EKIP– Expert Club for Economics and Politics A Different Opinion
In the first part The incentives driving the behavior of politicians and the "People" were examined, and at the same time it was questioned that the "People" is a homogeneous body that thinks and acts alike. The topic of the second part will be several policies that have been on the agenda in recent years and were imposed with the argument that they are what the "People" want and need.
I. The increase in the minimum wage (MW):
When the minimum wage was last raised from 310 to 340 leva, bTV reported on a sewing workshop. One of the women working there shared in her interview with the media that she was happy about the measure taken, because it meant that she and her colleagues could earn more. Unfortunately, the minimum wage has proven to be an ineffective tool for combating poverty. She misses the fact that the people who will remain in their jobs will benefit from the increase. Due to the increase in the cost of labor, companies have an incentive to lay off employees, extend the working hours of those who remain, and replace labor with other factors of production (especially in the long term). Also, due to this increase in cost, some companies are ceasing their activities, and others are abandoning their planned entry into the market. It is no coincidence that the level of official unemployment is so high, especially in the poorest regions – in Northwestern Bulgaria the official unemployment rate for the third quarter of 2014 was 13.5%, while in Southwestern it was 8.9%. An even more accurate indicator is the employment rate, which for the Northwestern region is 56.5%, and for the Southwestern - 66.8% according to NSI data. The difference between them de facto doubles. And quite naturally, the poorer region will always be more affected by the increase in the minimum wage than the richer one. In practice, the “People”, getting what they want today – namely a higher nominal wage – loses much more in the long run. Last but not least, the minimum wage cuts off the path to the labor market precisely for the people it is supposedly intended to help – the young and the workers with the lowest qualifications and least experience. 1 Of course, if the seamstress loses her job, it will be the bad entrepreneurs and “wolf capitalism” who will be to blame, not the “good” politicians and unionists who changed the market situation and forced her bosses to lay her off.
II . The moratorium on the sale of agricultural land to foreigners:
Driven by the irrational fear that the Turks, Jews, Americans, and the omniscient Illuminati would enslave him by buying the land soaked with the blood of his ancestors, "The People" decided that they must fight tooth and nail to have the moratorium on the sale of agricultural land to foreigners extended. "Overwhelmed by momentary madness ", a large majority of the deputies of the 42nd National Assembly listened to "Narod" and voted for a law that created unnecessary tension between Bulgaria and the EU and was subsequently ruled unconstitutional by the Constitutional Court.
But what are the economic effects of it? The number of potential buyers of agricultural land was artificially limited by lawmakers, and its owners were forced to sell it at a much lower price than they would have received in a free market. According to some rumors, the most likely buyers are local feudal lords, as well as companies close to the DPS, which are supposedly the great enemies of "Narodna". In the long run, they will benefit from having bought the agricultural land at a reduced price now and being able to sell it in 2-3 years to Western investors at a substantial premium. Of course, the losers from the moratorium are precisely the ordinary people, who are prohibited from freely disposing of their property.
By the way, here it is appropriate to ask the question – if the Turks are so scary, does this mean that 1 million Bulgarian Turks, citizens of the Republic of Bulgaria, should be banned from purchasing and owning agricultural land? Isn’t it easier for some “evil” politician in Ankara to hire a protégé with Bulgarian citizenship, instead of personally buying the wretched Bulgarian land soaked with the blood of their ancestors? The answers to these rhetorical questions clearly show that the arguments for the ban are untenable. It is also advisable to recall the good example of the 20-year-old Belgian Victor Rombaut, who settled in the village of Tsar Petrovo, began to cultivate the Bulgarian land instead of leaving it deserted, and created jobs for the residents there. 2
II I. The “Interest Rates” of “Quick” Loans
For more than a year, various media outlets have been broadcasting heartbreaking reports about people who took a small amount as a quick loan without collateral and were forced to pay it back in double and triple amounts. The “greedy” financial institutions and “high” interest rates turned out to be the culprits for “Narodna”, and not the fact that borrowers usually do not read their contracts carefully – after all, the problem lies in the penalty fees for late payments, which in turn easily fall into court. A group of left-wing MPs, led by Rumen Gechev and Georgi Kadiev, came to the rescue and regulated the annual percentage rate (APR) to 50%. What did they manage to achieve with this move? They limited the ability of people to take out small loans without a guarantor. Why did this happen? A simple concept from the field of finance states that the greater the uncertainty and the higher the risk, the higher the interest rate must be in order for the specific investor to agree to participate in a particular deal. Giving a loan to someone you don't know, without a guarantor, is a rather risky undertaking. Giving loans to hundreds of strangers already implies that you have to secure yourself in some way, because the probability that some of the loans will not be returned is huge. Accordingly, the regulation of the BSP deputies made it so that the business with quick loans could not be profitable, because limiting interest rates also limited the possibilities for the risks associated with consumers to be controlled. Some banks directly closed their departments, some companies left the sector, and those that remained now require a guarantor. The "people" for their part either have to find a guarantor or go and take loans from moneylenders and moneylenders. Borrowing from the latter is particularly unpleasant, because there the borrower has no legal protection and late/non-payment of installments can cost him a limb in a cast or even more. It is worth reading more on the topic on the blog of financier Vladimir Karolev, as well as in the articles by Daniel Vassilev and Metodi Tsanov for EKIP .
IV . Energy
“Bulgaria should be an energy center in the Balkans”; “Electricity should be cheap until our incomes become like European ones”; “Energy is profitable and should be in state hands, so let’s nationalize the EPCs” “Energy is a monopoly that the State Energy Regulatory Commission must regulate so that capitalists cannot exploit the poor people” are some of the clichés that have been repeated like a mantra over the last decade. And they are the basis that serves as an argument for state intervention in this sector. And it is coming of the politicians who, in the name of "the People", but more so for their own personal gain, passed a bunch of harmful measures.
One of them, for example, was the unsuccessful construction of the Belene NPP, for which several billion leva were spent and in the end the losses were for NEK, i.e. for the taxpayers. And all based on false calculations and forecasts, the thirst for some commission from politicians and the megalomania and naivety of "Narod". And the most likely loss in the arbitration with "Atomstroyexport" will make things even worse.
Another harmful policy is the preservation of a number of companies in the sector as state-owned. Their funds allowed the rulers of the last 4 governments to have a huge financial resource to deposit in a friendly bank, through which to lay hands on other sectors of the economy, such as BTC and Bulgartabac, for example, and finally to bankrupt the same friendly bank, forcing the taxpayer to once again pay the bill for a lunch they did not eat personally.
A third harmful policy was the lowering of the price of electricity, which the first GERB government and the subsequent government of Plamen Oresharski did several times. Besides, the energy sector is overheating from deficits and there will soon be more than one or two bankruptcies. , the power cut has led to the fact that whoever consumes more benefits more from the price reduction, and not the poorest, for whom the reduction was supposedly undertaken, benefit. A far more effective mechanism for solving the problems would be the liberalization of the sector and the distribution of energy subsidies / vouchers to the poor.
1 Another such counterproductive measure was the regulation of internships by the previous National Assembly, which practically almost destroyed the possibility of using them as a means of gaining experience by pupils and students.
This was written by some liberal idiot who does not understand the cause-and-effect relationships in social and political processes. He does not understand or does not want to take into account that all the negative effects of the above measures are a consequence of the poverty and fragmentation of society deliberately caused by politicians, of the deliberately suppressed and manipulated public debate. Such a character is, for example, in Karolyev, who is known to receive payments to prepare precisely such socially destructive and anti-state consultations to advertise liberal policies that are not found in other countries and especially in strong Western economies. Such financially motivated characters have absolutely no theoretical and practical justification and have no vision of the consequences of the measures they propose. In general, the proposals fall under the heading of 'national treason', which is the subject of an entire chapter of the criminal code.
Expressions like "causal relationships in social and political processes" are common sayings intended to accuse the reader that the writer is competent on the subject. Your entire post is not based and does not contain a single fact, but only empty words and accusations. The only thing I tend to agree with is your second sentence.
The "theoretical justification" for liberalism is quite solid and is based on hundreds of years of theorizing by the Austrian School of Economics. The fact that you are not familiar with and reject the views of liberalism is your problem.
I myself do not consider myself a liberal and I will give you an example, which also leads me to the last part of your comment - regarding Karolev. I personally argued with him and did not agree with his thesis about limiting the APR in the amendment to the law on consumer loans. In the end, he was right - the limitation of the APR KILLED fast and commodity loans and created a business for the swindlers and usurers.