Internal Contradictions of Economic Security

Economic security is both a complicated and controversial subject. Its analy- sis is carried out in several different reference sectors, the main distinction being made among the economic security of the consumers, of the producers (corpo- rate security), of the owners of production factors, and of the state. The national economic security is conditioned by a balanced combination of these four com- ponents. On the other hand, in a small country the security of the consumers and of the production factors owners is more important and lucrative than the security of the state and corporate security, as the small country does not have enough capacities to manage them as well.

From the viewpoint of the origin of security factors (variables), one can distinguish internal and external national security. Reference sectors, as well as the internal and external dimensions of economic security can be complementary, but, on the other hand, it is quite often that they are concurrent, especially in post-totalitarian countries that are undergoing transition to a market economy and democracy. Moreover, when it comes to Moldova, the interdependence of these components and dimensions is at least as complex, and their control – at least as difficult as in some large countries. This situation is conditioned by a number of factors:

1. Extremely unfavourable political and social-economic conditions that pre- ceded the transition to a market economy, which is the reason why currently in

the Republic of Moldova the informational and conceptual stagnation of the transition is observed; European society, a part of which we strive to become, will grow in the nearest future into a true informational society, but in the Republic of Moldova still very few people have access to the Internet;

2. Extraordinary penury of financial and economic resources due to the lack of natural resources and of corporate management skills; extensive fiscal evasion and quasi-social approaches towards macroeconomic management employed not so long ago that would probably turn into socialism in the future;

3. Unilateral dependence of Moldovan producers and consumers on Russian and Ukrainian energy sources and raw materials, as well as on foreign markets that allow for selling only a narrow range of uncompetitive goods;

4. The interference of major economic, political and criminal interests (the latter are mostly trans-national), has conditioned high corruption levels, led to the overtaking of control over some key sectors and companies by criminal or corrupt bureaucratic circles, and led to the loss of social and civil trust in the state’s ability to warrant consumer and corporate economic security;

5. Underdeveloped civil society that cannot ensure the feedback needed to adjust the economic system to the people’s needs, i.e. to the needs that are the fundamental landmark for evaluating national economic security.

So far, two main directions of approaching economic security have been identified – the Anglo-American approach and the Asian one. The Anglo-Ameri- can school claims that the fundamental goal of an economic system is to ensure high living standards for the citizens of the country. The American capitalist system is based on individuals rather than the government or the community.

Americans believe that in a true democracy the economy does not have the goal to prepare the country for war, but to meet the needs of the national consumers and producers.

From the Asian viewpoint, economic security means, primarily, increased na- tional economic power abroad. Thus, the state has the right, or even the duty, to control the economic activity that directly influences economic security. This approach is what the American scholars call a „militarised approach to the eco- nomy,“ [7] and history proved repeatedly that such approaches to the economy do lead to wars.³

The European vision about economic security is a rather weird symbiosis of the Anglo-American and the Asian versions. One of the best-implemented models is the Swedish social-oriented economy that, however, is increasingly displaying

„fatigue signs.“ Thus, the contradictions between the two approaches are very subtle and lead to confusion, as a practical synthesis of the two is very difficult.

Even the most notorious economists have made mistakes and confusions. For instance, it was Adam Smith who believed that an economy is too complex to

3 As it is well known, the English-German trade conflict at the beginning of the 20th century was one of the main triggers of World War I

be controlled by the government, [8] which was also proven by the collapse of centralised socialist economies (i.e. a thesis in favour of the American vision of economic security). On the other hand, it was also Adam Smith who believed that

„sometimes, the protection of the country is much more important than opu- lence“ (i.e. a thesis in favour of the Asian vision of the security). [9]

Additional difficulties in analysing economic security are caused as well by the incessant academic arguments about the superiority of the economic or political aspect in human existence, social behaviour and the subconscious. These argu- ments are conditioned by the deep differences between the logic of a politician and that of an economist, as well as between the principles of political and economic philosophy. The political space is radically different from the economic space. The former cannot exist without continuity, without interdictions and con- trol; while the latter is much more dynamic, and major interests are focused on controlling flows and networks and exceeding national borders. [10]

Due to contradictions and confusions in political and economic thinking, the concept of security, in general, and the concept of economic security, in particu- lar, as they were developed so far, repudiates any attempt to develop the analysis within strictly set limits. It is futile, even impossible, to approach the economic dimension of national security apart from the political, military, informational, and other variants of security. Firstly, the borderlines between the security dimensions are very volatile. Secondly, security dimensions determine each other, and some- times it is extremely difficult to separate factors threatening economic security from the sectors jeopardising political security. Indeed, the quasi-total depen- dence of the Republic of Moldova on external energy and raw materials sources has determined the agrarian type of economy and a unilateral focus of trade relations, thus jeopardising the ability of the Moldovan state to provide resources and economic goods to producers and consumers. Therefore, it is highly probable that in the case of a military conflict or in the case of the threat of a military conflict, the Republic of Moldova will be totally unable to ensure a viable war economy. Even under the current conditions of peace, the extreme penury of the state does not allow for the establishing of a defensive economy, as well as for restoring and mobilising the military-industrial potential left from the Soviet Em- pire. Certainly, this vulnerability may be easily used by aggressive and subversive forces interested in diminishing the real political independence of the Republic of Moldova. Another example is the Transdnistrian conflict that has often over- stepped the political dimension into the economic one, and Transdnistrian au- thorities have proven convincingly to the Moldovan government that they have enough tools to influence the economic security of Moldova and turn negotia- tions to the direction they need.

We cannot refer to economic security, as it was a specific condition, achiev- able by economic, political, or military means. Such an approach would be false.

Even if we wanted very much to, we could not describe exactly – either qualita- tively or quantitatively – what we mean by economic security. In Barry Buzan’s

opinion, „the generally accepted idea that economic security is an absolute widely-applied value is no more than an illusion, and following it means to follow a chimera.“ [9] This quality of economic security becomes perceivable at once if we extend it to the level of the capitalist system, based on free initiative and competition. However, we have in mind not only purely capitalist societies but even the countries undergoing transition to a social-oriented market economy, such as the Republic of Moldova. These contradictions are noticeable even in eminently social economies, e.g. Sweden. Furthermore, we will identify the con- tradiction for each of the four components of economic security – consumers, owners of production factors, producers, and the state, by firstly defining another issue – the contradiction between security and efficiency. It is the perpetual problem of balancing social equity and economic efficiency. Recently, another issue was added that makes it even more difficult for the decision maker, namely the need to minimise the impact of human activities upon the environment. The concept of sustained economic development is defined as the meeting point of these three principles.

As it was mentioned above, uncertainties occur while analysing consumer economic security. Firstly, consumer economic security is often confused with individual social security. Individual social security means everyone’s right to have access to a minimum necessary for biological survival and to benefit from a guaranteed living standard. Article 47 of the Constitution of the Republic of Moldova clearly sets forth that „the state must undertake measures to ensure decent living standards for everybody that would secure his health, his and his family’s well-being, including food, clothing, dwelling, healthcare, as well as nee- ded social services.“ Article 126, paragraph (2) sets forth that „the state must ensure more jobs, appropriate conditions for increasing living standards.“ Jobs or a decent minimal income is not expressly guaranteed, as it would mean that the state or employers would have to undertake additional liabilities. On the gover- nment’s part, it would mean major interventions in the open market mechanism, in order to create new jobs (thus decreasing economic efficiency) and in order to ensure socially equitable income repartition (thus hampering a person’s right to fully benefit from his own abilities and skills). The main risk of such political intrusions would be „a Soviet-type outcome, where individual social security was gained by overall low living, or a British-type outcome of relative economic decline and increasing difficulties in maintaining overall employment and corresponding growth.“ [9] Maintaining the balance between security, efficiency, and the environ- ment should also be a fundamental issue for the government of the Republic of Moldova.

Another confusion appears while analysing the economic security of the owners of production factors (labour, capital, land, information), when the eco- nomic security of the employed (owners of a production factor – labour) is mis- takenly confused with social security. Within national economic security, major conflicts of interests occur, for instance, between the interests of the workers

(defending the economic security of the owners of production factors) and the producers’ interests (defending corporate interests).

Contradictions still emerge when analysing corporate economic security com- ponents. Overall high productivity and the appropriate use of limited resources in an open market are only possible by eliminating businesses that are less able to resist market pressures. Under such conditions the ones who survive are compa- nies that have more flexible organisational structures and management systems, while the companies that cannot adjust are eliminated. The establishing of mo- nopolies, the creation of cartels are just several artificial barriers preventing market access for other corporations. Thus, an open market economy is based on the idea that seems unacceptable at first look, namely the idea of the development instability that admits a certain degree, sometimes a rather high one, of corporate economic security. If we extend this reasoning to the level of international rela- tions, we will come to the wrong conclusion that the economic security of a country is also unattainable. However, we must be aware that there are significant differences between consumer economic security and corporate economic secu- rity, on one hand, and the state’s economic security, on the other; the most remarkable factor is that the state can adjust their „inner structure“ to the exter- nal environment and has constraint measures aimed at ensuring security in case of external or internal threats.

To put it differently, an open market requires increased adjustability from companies that want to keep their positions in the market. Although corporate security is an indispensable part of national economic security, raising corporate interests to the level of absolute priorities of the national economic security policy is unacceptable, as there is yet another aspect characteristic of the eco- nomic security – the antagonism between producers’ interests and consumers’

interests. As producers, companies are interested in maximising their profit, in- cluding the creation of monopolies, while the consumers are interested in in- creasing the utility of the goods and services. This can be achieved only by diversifying consumers’ options, and the idea of a monopoly is equivalent with increased consumer prices and the impossibility to choose. It should be men- tioned that in the Republic of Moldova numerous cases were registered when corporate interests dominated consumers’ interests, as well as the state’s inter- ests; one of the most famous cases is the confusing situation during recent years regarding Franzeluþa, North and North-West Power Distribution Grids, etc.

These cases can be explained by a phenomenon that often occurs in poor countries and countries undergoing transition, namely the corruption of the pub- lic officers in charge of overseeing the compliance with the legal framework con- cerning free competition by local and foreign producers. Besides, in such a small post-totalitarian country as Moldova the Communist methods of labour rotation within public authorities, state-owned companies, administrative and oversight bodies, the diplomatic corps, political parties, and other such structures were preserved almost intact. The impact of these phenomena upon the national

economic security are obvious They lead to the fossilisation of the political life, which results in the fact that large producers obtain illegal levers to promote their corporate interests to the prejudice of the individuals’ and the state’s security interests.

Another dimension of economic security that was not mentioned above but is analysed by several scholars (Buzan, Galtung) is the economic security of the classes. Quite often, discussions on this topic are avoided, as it is contiguous to Marxist economic theory. If we apply this concept to the case of the Republic of Moldova, we also avoid using the notion of „classes“ as it is not a social reality.

We would rather mention the economic security of elite that is not numerous (bankers, politicians, managers, public officers) and the increased insecurity of the other members of the society, most of them living under the minimum subsistence level. The middle class is underdeveloped and this determines the lack of an element balancing economic security interests and economic efficiency interests.

It would seem that, unlike the consumer and corporate security, the state’s economic security should be easier to analyse, as by their nature states are more stable than individuals and businesses. However, in the Republic of Moldova, besides the difficulties caused by the abrupt beginning of the transition to an open market economy one can witness a deep crisis of national identity; thus, the concept of the state’s economic security cannot be applied univocally. There- fore, when it comes to the Republic of Moldova, Marx’s opinion might be proven true when he stated that the state is nothing else but the tools via which the dominant class (the elite) secures its security and prosperity interests. Besides, while studying the security of the Republic of Moldova as a state we must be fully aware where this state starts and where it ends, i.e. what is the territory that is really under the state’s control. As Transdnistria has declared its secession and Gagauz-Yeri its autonomy, the eastern and the south-eastern borders are not controlled by the central government, but by regional elites supported by external forces. Thus, the Republic of Moldova is not only a small country, but also a weak one, split up from the viewpoint that implies specific vulnerabilities.

Studying the state’s economic security one can trace parallels between con- sumer economic security conditions and those of the state. Just as consumer economic security, the state’s economic security means, above all, the situation when all conditions needed for survival are ensured. Just as individual consumers do, the state need to ensure their immediate access to the needed resources.

When it comes to a small state, such as the Republic of Moldova, the availability of extremely limited local resources need to be compensated by the free access to foreign investments and by opening towards world trade and finances, which need to become a component of the national security concept as disrupted supplies or funding threaten local political stability and well-being. Therefore, one of the priority directions of the external economic policy is to diversify the range of suppliers and creditors, and of the internal economic policy, to reduce weak- nesses by establishing internal strategic reserves and a stable, as well as lucrative

financial-banking sector that would support real economic growth. To identify in the future local alternative energy resources and funding is critical for preserving real political independence.

The idea that despite instability and imperfections the open market is the best opportunity to increase economic efficiency, social and economic security, as well as innovation and distribution is widely accepted. For this reason, in order to operate more efficiently, the market has to include threats to the less produc- tive economic agents. Therefore, a wide range of economic threats – that are most often purely economic risks – is an integral component of the rules and requirements imposed by the open market. Thus, it is very difficult to set the demarcation line between mere risks and exceptional situations that jeopardise the producers’ security – an integral part of national economic security. However, as Buzan states as well, „to invoke too often the national security would simply mean increased governmental interventions in the economy to the extent when the market cannot operate anymore.“

Such interventions would mean that the state gains a status that is alto- gether different from that of the other economic agents, which would fully com- promise the idea of free initiative and private property. The existence of private property implies the existence of a number of economic interests expressed by a variety of particular firms and individuals. For this reason, the open market mechanism leads to the situation when the state’s economic interests cannot be defined as explicitly as its political or military interests. For the same reasons, when we talk, for instance, about the need to diversify energy resources suppliers and reduce the dependence on traditional markets, it does not mean that the state must dictate the import-export rules and directions. Most energy resources are imported and most Moldovan products are exported in conformity with con- tracts concluded directly by private economic agents. Thus, the state needs only to create the physical infrastructure and the local legal framework, as well as to join external economic structures in such a way as to condition export re-orientation and import diversifica- tion.

Despite all the contradictions we have mentioned above, we still need a working definition of economic security as the condition when, both locally and exter- nally, there are no economic and financial threats that might undermine the state’s possibilities to secure the resources needed for fulfilling its functions, which would compromise the successful operation of the producers, would limit the possibility of paying the owners of production factors, and would jeopardise consumer interest in increasing to the maximum the utility of goods. The main goal of national economic security is to ensure the fundamental conditions for the social and economic development of the country.

It is also important to define the term social-economic development. The term

„development“ may be perceived and interpreted differently by the partisans of various political schools and by the followers of various political doctrines. From the economic viewpoint and in the historical meaning of the term, „development“

is understood as the ability of an economy that has been static for some time