EKIP– Expert Club for Economics and Politics A Different Opinion
In the famous essay "What is seen and what is not seen" by the French economist Frederic Bastiat, there is a brilliant insight. It is that every action in the socio-economic sphere has visible but also invisible consequences. Invisibles are events or processes that did not happen due to the taking of one or another action. With the increase in taxes, investments in the private sector decrease, i.e. do not happen and are not visible, with the increase in the minimum wage, employment among some of the most vulnerable social groups decreases, i.e. becomes invisible, etc.
With this text we will try to supplement Bastiat's insight by drawing attention to the fact that political actions also have consequences that are almost invisible. The illustrative examples are from the Bulgarian economic history of the 1930s. They reveal features that are not unique to the Bulgarian reality and this allows for more general conclusions at the end.
Where does it come from and how is it seen that which is almost invisible?
In the third decade of the 20th century, Bulgaria's economy was predominantly market-based, although there were strong tendencies towards the establishment of a planned economy. These came from the main players on the political scene. Supporters of basic economic freedoms were almost absent among the political elite.
In the 1920s and 1930s, state intervention in the economy and social life became increasingly widespread. After the beginning of the Great Depression, the People's Bloc coalition came to power in the country through democratic means. The partners in the government tried to combine completely opposite policies. On the one hand, the Minister of Finance S. Stefanov made desperate attempts to cut budget spending and increase revenues. Currency controls were imposed, there were constant demands for layoffs of teachers and other civil servants, and a number of taxes and excise duties were increased or collected more actively, especially those on tobacco and alcohol. Payment for supplies under state orders was postponed, and payments of civil servants' salaries and pensions were systematically delayed. Against this background, the number of state and municipal services increased, where the rulers placed their party supporters. According to official statements, efforts are being made to improve working conditions, various authorities are regulating working hours, prices of basic products are being controlled, benefits are being distributed to the unemployed, etc.
In view of the topic that interests us, an important characteristic of the early 1930s should be noted. The press was relatively free. The newspapers with the largest circulation were "Zora", "Zarya" and "Utro". The first was well written by talented journalists, with a relatively moderate position, but far from leftist ideas. The second had a certain leftist bias, and the third had the highest circulation and often focused on sensationalism and yellow news, but was also skillfully managed. On the pages of these, but also of many other newspapers, one can find the consequences of state activity in the economy, which are almost invisible. After the coup of May 19, 1934, freedom of the press was limited, and the government directly bribed some of the influential newspapers. As a result, the sources for establishing what is almost invisible are limited.
The consequences of state policy viewed from the bottom up
State and municipal control of various economic activities creates changes in lifestyle and a breeding ground for all types of fraud, for petty or not-so-minor crimes.
With the delay in salaries and pensions, those who rely on them increasingly shop on credit, i.e. on credit from grocers and other small traders. The latter actually indirectly lend the state by temporarily taking on the burden of its debts. In order to increase state revenues, the so-called bread stamps were introduced in the early 1930s. They were affixed to bread sold in the cities, and they served as proof that the product was subject to excise duty. The capital's bakers reported that, as a compensatory reaction, domestic bread production had increased. Consumers preferred to purchase flour that was not subject to excise duty and bake their own bread. Pigs and pork sold in the capital were also subject to excise duty. The consequence was that local authorities noted "the smuggling of meat and pigs into the capital from the countryside." In July 1933, the Council of Ministers fixed the selling price of oil at 3 leva. and 20 cents per kilogram. Immediately, reports began to spread that oil was being sold at this price, but not per kilogram, but per liter, which made the price 3 leva and 90 cents per kilogram.
Some of the consequences, which are almost invisible, can be found in the crime chronicles.
With the introduction of currency controls, all foreign currency operations are concentrated in the BNB. As a result, court cases for illegal trade in foreign means of payment are increasing. The pressure of the authorities to increase state revenues also affects the functioning of the tax administration. Those working there do not receive their salaries on time and some of them try to earn additional income. They extort merchants, grocers, small craftsmen, etc. for bribes. In return for payment, they promise a quick settlement of their problems with the tax authorities, remission of fines, interest, etc.
In some cases, no state or municipal officials were directly involved. In early October 1933, the Sofia Police Command warned retail sellers not to fall for the tricks of individuals who, in return for money, promised them assistance with the authorities in obtaining permits to open stalls. Various craft and industrial enterprises were visited by self-proclaimed labor inspectors, who forced them to pay them various amounts, fees, etc. In order to stop the abuses, the Labor Directorate collected all the old cards of former agents and inspectors.
The high price of good intentions
The results of attempts to increase state revenues and forcibly impose virtues sometimes end in the most serious crimes and the deaths of young people.
By the early 1930s, about 60 excise laws were in force in the country. The increased taxation of alcohol and tobacco probably had the most direct impact on producers and consumers. Local authorities were required to ensure that no quantities of these goods remained untaxed. In November 1933, newspapers reported that in Suhindol, the local police bailiff Metodi K. Panov, a member of the Commission for the Inspection of Wines and Liquor, was shot with four bullets. The killer was a tavern keeper and butcher. It is assumed that the reason for the murder lies in the fact that the police bailiff "pursued the smuggling of wines and brandies with great energy." In the Shumen region, also in the early 1930s, the police authorities suffered casualties in attempts to limit the smuggling of excise tobacco.
According to the legislation in force in Bulgaria, abortions, except for medical reasons, are prohibited. The ban does not mean that the causes for them have been removed. In December 1933, at a congress of the Medical Union, it was found that abortions were performed secretly by midwives, midwives and all other incompetent persons. The result was sad, as there were "very frequent deaths, especially increased in recent times". There are no exact statistics on their number, because abortions are performed illegally. The Medical Union notes that illegal practices affect not only cities, but also villages. They are taking steps to ask the government to submit a draft amendment to the Public Health Act, which would also recognize purely social and economic motives for abortion.
The presentation so far is not an attempt to justify murderers or the health-threatening activities of individuals with poor knowledge and competence. They bear their personal responsibility for their actions. But it cannot be denied that the environment that gives birth to them is created by the good intentions of the state authorities. Something that is almost invisible.
Closing remarks
There are crooks and criminals in every society and in every historical period. Bulgarians have their own national characteristics, but they are not that different from their colleagues around the world. The point of power is to limit and punish the “bad guys”. The difficult question is how to create rules that provoke minimal attempts to circumvent or violate them. Probably at least some of them should appear as a solution of the people, and not as an imposed idea of good from above.
What is barely visible resembles the small print in contracts and labels, behind which things unpleasant for consumers are hidden. A look at the “small print” of the historical narrative shows that socio-economic relations are an extremely delicate matter. Intervening in them is difficult and very responsible. This is probably the reason why the “small print” is rarely presented to the public in an adequate manner. This makes it easier to market attractive, but dangerous to life and health, political products.
