It’s the Economy, Stupid!*

Bulgaria is the poorest EU Member State and this fact no longer surprises anybody.

Bulgarians got used to their place in the bottom of all rankings and revealing such information has even become an occasion of jokes and laughter. Of course, this is sad, but Bulgarians somehow manage to accept their destiny because all illusions for some better development have died out long ago.

For years on, voters have been living with groundless hopes that somebody will come out and “fix” things up. After several elections with the expectation that the miracle would happen, the frustration with the unrealized hopes began to dominate, which made a great part of Bulgarians rather cynical. And a cynic has no values. The main goal is the improvement of the personal welfare, even if such improvement is related to somebody else’s misfortune, including the misfortune of the whole society.

This paradigm takes away our freedom because one cannot be free and not respect the freedom of other individuals in society at the same time.  Whenever one is willing to violate somebody else’s freedom, it is reasonable to expect that somebody else is going to violate his own personal freedom in return. Whenever one is ready to ignore the laws, he has no reason to rely on these very laws to protect himself from encroachment upon his own freedom. Because it is only the rule of law that allows freedom.

It is the law that guarantees human freedoms and basic human justice in social relations – it is not the market; it is not human communities, formed in some way, but the law, enforced by the state.

The law of mobsters, based on exactly the opposite principle – the law of the stronger, has turned into a universal role model and this is the reason why the principles of the constitutional state and democratic society, which guarantee our personal freedom and protect our interests of individuals, cannot be developed.

During the period of our transition to market economy, each and every government has somehow contributed to the accumulation in Bulgarians of frustration with the political processes in the country.

The problem of today’s government, however, is that not only that it haven’t taken even basic measures to heal the social environment in Bulgaria, despite the proclaimed promises in its pre-election campaign, but with its actions it has further deteriorated the existing situation by its completely inadequate measures in the field of economy, in addition to the current problems related to the social security, educational and healthcare systems, which need reforms.

A lot has been written about the mistakes in the economic and financial policy of GERB’s government. The main problem, however, is that the government has put the state in service of monopoly and steadily protects its interests, thus drastically impairing the public interests. This has totally deformed the already deformed market environment in the country and placed lots of serious impediments to the development of normal competitive relations.

On the other hand, GERB’s government could be basically characterized with the considerable deterioration of the quality of the state administration by inappropriate appointments of incompetent people at key positions, which negatively reflected the analytical competency of critically significant units and ultimately lead to inadequate assessment of the political and economical situation, including of those related to national security.

This deficit of qualified people influenced the development of important documents that regulate the work of the government and institutions, such as the state budget and its concomitant laws.

Due to the inadequate expectations about the development of economy, the tax administration has been transformed from a structure, enforcing the legal requirements for tax collection, into an organization, which illegally, yet with the official authorization of the state, blackmails the business and citizens with the sole purpose to fill up the gaps that consecutively open one after another in the state budget.

All of this additionally aggravated the influence of the global economic crisis.

Statistical data pitilessly reveal the seriously deteriorated parameters in our country. Only for the first quarter of the current year, for which there is official data available from the National Statistics, the number of people, hired with employment legal relations, has dropped with approximately 11 000.

The main drop is registered in the private sector, where it runs to approximately 10 000, while in the public sector, the number of employed people has reduced with about 1 500. According to the Bulgarian Chamber of Commerce, the number of lost employments for the first quarter in the private business is 56 000, which means that approximately 2 800 companies have bankrupted. If the statistical information includes all employed people over the age of 15, then it turns out that only for the last two full years, during which GERB held the power, i.e. 2010 and 2011, employment in the country has dropped with 304 000 people, which represents a drop of 9.3%.

According to Eurostat, employment in the country for 2011 has turned with approximately 6 years back to the middle of 2005, when the serious economic boom in Bulgaria of the last years before the crisis was yet to come – the crisis began to spread over to the country as early as the middle of 2009.

GERB’s government constantly emphasizes the extremely good indicators of the country in terms of the state debt and budget deficit. The comparison using these indicators was necessary, on one hand because it was important for the government to have some indicators, which it could use to cast some positive light on the background of the tempestuous crisis in Europe, and on the other hand because these are the two parameters that the European Commission uses to assess the financial condition of the Member States.

The government, however, avoids talking about the constantly increasing unemployment and even uses tricks in announcing the unemployment rate by presenting data about the registered unemployed people in the employment offices, instead of data from the National Statistical Institute. It is obvious that the registered unemployed people in the employment offices are considerably less that the total number of unemployed.

According to the national statistics, during the first quarter of 2012, unemployment has reached a peak of 12.9% as compared to 11.4% at the end of 2011. This plainly shows that the economic situation in the country continues to deteriorate, despite the good indicators in terms of debt and deficit.

Actually, in terms of unemployment, Bulgaria lines up among the EU Member States which face extremely serious economic problems and receive EU funds in order to cope with the crisis. For example, according to data for March 2012, Bulgaria takes the eighth place in terms of unemployment, following only the problematic states in the Union, such as Spain, Greece, Ireland, Portugal and Latvia, all of which receive international assistance.

The only country outside this group with worse indicators than Bulgaria is Slovakia. Even Hungary, which has received international funds to support its finances twice already, as well as Romania, which also receives financial support from EU and IMF, have lower unemployment rate than Bulgaria.

The negative economic development is already influencing the emigration flows from Bulgaria. In 2009 and 2010, an explosion of emigrants from Bulgaria is noticed – the number of people leaving the country increasing not with percentages but with times. Thus, for example, the difference from 2008, when about 2 000 people were leaving Bulgaria, in 2009, the emigrants from the country were already 19 000, and in 2010, this number reached almost 28 000 people.

In 2011, another 10 000 people had left the country in an attempt to find better conditions for living.

This is a huge loss of human capital. The country is anyway in a very difficult position in terms of the labor market and personnel qualification. Bulgaria is on the third place in EU in terms of deteriorating indicators of its demographic picture, following only Latvia and Lithuania. Romania also has a better demographic profile. In the other former socialist countries, the demographic picture is much better.

The future demographic development is extremely alarming. In its last report on the demographic and social development, published in May, the European Commission forecasts that Bulgaria is the country, which will undergo most severe and even drastic shrinkage of its population in 2060 – the shrinkage is forecast to reach 27% for the period. Even Latvia and Lithuania are behind Bulgaria in terms of this indicator.

The fact that the age structure of the population is also changing will have a further serious negative impact – people of working age (15-64 years) will shrink with 42% and in 2060, they will run to a little below 3 million people. At the same time, the share of retired people will almost double to a little below 33% of the population as compared to the current 17.6%, which will negatively influence the costs of pensions. The low fertility rate, which remains far below the level of population reproduction, is just another negative feature of the demographic picture in Bulgaria.

All of these problems will lead to a change in the normal population pyramid in the country. With time, the population in young and working age will become less and less, while the number of retired people will increase. This will render all options for economic growth rather difficult. With years, the potential growth of economy will diminish, until becoming 0.8% in 2050. With such economic growth, Bulgaria will continue to considerably drag behind the average level of economic development in EU. From this point of view, the government’s promises that during the next several years Bulgaria will become an averagely developed European economy sound more like an incantation and extreme populism than an actually achievable result.

Neglecting the economic problems in the county is not a short-term problem related only to the present crisis. The crisis will sooner or later end – most probably within the next 10 years, but the harm it would have inflicted on the options of the country for economic development and on its demographic picture will have an extremely long-term, if not permanent, negative effect.

There are several economic dependencies, which this government refuses to realize. The economic growth attracts immigrants, which favorably affects the labor market by increasing the number of people in working age and thereof positively affecting the long-term economic growth. On the other hand, a country in continuous economic recession or stagnation tends to lose a part of its population since unemployment increases, which on its part reduces the potential economic growth. Ultimately, long-term employment drops.

If the government continues to fail to apply a proper economic policy, more and more people will prefer to leave the country and the situation will become a vicious circle. This is exactly what currently happens in Latvia. Ultimately, if the age of the people, leaving the country, is lower than the average or if the level of their education is higher than the average, then the quality of the work force, along with its potential performance, drops.

From this point of view, the low levels of budget deficit and state debt have no much importance for the long-term economic development of the country. On the contrary, the situation is getting worse since less number of young people means less number of new families, less number of children and greater health and pension instability in the long run. This is all so obvious that it is surprising why the government cannot realize it.

Today’s government incompetence will have a serious negative impact in the long run and it will affect also the future Bulgarian generations. In the final reckoning, everything is in the hands of Bulgarian voters.

If they wish to live in an orderly and well organized country, they have to choose the people, who can do it such.

Otherwise, for years on, Bulgaria will remain the poorest and worst developed EU state, even after the accession of new member states, which will become an occasion of jokes and laughter – unfortunately, not only in Bulgaria but also all around the world.

* Bill Clinton’s successful campaign slogan for the US presidential elections in 1992

Статията е публикувана за първи път на 29.07.2012 г. в www.mediapool.bg