How can Croatia become a tiger of southeast Europe?

The generator of Croatia’s economic growth will be the individual supported by a generation of honest and competent leaders advancing economic freedom.

First posted on Index.Hr, Croatia's independent media communications group, the Croatian text can be found here.
March 18, 2011

By Natasha Srdoc, co-founder and chairman, Adriatic Institute for Public Policy
 
In order to prosper, Croatia’s people must reject dependency on the state and must embrace market economic reforms based on the rule of law and protection of property rights.  The generator of economic growth is the individual not the state! 

An individual, who can freely grow grapes for Asia and Latin America’s growing markets; an individual who can benefit from fishing in an exclusive economic zone in the Adriatic Sea and sell his/her catch of fish to whichever market fetches the best price. An individual who has a great idea of launching innovative ideas, perhaps starting the world’s new “Facebook” and is able to monetize her idea and become the next billionaire.

Croatian citizens have never experienced a market system with an accountable and limited government based on the rule of law and protection of property rights. The more limited the government is, the less damage it will have on the real economy.

Croatians were led from communism directly to criminal capitalism by the very same  political elite that held power. The communists never had sincere convictions  in communism as a higher political order. The communist leadership just used the statist system to subdue the majority of the citizens and made them dependent on a nanny state. The communist leadership went on to robbing  citizens of political freedom by tying their finances and income to the communist state. Private property was limited to personal dwellings and personal belongings and the rest was nationalized and kept under the control of a corrupt regime. The Communist party leadership, the very same people who were promoting equality, were “more equal” than others enjoying higher privileges. 
 
Lady Thatcher succinctly stated, "The problem with socialism is that eventually you run out of other people's money [to spend]."

The HDZ regime in the 1990s continued the practice of stripping an individual of economic freedom. Instead of giving to an individual the economic power to decide how to best use resources - by completely restituting the confiscated property to the original owners and letting taxpayers benefit from a transparent privatization process, Croatia’s politicians decided  to solely protect their own interests. The Law on compensation (Zakon o naknadi za imovinu oduzetu za vrijeme jugoslavenske komunisticke vladavine) passed in 1996 was most damaging to the protection of private property rights of Croatia’s citizens.

The law on compensation stipulates that compensation is applied in cases where restitution in kind is not possible due to the protection of acquired rights or public interest. The HDZ controlled parliament reduced the value of private properties that needed to be compensated to a shameful value which was further reduced with side regulations, payable through the bonds in two decades.

The EU report from 2010, “Private Properties Issues Following the Change of Political Regime in Former Socialist of Communist Countries” mentions about Croatia that, “The County Public Administration Office is given the exclusive duty of deciding upon claims to property that are mostly owned by the counties themselves. This places the County Public Administration Offices in a position to decide upon the approval or denial of claims to its own property vis-a vis the eligible claimants.”

This is a clear example of conflict of interest and is a source of numerous abuses of power and corruption, continuing to rob Croatia’s citizens of their legitimate private property. The same report also notices, “ ... the slow procedure seems to be a result of the low priority placed on the restitution and compensation process by the counties."

The last twenty years of criminal capitalism in Croatia have had very similar features to communism. Croatia’s governments led by HDZ and SDP in the last 20 years favored the citizens’ dependency on the government. With around 50% of Croatia’s working population employed by the government or state-owned companies, the nanny state continued to be promoted instead of market economic reforms.

Benjamin Franklin, one of the Founding Fathers of the the United States of America who once met with Republic of Ragusa’s Ruđer Bošković, poignantly said, “Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety. “

The historic Republic of Ragusa’s own statement on this topic says it clearly, “Liberty cannot be sold, not even for the price of gold.”

Croatian’s citizens and voters are at a crossroads and their options are clear:

1.  They may continue to expect dependency on the state, be subservient to every government that comes around and relegate themselves to very poor standards of living and economic hardships.

or

2.  They can demand equal justice under the rule of law, protection of property rights, independent judiciary and greater economic freedom. 

If Croatians choose the first option, an unsustainable model, its economy will collapse and Croatia will end up as Europe’s sick man.  Croatians must press ahead for full economic freedom which is a requirement for political freedom.

I hope that my fellow-Croatians will discern the significance of a dynamic global economy and understand the importance of engaging in a competitive marketplace for jobs and capital. Croatians need to embrace free market economic reforms based on the rule of law.

Prosperity will not come  from the “state income” - which is taken from us citizens, in the first place. The government cannot create new jobs, except with our taxpayer money generated first of all inthe private sector. Croatia’s huge government apparatus needs high amounts of taxes to fuel its inefficient bureaucracies and perpetuate its control of special interest groups.  In essence your taxes are used by political parties to buy votes during election season in the form of subsidies. 

Croatians need an honest and competent government which will be open, transparent  and accountable.  We urgently need a clean government! The economic policies pursued by the next government must focus on creating a favorable business environment that will boost domestic and foreign direct investment and create new jobs.   The only way out of Croatia’s economic crisis is bold market reforms.

The corrupt laws and in particular - 'The Law on Compensation for the Assets Confiscated During Yougslav Communist Regime' have to be replaced by just laws putting the  interest of an individual (taxpayer/citizen) above the interest of the state and fully protecting private property rights. We need to see an immediate and unconditional return of all private properties confiscated by communists and their descendants to their original owners.

The properties which cannot be returned can be compensated in-kind (available land that the government holds) or in cash value at the market prices. The corrupt privatization deals have to be revised and the amounts of indemnifications paid to the state budget for the sole purpose of repayment of public foreign debt.  Croatia’s citizens and stakeholders should demand the confiscation of assets from former and current politicians and their cronies that have amassed unexplained wealth.  Justice must prevail!

I believe that Croatia needs to take a 180-degree turn. We need to strip the government of any economic power except to perform its legitimate and vital functions. People now understand that the government can not play the Santa Claus with taxpayers money.  We need to see Croatians owning private property and having independent resources to be politically independent.

We need to see Croatia’s individual citizens being empowered to make Croatia a new economic tiger of Europe!

The Adriatic Institute for Public Policy, an independent think tank founded in 2004, has never received any government funds from Croatia, EU or US government grants. Our independence makes it possible for us to speak boldly and truthfully about these issues and write about the present realities without any censorship.  The independent think tank receives support from a base of individuals, entrepreneurs and foundations that are dedicated to strengthening the rule of law and advancing economic freedom in Croatia and SE Europe.