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17 April, 2016

Bulgaria in the trap of neoliberalism

In 1989 the Berlin Wall fell and the so-called “transition period” for Central and Eastern Europe began. The goal pursued was a radical change of society at economic, political and social level. In relation to this, Bulgaria endorsed a variety of development programs, which were manipulated by the two supranational institutions – the World Bank and the International Monetary Fund. The country was quickly encompassed by a wide network of non-governmental organizations (NGOs) whose number amounts nowadays to 38,000. The UN agencies, supranational authorities and NGOs organized and coordinated Bulgaria’s transition through the same methods, ideas and language, which were being used for the Third World Countries by that time.

by Daniela Penkova

PART 3 - Structural Adjustment Programs (PAS)

The four key reforms required by the neoliberal doctrine and encouraged by the World Bank, the IMF, the UNDP and the think tanks were privatization, liberalization, deregulation (regulations removal) and dramatic cut-offs of the government spending. These reforms were already imposed on the developing countries in the 1980s through the so-called Structural Adjustment Programs. These are a series of macroeconomic measures proclaimed as necessary so that these countries could gain the trust of the private investors. The main goal of the structural adjustment programs was to make all the world’s economies capitalistic ones, thus placing them into a common system controlled by the international capital.

During the 1950s, 1960s and 1970s it was widely assumed that the economies of the poor countries were structurally different from those of the advanced industrial ones because they had been victims too long of the colonization from the Western imperialistic states. In order to get rid of poverty the economically underdeveloped countries needed to get modernized through a transition from the traditional agriculture based economy to industrialization – the so-called Modernization Theory. At that time it was commonly assumed that in order to achieve such a result it was imperative to follow policies of Keynesian type which were applied in all Western countries during that period. “The Development Economics” was considered a “special” instance of Keynesian economics where the main role for the social and economic modernization had been entrusted to the state.

During the 1980s with the ascent of the neoliberal theory also changed the ideas concerning the methods for accomplishing economic development. The approach still remained Euro-centered but this time it was about following the decrees of the neoliberal economic theory which was already making its way into the Western countries.

The international institutions were lending loans to the developing countries through the Structural Adjustment Programs under strict conditions. In case the country did not abide to the conditions it had signed up for, the financing was cut off. The World Bank in 2005 and the IMF in 2002 proclaimed the beginning of a process of revising the method of loan lending. In spite of this, to this day every signed agreement still goes with up to 67 economic requirements to the indebted countries concerning privatization and liberalization of sensitive sectors such as the key spheres of education, health services and aquatic resources management.

Bulgaria applied for its first loan from the World Bank in 1990 starting off from a totally different economic position compared to the developing countries – it was broadly industrialized with developed infrastructures along its whole territory. In addition to that the country had built stable health, pension and educational systems functioning excellently and had a positive trade balance of almost 900 million dollars.

In spite of the big differences from the Third World countries, the loan lenders imposed on the country the same conditions that were imposed on the poorest of the countries: Bulgaria had to quickly start the process of privatization of most of its economic sectors including the banking sector. In addition to that the country had to liberalize all the prices and liberalize and deregulate its markets. The officially stated goal was to increase the Gross National Product – the index adopted as the measure for economic development.

In 1991 Bulgaria signed with the World Bank its first loan requiring structural reforms. Since then were signed 17 agreements with the World Bank and 13 agreements with the International Monetary Fund - all of them with conditions for reforms. Both institutions did not ask themselves the question how to keep the positive results achieved in the country’s economy and social sphere until 1989. If anyone still thinks that today’s economic condition is caused by the short-sighted Bulgarian politicians led by wrong policies, it would be better to get rid of this conviction. All reforms carried out during the last 25 years were worked out, imposed and approved by the two mightiest global institutions.

Source and references:

[1] [2] [4] [5] [6]

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