A Harmonica Which Doesn't Play

Socially owned property, the mainstay of the ruling Socialist Party of Serbia (SPS), has influenced the draft version "of the first law in importance after the Constitution", the Draft Law on Enterprises which is in a phase prior to being adopted by the Yugoslav Assembly. This ownership without an end, beginning or economic content, but with unlimited competencies and no responsibility on the side of the state leadership, has "been recognized as a reality", as those drafting the law said, under the euphemistic term "social capital", because 80% of the economic potential and 80% of those employed in Yugoslavia, work in firms which are "socially owned". In this way Yugoslavia remains the only country in the world with a "surplus" ownership relation: one, which from here to eternity, encourages and spreads irresponsibility in the economy and concentrates total power in the hands of the state apparatus. This is why this change in the law on enterprises has lost its basic meaning.

It looks as if all chances of a real change in a important law have been buried definitely, because the SPS Economic Council recently (27 April) under the chairmanship of Nikola Stanic said that the draft law "had entered the final phase and that only amendments could be proposed now". In other words, there will be no further discussion on vital issues. The team which in the name of the SPS gave its blessing to the continuation of Socialism and self-management, was representative. Thinking of social ownership, vice-president of the Federal government Nikola Sainovic said that the draft law "defined the reality with the goal of preparing it for further growth" (what growth is going to be prolonged?). Economist and former minister Oskar Kovac said that claims that socially-owned property didn't have a title holder were wrong, because "the title holder is the enterprise into whose property the capital has been invested and whose goal is profit" (he failed to explain when socially-owned firms had ever had profit as their goal?). SPS vice-president Mihailo Markovic recalled that "the SPS program bound all members to fight for the right of employees to take part in decision-making, i.e. to take part in the firm's management" (it remained unclear why the term self-management was being changed?).

Two years ago the SPS made sure that it wouldn't encounter any surprises, i.e. the possibility that someone might insist on fundamental changes in the basic law on the economy. Apart from prominent legal experts in this field (Vladimir Jovanovic was alive at the time), the drafting of this law was entrusted to professor of Economic Law Mirko Vasiljevic, who is a member of the SPS Main Committee and four economists who know very little law, but it's possible that they will become authorities in their fields of interest in the future. Vasiljevic probably received help with the theoretical part of the issue from his assistant Stojiljkovic Jr, whose father Vlajko Stojiljkovic is the President of the Serbian Chamber of the Economy, and who underscored on several occasions, the need for the speedy adoption of the law, offered the help of his association, organized "meetings with businessmen" at which support was given to the "basic orientation", and at the already mentioned SPS Economic Council revealed that the draft law "insisted on efficient firms, regardless of whether they were socially, mixed or privately owned." There is small consolation in the fact that this important but hastily drafted new law will be replacing one which was similarly knocked together in three weeks in 1988. Yugoslav Prime Minister at the time Ante Markovic, was in a hurry to deregulate the old system, and gave an impossibly short deadline for the writing of the law on enterprises. The late Branislav Ivanovic agreed to do the job, and managed to switch from the language of income to the language of profit.

The new draft law is truly much better than the old one which had been underwritten in spite of several amendments in the first few months after its introduction. Vasiljevic chose to emulate the well-known French law on Business Associations from 1966 which replaced part of the Code de commerce. It is interesting that Russian Bolshevists avoided linking laws on organization and the rights of economic subjects with trade, partnership or joint-stock companies, which is customary in legal history and contemporary France. This running away from old terms is being alleviated here with changes of the word "shareholder" into "stockholder", citing the 1896 Serbian law on joint-stock companies, which will come as a boon to stamp-engravers and sign-writers because all d.d. (shareholding company) have to be changed to a.d. (joint-stock company). But, the basic letter of the law is not being changed, we continue with enterprises, a term cooked up legal expert Bartos with the idea of reconciling the essence of economic enterprise and Leftist ideological dynamics.

By linking together modern solutions with domestic reality, the draft law on firms drops the old classification of ownership forms, and adopts three criteria in the organization of firms: a business society, a social enterprise and a public enterprise. A business society is founded either as a society of persons or as a society of capital.

A society of persons can be founded either as a partnership company (partners bear unlimited solidarity in responsibility with all their property with regard to obligations towards society) or as a limited partnership (at least one person has unlimited responsibility with all property towards obligations concerning society, and the others up to the value of their deposits).

The society of capital can be an joint-stock company, whose basic capital is established as not under 10,000 US dollars and is divided up into stocks of a nominal value, which cannot be under 5 US dollars per stock, while individual stockholders cannot enter the company with less than 500 US dollars. During last year's debate of this draft law in the Yugoslav Assembly, and with regard to all these limitations, a debate took place, wondering if things had gone too far.

Social capital can be organized as a company with limited responsibility, for whose obligations the founders are responsible in proportion to their deposits, and their ownership part in the company cannot be expressed through stocks (in France, Germany, Italy and Switzerland there are limited partnerships with stocks). Members of such a partnership have the right of first offer when a depositor wishes to transfer his stock to a third party, and if none among them are interested, the stock which is being transferred is divided in proportion to the overall participation of the interested parties in the joint-stock company.

Novelties in regulating social enterprises are mostly of a terminological nature, even though the proposers of the draft law claim that their management is "compatible with the management found in societies of capital". Instead of the former workers' councils, the assembly of the social enterprise is now elected and is made up of representatives of the employees. It chooses the management board which can be also be joined by "experts outside the social enterprise." This board elects and dismisses the director of the social enterprise, and he can elect, as an auxiliary organ, the director's management board. The supervisory board is also elected. Naturally, the draft law is not much more specific when it comes to "social capital" in these enterprises, except in the provisions on the management of the enterprise during the procedure when changes in capital ownership occur and the possibility of issuing priority stocks or participation without the right to vote are mentioned. An old idea, that this social capital be finally nominated into the "enterprise's own stocks" is not mentioned here. Therefore, social capital continues to be like a accordion which doesn't play, but can be stretched or squeezed, according to need and regardless of the market.

Some far-reaching ambitions of the drafters of the new law on enterprises is best seen in the provisions which regulate public enterprises and "other forms of enterprises which carry out activities of public interest". Namely, apart from public enterprises which are founded by the state or units of local self-management, Article 400 says that "activities of public interest are carried out by other forms of enterprises established by this law" (therefore, either private or predominantly private enterprises, as well as contractors). Article 402 gives a general definition of activities which are of public interest, such as activities in the field of energy, water resources management, traffic, PTT services, public utilities, forestry, the exploitation and management of public and sea goods, information and activities necessary for the work of state organs and organs of local self-management, including activities linked to defence, security and foreign obligations.

When all these fields in which all have the right to be engaged, are listed, we come to Article 403 - the "ensuring of public interests". If we leave aside state firms in which the state, according to Balkan customs controls everything and does as it pleases, let us take a look at what rights the state gives itself with regard to "private enterprises, i.e. those with a majority private ownership" which are involved in the field of information or any other activity of public interest.

(Even though federal MP Miroljub Labus has already pointed out these scandalous provisions, and VREME wrote about them, it is worth citing them once more.)

The law will appoint a body which will "give its approval to the statute, i.e. statute provisions which are of importance for the realization of public interests" in privately owned media. A state or parastate organ will elect a third of the supervisory board members. It will "issue approval for acts which establish the price policy". All that has slipped by here, will be done "in another way which is established by the law, i.e. by a decision made on the basis of the law."

Those who don't observe the above mentioned decisions can be ordered by "the competent state organ, i.e. the organ of the self-management unit" to continue work as decreed, and it can stop the implementation of decisions it doesn't like, and "order the work engagement of employees in an enterprise with the aim of the regular and uninterrupted carrying out of activities or offering of services", and it can also undertake other measures.

And finally, if all this doesn't succeed, "the competent organs can make a decision on taking over management according to Article 60 of this law".

In this way we have arrived at the familiar old-new institution of "taking over management" (receivership) thanks to which the state can simply take over any private firm "in the field of information", for example. Even if Article 60 of the Law on Enterprises is not foreseen for the "nationalization of information", it is problematic in itself, or rather, it clearly reflects the state nature of social enterprises. Namely, this article empowers the federal and the republican governments to take over the management of any enterprise which "doesn't use its property appropriately", or doesn't renew, increase and promote it, or has problems and losses.

Even if we disregard all criteria of failure which can be objectively explained, the fact that it is the Government which assesses if property is being used "appropriately", is proof enough of who is the real owner of 80% of the Yugoslav economy. There need be no talk of titular holders of social property, when the state as the only "realistic titular holder" assesses the appropriateness of property exploitation. It is no accident that Srboljub Vasovic from the automobile plant Crvena Zvezda was very cautious with regard to this article at the meeting of the SPS Economic Council, because his firm counts on the (not majority) continuity or entry of foreign capital in some of its units. And his firm is affected by "appropriateness" and everything else, because they have losses by the dozen. Just like the whole of the economy. And this is because the state took over Zastava long before the law became topical. The SPS isn't concerned over fundamental criticism concerning the draft law on enterprises, and is trying to create a clash with opponents on the civic side over the participation of employees in the management of enterprises. This is where they can appear as the defenders of the working class and the keepers of the rooted tradition of self-management, and this is something we are all familiar with.