Trade Deficits and the Health of the Economy - Part X

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Trade Deficits and the Health of the Economy - Part X Dialog with Nikola Gruevski, former Minister of Finance of the Republic of Macedonia By Sam Vaknin Author of "Malignant Self Love - Narcissism Revisited"

SV: Wine and apples are two fine examples of the "Macedonian Malaise" (typical to most so called "countries in transition"). The condition is characterized by an overwhelming sense of inferiority. Having been oppressed and subjugated for so long, small nations convince themselves that they deserve it, that something is wrong with THEM, that they are no good, bums, stupid, or simply unlucky. But always lacking and deserving of punishment. With such a national mood, there is no room for initiative, self confidence, self worth, trust, belief in the future, planning, legal behaviour, postponement of immediate satisfaction (also known as savings and investments) and capturing of markets. The weapons of the weak are socialist: poverty for all, steal from your employer, increase the information fog and dis-information, think now, there is no future, no loyalty, hide your true emotions and so on. The weapons of the strong are capitalistic: market yourself, believe that you are the best, improve constantly, think big, think ahead, fight your competitors on equal terms, honour obligations. Macedonians still have to make this transition. This is the ONLY transition that they have to make - because the only transition is in the mind and the rest follows from it.

The second symptom of the "Macedonian condition" is laziness brought about by the "Big Brother" phenomenon. Central planning is a very comfortable thing: no responsibilities, just blind obeisance of faceless instructions and plans, no headaches, no profits but also no losses. Each one has his own, undisputed, irrevocable and irreversible place. Admittedly, the former Yugoslavia suffered less from this malignant form of communality (thanks to Tito). Still, Macedonia had to export all its raw materials to Croatia and Slovenia. The latter would process them and sell the finished products to Macedonia. The Macedonians remained poor but happy: their lives were uncomplicated, straightforward, predictable, clear and controllable. Many Macedonians still miss these times of black and white. Now that the world has been coloured by the palette of personal profit, it is less easy. I personally met wine manufacturers in Macedonia who refuse to even entertain an idea of introducing bottling, packaging, branding and marketing of their wine - even if it means TEN TIMES the income! I met people in Gevgelia who preferred to let their apple crops rot rather than transform it to HOME MADE jam (no complicated industrial processes and no costs involved - the buyer was willing to pre-finance the whole operation). This is the power of comfortable habits and hundreds of years of sabotage, avoidance of all effort and labour and being someone else's colony (cheap labour and raw materials).

Whether money incentives will solve this state of things is an open question. There is a lot of fear of the new and untried. A lot of ingrained conservatism. A lot of hostility towards the educated, the foreign, the "superior", a lot of false pride (which is truly stupidity in its purest form). People are not used to a life of cut- throat competition. Many will prefer to stay poor. A few will take up the challenge. Will their number be sufficient?

NG: These are the things, which the Macedonians for a long time cultivated and thus experienced the "Slovenian complex" - the state bought unfinished wine, apples and other agricultural produce from its citizens and placed them for export for a price much higher than the one paid to the Macedonian producer.

There is one inevitable condition, which has to be satisfied to enable these "plans": the realization of a satisfying profit and the ability of the relevant companies to survive and develop by themselves.

I think that the development policy of RM in the future should be directed at stimulating and developing the industrial sector and products, which are not "tradable commodities". That does not mean that tradable commodities should be de-stimulated, only that the tremors of the commodities exchanges can reverberate very strongly in small countries such as RM.

SV: It is essential for a country in the process of modernization and integration in the global economic community to decouple itself from the volatile prices of commodities. One of the main reasons for the recent crisis in Russia was its over-dependence on energy products. But I would like to add two recommendations. First, whenever and wherever possible, the state should strive to hedge its commodity exposure. In other words, it should buy futures contracts in the world markets (Chicago Board of Trade, Chicago Mercantile Exchange). These contracts are like insurance policies. By paying a small premium, the future price of the commodity is guaranteed. True, if the price goes up above the guaranteed price - the difference is lost. But, if it goes down, the guaranteed (higher) price is paid to the holder of the contract. In the last three decades commodities were a one way business: down. Almost every type of commodity has such contracts available: pork bellies, lamb cuts, certain species of tobacco, corn, wheat, rice, currencies, interest rates - everything. It would be a wise idea to use financial futures to limit the exposure of Macedonia to variations in international interest rates or in exchange rates. All this can be done today. The second recommendation is to establish an "Exchange Rate Guarantee Corporation". The state will ensure exporters against foreign exchange fluctuations. The exporters will pay a premium and will purchase from the state an insurance contract, which will guarantee the rate of the foreign exchange that they are going to receive in terms of denars. This will enable them to price their products with an element of certainty. In most economically advanced countries in the world, such mechanisms do exist. Gradually, the state will be able to pass on this function (of insuring exporters against currency exchange fluctuations) to entrepreneurs in the private sector.

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AUTHOR BIO (must be included with the article)

Sam Vaknin ( samvak.tripod.com ) is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He served as a columnist for Global Politician, Central Europe Review, PopMatters, Bellaonline, and eBookWeb, a United Press International (UPI) Senior Business Correspondent, and the editor of mental health and Central East Europe categories in The Open Directory and Suite101.

Until recently, he served as the Economic Advisor to the Government of Macedonia.

Visit Sam's Web site at samvak.tripod.com