AEC, KI a INESS v spolupráci s ďalšími partnermi organizovali medzinárodnú konferenciu v rámci Free Market Road Show 2013 na tému Šetriť alebo nešetriť: Zachránia Európu len úsporné opatrenia?, ktorá sa konala dňa 7. júna 2013 v Bratislave. Ďalšie súvisiace informácie nájdete na www.konzervativizmus.sk AEC, in cooperation with the Conservative Institute and INESS, and in association with international partners organized the Free Market Road Show 2013 in Bratislava on June 7, 2013. More information at www.institute.sk.

1. Associate Professor, Dr. Krassen Stanchev Sofia University,
CEO of KC2 LTD and Board Chairman of IME
1Free Market Road Show -- Bratislava, 7-6-2013
People spend lots of time taking,
or trying to take,
things from somebody else.
P.J. Hill

2. EU raises some principal issues
 What is “government”, who is “we”,
what is “can” and what are the statistical
fictions?
 Government expenditures and economic
growth
 Why the Transfer Union and how it
repeats the patterns of COMECON
 Government expenditures does not
necessarily indicate the entire “burden”
of domestic and EU government.
2Free Market Road Show -- Bratislava, 7-6-2013

3. “The secret of taking money is the
promise to give money”.
• This is the basic reason behind the
growth of both EU and national
government.Free Market Road Show -- Bratislava, 7-6-2013 3

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5. The Process and Facts
Spending Taxes Deficit (surplus) Explicit Public Debt
Spending is the key driver; especially the social transfers
Figure 1. General government spending as % of GDP
Source: Tanzi V., Schuknecht L. (2000), Public spending in 20th century, Cambridge University Press ; World Economic Database
Figure 2. Social spending (in-kind and in-cash spending) as % of GDP
Source: Master theses on welfare state dynamics by: Magda Ciżkowicz, Jarosław Kantorowicz,Piotr Pękała, Wiktor Rak , Seweryn Szwarocki
1913 1920 1937 1960 1980 1990 2000 2007
France 17,0 27,6 29,0 34,6 46,1 49,8 51,6 52,3
Germany 14,8 25,0 34,1 32,4 47,9 45,1 45,1 43,6
Italy 17,1 30,1 31,1 30,1 42,1 53,4 46,2 47,9
UK 12,7 26,2 30,0 32,2 43,0 39,9 39,0 44,2
USA 7,5 12,1 19,7 27,0 31,4 32,8 34,5 36,6
1913 1920 1937 1960 1980 1990 2000 2007
France 1,2 3,7 13,7 26,1 29,3 32,0 32,0
Germany 21,1 30,4 27,6 31,8 28,9
Italy 2,2 3,3 16,4 25,4 28,4 29,6 31,5*
UK 7,1 10,5 15,3 22,9 24,7 26,3 29,9
USA 8,6 9,7 18,1 18,4 19,6 21,4
5
Leszek Balcerowicz: Berlin, Federal Ministry of Finance, December 7, 2011
Free Market Road Show -- Bratislava, 7-6-2013

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7. Entrenched (structural) ignorance
The analogy with the COMECON…
“RESTART THE EU BUDGET” of 2007
Entranced ignorance of EU institutions, and politicians and
servants:
a. No-bankruptcy mentality – this is why lack of discipline and
growth of expenditures;
b. No institution to underwrite creditors-debtors agreement;
c. Omni-present free-riding political expectations;
d. Disregard to the rule of law in monetary and economic fields;
e. Folk economics;
f. False economy.
Free Market Road Show -- Bratislava, 7-6-2013 7

8. 8Free Market Road Show -- Bratislava, 7-6-2013

9. What is not seen: calculating the cost of
government
Expenditures +:
Implicit government debts (costs of promises);
Inflation tax;
The costs of compliance;
Time and recourses spent on indirect transfers;
Same, but spent on preventing the direct and indirect
transfers to “others”;
“Government substitution costs”;
Crowding out effects;
..?
Free Market Road Show -- Bratislava, 7-6-2013 9

10. EU FALSE ECONOMY AND ITS COSTS
Administrative and reporting costs of the EU for 1999-2009 – €1.3
trillion;
Compliance costs – last calculated in 2001 – €535 billion;
Currently – roughly, €1,200 per capita (on average 75-80% of
domestic regulation originated in the EU);
Indirect transfers associated to public pension systems (7-8% of
GDP);
Private security expenditures – not calculated (examples);
Consumer costs of protection (€600 billion, see:
Free riding on the welfare state – not calculated (examples sick
leaves, jobs);
Costs of the EU Commission – 1% of GDP (about €140 billion);
Cost of EU energy policy - €100 billion a year;
Costs (time tax) of competing for EU transfers.
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