The Politics Of Bozovic's Government

It is estimated that this year's production level will be only a half of the one in 1989. To illustrate this we can begin with the fact that, Portugal and Yugoslavia for example, had almost an equal GNP per capita at the end of seventies, which allows for the assumption that their average standard of living used to be more or less the same. According to certain estimates, in 1992 we will realize only about 34% of the Portugese GNP per capita, although Portugal has not been noted for swift growth; bearing this in mind, we are no longer in Europe, but somewhere in North Africa. If we take into account the redistribution which is to the detriment of the average standard of living because of the war and the increased costs caused by the creation of new states, as well as the net outflow of funds caused by the balance-of-payments blockade - we can affirm with certainty that the average standard of living is lagging behind even more (probably lower than one fourth), with an enormous increase in the number of people who are sustained: the pensioners, the unemployed, the army...

If we start with the assumption that the arrival of the UN forces will bring about peace, that means that the basic premise for abandoning the principle of war economy is fulfilled. But, the atmosphere which is being created in the Serbian economy is neither conducive to the quick recovery of the production which has been abruptly halted owing to the disintegration of the Yugoslav market and the war operations, nor to the development which would help it to join Europe and the world.

When talking about a quick revival of trade on the Yugoslav territory, it is clear that its size and structure as well as the level of production cannot be attained if the trade is conducted through barter and if each business deal has to be authorized by the responsible state organ.

Unfortunately, all this fits well into the environment of the system which makes the perspective of a long term development uncertain.

The concept of trade which is characterized by competition and the motive of profit maximization is being replaced by the concept of export of surplus products and import of those which cannot be produced.

It seems that the main lever of the "macro-economic" policy concerns the material balance, which is the main characteristic of administrative socialism. Although short-term effects can be achieved by such economic policy of substitution of production for imports (from abroad or from the Yugoslav area), in the long run the effects will be a handicapped economy, incapable of competing in the market. Among the arguments for this claim we should emphasize the wide sweep of turning companies into state-owned and the integration of good and bad companies, expecting that the share-holding capital will start flowing towards them (where from?).

The system and the economic policy have a discriminatory attitude towards private firms. The tax system restricts the growth of private firms; the decree concerning the compulsory sale of foreign exchange when importing consumer goods, will cause many private firms to close down. Such an economy creates an environment which is conducive for using private domestic capital for speculative purposes with a quick turnover and with incredibly favourable conditions for doing business.

Ten percent of the monthly interest on foreign exchange which the newly formed private banks have been giving means 200% annually! If it is a clean business, it remains unclear why the National Bank of Yugoslavia does not make fixed term deposits in those banks and finance its liabilities from the interest it receives.

This way development has got stuck between the tax system, the concept of a closed economy and legal insecurity, or rather the uncertainty concerning the conditions of business doing. There is no capital for development and it is unlikely to come at all, all the more so because a rampant inflation is now almost certain to take hold. At this moment the control of money issuing and its exclusion from the budget cannot be attained, since that would lead directly to social explosion, as these funds are used for financing a wide range of consumption - from the army and the administration, to pensions and salaries for non-existent jobs.

We must shed the illusions that more democracy will bring faster growth by itself. It depends on the efficient handling of capital; democracy is welcome, but it is not a necessary precondition. However, vice versa: inefficient economy and lagging in economic growth inevitably lead to a thwarting of democratic processes.