Waves of Interventionism


Nikola Popovski

During the 80s of the 20th century, socialism and socialist state economies around the world began very seriously to manifest all the systemic deficiencies that had gone through their societies for decades, and in economic terms, the most important thing was that the market, and market mechanisms were seriously or completely suppressed by the overemphasized state economic interventionism. In the same period, the most developed Western market economies, led by President Ronald Reagan’s combination of conservative economic policies in the United States and Prime Minister Margaret Thatcher in the UK, made further liberalization of their economies with which not so much present instruments and measures of state control over the economy, started to suppress them. A new wave of liberalization, privatization and deregulation of economies emerged.

Finally, in the early 90s of the 20th century, socialist systems and economies formally collapsed, and neoliberal economic systems strengthened and expanded almost all over the world. Their power was mirrored by the appearance of the so-called rules. “Washington Consensus” created by probably the three most powerful economic institutions in the world then and now – the US Treasury Department ,the IMF and the World Bank. The economic philosophy of that consensus, reduced to a few words today, is described as: “privatize, deregulate, liberalize, reduce (referring to the role of the state), globalize”. Under the influence of that ruling and dominant economic doctrine, the world has been developing for almost two decades, until the great financial, and then economic crisis of 2009. Economies grew at a satisfactory rate, macroeconomic stability was generally present, employment and trade also rose, structural changes accelerated. It seemed that everything was going well, until the strict laws of the market brought the world to the knowledge that it had quite “escaped” the process of deregulation, privatization and the withdrawal of the state from the economy, and that the stage of economic expansion was over. Neoliberal economic concepts again have crashed down like a tower of cards. Deregulated and liberalized banking has threatened to tear down and crush the economies as a whole, overnight and without much difficulty. Strictly set fiscal policies with low deficits and low levels of providing public goods in society seemed unable to help, and neoliberal monetary authorities with their rather deregulated and liberalized supervisory function were more a cause than a solution to the financial shipwreck and the impending recession.

Today, it is already clear to all of us that the way out of troubled crises and recessions is found in the unequivocal state interventionism based on the New Keynesian model, but also on the postulates of the importance of aggregate demand and the fiscal and monetary interventions on markets, known from the learning of classical Keynesianism. Measures have spread from using the mechanisms of fiscal and monetary policy to direct state aid and subsidizing many economic entities and activities. The first in line were banks that were repaired with state money. Given that there was no large amount of state money, interventional subsidies were made possible through the indebtedness of the states that created an enormous growth of fiscal deficits and public debt. In the most developed countries, it has reached just below 100 percent of the GDP value as was the case in most EU countries, over 100 percent in the US case and over 200 percent in Japan. Some countries did not endure this race and went bankrupt. Such was the case with Greece, which was then rescued by the EU, the ECB and the IMF, and only because it is part of the Eurozone. Interventionism, fortunately, has succeeded, and many countries, as well as the world economy as a whole have returned to the path of economic growth. But that was not enough. The growth was weak, with new threats of recession in the period around 2012, when a very significant upheaval took place. Interventionism continued, expanded and strengthened. Assistance to many sectors continued to persist and even introduce. Agriculture, education, finance, especially banking, innovative industrial branches, export sectors, and so on. The EU has begun to expand its state aid funds, as well to introduce new ones. To introduce additional barriers and import protection from the United States, China to introduce reciprocal measures, EU to protect itself. In such conditions, what could be expected from the weaker and less developed ones? They simply started to follow such examples. Market mechanisms are suppressed by increasing interventionism and subsidizing everything in the economy. All countries now offer assistance for certain activities, offer tax exemptions, free resources for foreign and domestic investors, concessions without compensation, subsidizing new jobs, new products, new start-up companies, additional exports, substitution of imports etc. They all readily argue that state aid and interventionism are necessary for growth and development, and that the market mechanism alone can not meet our expectations. Now, the time has come again for the state economy. It is the state that provides, finances, repairs, subsidizes, divides and redistributes, prohibits and enables, produces and sells. Market-oriented companies, branches, industries and national economies …. what was that?

In such conditions of environment in the world and the region that should be expected from Macedonia? Since 2009, it began slowly but surely to move along the path of domination of the state in economic life and economic activities. Remember the revocation of the licenses of a lottery company and the re-establishment of the state lottery? Remember the hysteria about the introduction of huge fiscal subsidies for state-supported agriculture, construction leaning only on state public procurements, the formation of excessive capacity for state higher education, the granting of inappropriate state subsidies and concessions to foreign investors in the industry, utilities, energy, services? Remember the attempts to change the Constitution in order to enable the existence of double standards with enormous privileges for the newly formed financial and banking activity? This, in one way or another, continues to this day. The state is even more active in helping investment, employment, exports, innovations, import substitution, purchases from domestic companies, and even wants to recapitalize companies by recording their own shares and stocks. This world wave that splatter the Macedonian economy now looks ‘sweet and sticky’. It looks like a quick success. But one day, it will come back much stronger, and when the market with its mechanisms will tear down the now set state barriers, it will actually come after its own. Then, survival will be difficult and only for the chosen ones who realized on time that they must, first of all, rely on its granite mechanisms.
In the past few days, the Ohrid Lake with its natural rage, took part of the manmade interventions on its coastline. The citizens of Ohrid commented that the lake actually just came for its own. What has always belonged to it.