The Secret of IME (15 years since the registration of the Institute)

Outside the narrow professional circles it is unlikely that anybody knows that last week was the fifteenth anniversary since the registration of the Institute for Market Economics (IME). Many probably do not know also that after fourteen years of managing the Institute, the author is only a supervisor of its work. However, Svetla Kostadinova is already known as its director. 

Language and Historic remarks

The idea of IME came about in 1992 and was implemented as a typical "think tank" after March 1993, when with a few exceptions – Lithuanian Free Market Institute (http://www.lrinka.lt/), The Gdansk Institute for Market Еconomics (http://www.ibngr.edu.pl/english/index2.htm), the CASE Institute (http://www.case.com.pl/ ) and some other "think tanks" were very rare in Central and Eastern Europe. I myself understood about the existence of the Gdansk Institute during my visit (with educational purpose) to the Heritage Foundation (http://www.heritage.org/) during April 1993. The name of the Institute for Market Economics was given by the than ambassador to the USA Mr. Ognian Pishev. Actually, from that time until now there are not significant changes in the way the Institute operates.

"Think tank" could be translated into Bulgarian as "a reservoir for thoughts" or "a brain trust". I could testify that all translations are equally correct and that the think tanks are political i.e. based on a certain value system institutes.

The first such tank (The Institute for Economic Affairs, IEA, in the United Kingdom – http://www.iea.org.uk/) was established during 1955 based on the idea of Friedrich von Hayek. Hayek is a great thinker, but a lousy administrator. The will and engagement of Ralph Harris (later Baron Harris of High Cross for his contribution to the prosperity of the British people) were required to start the actual work of dismantling of the socialist economic policy in the UK and the World. The example became contagious, particularly in the US and North America.  In the US with particular influence are known the already mentioned Heritage Foundation, the Cato Institute   (http://www.cato.org/), the American Enterprise Institute (http://www.aei.org/) – to mention a few. From Canada today the entire World knows the Fraser Institute (http://www.fraserinstitute.org/), with which IME and seventy other think tanks publish The Economic Freedom of the World Reports (http://www.freetheworld.org/). 

After the fall of the Berlin wall the movement spreads to Eastern Europe. After Eastern Europe – a wave of new mainly orientated towards market and freedom think tanks comes to Western Europe, while the old such organizations are very enthusiastic about the success of Eastern Europe. This happened even in prosperous countries like Germany and France. Today most such institutes are united in Free Europe Coalition.

I enclose the web sites of these reservoirs of thought, because from them one could check how they are connected to each other (for example: they work jointly on many projects or representatives of one are members of the consultative councils of others).

"Thought Factories"

Even a brief overview of the above mentioned web pages would show that these institutes are different from the so-called "thought factories" or "institutes for public policies", as incorrectly sometimes the "think tank" is translated.

These "factories" are characterized with their belief that a man could think something new only because he would like to think of something new. Thinking here is understood as the fruit of one type of company organization.

In addition, they believe in some version of the tale about the good king, i.e. either if you give to the government some idea, it will apply it, or either that the government has the good will "in the interest of the public" (which by itself most probably does not exist) and most often is part of the solution. A consequence of that belief is the fact, that these structures could come up with any policy for which one could pay and by that they look alike the Brussels's consulting companies, which could do any project, regardless of how unreasonable it is. The economists in such institutions are something as servants to the governments and their effort to redistribute or in the worst case – ideologists.

I will abstain from showing such web sites.

The Secret Weapons of IME and the Market Orientated Political Institutes

During the fifteen years I do not remember a significant problem of the people in Bulgaria, which had not passed through the Institute. The list could begin with the seemingly far removed from the economic problems with the former "collaborators" with the communist repressive apparatus. Than one could mention the attempts to buy, personal use and expropriate the Institute, which on a different level are a significant problem for the Bulgarian economy. There were problems like political and value system division, attempts to steal resources and ideas, complete lack of funds on the border of bankruptcy, struggle with economic illiteracy and destruction of mental fossils, loss of money in bankrupt banks, lack of people and alike.

The details are not really interesting, except for the lovers of soap operas.

Regardless of whether it was a question internal or external to the Institute problems, the methods for solving them were generally the same and arise from the general principles of operation of a market orientated and to individual freedom think tanks.

Always extremely useful proved to be the publicity of the fundamental values, resources and intentions. Starting with the name, the Institute has always been open about what value system intends to analyze, comment and develop solutions. I think that my memory is accurate: IME is the first nongovernmental organization (except for the Open Society Fund), which is regularly audited by reputable auditors and which reports are completely public. Something more, we apparently never work only of interest for the money box of those, who we hoped to apply our ideas. We have always made an effort to convince the public at large that what we propose makes sense. During the last ten years 25% of the time of the people working with IME is dedicated to writing articles for the press and participation in radio and TV programs.

To be able to influence, the think tank must have community of ideas, mutual trust in them and common use of these ideas as a lens through which are observed and analyzed the processes. One experienced friend, who had managed the American Enterprise Institute for 21 years, calls this a school of thought in its classic meaning. This thinking is applied, the ideas should be implemented in practice, and they must be used in real life.

Among other things, when there is no fraternity of the philosophy, the analysis and the messages have no face. It is not possible to challenge them; they are not interesting at all. This to a large extend explains the popularity of IME.

The academic style is not very appropriate for IME and other similar institutes. The academic analysis and scientific justification are means to justify and convince that something must be done. In that sense we at IME really more often succeed in organizing the intellectual efforts better than the universities and the academic institutions. The list of pioneering research for Bulgaria is very impressive: the costs of the companies, the gray economy, the potential of the mortgage market, the investment companies, the informal labor market, etc.; without mentioning the ration of cost-benefits evaluation from passing and application of approximately 250 bills and regulations. The most specific for IME example of applied analysis is the so call "alternative" budget of the government. It has been produced by my colleagues and first and foremost  by George Angelov for a number of years as an empirical confirmation of our thesis, that it is possible and useful to significantly reduce taxes, without significant cuts of the social obligations, if the government is willing to rationalize them.

Since the principals of market economy and freedom are contradictory to the prevailing in Bulgaria idea to live at the expense of others, these principles together with the developed on their basis research and recommendations were not always popular and almost always of the opposition. This fact alone makes the financing of institutes like IME an extremely difficult task.

Institutes like IME must accumulate ideas, which application is useful. This could not happen by itself. Very often a lot of mistakes are made. But even more often the application requires time. The ideas of the UK Institute of Economic Affairs for liberalization of prices and commerce were developed during 1955, but were implemented during the ‘80s. What IME was proposing during 1996 about the registration of the companies is being applied today. The idea of a flat and low tax had to wait eleven years. And again the application of both ideas is not the best possible.

Now we work for change of the EU. I think that one of my main mistakes was that I was not more radically against the Bulgarian membership of the EU.