Bulgarian Economic Policy Is Not Rightist

The assessment of an economic policy as leftist or rightist depends on whether this policy is based on a redistribution of wealth from the rich to the poor or whether the state channels resources in support of the business sector. A leftist government decapitalises the country by lending support to the poor and is thus a short-sighted policy, while a rightist government stimulates business, increases the fiscal reserve and invests in profit-making activities, which increases the country's wealth in the long term. Free market and free competition are part of none of these alternatives. The rightist and leftist policies are an instrument of social engineering and of the collective management of the country. A true rightist policy would give up redistributing any income through the budget, so a policy which is helping the business is no true rightist policy. A true rightist policy envisages that the management of the country should altogether be left to its own resources. A true rightist market policy never had its roots in Bulgaria after 1997 as few were harbouring such a policy. The reforms in Bulgaria were being carried out at the insistence of the International Monetary Fund. According to the IMF, the market changes in Bulgaria had to include: – price liberalisation – reduction of tariffs – a balanced state budget – abstaining from leading a monetary policy (which was achieved by introducing a currency board) – liquidation of loss-making companies – privatisation – removing subsidies – a simple taxation system without preferential treatment – deregulating energy and telecommunications What the United Democratic Forces (UtDF) government achieved was introducing a currency board, privatisation, price liberalisation, reduction of tariffs, a balanced budget and temporary reduction of subsidies. The privatisation is the only irreversible element of the reform. As can be seen from the economic policy and the political activities which are implemented now, the current SIINM government could start leading a monetary policy again and could fix prices, increase subsidies and introduce protective customs tariffs. What the UtDF government did that differs from the rightist policy was increasing public investment; saving loss-making companies instead of liquidating them (such as the Varna shipyards, fertiliser producer Chimco, oil refinery Plama, Bulgarian airline Balkan, Bulgarian state railways BDZ and the plants in the defence industry, about 130 companies all told); backtracking on liberalisation in the energy and telecommunications sector; endorsing a socialist-style pension and healthcare system; allowing privatisation through management-employee buyout schemes in which the managers have been appointed by the government. The Simeon II National Movement (SIINM) government is a government of a typical political movement. This fact presents a particular difficulty as the government differs from the typical governments of political parties which protect a fixed set of values, as it tries to represent the entire spectrum. That is why the government cannot distinguish itself since it cannot determine itself. As a result, the promises and the intentions of the government are always so general that they are always true. Even though the ministers from the SIINM and the co-ruling Movement for Rights and Freedoms have been terming themselves as rightist, they are more often talking about the Nation and the Country, rather than about the Market and about Individual Freedom. Most of the measures they have adopted can be qualified as supporting the business. However, they are not supporting the business environment as a whole, but rather certain business sectors only. All this is combined with activism and a willingness to carry out a management at a micro level in the economy. This translates into government measures such as: – introduction of tax preferences and concessions in public procurement, instead of equal-for-all tax reductions. This makes economic agents operate under unequal conditions. – increasing subsidies for the agriculture, tobacco growing, state owned enterprises and introducing customs tariffs. These measures have the effect of drawing funds from groups of entrepreneurs and handing them over to other groups with the overall effect being zero. – turning branches of the economy into cartels and raising obstacles before new entrants – setting up investment funds and a new airline with taxpayers' money. There is also an idea to set up a state company which will start purchasing agricultural land – starting active management of the foreign debt, which is typical of risk capital managers, but not of governments – starting to manage the fiscal reserve of the government without taking into account that it goes against the principles of the currency board and the results could be very negative. In the end, government involvement in private life in 2003 is roughly at the same level as it was in 1998 (even though the structure of the involvement has changed). Public spending in 2002 was 39.2 pct of GDP, compared to 40 pct in 1998 and 44.1 pct in 2000. The ratio of subsidies to GDP has increased to 2.4 pct in 2002 from 2.1 pct in 1998. Salaries paid by the state accounted for 5.6 pct of GDP in 2002, down from 6.7 pct in 1998. Social and welfare spending accounted for 14.6 pct of GDP in 2002, up from 11 pct in 1998. Pension and healthcare insurance are a case in point, as the reforms carried out in these sectors are the clearest demonstration of the state involvement in the lives of citizens. The models of insurance chosen in Bulgaria do not allow free choice and voluntary solidarity. Bulgaria has chosen a scheme under which current revenue (27 pct or 29 pct of personal income) covers current expenditure on pensions and healthcare. The idea underlying this scheme is that future generations of working-age people will pay for the current generation when it retires. Under the current financial scheme in healthcare, the young and healthy are the only ones who are paying for it, while the old and the ill are the only ones who receive treatment. The priority in the healthcare system is treating the chronically ill rather than offering timely and high-quality treatment when needed. This turns the healthcare system into yet another scheme for income distribution. Part of Bulgarians are completely willing to remain dependent on the state and to receive their income from the budget. We do not know the percentage of these people, but the size of income which is re-distributed in this way is well-known. The state takes resources from those who generate income and play with risk on the market. Examples of redistribution from the state budget include 130 mln Bulgarian levs of subsidies for tobacco producers, a further 150 mln levs for farming in general and 70 mln levs for BDZ. These figures equal 520 levs, 400 levs and 2,700 levs per employed in the three fields respectively. Naturally, the state is continuing to pay out pensions that will total 3.0 bln levs for 2003, as well as scholarships, welfare payments and salaries to the state administration. The other form of transferring income is through the state healthcare, education and mail services. In the end, Bulgarians can be put into two groups: net payers and net receivers. The sums set for subsidies and social and welfare payments in the 2003 state budget stands at 6.0 bln levs, or 17 pct of GDP. The entrepreneurs are those who foot the bill. The number of Bulgarians who are generating income is estimated at 2.0 million, including 1.8 million employed in the private sector and 200,000 who are employed in the public sector but who can be considered (conditionally) to be creating added value. The 2.0 million account for only 30 pct of the Bulgarians older than 15. They contribute annually an average of 3,000 per person for the type of public spending which goes into redistribution to the poor and needy. In addition, they also pay for public services such as the judicial system, police, army and roads, from which all Bulgarians benefit. The choice between right and left is to a large extent a choice between generating income and redistributing income through the state budget. Since we are not witnessing a public consensus on reducing the redistribution through the Bulgarian government, we have no grounds of expecting more rightist political decisions to be made. ($=1.73 Bulgarian levs)