All's Fair in War and Economy

Several days before the implementation of the anti-inflationary and stabilization program (expected to start on January 17), the authors of some 15 odd studies on which the anti-inflationary program is to be based, have publicly renounced what the three governments adopted. No one at the Economic Institute and the Institute of Economic Sciences received an official copy of the "Program for the Reconstruction of the Monetary System and the Strategy of Yugoslavia's Economic Recovery." Most of the experts who participated on the editorial board and signed the document have not yet received a copy.No one challenges the right of project head Dragoslav Avramovic to choose what he wants from the studies he received, and put his signature on what he considers to be the best solution. It remains to be seen who will win: Avramovic or the Serbian government which commissioned the program. Serbian President Slobodan Milosevic played a key role in the whole matter. In fact, Federal Prime Minister Radoje Kontic said that Milosevic had inspired the undertaking. It is true that Kontic carries out protocol duties in the Federal government and that Federal vice PM Jovan Zebic is the man most involved with the program. The post of National Bank of Yugoslavia (NBJ) governor remains empty, a very important post when it comes to curbing hyperinflation. VREME has learned that a new NBJ governor won't be found for some time, and that when the time comes for the post to be filled, someone who took part in organizing the project of monetary reconstruction will be chosen.Nebojsa Savic of the Economic Institute concludes that there are four crucial differences between that which the Institute proposed and that which the government adopted.First of all, the authorities foresee the control and freezing of prices "under special circumstances, but never for more than three months", while the Economic Institute never mentioned any kind of a price freeze. Savic believes that the government should drop the idea of a price freeze. The second difference concerns the concept of an economic policy aimed at curbing hyperinflation: the International Monetary Fund's (IMF) answer boils down to a blockade of Yugoslavia's capital abroad and demands for a change of monetary and fiscal policy, all the more so since it is no longer realistic to plan a public deficit of 1.5 billion US dollars for this year. Retaining such a deficit would mean a prolongation of hyperinflation, i.e., the annulling of the main goal of the program of stabilization. Instead of such a large deficit, Savic believes that it would be realistic to expect a deficit of 330 million dollars in the first three months while the program was being implemented, something which can be financed from the NBJ's hard currency reserves, without the printing of new money. By the end of the year, the state would have to find the missing budgetary income by borrowing from the money market. This approach implies a sharp decrease of the deficit and its reducing after three months, to 5% of the social product. The public deficit is now estimated at 70%-80% of the social product. This is the only road to curbing hyperinflation. At the same time, this would allow the NBJ to conduct an independent policy, and the income arrived at in this manner would not endanger social policy.Thirdly, the experts and the government differ over monetary policy: the program supported by the government says that the NBJ will "cooperate closely with the top political authorities in increasing employment, production and investment strategies", while the next sentence claims that "its credit policy will be aimed at covering short-term credits for production and the sales of goods and services". Experts have, however, proposed that monetary and credit policies be separated so that the first would come under the competency of the NBJ, on the principle of healthy money, while the latter would be within the competency of commercial banks. The NBJ sets the basic rules of work for banks with a real positive discount rate and credit limit of current solvency for the period of three months at the most. In other words, the NBJ will stop financing state-generated deficit and will not have direct contacts with firms.Finally, Savic believes that preparations, technical or otherwise, have not been made for the introduction of a new currency, and that any attempt at doing things quickly, would only lead to confusion and undermine efforts at stabilizing the domestic currency, i.e., it would only serve to increase the citizen's mistrust of the dinar. Instead of healthy money, the authorities are preparing to offer the nation public works, another move directly opposite to what the experts proposed. This turnabout will not surprise anyone who watched Avramovic praise academician Kosta Mihajlovic before TV cameras, and the high rate growth from the fifties, in short, spouting obsessively on tons, kilometers and other anti-monetary economic measures. The only difference between the two lies in the fact that Avramovic urges a Socialist economy but lives in Washington and has a World Bank pension. Another difference is that ten million Yugoslavs will be living out economic phantasies in vivo.Associates of the Institute of Economic Sciences came up with five studies, but the Institute was excluded from the anti-inflationary program preparations - "thanks to someone", says Institute of Economic Sciences director Tomislav Popovic, while the public has been led to believe that the authorities will implement what the experts have proposed. We will give a thumbnail sketch of what the Institute of Economic Sciences proposed: Yugoslavia's return to the modern world, an active social policy, the eliminating of the grey economy, etc. Stojan Stamenkovic, the author of a study on macro-economic policy who was not consulted by the Federal government, says that international sanctions are not the main cause of the monetary and overall economic collapse. He claims that the collapse would have taken place without sanctions, only 18 months later. The domestic authorities, especially those in Serbia, are to be blame for these developments. To illustrate this point, all we need do is say that the drop in industrial production and the social product over four years (from 1989 to the present) will be made up in a quarter of a century, on condition that we have an annual industrial growth of 5%. Stamenkovic's calculations show that 1.3 million people are currently fictitiously employed and that the social product in 1994 will drop by another 10%. This practically means that the Federal Republic of Yugoslavia will end 1994 with a social product of close to eight billion US dollars and a corresponding decrease of the current average wage of 15 German marks.Stamenkovic claims that the current public deficit stands at around 80% of the social product (it is realistic to assume that the military budget is responsible for 12% and not 8% of the social product). However, no one, with the exception of Milosevic's closest associates does not have any vital data: the quantity of the monetary mass is unknown, the country's foreign currency reserves are a secret (at first 200 million US dollars couldn't be found for the stabilization of the dinar, and now it turns out that the NBJ has 600 million dollars in reserve), the official story that the Serb krajinas get 20% of the Yugoslav social product is highly suspect... it all boils down, including the confusion over stabilization, to the essence of this authority: figures have a way of tripping up historical goals.