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TRANSITION IN THEORY AND PRACTICE

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

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TRANSITION IN THEORY AND PRACTICE

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  1. TRANSITION IN THEORY AND PRACTICE

  2. BASIC ECONOMIC QUESTIONS WHAT - maximizationofutility, product market, consumers, restrictions, planner HOW - maximizationof profit, laborandcapital market, producers, restrictions, planner TO WHOM-productandfactors market, planner WHEN - capital market, planner

  3. ECONOMIC SYSTEMS

  4. COMPONENTS OF TRANSITION 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 restructuringandmarketization 4. Creationof a neweconomicsystem

  5. DILEMMAS OF PRIVATIZATION MECHANISM FreedistributionSales to whom to whom to everybody - to employees to citizens - to foreigners - equally Patterns - by age - stock market - byyearsofemployment - auctions Patterns- workers-managersbyouts direct - debtequityswaps indirect - directsales Restitution- increaseofcapital in kind compensation

  6. MACROECONOMIC STABILIZATION Assessmentofeconomicsituation: D>S, Washington agreement; IncreaseofSupply: liberalizationofimports, pure socialist productiongoods; DecreaseofDemand: priceliberalization, restrictivecreditpolicy, restrictivefiscalpolicy; freezeofwages, fixedexchangerate; Results: economicdepression, measuredandactual, unemployment, social diferentiation;

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

  8. TRANSITION MODELS IN CEE TRANSITION MODELS 1.Baltic 2.Visegrad 3. Slovenia Startingposition EE, LT, LV CZ,HU, PL, SKSI Privatization sales to sales to freedistribution foreigners foreigners MW by-outs Stabilization fixedex.rate switching floating fiscal discipline adaptable adaptable Social Considerations absent present important Restructuring absent by FDI decentralized Problems CA deficit CA deficit balance emigration budget deficit EMU problems MODELneoliberal embedded neocorporativist neoliberal

  9. THE DEVELOPMENT IN CEE COUNTRIES

  10. GINI COEFFICIENTS, 2000-2006

  11. SOCIAL COHESION INDICATORS IN NMS

  12. EXPENDITURES FOR HEALTH AND EDUCATION1994-2003

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

  14. THE YUGOSLAV ECONOMIC SYSTEM AND ITS BREAKDOWN SystemicDevelopment: 1946-1952: administrative socialism, centralisedanswer to allfourquestions, planning, 1953-1962: administrative market, WHAT and HOW- decentralised, TO WHOM and WHEN - centralised, investmentfunds, dualismofprices 1963-1973: market socialism, decentralisedanswers to allfourquestions, reforms 1961, 1965 1974-1988: contractualsocialism, LawofAssociated Labor 1976 1988: collapseofthesystemandofthecountry Stagnation 1980-1990 Politicaldevelopment 1989-1990 Economiccollapseofthecountry in 1990 Thecollapseofthefiscalsystem; June 1990, October 1990; Thecollapseofthemonetarysytem, December 1990 Customswithinthecountry, July 1990 Theappearenceofdifferenteconomicsystems

  15. SLOVENIA IN 2009 Surface: 20.273 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; 1919-1941 part of Kingdom of Yugoslavia; 1941-1945 occupied by Germany, Italy and Hungary; 1945-1991 Yugoslav republic; 1990 - political transition: 1991 independence, May 2004: EU member state, January 1, 2007 EMU member; Economy: GDP 34 billions €, GDP/capita 17.000 €, 91% of EU27 average, - GDP growth: 4%(2008)-7.6%(2009), - unemployment rate: 4.4%, 60000 (2008),6.9% 100000 (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)

  16. COMPONENTS OF TRANSITION IN SLOVENIA PRIVATISATIONspecific model ofdecentralized, distributionalandgradualtransformationof social property MACROECONOMIC STABILIZATIONbenefitsofignoring Washington agreement, gradualismversusshocktherapy, floatingexchangerate MICROECONOMIC RESTRUCTURINGslowdecentralizedfiringandretiring, cautiousapproach to FDI CREATION OF A NEW ECONOMIC SYSTEM THE KEY ELEMENTS: Startingposition – thelevelofdevelopment, historicalinheritance, from Maria Theresia to Edvard Kardelj Politicaldevelopment – softnessofpoliticaland social changes. creationof a new elite or changes in theideologyofold elite, peoplewithoutideology Thebenefitsofignoring IMF andinternationalfinancialinstitutions Responsiblefiscalandmonetarypolicies

  17. THE LAW ON THE OWNERSHIP TRANSFORMATION OF COMPANIES Privatization Equation: (10 + 10 + 20 + (1-x)*40) + (20 + x*40) = 100 10% Pension Fund 20% employees - 10% Restitution Fund 40% 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

  18. 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 199920002001 Non-listed companies 481360308265 - Predominance of insiders 470333276241 - Predominance of ousiders 492387340288 Listed companies 7497457640853653 All companies 2820176515671349

  19. ECONOMIC DEVELOPMENT OF SLOVENIA

  20. GAMBLING AND THE END OF THE SLOVENIAN “SUCCESS STORY”

  21. BORROWING ABROAD TO INVEST ABROAD

  22. THE END OF THE SLOVENIAN “SUCCESS STORY” AND THE ENTRY INTO THE CRISIS DEPENDENCE OF THE COUNTRY ON EU • institutional (economicsystem – EU directives, monetaryandfiscalpolicy, controlsofflows) • Economic - exportsandimports, euro CREATION OF SLOVENIAN CASINO CAPITALISM (2005-2008) • theroots in vaucherprivatization, creationofownersofassetsinsteadofownersofcompanies; creationofinvestmentfunds; • globalizationofproduct market leading to indirectglobalizationoflabor market andreplacementofworkerswithflexible “laborforce”; • gradualturningofsavings to speculations, creationofvirtualfinancialwealth; • gradualdisappearanceof social cohesion;

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