State Packaged Misery

The price freezes have just helped increase the catastrophe. The foreign currency black market's answer to the ``introduction of disciplinary financial measures'' has been to hike the average black market rate for one Deutsche Mark from 100 million to 300 million dinars. There are no goods in the shops, no cigarettes in the kiosks, and the price of potatoes at the green market is over 150 million dinars. The only novelty is that the people have been promised that the state will regularly distribute packages of foodstuffs.

From the point of view of political marketing, the idea is ingenious. Deep down in their collective soul, for the people here the promise of a parcel means something good, like a Christmas parcel, or one received for the New Year, or in the army, or in jail, or from one's Uncle in America. There is always something nice in the parcel, and the sender or the giver is always a benefactor. As many as 2.5 million parcels will allegedly be distributed in Serbia over the next few days to four-member families. It is expected that a monthly parcel will contain 25 kgs of flour, one kilo of salt, three kilos of sugar, three kilos of detergent, three liters of oil, three tubes of toothpaste and soap. All this at ``lower prices'' and the box for free.

The political marketing of the idea is underway. Headquarters are being set up, distributors chosen, lists of recipients drawn up. The protection of the parcels from speculators is being discussed, including situations where families don't have four members, or where a parcel is supposed to go to villages which have not handed in their wheat, etc.

Problems will crop up later when the parcels, just like pensions, start being late, when they reach the flea markets before they reach the local communities, and when the detergent is missing or the toothpaste, etc.

``Sainovic's parcels'' (Serbian Prime Minister Nikola Sainovic), are proof, in a way, that a number of other measures from the ``economic policy package'' are not expected to come up with much in the second half of the year, and that the authorities do not have any illusions concerning the fact that they will not be able to maintain the pretense of a ``harmonious'' monetary, fiscal or any other form of macro-policy much longer.

With hyper inflation measured in billions of percent, the Serbian government has decided to collect some real income from the people. Its ``package of measures,'' prepared at a special session of the Serbian Parliament (which started on August 27), includes 23 laws and 20 decrees which consist mostly of rules aimed at increasing taxes, including taxes which have to be paid in advance and those which have to be paid for back periods. Allegedly, a special tax law is being drafted and will be ``in force for the duration of sanctions.'' It foresees a property tax increase of 5,000 times (with a re-balancing of the budget by 122 times). The tax on trade is being increased as is income tax, the taxing of corporation profits, and the taxing of land-registry income. New taxes are being introduced for supplies, municipal services, and the railway. Payment deadlines are being speeded up, fines and delay interest rates are being stepped up.

In principle, it is better when a state aims at relying on realistic taxation instead of on inflation. When this Serbian package is analyzed more closely, apart from its acceptable trends, a ``lack of proportion'' becomes obvious, because those who are still doing some work, are being overburdened with extra work.

Viewed as a political strategy, this tax package has the stamp of the Serbian Radical Party (SRS), because it aims at taxing rigorously those who have property and income in the name of ``justice and solidarity.'' This will probably be explained as the state's ``revenge'' against those who have taken advantage of an economy riddled with crime.

To return to the general guidelines of the program issued by the three governments. It must be said first that the majority of political factors do not expect it to yield any serious results, so that no one is a hurry. SRS leader Vojislav Seselj said scornfully that his proposals are being adopted, and added obliquely that he would let the authorities be until the New Year. September 15, the deadline set by the SRS before the government, is no longer being mentioned. Many believe that they should not stick their fingers into the crisis before the ``fall of the national currency.''

The governments are getting ready for the time when money as such will be abandoned altogether. This explains the putting-off of the denomination. They are now thinking of saving paper, and not of using it for the printing of money with countless zeros. The hesitant attempt at introducing a law under which salaries larger than the guaranteed minimal wage must be paid via accounts only, is part of the whole set up. The authorities are trying to realize the ideal of doing away with the power of money, thus making the people independent.

At the beginning the state stimulated the buying of foreign currency from the citizens with worthless money without cover, (according to some exaggerated estimates state banks collected 5 billion dollars this way and transferred them abroad). Now that there are more fresh dinars and less foreign currency, the state wishes to stop the process. Inspectors have greatly slowed down payment transactions by inspecting ``suspicious payments,'' while threats of prison sentences have scared some bankers. Consequently, some firms will not be able to give out salaries since their branches abroad will not sell foreign currency at the official rate. When they fail to give the salaries, they will report to the Serbian government. The black market rate will halt when the streets and factories are absolutely empty of goods.

All these programs seem to take as their point of departure the fact that sanctions will loosen up by the end of the year, and that a real stabilization will then begin.