TRANSITION IN THEORY AND PRACTICE

BASIC ECONOMIC QUESTIONS WHAT- maximization of utility, product market, consumers, restrictions, planner HOW- maximization of profit, labor and capital market, producers, restrictions, planner TO WHOM- product and factors market, planner WHEN- capital market, planner

Ownership Management State or socialPrivate Centralisedstate/ centralised Soviet Union private/ centralised South Korea Decentralisedsocial/ decentralised Yugoslavia private/ decentralised USA ECONOMIC SYSTEMS

1. Privatization - objectives - efficiency, justice, democracy - complexities of privatization - privatization models -outcomes of privatization 2. Macroeconomic stabilization - assumptions and Washington agreement - transformational depression 3. Microeconomic restructuring and marketization 4. Creation of a new economic system COMPONENTS OF TRANSITION

DILEMMAS OF PRIVATIZATION MECHANISM Free distributionSales to whomto whom to everybody - to employeesto citizens - to foreigners - equallyPatterns - by age- stock market - by years of employment- auctions Patterns- workers-managers byouts direct- debt equity swaps indirect- direct sales Restitution- increase of capital in kind compensation

Assessment of economic situation: D>S, Washington agreement; Increase of Supply: liberalization of imports, pure socialist production goods; Decrease of Demand: price liberalization, restrictive credit policy, restrictive fiscal policy; freeze of wages, fixed exchange rate; Results: economic depression, measured and actual, unemployment, social diferentiation; MACROECONOMIC STABILIZATION

Demand Supply Shortage output Prices Ps P Qds Qss Q AGGREGATE SUPPLY AND DEMAND CURVES

TRANSITION MODELS IN CEE 1.Baltic2.Visegrad 3. Slovenia Starting positionEE, LT, LVCZ, HU, PL, SKSI Privatizationsales tosales tofree distribution foreignersforeignersMW by-outs Stabilizationfixed ex.rateswitchingfloating fiscal disciplineadaptableadaptable Social Considerationsabsentpresentimportant Restructuringabsentby FDIdecentralized ProblemsCA deficitCA deficitbalance emigrationbudget deficitEMU problems MODELneoliberalembeddedneocorporativist neoliberal TRANSITION MODELS

THE DEVELOPMENT IN CEE COUNTRIES

GINI COEFFICIENTS,

SOCIAL COHESION INDICATORS IN NMS Public expenditures/GDP Gini coefficient Inequality coefficient Social Security Expenditures/GDP

EXPENDITURES FOR HEALTH AND EDUCATION

SLOVENIAN TRANSITION MODEL Slovenian privatization model ignoring Washington agreement in macroeconomic stabilization gradualism and floating exchange rate some of the consequences

THE YUGOSLAV ECONOMIC SYSTEM AND ITS BREAKDOWN Systemic Development: : administrative socialism, centralised answer to all four questions, planning, : administrative market, WHAT and HOW- decentralised, TO WHOM and WHEN - centralised, investment funds, dualism of prices : market socialism, decentralised answers to all four questions, reforms 1961, : contractual socialism, Law of Associated Labor : collapse of the system and of the country Stagnation Political development Economic collapse of the country in 1990 The collapse of the fiscal system; June 1990, October 1990; The collapse of the monetary sytem, December 1990 Customs within the country, July 1990 The appearence of different economic systems

SLOVENIA IN 2009 Surface: sqkm, 66% forests, Population: 2,02 millions, Language: Slovenian; (Italian, Hungarian minorities) Political Arrangement: parliamentary democracy, coalition governments; “left” or “right” History: until 1918 part of Austro-Hungarian empire; part of Kingdom of Yugoslavia; occupied by Germany, Italy and Hungary; Yugoslav republic; political transition: 1991 independence, May 2004: EU member state, January 1, 2007 EMU member; Economy: GDP 34 billions €, GDP/capita €, 91% of EU27 average, - GDP growth: 4%(2008) -7.6%(2009), - unemployment rate: 4.4%, (2008), 6.9% (March 2010); - inflation 5.7 %(2008) 1%(2009), - public balance/GDP: 0.4%(2008), -5,5%(2009) - CA/GDP: -4.5%(2008) -0.6%(2009)

PRIVATISATION specific model of decentralized, distributional and gradual transformation of social property MACROECONOMIC STABILIZATION benefits of ignoring Washington agreement, gradualism versus shock therapy, floating exchange rate MICROECONOMIC RESTRUCTURING slow decentralized firing and retiring, cautious approach to FDI CREATION OF A NEW ECONOMIC SYSTEM THE KEY ELEMENTS: Starting position – the level of development, historical inheritance, from Maria Theresia to Edvard Kardelj Political development – softness of political and social changes. creation of a new elite or changes in the ideology of old elite, people without ideology The benefits of ignoring IMF and international financial institutions Responsible fiscal and monetary policies COMPONENTS OF TRANSITION IN SLOVENIA

THE LAW ON THE OWNERSHIP TRANSFORMATION OF COMPANIES Privatization Equation: ( (1-x)*40) + (20 + x*40) = % Pension Fund20% employees -10% Restitution Fund40% social property 20% Development Fund 40% social property 0 < x < 1 x = 1 - small successful companies, majority of workers&managers x = 0- large unsuccessful companies, state property, PF, RF 0<x<1- large successful companies, auctions for vauchers

PRIVATIZATION PROCESS Supply of Capital: shares in 1400 companies Demand for Capital: certificates, managers-workers by outs, restitution claims, transfers to KAD (pensionary fund) in SOD (restitution fund) Privatisation outcome (November 1997) 1127 privatized companies, 70 state owned companies, 82 liquidated companies; privatization gap 32 companies without insiders, 455 with insiders as minority shareholders, 795 with insiders as majority shareholders Gradual Concentration of Ownership Number of Shareholders in a Privatized Company at privatization Non-listed companies Predominance of insiders Predominance of ousiders Listed companies All companies

ECONOMIC DEVELOPMENT OF SLOVENIA

GAMBLING AND THE END OF THE SLOVENIAN “SUCCESS STORY”

BORROWING ABROAD TO INVEST ABROAD

THE END OF THE SLOVENIAN “SUCCESS STORY” AND THE ENTRY INTO THE CRISIS THE END OF THE SLOVENIAN “SUCCESS STORY” AND THE ENTRY INTO THE CRISIS DEPENDENCE OF THE COUNTRY ON EU -institutional (economic system – EU directives, monetary and fiscal policy, controls of flows) -Economic - exports and imports, euro CREATION OF SLOVENIAN CASINO CAPITALISM ( ) -the roots in vaucher privatization, creation of owners of assets instead of owners of companies; creation of investment funds; -globalization of product market leading to indirect globalization of labor market and replacement of workers with flexible “labor force”; -gradual turning of savings to speculations, creation of virtual financial wealth; -gradual disappearance of social cohesion;