The hidden mechanisms of business legislation - how and why is patriotism abused?

Voting on legislative acts takes place in a well-known, transparent manner. Behind the precise formulation of all the elements of a particular law, there are forces that rarely become publicly known. They are driven by a direct interest related to the operation and scope of the legislative act. Material interest is often masked by patriotic arguments.

The archives of the parliament contain interesting evidence of the hidden mechanisms that operate in the development of laws that determine the directions of Bulgarian economic development.

The Local Industry Promotion Act of 1928.

Since the late 19th and early 20th centuries, the Bulgarian government has been pursuing a policy of supporting industry, which has not yielded remarkable results. Several laws for the promotion of local industry (ZNMI) were adopted in 1894, 1905 and 1909. The term of the 1909 law expired in 1925, so it was extended several times until the adoption of the last ZNMI in 1928.

During the parliamentary debates on the 1928 bill, Prime Minister Andrey Lyapchev declared that this was a “liquidation” normative act, i.e. after its term expired, the industry would no longer be encouraged. The Prime Minister’s words reflected the generally good idea of ending ineffective state support. Their value should not be exaggerated. No one can predict what the political and economic situation in Bulgaria would be like after the end of the 15-year term during which the last LNMI was intended to be in effect.

The law consists of 65 articles, which define the concept of an industrial enterprise. It must use non-muscular motive power of at least 10 horsepower, have at least 10 workers who work continuously for at least six months a year, and have invested at least 20,000 leva in machinery and equipment. 21 groups of industries are listed that will benefit from the privileges. The privileges themselves are not original. They include: relief from tax burdens, discounts on BDZ, duty-free import of machinery and materials, favorable conditions for the use of subsoil materials, preference in government procurement, etc. The law was published in the State Gazette on June 14, 1928.

Lobbying in different directions

The Law on the Promotion of Local Industry affects all segments of Bulgarian society, but to varying degrees. The patronage of industry often leads to an increase in the price of goods produced by the promoted enterprises and to the possibility of accumulating easy profits for industrialists. However, only professional and social groups whose profits and/or losses are the greatest are included in the discussion of the law. The majority of consumers remain silent and do not take any part in the draft law. For them, the losses from the possible application of the law are relatively small compared to the possible profits from its rejection. The Bulgarian economy is still semi-subsistence and agrarian. Rural households rarely go to the market as buyers of industrial products and do not feel the sharp increase in the price of industrial goods. Therefore, their representatives do not participate in the discussions.

Those interested in the law created an intense lobbying storm around the factors responsible for formulating its main provisions. The project was adopted by the Council of Ministers on November 11, 1927. A few days later, the Parliamentary Committee on the Bill was formed, which was to prepare it and submit it for a vote in the National Assembly. The first to address the committee, on November 18, were several Kazanlak rose traders. They were concerned that the project did not contain a single word about encouraging the rose oil production industry and insisted that it be included among the industries favored by the state. Shortly thereafter, the Sofia Chamber of Commerce and Industry joined the requests to expand the scope of the privileges. It insisted that those related to printing and graphic arts, as well as the parquet industry, be added to the encouraged industries. The Provadia cooperative "Podem", in order to support its salt-producing factory, wanted the extraction of local salt to be included in the privileged industries.

At the end of 1927 and the beginning of 1928, lobbying demands gained momentum. The Union of Gabrovo Industrialists insisted on inserting a text according to which new, not explicitly foreseen in the law, industries would be encouraged. Another, no less important, insistence of the Gabrovo industrialists was not to terminate the incentive measures for the textile industry. Hristo Gospodinov from the collective society "Ela", village of Chepelare justified the need for state support for industrial enterprises for mechanical processing of wood on the grounds that this would limit the devastation of forests. The struggle for privileges was joined by paper bag manufacturers, millers, who believed that their industry was not yet sufficiently established, the owners of jute factories, the sugar refinery in Ruse, etc.

There are also requests to exclude certain industries from the scope of the LNMI. Such are in the letter of M. Yulazari, who believes that the workshops for amalgamating glass plates for mirrors are primitive and small and should not benefit from the right to duty-free import. The craftsmen are organizedly declaring themselves against the bill. For example, representatives of the rope-making guild from Kyustendil object to the duty-free import of hemp, which is in favor of 2 cooperatives and 5 factories, but will ruin over 1000 craftsmen. Craftsmen coppersmith associations from Chirpan, Haskovo, Stara Zagora, Shumen, Vratsa, Varna, etc. also insist that duty-free raw materials should not be given to the production cooperatives in their industry, because this will ruin the free craftsmen. More general objections to the ZNMI are raised by artisans from Pleven, Malko Tarnovo, Sevlievo, Varna, etc. They want to end the privileges that industrialists have enjoyed for more than 30 years.

The face of economic nationalism

The bill to promote local industry gives impetus to the manifestation of economic nationalism. Its forms sometimes take on comical dimensions. The Kazanlak rose traders note that through state support they will be able to successfully fight foreign production. The motives for the need for “our, native” production are also visible in the request of the manufacturers of paper bags, jute products, the perfume industry, etc. No matter how insignificant their production may seem, they are presented as a guarantee for the prosperity of the Bulgarian economy. For all of them, patriotism is expressed in the rejection of competition. The Union of Bulgarian Chemists also joins the people of economic nationalism. In a letter to the Parliamentary Committee on the bill, it is insisted that industrialists be obliged to replace their technical staff with Bulgarian citizens, because this will achieve the emancipation of our “industry from foreign specialists”. This would lead to strengthening the economic independence of our country.

It is remarkable that nowhere is there the slightest regret that the patriot-industrialists will burden the Bulgarian consumer with higher prices for their goods, and that in this way they are not actually acting particularly patriotic. Even the representatives of the artisanal classes do not use such arguments in their opposition to the ZNMI. They simply state that their interests should not be ignored, because compared to the industrialists they are the majority. The patriotism of the lobbyists for various privileges from the state disappears when it affects their interests. The representatives of the milling industry insist not only on preserving their privileges, but on not allowing the opening of new mills, i.e. on limiting the rights of the rest of their compatriots to compete with them.

Elements of economic nationalism were introduced into the main text of the ZNMI. According to its Article 45, during the first five years in which the promoted industrial enterprise enjoys the benefits provided for in the law, at least 75 percent of the specialist workers must be Bulgarian citizens. From the sixth year onwards, all specialists must be Bulgarian citizens. General workers must be Bulgarian citizens from the very beginning. Bulgarian citizenship is also mandatory for administrative personnel, with the exception of directors and deputy directors.

The muted forms of corruption

Some of the industrialists' requests for changes to the bill have been taken into account - such as that of the rose growers - while others have been rejected. The parliamentary committee is making efforts to deal with the diverse requests.

The huge material interests associated with the state's legislative initiatives in the economy create a favorable environment for corruption. Some of the deputies who support the 1928 Law on the Industrialization of the Bulgarian Economy are personally interested in its provisions, as they are industrialists or shareholders in companies with industrial activities. Convincing the people's representatives that a given law should be adopted or rejected can also be done through the power of money. The Social Democrat Ivan Pastukhov remembers being offered 50,000 leva to vote in a certain, advantageous way for the payer, on the law on the Bulgarian Commercial Steamship Company in the 1930s. He writes that he does not accept the money, but it cannot be said that this always happens with all deputies. The hidden mechanisms of legislation in the economic field create a favorable environment for corruption and, at the same time, hinder free economic initiative. Such practices impose a cloak of patriotism because that way they are more easily accepted by the public.

Image source: Wikipedia

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