INTEGRATION OR ASSIMILATION: Whence the Private Sphere ? Doctor Professor, Joseph W.H. Lough

1. INTEGRATION OR ASSIMILATION:Whence the Private Sphere? Doctor Professor, Joseph W.H. Lough

2. Overview • Prvo, pusti me da zahvalimdoktorprofesorSafetKozarević, Univerzitet u Tuzli, a Odjelzaekonomijuzaovupriliku da razgovarasavamadanas. • PozdravizSjedinjenihDržava, saUniverziteta u Kaliforniji, Berkeley, a izOdjelazaekonomiju, domsljedećipredsjednik US Federalnihrezervi, profesor Janet Yellen.

3. Overview • The Problem • Why capital does not flow “downhill” from wealthier to poorer economies • The private and the public spheres: why smaller government is not the solution • Solution: a strong, independent public sphere authorized to enact and enforce laws and regulations aimed at expanding wealth

4. The Problem • By 2000, Ninety Percent of Economies were experiencing Economic Growth • Bosnia and Herzegovina should among the economies experiencing growth Source: R Lucas, Lectures on Economic Growth (Cambridge: Harvard UP, 2004), p. 101

5. The Problem • Sluggish Growth throughout the former Yugoslavia • Factor Costs • Caeteris paribus • nearly a six-fold advantage for BiH over the US in factor costs • nearly a thirty-eight fold advantage for BiH over the EU in factor costs

6. The Problem • Why isn’t capital flowing “downhill” from the relatively wealthy and costly US and EU to the relatively poor and inexpensive Bosnia and Herzegovina?

7. Privatization/Deregulation • Privatization and Deregulation: Not the Solution • Free markets flourish within the context of: • independent robust public institutions • universally enforced laws, rules and regulations

8. Bloated Public Sphere • Bloated public phere is not the cause of problem • Private interference in public institutions is cause of problem

9. The Private Sphere • Economy = ekonomija = oikonomia = οἰκονομία= • οἶκος (household) + νόμος (laws) • prohibitive transaction costs • Management of private enterprise • Manager = despotes = δεσπότης

10. The Private Sphere • Market distortions introduced by private enterprise: • arbitrary, ad hoc rules, laws, and regulations • largest households (oligarchoi) dictate rules, laws, and regulations to smaller households • largest households (oligarchoi) refuse to do business with smaller households • Market distortions make sense for each private household that benefits from them

11. Public Sphere • Public Sphere • competative bidding on contracts • competative, merit-based hiring • transportation and communication • independent courts empowered to enforce law • independent, public sources of information and knowledge • political parties independent of wealth • fit, educated, healthy, secure workforce

12. Public Sphere • Who is harmed by a robust, independent public sphere? • the oligarchs and their political appointees • monopolies, quasi-monopolies, and cartels

13. Public Sphere • The myth of the bloated public sphere • Why is the public sphere bloated? • The public sphere is bloated and inefficient because of interference of the oligarchy.

14. Solution • Why has capital failed to flow “downhill” from the wealthiest countries to the poorest; • even though Bosnia and Herzegovina enjoys between a 6-1 or 38-1 advantage over its American and EU competitors? • ANSWER: Distortions introduced and maintained by private enterprise.

15. Solution • What can we do? • FIRST, teach students and public that a robust private enterprise depends on a robust and independent public sphere. • SECOND, demand and support political candidates committed to eliminating corruption, patronage, and cronyism in government and monopoly, quasi-monopoly, and cartels in private enterprise. • THIRD, reject patronage and cronyism at our academic institutions, administrative and academic.

16. CONCLUSION • Bosnia and Herzegovina will join the 90% of nations enjoying economic growth. • When they do so is up to us. • Will we rein in the oligarchs now, or will we wait until they have further destroyed BiH? • Will we strengthen our public institutions, or will we further weaken the only independent agent capable of standing up to the oligarchs? • The choice is yours.