The administration is slow and creates problems

Nikola Popovski

On one occasion, the icon of economic ultra-neoclassicism, the famous economist and Professor Friedrich Hayek, wrote that the basic task of economic theory is to explain how to adapt to the unknown. “It is undeniable that the constant changes in economic activity are caused by a number of factors that no one knows completely. Hence, we are constantly adapting to these factors that are unknown to us and we can only use limited and fragmented data… The system is the market, and the signals are the prices”, he says. Prices are signals that should inform the participants in economic activities about what they should do in the given circumstances.
Such perceptions, while perhaps exaggerated, were nevertheless based on the market economy model in its rather pure form, but also subject to much denial due to the many imperfections and failures of the same model that lead to economic distortions, inefficient use of available resources, and enormous realistic inequalities.
There are many indications that currently the Macedonian government is primarily concerned with attempts to promote precisely the “denials”, and with constant pressure on a system that, in a strange way, should be stripped of its excessive market influence. Namely, it seems that the unnecessary and excessive state direct interventionism on the market mechanism is starting to become a “new norm” in our country, which currently does not have any serious opposition, since such economic conception essentially started with the previous government, and the current one only continued to perfect it and expand it in many domains. Something quite different, but strong enough and influential resurfacing on the political and ideological scene, lacks for the time being.
In such circumstances, it wouldn’t come as a surprise if the economy remains trapped in the grip of such, almost omnipresent, interventionism for the long term, intending to treat all, or almost all, economic factors and activities as market-oriented that could not provide for their own survival, or in a cleaner state, a form as presented to us by the Government, could not secure their own future development unless they were state-supported in one way or the other. Hayek (whose work I and many other economists have many dilemmas with) in 1944, in one of his most influential books, and wishing to point out the possible nonsense of underestimating market power and market mechanism, said it was “The Road to Serfdom”.
It is clear that such general determinants of how a state and social system will address the problem of regulating the economy is very general and requires much broader and more detailed elaboration, yet it is ultimately productive as it seeks to prescribe the basic model that will dominate the economy. To clarify these phenomena on an actual social and economic question we may ask, for example, how to determine the minimum monthly wage in the country and how to stimulate investment and exports. One extreme is that there is no statutory minimum wage because, according to extreme neoclassicists, it would be a wage deviation from what they would have been if they had had a completely free labor market and, consequently, created additional unemployment. In the absence of that, let’s call it an “anti-market” measure, according to neoclassicists, the economy should end up in a state of full employment or at least with a natural unemployment rate.
The other extreme would be the excessively arbitrary minimum wage that would suppress the labor market, increase operating costs, reduce the profitability of economic activity, and ultimately discourage investors from investing in the future. The choice is not easy, but points to the need for appropriate interventionism and the existence of a legally prescribed minimum wage, the amount of which must be very carefully determined and a predictable mechanism to be built to align it with other economic movements in the future national and global economy.
It is quite the opposite when it comes to stimulating investment and exports that have recently been the subject of interventionist state influence. Prescribing certain pricing or other monetary interventions in that case is superfluous and unproductive. Their growth should, above all, be ensured by the stability and predictability of the economic environment and the non-interruption of the functioning of the market mechanism by the state which in this case is sufficient to perform its functions as a provider of the quantity and quality of public goods and providing a macroeconomic environment favorable to investors and exporters. No budgetary or off-budget direct incentives are needed as they are arbitrary, voluntary and unproductive, faced with the danger of being on the road to proper slavery.
According to media reports, at a meeting of a government minister in charge of economic affairs and business in the Economic Chamber of Macedonia held today, many of the discussants did not ask the government to pay regular and increased subsidies for everything, but rather simply that the authorities, through their administration, exercise their prescribed powers in accordance with the laws of non-stop and individual arbitration. It is, in fact, one of the traditional public goods – the provision of public services by the public administration in a satisfactory and efficient manner. The reaction of the present member of the government was as surprisingly sincere as it was defeatist – he publicly acknowledged, quoting: “The administration is slow and makes trouble.”
This is an unwanted acknowledgment that most of the problems in the economy are not caused by the “bad” functioning of the market mechanism but, on the contrary, by the obstruction of its free functioning. Such problems are not solved by additional administration and arbitration like, I quote again: “We will quickly promote a measure, the introduction of a hotline within an office where business people can call online and the government can respond to their problems”. Better conditions and a more stable business environment are needed, not subsidies. The government needs to deliver on its commitments, and for many it will be enough without the need for additional budget money to stimulate new investments, new exports, new jobs and similar initiatives in sectors and areas where there are completely different mechanisms for their encouragement from those coming from the budget.

Views expressed in this article are personal views of the author and do not represent the editorial policy of Nezavisen Vesnik