LFMI PRESENTS

 

 

The Lithuanian Free Market Institute (LFMI) presents a collection of the works of eminent French economist Frederick Bastiat, entitled “A Collection of Economic and Political Essays.” As Lithuanian free-market philosopher Algirdas Degutis, the compiler of this book, noted, this selection includes some of Bastiat’s greatest articles and essays.

 

“In the time when socialist ideas were increasingly spreading around the world, Bastiat strongly defended the ideas of private property and the free market, admonishing his contemporaries of the disastrous consequences of socialism and communism. Based on transparent economic and moral arguments, with a taste of satire and humour, Bastiat’s essays and articles are characterized as overly forcible and perennially topical,” - A. Degutis wrote in the foreword of the collection. This is a second book released by LFMI in this series. In 2006, the Institute initiated a publication of Ludwig von Mises’ “Economic Policy: Thoughts for Today and Tomorrow.”

 

 

An initiative group, formed to promote an agreement on higher education reform, has released a collection of articles and other writings. This collection is intended to present the position of the Initiative group which rallied in May 2007. The Lithuanian Free Market Institute was the compiler of this collection.

 

Acknowledging the unsatisfactory state of the country’s higher education system, members of the Initiative group seek at promoting a higher education reform which would build conditions for the competitiveness of higher education and the improvement of its quality. The key measures to attain these goals are competition, the autonomy of higher education establishments, funding of studies based on student choice, programme- and tender-based funding of science, non-discrimination of higher education institutions and freeing them from meticulous control of public administration.  

 

TAX POLICY

 

The following presents an extract from an article by LFMI‘s Policy Analyst Vytautas Kuokštis printed in a tax weekly Mokesčių Žinios at the beginning of October.

Excise taxes on cigarettes underwent significant increases in several stages between 2001 and 2004 when bringing them in line with the requirements of EU’s tax law. The specific component of the excise duty (applied per 1,000 cigarettes) was raised from 30 litas in 2001 to 47.5 litas in 2004. In addition, a ten-percent ad valorem component was introduced in 2002 (expressed in percent and calculated based on the maximum retail selling price), which was increased to 15 percent in 2004. Rapid increases in excise taxes have prompted considerable effects on the tobacco market.

 

The purpose of excise duties is to raise the price of tobacco products and so reduce their consumption. According to the European Union, raising taxes on tobacco products is considered to be the most or one of the most effective measures to fight smoking. Economic logic dictates that the consumption of cigarettes must diminish when their price goes up – this fact has been supported by empirical research. However, it should be noted that the effectiveness (in other words, a price-caused effect on general consumption) of excise duties, as a means intended to lessen consumption, depends on a number of factors and may vary from country to country.

Currently, debates over creating favourable tax conditions for investments are in full swing in Lithuania. Their aim is to find and adopt the most suitable measures which would increase economic competitiveness and raise labour productivity and value added.

 

One of the proposals in this respect is to introduce tax incentives for high and medium-high technologies, as well as investments in R&D.

 

LFMI thinks that building favourable tax conditions for investments is plausible, but distinguishing certain types of investments is inexpedient.

 

In November LFMI submitted its position on this issue to Lithuanian Ministries of Economy and Finance.

 

In September 2006 the Lithuanian Parliament debated a proposal to introduce tax deductions to persons who purchase new automobiles. In LFMI’s opinion, this tax relief would distort people’s economic choices and would groundlessly improve the conditions of those individuals who acquire new cars. Such distinction would also discriminate all remaining citizens and would run counter to the principle of tax fairness. Besides, the introduction of one more tax relief would increase the inconsistency and complexity of the Lithuanian tax system, encumbering the administration of the personal income tax.

 

It is important to note that according to the effective Law on Value Added Tax, VAT deductions for purchases, imports and lease of automobiles are not permitted. Such provision runs counter to the principle of value added tax which says that only value added must be taxed. At the moment, cars are baselessly singled out from other types of assets, thus perverting market conditions and disorganising companies’ activity. More to that, such procedures are artificially aging Lithuania’s fleet. Therefore it would be expedient to amend the Law on Value Added Tax, allowing VAT deductions for automobiles.

 

ECONOMIC POLICY

 

As eminent Spanish philosopher Ortega y Gasset once remarked, somehow, when bread gets more expensive, people set bake houses on fire… At times it seems we are on a similar road: when prices of bread and milk climb, we cast the blame on bakers, processors and sellers. All we do is search for treachery behind their actions so that we could punish them legitimately.

 

The search for the culpable ones bursts out every time the prices of primary commodities tend up. When prices of any commodities rise, it is necessary to bear in mind that the price is the ratio between goods and money. And money is accumulating in Lithuania in general and in people’s pockets concretely.

 

Most likely, the primary cause is the world’s growing population, increasing labour division and aggrandising welfare. In China and other countries, there are increasingly more people who manage to purchase high-quality food and are not compelled to toil and moil from dawn till dusk in preparing it themselves. Evidently, demand is rising on the market. It’s relevant to remember the words of the former owner of real estate company Ober-Hause who sold his company and declared he was moving from Estonia to Argentina to take up a dairying business. Drawing on pure business intuition, rather than on some statistics, he said that global demand for milk is growing, so it should be a juicy business. Shortly after that, milk prices on the global market shot up by about 20 percent and by even more in the later period.

 

Shame on Western world: several months ago, Fidel Castro, the leader of communist Cuba, pointed to another cause of price growth in his reproach to US President George W. Bush. Western countries (Lithuania included) have increased milk prices worldwide. But how on earth could they do that? It’s through promotion of biofuel production. Farmland and other resources needed for the production of agricultural products are limited. Use them to satisfy one type of needs and you’ll run short of them to meet others. It is natural that the more rape and grain are cultivated for the production of biofuel and bioethanol fuel, the less farmland will be cultivated for food production.

 

The full text of the commentary can be assessed here.

 

The 20^th Survey of the Lithuanian Economy conducted by LFMI shows that market participants hold quite optimistic expectations regarding economic growth in 2007 and 2008. They expect that GDP in real terms will grow by 7.2 percent in 2007 and by 6.5 percent in 2008. Household income and personal earnings are also expected to rise significantly. According to the survey, average monthly monetary household income will go up by six percent, to 2,618 litas, in 2007 and by 12 percent, to 2,925 litas, in 2008. Average net personal earnings are expected to grow by ten percent, to 1,475 litas per month, in 2007 and by 12 percent, to 1,657 litas per month, in 2008. The survey demonstrates that corporate indicators will also remain high: average profit margin (the ratio of net profits to net sales) will account for 6.5 percent in 2007 and 2008. 

 

The growth of labour productivity is the main driving force behind economic development, ensuring competitiveness and people’s welfare. Therefore, the task of the Lithuanian government is to take action and launch reforms to facilitate companies in raising competitiveness and productivity, rather than aim at holding back economic growth. The issue of increasing labour productivity is fairly pressing in Lithuania at present, especially as there is an alarming lack of labour, which in turn speeds the growth of earnings. Earnings have been rising faster than labour productivity for several consecutive years (although it’s probable that the official statistics overstates the real growth of earnings due to diminishing popularity of “envelope” wages). Market participants think that this trend will be discernable until the end of the year: labour productivity (value added generated per one hour) will rise by 7.8 percent and net personal earnings will surge by ten percent.

 

LFMI highlights the key roadblocks to labour productivity growth that were pointed by market participants:

 

-          insufficient investments in innovations and high technologies;

-          a shortage of qualified labour;

-          a lack of employees’ motivation;

-          a heavy bureaucratic and regulatory burden;

-          poor management and labour organisation.

 

The 20^th survey of the Lithuanian Economy can be downloaded here. 

 

Bellow is an extract from a commentary by LFMI’s Senior Policy Analyst Giedrius Kadziauskas, posted online at a business portal Verslo Savaitė.

 

Lithuanian citizens now may take breath: although mobile telecommunications services appeared in Lithuania more than a decade ago, the country currently has 4.73 million of active users of mobile telecommunications services and may boast of record-high penetration rate of mobile telecommunications in the entire Europe (139.9 percent), it is only now that a website, titled Skaiciuok.lt (­eng. – calculate), for comparing services’ prices has eventually appeared. It’s been presented by Communications Regulatory Authority, a government institution.

 

Too naïve. But why for taxpayer money?

 

Government-proposed calculators are invariably grounded on a presumption that consumers are “too silly”and often duped. This can be the only excuse for government institutions to create services that don’t even smell like a government function. Price comparison and finding best deals is an important, needed and consumer-valued service in the market.  Communications Regulatory Authority must be thinking that consumers are lost in a variety of advertisements, don’t read agreements they sign and don’t have an idea what services they are paying for.

 

 

 

The draft of the Strategy lists acute problems of the Lithuanian economy and anchors the aspiration to solve them, which is a positive aspect of the document. The said problems are as follows:

 

-          to reduce a bureaucratic burden and regulations and so build more favourable business conditions;

-          to seek for a non-deficit or at least cyclically balanced state budget;

-          to eliminate various tax breaks that distort the market (VAT breaks, deductions of personal income tax applied to housing loans, etc.);

-          to cut the rates of direct (e.g. personal income tax) taxes;

-          to conduct, at least, partial privatisation of such state-rendered services as healthcare and education;

-          to liberalise the labour market.

 

However, it should be pointed that pension and higher education reforms, liberalisation of the land market, simplification of territory planning and liberalisation of various other segments of the market were analysed with superficial and insubstantial attention. If implemented, these reforms would also contribute markedly to the development of the Lithuanian economy and would help pursuing the strategic goals set forth in the draft strategy.

 

In addition to that, the state’s paternalistic attitude towards the economy and society should be evaluated negatively. The document contains provisions that the state must divert economic activity and society towards a certain direction by singling out, for example, companies based on their size (small- and medium-sized companies), type of activity (those exporting, investing in high technologies, etc.) and the like. Such approach is especially inadequate since the same Strategy contains a provision that the state’s too active involvement in economic activity reduces the average rate of long-term economic growth.

 

 

 

Just as the majority of decent Lithuanian citizens, Lithuania’s President Valdas Adamkus has reason to be concerned about car accidents and drink-driving - the key cause of car accidents in many cases. In the light of this issue, the President convened a high-level meeting to discuss the war on the so-called “road wars.” The meeting decided that trade in alcohol in gas-stations must be prohibited (and that the responsibility for traffic violations and the rules for teaching driving must be restricted).

 

Two things now appear on a pair of scales: on the one side of the scales there is an opportunity to buy a bottle of beer or champagne when you drive to the gas-station for fuel and so save time since you won’t need to stop at another shop; on the other side there is a dozen of saved lives and several tens less of injured people.

 

It goes without saying that life and health are more precious! We just placed an exclamation mark and that’s it? Hardly so… A good deal of questions must be answered before we can jump to this conclusion.

 

Gas-stations in Lithuania sell a very negligible share of the total amount of alcoholic beverages sold in the country. So can we expect that this prohibition to sell alcohol in gas-stations will reduce overall alcohol consumption and the number of drunken drivers? After all, when there is demand but no possibility to purchase alcohol in gas-stations, the desired products will be obtained in other places. It is strongly doubtful that the share of drunken drivers who appear to have purchased alcohol in gas-stations is considerable. If so, it’s also questionable that they wouldn’t have done the same thing somewhere else.

 

Lithuania has already seen a period when trade in alcohol products in gas-stations was forbidden; currently it is allowed again. For this reason, prior to introducing the planned restriction again, it is necessary to provide evidence if there was any linkage between permitting trade in alcoholic beverages in gas-stations and the number of car accidents caused by drink-driving or the number of drunken drivers detained.

 

If such research and answers are not needed, then, perhaps, we should take further steps? Following the logic of the proposal to prohibit trade in alcohol in gas-stations, trade in prepaid mobile telephone cards and newspapers should be also forbidden (as speaking on mobile telephones and reading when driving is not permitted); perhaps gas-stations should be even disallowed to trade in all other products (because when driving one must concentrate only on driving).

 

If an individual drinks without common sense, or even if he or she is such a numskull as to drive being completely drunk, it is the offence done by and the problem of this particular person, rather than that of the car, alcohol or the street. Isn’t it evident that new prohibitions consolidate the already wide-spread idea among Lithuanians that not the individual himself or herself but the system, government, education and similar things are to be blamed for any of his or her wrongdoing?

 

In this particular case the problem of “road wars” has been resolved by picking a very convenient scapegoat – the gas-station. We now may quarter or geld it, and the fighters against road wars and all of us – the victims of road wars – will be able to rejoice. However, this kind of magic will hardly be of much help nowadays. We’d better carry out analysis to find out why so many drivers dare to drive being drunk. We’d better face the individual and announce that he or she, not the gas-station, is culpable for his or her own actions.

 

 

 

The draft law is largely a rewrite of the Directive’s text which determines all shortcomings of this document: the draft law is too general, its provisions are insufficiently defined, the definition of prohibited activity is incomprehensive and therefore can be interpreted rather widely and subjectively, with an unfavourable approach towards the agents of business activity.

 

LAW-MAKING

 

On 7 November the Parliamentary Committee on Legal Affairs and the Lithuanian Free Market Institute staged a discussion “The Law on the Public Interest Protection: Opportunities and Threats.”

 

Currently, the Parliamentary Committee on Legal Affairs is debating a draft law which will regulate the protection of the public interest in the administrative and civil process. This legal document will bring essential changes to the Lithuanian legal system as it will widen the circle of individuals who will have the right to go to court to protect the public interest. This law is closely linked with a basic problem as to what the public interest and its extent are.

 

Among the speakers were the head of the Parliamentary Committee on Legal Affairs, other members of the Parliament, lawyers, judges, officials from the General Prosecutors’ Office and policy analysts. LFMI’s Policy Analyst Giedrius Kadziauskas delivered a paper on differentiating the public interest from the private interest.

 

 

1. By the decision of the Board of the Seimas, to publicize analyses conducted to date, and also those that will be carried out in the future, by the Unit for Informational Analysis of the Seimas by posting material on the Seimas’ Internet website.

 

2. To oblige drafters to specify in a covering letter of a draft law what studies the draft law has been based on if relevant research was done for that purpose. If they draw on the studies financed from public resources (for example, analyses commissioned by Ministries or conducted by the Office of the Seimas), their full texts must be open to the public and accessible.

 

3. To oblige the Legal Department of the Seimas to furnish evaluation of the conformity of a covering letter to the requirements of Article 135 Clause 3 of the Statute of the Seimas when submitting its conclusions on the compliance of a draft law to laws already in effect, the Constitution and the technical rules of law making.

 

4. It would be also expedient, at the request of a member of the parliament, to oblige the Legal Department of the Seimas to assess important legal arguments presented in a covering letter (regarding foreign practices, the impact on the legal system, major legal norms proposed in a draft law) that are not directly highlighted in Article 135 Clause 3 of the Statute of the Seimas.

 

5. A draft law submitted together with a covering letter that contravenes the requirements of the Statute of the Seimas must not be registered and must be returned to its drafters as non-conforming to the form specified in the Statute of the Seimas. Non-conformity to this requirement of the Statute of the Seimas must be treated just as other defects of the technical rules of law-making that provide grounds to the Secretariat of the Seimas Sittings not  to register the draft law.

 

6. The Board of the Seimas must demand that all draft laws submitted by the Government are accompanied by covering letters complying with the requirements of the Statute of the Seimas, related studies commissioned by Ministries and basic or expanded impact evaluations of draft laws.

 

7. To institute responsibility for knowingly submitting incorrect information in covering letters.

 

The full text of LFMI’s comments can be assessed here.

Leaders of non-government organisations claim that the currently debated draft law on the basics of law-making is the most suitable opportunity to build the foundations of an open, transparent and public process of law-making. In their address to the Parliament, NGO leaders have proposed simple solutions how to implement these principles.

 

-          the law must lay down that all decisions adopted in the law-making process are public;

-          it is indispensable to set that task forces drafting legal acts and legal acts adopted are public. Authorities preparing legal documents must be obliged to inform civic society organisations working in specific fields that the preparation of a certain legal document has been commenced;

-          it must be set forth that drafts of legal acts and other documents related with legal acts are announced to the public. Drafts of legal acts and all documents accompanying drafts of legal acts must be open to the public and accessible. This refers to proposals submitted by state or municipal institutions, interest groups, private individuals and individual organisations, texts of research, studies and analysis, funded from public resources, that served as the basis for the draft of a legal act, conclusions of a basic or expanded impact evaluation, documents of the effectiveness of legal regulation and impact-evaluation, drafts of planning law-making, etc.;

-          it must be specified that not just drafts of legal acts but also all documents of the law-making process must be accessible in a uniform database and one Internet website.

 

ENERGY POLICY

 

The following presents an extract from a commentary by LFMI’s Senior Policy Analyst Žilvinas Šilėnas published in a political weekly Atgimimas

When debating about gas prices and searching for someone to blame when they climb, political arguments usually prevail; however, debates based only on political aspects don’t reveal the genuine causes and may even entail negative consequences.

 

The current situation when Lithuania (or consumers acting on the Lithuanian market, to be more precise) has an ability to buy gas actually from just one source, Gazprom, is more advantageous to this Russian company in negotiating gas prices. Gazprom’s power to negotiate has been also improved by the fact that natural gas is a marketable product in Europe (Gazprom has an ability to export gas to Europe) and it may sell gas there at a bigger price compared to Lithuania.

 

There is no doubt that Gazprom might supply gas to Lithuania more cheaply than to Western Europe. This might be done not just due to lower transportation costs but also due to a marketing policy (seeking to optimise income flows, different consumers are offered different prices for the same product). This may well be among the reasons why Lithuania has enjoyed lower prices until now: this might have been Gazprom’s policy seeking to retain a sufficient level of consumption of natural gas and to prevent Lithuanians from looking too actively for new energy sources or alternatives of importing gas. However, the situation has changed in line with a considerably increased demand for energy, and economic logic dictates that if, ceteris paribus, a seller has an opportunity to receive a bigger amount for the same good, he or she should go on and sell it at a bigger price. So notwithstanding our likes or dislikes for the Russian company Gazprom, we have to admit that such marketing policies is a natural global phenomenon and that the current rise of prices is a reflection of global factors.

 

On the other hand, if prices were raised as a result of political motives, then we are faced with a question what political tradeoffs we’ve been offering to the other party so far in return of cheaper gas.

 

Below is an extract from a commentary by LFMI’s Senior Policy Analyst Žilvinas Šilėnas posted on the Internet portal Delfi.lt. The author comments on the calls of producers of hydro energy and wind energy to raise the buy-up prices of their energy.

Support for the production of economically inefficient energy boosts the price of energy. Energy-supply companies buy-up electrical energy from various producers and supply it to consumers. According to a government regulation, the energy of producers using renewable energy resources must be bought-up at a government-fixed price (this has been termed as services conforming to the public interest), which inflates the cost price of the energy supplied to consumers.

Support for economically inefficient products costs twice: first, it is the taxpayer money shelled out in the form of subsidies; second, it is increased prices of given products paid by consumers (it may cost even a third time, which happens when prices of related products go up). The arguments that such products will eventually get cheaper as a result of innovations and economies of scale are correct only in part, while the argument of economies of scale may be applied to any other product.  A technological progress will surely push down the prices of such type of energy but this is namely the reason why we should wait until economically efficient technologies (for example, second-generation biofuel) arrive, instead of spending money on costly and inefficient energy. 

The major cause of the current rise in food prices is increasing demand for staples and food products themselves. It’s a global process – even termed as agflation – and sooner or later it will come to all countries. Interestingly, this global increase in prices has been largely the result of state intervention in the market when the EU and US decided to promote biofuel production. From a political standpoint, this move seems popular: taxpayer money is used to please farmers and voters concerned about climate change and energy independence. Of course, prices have been driven up both by low harvest in Canada and rising living standards throughout the globe. But this just illustrates simple truth that even minor changes in demand may bring considerable effects on prices.

 

From an economic point of view, this political decision (just like the bulk of similar decisions) is ineffective. According to Global Subsidies Initiative, it’s 20 times costlier to reduce CO2 emissions in the EU by subsidising biofuels than by buying CO2 offsets. In absolute terms, to reduce CO2 emissions by one ton through subsidising biofuels, the EU needs to pay from 340 to 4,500 US dollars. Biofuels as a source of energy don’t shine either. To produce 1.3 unit of biofuel energy requires one unit of energy (although this figure differs from country to country). From the point of view of land use, the efficiency of biomass energy fluctuates between 0.01 W/m2 and 1.2 W/m2. To compare: the efficiency of sun energy is 10 W/m2 and that of fossil fuel ranges from 1,000 to 10,000 W/m2. From the point of view of environment, active promotion of biofuel production will lead farmers to increase plots of farmland at the expense of forests. Biofuel should be produced only when it is cost-effective. It’s too naïve to believe that the price of staples will remain the same after demand for biofuel has been artificially increased. The market will respond to rising food prices – more grain will be raised. However, if the government keeps promoting its production artificially, it’s very likely that new harvests of grain will be utilised for biofuel production rather than for baking bread. It is projected that second-generation biofuels will be more efficient, but this is for time yet to confirm. One way or another, supporting first-generation biofuel production doesn’t encourage the emergence of second-generation biofuels.

 

The measures that may, if at all, diminish the rise of the sea level by one centimetre in one hundred years are having real, specific and painful effects on people living at present. And it’s important to note that the responsibility rests not with business people or farmers, but with politicians who are supposedly concerned about the future of our children and grandchildren.

 

KNOWLEDGE ECONOMY

 

The following presents an extract from a commentary by LFMI’s Senior Policy Analyst Žilvinas Šilėnas, printed in an economic weekly Veidas at the end of summer.

Every arrival of new technologies and new products is invariably accompanied by the problem of standardisation. This issue becomes especially acute if groups of companies supporting different standards are formed in the new industry. Groups of companies that have invested immense resources in a selected standard are surely reluctant to concede to their competitors and to buy technologies from the competing consortium. 

 

Then the so-called “standards wars” break out when both groups seek at outrivaling their competitors and achieving that their technology would become a dominating and, eventually, the only technology, or the standard technology. The winner “wins” money from licensing their technology, a competitive advantage due to their greater expertise and, of course not least importantly, “the winner’s laurels” which are of help for marketing purposes. At present, a similar situation is running in the EU as regards the standards for mobile TV. Although different standards for mobile TV exist, for example, DVB-H (promoted by Motorola, Nokia, Siemens and others) and DMB (promoted by Microsoft, Samsung, Deutsche Telekomm and others), the EU has recently voiced its favour towards the DVB-H standard. If DVB-H is published in the list of official EU standards, all EU countries will have to support and encourage the use of this standard. To put it in other words, seemingly, the EU tends to choose the DVB-H standard, although it’s not yet official and final.

 

But this decision should be put to the market’s verdict. Standardisation would probably speed the development of mobile TV, bring clarity to the entire process and exert certain negative economic effects (for instance, the effect of economies of scale). However, by singling out a specific standard, the EU would simply leave no space for economic processes that determine the success of one or another product. By doing so, authorities shut out competition – as a result the latter product is defraud of an opportunity to be enhanced, which will definitely determine that its quality will be lower than it would have been if the product had evolved in competitive conditions. In the final analysis, companies may agree themselves as to which standard to apply in their industry – the case of CDs is a good example in this respect. 

 

Seeking to build conditions for a more rapid and better investigation of serious crimes and to implement criminal persecution (which means seeking to fulfil the functions ascribed to the state more effectively), the state is “asking” private agents to provide an economic commodity/service – to generate and manage slightly more of certain data and to preserve this data for a longer period of time than these agents usually do. LFMI pointed out that any product or service, for the creation of which resources have been used, is an economic commodity; therefore, the said service of preserving and providing data is an economic commodity. The EU Directive 2006/24/EB does not specify compensations for the said services, although such a provision was laid down in the previous versions of the Directive. However, the adopted Directive does not specify either that these services should not be compensated for. In other words, the Directive does not presuppose non-repayable proving of these services. In this particular case, the right of discretion – the right to resolve whether these services must be repayable or not – is within the competence of the Republic of Lithuania.

 

It is an arduous task to prepare and institute any reform, even the most pressing one. But to spoil it is a much less complicated deed. The more time passes, the more it seems that the Lithuanian Government is aiming at spoiling the higher education reform – it seems that it’s trying to provoke everybody’s opposition towards this reform, to prevent the preparation for it and, finally, to halt the reform altogether.

 

The majority recognise that the situation in the higher education system isn’t satisfactory: it lacks financial resources, their use is frequently inefficient, education is being depreciated, pseudo education is spreading, and science and teaching are increasingly loosing their attractiveness. These are the symptoms of the current problems. However, there is no consensus about the causes of these problems. Some stress that it is a lack of competition among higher education institutions for students and lecturers, and competition among lecturers, incentives and opportunities to act effectively and to provide to students the best services. Others, on the contrary, believe that problems stem from the shortage of regulations, control of higher education establishments and the existence of centralised priorities; they also think that students should not be involved in any decisions regarding higher education and that studies is not a service at all.

 

Seeking to really tackle the problems of higher education, it is indispensable to acknowledge that the price of studies must correspond to their demand, or else problems will arise on the side of supply (higher education institutions) - in the first place as regards their quality. Aiming at ensuring demand and students’ ability to pay for their studies, it’s needful to resolve without delay what principles will be followed when allocating state support for students and when bringing into play the system of student loans. Only then the situation will become clearer, and perhaps it will even become evident that competition is the higher education system is no bugaboo, but, rather, the only currently possible way to ensure studies’ accessibility and quality.