Black Magic, White Magic
Managing our Future

By: Dr. Sam Vaknin

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An address given to the Council of the VMRO-DPMNE, Macedonia's ruling party, chaired by Minister of Defence and Former Prime Minister of the Republic of Macedonia, Mr. Nikola Kljusev on 16/7/99

Germany's economy collapsed following a reparations agreement which sapped and consumed less than 10% of its GDP. America's economy collapsed, its unemployment soared, its stock exchange vanished and it entered a deflationary cycle which necessitated the most pervasive federal intervention in its history - mainly because of multilateral trade restrictions.

Macedonia has endured trade embargoes, international isolation, wars, an influx of refugees - and still survives as an intact, functioning economy. There is no civil war, no hyperinflation, a stable currency and no famine. It is nothing less than a miracle. No textbook economist would have predicted this outcome.

But Macedonia is trying to cope with its predicament in wrong ways.

It is trying to change other countries, or to force or convince them to change their policies, or to engage in "Voodoo Economics". An economy cannot be run on the bases of promises, contingencies, gifts, aid and a Lotaria na Makedonija approach. Economic policy must not be based on the usual but rather on the normal. In politics, most magic is black and mostly bad things tend to happen. Macedonia is situated in an accident prone area. It cannot and need not pretend (as Slovenia more successfully and Croatia with less success do) that it is part of Western Europe. This denial of the painful truth - that we are at the mercy of forces beyond our control in a region resembling a mental asylum - is at the root of our economic malaise. What if Montenegro erupts tomorrow?

Macedonia cannot change other countries, nor can it influence them to change their policies. It is too small and insignificant and it has no policy options. Will it really deny NATO next time around if it does not receive the compensation it requested from it? Will the nature of its relationship with the EU change if the EU will not honour its promises and obligations? Macedonia is constrained to a very limited set of diplomatic and economic choices.

Instead of changing others - we must change ourselves. We must force Macedonians to change and let ourselves be convinced to change our policies. We must, in other words, introduce magic - the magic of trust. Trust in our banks will encourage domestic savings and domestic investments. It will draw out 1-2 billion dollars from under mattresses and into deposits. This amount is equal to 5 years of aid or FDI (foreign direct investment). Trust in our courts will attract foreign investments. Trust in our government will end the current civil disobedience. Our citizens are rebellious. They don't pay their taxes, they do not collaborate with their own government. They don't trust it to do the good and the right thing.

Macedonia is not perceived by the Europeans to be European. It is too poor to become a member of the EU, public relations exercises (the stability and Growth Pact) notwithstanding. It is too needy and donor weariness is setting in. Money will be harder and harder to come by. And our products compete head on with European products protected and promoted by the strongest lobbies in Brussels.

And with these FACTS we have to live. A sound, prosperous economy is the result of minute, mundane, routine and boring activities - not the result of rabbits pulled out of a hat. Even if the rabbits are European.