In his new book, Time and Economics: The Concept of Functional Time, Željko Rohatinski focused on the concept of time, specifically on the question of whether economic time exists, as opposed to calendar time. Although the book is a revised doctoral dissertation defended back in the late 1980s, its thesis is by no means outdated.
On the occasion of the recent promotion of the book, Rohatinski answered current economic questions in an interview for Novi List, among which are the slowdown of economic growth, the introduction of the euro, and the outflow of labor.
If we talk about the domestic economy, growth is slowing down again, exports, whose jump was a result of entering the EU, are again getting a too strong counterbalance in imports, everything is again reduced to personal consumption, there are no private investments, and there are no public ones either…
>>>Rohatinski: In the economy, we shape everything ourselves, including time
– The problem is that the growth we have, of 2 or 3 percent, is monocultural, based primarily on tourism, on a little transit, and the fundamentals for long-term, stable growth are not being created. This is best seen in the industry where it is true that start-up companies are opening, but all of that is still too little.
Bread and milk are, of course, constants, but again there are cars, and everything else is stagnating.
Large industry has tremendous fluctuations even on a monthly basis, which shows that it faces problems in placement, financing, procurement of raw materials, investment. From all of this, a healthy basis for long-term and stable growth still cannot emerge.
So, are we indeed going back, into a period of stagnation, if not a new recession?
– That’s right. I do not believe, however, that neither the balance of payments nor the fiscal relations, which are now balanced (for the first time we do not have a double deficit), will significantly worsen in the coming years and return to levels from before 2008. I think the danger of such imbalances does not exist, but that we will be able to maintain a balance of payments surplus and a balanced budget in the long term with the current characteristics of the economy, I do not believe in that either, precisely because healthy fundamentals are lacking. However, it is enough for everything to remain at the current level, and we will again relatively lag behind, in economic, technological, and every other sense.
The price is paid through the foreign sector: the labor force that our economy cannot absorb goes abroad.
– Exactly, and that is primarily a cost for the national economy. Because that qualified labor force is educated at the expense of our taxpayers. They have knowledge, skills, qualifications, which they will not use for the benefit of their country, but will sell them somewhere else for the benefit of another country. To stop this, a fundamental change in the way the Croatian economy operates is needed.
>>>Rohatinski testified about the ‘pressure’ from Karamarko and Kujundžić – strange things were happening
You recently said that this government is unambitious because it has set as goals entry into Schengen and the introduction of the euro, while there is no real economic policy. What should that policy look like, what should the government do?
– A proactive economic policy should be pursued, which means encouraging domestic production and direct support for that domestic production. Let’s see how others do it. They lead an incentive policy that can be either active in terms of encouraging their own, or relatively passive in terms of limiting the influence of external elements that can stifle domestic ones. The EU is full of such examples regardless of the ‘Constitution’, the Lisbon Treaty, etc. One should not be a bigger pope than the pope. Finally, one must never forget what the starting conditions were for the EU to be formed at all, especially the eurozone.
You advocate for protectionism.
– One must fight for their own interests, but such a fight entails risk. It can mean risk for the state, because EU institutions, if they consider that such a form of fighting for one’s own interests is outside the adopted standards, can impose some form of sanctions. But it can also mean personal risk, because it is very attractive, after serving one or two terms in the institutions of one’s own state, to still get one or two terms in the institutions of the EU.
>>>Kujundžić claims he does not know what Rohatinski is talking about
So, what seems to us like a protest policy is mainstream for the great powers?
– Yes, only they do it in a more refined way. To illustrate with an example from banking. The ECB has been injecting huge amounts of liquidity into the financial system for several years, mainly through open market operations. The HNB creates primary liquidity exclusively by purchasing foreign currency. The idea that the HNB, in addition to purchasing foreign currency, uses other liquidity creation instruments is a priori rejected because it allegedly prevents eurozone regulations.
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At the HNB, they would say that they are conducting an expansionary policy, while some critics would say that they pointed to the same while you were governor.
– The monetary policy of the HNB was not really restrictive during my term, but it was significantly ‘more restrictive’ than was then suitable for commercial banks and certain political structures. Fortunately, it was so, because otherwise the consequences of the crisis would have been even more drastic.
But despite all the problems, we are dealing with the euro.
– The situation with the euro is very simple. By the accession treaty to the EU, like all newly admitted members, Croatia has taken on the obligation to introduce the euro, which will happen when two conditions are met: the first is that Croatia meets the economic conditions, primarily defined by Maastricht, and the second is that other eurozone members give their consent. This can happen in three or ten years, the timing is uncertain, but the direction is clear. The essential question is how the eurozone functions, what are the potential benefits of entering the eurozone.
