Country Study, Slovenia: Winning the Transitional Economies Race

БОЛЬШАЯ ЛЕНИНГРАДСКАЯ БИБЛИОТЕКА - РЕФЕРАТЫ - Country Study, Slovenia: Winning the Transitional Economies Race

Country Study, Slovenia: Winning the Transitional Economies Race

Country Study

Slovenia:

Winning the Transitional Economies Race

Submitted by

Michael Milton Peter mpeter@indiana.edu

Robert Scott Taylor staylor@indiana.edu

Dmitri Maslitchenko dmitri@mailroom.com

Government Finance in Transition Economies

Professor John Mikesell

Fall 1996

The World Development Report: From Plan to Market (WDR) argues

that with consistent and sustained reforms, transition countries can

achieve successful long-term economic growth, but also warns that

many challenges and risks -- among them long-term stagnation and

rising poverty -- still lie ahead for some countries.

-World Bank News, June 27,1996-

INTRODUCTION

Five years ago a small republic of the former Yugoslavia, started on

its path of transition from an eastern block socialist government with a

planned economy to a democratic government with a free market economy.

Fortunately, the rocky road, described by the World Bank News in the quote

above, has not been long for Slovenia. Although Slovenia was the most

prosperous Republic before the dissolution of Yugoslavia, after the breakup

of Yugoslavia in 1991, Slovenia experienced high levels of inflation, a

drop in the GDP and a tripling of the unemployment levels[1]. These

problems did not stop Slovenia’s transition to an economic powerhouse in

the former Eastern Bloc. However, Slovenia had several advantages over

other Eastern Bloc countries which aided in such a successful transition.

This analysis will present both Slovenia’s historical and current

economic status by examining the political and economic background,

budgetary and monetary conditions, expenditure policies and assignment, tax

structure and administration, and social insurance.

Political and Economic Background

Passing through its transition period from a centrally planned

economy to a market economy, Slovenia has dealt with some successes and

some failures. However, Slovenia’s experiences and economic policies could

prove to be helpful for other economies in transition. There are many

reasons why the transition period for Slovenia has been successful. The

foundation for its quick transformation to a market economy lies within the

positioning of Slovenia in the history of Yugoslavia before and after

its dissolution.

After the end of World War II, Yugoslavia’s definition of socialism

changed. Ownership of the means of production was defined as ‘social’

rather than ‘state’ and firms were managed by workers councils. No central

planning existed after 1965 and Slovenia, as well as the other republics in

Yugoslavia, were given a high degree of autonomy. Also Tito, a former

leader of Yugoslavia, had deviated from the ‘command economy’ model of the

Soviet Institution. As a result, the Yugoslavian government policy had

an emphasis on a greater sense of autonomy, as far the economy was

concerned.[2] The Republic of Slovenia developed its economic base by

increasing the level of manufacturing in the republic as well as

establishing stronger ties with the Western European countries.[3]

Slovenia had always been oriented towards the west, however, due to its

northwestern location in Yugoslavia, its economic interaction with the

western countries led it to become market oriented faster than other

Eastern Europe countries.

While Slovenia was a part of Yugoslavia, it was by far the most

successful republic with a per capita income of almost double that of the

national average.[4] The Slovene economy could not be solely dependent on

the national market and therefore they actively traded with Italy, Austria,

Bulgaria and Hungary. In fact, “with only 8% of the population, little

Slovenia brought in 25-30% of Yugoslavia’s foreign exchange.”[5] Also,

Slovenia accounted for 20% of the country’s Gross Domestic Product.[6] As a

result of this high degree of decentralization and positive net outflows,

the aforementioned characteristics provided the economic basis to

secession. In May 1990, the people of Slovenia elected a government whose

economic policy, according to Mencinger, " was set by the premise that

prospects of transition to a market economy were worsening; the economic

policy of the federal government mistaken, the existing economic system

unsuitable, and the Federation facing political turmoil."[7] The

referendum on independence passed with 90 percent support. Since that

1990 vote, Slovenia has come a long way economically.

Slovenia declared its independence on June 25, 1991. The first year

for Slovenia was quite diffic