North Macedonia (Brussels Morning Newspaper), The national economies of the world can be divided to the scavenger and the predator types. The former are parasitic economies that feed off the latter. The relationship is often not that of symbiosis, where two parties maintain a mutually beneficial co-existence. Here, one economy feeds off others in a way, that is harmful, even detrimental to the hosts. But this interaction – however undesirable – is the region’s only hope.
The typology of scavenger economies reveals their sources of sustenance:
Conjunctural
These economies feed off historical or economic conjunctures or crises. They position themselves as a bridge between warring or conflicting parties.
Switzerland rendered this service to Nazi Germany (1933-1945), (North) Macedonia and Greece to Serbia (1992 to the present), Cyprus and Serbia aided and abetted Russia (1987 to the present), Jordan helped Iraq (1991 to the present), and Montenegro acted the part for both Serbia and Kosovo.
These economies consist of smuggling, siege breaking, contraband, arms trade, and illegal immigration. They benefit economically by violating both international and domestic laws and by providing international outcasts and rogues with alternative routes of supply, and with goods and services.
Criminal
These economies are infiltrated and hijacked by criminal gangs, kleptocracies, or suffused with criminal behavior.
Such infiltration is two-phased: the properly criminal phase and the money laundering one.
In the first phase, criminal activities yield income and result in wealth accumulation. In the second one, the money thus generated is laundered and legitimized. It is invested in legal, above-board activities.
The economy of the USA during the 19th century and in the years of prohibition was partly criminal. It is reminiscent of the Russian economy, permeated as it is by criminal conduct. Russians often compare their stage of capitalist evolution to the USA’s “Wild West”.
Piggyback Service Economies
These are economies, which provide predator economies with services. These services are aimed at re-establishing economic equilibrium in the host (predator) economies.
Tax shelters are a fine example of this variety. In many countries, taxes are way too high and result in the misallocation of economic resources. Tax shelters offer a way of re-establishing the economic balance and re-instating a regime of efficient allocation of resources.
These economies could be regarded as external appendages, shock absorbers, and regulators of their host economies. They feed off market failures, market imbalances, arbitrage opportunities, shortages, and inefficiencies.
Many post-Communist countries and polities in South and Central America and Asia have made the provision of such services a part of their economic life. Free zones, offshore havens, offshore banking and trans-shipment ports proliferate, from Panama to Archangelsk.
Aid Economies
Economies derive most of their vitality from aid granted them by donor countries, multilateral aid agencies, and NGOs. Many of the economies in transition belong to this class. Up to 15% of their GDP is in the form of handouts, soft loans, and technical assistance. Another 15-30% are comprised of remittances.
Rescheduling is another species of financial subsidy and virtually all developing countries have benefited from it. The dependence thus formed can easily deteriorate into addiction. The economic players in such economies engage mostly in lobbying and political maneuvering – rather than in production.
Derivative or Satellite Economies
These are economies, which are dependent upon or very closely correlated with other economies. This is either because they conduct most of their trade with these economies. After all, they are a (marginal) member of a powerful regional club (or aspire to become one), or because they are under the economic (or geopolitical or military) umbrella of a regional power or a superpower.
Another variant is the single-commodity single-goods or single-service economies. Many countries in Africa and many members of the OPEC oil cartel rely on a single product for their livelihood. Russia, for instance, is heavily dependent on proceeds from the sale of its energy products. Most Montenegrins derive their livelihood, directly or indirectly, from smuggling, bootlegging, and illegal immigration. Drugs are a major “export” earner in Albania, Afghanistan, and Thailand.
Copycat Economies
These are economies that are based on legal or (more often) illegal copying and emulation of intellectual property: patents, brand names, designs, industrial processes, other forms of innovation, copyrighted material, etc.
The prime examples are Japan and China, which constructed their entire mega-economies on these bases. Both Bulgaria and Russia are Meccas of piracy.
Though prosperous for a time, these economies are dependent on and subject to the vicissitudes of business cycles. They are capital-sensitive, inherently unstable, and with no real long-term prospects if they fail to generate their intellectual property.
They reflect the volatility of the markets for their goods and are overly exposed to trade risks, international legislation, and imports. Usually, they specialize in narrow segments of manufacturing which only increases the precariousness of their situation.
The nosology of Predator Economies includes:
Generators of Intellectual Property
These are economies that encourage and emphasize innovation and progress. They reward innovators, entrepreneurs, non-conformists, and conflict. They spew out patents, designs, brands, copyrighted material, and other forms of packaged human creativity. They derive most of their income from licensing and royalties and constitute one of the engines driving globalization.
Still, these economies are too poor to support complementary manufacturing and marketing activities. Their natural counterparts are the “Industrial Bases”.
Within the former Eastern Bloc, Russia, Poland, Hungary, and Slovenia are, to a limited extent, such generators. Israel is such an economy in the Middle East.
Industrial Bases
These are powerhouse economies that make use of the intellectual property generated by the former type within industrial processes.
They do not copy the intellectual property as it is. Rather, they add to it important elements of adaptation to niche markets, image creation, market positioning, packaging, technical literature, combining it with other products or services, designing and implementing the whole production process, market (demand) creation, an improvement upon the originals and value-added services.
These contributions are so extensive that the end products or services can no longer be identified with the originals, which serve as mere triggers.
Again, Poland, Hungary, Slovenia (and to a lesser extent, Croatia) come to mind.
Consumer Oriented Economies
These are Third Wave (Alvin Toffler’s term), services, information, and knowledge-driven economies.
The overriding set of values is consumer-oriented. Wealth formation and accumulation are secondary. The primary activities are concerned with fostering markets and maintaining them.
These “weightless” economies concentrate on the value added by intangibles: advertising, packaging, marketing, sales promotion, education, entertainment, servicing, dissemination of information, knowledge formation, trading, trading in symbolic assets (mainly financial), spiritual pursuits, and other economic activities which enhance the consumer’s welfare (pharmaceuticals, for instance).
These economies are also likely to sport a large public sector, most of it service-oriented.
No emerging or developing economy qualifies as “Consumer-oriented”, though there are pockets of consumer-oriented entrepreneurship within each one.
The Trader Economies
These economies are equivalent to the cardiovascular system. They provide the channels and transmission mechanisms through which goods and services are exchanged.
They do this by trading or assuming risks, by providing physical transportation and telecommunications, and by maintaining an appropriately educated manpower to support all these activities.
These economies are highly dependent on the general health of international trade.
Many CEE economies are Trader economies. The openness ratio (trade divided by GDP) of most CEE countries is higher than the G7 countries. These are the official figures. A lot of trade goes unreported in the grey, black, and informal sectors.
Additionally, these states have one low-weighted customs rate. Openness to trade is an official policy, actively pursued.
These economies are predatory in the sense that they engage in zero-sum games. A contract gained by a Slovenian company is a contract lost by a Croatian one.
Luckily, in the past few decades, the global economic cake tended to grow and the sum of zero-sum games amounted to more welfare for all involved.
These vibrant economies – the hopes of benighted and blighted regions – are justly described as “engines” because they pull all other (scavenger) economies with them. They are not likely to do so forever, however.
Still, until recently most governments have assimilated the lessons of the 1930s. Protectionism is bad for everyone involved – especially for economic engines. Openness to trade, protection of property rights and functioning institutions increase both the number and the scope of markets. The only discordant note is the USA, where the likes of Donald Trump are threatening to upset the apple cart.
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