The Civilized State Participates in the Governance of the Economy
A b s t r a c t
This is the first article – response to the articles of Prof. G. Petrov. It is difficult to discuss with him, because we think and talk on different economic languages and he does not understand anything but his own language. He believes that if there is a private sector, financial stability and full liberalisation everything in the economy will be solved automatically by its own. Any state intervention is counterproductive.
I’m well acquainted with the functioning of the world economy and do not know of a single civilized country, where the state does not participate in the governance of the economy. The more advanced the economy, the more sophisticated are the methods of government intervention. A number of examples are given in the article to support this.
Prof. Petrov confuses ends with means of economic development. The human being must be in the focus of economic development and economic policy, namely – the improvement of his quality of life. An economic policy, which does not produce such an improvement after a sufficient time lag is a wrong policy. Low inflation, balanced budget and current account, stable exchange rate, reasonable foreign exchange and fiscal reserves and so on are only means of economic policy and not its ends.
The article further confutes the arguments of Prof. Petrov, who believes that Bulgaria must go on with the Currency Board (CB) arrangement until joining the eurozone. Any modification in the CB, says he, will mean economic catastrophe for Bulgaria. The article proves that the CB, which was indispensable in 1997, is now producing more and more negatives to the economy. Particularly, the long lasting pegged exchange rate.
The article offers a review of the development of the central European countries without CB – inflation, budget, current account and others. The conclusion is that thanks to the flexible economic policies these countries prepared better for the EU and were ready for accession in May 2004. On the other hand, Bulgaria with its low inflation, low budget deficit, stable exchange rate, considerable foreign exchange and fiscal reserve is at the bottom on competitiveness and first in poverty among CEECs.
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