OUTLINE OF POLITICAL ECONOMY

Author: Georgi Danailov

Editor's Note: This material is a stub. It should be re-written at appropriate occasion further in time. Have in mind that modern economists of Keynesian type didn't have a school of their own in Bulgaria. Their economic thought was expropriated by the spectrum of Marxism-Leninism. Few extraneous economists flashed for a short period of time in the 1930s and 1940s — i.e., professors from the Free University of Sofia, Konstantin Bobchev and Dimitar Dobrev — but their efforts were hastily forgotten after 9 September 1944. Rehabilitation of bulgarian economic science still awaits to take place. Meanwhile, we begin from the reverse and present in this review the old school of classical political economy in pre-war Bulgaria with its typical representative Prof. Georgi Danailov (1872-1939), ditto.

Spectrum of Marxism-Leninism

[1] In the period 1948-1989, Marxism-Leninism was not only the official but also the only allowed basis and framework for economic science, research, and the training of economics students at Bulgarian institutions of higher education.

[2] In the period 1944-48, along with the changes in political life characterized by the Communist Party’s complete takeover of power, Marxist-Leninist ideology was completely imposed in economic science and education. University lecturers whose views differed from the official ideology were dismissed from work - retired or fired.

[3] Marxism-Leninism dominated economic science completely throughout the entire Communist period of the country’s history. There were hardly any differences within the paradigm, with two exceptions: the problems of the market and the market character of socialism were posed and discussed at the beginning and at the end of the period.

[4] At the beginning (1948-49), an eminent Bulgarian statistician and financier, Ivan Stephanov, at that time Minister of Finance, was an adherent of the idea of preserving a planned economy, but one open to European markets. Soon after, he was fired and sent to work at the Bulgarian Academy of Sciences, BAS, where he established the Institute of Economics. Several months later, he was sentenced to life imprisonment in a typical Stalinist trial, similar to these in Hungary, Czechoslovakia, and Poland. Not until the 1960s and 1970s was market socialism discussed again. Then it was argued more broadly and with greater depth and became part of the common views of Orthodox Marxist-Leninist revisionism, which spread in most Eastern European countries.

[5] The rest of the time, economic science in Bulgaria was settled within the framework of official Marxism-Leninism. What changes there were reflected the common changes in the political system. The period until 1956 was more dogmatic than the next period and was strongly colored by Stalinism. Afterward and especially during the 1970s and 1980s, discussion of improvements to the economic system began, but within the socialist framework. Almost every 5 years, new economic models were proposed to resolve the contradictions of the socialist economic system. The main problems discussed included "owners and managers", "organizational structure change", "extensive vs. intensive growth", and "workers’ and directors’ motivation". Discussion was actually more a pseudo-scientific argumentation about an imitation of changes than a search for solutions.

[6] In 1989, at the very end of this period, an economic model was introduced that seemed at first sight radically different from Marxism-Leninism. The state was to withdraw from operative enterprise management; organization was to resemble company organization in countries with a market economy; private property, under the name of "citizens’ property", was to gain recognition along with state and cooperative property; the establishment of Bulgarian companies abroad was to be stimulated, etc. This model was not introduced as a result of public debates, but was established and imposed from above. As practice in the next several years confirmed, this model turned out to be a very suitable framework to de-capitalize state companies and transfer state assets to the possession of representatives of the nomenclature.

Pre-war traditions

[7] Economic science in Bulgaria developed along with the development and consolidation of the Bulgarian state and matured during the period between the two world wars. In the mid-1930s, totalitarian economic views began to spread; the traditional economic schools reacted critically against this. The pre-war tradition in economic science was discontinued during the period 1944-48, when Marxism-Leninism was imposed as the only possible framework of development of the field of economics.

[8] The two main movements around which the representatives of economic science grouped were, first, the pragmatic, which addressed the problems of developing the national economy and, second, the theoretical, which comprised the Bulgarian representatives of basic theoretic schools of Western European economic theory.

[9] The representatives of the first movement were mainly politicians or business representatives with ambitions in politics. The most eminent were Stefan Stambolov, who as Prime Minister from 1887-94 began Bulgaria’s industrial protectionism, and Alexander Stamboliski, Prime Minister from 1919-23, who stressed the development of the farming sector, including the establishment of cooperation.

[10] The main representatives of the second movement were Georgi Danailov (of the school of institutional history and social legislation), Simeon Demostenov (of the subjective school), and Ivan Kinkel (of the theory of the cyclic character of economic development). The most eminent representative of economic science in this period was Oskar Anderson (statistics, finance), one of the most famous Eastern European economists of the 20th century, who worked in Bulgaria for more than two decades. He and other economists, as university professors and researchers, established schools in various fields that played a significant role in the dissemination of their respective theories in Bulgaria. Most Bulgarian economists’ contributions in the pre-war period were applied-scientifically oriented.

[11] Probably the strongest school was the school of statistics. Along with Anderson, many statisticians worked in Bulgaria at that time, defending doctoral degrees at the most prestigious European and American universities - Prokopi Kiranov, Ivan Stephanov, Anastas Totev, and others. This group laid the foundations for modern statistics education at the institutions of higher education and for studies applying state-of-the-art statistical methods and approaches.

[12] Between the two world wars, Bulgaria had a well-established network of institutions of higher education and economic studies. There were three specialized institutions of higher education in economics - the Balkan Near East Institute of Political Sciences (Balkanski Blizkoiztochen Institut za Politicheski Nauki, 1920, Sofia), the High School of Business (Visshe Targovsko Uchilishte, 1921, Varna), and the High School of Business (Visshe Targovsko Uchilishte, 1936, Svishtov). Studies were carried out at the Statistical Institute for Business Studies (Statisticheski Institut za Stopanski Prouchvania) at Sofia University (1934), the Institute for Farming Business Studies (Institut za Zemedelsko-Stopanski Prouchvania) at the Agrarian Faculty, and elsewhere. The most prestigious scientific journals were Spisanie na Balgarskoto Ikonomichesko Druzhestvo (Journal of the Bulgarian Economic Society, 1826-1944) and Stopanska Missal (Economic Thought, 1929-1938), which was published by the Association of Economics Academicians in Bulgaria.

Impact of Western theories

[13] Throughout the entire socialist period, Western theories had a very limited and indirect impact on the development of economic science in Bulgaria. The translation of books was limited to several old classic authors; access to original editions was limited; and only the field of econometrics applied modern methods and models.

[14] An examination of the bibliographic editions shows that not a single book written by a Western economist was translated in Bulgaria until 1980. During the period 1981-1984, several books by Adam Smith, David Ricardo, and others were published. In the period 1981-89, around a dozen books on management were translated, most of them of a popular, rather than scientific, theoretical nature.

[15] During this period, scholars and scientists could acquaint themselves with modern theories and economic studies by Western authors mainly by means of the controlled access to this literature. The main libraries in Bulgaria - the National Library, the Library of BAS, and others - possessed rich collections of books and journals on economics. For example, during the first decades, the Library of the Institute of Economics of the BAS (Ikonomicheski Institut na BAN) bought dozens of books annually and afterward 150-200 per year; at the end of the 1980s, it had more than 4700 books. During the period 1950-59, it subscribed to 40-50 periodicals; later, 150-190.

[16] Most of this material was statistics or editions from international organizations - the UN, the Economic Commission for Europe, the International Labor Organization, and others. There were relatively few theoretical editions. For example, there were only 3-4 referenced theoretical journals.

[17] Access to Western books and journals was supervised. The books and the journals were divided into two groups. The first group was defined as ideologically dangerous, and access to it was based on permission. Access to the other Western books and journals was based on registration. Not until the 1980s was the greater part of the Western economic literature made openly and freely accessible, in special reading rooms. Here we do not comment on the selection of and access to literature at the research centers of the Academy for Social Sciences and Social Management (Akademia za Obshtestveni Nauki i Sotzialno Upravlenie) of the Communist Party, because the supervision there was realized mainly by carefully selecting the people who worked there.

[18] Under conditions of limited and supervised access to Western theories, their impact could be felt only in fields whose relationship to the official ideology was neutral, i.e., economic modeling. In 1962, a "Laboratory on Economic Modeling" was established at the Institute of Economics of the BAS. The training disciplines "Economic Modeling" and "Econometrics" started to be taught in many majors of the economics departments. This enabled modern models and econometric methods to be applied in the analysis of economic reality.

[19] There were two approaches to econometrics. Representatives of the first thought economic modeling, combined with management computerization, could solve the problem of information insufficiency and establish the conditions to introduce an entire system for the centralized management of the national economy. The representatives of the second group were pragmatically oriented econometricians and used modern models and methods as technical instruments for economic problem solving. Their main interests were in the balance of inter-branch relations, optimization models, prognostic models, operational study, and the massive service theory.

[20] One impact of Western theories was the growing interest in cybernetics and its effects on economic theory and management. Problems discussed included the economic base of value and the economic systems’ cybernetic management base, but on the whole, this movement had limited impact.

[21] As interest grew in the development of small and medium-sized enterprises (SMEs) in the developed countries and of a program to establish SMEs in Bulgaria, the problems of this sector began to be discussed in the mid-1980s. This made it possible to defend the position that SMEs are a vital, necessary constituent of any modern economy and to erode the position that the socialist economy should consist only of big enterprises.

Principal academic journals

[22] The main academic journals in Bulgaria are the Ikonomicheska Misal (Economic Thought) and the series Ikonomicheski Izsledvania (Economic Studies). The journal "Economic Thought" comes out 6 times per year and covers the entire spectrum of economics. It is a national scientific-theoretical journal published by the Institute of Economics of the BAS. The editors of the journal are well-known economists, representatives of the main academic centers in the country. They accept articles with proven scientific merits and contributions to the theory and practice of economics. Each article is read by at least two editors. Many issues of the journal contain materials written by famous foreign authors (both classic and contemporary); some of them are written especially for the journal. All articles have a summary in English.

[23] "Economic Thought" contains discussion of the problems of economic reform and of business policy in the Bulgarian economy, including the problems of the financial system, privatization, the new industrial policy, the development of priority industries and sectors in the Bulgarian economy, social problems, international economic cooperation, and integration in worldwide economic structures. From 1985 until 1992, the journal came out once a year in Russian and English. From 1992 until now, one issue is published in English; it includes articles by Bulgarian authors on the problems of the Bulgarian economy. The journal has a circulation of 500 copies. 90 copies are disseminated among the largest libraries in the world.

[24] "Economic Studies" publishes articles with the results of scientific studies on significant and interesting modern economic problems. The articles in this journal are longer - up to 40 pages. The series Economic Studies was founded in 1950 as Izvestia na Ikonomicheskia Institut (Announcements of the Economic Institute). In 1985, it took its present name: "Economic Studies". Since 1998, the series has been published by the Institute of Economics, BAS along with the Academy of Economics (Stopanska Akademia - "D.А. Tsenov") and since 2000 also in collaboration with the Economic University (Ikonomicheski Universitet), Varna. The edition has had a national scope since 2001. "Economic Studies" publishes the results of the studies of scientists from the whole country on a broad spectrum of economic problems - economic policy, branch restructuring, regional and ecological policy, financial and fiscal problems of transition, company ownership and behavior, social insurance, foreign economic relations, and European integration. The studies are published after two positive reviews. Each study is accompanied by a summary in English. "Economic Studies" comes out three times yearly with a circulation of 500 copies. Apart from Bulgaria, it is subscribed to by more than 50 large foreign national libraries, international organizations’ libraries, and libraries of well-known universities.

***

Comments on Economic Science in Bulgaria

[1] I would like to emphasize three issues that are present, but unevenly developed in the report: the role of legacies; the East-West interface; some aspects of the actual agenda.

[2] The main point is on legacies. Economic knowledge develops in a continuum even when it seems, at first glance, that profound breaks appear. The actual status of economic science in Bulgaria is as much the product of the immediate past, as of the pre-1944 intellectual background. If the communist legacy is the “first-order” explanatory variable, the more distant past constitutes a kind of test for the limits of the intellectual achievements possible in a “spontaneous” environment.
Pre-War Tradition.

[3] Both, the specific social background and particular theoretical affinities shaped the pre-1944 profile of economic knowledge in Bulgaria. The report proposes a taxonomy based on “pragmatics versus theoreticians”. In my view this is not the most adequate classification and the inclusion of politicians in the first category is misleading.

[4] Looking at the doctrinal fundamentals, a noteworthy feature was the absence of clear-cut “corner ideologies”: neither “pure” conservatism, nor liberalism had a strong impact in economic science. Those were traditionally marginal currents and, as a whole, “free market” capitalism was seen as an alien addendum to the traditional economic structure of the country. In turn, Etatism developed as a consensus ideology, taking often corporative, populist and even totalitarian nuances.

[5] The form of theoretical knowledge was characterized by a deceiving lack of original conceptual contributions and by marginality. Economic theory taught in local universities was eclectic and epigone. When a global vision was needed to face major economic challenges, projects produced were either kind of “plagiaries” or peripheral social utopia with systemic drive towards collectivist ideologies. Reliance on outside authorities was the rule, with the corresponding humility and excuse of “smallness”. There was a significant misbalance in the areas of development of theoretic knowledge. It is not by chance that fiscal studies attained relatively higher levels compared to monetary research in a hardly monetized and etatist economy.

[6] In a sense this profile of economic knowledge prepared intellectually the coming communism. With a strong dogmatic and casuistic component, with many stable semantic constructs, with the respectability gained by Marxism, the era of the scholastic communist “political economy” was open.

[7] The national heights in economics were elsewhere, in descriptive, and to a lesser degree applied research. Outstanding achievements were produced in “mapping” the economy through monumental descriptive frescoes. Business cycle phenomenology was particularly well captured according to leading international standards.

[8] A corollary of this bias was the decent technical expertise offered, by the 1930s, in the field of economic policy. The interaction between expert knowledge and economic policy, however, was not successful. As a rule, the society ignored expert advice and generated its own, hybrid responses. Intents to overcome this lack of communication produced, from time to time, projects based on “enlightenment” principles, starving to minimize the errors of economic policy and trying to “coordinate” opposing interests.

[9] Roots of this intellectual landscape could be traced in the specific and unclear social fabric. Entire social strata were missing. The national bourgeoisie cultivated a close dependence from the state, middle class and liberal professions were extremely weak, corporative and collectivist ideologies (especially cooperative) prospered.

[10] The role of the research institutions mentioned in the report deserves to be further stressed. The Bulgarian Economic Association (BEA) shaped the cognitive standards in the economic profession, the politically correct discourse, and the public debate. BEA’s influence, however, was not only related to its intellectual appeal, but to a great extent to the fact that it was a first-order pool for the recruitment of the political establishment. Otherwise, the Association faced a narrow interest among the general public and strong utilitarian expectations.

[11] The highest pre-1944 Bulgarian achievements in economics were attained by the Statistical Institute for Social Studies (SISS) (1935-1938). Its institutional design created a remarkable harmony between demanding scientific standards, elitism and organizational autonomy. The construct rested on several pillars. The Russian émigré Oscar Anderson (residing for two decades in Bulgaria) assumed a strong and internationally recognized leadership: he created a full-fledged “one-man institute” like those of N. Kondratieff (Moscow), E. Wagemann (Berlin) or W. Mitchell (USA). Effective and well regulated contacts with technocratic government institutions were carefully designed. Financing (Rockefeller Foundation, Bulgarian National Bank, Agricultural Bank) was wisely mixed and conflict of interests avoided. The research program was completely in line with mainstream economics. Finally, a high-level international research network was established, including R. Frish’s Institute in Oslo and League of Nations (Tinbergen-Haberler) projects. The short-lived SISS experience demonstrated that - under particular circumstances - convertible positivist knowledge could be produced in a peripheral country.

Impact of Western Theories: East-West Interface

[12] European economic knowledge was the driving force for Bulgarian economic science. East-West contacts in the field of economics, however, have never been easy or comfortable.

[13] Western formation of many Bulgarian economists did not mean an automatic internalization of Western values. The rule was superficial absorption, while powerful feedback from local culture often “corrupted” the imported clichés.

[14] Western influence penetrated through different channels. The main one was, undoubtedly, foreign creditors’ conditionality. Let observe that an essential, implicit, creditor’s asset is to “impose” a particular economic ideology, i.e. to impose the standards according to which debtor’s national economic policy is assessed. Theory means power and vice-versa. A problem (even a cultural shock) arises when there are fundamental differences between foreign and local economic values, as it was the case between the dominantly liberal foreign advisers’ societal model and the traditionally etatist and collectivist Bulgarian economic mentality. Memorable (latent or open) ideological conflicts developed with the League of Nations’ (LN) doctrine (inspired from the 1920 “Brussels” orthodoxy), or recently with the difficulties in absorbing the “Washington consensus”. Agents of foreign conditionality were powerful enough to design the frame of the needed reforms, but never in a position to implement them smoothly and to obtain relatively “pure” and coherent social forms or institutions.

[15] Pertinent foreign advisers (J. Rueff , L. Pasvolsky) managed to capture the reverse signals. They focused the specific circumstances, not dogmatic principles, preached a kind of conceptual humility (to stay on firm theoretical grounds, but taking into account the uniqueness of each particular case), discarded fashionable “financial esthetic”, tried to avoid the temptation to proceed too fast.

[16] At the junction of foreign conditionality with local policy are the IMF’s counterparts in the host country. They play a key role in the intellectual transfer, being the privileged interlocutors of foreign advisers, the main vehicle of their messages, the translators of the confronting positions to a common conceptual language. To find the right counterpart was not always an easy task in the relatively narrow Bulgarian “convertible” elite.

[17] A particularly interesting topic is the identification of the national sources of intellectual influence on economic elites. The predominant one in pre-war Bulgaria was French and German, while the direct Anglo-Saxon influence was weak. Anglo-Saxon impact was enormously important, however, through the macroeconomic paradigm of the LN and, eventually (in the 1990s), through the IMF. A clear affinity of Bulgarian official science to doctrinal clichés in the economic “metropolis” could be observed. Cohorts of economists regularly excelled in producing dogmatic texts along the German (pre-war) or Soviet (post-war) doctrine.

[18] Conditionality mattered. It created, for example, official language by introducing words and notions in a sort of semantic vacuum. In several instances the Bulgarian elite - inexperienced in practical matters, or rooted in a very different cultural tradition, - adopted a specific professional language precisely through foreign conditionality. This was the case in the early XX century, but also in the early 1990s when the IMF slang gradually supplanted the communication codes of a completely Marxist-indoctrinated professional milieu. Conditionality created data, as well, by setting out a comprehensive and explicit economic statistics. Pressures for more reliable fiscal figures needed by foreign monitoring were permanent throughout the century. Completely missing monetary (including Central Bank) statistics were designed during the 1990s. Finally, conditionality mastered institutions, the reform of Bulgarian National Bank in the 1920s being a particularly emblematic case.

[19] The 1990s saw changes in conditionality style, not so much in its substance. National specifics of conditionality tend to fade away. Western influence becomes overwhelmingly bureaucratized. Commercialization is widespread, with a burgeoning consultancy-providing industry relying on revenues from large scale propagation of standardized “conceptual” products (up to entire macroeconomic reform packages). Doctrinal standardization is extreme - “politically correct” - clichés are reproduced today by an infinite number of voices. Devaluation of the economic profession and easier communication produce uniform cultural formatting. Economic issues are immediately “codified”. Conditionality becomes a depersonalized activity, while marking personalities with a global vision are notoriously absent.

[20] In post-communist transition economy IMF’s institutions turned out to be central vehicles of transfer of economic knowledge. Theirs is, however, a specific kind of knowledge - a mix of pragmatic, conservative, common sense fiscal and monetary policy rules. IMF’s institutions (past and present) are types of laboratories that do not secrete theory, but easily applicable standardized “doctrines”. They are an essential source of more or less rough material recycled by academia. Research departments of post-war IMF harbor high-level professionals that do not pertain to a single theoretical framework. The purely academic motivation in conditionality enforcement is scarce. Theoretical interest towards a small country like Bulgaria is fostered only when the country becomes a test case. Two examples could be mentioned - the LN arranged Stabilization loans of the 1920s, when Bulgaria was a part of a select group of countries adopting a new stabilization scheme, and (from 1997 onward) with the implementation of a currency board. These specific situations tended to attract the interest of first-order foreign economists.

Communist Legacy

[21] Views on the communist legacy in economic science differ to some extent.

[22] Marxism - in the communist context - could hardly be treated as a paradigm. A paradigm is supposed to be critically discussed through hypothesis testing, subject to changes and eventually “falsified”. This was obviously not the case with the rigid Marxism, considered as an unmovable official state ideology.

[23] Referring to the existing research institutes it should be observed that their role was twofold. On the one hand, they produced “official critical thinking” that was entirely inside the status quo, never challenging the fundamentals of the regime. The results (even the most “critical”) were never part of a truly mainstream theoretical framework.

[24] On the other hand, the official institutions tolerated “soft dissident knowledge”. These places were in no way intellectual deserts. Control and inaccessibility of Western economics should not be overestimated (as the report tends to do) at least since the mid-1970s. Researchers who really desired so had the possibility to be informed (at low cost in public and academic libraries) about the main trends in mainstream economic knowledge. The much more tangible barriers (in Bulgaria) were the scarcity of foreign language skills, education and the social context. Education, in particular, was completely indoctrinated, so that - even for those who tried to fill the gap - entire formational building blocks of Western economic theory were missing. Insertion into the mainstream context was further obstructed by the lack of social (career) incentives to develop such knowledge, given the strongly dogmatic professional milieu and non-existent contacts with the Western scientific community. It should be added that after 1947 non-Marxist economists faced a single dilemma: between ostracism from universities (research institutions) and opportunistic coexistence.

[25] At the end of the day the “dissident choice” was quite restricted. Mathematical methods (as elsewhere in communist countries) offered the possibility of internal emigration and implicit rejection of Marxism. Results, however, were disappointing. Generalizations, as a rule, remained inside the dominant discourse. Applied econometrics was of poor quality, inconsistent with mainstream patterns. Some marginal Western areas (such as large-scale models and input-output analysis) were over-represented due to their compatibility with the socialist - naturalistic and demonetized - conception of the economy and with planning practices. Misinterpretation of Western theories was also frequent as a result of limited understanding of their substance, and (above all) of their context. The case with “economic cybernetics”, cited in the report, is one of the most adequate illustrations of this phenomenon: it is not an example of Western influence (as interpreted in the report), but rather the contrary, the demonstration that simple transposition of fashionable theories does not represent authentic critical thinking. The only additional refuges available were the possible choice of more technical (less ideological) research issues, or the studies of capitalist economies (a semi-open window to the realities of the market). It should be noted, as well, that the more empirically oriented economists developed marvels of sagacity and uncommon skills in dealing with the statistically biased communist realm.

[26] On the whole, Bulgaria did not produce radical “dissident” economic knowledge in its two possible dimensions - a critique of the regime’s fundamentals based on mainstream theories, or the formulation of original theoretical insight explaining (in a mainstream framework) the functioning of a communist economy.