It is moral to state aloud what you are, it is moral to be consistent in affirming your own beliefs, it is moral to think in the long run, it is moral to affirm your own identity. It is moral to have the courage to say you are different from the others, even if the others represent, for the time being, the majority.1. Errors made by governments in managing the crisis
In order to devise a set of effective policies, the vulnerabilities of the Romanian economy must be identified. Unfortunately, the necessity to address these vulnerabilities seriously limits our freedom of action. For a long time, an unsustainable economic growth, based on over-sized consumption, which in turn was fuelled mostly by imports, has undermined the Romanian economy. Thus, we consider the following to be the internal deficiencies which have worsened the effects of the crisis:
Over-evaluation of prices in the real-estate sector, oriented on short-term gains.
2. Liberal solutions for the invigoration of the economy
Redefining the state: a smaller, but stronger state
1. Restricting the attributes of the state through Constitution –Redefining the role of the state, by concentrating on its fundamental duties: providing security and justice and perhaps, as a watchdog in the economic and social arena.
2. Restricting the number of public authorities and limiting the creation of new ones - Defining through Constitution the number of Ministries and main public authorities. We envisage, for example, amalgamating all ministries with economic attributes (Agriculture, Economy, Transportation, Tourism, Constructions, Telecommunications etc.) into a single one.
3. The goods in the public domain – leasing all goods in public property to private entities, whose duty would be to develop and maintain them.
4. Complete withdrawal of the state from the economy - In order to meet its fundamental attributes, the state needs not own economic entities. Two actions are thus necessary:
a. Selling all real-estate belonging to the state
b. Fully privatising economic agents – As demonstrated by experience, the state is an ill administrator.
1. Privatising the energetic sector – absolutely necessary, in order to create a true market in the field of energy.
5. Transforming the AVAS into a society of financial investments, whose shares would be sold on the stock market.
6. The Property Fund – which has been created as means to repay former owners whose assets had been nationalised by the Communist regime, should be listed on one of the major European stock markets.
7. Launching the process of privatisation in aerial and naval infrastructure – Selling all shares owned by the state in the international airports from Bucharest, Timisoara, Constanta as well as of all companies involved in the administration of maritime and fluvial ports.
8. Launching the process of privatisation in the communications sector, by privatising the Post, The National Railway company etc.
The fiscal system ought to be thoroughly reformed, allowing a separation of status between taxes owed to the state budget and taxes owed to local communities. The state ought to renounce the counter-productive practice of arbitrary redistribution from the state budget to local communities. We envisage the creation of a Bank for Community Development, owned by local communities, and from which communities could borrow money to finance their projects.
Local taxes should be freely determined by local authorities and authorised by local referendum, by the members of that community.
In essence, taxes should only be levied to finance the bare essential functions of the state. Excessive taxation is nothing short of an aggression against citizens. The taxation system should be reformed, according to these principles:
Separating the tax collection between the central and the local authorities, so that local projects would no longer be dependent on the whims of the central government
Significant reduction in public spending, corroborated with the reduction in attributes for the State
Reforming the system of pensions and social security, as well as that of education etc.
Expanding the fiscal potential by corporatizing and developing the agricultural sector.
These are the main actions which ought to be undertaken:
a. The income tax for individuals and companies should be reduced from 16% to 10% within 3-5 years. Also, dividends for individuals should no longer be taxed. The income tax ought to be restructured, with a 4% now and 2% in the future owed to central authorities and 12% now and 8% in the future owed to the community in which the contributor is registered.
b. VAT ought to be cut to 15% within 3 years, with 8% owed to the state budget and 7% owed to local communities.
c. Constitution ought to forbid any government the modification of taxes by Government Decree. Modification of taxes should be approved by Parliament, and by referendum.
d. Constitution ought to state that no new tax can be introduced unless there is a clear justification for its necessity.
Currently, human resources are far more important than physical capital. The education system should move from educating people to educating human resources, it should transform from an institution which spends money into an institution which produces human capital. Thus, two lines of action are required:
The financing should be focused on the lerner. Thus, the education institution should be transformed into a Non-Profit Organisation, whose purpose is to provide education services. The Ministry of Education would authorise schools. Schools which cannot finance their activity would be dismantled, their actives being transferred to similar institutions. Students would be financed through scholarships, awarded exclusively at the end of a contest.
Today’s pensioners are, regrettably, at the mercy of the political class, which has the ability to arbitrarily determine the level of their pensions. Unfortunately, creating a sustainable pensions system is a long process, taking 20-30 years to implement, a period during which the pensions system ought to be supported by the state budget. The transformation process would involve the following actions:
1. A private fund to pay dues to pensioners prior to the initial moment. Pensioners and those who have already contributed to the Pensions Fund have lent money to the State. The State should therefore create a private fund to meet its obligations. The resources of the fund would be as follows:
- income from privatising commercial societies, funds or mixed societies owned by the state.
- income obtained from selling state-owned real-estate
2. For employees who have already contributed to the pensions fund, the state should emit bonds equal to the contributed sum. These bonds, with a maturity period of 40 years, will be deposited by contributors, to any private pensions fund.
3. After the initial moment, all contributions to the pensions fund will be determined by employees with their employer, but no less than a minimal level, determined by the state.
Transforming the healthcare system
The functioning of healthcare institutions should be funded by the Social Insurance Fund, by adopting the practices of private health insurance companies. Healthcare institutions become self-standing institutions, in which salaries are determined, individually, by the Administration Board. In case healthcare institutions cannot meet their financial obligations, they would enter the bankruptcy procedure (this procedure meaning simply financial reinvigoration under judicial supervision). We also consider it a viable option to list 50% of the capital owned by the Social Insurance Fund at a stock market.
Sorin Dinu
Dan Trepcea
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