Norberg's Financial Fiasco in Bulgarian

The cover of Financial Fiasco: left - the original, copied from Amazon.com; right - the Bulgarian translation, copied from the site of the publisher MaK.

After Hazlitt's Economics in One Lesson, another libertarian book has been published in Bulgarian in my translation: Financial Fiasco, by Swedish historian Johan Norberg (published by the Cato Institute, 2009). I have written about it also in my Bulgarian blog; Bulgarian readers can go directly there.

This book describes and analyses in a way understandable for lay readers the global financial crises which reached its maximum in 2008 but is still reluctant to go away. According to the author (and I agree), the worst in this crisis is that it has caused comeback of the ideas for massive government intervention in economics. Norberg discusses and rejects the arguments for such intervention and defends the free market. To give the reader a taste of Financial Fiasco, I am quoting below parts of the closing Chapter 6 (but the other chapters are also excellent, so read the entire book if you can!).

"What exactly happened? How could overenthusiastic homebuyers in the United States sink the global economy? Many politicians across the world quickly declared that the crisis must have come from inside the financial system, that the reason must have been that market players had been given too free a rein and made toobig mistakes...

Politicians who had never hesitated to claim credit for each one tenth of one percentage point of growth or for each new job created now immediately went to great pains to pin the blame for the downturn on their lack of influence. But did they lack influence?
Critics say that the financial market was completely unregulated. But 12,190 people work full time on regulating the financial market in Washington, D.C., alone—five times as many as in 1960. The big wave of deregulation is said to have begun in 1980. Since then, the cost of the federal agencies in charge of regulating financial operatorshas increased from $725 million to $2.3 billion, adjusted for inflation.

A ‘‘Hoover myth’’ is now developing about President George W. Bush to the effect that he was some kind of a deregulator. However, during his eight years in the White House, new federal regulations were added to the tune of 78,000 pages a year. That is the highest pace in the history of the United States. Bill Clinton reduced the number of federal bureaucrats by 969; Bush increased their number by 91,196. Clinton reduced the cost of financial regulation slightly;Bush increased it by 29 percent...

(Some people) talking about inadequate regulation simply mean that the authorities did not understand the risks in the markets, paid attention to the wrong things, and made reasonable behavior harder and unreasonable behavior easier. Indeed. But that the government often acts incompetently is not news. And that is precisely why it is pointless to compare the real-life market economy, in all its imperfection, with an ideal image of how hypothetical, perfect
authorities would govern the economy. It goes without saying that we must compare it with the real, imperfect authorities that we actually have.
The problem was not that we had too few regulations; on the contrary, we had too many, and above all faulty ones. Some readers may object that by pointing this out, I am mainly quibbling about the meaning of words and fighting an ideological battle. I grant you that you may have a point there. Please feel free to call the problem whatever you like if you have political reasons for doing so, just as long as you are aware of what it consists of. Because what would be fatal would be for slogans about ‘‘insufficient regulation’’ to give rise to the idea that the crisis happened because the government was absent, and that the government must therefore intervene and regulate more to avoid a repeat...

When businesspeople and senior executives do a bad job, they are—eventually, at any rate—thrown out on their ear. When politicians and financial authorities do a bad job, however, they get more power... . After government authorities had helped create the worst financial crisis
in generations, the climate of ideas has now shifted dramatically in the direction of bigger and more active government... Create a crisis, and people will give you more power to fight it. This
could be called the ‘‘Stockholm syndrome’’ of politics—our utter dependence on our hostage taker makes us develop a relationship with him and start taking his side against the rest of the world... As I have shown in this book, today’s crisis is in many ways the result of our failure to break sufficiently free from the 1970s mentality and from the dream of the government as supervisor, monitor, helper, and supporter."

No worker can ever be underpaid

One of the doctrines dominating the economic "thought" in Bulgaria can be summarized as "Prosperity by starvation wages". Its proponents claim that, because of the lack of natural resources in Bulgaria, the only way we can have a competitive economy is by paying super low wages, far below their market value. Of course, the real result of this policy is bringing labour productivity down to the level of wages, because productive people tend either to become less productive or to emigrate. So Bulgarian economy is anything you like but NOT competitive.
However, our brave employers, both government and private ones, never let facts deter them from logic. And their logic is really impenetrable. If an employee never asks for pay rise, he is apparently happy with his wage and it doesn't need to be increased. If he asks for pay rise, he is arrogant and insolent and so doesn't deserve even a penny more.
Here, I expect some people considering themselves economic experts to ask me how I can determine the market value of a wage. No problem, darlings - like the market value of any other product: by the law of demand and supply. If you want to buy a pair of shoes for (say) EUR 10 and cannot find any shoes costing as little, or if the few shoes you find at that price are of too low quality to be used by any person alive, this means that current market value of shoes is definitely above EUR 10. By analogy, if nobody agrees to work for the wage you are offering, or if the only people who agree are those who cannot really do the job, this is a sure sign that the position is underpaid. I have already mentioned this a year ago in my post University teachers vote with their feet.
In the private sector, I have heard of numerous cases when the employer refuses to increase somebody's salary from (say) 500 to 600 leva, then the worker leaves and the employer has to replace him with two people receiving 700 leva each and combined doing less work than the lost employee. However, the situation in the government sector isn't significantly better, and I strongly suspect that private employers are just following the example of government. The immediate trigger for me to write this post were the obstacles put to my colleagues Victor and Eva (not their real names) to prevent them from receiving higher wages.

Hazlitt's "Economics in One Lesson" in Bulgarian

It is pleasant to brag and I think there is nothing wrong with a little bragging after having done a good job.
Some time ago I wrote how nice it would be to make Henry Hazlitt's Economics in One Lesson known to the Bulgarian reader. Recently, the book was published in Bulgarian in my translation. The price is 10 leva; more details at the sites of the publishers MaK and Iztok-Zapad.
Economics in One Lesson defends the free market with simple and logical arguments understandable for a broad circle of readers (i.e. no special expertise in economics is needed). I am glad that the book is published in Bulgaria right now, in the midst of the global economic crisis. Unfortunately, market disturbancies mess with people's heads and we are seeing more and more economists who are expected to be in their right mind to insist on stronger government intervention in economy and even for total government control. Here in Bulgaria, we have been there and done this. Let's prefer experience, logic and common sense.

The above text is a literal translation of my May 9 post on the subject on my Bulgarian blog. After that post, I had a discussion with a Bulgarian-American commenter. She expressed disagreement with me and said that every single sane economist is now demanding more government intervention. She also cited a Nobel Prize-winning economist who seriously stated that free market must be abandoned and replaced with another economic system. I didn't quite understand what exactly this new system was supposed to be; it seemed that only the mighty intellect of a Nobel Prize winner could do such a feat. Because my rule is to avoid advertising the enemy for free, I won't give the name of the guy here. I am writing about him just to show that the problem turned out to be much more serious than I was anticipating. Where are the sane and honest economists? Please speak out and try to bring people back to their senses! We lay folks cannot and should not fight your battle. I am too often bashing arrogant ignorant people to risk presenting myself as one of them, a lay person criticizing experts. Anyway, with my translation of Hazlitt's book I have already done my best.
Instant update: I decided, however, to reveal the identity of my renowned in-absentia opponent - Paul Krugman.

The cow that wanted no subsidies

I have already mentioned on this blog Vassil, who lives in the village of Rasnik next to the summer house of my mother in-law. Of all villagers whom I know, he is the best and the one with whom I really can talk, however different our lives have been.
During his most active years, Vassil has been a miner and a steel worker. He has told me how in the Socialist era he had to get up at 4 am to reach his workplace in time, because he hadn't zhitelstvo (permission to live in a particular city) that would allow him to rent an accomodation closer to his work. Democracy gave him the right to live wherever he wished and he prefered to return to his village after retirement. He couldn't step on the rails of a typical Bulgarian retiree, staying idle in some overcrowded urban flat and complaining that his pension doesn't suffice for anything. He chose instead to become a subsistence farmer in a village without regular water and electricity supply, sewage, pavement and - possibly worst of all - doctor.
Vassil is living with his wife and his sister, whose husband died many year ago. Both he and his sister have sons who live elsewhere. Vassil is the main worker in the household. With the help of the women (and of his son on weekends), he manages a cow, a dozen of sheep, about 20 chickens, two dogs of the Karakachan breed and, in most years, a pig. These animals produce much of the food consumed by the three subsistence farmers and even something remains to be sold. We occasionally buy from them fresh eggs and milk. Last year, they even found time for volunteer work on the construction of a new Evangelical church in the village. It is small, resembling an ordinary modest house and located just beneath our house.
At age 70, Vassil is hopelessly behind the modern fashions in farming. He can work without rest and pasture his cow in any weather, but he could never fill and submit forms to the EU buraucrats in order to receive taxpayers' money for nothing. I regularly argue with my husband about European farm subsidies. I am against them, he says that they must be sound after they are universally accepted in the EU. He said once, "Without subsidies, our farmers will be driven out of business - from where will you buy milk then?". I answered, "From Vassil's cow - she wants no subsidies".
On Sunday, we saw Vassil's wife coming back from church. She told us that Vassil had suffered a brain stroke 20 days earlier and was still in coma in a hospital. His loved ones could only pray for him to come back alive. The two women knew, however, that even in this case he would never be the pillar of the family again. He would depend on their care, and they were prepared for it. They started to dispose of the animals they couldn't look after. The cow had been sold the previous day (Saturday). Talks were under way with some relations to take over the sheep. Even the chickens were to be reduced in half. How easily our deeds go away.
Update: Vassil died on May 29.