DIFFICULT TIME OF SOCIAL AND ECONOMICAL TRANSFORMATION

social reality in Bulgaria after 1989 is being defined by all analyzers as a transition period of
historical and fundamental importance. Even if it sounds a little banal, this appraisal is not exaggerated. Since the aim of the transition is to change the economical, political and social system, to lay the foundations of the democracy and the market economy.
Through the change of the economical, social, moral and psychological characteristics of the Bulgarians, the Bulgarian society is to be integrated with the European and global perspectives of development. The Bulgarian transition is unique with its concreteness, determined by national, political, social and psychological and other characteristics. At the same time, it depends on the processes, which determine the universal character of the market economy and it happens in the conditions of globalizing international economy. Thus, it inevitably contains the national peculiarities, which make it so specific and distinguishing features that define it as an element of the world market economy.
The topic of this paper implies a comprehensive and systematic analysis of the acts, the problems and the results of the socio-economical transformations in Bulgaria. Obviously, in view of the limited size of this paper, such ultimate ambition would be inappropriate. And it is hardly possible that one study could exhaust thoroughly the Bulgarian transition period. The analytical points could be quite various. This paper gives focus to the problems and difficulties of the transition. Analysis of the transition period from the point of view of the hardships, of unsuccessful or undone steps does not mean undervaluing or ignoring the success that has been achieved so far. Thus, it is worth mentioning that over the years of transition Bulgaria became a full member of the EU, and to some extent the market economy was built. It has reached an economic growth rate of about 6%. The unemployment rate for 2007 was 6,91% etc. The aim of this paper is to explain some of the problems in the context of an intellectual scheme which complements the market philosophy. It considers the controversial question whether the transition achieved or approached the desired results.
The beginning of the transition caused theoretical confusion and intellectual duality to the general public and the economic trusts in particular.

The denial of the Marxist’s theory, acknowledged as the “only truthful” one, was done through slow, painful and even impossible parting with its ideology, but also with its quick replacement with other theories, with uncritical, and biased infatuation in them. Through the mediation of the International Monetary Fund and the World Bank, it was suggested that the neoliberal model is the required standard. We accepted the monetary concept and followed it without any caution and critical attitude. The admiration of the new theoretical idol along with the already existing ones led to generation of dysfunctional economic ideas lacking originality. We sustained the transition to market economy literally reading its gospel – the market fundamentalism. The market economy was being built as per the abstract, simplified model of the market economics, which is a mixture of private property, competition, costs and profits .
Far from being orthodox, we need to add as well: coordination of the state with legal, regulatory, social, infrastructural institutions which promote the market economy. In particular, they protect the competition, ensure the adherence to the agreements, and declare bankruptcy in conjunction with the law, exert financial control, in other words – overcome the market failures. The world history has proved that the counteraction to the unfavourable effects of the “wild” capitalism required centuries-long state efforts. The reality of the Bulgarian transition faces the same. It unnecessarily repeats the same route and extends the time. Since the honest market operations and the moralizing function of the market are performed if there is a well-built, strong and actively working market. As long as the market is being built or it is actually missing, the state supports it by its regulatory function. However, even a well-developed market economy cannot effectively function without the interference of the state, legal regulations, regulatory bodies etc.
Private property. The transition to market economy required setting of private property. The main instruments used were privatization and restitution. The Privatization agency published the latest results of the privatization in Bulgaria as of 31.07.2008 . According to these results, 91,53% of the assets subject of privatization have been privatized, in comparison with the size of all state assets - 60,44%. 2931 whole enterprises have been sold; 2322 separate properties; 4116 minority packets. In essence, these figures prove the success of the privatization process. They guarantee that the private property, as the base of the market economy, has been generally built. However, the history reveals a lot of controversy and some unsuccessful privatization years.
Privatization had to be done as quickly as possible. Regarding the priority of this task, the accent on the principles and methods, and mainly on the rules and regulations of the privatization, was not strongly marked. Notwithstanding the fact that the principles (promotion of economically effective privatization, transparency of rules and procedures for all participants, equality of investors) read in each political speech, were not strictly followed.
Under the Law on reorganization and privatization of state-owned and municipally-owned enterprises as of 1992, the Privatization agency was established to privatize the big enterprises in the country. The small and middle-sized enterprises were privatized by the line ministries, while the municipality ownership – by the municipalities. It probably led to abuses, lobbying of interests, sharing parts of the enterprises between the directors. Some friendship circles were done. Having been quite familiar with the problems in economical perspective, a bigger part of the company assets was sold and they declared bankruptcy. A big amount of capitals were taken abroad. Thus, today it is considered that privatization has substantially contributed to the plundering of the company assets. The conclusions that the state ownership has been privatized for small sums are quite reasonable. The figures prove that fact . The financial effect of the privatization deals from 1 January 1993 to 31July 2008 is: contractual payments are BGN 8873,638 m; undertakings are BGN 1461,994 m; paid-up obligations are BGN 10,198 m; agreed investments are BGN 6337,587 m.
The majority of the public was not involved in the cash privatization. Their savings had vanished due to the liberation of prices, so they could not take part in it. The establishment of the centre of mass privatization in 1994 marked the beginning of the mass privatization process. Unfortunately, it had to be implemented by unprepared people with limited investment knowledge of individual participation in tenders. Thus, a big part of them (three million people who had been members of privatization funds) transmitted their investment vouchers to privatization funds established by private physical and legal persons. The state had no leading part in those funds (unlike Poland and Romania), and it did not manage to create a legal environment which could ensure the efficiency of the process. For the bigger part of the 81 privatization funds established, the recovery and stabilization of the privatized enterprises, increase of jobs and incomes of the employees were not major goals. Following the trend, a lot of the privatization funds were transformed into investment companies. Then it was the time of speculative deals, transfer of shares etc. For that reason, it is almost impossible for many people to trace the shares they owned.
On the internet, some of the most frequently asked questions are: Does the fund exist? What should I do with my privatization bonds? and others. The great number of abuses led to setting up an Association of the victims of mass privatization. However, abuses are done because the laws and regulations allow them. As the Privatization and post-privatization control act was passed in 2002, all the activities of state-ownership privatization were concentrated in the Privatization Agency. Only then was the Agency of post-privatization control established, which imposes control on the fulfillment of buyer’s responsibilities defined by the contract for sale of companies with over 50 % government interest.
The following conclusion can be drawn from the above-given brief analysis: the inappropriately conducted privatization led to plundering of the assets, bankruptcy, worsening of the economical crisis. Massive unemployment and social tension were created. Privatization failed to achieve its purpose, and namely to stimulate the economic growth. These conclusions can be explained by the facts that it preceded the legal and institutional infrastructure, which had to ensure the efficiency of the process. Their construction was the responsibility of the state.
Competition. Due to the dysfunctional market, privatization is not carried out in competitive environment. Provided that the regulation is lacking, it often turned the state monopoly into private. Despite the fact that the first Law on protection of competition was enacted in May 1991 and the Commission for protection of the competition was institutionalized as an independent government body, the state did not mange to carry out the competitive policy. It did not create an environment for free entrepreneurship. It did not manage to protect the business against abuses with the monopolistic, dominating position at the market. It did not effectively influence against making agreements between the companies, which breach the fair competition. It could not stop the disloyal competition and arrangements between the companies, which obstructs the creation of competitive market conditions. It could not establish effective control on the government subsidies granted to the companies, and in this way impacted the competitive environment. It is a well-known fact that the policy of the state, which promotes effective competition, is instrumental for the successful operation of the market and the respective market structures. Possibly, this was the reason for the little investment interest of foreign companies in the Bulgarian economy for a long time. The Privatization agency published the statistical information that the foreign investments deals amount to 173.
Prices. The first and decisive step towards market economy was the liberalization of prices in 1990. It was the necessary step towards creation of market stimuli for production development. However, due to the dysfunctional market, it stimulated the inflation, reduced the real incomes of the people and impacted the macro-stability. Liberalization of prices was asynchronous with the privatization and development of well-functioning competitive market. Therefore, the control of the inflation became a priority of the macroeconomic policy, and consequently it inhibited the real economic growth. Imported goods flooded the market. Regulation of prices on a dysfunctional market appeared to be impossible, so their trend was upwards. These facts have been proved by the inflation calculator of the National Statistical Institute . The inflation for July 2008 was 389 659,4% in comparison with May 1990.
Profit. According to the classical economics theory, the aim of the business is the profit, even the maximum profit. Market economy is the mechanism for its realization. In the Bulgarian transition period, this philosophy was uncritically accepted. Perhaps, we are still immature for the concept that”profit is the price of the future” (Draker); the business is an interdependence of employees and employers who work towards a mutual goal and obtain mutual benefits; the correlation between profit and salary is expressed in the realization of individual interests.
The Bulgarian transition created environment which favoured the pursuit of profit through disloyal means. Dishonestly earned money, violation of laws, and the business misunderstood as “a swindle” have become a moral indication of the transition and their social impact is still difficult to overcome. Even today the general public believes that the business is run by people who deceive, steal and bribe. Unfortunately, this opinion is shared by the European commission. This is the most serious problem that needs to be solved at present. The social hardships of the Bulgarian society are due to the wrongly taken steps over the transition period. Companies were driven to bankruptcy in the pursuit of profit, low payment, log-term unemployment and dequalification which eventually caused “brain drain”, or emigration of skilled labour force from the country. The Law on protection against unemployment became effective as of 1 January 1998. Only since the 1 January 2002 has the government policy of employment been implemented in conjunction with the Law on encouragement of employment. The whole work of the Employment Agency is based on this law, despite the fact that before its institutionalization the problems of unemployment were dealt by the National bureau of employment (1990), National labour exchange (1991), National employment agency (1992). The priority is still given to the employment, and not so much to its quality. Another relevant fact is the insufficiency of staff in many sectors of the economy.
The long-lasting adverse effects of the transition have been observed for the recent years and they will continue existing in the future, and thus causing delay in the development. Overcoming them is a real challenge to the intellectual thought and theories which need to design a model of assessment of the impact exerted by the government policies, in particular the inappropriate ones; to acknowledge and quantify the mistakes of the past in order to open up the possibility for the establishment of effective future policy. This challenge became a strong reason for writing this paper. The theoretic part does not criticize the necessity of changes that occurred, but the way in which it was done. The following theory is advanced that the market and the state are interdependent; they complement each other and overcome together the inescapable failures. In the transition economy, a period characterized by sluggish market, the “invisible hand” does not work quite successful, so the state plays a significant role. This paper is the result of the intellectual experience gained through the years of academic work and analytical observations as a contemporary of the Bulgarian transition. It proves the fact that the truth is more elusive than the ambition to write it.

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