An Open Letter
Addressed to: The New Prime Minister
Of The Republic of Macedonia
“Macedonia, 19/10/98”

By: Dr. Sam Vaknin
 

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September 21st, 1998

Sir,

By sheer coincidence, the 19/10/98 is bound to be an important date both for Macedonia and for the world. In Macedonia, the first results of its most important elections hitherto will be published. In the world, this date will witness the collapse of Wall Street and the official start of the greatest economic depression in human history. Of course, no one can predict the exact day – but I predicted the global slump and its climax in October as early as April 1998.

Macedonia faces a few threats related to this sorry state of global affairs :

  1. All international aid will dry up. Macedonia is heavily dependent on foreign aid for the shoring up of its insupportable deficit in the balance of payments.
  2. Macedonian goods will become even less competitive than they are. Macedonia refused to participate in the latest round of currency devaluations worldwide.
  3. The global banking system will be eradicated. There will be no private capital available to replace international credits and grants.
  4. A wave of trade protectionism will sweep the economies of the East and the West alike. Countries – from the USA to China and from Australia to Russia – will block imports and try to protect domestic industries.
  5. The collapse of stock exchanges and banks throughout the world will create a reverse “wealth effect”. People will feel poorer, they will consume less, world growth and the growth in international trade will be reversed.
  6. Less attention will be paid to international crises. Economic depression breeds political isolationism. Macedonia will be left to its fate and may even face existential dangers.
Any new Prime Minister must immediately embark on a “Program to Save Macedonia”. Such a program must have a geopolitical component (of which I am no expert) and an economic component.

The economic component must, as a minimum, include the following elements :

  1. An immediate devaluation of the denar (“competitive devaluation”) – with or without the consent of the IMF. The IMF and the World Bank are under severe criticism in the West now for gross mismanagement of the global economy. They are bad advisors because they are one track minded. They think only about fighting inflation through deflating the economy. This is a disastrous recipe, which already ruined the economies of dozens of countries.
  2. A transparent, predictable exchange-rate regime (trading within a band, for instance, or creeping, daily, devaluation).
  3. A declaration concerning the target of annual inflation (10-15% is reasonable), accompanied by the implementation of steps to make sure that it is not exceeded.
  4. The immediate introduction of VAT in order to encourage exports.
  5. The encouragement of exports by structural means of reforming key sectors in the economy (like customs, telecoms, courts, and banking). This could be done swiftly by throwing the door open to foreigners. The corrupt and inefficient customs service, for instance, could be transferred to foreign management immediately. Private arbitration courts can be established. All state companies (including the Telecom) must be privatized immediately and almost at any price. Failing banks must be allowed to fail.
  6. Import controls on luxury goods (example : cars, caviar) and the encouragement of import substitution (Macedonian tomatoes, not Turkish ones).
Of course, these steps will hurt the economic interests of many politicians and their crony businessmen. But this is an emergency and time is unbelievably short. Action must be taken immediately – or there will be no economy to benefit from in the future. All the citizens of Macedonia : politicians, businessmen, journalists, workers, intellectuals, farmers, the well-to-do and the no-goods have to unite now. It is truly a question of “To act or to Die”. The world is entering the worst economic crisis in human history. Small countries are better adapted than big ones to survive. Macedonia could be an example to others – a model to follow or a warning. It depends only on the Macedonians.