It is not possible to directly estimate
the efficiency of trade and financial embargo in the course of 1991-1996.
No official data on commodity exchange for FR Yugoslavia are accessible for
years 1993 and 1994. Nevertheless, one can get quite a general impression
from the imports and exports trends for FR Yugoslavia.
If 1990 is taken to be referential year,
then total exports in 1995 accounted for 26% and total imports stood at 35%
of total exports in 1990. It is important to emphasize that sanctions
initiated a change in Yugoslav foreign trade structure, not only by sectors
but also regional. First of all, Yugoslav exports have a changed structure
on behalf of greater share of sectors less dependent from the outside.
Production of machinery, chemical industry, basic chemicals industry,
electric industry exports harshly declined, having in mind that these
sectors belong to a group of the most important exporters. Within the value
of exports, the share of clothing industry, alimentary industry and
production of non-ferrous metals increased. By the side of imports, the
leading sectors were still oil industry, electrical industry, basic
chemical industry, production of means of transportation and production of
machinery. Eight sectors of industry realize approximately two thirds of
total imports in the economy, or over 70% of total imports brought by
industry. But sanctions drifted Yugoslavia apart from the European Union,
traditionally the most important foreign trade partner.
Dramatic decline in foreign trade (Table
1) was followed by redirecting the flow of commodities towards the
countries in transition (Table 2), principally Russia and Ukraine, as well
as towards developing countries. Besides the trade volume, it is important
that developing countries granted the most favorable exchange conditions,
concerning the coverage of imports by exports. Having in mind that there
are no official data on the characteristics of these arrangements, it is
not possible to observe the form of financing trade deficit.
Agriculture - a built-in stabilizer
The agriculture is "built-in
stabilizer", which permitted the authorities to stubbornly oppose the
sanctions, at least in the beginning. Agriculture accounts approximately
for 20 to 25% of total GDP. Out of the total arable land, some 84% are
privately owned. The majority of farming households possesses private
estates up to 5 hectares. The usage of artificial fertilizers in public and
private agricultural sectors accounted for 150 kilograms per hectare in
1991. After the imposition of sanctions this indicator stood at only 50
kilograms in 1995. Nevertheless, the existence of small estates is the
source of a very high labor-intensity of agriculture. The widespread use of
traditional fertilizing methods, level of production did not experience any
change. If 1991 is taken as base year, level of agricultural output in 1992
accounts for 82.3%, and its level in 1993, 1994 and 1995 stands at 79.2%,
83.9% and 87.2%, respectively. If one considers the fact that the highest
value of agricultural output was recorded in 1991 (chain index related to
1990 accounts for 109.3%), it is clear that agricultural production stayed
out of range of sanctions. Perhaps the sanctions had impact exclusively on
highly capitalized public sector of agriculture.
This is how the famine was avoided as a
possible consequence of sanctions. "The green market-place",
which consisted of individual producers, always presented certain level of
supply.
The authorities' reaction to the
challenge of sanctions
At the first moment the regime treated
the sanctions imposed by international community as a transitory
phenomenon. Therefore it was indispensable for authorities to by time,
whatever the costs could be. Two main devices were used. First, by printing
money authorities tried to fill different gaps in the economy that
inevitably emerges in a country cut off from international financial
resources and normal imports and exports. Second, by freezing the
privatization process they secured for themselves unchallenged role of
omnipotent arbiters.
Hyperinflation
The year of 1992 was the period with high
inflation - the rate of 200% per annum has been registered. Even before the
Security Council imposed the sanctions on May 30, 1992, some large-scale
efforts intended for the purpose of gaining war profits under the auspices
of the state were registered. By the beginning of that year the Serbian
government brought the decree, which restricted the turnover of strategic
alimentary products - wheat, flour, sugar and oil. There were sufficient
supplies of these products for a usual level of consumption, but the
government introduced an artificial monopoly. Certain individuals from the
ruling structures, altogether with some entrepreneurs close to them, became
rich over night by selling these products at the monopoly prices, gradually
supplying markets from the overloaded warehouses [Dinkic, 1995].
The ruling political party, the Socialist
Party of Serbia (SPS), made a promise to voters just before republic and
federal elections, which were held in 1992 and 1993, that there would not
be any dismissals in spite of decreased level of production throughout the
period in which the U.N. Security Council sanctions were in force. The fact
that the greatest part of the economy was still functioning under the
regime of "public" and state property made this formulation
operative. The Serbian Parliament, in April 1993, with regard to the
initiative of SPS, passed the law that did not permit a dismissal of
employed while the sanctions were still effective [Obradovic, 1996]. The
number of "employees" that were temporarily and mandatory
unemployed (paid layoffs) was 1 million of employed in 1994. It could be
realized how massive this phenomenon was if it is compared to the total
number of employees and temporarily unemployed. This assessment gives the
figure of 3 million persons. So, one third of the whole labor force was
temporarily unemployed in 1994. Although it was the state that supported
and carried out this "solution", it did not take the burden of
assuring the existence for those persons, but the enterprises bore all
weight. In addition, the number of retired persons was 1.2 million in 1994,
whose current proceeds are financed through the system pay-as-you-go
(current proceeds are collected from current contributions set aside from
salaries). Relatively speaking, the average amount of pension is fixed to
75% of an average salary, by decision of government made in the beginning
of 1994. Thus an implicit relation between the average senescent pension
and the average salary is set to over 90%, which is not seen anywhere in
the world [Posarac, 1995]. By doing this, the ruling party attracted a
great segment of the electoral body. But, at the same time, it
"ironed" the proceeds in national economy, overloaded its budget
to the inconceivable levels and reduced the proceeds of employees.
The war in the former SFR Yugoslavia
region carried on. Approximately 700,000 refugees fled in Serbia, who
generally settled down (over 94%) at their relatives and friends. For the
purpose of "helping brothers in Bosnia and Croatia", whatever was
meant by this, the state, following the unchecked data, set apart 20% of
GDP! Maintenance of such a high level of budget outlays led the authorities
to a unique solution: monetary expansion. During 1993, 90% of budget
outlays were financed with newly printed money [Avramovic, 1995a].
Hyperinflation, that persisted during the
period 1992, 1993 and in January 1994 was a premeditated choice of the
authorities. First of all, it essentially represented a compulsory tax
payment. Of course, a higher force explained the persistence of
hyperinflation: economic blockade, indispensable relief for refugees, etc.
An average citizen experienced hyperinflation as an unexpected natural
disaster. It was actually a kind of mechanism constructed for depriving the
citizens of their foreign currencies reserves, which they kept under straw
mattresses after the collapse of so-called earlier currency savings, which
were formed in the former state during operation of Ante Markovic's
government. Hyperinflation reduced the value of monthly proceedings;
population have been receiving, to the level of 20 to 30 German marks. In
order to survive people had to sell their foreign currency reserves.
Besides, the state initiated establishing so-called pyramidal savings
banks. These savings banks were privately owned, but only formally. By
offering unbelievably high monthly interests ranging from 15 up to 18% per
menses for deposited foreign currency in the form of three-month time
deposits, they attracted a large number of paltry clients. Saving in these
"banks" was the only way to survive for the most part of the
population. Finally, in April 1993 a great failure of these banks took
place. But worthy clients succeeded in raising their money, till the
majority of insignificant clients stayed barehanded. The total sum of
foreign currency which has been usurped from the citizens by means of
printing money, foreign currency ransom as well as through the system of
pyramidal savings banks, is estimated to approximately 4.7 billions of
German marks [Dinkic, 1995].
Stopping hyperinflation with
preserving status quo
Hyperinflation reached its limit when it
came up to the level of 3 million per cent per month in January 1994. The
authorities realized that something had to be undertaken so they initiated
certain actions during the last quarter of 1993, in order to bring this
hyperinflation to an end. The solution to this problem was found in the
form of the Program of monetary reconstruction of the Yugoslav economy,
which was inaugurated on January 24, 1994. This program was basically
created and its realization was supervised by Mr. Dragoslav Avramovic,
later the governor of the Central bank of Yugoslavia. A new currency was
introduced, concretely new dinar, which was exchanged against the old ones
in proportion 1:12,000,000, and free internal convertibility of new dinar
for German mark in 1:1 ratio, was established. Complete and free
convertibility has never been achieved, although the public, at least for
the period of several initial months, was very impatient about its
initiation. Nevertheless, the hyperinflation ended. Soon after, there were
new inflationary pressures, which consequently exerted pressure on the
exchange rate. So, the rate of inflation reached 7% in November 1994.
Already in December of that year new dinar to German mark ratio was 1.4:1.
Why? Straightforwardly, one cannot find good money in a diseased economy.
The program contained the measures for relieving the enterprises of the
persons on layoff. That never happened. It was also recommended that
balanced budget policy should be employed, which was omitted too. The
average proceeds of the public reached the level of 180 to 200 German
marks, which raised the level of the effective demand and thus produced
pressure on prices [Avramovic, 1995a]. Nevertheless, the main reason for
such a change in exchange rate were enormous government expenditures, which
stood at more than 50% of the GDP. This level of public spending was a huge
burden for the economy, for the given degree of the GDP per capita. Having
in mind an ossified ownership structure, and no wish to initiate real
privatization process, the authorities did not want to be deprived of the
main social management levers, which are based on an endless redistribution
- redistribution of poverty.
This was something that Mr. Dragoslav
Avramovic did not understand appropriately. From October 1994, until March
1995, he was in charge of three working groups as the National bank
governor: (i) group for pensions and wages, (ii) financial system
reorganization group and (iii) investments program group. His basic concept
was built on the notion that it was possible to stabilize the economy
despite the existence of sanctions, that is, in extreme conditions of a
closed economy [Avramovic, 1995b]. On the other hand, Mr. Avramovic drew
the conclusion that Yugoslavia needed approximately 1.5 to 2 billions of
dollars for investment activity initiation. To acquire that, it was
necessary to reestablish domestic savings program as well as to attract
foreign investment capital. The level of domestic savings was actually near
the figure zero, because there was no confidence in the banking system
among the public, which was the consequence of hyperinflation. Concerning
foreign investments it would be better to quote Mr. Avramovic:
"The greatest part of our
investments requires the engagement of both foreign public and private
capital. Public capital - originating from international financial
organizations and regional organizations - will, we can only hope, be at
our disposal once the sanctions are lifted. We will not be eligible for
access to these organizations simply after the U.N. sanctions are
lifted, but these organizations should constitute their own decisions
concerning the renewal of our membership. Since, throughout recent
negotiations that we have, we should ask of leading countries to oblige
that they will support our reintegration in international financial
institutions. It is in our interest to make the initiative for
negotiations with international institutions, as soon as possible"
[Avramovic, 1995b].
In keeping with the basic philosophy of
the Program of monetary reconstruction, which was founded on the concept of
a closed economy, and independently from the U.N. sanctions, an
institutional mechanism of stabilization process administration was
constructed. The National bank of Yugoslavia was the main control center.
It was the governor's discretion to allow primary currency issues for
certain enterprises' needs. This was the foundation for the development of
discordance among different interests lobbies, on the one hand, as well as
among the governor and interest lobbies as a whole, on the other hand. What
was the essence of disagreement among interest lobbies inside the system of
macroeconomic control?
It could be stated that affection for the
sake of interest between the governor and leading economic lobbies lasted
as long as the post-hyperinflationary remonetization process. Until the
autumn 1994 the governor kept the keys for printing money, while the
process of remonetization enabled him to gather economic establishment,
which consisted of several tens of selected enterprises, by means of
selective crediting. The principals of these enterprises were, at the same
time, members of different commissions in the National bank of Yugoslavia.
One author [Popovic, 1995] emphasized that late suspension of
remonetization process, in October 1994, left the governor deprived from
the levers of power and control. These levers were transferred to the
Serbian government, which controlled about 60% of all budget expenditures
in FR Yugoslavia. In the middle of 1995 it becomes more than obvious that
the governor lost all of his economic and political power, as well as any
impact on media. The same author states that conflict, between and among
interests lobbies, within and near the Serbian government, with the
governor was not of a conceptual character. To be precise, the governor did
not, at least publicly, leave the assumptions on fixed exchange rate,
passive interest rate policy, pausing the privatization process,
administrative restraints and licenses, keeping low electricity, communal
services and other products prices, in order to maintain the social
tranquility.
The second fissure in economic power,
following the speech of governor he had during the Conference of Yugoslav
economists held on December 7, 1995, is the one between the governor, on
the one hand, and several tens of leading enterprises within and near the
Serbian government. The rest of the economy constituted an impoverished
lobby, gathered within the Serbian Chamber of economy, which was composed
of the textile industry, footwear industry, metal complex, domestic trade
and construction representatives, which had to bear all the economic and
social crisis burden. This lobby faced extremely problematic business
conditions: too high taxes, lack of working capital accompanied by
exceedingly high money market interest rates, redundant administration,
substance devastation, burden of assuring the existence for temporarily
unemployed workers and absence of privatization possibilities.
It was obvious that governor Avramovic
was in a very inconvenient situation. The authorities wanted again, after
the period of hyperinflation, to take control of economic activities and to
provide the privileged group to continue with old habits without any
interruption. Believing that his time has not still expired, governor
Avramovic proclaimed the Program II, by the end of 1995. Nevertheless, not
even this time an unequivocal step was taken towards the opened market
economy, with all concomitant consequences, which such a program could have
provoked, concerning international behavior of FR Yugoslavia. These
consequences refer to inevitability to approach the stabilization of the
economy within the scope imposed by normalization of relations with
International Monetary Fund, World Bank, World Trade Organization and other
international institutions. The importance of this issue cannot be
overestimated, having in mind that, after the lifting of sanctions on
October 1, 1996, Yugoslavia was later imposed so-called "outer
wall" of sanctions. This was the only framework that allowed the
access to the general liberalization of the economic activity,
privatization process, transparent defining of monetary policy, domestic
currency convertibility matters, dealing with the problems of public debt,
overhaul of budget deficit problem as well as of other chronic problems of
the economy. The offered program just symbolically corresponded to the open
market economy model, instead. For instance, in place of privatization, the
Program II follows the expression "democratization of ownership
relations". Although this Program was written sententiously, with
fifteen points on an A4 paper layout, it introduced much confusion and it
did not answer the experts' and democratic public's expectations concerning
the destiny of reforms. It was not too surprising that Mr. Avramovic was
discharged from the position of governor in the spring of 1996.
Privatization process freezing
It has already been cited that the
Serbian authorities suspended the privatization process, as a central axis
of the transition. After the E. U. sanctions were imposed in autumn 1991,
as well as after the U. N. sanctions were enforced on May 30, 1992, the
authorities obtained an external alibi. They previously had an internal one
within layers consisted of potential losers who were afraid of
privatization.
Privatization process was outlined on
federal level in 1989, and it was implemented in the course of 1990 to
1991. Implementation of Public capital Act initiated a huge wave of
privatization, on account of a very liberal, decentralized and stimulative
concept, which favored workers in enterprises. This act in reality
permitted workers to take over the enterprise, with an option to exchange
acquired shares on the capital market. This act has never made a difference
between companies, it offered an extremely preferential treatment of
domestic investors, the capital value was settled as the accounting one,
privatization was voluntary and not state-controlled and it could have been
realized in several stages. As a result, there was a real privatization
euphoria, which consequently produced a figure of 169 privatized companies
by the end of 1990, and even 1051 privatized companies for the first eight
months of 1991. Approximately one third of enterprises were transformed,
with insider privatization scheme comprising over 99% of all cases of
privatization [Zec, 1996].
Having in mind that federal act on
privatization was liberal and that it excluded the state from regulating
the processes, its implementation was straight away suspended in Slovenia,
Croatia and Montenegro. Until the moment of disintegration of the country
it has been being implemented with the greatest intensity in Serbia, Bosnia
and Herzegovina and in Macedonia.
After the country has disintegrated,
first important institutional changes concerning privatization occurred. In
August 1991, a new act was passed in Serbia: Act on conditions and
proceedings for the public property transformation into alternative
ownership forms. It was considerably more restrictive than the federal act.
First of all, this act invited control of previously realized privatization
process, which was put into practice according to the prior federal act.
Instead of using the accounting value of capital, this value was the object
of an estimation, which produced about 4 to 8 times greater values. The
estimation had to be verified by a special State agency. Secondly,
strategic sectors were deprived even of the possibility to be privatized
(energy, mining, media), and all privatization realized in the
companies dealing with oil derivatives was annulled. Simultaneously, great
enterprises' nationalization was initiated (Serbian Petroleum Company,
Yugoslav Airlines (JAT), Serbian electrical industry (EPS)). Nevertheless,
aside from very restrictive articles, concerning the conditions for the
insider privatization, which this act contained, it could be stated that
high inflation was the most important ally of all employed, when they were
trying to privatize their companies. By the end of that year 34 enterprises
began the privatization process, while in 1992 there were 139 transformed
enterprises, and, finally, during the most severe inflation in 1993, 465
enterprises initiated the privatization process. A certain number of
enterprises, namely 921, transformed in that year, without the Agency's
compliance. Issuing permissions for privatization by the Agency was
lingered, which, together with handing down decisions on astronomical and
irreal estimations of the value of public capital, basically froze the
whole process. In summer 1994, the parliament amended the Act by
introducing the audit and privatized capital revaluation proceedings.
Retroactive amendments of acts as well as monetary nominalism principle
infraction represented no obstacles for achieving a set goal - to annul the
attained level of public capital privatization and to have an economy under
harsh surveillance. A certain price had to be paid for that. According to
the final accounts of the Yugoslav economy for the year of 1995 (excluding
gray economy), so-called "public" economy and public sector,
comprising 56.7% of all assets in the economy, gave 37.1% of the registered
GDP. At the same time, private sector, which includes 10.5% of all assets
in the economy, produced 37.9% of the registered GDP. Following this
criterion, private sector is 5.5 times more productive.
Retroactive implementation of 1994 Act
did not involve all capital transactions. As always, while depriving some
people of their rights, the authorities presented the state housing fund to
(some) residents. Nearly 600,000 apartments were public property by 1993.
The greatest part of the mentioned housing fund was built after the World
War II, by using the capital, which was being collected from all employed
citizens who were paying the housing fund construction fees. People who
could buy apartments already had the right to occupy them, so when public
apartments' selling process began, in the beginning of 1993, the fixed
price counted for approximately 200 German marks per square meter. With the
inflation growing, people who lived in public apartments experienced
increasing prospects of acquiring capital gains. Finally, the whole 100
square meters apartment could have been bought for 100 German marks. It
should be emphasized that the market price of an apartment, for instance in
Belgrade, stood at 1300 up to 2000 German marks per square meter in the
course of the whole period observed. All of those who considered themselves
winners within the existing system, where the majority was consisted of
persons who obtained public apartments, were given a special present in the
form of a capital gain. The state, or, more precisely, the authorities,
tied all of them to itself in an implicit manner - if there was no regime
change, there would be no housing fund revaluation.
This way, the institutionalized
privatization process in Serbia had two purposes. On the one hand, the
process of transition was actually stopped. In permitted the constitution
of a huge public enterprises' sector that the authorities used extensively
for keeping control over utmost number of employed. Also, many members of
the ruling political party used this public sector in order to maintain
major ruling positions they enjoyed in the old system. At last, but not the
least, by blocking privatization process the whole transition was in fact
obstructed. On the other hand, the capital gains "presents",
which were received by persons who simply lived in these apartments,
preserved the social tranquility and, consequently, the voters' support for
conserving the status quo was assured.
The authorities kept the public capital
under control, by slowing down the privatization process. War, U.N. and E.U.
economic sanctions, economic policy pursued by the authorities, aggravated
the economic state of affairs as well as the status of all social groups.
The majority of new entrepreneurs are recruited from the contingent of
unemployed persons, persons who are temporarily unemployed and from persons
who are employed in public sector. A number of 200,000 private companies
are registered in FR Yugoslavia, but only 60,000 are currently in
operation. Out of total 1.7 millions of employed in FR Yugoslavia, private
sector absorbs approximately 200,000. Number of employed persons in private
sector is probably 50% higher, because many owners do not register their
workers in order to evade paying too high taxes and fees, which count for
110% of net wage per worker, approximately [Denda, 1998].
The authorities as a necessary evil treat
such a private sector. Having in mind that about 850 publicly-owned or with
mixed property enterprises generate approximately 90% of all losses in
entire economy, engaging just about 55% of labor force, the state openly
protects them. The state plays a role of a great arbiter, which collects
extremely high taxes from the private sector and redirects them to the
public sector.
The Gray Economy spring up and birth of a
new economic elite
It is absolutely expected that the
citizens' propensity to gray economy is greater in abnormal economic
conditions: economic embargo, broken up relations with ex Yugoslav
republics, extremely high level of unemployment, war in the region, high
tax rates - all of these are factors that contribute to a real gray economy
blossom in Yugoslavia from 1991 until today. Following one estimate [Bozovic,
1994], the gray market alone reached approximately 30% of registered GDP in
Yugoslavia in 1992. The same research indicates that, after comparing total
spending made by population with total registered proceeds for the same
year, the total spending is covered by 42.5% of registered proceeds.
According to some unofficial estimates of experts, gray economy reached
over 50% of registered GDP in 1998.
What did provoke such a dramatic growth
of gray economy? It could be stated that this growth was partly endogenous
and in part exogenous. It did reveal the population's adjustment to the new
conditions to a certain extent, but it was also the result of conscious
brokerage performed by the members of establishment.
Incapability of the system to fulfill the
basic needs of population, improper tax system comprising excessive taxes,
soft law system, inefficient tax and justice administration, state and
political system legitimacy crisis, are factors that consist the first
group. According to one questionnaire [Mrksic, 1994], every second
household participates in the activities of this type of gray economy,
while irregular proceeds make more than one third of total regular proceeds
of the population. Following these data, Yugoslavia surpasses such
countries like Italy and Holland. In line with the same questionnaire, the
activities of the gray economy in Yugoslavia are principally aimed at
trading smuggled commodities, instead at the production for market. The
data show that members of all social layers participate in the activities
of gray economy: unemployed persons, skilled workers, clerks and
technicians. Comparing low demand with the level of supply in this hidden
market, one can find that dominant form of behavior is phantom - whenever
an opportunity knocks one involves in these activities. The allocation role
of this segment of the economy is most certainly negative - by redirecting
labor and entrepreneurial input to the informal sector of the economy, the
resources of budget revenues become reduced. The consequence is simple:
enlargement of fiscal burden makes the economy less competitive.
Nevertheless, these activities give birth to stabilizing effects at least
in the short-term. If the informal sector of the economy is solid, the
negative effects of declining activities of the official economy are
mitigated, at least concerning supplies for population.
The second group of factors, which is
called exogenous, deserves special attention. Sanctions provided the
authorities with an alibi for the miserable situation in the society, and
gave incentives for the appearance of organized crime and war profiteers.
As stated by an author [Blagojevic, 1994], "an intensive and hasty
criminalization of the society contributed to springing up of a new elite,
which was recruited from criminals. No other sphere of the society was
impacted so strongly by the sanctions, which thus participated in the
destruction of social tissue. Beginning with sanctions (and probably with
war), a new period in social development commenced - the state apparatus
and organized crime grew together." As it's already said [Dinkic,
1995], a very good example could be machination process of foreign currency
ransom from citizens. These arrangements could not be realized without a
very close cooperation of state-owned banks with the nominal owners of
private banks. For instance, the owner of such a bank was acquired with an
exclusive monopoly right of international trade in exchange for a specific
foreign currency "aid" directed to the state. Namely, monopolized
commodities trade was, initially, the main source for financing enormous
foreign currency interests. Besides, although this bank has never been
given permission to perform foreign currency operations, it has been
depositing foreign currency in treasury of the National Bank of Serbia.
This private bank was sued several times by corresponding financial
infringements officials, but the prosecutor (!) would always finally give
up his charges. This anecdotal story just illustrates general atmosphere,
which accompanies development of a new economic elite in Yugoslavia.
Observing from a broader perspective, it
could be stated that the ruling group in Yugoslavia kept its position, and
as a result of a forehand change of its identity from the class to the
nationalist one, it succeeded in consolidating itself. It benefited from
so-called "ownership transformation" because it carried it out by
way of transforming all important enterprises in public sector, enabling
its members to keep their previous administrative functions.
"War, and especially U.N. imposed
sanctions, created specific societal conditions: exhausting the
resources, in conjunction with raising needs and impossibility that they
are satisfied in a regular way, with resulting consequence of the law
system destruction (the process whose protagonist was the state),
generated the assumptions for drastic social differentiation. Impetuous
and massive pauperization coincided with a very fast enrichment of newly
created thin layer of `warlike entrepreneurs`. Of course, the
destruction of the legal system provided the principals from the `public
sector` with an opportunity to use their positions in order to transfer
the assets to their private firms (their own, family ones etc.)" [Lazic,
1994].
To this group of entrepreneurs belong
those ones who could be called "public" because they work under
the auspices of the state. On the other hand, there is a special group of
entrepreneurs who obtained the initial capital by using illegal and
paralegal means. They complete business transactions based on the above
mentioned mechanisms, in cooperation with and supported by the state. These
are the entrepreneurs who perform an indispensable international exchange
of commodities in conditions of embargo. They could be identified as
absolute martial entrepreneurs. Finally, there is a group of real
entrepreneurs who work respecting the principles of supply and demand as
well as the regular capital accumulation. It is very important to emphasize
the fact that state has never supported the activities of real
entrepreneurs, through its economic policy. Extremely high taxes,
disorganization and complicacy of legal regulations, frequent and
retroactive changes in laws, which regulate the functioning of private
sector - are all the factors that push the activities of this sector of the
economy into the zone of gray economy. The position of public and martial
entrepreneurs is quite different from that of real entrepreneurs: the
former never experienced the collision of interests, which could eventually
become apparent for the public. If there is any collision of interests it
functions on the principles of Mafia. The situation complicates because, in
some cases, it is not possible to draw a clear line between public and
martial entrepreneurs. Thus, for instance, if a principal of some public
enterprise (or of an enterprise formed by the transformation of a socialist
firm to a company) was murdered, it would not be absolutely clear which
rules he breached: those of public sector or those that belong to the
organized crime.
According to some empirical research [Lazic,
1994], it could be concluded that two basic groups of entrepreneurs, those
related to the state and the real ones, are in essence differentially
oriented to the necessity of foreign capital attraction. The first group
uses location rent and the arbitral conditions (which are another
expression used for the irregularity) for realizing its own interests. It
is logical that just one-fourth supports unconditional attraction of
foreign capital, while three fourths sustains the attraction of foreign
capital respecting certain conditions. Quite the opposite, three fourths of
real entrepreneurs support the unconditional and one-fourth conditional
attraction of foreign capital. Similar findings, concerning desirability of
state-governed regulation of economic life as well as the form of ownership
that should dominate, state or private could be ascertained.
Political background
After the Berlin Wall was breached in the
summer of 1989, it was believed that the era of a truthful multiparty
system began in the Eastern European countries. At the same time,
privatization of the state-owned property was initiated in all those
countries, forming the authentic base for multiparty system functioning.
The situation in Yugoslavia was significantly different. The national
question was the predominant one. The elite in power, by changing its basic
identity, converted from the class to the national one. During the period
that began in 1990 when Serbia had the first multiparty elections, until
the last 1998 elections, there has been just one political party in power
in Serbia - the Socialist Party of Serbia (SPS), which holds not only
majority, but is dominant [Goati, 1999].
Ruling party in Serbia has grown from the
former League of Communists. The core of the SPS political technology is
the populism. By looking for the support from the electoral body SPS
denoted itself as an exclusive representative of the national interests in
the disintegrating SFR Yugoslavia, having in mind that at that moment there
were Serbs in Croatia (Krajina) as well as everywhere in Bosnia and
Herzegovina. Simultaneously, SPS identified itself as the representative of
interests of the social groups who were possible or probable losers in the
process of transition. Thus the social energy of the society faced with the
challenges of transition, followed by uncertainty and worry about the
effects of change, was transformed into the tide of nationalistic hysteria
[Obradovic, 1996]. The ideological foundation of this party is the
equalization of the Serbian national interest with the preservation of
socialism [Obradovic, 1996]. At first this was the rule in entire SFR
Yugoslavia, but later just in Serbia, Montenegro and in parts of Croatia
and Bosnia and Herzegovina where the Serbs represented a major population.
The basic method by which this party can
be recognized is the mobilization and homogenization of the masses with a
simultaneous atomization of the society. In the beginning, in the form of
general set up for war, Serbia offered a narrow space for the establishing
and functioning of interest groups, free trade unions and non-governmental
organizations. Political parties, just formed, faced with one-sided and
state-controlled mass media. Every single declaration of theirs was
interpreted as if it were the act directed against the national interests.
Therefore the parliamentary life was a kind of facade at the back of which
the absolute political monopoly of the ruling party could be found.
It could also be stated that the ruling
party, at least in political life, behaved as if it were the agent of
potential social losers in the process of economic transition. That is why
it would not be contradictory if one states that, from the point of view of
direct interests of unfavorable social groups, despite their worsening
economic situation, the ruling party comported as a socialist party.
Nevertheless, concerning the entire society as a criterion, it is a
conservative party because it blocks the transition process [Goati, 1995].
Sanctions and elections
In December 1990 the first free elections
were held in the Socialist Republic of Serbia. The SPS won 45.8% of the
vote and obtained, on account of the majority formula system, which was
applied only on that occasion, 77.6% of the legislative seats in Serbian
National Assembly (190 out of 250). Slobodan Milosevic, at that time
presidential candidate, won 65.35% of votes (46.72% of the entire popular
vote). Taking into consideration the partiality of the media throughout the
election campaign, the support that the Serbian authorities received from
respectable individuals in the Serbian Academy of Arts and Sciences and in
different writers' associations, then from retired generals and many others
who come to the surface of events for the period of crises, it must be
conceived that the electoral results are modest success of SPS and an
absolute victory of Slobodan Milosevic. The majority of the population has
been accepting his national program despite the fact that the social part
of his program, consisting on preserving the status quo, divided the
population. While voting for the national program, the Serbian electors
actually chose the territorial conquest and the integration of all
"Serbian territories".
The war broke out and the United Nations
imposed the sanctions on Serbia and Montenegro on May 30, 1992. How did the
public accept this fact? Almost seven months after the imposition of the
U.N. sanctions, new parliamentary and presidential elections were held in
Serbia. It should be remarked that an ultra-nationalist political party
appeared on the Serbian political scene - Serbian Radical Party (SRS). It
is a typical example of a strong leader political party (its president is
Vojislav Seselj, at the time being vice-president of the Serbian
government). Although his activities are based on anticommunism, which is
the opposite identification to SPS, SRS shares the same national program
and addresses to the same social groups, which represent potential losers
in the process of transition. It explicitly proclaims what SPS declares
implicitly. His slogan: "Karlobag-Ogulin-Karlovac-Virovitica"
representing western Serbian countries border is just one along with many
publicly proclaimed by SRS. On the above mentioned elections held in form
of proportional method in nine electoral units for the total of 250
legislative seats, SPS won 28.8% of votes and 101 legislative seats (40.4%
out of total number), SRS received 22.6% of votes with 73 legislative
seats, DEPOS, which was the coalition headed by the Serbian Renewal
Movement (SPO) 16.9% of votes and 50 legislative seats and the Democratic
Party (DS) only 4.2% of votes corresponding to 6 legislative seats. All
other political parties that caught the limit won 20 legislative seats in
republic parliament. The share of voters that took part in elections was
69.7% of the entire electoral body, where the base includes the Albanians
who mainly boycotted the elections. The lack of support for the national
program expressed by the voters could be witnessed through the percentage
of votes obtained by Slobodan Milosevic. He wins, again in the first round
of elections, with 53.24% of all votes (37.12% of the entire electoral
body). Milan Panic, the protagonist of finding a peaceful solution to the
national question, won in these elections 32.11% of votes (22.38% of the
entire electoral body). It is very interesting that 38% of SPS followers
would vote for SRS as the second best solution, while 39% of SRS followers
would cast a vote to SPS as the second best political party. The U.N.
sanctions produced first, although indirect, effects that were reflected in
the percentage of votes gained by Milan Panic and the decrease of Slobodan
Milosevic's popularity. The electoral body in Serbia stays divided
regarding internal regulation, because more than a half of votes were cast
to the political parties, which defend status quo - SPS and SRS. SPS
decided to form the minority government, but it could count on
parliamentary support from SRS, concerning internal regulation and foreign
policy issues. It should also be noted that the international monitoring
group of the Conference on Security and Cooperation in Europe (CSCE) gave
its own evaluation of the elections and concluded that the elections held
on December 20, 1992, did not meet the minimum of democratic standards.
Official mass media treated the radicals
with affinity. The latter not only candidly defended the Great Serbia
policy but also expanded the dread of the opposition activities within
Serbia.
The U.N. Security Council issued
Resolution 820 on April 17, 1993, which called upon all member states to
tighten the embargo against the Federal Republic of Yugoslavia. The break
up of the implicit cooperation between the ruling SPS and SRS took place by
the middle of 1993 because the Serbian authorities accepted the
"Vance-Owen" peace plan for resolving crisis in Bosnia and
Herzegovina. The very next day the state-controlled mass media changed the
treatment of radicals. They were accused of "utterly primitive
chauvinism", "incitement of warmongering atmosphere",
"contribution to the isolation of Serbia in the world" and
"atrocities against the civilians in Bosnia and Herzegovina and
Krajina".
Having completed some usual propaganda
and systematic promotions, new parliamentary elections were held in
December 1993. This time the situation drastically changed concerning the
porousness of the borderline between SPS and SRS. At that moment only 7% of
the SPS followers described SRS as the political party they would vote for
(as their second best selection), while 6% of the SRS followers selected
SPS as the second best solution [Goati, 1999]. The saying that the citizens
of Serbia create their opinion on the basis of state-owned TV, radio and
press seems appropriate and true.
During the period of the most intense
inflation, the consequences of which the citizens of Yugoslavia were
experiencing, polling stations were "visited" once more by 61.6%
of the electoral body. SPS secured 36.7% of votes and acquired 123 seats
(49.2%), DEPOS (only this time without the Democratic Party of Serbia) won
16.6% of votes and 18% of seats, SRS just 13.8% of votes and 15.6% of
seats, DS 11.6% of votes and the same percentage of legislative seats. All
other parties obtained the total of 14 seats (5.6%). For a second time
almost identical percentage of voters chose SPS and SRS, just like in the
preceding 1992 elections (51.4%). Differences within society stayed the
same. The populist parties, which in reality defend and carry out the
system of the paternalistic redistribution, earned again the confidence of
every second citizen.
Political opposition and authorities
This survey of results of the elections
that were held from 1990 to 1993 points out the fractionalization of the
Serbian oppositional scene. DEPOS, as a movement, SPO, DS, DSS and some
other minor parties, are usually called and really are oppositional. They
oppose the ruling party by their apprehension that political and economic
transition process is absolutely necessary. Each of them supports the
abrogation of every kind of public property, and the division among
legislative, executive, and judiciary powers. Someone could always ask a
question why these parties were not more successful in opposing the policy
of the ruling party.
It is obvious that the weaker is the
opposition the stronger is the regime. The strength of the communist regime
in Serbia rests on two levers. The first one is much wider support it
enjoyed than the related regimes in the rest of the Eastern European
countries. Namely, the communists rose to power on account of the authentic
social revolution that took place during the period 1941-45. They came out
of the civil war and the battle against the occupants as winners. The
allied powers, which won World War II - United States of America, the
United Kingdom and Union of Soviet Socialist Republics, recognized the
communists. After the war they complied with the model of 20th century
revolutions, which could be described as "the project of accelerating
history as well as of shortening the paths of development" [Stojanovic,
1996]. This concept had, concerning Serbia, very deep roots, which could be
found in the model of so called populist socialism in the second half of
the 19th century. Permanence of those ideas in Serbian political history
uncovers very much about their social, historical and political
foundations. By promoting rural (and workers', if this one could be defined
as a particular social group) social groups, with a fast disagrarianization
of the country, they developed an interest social block, which, consciously
or unconsciously, supported the ruling order. They thought about themselves
as if they were actual winners in this new system. Authoritarianism,
insufficient social differentiation and deficiency of democratic traditions
contributed to legitimacy and stability of the regime. At the same time,
the communists could enjoy the fruits of the specific rent they have been
receiving due to a game they played between the west and the east before
the Berlin Wall was demolished in 1989, and by which they could disguise
the system inefficiency. The proportions of this rent could easily be
observed from the fact that SFR Yugoslavia, following certain estimates,
during the entire period of its existence did not produce a single cent of
its own accumulation, simultaneously accomplishing the economic
development. Foreign aid and financial credits were the main source.
As it was already mentioned, the
communists changed their basic identity, converting it from the class to
the national one, just on the eve of the war and disintegration of
Yugoslavia. Having done this way, the communists in Serbia have seized the
space of national interests promotion, which the political opposition
pleaded for. Practically speaking, just before the 1990 elections they
created a sort of alliance with the opposition for the purpose of joint
struggle for the Serbian national interests.
"The opposition was in an almost
schizophrenic situation: its national program from 1990, on which it
constructed the greatest share of its popularity, and which proposed to
make the secession of areas inhabited by Serbs impossible for
independent Croatia, even using weapons if needed, was taken by the
ruling elite and literally carried out; hence, if the opposition wanted
to preserve its basic political program consistency, it had to support
the martial policy of the regime and thus awarded the regime with the
most wanted gift - a complete political legitimacy" [Antonic,
1993].
The Serbian opposition dragged its
national program as a bob. Due to this program it could not switch to the
questions of transition and of political reorganization of the entire
society in Serbia. For example, the privatization issue has never got its
place on the list of priorities. The process of a massive privatization was
initiated in the whole country during 1989 by the reformist government of
Mr. Ante Markovic. Two years later, through 1991, this process was
significantly decelerated, as a result of a very repulsive approach of SPS.
Amongst the rest, this is just one of the reasons why Serbia did not
experience the forming of a wide pro-reformist block, which would most
certainly have a very strong impact on the electoral results in 1992 and
1993.
Consequently the political scene in
Serbia was divided into two political blocks. Each block was archaic
because they followed the territorial conquest policy, in the end of the
20th century, in country that is geographically an integral part of Europe.
There could not be found a political leader of some important oppositional
political party, which would have, just from the beginning, enough
imagination and courage to support the resolution of the conflict and
Serbian national interest in a peaceful manner. After Badintaire EC
arbitrary commission reported that SFR Yugoslavia was disintegrated, real
policy sense had to provoke a change in attitude on the resolution of the
Serbian national question among the opposition leaders. The opposition
accused the authorities of the war, only with respect to the modalities of
its conduct, not of undertaking this military adventure in the first place.
The autism of the political scene, regarding the messages of the
international community, was absolute.
It is now possible to estimate more
clearly the effects of the sanctions imposed by the international community
against Serbia and Montenegro. The economic effects of the sanctions were
immediately perceptible. Their effects on the state of spirits realize very
slowly, but the final outcome is still unpredictable.
The question of modernization - some
demographic facts
The second important factor that should
be taken into account concerning relative stability of the ruling system in
Serbia is the demographic structure with reference to its division into
rural, mixed and urban groups. The communists found the following structure
when they took over in 1945: 75% of total population in villages and 25% in
compound settlements and towns. Hidden unemployment in villages was, with
foreign financial support after 1965, the main source of postwar
accelerated industrialization process. According to the census of 1991 some
10.5 millions of inhabitants have been living in FR Yugoslavia. Out of this
total, 28.4% belonged to rural population, 56.8% consisted urban and the
rest of 14.8% constituted so-called mixed population. The expression
"urban population" should be accepted with reserve. Every
settlement that was declared urban automatically received the designated
status. Thereby the settlements with no more than 3,000 inhabitants could
have the status of a town. Nevertheless, the disagrarianization of the
economy was completed. This is why so high percentage of the population,
employed in industry, still lived in rural milieu. So-called second-raters
constitute the greatest contingent of industrial labor force. Partly in
industry, partly in village, they live twofold life. They obtain social
security, pension and health insurance in industry. They acquire additional
funds by working on their own estates in villages. Industrialization did
not denote modernization. This fact is absolutely confirmed by the lack of
modern working class. Industrial workers, especially ones more than 30
years old, share traditional standpoints, and have a tendency to accepting
authoritarian type of social organization, and, in addition, they are
xenophobic. The absence of numerous memberships in modern unions
synthetically confirms this fact.
There is one more demographic
characteristic that deserves full attention. In line with the census of
1991, in the group of population aged 15 or more years, 9.5% was completely
illiterate, 2.9% completed up to three years of elementary education, 20.5%
completed up to seven years of elementary education, and 25% accomplished
elementary school education. Just 5% of total population, or more precisely
354,610 persons with more than 15 years of age received university
education. Educational structure of the Yugoslav society is extremely
underdeveloped. The share of semiliterate population accounts for one
third, which represents an aggravating circumstance for promoting modern
political options.
Resulting from modernization
incompleteness, together with unsatisfactory educational structure of
population, the populist political parties (SPS and SRS) enjoy "the
natural" support from a great number of citizens. This is why their
"political nets" were always loaded enough to allow them to
exercise their power freely. Western countries' will, expressed through the
Security Council sanctions, as well as through the decisions of the
European Union, could be interpreted, by the part of population, as an
international conspiracy. Such an interpretation was verified during the
elections, although meagerly and with many abuses, but verified.
Life after sanctions - an estimate of
long-run effects
Among other experts in different fields,
many academic and professional economists drew attention to short-run and
long run consequences of such domestic authorities policy, which they
called "the pure policy" [Madzar, 1994]. All decisions made were
based, at least formally, on political considerations. The authorities took
the position of the Serbian national interests guard, as it was represented
in state-owned media, whatever was meant by that. The authorities
understood and interpreted these interests in a special form and they were
advocated at any price. There were no economic reasons, estimates of
short-run and long run costs, effects on different social groups situation,
which would be either convincing or even relevant for the pure policy
criteria.
Besides, many economists supported the
idea of "unjust and undeserved sanctions" [Mihajlovic, Cobeljic,
Gnjatovic, 1994], which was mass media leitmotif. Some radical measures
were backed up, at the outset, the import substitution. Even the president
of Serbia, Slobodan Milosevic, personally opened a new oil field, and
promised, on that occasion, that "our rich country" would face a
very fast development process in all segments of national economy.
Afterwards, there were no press or TV reports on oil exploitation in this
part of Vojvodina plane.
Tackling the problem seriously, it is
very difficult to quantitatively represent all long-run effects of FR
Yugoslavia's policy, and, consequently the effects of sanctions. Something,
which is absolutely sure, is a negative sign that stands before these
effects. Under the assumption that sanctions were definitely lifted at the
moment, it would be possible to speak about the resulting economic,
political and psychological consequences.
Yugoslavia spent one key resource during
the sanctions and that is time.
The level of GDP stands at 35% of this
indicator from 1989. That is the direct consequence of war and sanctions,
together. The economic consequences reflect in a fact that Yugoslavia would
experience a missing capital gap. Yugoslavia must meet certain conditions
in order to take part in international capital markets again. It should be
useful to depict the fact that, according to official sources, external
indebtedness of Yugoslavia in 1996 counted for 8 billions of US dollars,
approximately. Out of total, Yugoslavia owes 3.6 billions to the Paris Club
of creditor governments, 2.7 billions to the London Club of Western
creditor banks, a sum of more than 1 billion to the World Bank and about
900 millions to all other creditors [Jovicevic, 1998]. First of all, the
status of FR Yugoslavia in IMF should be restored in order that IMF could
approve a stand-by agreement for Yugoslavia. Conditions that must be met
are: a significant foreign trade liberalization, free prices and interest
rates, accompanied by an equilibrated exchange rate. Something, which must
also be fulfilled, are very restrictive monetary policy, hard budget
constraint and privatization of the rest of economy. Afterwards, it would
be possible to open negotiations on Yugoslavia's membership in the World
Bank. Assuming successful negotiations, it could be expected that
Yugoslavia would obtain financial assistance for its economy (SAL, F-SAL
credit lines). Yugoslavia should also settle its obligations toward the
World Bank, which are due, but not paid off. Domestic companies in relation
to foreign commercial banks must perform the similar procedure. Bearing in
mind that Yugoslavia has almost no foreign currency reserves, it should
initiate negotiations with foreign commercial banks as well as all other
Paris Club creditors.
Nevertheless, it is absolutely uncertain
when will Yugoslav foreign currency reserves, held in foreign countries, be
defrost, because several issues concerning the former SFR Yugoslavia assets
and debts succession are not still discussed. Besides, it could be expected
that ex-Yugoslav republics would lay claims to the assignment of foreign
currency reserves volume, which existed before FR Yugoslavia broke up.
All that was mentioned depends crucially
on the attitude on resolution of issues concerning the outer wall of
sanctions, which is not time-limited. The outer wall of sanctions will stay
firmly until the authorities in Belgrade meet all American and E.U.
countries' requests concerning the cooperation with War crimes tribunal in
Hague, completing the division of assets and mutual recognition of all
ex-Yugoslav states in the region, implementing the process of
democratization in Serbia on the basis of recommendations of the commission
of the Organization for Security and Cooperation in Europe (OSCE), which
this organization established after local elections and mass civilian
protests during the winter 1996-1997, as well as the official recognition
of electoral results of recent presidential (1997) and parliamentary (1998)
elections held in Montenegro.
The year 1998 is characterized as
breaking. According to scientific institutions' researches, if there is no
improvement in reestablishing relations with IMF and other financial
organizations, if there is no response to the above listed requests, if the
process of necessary structural adjustments and reforms is not initiated,
Yugoslavia will face the worst scenario. It means that GDP will decrease at
the rate of 6% a year cumulatively, living standards will decline at the
rate of 15% and a massive destruction of capital followed by its ransom
(1.5 billions of dollars a year) will take place, in order to equilibrate
the balance of payments. Such a scenario would be tenable for just three
years. Yugoslavia would enter the new millennium with a time lag measured
by several decades. Rather gloomy foresight.
The outer wall of sanctions is still
operational and its lifting is simultaneously close and distant. Everything
depends on development of political events in Yugoslavia. In the meantime
19 NATO member countries bombed Yugoslavia, which was later verified by
decisions of the United Nations Security Council. Also, the Stability Pact
for South Eastern Europe is now offered, but it is assumed that Yugoslavia
would previously fulfill some political requirements. First of all, the
people are expected to change the existing regime.
The issue that turns out deals with
political consequences of sanctions. Ruling political parties, SPS and SRS,
used sanctions of international community as an evidence for the existence
of international conspiracy against the Serbian people. There is a very
famous motto of SPS about "unjust and undeserved sanctions, of
so-called international community, against a small and peaceful
nation". Ruling oligarchy used sanctions as a means for consolidation
of dichotomous differentiation of the society. One side of the society is
characterized as traditionalistic, traditionalistic and autistic. The
authorities rely on their support. The other part of the society is
pro-European and did not support the Great Serbia policy, at least in
subsequent phases. This part of the society is not reluctant to the
transition, conceived as a process of disintegration of old regime as well
as old, but still actual, system. Thus, sanctions contributed to the
polarization of political forces in Yugoslavia. What will be the outcome of
these measures, or, more precisely, what will be their consequences on
internal scene - permanent isolation from the worldwide community, triumph
of any side resulting from political processes, or a civil war - is very
difficult to assess. International community undertook a radical step by
imposing sanctions against Yugoslavia and especially by keeping the outer
wall of sanctions operational. But it plays safely in realizing this
project, which is overloaded by risks. Target country bears all costs of
selected option.
It is not possible to separate
psychological estimation of effects of sanctions from psychological
consequences of war in the region of the former Yugoslavia. War and
sanctions persist almost eight years now. Urban population is currently in
a condition that could be described as an overall tiredness, apathy and
despair. Consumption of medicines dropped because of ruined health services
and impoverished population, but consumption of tranquilizers increased
several times. The young who live in urban areas are terribly affected by
the cognition that they have no perspective. One could find on the streets
of Belgrade a graffito that was written some 5 or 6 years ago: "It's a
spring and I live in Belgrade..." This frustration is occasionally
released through citizens and student demonstrations. In winter 1996-1997
hundreds of thousands of people have been demonstrating for 88 days in all
big Serbian cities, because of an electoral fraud made on the local
elections. This is a case without precedent in modern political history of
the world. Demonstrations ignited spontaneously, which could be noticed
from political leaders' astonishment. They addressed protesters from the
balconies, by speaking about the electoral fraud, not by offering any kind
of political program. "Ground floor is better than balcony this
time", was a typical commentary of young protesters. Massive energy of
these protests transformed into a social implosion after break up of
Coalition "Together", whose protagonists were SPO and DS, the
political parties that conducted demonstrations.
It is not surprising that, in the course
of war, from 1991 until today, some 300,000 people emigrated from
Yugoslavia. The main target countries were Canada, New Zealand and not too
often countries that belong to the European Union. These persons were
mostly young and educated. They refused to be engaged in a war conducted
for purposes they did not feel as personal ones; furthermore they faced
unemployment and no perspective. Out of 750 thousands of unemployed persons
during 1992, some 300 thousands received high, higher and secondary
professional education, or 40% of the total of the unemployed labor force.
This one-way exodus incurred a high cost for Yugoslavia if it is well-known
that a creation of an expert requires an amount ranging from 50,000 to
100,000 dollars [Grecic, 1994]. Some 2,000 researchers, who were employed,
left the country in the course of war and sanctions. Deficiency of
scientific communications as well as meager possibilities for promotion
were stated as main motives for their emigration.
Massive departure of young and educated
people will most certainly have long-run negative consequences on
development of the society. First of all such an emigration causes negative
political and sociological consequences. As defenders of an idea of
Europeanization of Serbia they were protagonists of modern political
conceptions. After they have left, spreading of such ideas within Serbia is
extremely impeded.
Final comments
Simultaneously with the fall of the
Berlin Wall, Yugoslavia was confronted with the choice of its further way
of existence: redefinition of the political system - asymmetric federation,
confederation, alliance between countries or something else - or a bleeding
war for territories. Serbia and Montenegro opted for the latter option.
Behaving as a rhinoceros, Serbia believed in its indestructible
predominance over Yugoslav partners. When international community
interfered in Yugoslav conflict, one could observe that Serbia, when it
opted for war, could not recognize some important characteristics of its
international position. The authorities were and still are completely
autistic concerning the historical changes in Europe.
Serbia began the war with disguised
communists in power. Ruling political party changed its identity from class
to a national one, thus removing the opposition from the political scene.
Ruling political party, SPS, took over the operationalization of the
national program. It was not too hard for this party to do so, having in
mind the fact that all other opposition parties have been, implicitly or
explicitly, supporting the war as the only method for Serbian national
question to be resolved.
Respecting the fact that SPS is a party
of continuity, it gave the same level of importance to both Serbian
national question and preservation of the old political system - of
socialism. That is why the war for territories was accompanied by a silent
confrontation to the process of transition. In fact, SPS is profoundly
conservative political party. After an ultranationalistic party appeared,
SRS, a conservative political block was built and it rules Serbia since
1992 elections.
Parliamentary system, administration of
justice and mass media represent a facade for undemocratic regime. What
makes this regime so stabile?
Citizens can vote for a tyranny, the
ancient Greeks used to say. The structure of Serbian society is extremely
unfavorable. It is still in a prepolitical status. Serbia is an
experimental model for the application of authoritarian, xenophobic and
nationalistic political recipes, along with its certain characteristics:
hardly more than a half of the total Serbian population is settled in
towns, where the term "urban population" should be considered
with a reserve concerning the European standards; it has no modern working
class; and the share of illiterate and semiliterate population is very
high. The regime used these facts for performing the above-mentioned
experiment, with presence of international sanctions. Mass media,
especially TV, were abused to such a great extent that a separate paper
could be written on it.
Economic system remained basically
unchanged, but in some cases it was degraded - a very good illustration of
this is the episode about the privatization process. Regime wanted to
preserve the support it has been receiving from the citizens. The motto:
"workers cannot be discharged during sanctions" was not a simple
motto, because it was transformed into a law. Pension system was taken from
old socialist times and it functions as pay-as-you-go scheme. A real army
consisted of pensioners, by the way, traditional strong point of the
regime, had to be supported financially by the fading economy. Both school
system and health services remained with the same financial structure. The
state kept its prior status of an omnipotent arbiter. As the time was
passing, funds for distribution were progressively decreasing. For example,
proceeds that were due in April were paid in September. The state faced
such a level of liabilities, which exceeded its real capacity. One of the
ways to balance liabilities with real capacity is printing money, or, in
other words, inflation. Hyperinflation in Yugoslavia in the course of
1992-1993 is a separate story. By using hyperinflation, the authorities
actually robbed their own citizens, forcing them to pull out the very last
foreign currency bill, which outlasted in their straw mattresses.
The conditions created by war and
sanctions generated ideal situation for spring up of a rent-seeking
society. Clientelism and corruption represent usual manner of behavior in
business sphere and they spread from top to bottom of a social pyramid. A
new class of owners is generated in Serbia, and they are recruited from
public entrepreneurs, war profiteers and similar persons who reached high
levels in (and around) a pyramidal governmental structure. There are 47
large companies among the private companies in Serbia. The public cannot
access the names of these Serbian "barons". The authorities
probably decided that it is not still time to present them. Serbia
experiences a process of perverted privatization, which involves a few
chosen persons and it is certain that this process comes to an end.
This is how Serbian authorities fell into
their own trap, after ten years. Instead of defending a national card,
which they were playing, they supported socialism, and finally lost both.
Now isolated, but not from the beginning, the authorities must find a new
identity for domestic use. For the time being, they find reliance in a use
of bear force against the citizens, in quietness of working class,
pensioners and, finally, in nationalistic "sound and fury"
expressed by progressively dwindling parts of population. The authorities
are aware of the fact that such identity is not completely congru
(Fr).
In the course of autumn 1999, new
demonstrations against the ruling regime began in Serbian cities. The part
of population that protests excludes second-raters, pensioners and
peasants. A meager number of real working class also protests. Serbia that
is literate, tolerant and not afraid of transition participates the
demonstrations. The demonstrator is Serbia that has no place to go.
Conclusion, if any
Formally, sanctions endured approximately
two and a half years. At the same time, in the area of the former SFR
Yugoslavia, a brutal war for territories was carried on. Not only were
Yugoslavia under imposed sanctions, but also all the economic and
technological relations with former Yugoslav republics - Slovenia, Croatia,
Macedonia and Bosnia and Herzegovina - were broken up. Even if there were
no international community sanctions, this fact is sufficient for
explaining to a great extent so great reduction in national product as well
as in industrial output, which were registered in the observed period.
Sanctions just overloaded the society, which has already behaved like a
swimmer on the heavy sea. Yet, were the sanctions successful?
The answer to this question depends on
what is meant by the goal of sanctions. Their goal could be punishing the
subject of international law - the state. Consequently, the residents of
the state in question would be punished as well, in spite of the intentions
of the sanctions enforcers. A very famous maxim of Montesquieu: "First
of all I'm a man, then I'm French", could not be of use to any
individual who is unfortunate to be a citizen of the target country.
Alternatively, the imposition of sanctions could be observed as a
manifestation of aspiration of the international community (the United
Nations, or, precisely, the Security Council) to influence a change in
demeanor of a state, which endangers international peace and security. The
sanctions against Serbia and Montenegro have been imposed under Chapter VII
of the Charter of the United Nations, intended for the change in behavior.
Yugoslavia signed the Dayton Peace Agreement, renounced territorial
conquests, precisely; the war against internationally recognized countries
- Croatia and Bosnia and Herzegovina. Yugoslavia did change its
comportment. The international community did achieve its goal. Sanctions
were lifted. Punished by the international community or not, Yugoslavia has
changed its policy towards neighboring countries. However, is it capable of
implementing a policy of friendly relations with other countries, of
international cooperation, of guaranteeing attainments of the European
democratic societies within its borders and hence become one of the oarsmen
in the European ship?
Involving Serbia into another internal
war in Kosovo and confrontation with NATO, Milosevic and his regime have
played they ultimate card. Sanctions finally have got the military form.
The guess is that sanctions have consolidated Milosevic and his regime.
Formally, there is a chance that Serbia becomes modern country, because the
Stability Pact for South Eastern Europe is now offered. But, the Serbian
society looks like it is devoid of the inner levers for its acceptance as
well as for carrying it out.
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