Mr. Karamarko, in his statement to a daily newspaper, says it is of strategic importance for Croatia to connect some islands to the mainland with underwater tunnels.
He even states that ‘they are not tunnels but pipes laid on the seabed.’ He emphasizes that this ‘should help the economic development of the islands.’ A basic understanding of the fundamental principles of market economy functioning suggests that initiatives where a prominent politician combines the terms ‘strategic importance’ and ‘economic development’ should be analyzed with particular caution and skepticism. When he adds that ‘the state needs to kickstart the construction industry’ and that ‘the price of the tunnels is not important because it will be financed from EU funds,’ it is worth reminding that empirical data shows that all of the above is (too) often not based on the presence of sufficient economic prudence.
1. Indifferent Danes and Swedes?
Let us not deceive ourselves that, for example, a Dane or a Swede is indifferent to how much their country contributes to the EU budget from which the tunnels ‘whose price is not important’ are built. What if the Danes and Swedes decide to add another lane to the Oresund Bridge (which connects Malmö and Copenhagen with four car lanes and two railway tracks) and finance the project from EU funds, resulting in increased contributions from Croatia to the EU budget for some bridge that most of us will never use or see?! Yet, the price is important to all of us!
2. The Illusion of Free Things
In socialism, but even today, some chant (and some really believe in these things?!) about free education, healthcare, etc. Unfortunately, the ultimate indicator of the price paid for ‘free things’ is a significantly lower standard of living because you have given up something else to ‘receive free healthcare and education’ provided by an inefficient service provider (the state), which collects money from users to provide ‘free services’ through taxes, excise duties, customs, etc. Our ambition should be a high GDP per capita that allows discretionary acquisition of desired services in reasonable quantities and at reasonable prices instead of a low GDP per capita in a country where ‘things are free.’ There are no free things, and in the end, someone always pays for them, and the peoples prone to populism unfortunately pay for it with a lower overall standard of living. Therefore, neither are the tunnels (bridges) free, nor is their price unimportant.
3. The Private Sector Dependent on the State
I consider it extremely harmful to believe that ‘the state needs to kickstart the construction industry.’ I spoke with a private doctor who says he is very happy because only 0.4% of his income comes from HZZO. In the last four years, his business has been growing, but he is concerned about what the state is doing. Due to the disproportion between public spending and activities in the real sector that must finance it, users of his services pay a higher VAT than in previous years, 150,000 people in the private sector lost their jobs during this period, and they are potential users of his services, etc. It is very (economically) dangerous when the state determines which sectors approach the status of a sacred cow. Croatia needs resilient and profitable companies, not a cult-like relationship with a chosen sector, especially if the cash flow of that sector (which is in private hands) primarily depends on state (irrational) spending that others (from the private sector) must finance. As things stand now, Alpine Bau (one of the largest construction companies in Europe and also the majority owner of Osijek Koteksa) is going bankrupt, and the state does not intend to save it with fictitious works. The state cannot be the solution to all problems in the economy, especially in the part that directly affects the ability of private owners and management to make decisions about what to invest in, how to finance themselves, and ultimately how to manage the entire circus.
