Electronic Library of Scientific Literature
Electronic Library of Scientific Literature
Volume 46 / No. 3 / 1998
Ivan OKÁLI
The paper states at first that the starting period of transformation
is also the period of initial macroeconomic stabilization of the economy,
during which the manifestations of market unbalance existing in a centrally
planned economy are eliminated. The initial macroeconomic stabilization
of the economy (installing the supply - demand balance) was accompanied
by a transformation recession (the rise of a distinct unbalance among production
capacities, work potential and their utilization). The creation of market
balance during transformation led towards the origin of other manifestations
of overall unbalance. From this point of view the starting stabilization
had a partial character.
Initial partial stabilization of transforming economies at the same time
has no permanent effects. Mainly in external economic relations the unbalance
renews itself, grows and exceeds tolerances which characterize standard
operation of market economies. If the initial stabilization (the approach
of the economy towards the state of balance) was only a partial one, and
moreover only temporary, it is obvious that initial reform measures did
not create market mechanisms in a form which could provide further maintenance
of balance on its own. The solution of this problem in the necessary volume
was not either ensured by the revival of economic growth.
The paper aims to ascertain how was the initial macroeconomic stabilization
in the Slovak Republic (i. e. that reached at the beginning of transformation
process) gradually weakened as a result of chronic unbalances existing
in the entrepreneuring sphere. This is analyzed separately in profit making
and losing enterprises, using the data of the table.
The fairly high share (consistently over 40%) of losing enterprises in
the total number of employees in non-financial enterprises with 20 and
more people signals the great extent of social and economic problems connected
with the fact that part of the microsphere could not adapt itself to the
situation in a market economy.
The relatively high profit rate in profit making enterprises and high share
(approximately 80%) of this group of enterprises suggests that in the economy
of the Slovak Republic costs adapted themselves to market prices so as
to use the revenues to provide resources necessary to recover and to develop
new technologies. On the other hand the high rate of negative profit rate
in losing enterprises, "stabilization" of this indicator on approximately
the same level and since the year 1996 the growth of the share of this
part of non-financial enterprises (mainly after their share in the total
revenues of the business sphere) signals that these enterprises are unable
to make the profit necessary for development and probably not even for
the simple regaining of their production capacities, and are thus usually
unable on their own to overcome this position.
In the branch projection of the results of profit making and losing enterprises
one discovers than in all branches a considerable part of enterprises operate
on a profit rate level ensuring necessary investments and maintaining competitiveness
at home as well as on the foreign market. This conclusion does not hide
the vast, and in the period of weakening macro-economic balance even growing,
problem of losing enterprises in all branches of the economy.
The paper presents the information that the problems discovered in the
Slovak business sphere appear also in other transitional economies.
A separate part of the paper notes the link between (un)balance in entrepreneuring
sphere and at the macrolevel and finds that losing enterprises negatively
influence the total balance by their substandard labour productivity and,
linked with this, the growing negative production differential (e. g. the
growth of the difference between labour productivity in the export segment
of the Slovak economy and abroad. These losing enterprises have also a
considerable influence on the maintenance of positive inflation differential
values, mainly through:
1. Neglecting the obligations to pay income tax and to pay fees to insurance
funds, thus causing one of the unbalances in national budget management,
or in the budget of the whole public sector.
2. Wage increases, which in fact copy (in the years 1995 and 1997 even
exceeded) wage increases in the profit making part of the microsphere.
3. Former accepted need to provide for the operation of losing enterprises
also by means of granting risk credits. This produces pressure to increase
bank credit margin and thus to increase the overall interest rate.
The unbalance in losing or low profit enterprises leads through its impacts to a relapse of the macroeconomic sphere and acts towards further weakening of the balance in the whole microsphere, consequently also in profit making enterprises. Unbalances at macro-level and microlevel are phenomena to a certain extent mutually independent which are nevertheless internally linked one to another. The solution of the problem of badly managed enterprises becomes a focal task of the next phase of the transformation process.
Egon Hlavatý
The paper is dedicated to the analysis of the results of the Slovak
currency policy in the years 1993-1998, and to the open problems of its
future development.
The experience from the currency development of the Slovak Republic confirms
that the currency policy of the transforming economy has to start from
the real conditions of the relevant period, and objectives to be achieved.
As both these factors change, the policy should react to these changes
and adapt itself to them.
The experience of the development in Slovakia has confirmed the fact that
up to now even without more drastic monetary measures the real economy
achieved relatively good results, which by GDP growth and inflation decrease
(in 1997 inflation stood at a mere 6.4%) widened manoeuvring room for monetary
policy. Various developments in the years 1993-1998 show that after the
successful managing of the currency stabilizing phase, problems appeared
above all in the years 1996-1997 in the attempt to accomplish certain development
objectives in the changeover from restrictive, anti-inflationary oriented
poli-cy towards more active development currency and credit policy.
In this aspect the development in the Czech Republic can be a suitable
lesson, as a similar, earlier process has taken place there.
The evaluation of the Czech currency crisis in the year 1997 demonstrated
above all the fact that its origins rested mainly in serious macro and
microeconomic structural and institutional problems which obstruct solution
of this crisis and create the continuing possibility of its relapse. At
the same time it was confirmed that the results of currency policy are
influenced more than in standard market economies also by extra-economy
factors. The achievement of the currency objective of the economic policy
is thus conditioned above all by the process in which the whole system
in its basic relations creates conditions for the rational use of money
in macroeconomic policy.
From the facts stated above, it follows that in the Slovak Republic long
term stabilization and strengthening of the Slovak currency, defence against
inflationary tendencies and consolidation of internal and external currency
balance, continue to remain an important currency objective. On the other
side the experience from the Czech Republic indicates that, in relation
to further objectives of economic policy, currency policy cannot be neutral
in the sense of supporting solely the stabilization monetary objective
without the support of economy revival and growth. Purely monetary criteria
in currency objectives without the second objective, the long term stabilization
of economy growth based on restructuring, when successful, have a brief
life only, do not facilitate long term currency stabilization and permanently
threaten a relapse to the deterioration of the internal and external balance.
The currency policy approach, respecting the above mentioned dual currency
objectives in the transitional phase of economy transformation, represent
a certain combination of expansive credit policy and currency-stabilizing
restrictive fiscal and income policy. In order not to provoke the relapse
of inflationary movement by active currency policy, one has to:
- start to prepare a complex economic programme of the optimum incorporation
of the Slovak economy into the international division of labour,
- co-ordinate fiscal and currency as well as credit policies,
- ensure consistent economic selection of the allocation of limited monetary
resources.
The exploitation of credit as a source of an active development economic
policy demands also an adequate credit policy. High interest rates would
retard entrepreneuring, and primarily investment activity. They would affect
particularly unfavourably the development of private enterprising and the
activities of small and medium enterprises and tradesmen.
The unbalance of external economic relations which originated in the year
1996 by more rapid growth of imports was reflected by the increased trade
deficit and increased current account of the balance of payments deficit.
In spite of this, the state of currency reserves of the Slovak National
Bank did not drop and ensures the coverage of a 3.4 multiple of the average
monthly import. The total state of reserves in commercial banks has an
increasing trend. Due to the expected restructuring effect of the increased
imports, stronger limitation of imports, in currency policy at the expense
of the restructuring rate decrease would lead in the long run to the violation
of the external balance. As an essential solution one should rather choose
the faster inflow of foreign investments.
On the basis of 6 years experience the author tries in the present paper
to suggest some new views concerning currency policy during the current
economic transformation. At the same time he assumes that the currency
problems discussed here are not specific only for the Slovak economy, but
in the wider context can be meet also in other transforming countries.
Zdeno JAURA
The paper consists of two parts: 1. Development tendencies of administration
costs in the Slovak Republic and 2. Theoretical problems of bureaucracy.
In the first part is defined the term administration as used
in current economic practice and mainly in state closing accounts; these
represent the main source of the analytical part of the paper. Under the
term administration mainly the state administration is understood.
For instance in the year 1992 the share of state administration in current
administration costs totalled 87%, and other components of administration
(courts, prosecution and state notary offices), 13%. In 1994 the share
of state administration in total administration amounted to 96% (prosecution
4%).
Total costs of administration (current costs and investment costs) kept
growing in absolute numbers year after year. The only exception was the
year 1994. This absolute increase was very striking. This is witnessed
by increments of 2 374 million SKK (1993), 2 039 million SKK (1995) and
above all 4 499 million SKK (1996). High annual percent increments corresponded
to these data; the highest of these were in the years 1996 (54.6 %), and
above all in the year 1993 (61.0%).
It is remarkable that state budget expenditure related to the GDP development
decreased in all years with the exception of 1993 (109.1% growth was registered
then). In the years 1994-1996 a certain regularity of this decrease was
witnessed (85.5%, 77.1% and 75.9%). The overall trend of state budget expenditures
in relation to GDP is convincingly decreasing. Total administration expenses
related to the GDP had a different course. Compared to 1991 they have kept
rising ever since. This growth had its fluctuations; the trend is, however,
distinct: the administration expenses grow in relation to the GDP.
In the structure of administration expenses prevailed the great prevalence
in non-investment administration expenses. This means essentially a prevalence
of labour costs and non-investment material costs for the operation of
the state administration. Investment costs, in their share in administration
expenses, had no distinct remarkable tendency.
For the year 1997 one could use only the assumed data of the state budget
for that year. The fact that the trends started in previous years go on
is vital information for 1997.
As for the shares of individual structural bodies of state administration,
one can see that markedly highest administration expenses are allocated
in the ministries and regional authorities (newly created bodies of state
administration functioning as lower regional units), therefore in the classical
bodies of state administration. These absorb together up to 86.1% of all
non-investment administration expenses (the ministries 58.5%, and the regional
authorities 27.6%).
The expansion trend of administration expenses is directly linked to the
number of people working for the bodies of state administration (wages
and salaries). The number of people in central bodies of state administration
kept growing since 1993. Whereas in 1993 there were 4 735 people employed
in the central bodies of state administration, in the year 1997 7 865 people
employed there are estimated (66.1% growth). More distinct yearly increments
occurred in the 1994 (12.4%) and mainly in the year 1996 (25.2%).
Especially remarkable, alas, is the fact that, contrary to expectations,
the newly created regional authorities as new bodies of state administration
did not halt the tendency in the absolute increase of the number of people
employed in the central bodies of state administration.
In the year 1996, when the formation of the regional authorities was approved,
the number of people employed in the central bodies of state administration
increased by 1 433 people (25.2%) and in the year 1997 one assumes an increase
of people employed in the central bodies of state administration by a further
740 (10.4% increment).
This clearly opposes political statements informing that "decentralization"
of the state administration means the transfer of competence down to the
lower (e. g. regional) bodies of administration. It was stated further
that this process will secure more effective utilization of the financial
means flowing through state administration. There are so far no arguments
on the effect of "decentralization" to regional authorities,
but the expenses for state administration (now central and regional) do
not confirm this. State administration continues to be more expensive.
The second part of the paper deals with the theoretical problems of bureaucracy
trying to reflect the preceding analysis.
Latest information of sociology on bureaucracy are outlined (mainly based
on M. Weber), and above all the economic (so called managerial) concept
of bureaucracy is analyzed.
In connection with the position of bureaucracy, one fundamental question
arises. Can the public administration and its management have an autonomous
position? The question is le-gitimate, as from the legal point of view
this administration is only a "tool" of political power.
It appeared that in practice the situation occurs that no, however detailed,
rules can envisage all situations, and therefore the political centre must
cede to subordinate bureaucracy a certain realization of liberty, the so
called discretion power which is used by the administration. This
is a result of a real factor represented by asymmetric information.
In general the problem of asymmetric information consists in the
fact that one party is enabled to utilize this asymmetry in its own interest
at the expense of other parties of the decision making process. This can
result in various inefficiencies. The managerial concept of bureaucracy
starts at this information asymmetry, which then results in the term, discretion
power.
A dilemma emerges in theory, and mainly in practice. Various dispositions
towards inefficiency are attributes of bureaucracy, yet on the other hand
bureaucracy in modern society is considered to be necessary. No country
can manage without a state bureaucracy. Therefore one has to come to terms
with bureaucracy. One should provide it with only such a space that would
not markedly (markedly is accentuated, because due to the character
of bureaucracy the disposition for inefficiency will always exist) endanger
the possibilities of rational economic approaches as well as the democratic
system. This second aspect (e. g. possibility of endangering the democratic
system) is at least equally important as the economic aspect.
Control appears to be a most important phenomenon, which could at
least partially limit the negative effects of state bureaucracy operation.
It serves political authorities as a tool to decrease or eliminate the
deviations between the volume (cost) of public estate production optimal
from the political power point of view and the volume from the bureaucracy
point of view. One assumes that political power tries to decrease the measure
of liberty for administration by the expansion of control which will improve
its own knowledge. It is impossible to ensure bureaucratic "production"
at the level of political optimum; one supposes, however, that control
is mostly rewarding. Control is understood as a self-evident and system
component of the whole democratic system, even when the not negligible
control costs are taken into account.
Herta GABRIELOVÁ
Recently much attention has been paid to the analysis of relations between
wage development and labour productivity in transitional economies; this
relation constitutes one of the factors of possible danger to their competitiveness.
Attention is being paid not only by the relevant countries themselves,
but also by various international institutions. This paper to a certain
extent follows up these analyses.
The paper has two basic aims: to present a concise but at the same time
relatively complex review of methodical procedures used for the quantification
of the relation between wages development and labour productivity and its
international comparison, and to characterize the position of the Slovak
economy in this relevant field on the basis of the particular analysis
of the development tendencies of this economy. Attention is focused not
only on the investigation of the dynamics of the parameters followed, but
also on the identification of their achieved level in comparison with other
countries.
In the first - methodical - part of the paper the indicator of the unit
cost of work (JNP) is the basic starting point for the quantification of
the relation of wages and labour productivity. At the same time input data
applicable for its quantification and various possible methods of their
construction are characterized.
Current monitoring of JNP dynamics does not provide sufficient information
necessary for an evaluation of how JNP development influences the competitiveness
of the economy. Only the quantification of the dynamics of internationally
comparable JNP (JNPMP) and detecting their relative dynamics
(in relation to other, usually competing countries) after the method presented
in this paper enables evaluation, whether the position of the monitored
economy improves or deteriorates as for its competitiveness.
Considering the sizeable lag of the transitional economies behind the economically
developed economies in wages as well as in labour productivity levels,
and also systematically faster growth of JNPMP in transitional
economies compared to economically developed economies, the paper focuses
its attention also on the methodical problems linked with the recognition
of the internationally comparable level of JNP.
The determination of an internationally comparable level of labour
productivity is especially problematic. Adherence to the universally established
principle - to express labour productivity for JNP quantification in comparable
prices - is ensured in this case by the use of an indicator of purchasing
power parity (PPP). The results reached on the basis of PPP utilization
should be considered, however, as certain estimated values, which nevertheless
approximate reality much more than the indicators based on currency exchange
rates.
Gradual changes of the relative level of JNP (calculated on the basis of
the recognized relative JNP level and continued monitoring of the JNPMP
dynamics) can relatively comprehensively evaluate the intensity of the
growing JNP influence on competitiveness. They do not reflect only actual
changes in relative JNPMP, but also initial relations of their
level.
In the second part of the paper presented methodical procedures are applied
to the particular analysis of the JNP development in the Slovak economy,
both on the national economy level and within the frame of the manufacturing
industry.
Based on the approximate calculations one discovered that in the national
economy of the Slovak Republic the JNP in 1997 reached about one third
of the Austrian level, which is about 6 per cent points more than in the
year 1993. The obtained results confirm to a certain extent that the Slovak
economy has, above all in relation to the economically strongest partners,
still a relatively large space for an increase of the relative level of
JNP. One can estimate that Slovakia will, at the current relative JNP growth
rate, reach 70% of the Austrian JNP roughly around the year 2010.
Analysis of the development of JNP in manufacturing industry is of primary
importance for an appraisal of the influence of wage increase on competitiveness,
since the manufacturing industry directly enters the foreign trade exchange.
The paper characterizes JNP development in the Slovak Republic in the years
1993-1997 and compares it with the development in selected CEFTA countries;
at the same time it traces the JNPMP level in monitored countries
compared to the Austrian level.
Some results follow.
The difference between Slovakia and the economically developed countries
measured by the levels of comprehensive hourly labour costs (ÚNP) in the
manufacturing industry still remains extraordinarily wide - in the year
1996 the hourly ÚNP in Slovakia compared to Germany reached only one tenth,
compared to the EU average about 15%, compared to Portugal (EU country
with the lowest hourly ÚNP) somewhat more than 50%.
In the year 1993 in the Slovak manufacturing industry compared to Austrian
manufacturing industry (after the calculations of P. Havlik [16]) labour
productivity reached 39%, yearly wages 6.7% and JNP 17.2%; our calculations
suggested that during the years 1994-1997 relative JNP in this branch increased
by 50% and in the year 1997 reached roughly 26% of the Austrian level.
The growth of relative JNP can be witnessed also in the Czech Republic
(34%) and in Poland (18%). In Hungary, on the other hand, relative JNP
in manufacturing industry dropped during the monitored period, also due
to currency exchange rate changes, by almost 30%.
In all monitored CEFTA countries the relative level of JNP in manufacturing
industry, which was fairly differentiated in 1993 (17.2% in Slovakia and
36.9% in Hungary) reached during the years 1994-1997 virtually the same
level - about one quarter of the Austrian value.
Irrespective of the necessary approximation, the analysis of the relative
level of JNP for the Slovak national economy and particularly for the manufacturing
industry shows that wages development at the existing relative level of
JNP should not endanger competitiveness of the Slovak economy to such an
extent that could lead to an external unbalance.
The hot-bed for the latent external unbalance creates a whole complex of
problems and limitations which prevent particular subjects to assert themselves
in the international trade exchange. One can hardly solve these problems
by the attenuation of wage increases only. The focal point in the process
of increasing Slovak export performance definitely lies in a long term
economic policy aimed at the support of structural adaptation processes
and application of technical and technological innovations as the basis
for the acceleration of labour productivity growth. The pressure to maintain
low levels of wages can obstruct this process to a certain extent - thanks
to this, entrepreneuring subjects can assert themselves in the foreign
markets, at least momentarily, without systematic efforts to innovate production
and to invest in human capital.
Ignác RENDEK
The paper starts from the fact that external and internal unbalance
are features which are mutually interconnected by numerous quantitative
and causal links.
From the purely numerical point of view external unbalance is quantitatively
equal to the aggregate internal unbalance. That is to say, if one consumes
more than is produced at home, missing resources can arrive only from abroad.
Much more important and complicated than quantitative connections are causal
links. Identification of focal points where primary impulses of unbalance
start, recognizing whether they primarily start at home or abroad, unwinding
the complicated tangle of related causal links represents the first precondition
of successful economic and political measures that should correct the unbalance.
As for the unbalance factors which originate autonomously at home, the
paper is not limited to global views of the economy alone, but analyzes
also the development of household and public administration consumption
as well as the development of gross fixed capital formation and tries to
identify where in the CEFTA countries and in which of these spheres primary
unbalance impulses acted in the years 1995-1997.
In the household sphere in Hungary before the year 1995 and in the Czech
Republic before the year 1997, consumption grew faster than the resources
produced at home (GDP); anti-crisis programmes are thus aimed also at household
consumption restriction, which one considers as correct. There has been
a considerable household consumption growth in Slovenia, and in the years
1996-1997 also in Poland. Household consumption in Slovakia, on the other
hand, cannot be considered a factor of unbalance.
However, such an important problem of whether households represent a primary
focal point of unbalance cannot be answered on the basis of consumption
development alone. One should consider also further factors, among them
relations of the growth of productivity and real wages. These relations
too developed unfavourably in Hungary and in the Czech Republic before
the adoption of anti-crisis programmes. On the other hand, from this point
of view, one can describe the development in Slovakia on the whole as acceptable.
As for public administration consumption, this can be denoted as an unbalance
factor in Slovakia: its share in the GDP is high and in the year 1996 extreme
increases took place. This share was high in Hungary too, but has decreased
considerably as a result of anti-crisis measures. One cannot indicate public
administration consumption as a primary focal point of unbalance in other
countries analyzed.
As for the gross fixed capital formation, its excess cannot be identified
solely on the evaluation of GDP share or on the basis of its growth rate
comparison with the GDP growth rate; the urgent need for technical reconstruction
in transition economies substantiates the adequately higher investment
growth rate in comparison with the GDP growth rate. In spite of this, however,
it is obvious that the scope of investments in Slovakia and the Czech Republic
is excessive and represents a primary focal point of the internal unbalance.
The paper states that many factors acting autonomously in the sphere of
foreign economy and influencing external, and indirectly, also internal
unbalance, have been sufficiently analyzed in literature. The paper therefore
deals in detail only with selected aspects:
- "subject" weakness of domestic enterprises,
- some difficulties in penetration into western markets.
After privatization many domestic enterprises (with the exception of those
with prevailing foreign participation) appeared low experienced, weakly
equipped with capital, and entrepreneuringly less capable. A considerable
part of privatized enterprises (usually in the form of Limited companies
- Ltd.) as well as companies related to them prefer the improvement of
"their own" property over the privatized enterprises; privatized
enterprise is for them somehow second class property. "Tunnelling"
occurs frequently. In general, the function of the owner is overestimated,
other components of modern "corporate governance" are underestimated
- management function is particularly underestimated. Pressure from public
authority (Courts of Commerce, bankruptcy proceedings) to contribute to
the improvement of entrepreneuring subjects is inadequate.
Enterprises with prevailing foreign capital participation are usually characterized
by a high level of "corporate governance".
As for some difficulties connected with penetration into western markets
and thus difficulties in providing external balance by normal means, the
paper points out that today's level of protection by customs tariffs does
not represent the main problem. The main problem is the phenomenon indicated
as western protectionism. Mainly due to this protectionism the share of
imports from CEFTA countries in the imports of EU non-member states is
very low.
Multinational corporations exert a complicated influence on the balance
of payment current account. The paper points out mainly the phenomenon
of transaction prices, where the transfer of commodities inside multinational
corporations is accounted. In numerous cases these prices are artificially
decreased - thus enabling profit centralization in the headquarters of
multinational corporations. In essence these prices are a sort of subsidized
prices. They decrease export prices as a tax basis in the country where
the filial company of the multinational corporation has its seat.
The paper deals further with the experience of Hungary and the Czech Republic
in overcoming the unbalance.
The Hungarian concept was based on the drastic restriction of domestic
aggregate demand - mainly household consumption. The paper points out considerable
economic and social costs connected with this solution. One can appreciate
as a positive aspect the fact that Hungary thus achieved considerable decrease
of its external as well as internal unbalance. It is significant that two
years after the start of corrective measures the growth of the Hungarian
economy has been restored.
The Czech "packet" of measures to overcome unbalance is also
aimed at the restriction of aggregate domestic demand, but unlike the Hungarian
concept it contains measures (at least on the analytical level) for the
increase of microsphere performance. It is too soon to evaluate whether
the Czech way succeeds more in overcoming the unbalance with lower economic
and social costs, compared to the Hungarian way.