The Power Of Selfish Interests

I claim we, Slovenes, are lucky because we have not had a glorious past. We do not exhaust ourselves arguing about the Kosovo battle, who won, who betrayed, and who did not... The Serbs have not been that fortunate. They have a glorious past, alike Croats, and now they argue who has a better past and who has a greater culture Following the recent duels in the Slovenian Parliament concerning the future of the Slovenian and Yugoslav economy, we spoke to Dr. Joze Mencinger, one of the best Yugoslav macroeconomists, who until recently held the office of vice-president of the Slovenian government in Peterle's Cabinet and research fellow at the Institute of Economics adjacent to the Faculty of Law in Ljubljana.

* The Yugoslav Vice-President Branko Kostic said that Yugoslavia will undoubtedly recognize Slovenia and that the only remaining issue to be solved concerns the property settlement. Can a rational agreement be reached with the gentlemen who are the leaders of the so-called Yugoslavia?

I suppose that the recognition will be preceded by an agreement concerning certain issues, although a total agreement will not be possible. I expect that the settlement arrangements will take ten years to complete. The most important thing, however, is that someone consents to negotiations and that he is prepared to accept the interference of an arbitrator concerning the controversial points. It is in the Slovenian interest to be recognized by Yugoslavia as well, since that would enable Slovenia to start negotiations with creditors, in the financial market, which has now been difficult precisely because of these unresolved issues. I would not be surprised if an agreement would be reached soon; it is obvious that Serbia has unresolved economic problems and economic interests as well. The sooner we realize that "brotherhood and unity" is not a lasting concept, but that selfish interests are, nevertheless, the sooner will normal relations be restored.

* Now that Peterle has managed to keep his prime minister's office, what is awaiting the Slovenian economy?

The downward economic trend will continue; it will fall to its all time low by the end of this year, although this is something that happens irrespective of the government. The main problem of this government is that it makes mistakes, although the government cannot influence certain objective circumstances, such as the loss of a quarter of the market. The main task of the government is to make sure that it makes as few mistakes as possible, and to leave the whole thing to be settled by economists, since businessmen are much more reasonable than politicians. If you leave businessmen alone, they will always find a way to conduct an exchange. I know directors

of certain Slovenian firms who pride themselves on having good business contacts with firms in Serbia. The cooperation of certain firms went smoothly even at the time when Serbian directors used to phone ours and say: "We'll send you a cable saying that we are breaking off relations with you, but don't take it too seriously", which clearly indicates what political pressure these people were under. There was considerably less incidence of this in Slovenia. We are pragmatic.

* The Serbian politicians thought they were pragmatic when they got rid of Slovenian goods in Serbian stores.

That gesture was pure nationalist nonsense, a pendant to the Slovenian claim that "we were being used in former Yugoslavia". A nonsense of similar kind has been launched by Serbian economists as well, who have been complaining that "Slovenia is using Serbia"... One day the relations between Slovenia and Serbia will be very strong, especially because these two economies are compatible. The only thing which might prevent this would be the complete breakdown of the Serbian economy. A situation could arise in which there will be no more political obstacles, but in that case Serbia will be left with nothing to trade with, since everything will be destroyed if the present trends continue.

* You said you expected bigger problems with Croatian firms than with Serbian firms in the future?

Yes, Slovenia and Croatia are rivals. Take Rijeka and Kopar, for example. These two competitor harbours are trying to attract freight from three states which have no port. There is a series of other problems, from the nuclear plant Krsko, to the problems which the Ljubljana Bank branch in Zagreb is experiencing at present... There are lots of economic problems we are faced with and there will be more. This is not the case with Serbia, since our economies are compatible. Serbia has something we need, and we can offer her something in return. We should only reach an agreement. But I am afraid that it won't be possible since Serbs are about to destroy their economy so scrupulously that we will have nothing to agree on. The present structure of the Serbian economy is not particularly good, although it is in the interest of Slovenia to have the Serbian economy in the best possible shape. That would automatically mean that we would be better off as well.

* Slovenia, just like the other republics of former Yugoslavia, expects a lot from the so-called

Western help. Are such expectations realistic?

No. Generally speaking I have serious doubts concerning the "help" of the West. If we consider the example of three East_European countries, which gained the most from that "economic help", the data say that a paradoxical situation arose in 1990: regardless of the fact that there were credits worth 16 billion dollars, only 5 billion worth of credits were used, and when the states paid out their debts and interest rates, it turned out that net capital outflow amounted to 9 billion dollars! That is the reason why the talk of the West concerning the help is a very strange thing. The term "help" implies providing credits; however, should I go to the bank and take the credit, I will not consider that I have been "helped" by the bank. That constitutes the normal conduct of business. Thus it would be important for us to discard similar ideas concerning "the help of the West" as quickly as possible. We need the help only if normal economic channels of goods and capital flow are opened. What good is that "help" if they prevent us from exporting to their market? Finally, the West has been taken by surprise by the events in Eastern Europe; while the Berlin Wall was still standing and the iron curtain was down, it was easy to talk about the free flow of manpower and capital, and now the Western world is now very much interested in not having only "free flow". That is the reason I am skeptical about the Western help.

* Slovenia has also been affected by the war which is being waged close to its borders - capital is slow in finding a way to the destabilized regions?

The present situation is such that Americans and Europeans as well, find it difficult to differentiate between Slovenia and Slavonia, which is only natural. Slovenia did not as yet rid itself from the maligning qualification of "the Yugoslav political risk", although the situation has changed for the better after the recognition, so that foreign investors are increasingly interested in it. On the other hand, the war presents an additional burden for Slovenia, since its market is too small to interest foreign investors, who quickly get disappointed when there is no more market on the territory of the former Yugoslavia. At the same time, another kind of investors has sprung up, the ones who see the Slovenian market as a springboard for penetrating the East-European market, with the use of the relatively cheap domestic labour.

* How real is the danger that foreign capital will buy up everything of any value in Slovenia?

Such sentimentalism is only natural, especially when dealing with small nations... The Slovenes would like to have capitalism, while at the same time wanting equality for all within it. The Slovenes would like to become a part of Europe, but not altogether... It is natural that they, who used to claim that Yugoslavia had been using us, are now finding the "culprits" in other countries, although one should not take this too seriously. I do not, at present, fear the sale of Slovenia.

* Slovenia was lucky to have rejected Sachs' plan. Otherwise it would have fared like Poland?

The collapse of Sachs' plan was expected. The people who are not well acquainted with the economic issues and are offering some seemingly simple solutions, while not distinguishing between Mongolia and Slovenia, are actually offering a catastrophe. I am afraid that the like-minded professors from Harvard will cause new October revolutions in Eastern Europe, precisely because of their oversimplified approach. They want to introduce a market, although in this case there are no market institutions, which means introducing chaos, which is the way it turned out in practice. We are faced with a terrible frivolousness. Let us suppose that someone wishes to introduce a price reform in Russia. That means that he has not looked out of the window, because if he had, he would have noticed how much snow and frost there is outside, since these things in a state like Russia are being carried out at the time of harvest and not in December... Or, for example, the West has been talking a lot about the convertibility of the ruble, which is an irrelevant issue, since the Association of Independent States is being faced with drastically different problems - the starvation problem should be solved, and real farmers created - the convertible ruble is clearly an irrelevant issue here. The convertibility of the domestic currency is important for Slovenia, since it is a small country condemned to live of foreign trade, while that is not the main issue in Russia. That is why the simplified recipes, which are relentlessly being pursued in the societies which have been struck by the severe economic crisis, can only cause great harm.

* Since we are talking about convertibility - what are your forecasts concerning the parity changes of the Slovenian tolar and the Yugoslav dinar?

I have read somewhere that, had there been no war between Serbia and Croatia, the tolar would have been much weaker in relation to the dinar.

Introducing the tolar in Slovenia represented the lesser of the two evils, where keeping the dinar would be a worse solution than introducing our own currency. The bad aspect of introducing your own currency is that it is meant for a two million nation, or rather, for a small territory... With regard to the exchange rate, it is normal that the tolar cannot be weaker than the dinar, owing to the war. The tolar was temporarily in a worse position at the time when there was a blockade of the flow of goods, especially the agricultural products, which caused the prices to rocket in Slovenia, while in Serbia, where the goods had been halted, the prices fell, since the market had nowhere to expand. However, that situation changed quickly, and the fact that today the tolar is stronger than the dinar is only logical. I think that the Slovenian economy could not have made so many mistakes to make the tolar weaker than the dinar. And, concerning the convertibility of the tolar, which is being advocated by some of our politicians as well, I would say that the tolar, has, in effect, become convertible, since the time the free floating exchange rate was introduced here. It is available, although you will have some problems if you are a foreign citizen. One should not expect, however, that the tolar will become a currency which the banks will store in their foreign currency reserves in near future. Only in that case we would be right in saying: "Yes, now we have total convertibility". But that will probably never happen.