Relations Must Be Restored

VREME: Mr. Bajt, according to the Bank of Slovenia, your opinion greatly influences the exchange rate of tolar. How do you do that?

Bajt: "After I had said the rate of tolar was still too high, the representatives of the Bank of Slovenia in February 1993 accused me of causing a sudden fall of tolar and said my statements had helped destabilize Slovenia's economy. Of course this was not true. Tolar's value decreased because of the real relations in the economy and not because of my statements. Many people objected to my statement because the german mark did start rising shortly afterwards. This was clearly not a consequence of my statements. On the other hand, even if my words did influence the rates, I see nothing wrong with it, because new rates did good to Slovenia's economy."

It seems the situation is the same again - the value of tolar has been falling over the past month?

No doubt something similar is happening again, although I think that at this moment tolar has reached the value it deserves (compared to the german mark). Things are simple - Slovenia is running a strict stabilizing policy and using the course of tolar to slow down the increase of prices on the domestic market.

How would you assess the trends in Slovenia's economy? Slovenia has accomplished a lot and yet the number of the unemployed has grown and the industrial production is falling.

I think Slovenia has reached the bottom. It is true that the industrial production is falling but it will soon start rising. Even if production again dropped due to the privatization process, the private owners would quickly rationalize production, so I see no major problems in Slovenia's future. When I criticise Slovenia's policy, I do so because it is content with average and under-average results. The essence of Slovenia's stabilization policy today is reduction of inflation. Such one-sided policy ignores the need to revive production. No policy can be considered successful if unemployment rate is high and if the production is dropping. After all, one could say our aim was Europe and that all customs regulations should be abolished, and the people will still manage somehow. I doubt the population would accept such a policy.

Despite all this, Slovenia's economic policy seems to be very successful?

Since we here are located between Austria and Italy, only due to that fact, we are "condemned" to a high standard of living and a high gross product. Even errors in economic policy cannot prevent such development. We shall certainly maintain the achieved standard and, sooner or later, we shall achieve the standard of the neighbouring countries. Whether we shall go further depends on the policy and on many other factors. However, we must never forget that what Slovenia has accomplished (and due to which she is now one of the leading post-socialism countries) is a result of what Slovenia had accomplished within the self-management system in the former Yugoslavia. The fact that our GNP per capita is over 7,000 dollars is a result of the fact that the GNP per capita in the former Yugoslavia used to be 9,000 dollars. This means that we have not yet reached the level we had in the allegedly unsuccessful system of socialist self-management. In mid-eighties, I made a project which showed that Yugoslavia's GNP could be twice as high if the investments were as efficient as they are in the West. We realized that investments in the less and medium-developed capitalist economies were twice as efficient as in ours. What did this practically mean? That if Slovenia's economy were as efficient as medium-developed capitalist economies, its GNP per capita would be 18,000 dollars. In my opinion, this is an aim worth thinking about.

Do you mean that Slovenia would have reached that level sooner if it had stayed in Yugoslavia?

No, certainly not. It was my estimate at the time that it would take us twenty years to reach that level, although perhaps even that would not have been long enough with the socialist model of economy.

It is interesting to see how over the past five years productivity has grown individually, in certain companies and not globally in all of Slovenia's economy. The piled-up economic problems were being resolved by dismissals, which everyone knows is the cheapest way. This is why the unemployment rate has increased: on one hand, the productivity of certain companies grew, and on the other, it was not followed by higher overall productivity.

How would you assess Slovenia's economic policy after all?

It is quite clear that Slovenia will have to become part of European and world economies, which means it will have to open up completely. There is the problem of adjustment, because our economy has been closed for a long time. If we had been lifting the protection gradually, it would have had positive effects on producers and fewer people would be unemployed. In fact, that was what Ante Markovic had done. Markovic had the course of dinar under control and the liberalization of import helped him keep down the prices and inflation. Markovic's policy was quickly accepted in Slovenia.

Even though they criticised him all the time?

Despite that, Slovenia first took over the basis of Markovic's economic programme. It took over the foreign-trade orientation, monetary policy and the ways to fight inflation, as well as privatization. Enough?

Isn't it a schizophrenic situation: to criticise Markovic - even nowadays the politicians mention him only pejoratively - and yet to build his policy in the foundations of the new Slovene state?

Slovenia's secession was a political decision, while economically we were out in the open. Those who created the economic policy could use nothing but their latest knowledge, and the latest knowledge in former Yugoslavia's economy was Markovic's knowledge. Slovenia's new government did not hesitate to apply it.

Slovenia seems to have successfully overcome the loss of the Yugoslav market, even though it had to face the competition of cheaper foreign goods on its own (poorly protected) market. How come?

The whole truth is that Slovenia has not yet overcome the loss of the Yugoslav market. It will take time to accomplish this. Economic relations and the market cannot be restored without normalization of political relations in the territory of the former Yugoslavia. The end of the war in Bosnia and normalization of contacts between the states of the former Yugoslavia are prerequisites for the recovery of all. And even when this happens, it is quite clear that the trade between the states will never reach the level at which it was before Yugoslavia's disintegration. First of all, because trade between the former republics was artificially encouraged because Yugoslavia, as a whole, was protected. Companies could not trade freely with foreign countries, there were a number of administrative restrictions (such as high prices, etc.), and naturally, they turned to what was at their disposal. This is how many economic ties were made on the Yugoslav market. I believe that common interests will revive the establishment of trade between Slovenia and Serbia and Montenegro, but this will certainly never be on the same level as it was in the past. Trade between Slovenia and the rest of former Yugoslavia will probably be 30 per cent of what it used to be. With Serbia and Montenegro, the percentage will surely be far lower. The relations will be difficult to restore not only because certain goods cannot be placed on certain markets but also due to political and psychological reasons. In the initial period, I suppose that the Serbian side, i.e. certain companies, will try to find other partners to trade with rather than Slovenia. Many Slovenes think similarly. In the long run, relations will certainly be restored.

Perhaps because the two economies are complementary?

We used to say: "Yes, the Serbs have copper; let's buy it and process it." It is no longer as simple as that. In the new circumstances, we shall import it from whoever sells it cheaper. At the same time, Serbian companies will prefer to sell their copper to whoever will pay more. It is true that Slovenia used to buy copper and other raw materials from Serbia and other Yugoslav republics and then process it and sell it elsewhere. This was partly so because, at the time, Slovenia could not import copper and other raw materials from abroad at the same price. Now everyone will do what is in one's best interest. This should not be regarded as wrong because the restored relations will have positive effects on all the republics of the former Yugoslavia. The low standard of living in the former Yugoslavia was partly due to the fact that most of the production was protected and the Yugoslav market closed, which caused lower efficiency. Once we open ourselves up to the world trends, we shall have higher gross product in all the states in the territory of the former Yugoslavia.

Might Slovenia's model of privatization be interesting for other economies, say the Yugoslav economy which has not yet completed the privatization process?

It certainly might be interesting, primarily because others could learn from our mistakes. There were many mistakes. The first mistake was that the entire privatization was not in accordance with the constitution. I am still convinced that privatization in Slovenia was carried out unconstitutionally, because not all the citizens had an equal access to the former socially-owned property. The property was privatized differently in different sectors, which means discrimination of citizens.

Are you in touch with economists in other parts of the former Yugoslavia?

I have had no contacts with them since 1990 and I have not travelled to these regions, except to Macedonia in December 1994, upon an invitation by the Macedonian Academy of Arts and Sciences. I had a very pleasant time there. I met many of my colleagues and I am convinced that such contacts are necessary. The acquaintances which were once made cannot cease to exist.

Do you follow the developments in Serbia and Montenegro?

Only general information, what I read in the papers. As I can see, the economy is a disaster and it can be nothing but a disaster after the blockade and the financing of the war. In spite of this, I think that the Serbian, Montenegrin and some other economies will be developing rapidly. Slovenia's economy is far beyond the economies of all other states in the territory of the former Yugoslavia and this is why we shall be developing rapidly, but this does not mean that someone else could not surpass us. Development will be rapid in all the devastated states.

Despite the fact that Serbia is running late with privatization?

Slovenia has almost completed the privatization process, and yet we have not achieved the efficiency which we should have achieved. I have always believed that socially-owned companies which did well on western markets should not have been privatized just for the sake of privatization. If they were successful, they should have been allowed to do business and to remain socialist, self-management companies. Why shouldn't "Gorenje" or "Krka" continue to work as such companies? Maybe they would have gone bankrupt, or maybe they would gradually have become privately-owned companies, but at least theoretically they would have had equal chances with other forms of ownership. Besides, the adopted system of privatization functioned in such a way that the employees still hold a substantial part of the capital.

"Vreme:" Do you have a message for our readers?

Bajt: I would like to greet them. I have not been much in the public in the past few years. I have written several articles, but this was very modest compared to my activity in the past. These times are behind us now, and I am glad I had a chance to speak for a magazine I respect.