Functioning of the Market and Regulatory Actions by the Government

[01.01.2004, Peter Gonda, PAPERS AND STUDIES]

A noticeable reduction of the extent to which the government interferes in the „real“ economy and the creation of more transparent market rules, are the main preconditions for a long-term economic development (not only) in Slovakia. The redirection of a considerable amount of financial funding from the center to private hands should support the enhancement of personal freedom and responsibility, as well as a decrease in the unemployment rate.

A high standard of living and the highest possible extent of personal freedom and responsibility are conditioned by a functioning market. A purposive functioning of limited government is an additional condition. The author evaluates the market functioning and regulatory actions of the government in Slovak terms presenting three views: the present (including the main problems), possible future (three scenarios), and a strategy leading to the required state.

According to the author the centralised and extensive administration, and regulatory actions of the government, together with none transparent rules of market competition represent the greatest problems for today. He assumes that governments will not be able to lower the excessive weight of public finances in the economy (although a slightly lower rate of public expenditure to GDP is expected within the medium-term period) and he believes that this is the most likely development of the situation. He does not expect any more consistent solution to the problem of none transparent rules as regards conducting business, he also does not believe that there will be any significant improvement in the situation on the capital market as regards law enforceability.

The author defines the key preconditions for required development, and these are: a significant decrease in governmental influence on the economy, a reduction of the government regulations and other restrictions on the market, and clear and cherished business rules. This could create space for a certain (but not significant) decrease in corruption and other manifestations of poor judgement. The final part of the article presents conditions for strategic success leading to a long-term increase in the living standard in Slovakia.

Author is an economic analyst for the Conservative Institute of M. R. ©tefánik.

The text introduces one chapter written by the author in the publication Slovakia on the Way to the Unknown (Bratislava 2003) issued by the Institute for Public Affairs.

The full text is available here as an Adobe Acrobat PDF.