The GDP decline of 2.5 percent in the first quarter should compel a responsible government to reconsider whether the measures from the economic package, focused solely on cutting consumption, are sufficient. Or do they need unconventional solutions.
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Written by: Miodrag Šajatović |
For now, only global warming could help mitigate the recession. If Vienna and Munich heat up to 30 degrees, we will have tourists. And that is the end of innovation. |
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When I try to visualize a recession, I remember the week spent in 1998 in Kyiv. The capital of Ukraine hosted the EBRD meeting that year. Ukraine was in the midst of a recession. The GDP decline was about two percent. The city authorities had no money for mosquito spraying. The owners of the then-rare cafes (concentrated in one place in the city center) defended us guests from mosquitoes by burning car tires. It smelled, but the flying beasts kept their distance. However, the cafes were half-empty because young people had no money to sit in them. They bought drinks at kiosks and sipped them while walking down the main street of Kyiv. Another sign of recession was the desolation on the streets. There was no fuel, so even during peak hours, no one waited at any traffic light. And the few drivers were targeted by a crowd of police officers whose salaries were delayed, so they financed themselves by directly taking money from ‘violators’ of traffic regulations. Only Šuker is calm The latest data for Croatia indicates that it is also in deep recession. Analysts are surprised that the decline in the first quarter is as much as 2.5 percent, and if one takes it seriously, it would be surprising that Finance Minister Šuker is the only one claiming that everything is under control and in line with expectations. It is true that in Croatia, mosquitoes are still being sprayed in the capital and that the morning traffic jams do not show that citizens are saving too much on gasoline, but the casual ignoring of prolonged recession is not the least bit smart tactic. No matter how much Prime Minister Jadranka Kosor stands behind her Economic Recovery Program, the quarterly minus should be an alarm. Things are dramatically complicating, the neoliberal model contained in the Prime Minister’s program does not guarantee the end of the recession (except perhaps technically in some quarter), so the responsible government must consider alternative scenarios. Reducing state spending means lower domestic consumption. This will further reduce the revenues of many companies, so the budget will be even less filled. Therefore, additional savings in the budget will be needed, which will cause lower domestic demand, poorer budget filling… The government and its advisors owe the public at least an explanation of how this spiral will be stopped. If they let things resolve themselves, it would be fair to announce that the recession will not end even in 2011. Consumption and investments will strongly decline, while neglected and discriminated exports will only slightly rise. The Brazilian lesson Taxpayers pay the state apparatus, among other things, to ensure that state intervention ‘cuts’ the deepest part of the recession and helps to pass rough times as painlessly as possible. Great statesmen know what that means. For example, Brazilian President Lula da Silva determined that every mother sending a child to school in Brazil receives 80 dollars a month. Besides better education, this targeted state aid has lifted small entrepreneurship in the poor parts of the country, supply and demand… Of course, the Brazilian solution is not applicable in Croatia, but the aim of these miniatures is to show that in every country there are specificities that can be transformed into a motor of growth and development through innovative approaches. In Croatia, it is time for unconventional economic ideas. Who says that political rapprochement in the region, as conducted by the presidents of once warring states in the ruins of Bosnia and Herzegovina, cannot also be the basis for ‘win-win’ situations in mutual market opening and a joint form of some level of protectionism towards third countries? If strength could be found to start helping those markets in crisis, who says that this ‘internal’ market of about 15 million consumers would not help in overcoming the recession more easily? An unconventional suggestion comes from a reader of Lider who recommends, among other things, that the rule of taking the cheapest offer in public procurement be abolished. An obviously experienced entrepreneur suggests introducing a rule of excluding the cheapest and the most expensive offer. The consequence would be avoiding poor quality, price dumping, later shenanigans with external cost works, the practice of not paying subcontractors and losing the bidders themselves would cease… As things stand now, only global warming can mitigate the recession. If Munich and Vienna finally heat up to 30 degrees this year, tourists will head to the nearest sea, ensuring some money in the budgets for – mosquito spraying next year. If the summer is gloomy, there will be a need for the IMF in the fall. |
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