Close To Zero Point

Prices are the result of economic trends and decisions in other spheres. This is why in his interview to VREME Danilo Sukovic underlined the fact that the entire mass of money planned for the last quarter of the year was released in the first half of November: ``This resulted in the current chaos and is, to put it mildly, a crime. A crime against the entire economy, against the population, against work and knowledgeagainst everything.''

VREME: What can the team of experts on prices do under such circumstances?

DANILO SUKOVIC: Nothing, of course, except point out the causes and the consequences. The team was put together after this summer's price freeze which resulted in the emptying of the shops. From the very beginning we urged a liberalization of prices. Under normal circumstances the state's only concern with regard to prices is to fight monopolies. That is why our main task was to free prices of control and get the goods back on the shelves, and this has slowly started to take place. This was followed by statements by top officials of the central bank and the federal government who said that the monetary policy had been placed under control and that the wave of hyperinflation had been severed, while exactly the opposite had been done.

The increased printing of money and the grey issue have brought us into a much worse situation than the one we were in during the summer, because inflation has gone out of control and its further growth will have the same effect as August's price freeze: the goods will vanish from the shops. The authorities obviously didn't have the courage to face inflation in the right way, but thought that they would solve the problem by printing more money. We cautioned them of all the disastrous consequences wrought by inflation and cited leading world names who know all about inflation, and said that the destruction left in its wake couldn't be perceived or calculated.

__* Experts estimate that the growth of inflation in the following month will pass 10,000%, and that that will be the start of a speedy and total disintegration.

This will happen, without a doubt, even though I hope that the excessive printing of money will be halted. Elections are close. Put differently, the economists can stop hyperinflation easily; the problem lies in the fact that the matter has more to do with politics. It is true that stabilization has its price, i.e., all must adapt their consumer ambitions to the real social product. If our industrial production is now only 36% of what we achieved in 1989, and if our agricultural production has dropped by around 40%, it is clear that overall consumption must be adapted to these quantities.

* Is the figure of overall public expenditure known and how much is allotted, and to whom?

No, not even experts know this, but it is clear that the greatest part of the state's budget and other public expenditures are financed from the primary issue. The public does not know the exact quantity of the monetary mass. This means that the public has been denied knowledge about the effects of hyperinflation, even in unexpected fieldsincluding national psychology and morals, as claimed by a famous American economist.

I repeat, the curbing of hyperinflation is no great problem for today's economic science. But this is where politics come in, or rather political interests, because stabilization implies not only a pinpointing of the causes of inflation, but their removaland that means errors in the system, in economic policy and politics in general, including the very foundations of the ruling system and its policy.

* At this moment the Yugoslav authorities would find it difficult to count on financial aid from abroadthis is considered to be one of the levers used in stabilizing national economies. Is this fact being used as an excuse by the authorities here to justify the prolongation of hyperinflation?

I don't think so, because the greatest part of hyperinflation has been engineered by domestic moves and policies. The issue concerns the fact that everybody's wishes and consumption must be aligned with real possibilities. I am convinced that hyperinflation is a greater evil than honestly admitting that a large part of the population cannot live off its earnings. With regard to the latter it is necessary to formulate a realistic statesponsored social policy and free the firms of all social obligations. There can be no stabilization, i.e. normal economy while the employed are given a joint of pork, or sacks of flour and sugar. This is not good social policy, this only serves to stratify society even further, and unjustly at that, because those who have more get more. The same holds true for price freezes: the rich can buy flour at ridiculously low prices just like those who can barely buy bread. All this is nonsense and unjust.

Look at the speed at which such a policy is devalued. The efficacy of its moves is deteriorating very fast. We are now close to zero point, and this will become a reality very soon, meaning in a week or two, if the printing of money is not stopped. There is no more time for putting off things, because everything will really come to a standstill. Briefly, when the tradesmen are forced to make a profit in the space of one hour and exchange their dinars for foreign currency or other goods, then it will become physically impossible to do so, and they will have no other option but to close their shops. The same holds true for producers.

* The daily growth of inflation is now estimated at 15%.

This means that we are on the brink of a precipice. The fact that the price of some products drops means that the producer needed a larger amount of money urgently, most often for salaries. This is followed by higher prices or the closing down of the shop. And this is disintegration. The economy might continue to struggle on, but based on the Deutsche Mark. The DM has become a part of our economy. Everything is calculated in DMopenly or secretly. I believe that stabilization must start with a new national currency. It must be promoted by a prime minister with sufficient political power and credibility, who together with the new money, would restore the people's trust in this moneyand in the final run, trust in the authorities and the ruling policy. With regard to stabilization, two great stumbling blocks come to mind: the disintegration of the Yugoslav economic area, because the economies of all the republics were intertwined, and international sanctions. Both circumstances, and a host of other problems encourage the rise of monopolies in Yugoslavia today, while a great boost is given by hyperinflation. Karl Marx claimed that capital didn't shun from blood when faced with enormous profits of several hundred percent.

* Aren't we witnesses to this, from racket to murders?

That's true. But it doesn't justify the authorities. The state's job is to create conditions for doing normal business, and this is basically based on ensuring legal security, healthy money and the curbing of monopolies. Without such conditions, there are no hopes of returning to the world market even when this war and sanctions are things of the past.

* But this is primarily a political decision.

Naturally. This is not the time or place to talk about what could have happened before the war. I do wish to recall however, that no answer has ever been given to the question why the authorities didn't have the courage to head towards developed democracies and markets, even though it was obvious that we had a great advantage in comparison to East European countries. The answer will be found eventually, but it cannot be made by one branch alone.

It is necessary to deal with hyperinflation today, or we will soon have a classic natural economy. The belief that the standard of living and the entire economy can be based on printing more and more money does not even bare talking about. It need be said however, that those who say that every inflation can be controlled, are not right. After a certain level chaos ensues, and we are close to that now. After a monthly inflation of 10,000%, we can only hope for Divine intervention.