TheMarketForIdeas

The notes that follow are a preliminary summary of our observations and studies in the field of Balkan economies and economic thinking as well as of scholars engaged in the subject of economic traditions in the Balkan region. The main characteristics of economic thinking in the Balkans set forth below must not be regarded as established definitively but rather as the first approximation towards the elucidation of the Balkan type of economic thought (BET).

Noteworthy is the fact that there are significant differences between the economic traditions and thinking among the individual Balkan countries. To this effect, there is great diversity in the Balkans. However, this is no impediment to the attempts at finding common macro characteristics thereby searching for a more delicate diversity at a second stage.

The examples have been taken above all from Bulgaria, Romania, and Turkey and partially from Yugoslavia. We have more knowledge and information about these countries. 

Reading from another’s script 

The centralized, state-stimulated transfer of institutions, practices and theories of the developed Western countries was not an elementary and automatic act. It was an interesting and complicated process taking us to the following characteristic of economic thought in the Balkans. Namely, its long-term cyclic dependence on the thinking of the leading core towards which the Balkan countries gravitated.

The centralized, state-stimulated transfer of institutions, practices and theories of the developed Western countries was not an elementary and automatic act. It was an interesting and complicated process, taking us to the following characteristic of economic thought in the Balkans. Namely, its long-term cyclic dependence on the thinking of the leading core towards which the Balkan countries gravitated.

That dependence, however, was not absolute, the imitation of the leading cores was not absolute either. Relativity was manifested along two lines.

“Our book examines the economic institutions and phenomena following a particular plan. A system of political economy according to an English or French plan remains quite unclear for Bulgarians, many institutes are not understood. The reason is that our economic structure differs even today from the English and French ones. For the Bulgarian reader it will be much easier to approach gradually the high English economic system and first of all to grasp the essence of the economy itself as a public product, its powers, the elements composing it, the organization of its numerous institutes. In other words, our thinking was on the one hand aimed against the abstraction of Western writers to introduce empirical means and elements drawn from our lives and on the other – to export general scientific facts and perceptions in a pedagogical way where concepts develop from one another – from the famous to the new, the unknown, just as the letters are discovered consecutively by the young pupil”. (Danailov, 1934, 26)  

First it was along the hybridization of leading Western institutions, practices and theories in their transplantation in the Balkans; second, in the presence of brief periods of independence, of autonomy. Within that autonomy, the economic and academic elites in the Balkans offered their solutions and even complete theories. To this effect, it may be claimed that the Balkans had a definite degree of freedom. It is likewise true that that freedom was brief and was usually accompanied by political and economic perturbations.

In general, the alternation of dependence and independence was a manifestation of cyclicity in the interaction between the Balkans (the periphery, the satellites) and the leading countries (the core). The stages of the cycle did not have the same amplitude. They rather reflected the dynamics and changes that occurred because of the rotation of the leading cores. In that cyclicity, the foreign political and geopolitical factors were determinate.

It should not be forgotten, and that is often underestimated that there was also a reciprocate influence in the Balkans on the development of economic science and thinking in the leading countries. That occurred at least along two lines

Of particular interest are the moments when the independence and originality of the Balkan economic thought was manifested. Although short, those moments occurred and were above all bound to the adaptation of Western practices, institutions, theories and ideas. Independence was manifested in the transitions between stages of dependence, which were also the time of crises and perturbations.

First, the Western economists who visited the region and familiarized with its economic practices often developed and “unintendedly” enriched their theories. For instance, the prominent French liberal Jacques Rueff, as a young expert for the League of Nations, visited in 1927 the Balkan countries, including Bulgaria, in the process of negotiating a stabilization loan. Rueff mentioned in his memoirs (which was evident from the records in the LN archives in Geneva) that after discussions with experts in the Bulgarian State Railways, he realized that technical efficiency was not necessarily bound with economic efficiency (Chivvis, 2010). Differences in evaluating efficiency (both technical and economic) remained in the future works of Jacques Rueff.

Second, the Balkan economists themselves sometimes developed original theories which provided an impetus for the elaboration of new research trends. Thus, a sui generis dialogue was achieved between the leading countries and the Balkans which, though asymmetrical, was a dialogue nevertheless.

As it has already been pointed out, in the process of transplantation of institutions of the leading core towards the Balkans, in many cases there occurred a hybridization of imported institutions. Certain elements were brought to the fore during the transfer. As a result, the nature of the borrowed institutions and practices was modified in-depth.

In general, central institutions and theories were adopted and “formally” imported most often. This does not mean that “hollow shells” were imported (as it was often claimed). Actually, the borrowing of Western institutional forms was the only way to import the experience of developed economies. Forms had priority and were filled with content (see the theoretical discussion in Romania about the “formele fără fond”/shapes without content between T. Maiorescu and E. Lovinescu). All that provided the specifics of the institutional shift in the periphery, the Balkans included. 

Figure 1. The dependence/independence cyclicity of economic thought 

Cyclicities and history 

To illustrate the dependence/independence cyclicity mentioned above, we could point out the evolution of the general economic thinking as well as the development of monetary theories and views (money is a major institution, an expression of economic thinking as such). The individual periods have often been overlapping and the scheme below is a theoretical model, an abstraction rather than a chronological illustration of cyclicity (Greece for instance became provisionally independent during the Ottoman Tanzimat or reform). Let us first dwell on the general economic thinking.

• Stage 1 – Ottoman period, Tanzimat, after the 1856 reforms (Ottoman market and Western Europe as centres of attraction), Serbia and Greece obtained autonomy/independence from the Ottoman Empire earlier;
• Stage 2 – From obtaining (full independence) political independence to the Great War (1912/13, 1914/1918), influence of Russia, of the leading forces in Western Europe (Austria-Hungary) (centres of attraction – Western Europe and Russia);
• Stage 3 – The period spanning the wars, initial influence of the League of Nations (1919-1931) (the centre of attraction – Western Europe) and partially of the USSR (the Stalinist variant of modernization);
• Stage 4 – After the Depression until the end of the war, the German zone, the managed economy (1931-1944) (centres of attraction – Germany, Italy) and partially the USSR (the Stalinist variant of modernization);
• Stage 5 – The socialist period, Soviet zone, Comecon (specificities of Yugoslavia, then of Albania and Romania) (1945-1989). Greece remained in the sphere of the capitalist world and became an EU Member in 1980 (the centre of attraction being the USSR, Comecon);
• Stage 6 – After the collapse of communism, influence of Western Europe, the USA; privatization of state property and building of market institutions; subsequently – EU membership and EU candidate membership (1989 – until now) (the centre of attraction being EU, partially Russia, particularly in Serbia, Montenegro, Greece).

As far as the thinking about currency and the monetary system are concerned we can differentiate between six periods without dwelling in detail on individual countries and without specifying sub-periods, which are important for a more detailed analysis:

• Stage 1 – Ottoman period, Tanzimat, after the reforms in 1856 (centres of attraction – the Ottoman market and Western Europe) the monetary system of the Ottoman Empire, bimetallism, silver currency, then paper currency for a short period (kaime); partial influence of the Ottoman bank after the model of England and France;
• Stage 2 – From obtaining (full) political independence until the Balkan War and World War I (1912/14), copying the Latin Monetary Union, bimetallism, then a gold standard (after 1903/4);
• Stage 3 – The period spanning the wars, initially an influence of the League of Nations, (1919-1931), paper currency, then monetary stabilizations and gold-exchange standard;
• Stage 4 – After the Depression till the end of the war, German zone, managed economy (1931-1944), currency control, clearing, compensation deals;
• Stage 5 – The socialist period, the Soviet zone, Comecon, till the collapse of communism (1945-1989), the transferable ruble, clearing; there was no convertibility. Greece remained in the sphere of the capitalist world and became an EU Member in 1980, bound to the EMS, later ecu and euro;
• Stage 6 – After the collapse of communism, the influence of Western Europe, the USA and consequently EU membership or EU candidate-membership (1989 – till today), strictly controlled currency rates; then Currency Boards, formal and informal (DM) Euroisation. Initially there was strong inflation, hyperinflation and financial pyramids in some countries (Yugoslavia, Bulgaria, Albania).

The above mentioned cyclicity in the monetary sphere can be illustrated graphically. Periods of a greater or minor dependence alternated in the monetary regimes in the Balkans on those in the cores to which they were pegged. That resulted in the adoption and adaptation of ideas and theories of the cores or in their rejection and an aspiration to develop independent concepts. 

Figure 2. The cyclicity in the monetary regimes within the Balkan area

Asserting independence 

Of particular interest are the moments when the independence and originality of the Balkan economic thought was manifested. Although short, those moments occurred and were above all bound to the adaptation of Western practices, institutions, theories and ideas. Independence was manifested in the transitions between stages of dependence, which were also the time of crises and perturbations. During such periods of time, the national economists played the leading role. Synthetic models (successful or not) were set forth as well as independent economic approaches and theories. They were related to the theories of economic nationalism, protectionism and encouragement of national industry. Those were considered a reaction to the policies of Western countries[1].

Synthetic models (successful or not) were set forth as well as independent economic approaches and theories. They were related to the theories of economic nationalism, protectionism and encouragement of national industry. Those were considered a reaction to the policies of Western countries.

An example of a creative reaction were the two theories of the Romanian engineer, politician and economist, M. Manoilescu (1891-1950). The first one consists in setting forth an original structural theory of foreign trade based on the non-equivalent exchange of different national labours. It justified the need for industrial protectionism in the Balkans (Manoilescu, 1929; for details, see Nenovsky and Torre, 2015). That theory was spearheaded against the liberal policies and against the advice of the League of Nations in the late 1920s for opening the economies of the Balkan countries (Manoilescu referred to the “clique of Geneva”). In his theory, the Romanian author countered the familiar logic of dwelling on foreign trade and offered a “general theory of protectionism”. Within the frameworks of protectionism, “free trade” was a specific case. Subsequently Manoilescu’s theory became popular in some peripheral countries of Europe, such as Portugal and Italy (Bientinesi, 2011), and later in Latin America (Latin American structuralists).

Five years later (Manoilescu, 1934), as a reaction to the proposed theories on managed economy and corporate economy, mainly by Italian economists, he formulated his original version of “pure and integral corporatism”. An attempt was made within the frameworks of his corporate model at formulating – again paradoxically – the “liberal corporatism”. In Manoilescu’s model the state figured in analytical terms at the end, it was the product of choice of the whole society. It was devoid of any group interests, it merged with the whole, it was a totality (there was a certain similarity with O. Span’s ideas).

Manoilescu certainly rejected the models of managed economy, which according to him were not radical because they were within the frameworks of the old system and served definite interests. The state was a separate economic entity in the model of managed economy unlike his model, where the state was a function. Manoilescu’s theory of pure corporatism reverberated also among the leading European economists in the 1930s.

Between the wars, the Russian economists expelled by the Bolsheviks, most of them students of the great Russian thinker Peter Struve and of the statistician A. Chuprov, settled in the Balkans and were actively involved in academic life.

The theme of protectionism and the role of the state was a part of new theories not only in Romania. In Bulgaria, for instance, K. Bobchev (1894-1976) offered his own theory of protectionism as a reaction to Manoilescu, based on the neoclassical principles (Bobchev, 1937). Protectionism, according to Bobchev, was just one of the possible configurations of the foreign trade policy (unlike Manoilescu) which could be useful in certain structural characteristics for mobilizing the productive forces. “Productive forces” is a category borrowed from J. Fichte, F. List, and as a whole from German economists, and again paradoxically, from K. Marx.

The evolution of Bobchev is an evidence of the power of statist practices and views in the Balkans. Having started as an extreme subjectivist and economist psychologist (R. Liffman and L. Petrajicki) and even a critic of the Austrian School (as a student, he reproached Menger for his objectivism) over the years and under the influence of his practical activity, Bobchev gradually adopted views which granted space to the state. That became noticeable especially after the war.

Russian émigrés 

Between the wars, the Russian economists expelled by the Bolsheviks, most of them students of the great Russian thinker Peter Struve and of the statistician A. Chuprov, settled in the Balkans and were actively involved in academic life. Those scientists had studied and specialized mainly in Germany. Most of them shared the liberal economic views and above all the principles of the Austrian School. Standing out among them were: A. Belimovich, S. Demostenov, N. Dolinsky, Ivan Kinkel (with a decisive impact on sociology and psychoanalysis in Bulgaria), later the prominent statistician O. Anderson, director of the Center for Economic Studies at Sofia University.

Not only practical actions but also the dissemination of theories associated with the shock therapy, the rapid price liberalization and privatization were characteristic of Central Europe. Meanwhile, the former communist and economic elites had a leading role in the Balkans. There was a slow and mafia-like privatization, and the state was privatized, captured. That was paralleled by a regime of a floating exchange rate, which enabled the functioning of various drawing down schemes.

Many of them offered interesting synthetic theories bringing them closer to ordoliberals (most of them recognizing the importance of the state). Original theories were proposed, for example, by S. Demostenov on money (philosophy of money), by I. Kinkel on the economic development (eclectic development), by O. Anderson on the decomposition of statistic series into trend and cycle, long and short terms (today known as cointegration). Russian émigrés shaped many young scientists in the region (even if we confine ourselves to Bulgaria only). A. Bilimovich was of great importance for the Yugoslav liberal thought, Slovenian in particular (everybody wrote in the local language be it Bulgarian, Slovenian, Serbian, etc.). 

Further contributions 

Let us dwell on a few more examples which illustrate the influence of the Balkan economists on the course of scientific discussions among the economists of the leading intellectual core.

The Yugoslav economist Svetozar Pejovic (1931) (rather from Montenegro) after emigrating first to Western Europe (1960s), later becoming the American economist Steve Pejovic, became known as one of the prominent representatives of the trend, known as “property rights, law and economics”. His first publications in this field dated back to the late 1960s and early 1970s. Pejovic has mentioned repeatedly that the main ideas of property rights and contracts have emerged as a result of the Yugoslav model of self-management of labour collectives launched by J.B. Tito (mid 1950s). At that time, the optimal distribution of property rights was the major methodological and practical problem which had to be solved in order to improve economic efficiency.

Before becoming a famous American economist, the father of economic ecology and de-growth, the Romanian N. Georgescu-Roegen (1906-1994), worked for a long time between 1937 and 1948 in the field of agriculture and forestry, as well as in foreign trade and statistics in Romania. It can definitely be claimed that the study of the natural resources of Romania shaped the profile of his future studies in the US.

Finally, we will mention another era, that of late socialism, where the leading concepts and trends in the political economy of socialism were conceived as the truth of last resort by Soviet scholars (I leave aside the resistance, different in nature, of the Romanian and Yugoslav economists).

After Gorbachev headed the CPSU and the so-called “perestroika” and openness were launched, the ideas were gradually revived of enhancing the role of commodity-money relations, CMR (i.e., the market) in the common socialist economy. Today, that seems ridiculous and naive, but at the time, it was a serious modification of the traditional concept of socialism. In the traditional Soviet model, CMR were bound to the sector of consumer services, they had to die out gradually giving way to the “universal planning”. Hungarian, Polish and Czech economists were a great deal ahead of Bulgarian and Romanian economists. They had a serious impact on discussions in the USSR – thus, for instance, J. Kornai offered a model of socialism as a chronic shortage (supply constrained, in a model of neoclassical disequilibrium) while C. Nagy developed a model of the possibilities for an investment cycle under socialism.

At that point, however, and today that is almost unknown, proceeding from positions which could not be defined as anything other than Marxist standpoints, two Bulgarian economists were seriously discussed in the Soviet Union. They were Jack Aroyo, and his book “The Law of Value under Socialism” (1987), and Nikola Popov (1922-2015), and his numerous speeches, lectures, etc. which he delivered in Moscow[2].

As it usually was the case with Western theories, the liberal views were not accepted analytically and creatively but rather as normative postulates. Reforms (Currency Board, euroisation, flat taxes) were so radical and unusual for the West that they created the illusion that every liberal measure could be implemented.

Both Bulgarian economists, each in a different way – Aroyo, theoretically, while Nikola Popov, more empirically and in applying to agriculture – proved that socialism and the market were compatible and that private property should be partially restored. It is true, though, but it cannot be denied that the two Bulgarian economists, because their works were either translated (J. Aroyo) or had visited the USSR (N. Popov), were the subject of discussion and sometimes were criticized by leading Soviet scientists. 

Regional differences 

In order to explain the character of the Balkan economic thought, it is important to compare it to the Central European thought. This concerns the general issue of several Europes which basically are reduced to two (F. Delaisi, 1929), or three (Hermet, 1996). In the latter case it is a matter of Western Europe (Europe 1), Central Europe (Europe 2) and Eastern Europe (Europe 3), within the frameworks of which the Balkans are included.

Central Europe was in every respect closer to the leading economic core, and at times even became part of it, and it experienced the strong influence of institutions, practices and thinking of the core. The problem of adaptation, hybridization of the institutions, practices and ideas, of their orientation in another direction was not so acute. In Central Europe, the task of political autonomy stood out rather than that of economic independence (the Czech Republic, Hungary, Slovakia, Poland, Slovenia, Croatia, etc.). The Russian and Soviet influence was significantly weaker except in the Baltics (compared to trade within the frameworks of the Hanseatic system).

If we confine ourselves to the period of post-communist reforms, to their sequence, as well as to the influence of economic theories, especially in the first 7-8 years (until 1997), some interesting contrasts may be pointed out.

Not only practical actions but also the dissemination of theories associated with the shock therapy, the rapid price liberalization and privatization were characteristic of Central Europe. Authors wrote about an in-depth structural reform, about outward opening (the role of FDI), as well as about the needs of a fixed (or at least controlled) exchange rate. The principles of the liberal market economy, and the views of reformers such as L. Balcerowicz (Poland), L. Bokros (HU), V. Klaus (Czech Republic), M. Dzuringa (Slovakia), M. Laar (Estonia) and others had a decisive influence.

Meanwhile, the former communist and economic elites had a leading role in the Balkans. There was a slow and mafia-like privatization, and the state was privatized, captured. That was paralleled by a regime of a floating exchange rate, which enabled the functioning of various drawing down schemes (Nenovsky and Mihaylova, 2015). 

Function followed form 

In general, the Balkan trajectory was similar to what happened in Russia. If we confine ourselves to Bulgaria, for instance, those processes were accompanied by the dominance of economists and ideas who considered that the role of the state was important (e.g., I. Angelov, R. Getchev). Market economists appeared much later, after the crisis, and because of external influence and under pressure. At that time, the Currency Board and the fixed rate were introduced (I. Kostov A. Bozhkov).

Similar processes were observed in Romania (1997), as well as in Albania (pyramid schemes 1996/97 involving 2/3 of the population along with President S. Berisha). A little earlier, Yugoslavia was torn by record hyperinflation (1993/95 and the subsequent reform of D. Abramovich). It was not before the late 1990s that extremely restrictive monetary and fiscal regimes were implemented (Montenegro, Kosovo and Bosnia and Herzegovina).

At that point, liberal economic theories had spread as well as the views of the Austrian Economic School (ten years after it happened in Central Europe). Moreover, as it usually was the case with Western theories, the liberal views were not accepted analytically and creatively but rather as normative postulates. It is true that reforms (Currency Board, euroisation, flat taxes) were so radical and unusual for the West that they created the illusion that every liberal measure could be implemented[3]. That liberal radical attitude in the late 1990s rapidly disappeared and was reduced to meaningless phrases posted in the media by various hordes of young people.

[1] The Bulgarian economic society emerged in 1895 as a necessity to discuss the protection of the national output. (Маrinova, 2012).

[2] Nikolay Nenovsky was a witness of these lectures in the MSU in 1987 or 1988, invited speaker at the lectures on agriculture of academician A. Emelyanov.

[3] Plans for introducing the gold standard, for privatization and moving the central banks abroad, etc., were discussed on “serious levels”.