Take a Break

We must not criticize Yugoslav National Bank (NBJ) Governor Dragoslav Avramovic for comparing all of the successful indicators in his annual report before the Yugoslav Assembly on December 27 with January 21, 1994, when he launched his program of economic stabilization. Considering the situation in January and the economic catastrophe suffered by the country when the economy came to a standstill and the 11 million-strong state tried to live with finances totalling 50 million DEM (4.5 DEM per capita), the popular Governor has really achieved a lot. He increased the level of production by 56%, salaries were slowly increased tenfold, prices went up by 6%, income by 70%-80%, and the dinar managed to remain stable, so that its current value stands at only 30% less than the DEM's buying power, which was the rate at which it devalued hourly in January.If we take a look at the whole of 1994 and compare it to 1993, the conclusion is that Yugoslavia hasn't achieved anything and that the country is still at the bottom of the pit it was pushed into by the warlords and those responsible for Yugoslavia's disintegration. Compared to 1993, the most optimistic estimates forecast 1% growth in industrial production, retail prices increases of 112%, the economy's income is realistically lower. The social product is some 19 billion dinars, while losses are estimated at 15 billion dinars (source: Jovan Rankovic). Something extraordinary did, however, happen. The little money that there is has been distributed more justly among the population.It is to the Governor's credit that by launching a strong dinar and managing relatively successfully to avoid printing excess dinars, the great robbery which financed the civil war and enabled war profiteering in 1993 has been stopped. A more honest approach to money-making and Serbian President Slobodan Milosevic's turnabout towards a more peaceful policy helped reveal the scope of state-sponsored plundering during 1993. There wasn't much of a change in activities during 1994 and the fact that salaries have doubled does not mean that an average Yugoslav family can now live comfortably until the end of the month (it is still impossible to put anything aside for a rainy day). Percentages and figures show just how mercilessly the country was plundered in 1993.Avramovic must be given credit for another thing. During the year he "kept up the initiative", encouraged the economy to enter into deals by promising credit (and later granting lower ones to those who embarked on new projects), he confused the farmers by promising them gold coins and saying that the sufficient sum of money was linked to the production of gold, he soothed budget wheeler dealers, all shades of businessmen and suspicious bankers by occasional incursions into the primary issue with "security in goods", he comforted workers and others by announcing the implementation of the "Singapore model" of big salaries, he wooed investors by forecasting a new "development phase", and silenced economists and journalists embittered by an old man's scoldings and outbursts of self-pity, and found the strength to admit that his "Ten Commandments" had lost some of their freshness and that economic policy and the economy as a whole are a constant worry. In the Assembly, deputies sneered that he no longer exuded optimism and praised him for that. It is probably a good thing that Avramovic realized that inflation cannot be extinguished "painlessly" in the Balkans (several months ago Avramovic bragged that he had achieved great success with stabilization and that it hadn't cost the country a cent), so that he now has to adopt the boring and painful recessionary anti-inflationary model of economic policy. Will this slow, painful and impoverished road towards Yugoslavia's economic recovery enjoy constant political support, as it had during Socialism when all wished to grab some of the glory for a successful monetary reconstruction which the citizens had financed with their last pennies? Will someone bang their fist on the table and shout that a "defensive economic policy" and a defensive policy as such must be abandoned?This defensive economic policy is defensive with regard to the freezing of the money mass, limited credit, frozen salaries, "anti-monopolistic" price control, control over the spending of foreign currency and financial activities. However, it would not be possible to describe the policy as defensive when speaking of public expenditure. The whole situation points to a new reallocation, because when the state realizes that it cannot collect as much money as it plans, then it will have to revert to inflation - which with November's 7% and December's 8% adds up to an annual rate of "8 to the 12th degree" percent (those who can add are free to calculate for themselves).The state let the people have a short holiday this year and Governor Dragoslav Avramovic played a unique role - with elegant simplicity and maturity. Things will either go back to the laborious process of trying to milk enough money out of an inefficient system in order to finance a dissolute state or the Governor will be forced to sign counterfeit bills.