 100 kilograms is paid for imported salt. The introduction of the excise tax on salt is the first step towards increasing the price of one of the few products that are consumed en masse by Bulgarians. More than half of the salt consumed in the country is imported, and because it is taxed, it cannot effectively compete with local production. The import duty benefits the few local producers, because they are not threatened by the import of cheap salt and can sell what they have obtained at artificially inflated prices. In practice, the import duty on salt is a hidden monetary premium from the state to a limited number of Bulgarian salt producers. The legislative changes related to salt are largely based not on the interests of Bulgarian society, but on the material benefits of those close to the government. Many of them direct their investments to salt production because, without incurring large expenses, the state indirectly guarantees them high profits at the expense of consumers.
The same “A team” in 1897 turned into law the idea that officials must wear locally produced clothes and shoes. This ensured a market for Bulgarian manufacturers and craftsmen, who were experiencing competition from foreign manufacturers. During the discussion of the bill, some deputies enthusiastically (and logically) suggested that the army should also use local fabrics in the production of uniforms for soldiers and officers. The response of the Minister of War N. Ivanov was that his ministry had placed orders from local factories, but “could not obtain satisfactory results”. Apparently, the quality of local production was not that high or the Bulgarian army had excessively high demands. Deputy Stefan Tanev said that a year before this law was adopted, the Ministry of Trade and Agriculture had recommended that officials wear locally produced clothes. As soon as some of the state and municipal employees began to purchase such items, it turned out that "neither the material is material, nor the paint is paint" and their clothes quickly "fell apart". On the other hand, local producers immediately raised the prices of their goods by 50 to 100%. Again, through the legislative activity of the state, some receive privileges at the expense of others, who are forced to buy expensive clothes of poor quality. The application of the law leads to absurd forms of control over its implementation and to additional administrative costs, which are paid by the mass anonymous taxpayer.
Second needle: social policy is anti-social
With the restoration of the Bulgarian state in 1879, hopes arose that those employed in its governance were not selfish, had no personal interests, had mostly good intentions, and that this was enough to help people in need. For this purpose, state institutions needed money, which was collected through taxes.
Immediately after the Liberation, their collection was entrusted to the town halls. There are at least two completely legitimate reasons for this decision. First, it is estimated that this will save costs, because there will be no need to support a large specialized administration. Second, come the arguments of naive social policy. It is assumed that "mayors will be softer towards weak taxpayers", i.e. representatives of local authorities, thanks to their knowledge of the situation and problems of the people in their regions, will not resort to excessively heavy taxation. Twelve years after the beginning of the independent existence of the Principality of Bulgaria, an assessment of the effect of this organization was made. And it is sad: the costs of collecting taxes are enormous, because the municipalities had to increase their staff to collect them, and practice shows that "in general, town halls were soft, generous not towards the weak and the poor, but towards the influential and the rich".
The central administration replaced local authorities in collecting taxes, but the results were no better. Taxes quickly became too high, which gave rise to a natural desire to circumvent them. At the end of the 19th century, for example, tobacco was subject to two taxes: a banderol and a mururié. However, more than half of the tobacco consumed in the country was smuggled. The smuggling itself was often practiced with the help and direct participation of those who were supposed to fight it.
Part of the funds for social policy are raised by creating state monopolies. At the beginning of the 20th century, the so-called second Stambolovist government imposed (1903-1908) a state monopoly on salt. The hope is that when the state purchases and sells to retailers all the salt consumed in the country, it will not allow the exploitation of Bulgarian consumers by wholesalers and private monopolists. The state monopoly, instead of fulfilling its "social" purpose, turns out to be a breeding ground for schemes through which consumers are exploited. There are registered cases in which the state deliberately creates artificial demand and provokes high prices for salt by limiting its sales. In such a situation, only certain traders close to the government receive quantities of salt from the state warehouses. The latter realize quick profits by reselling the salt directly or to retailers.
Third (booster) needle: the growth of the administrative apparatus creates "parasitic" jobs
Many observers of the post-liberation processes note that the state and municipal bureaucratic apparatus is growing extremely rapidly. The state table is proving to be a magnet for almost the entire intelligentsia. To a certain extent, the intelligentsia is created by the offer of various state and municipal services.
The opposition political parties are the most active in criticizing these processes. However, when they come to power, they also contribute to the increase in the number of people whose salaries come from taxpayers. In 1908, numerous data were presented to the parliament about the presence of redundant employees in each ministry, where “if five are needed, fifty [people – b.m. P.P.] are piled up”. The military has acquired particularly large dimensions, and in the military ministry itself there are “many redundant services, and they have done many things there to divide people ... into classes, and a caste spirit is noticeable there”. The continuous increase in jobs in state and municipal administration burdens the budget with unproductive expenses, but it also has another consequence. It diverts the most capable Bulgarian youth from business activity and entrepreneurship. Instead of focusing on production and trade in the uncertain private sector, they massively strive for secure positions in the state and municipalities. The problem is known to the responsible politicians, but measures to limit it are not being taken. They have an incentive to create "jobs" through which they repay their supporters.
Conclusion: vaccines and anti-vaxxers
Ordinary Bulgarians in the late 19th and early 20th centuries reacted with spontaneous denial of the described practices. A symbol of such a reaction is Andreshko. The famous hero of the eponymous story by Elin Pelin abandons the bailiff in the swamp, who goes to sequester the grain of a poor peasant.
The modern narrative of old economic and social practices was initially likened to a vaccine. It does not act directly, but shows what should not be done. Vaccination with a few doses of the politically unnecessary past could make some of the serious public diseases more bearable. However, creating herd immunity requires systematic efforts from many people. At least at this stage of Bulgaria's development, it seems that there is no critical mass willing to make such efforts and another that would be vaccinated voluntarily. On the other hand, anti-vaxxers, for whom the state is a source of career development, power and wealth, have material resources and effective strategies to prevent the effect of even small doses of meaningful knowledge.
In the end, we should leave room for hope.
