An interview with the president of the institute of free market of Lithuania

The institute of free market (IFM) has appeared together with the revived Lithuanian state - in 1990. It was founded by several post-graduate students. Charming Elena Leontjeva, who was noticed for her polemic articles, became the president of this institution. IFM has turned to the generator of ideas of market economy, and a well defined liberal direction. Tens major economic laws became the products of activity and investigation of institute, including preparation of the of currency management model in 1993-1994 and initiation of business deregulation in 1998. A maxim “where the free market is not created, there black one appears” became the motto of the market

In eve of decade of institute E.Leontjeva looks so, as if time didn’t touch upon her appearance at all. Awarded with the highest titles of elegance and charm, she with her irresistible smile is capable to pay in the belief even the most hopeless scoop...

-What team do you dispose today?

- 15 persons. And in contradiction to other institutes, all their activity is concentrated within the frames of the basic work.

- Well, and how" have you reached such a life "?

During the creation of the institute I was post-graduate student of Vilnius University; and before entering Economics faculty have acquired a profession of the programmer in a technical school. Furthermore, since the age of 15 I began working at the confectionery factory.

- The economist?

- No, the simple worker. I should also note, that work in production has given much to me in formation of weltanschauung. There, having seen from close distance, what defects and distortions planned system give rise to, I became "market woman". And then the question arose: what to do?

- You believe, that liberalism – is a universal "medicine" for all troubles and comparatively effective system of principles of economy and society development? Or it is possible to speak about it as about one of the self-regulation systems of society, the effect from which is stipulated "by time and place ", that is by inwardness of society? Whether, for example, would it be right to say, that liberalism is necessary for Lithuania because time of social democracy has not come yet. Or on the contrary?

- Yes, I am the staunch supporter of liberalism who sweeps aside any mixed systems radically. As a matter of fact, question is an alternative: whether to create welfare by any kind of violence (through planned redistribution as well) or to create values. Besides, nobody can know and decide, what others need. Only after we have run through a market mechanism an information on our unique needs becomes available. And on the contrary, any artificial interference in the market reduces efficiency. In such case it is frequently said, that efficiency is not all; justice is also necessary. But justice is individual in the eyes of each person, and there is no general recipe. Transfer of the right to any politicians or officers to think of it is an infringement of justice.

I think that bias against privatization is in many respects a psychological problem: people simply should get used to a private property in new spheres. Public health services or culture, for instance. But it occurs very fast, because if privatization is being realized normally its affect appears very soon. Today, for example, we can observe it in sphere of telecommunications, where under influence of competition literally on eyes mobile communication becomes popular, though yesterday it was available only for certain circle of people. Now the state monopoly brakes development of economy in power engineering: not having alternative in a choice, the enterprises are compelled to use those tariffs which are dictated to them. And they are not the only who suffer from it; the society also because the consumer costs grow.

- Finance is your hobby-horse. As one of main initiators of binding of lit to dollar and introduction of currency management in Lithuania, you are also the staunch defender from attempts at this financial mode. And today another wave with a request to untie lit from dollar as soon as possible and to devaluate it arose in the country. What will you tell on this account?

- I shall remind, that a main purpose of introduction of currency management was desire to relieve our financial system and our currency from an arbitrariness of politicians. Actually, in 1994 in Lithuania the dollar only painted in color of our flag was entered into a turnover. And it at once relieved us from provincialism, has led into global economy. During several months bank interest rates have sharply fallen and for the first time incomes of our people have started to grow. - The possibility to plan long-range business and incomes has appeared. And, perhaps, stability of lit became the only thing which was worth trust.

Well, and the fact that lit was adhered to dollar, not to the mark or any other European currency, was the correct decision not only with reference to that period, but withstood the time test, too. And I do not see any logic to get rid of it when the euro falls. It means, that if we were adhered to it, then in real measurement we would ever less.

Thus it is necessary to recognize that at a present ratio of euro and dollar for those enterprises the problems arise, which trade in the European markets. A question is what to undertake in order to reduce a negative effect.

In our opinion, we need not to untie lit from dollar, but to allow people decide themselves depending on a situation what currency to use. That is, to allow the enterprises pay the salary either in dollars, or in euro. In this way we can remove the myth that the lit to someone prevents and enable the enterprises to assume risk to work with this or that currency. For example, to distribute it bargaining with foreign firms, with the banks. And people will begin to understand, that problems are born not Lithuanian banks, but in the world markets, in the central Bank of Europe and so on. it Is necessary to inure people to orient at the global market where the lit itself means nothing. Therefore, the only thing we can do is to adjust to the situation in which search of the independent decision is required.

- Another extensive theme - restructuring of economy. In what stage is this process now to your mind? Is the environment as favorable as it is required by the laws of the market economy?

- That this process has beginning, but it has no end. Is it not right to speak about it as if it is in finishing stage because all time not only the new enterprises, but also the whole branches of manufacture will disappear and be born. The main thing is not to prevent it, not to force subjective point of view. There is an attitude, for instance, that manufacturing is a good thing and the manufacturers should be helped. Actually, the manufacturer is everyone who creates a surplus value and it doesn’t matter with the help of the machine, hands or a head. And development of the market shows that the greatest surplus value is formed not in the traditional branches of industry, but in science, information technologies, style, etc. – there, where anything can be planned in advance.

But there are obstacles, of course. I shall give an example: wrong VAT on services: it is considered that it is exported not then when for it was paid from abroad but then when it was proved abroad. But it frequently results in absurdities. Take such an example: the programmer who creates his product in Lithuania and sells it to the Swede exports the service in his turn. And he need not to go to Sweden for this purpose. Just as the surgeon who will operate the foreigner not abroad, but in Lithuania. So it would be logical to create such specialized medical centers where our highly qualified experts would be used not only for treatment of the citizens of Lithuania, but also for the foreigners. But technique of collection of the VAT prevents to realization of this idea.

- What concrete results introduced on your advices have given you the greatest satisfaction?

- You see, that what I do well, not that how third persons have disposed my advices, gives me satisfaction,. Probably, this the most unfortunate position when the inwardness of the person depends on reaction of other people. We see our applicability in education and in propagation of liberal views first of all. Furthermore, we show how to pass a way to market economy, too. By the way, now our institute works in frameworks of " a commission of rising " very actively, it works on developing concrete measures on limitation of a bureaucracy). And it is similar, that many of our offers will pass.

- And the last question: why did you leave the Office of the President, where you worked as the economic adviser?

- As rational the person, I like to see the results of my work. Working with the president, I saw that I didn’t not do more, than could achieve in institute. However, I had the certain limitations connected with the new status. At the same time, my words were tried to treat not as advice of the expert, but as actions and ideas of the president. Thus I was constantly required compromises: it is allowed, it is possible, it is impossible... In general, routine has confirmed that my real place is in institute and that to influence the free market it is possible only from the free one, independent institution when your only weapon is a force of argument.