Deja Vu

While the Serbian authorities are still wrestling with the "disobedient" businessmen who are reluctant to accept the prices dictated by the republic chief, the analysts have been trying to discover what the authorities have in store for the businessmen and the people.

The central issue here, of course, concerns the following: are we facing the period of market economy, which is what the Serbian authorities have been telling us, or will the people of Serbia revel in their newly found patriotism and continue to boycott the goods coming from other republics.

Dr. Miroljub Labas, the University professor who was until recently a man in charge of the economic programme of the Democratic Party, told "Borba" that "the Government is only testing the water before the future price freeze". This is how Labus sees the general stand of the Serbian government: "This is a combination of war economy and the return to state socialism. The essence of its orientation is that a state sector prevails in the economy, while the private sector remains on the margins. That policy excludes any kind of free trade with foreign currency and foreign goods. It

is a policy of considerable customs protection and big taxes. It is a dirigist economy which marks the return to barter economy which automatically excludes any possibility of market economy".

It would be fair to assume that this estimate is not primarily based on the last week's announcement concerning the regulation of certain prices and the partial income control. The main indicators which point to the fact that we will soon have a strictly controlled state economy stem from the government's hasty preparation of legislation concerning the regulation of economic life and the ongoing trade war of Serbia against Bosnia and Herzegovina, Montenegro and Macedonia.

Speaking of the new trade regulations, it would be important to stress that the government departments have done their best to keep it a secret before it got to the republic Parliament. Still the news concerning the return to state monopoly in foreign trade has leaked out. All the details have not been disclosed yet, but it is certain that private firms will be hit and that the market economy is out of the question. The data of the Federal Statistics Bureau say that towards the end of 1990 there were 38 000 private businesses, where trade occupied the most prominent place with around 25 000 firms. Half a year later, after the demise of Yugoslavia, the number of private businesses has increased to 61 000, and the number of trade companies has risen to 37 000. The above mentioned data should be taken with some reservation, since the statistics has not distinguished between the foreign trade private firms and the domestic ones. This however would not alleviate the shock which would ensue if the monopolization of foreign trade is to follow: it would affect all areas, from invested capital to the employment level as well as business confidence.

The regulation referring to the dirigist economy option of the authorities refers to the social sphere and to the status of the public sector in the economy. In the first case, according to the experts, the draft of the law was such that it should be completely altered, since they support the untenable presumption that the crisis can be overcome without affecting the standard of living. On the other hand, the public sector makes up one fifth of the Serbian economy, and thus it represents one of the most important agents of the economic policy. Had the Serbian government been truly dedicated to the stabilization policy and the creation of market economy, it would have supported the public sector in the way it is commonly done in the world: by enabling the private sector to function in these areas with the equal treatment of both the state and the private sector on the financial market etc. Such a step is unlikely now. Everything points to the creation of new monopolies which their creator the state, will occasionally pull by the bootstraps to please its subjects.

But all we can do now is wait for the official announcement of the proposed economic regulations. In the meantime, the attention of the public has been caught by the two groups of economists on the Serbian scene.

First the Serbian government formed its new economic council. The prominent retired professor dr Ivan Maksimovic was given the chairmanship. Academician Maksimovic has announced that the members of the economic council will be working on the strategy of the Serbian economy, meaning that it will not be involved in the current economic policy.

Almost at the same time, the Belgrade Economic Institute has completed the project entitled "The transition of the Serbian economy" (chaired by prof.dr. Pavle Petrovic). Here is their resume: the Serbian economy is now at a crossroads where it could either opt for the market model with private property, competition and entrepreneurship or, very quickly to the dirigist economy based on state property and its prime concern with the social issues. The authors put a special emphasis on the two additional problems, which should not preclude the creation of the market economy. It concerns the disintegration of the Yugoslav economy (and the ensuing hyperinflation. The existence of political will is a necessary precondition for removing both these obstacles. In the first case the damage will be mutual and so will be the benefit should they decide to start doing business together again. The authors think that the successful anti-inflation policy can only be realized by keeping the primary issuing under firm control and by proper handling of the current budget deficit. In other words: "The cause of hyperinflation is budget deficit on various levels, which is being covered by money issuing. Thus the main question refers to the readiness of the (economic) policy to adequately settle the deficits. There are, however, indications to the contrary. In that case, the hyperinflation will be contained with price control, which would only lead to "silent" hyperinflation. The economists agree that inflation is bad, that hyperinflation is even worse, while "secret" hyperinflation is the worst possible option. It is the world of shortages and rationing in black and grey markets. The stimulants and the signals in such a system would direct the economic subjects towards playing on the inadequacies of various markets instead of adopting a rational approach to business. The state is assuming a predominant role in the economy".

The responsibility of the state is becoming increasingly important, especially now that its role is becoming much clearer than it used to be.