Serbia On Its Knees

All is going downhill except the authorities in Serbia - this, freely interpreted, would be one of the main conclusions of the research on poverty in Serbia from 1990 to mid-1994 recently completed by Aleksandra Posarac of the Belgrade Institute of Economic Sciences.

The conclusions reached by the research deserve to be cited in entirety:

"The setting up and development of institutions in a civil society presuppose free, economically independent, self-confident and self-sufficient citizens. At present it would be difficult to describe Serbia's citizens as such. Over one third are not capable of satisfying their basic needs, while a third can be regarded as being potentially poor since they are not far from the poverty line. This means that any change in the given situation - a price increase in municipal and infrastructure services, the abolition of paid leave and the sacking of workers, a drop in salaries and other income whose level surpasses current possibilities, a more rigorous implementation of UN sanctions and the ensuing drop in black market activities (which is possible thanks to the strengthening of repressive state measures against those involved in black market activities), the stifling of the private sector, etc. - could seriously jeopardize the fragile basis on which the citizens' standard of living is based. Any exacerbation of the crisis will recruit new contingents of the poor, while the poverty of those who are poor now will only get worse. The urban populace is more endangered than the rural population because the farmers can satisfy their needs through consumption of their produce. However, the matter pertains to subsistence survival.

From an overall point of view, 90% of the population in Serbia faces the threat of poverty. Members of the last 10%, especially the last 5%, could even improve their participation in the division. What the long-term consequences could be remains to be seen. The matter concerns a choice between a strategy of recovery and a strategy of protracted rotting".

The main conclusion of the research states that in mid-1994, 35.6% of the population in central Serbia was poor, i.e. that 2.1 million people couldn't satisfy their minimum food requirements. Four years ago, this category covered around 365,000 persons (6.23% of the population). The number of poor has increased in the meantime by 6.8 times, while the rural populace saw a four-fold increase of the poverty rate. In 1990 the urban poor accounted for 57% of the overall number of poor, while in mid-1994 this number increased to 76.1%. Ms Posarac cautions that the relatively better off situation of the rural households is not due to economic expansion in villages, but to the fact they were better equipped to deal with their natural consumption and the drop in income. Urban dwellers did not have this opportunity, at least not in the same measure as the rural populace.

At the same time, the poverty gap has increased (that part of the social product which is sufficient for resolving the problem of poverty) from 0.4% of the social product in 1990 to 2.7% in mid 1994. This is the result of the simultaneous increase in the number of poor and a drop in the social product. It is a fact that the two didn't arise out of nothing. Ms Posarac estimates that four years ago - with an annual national income of over 4,000 USD per capita and a negligible poverty gap - there had been a solid base for passing relatively painlessly through the first and second transitional phases, i.e. for creating conditions for long-term economic prosperity. However, Posarac has come to the conclusion that the "process of transition and reforms towards a market model of the economy was stopped by the regime in 1991, and that the deep economic crisis which followed led to the pauperization of the population".

The contribution of individual categories of the population has not changed significantly in the analyzed period. The families of miners and industrial workers were and are the largest segment of the poor: four years ago they accounted for 43.6% of the poor, while in mid 1994 they held first place, with 29.6%. This is not the consequence of their eventual economic recovery in the poor group, but that the "competition" at the top of the poverty scale has grown. The bottom of the poverty segment has not changed. It is covered by the households of officials, and the participation of this category has decreased from 1.4% to 0.5% of overall poverty. In analyzing structural changes in the income of households in Serbia, Ms Posarac has discovered what we can expect to witness in the future. The greatest change in the past four years has been recorded in decreased money participation (down to 80.84%) and the simultaneous growth of natural consumption to 19.14% (an increase of over 50%). Ms Posarac concludes that "in their struggle with decreased incomes, households are returning to a manner of satisfying their needs which has been surpassed by the degree of civilized development: production for satisfying one's own needs", which is just another way of defining the process of the "demonetization of satisfying needs".

At the same time, the increased participation of natural consumption has spread to include all layers of the population and is the result of the great impoverishment suffered by citizens. Four years ago this was characteristic only of the most impoverished layers. It goes without saying that inequality in division has in the meantime increased: nine tenths of the households have recorded a decrease in the participation, while only one tenth have increased its participation in the division. In mid-1994 this one tenth covered more than one fourth of all the available means of all households in Serbia. Its expenses for food increased (from 29% to 34.4%), but at the other end of the scale, households in Serbia earmarked over 60% of their earnings for food. Thus, cautions Posarac, the consumption structure of households in Serbia has become similar to that of undeveloped countries where expenses for food and other elementary needs leave very little money for any other expenses. This is just another illustration that Serbia is approaching the group of undeveloped countries.