Iron Curtain

The conflict between Serbia's socialism and Yugoslavia's economic reality has flared up again, although well-informed political sources say that Slobodan Milosevic in a closed-door meeting with a group of officials in charge of economic policy rather plainly allowed them to submit the privatization project. In fact, he allegedly said: "All right. But let's see what model."

Of course, the model can be discussed over the next ten years. A little optimism arises from the fact that New Democracy (ND), the coalition partner of the Socialist Party of Serbia (SPS), is now announcing its model which may be a signal that the ruling party is submitting to privatization. Serbia's Deputy Prime Minister, Svetozar Krstic, at a recent symposium of economists held in Milocer 'on behalf of himself' suggested that the property of good companies be used for paying back the foreign currency savings and that what is left be distributed in the form of 'receipts' to all citizens of age. However, all of this is contrary to the Serbian Government's general course. The Serbian ministers' offensive on interest rates, free foreign currency rates and liberalization of foreign trade is carried out by means of traditional socialist rhetoric. Besides, Slobodan Milosevic has not publicly announced the 'creative interpretation' of Serbia's constitution, its monopolizing 'equality' of public property being the greatest obstacle to privatization and adoption of adequate laws, particularly the law on companies.

Reselling of credits: At the above mentioned Milocer symposium, Governor of the National Bank of Yugoslavia, Dragoslav Avramovic, openly attacked the government of directors and energetically rejected the 'campaign' for administrative limitation of interest rates and directly demanded 'deconcentration of industrial power'. Avramovic explained that the limited interest rates are requested by those who can always get themselves cheap credit and later sell it at a higher price, 'according to the iron law that all goods have only one price'.

Those who get the money at an interest rate of 15 percent per year later sell that money at 1,500 percent, Avramovic said and illustrated this statement by the information from the Managerial Board of Bank Association (September 18) saying that the economy as the creditor earned 600 million Dinars in the first half of the year, while the banks earned 400 million on the same basis. The problem of reselling credits is an old one; as far back as 1868 it was noticed that usurers were taking favorable loans from the state and later resold them to peasants at enormous prices. Referring to the iron law of one price, Avramovic advocated the 'stability of the present-day free rates' and 'restoration of Dinar's convertibility' which is not welcomed by Serbia's leadership. He made several other remarks about the Serbian Government and insisted on 'democratization of ownership relations' and breaking up of the industrial lobby. He laughed at those who said that there should be no rush for privatization, which he said he had been listening to for years while it became quite clear that inflatory pressures could not be released without the restructuring of ownership.

Dispute between the republics: It seems that the dispute between Serbian socialism and the Montenegrin socialists' course toward privatization is intensifying. This can be noticed also in Montenegro Prime Minister Milo Djukanovic's recent statements. The dispute began in 1992 when the Law on Ownership Transformation was passed in Montenegro and warmed up when the Law was improved in 1994. What are the differences?

According to Momir Dragasevic, the difference between the Serbian and the Montenegrin laws is not so much in that the former lacks certain models (e.g. selling a company or its ideal part to persons who take over the management, exchange of shares, identification of state capital in a company or institution of taking over the management in a bankrupt company) but in the way of resolving some of the crucial questions. First of all, according to the Montenegrin law, the entire public capital of a company must be transformed and turned into shares. Secondly, transformation can be carried out only on the basis of the assessed value of public capital, while the Serbian law contains something called 'accountancy value'. Thirdly, the Montenegrin law in addition to the assessed value requires a concrete plan of ownership transformation and the agency's role is to control the whole process and not only to put the signature on a certain value. Finally, the Montenegrin law includes monthly evaluation of unpaid shares which caused problems in the hyper-inflatory 1993 and was an excuse for the slowing down of the transition.

When looking at these differences, one may not see the depth of the ownership ideology dispute between Belgrade and Podgorica. In fact, the major difference is that Montenegro has a 'strong political will' in favor of free market economy, while Serbia has something else in favor of the 'iron law' of interests of the ideologically and emotionally pure authority.