Three Paths

From the top of the government, people received the New Year’s resolution that 1997 will be a year of serious reforms. In the series discussing the feasibility of the promises, Vreme weekly interviews Ph.D. Jurij Bajec, professor at the Belgrade’s School of Economics and consultant at the Economics Institute, who also holds membership at the Economics Council of the Serbian government.

Commenting on the inevitable question about the students’ and citizens’ protests, Jurij Bajec says: "I believe that the majority of the citizens, above all the youth and the students, seek a more precise vision of their near future, security in what could really be expected in this year and in the years to come. Also, what are the perspectives and chance for the better life? These key issues are above the fight of the parties for power in Serbia and Yugoslavia. Thus, we are facing the increasing expectations of the citizens - especially the younger ones- that a more successful phase of development will begin, which is normal after several years of difficult life, sanctions, fear and suspense."

Vreme: What is your vision of the future of Serbia and Yugoslavia?

Bajec: In the Economics Institute we have analyzed the developmental strategy of Serbia until the year 2000. We analyzed various scenarios of the growth and development of our economy. We have offered three possible scenarios of our immediate future which offer various developmental paths of fast and intensive development of Serbia and Yugoslavia that could relatively quickly supplement the tremendous fall of the development level due to the sanctions, the civil war and the splitting of SFRY. But this optimistic scenario requires the two basic preconditions - canceling the outer wall of sanctions and radical internal reforms.

The second scenario is less favorable. The starting point is that Serbia and Yugoslavia will continue the previous stabilization economic policy and at the same time conduct serious market reforms, but that no substantial inflow of foreign capital, as the support of internal developmental requires, can be expected over that time.

There is also the third possibility or scenario...

This scenario requires that the state in the next years will try to continue the previous stabilization policy, above all, through the restrictive monetary policy and non-inflation fiscal policy- to strive to repeat what has been done after the introduction of the stabilization program. At the same time, the precondition is that there are no political, economic and social conditions to begin internal reforms, nor the conditions for the inflow of international funds. This is the least favorable scenario which warns us that without actual internal reforms and connections with the world we would fast use up the effects of strengthening economic activity as the consequence of the partial reestablishing of foreign trade connections with abroad. This would not be actual development, but merely the renewal of production, with unchanged structure and the old way of production. This scenario warns that we would soon be back to stagnation already in 1998 and would be experiencing the decrease of the national product.

What are the conclusions of your analysis?

This analysis clearly shows that if nothing changes, the country will enter stagnation and economic activity would fall, which would be economically, sociologically and politically unbearable. That is why, in my opinion, the changes are imperative.

Foreigners send us messages that we should start "the fastest possible and the most consistent reform". Can that occur overnight?

In that respect I would warn that over the last six years we have had two entirely contradictory processes. On the one hand, we had turbulent and radical changes of the political and economic systems. From the one party state we became a multi-party state, out of a self-management-etatistic-socialistic economy we have defined, through constitutional and legal provisions, the new market economy. Thus, we have made the real "salto mortale" considering political and economic institutions. However, in practice, nothing crucial occurred in the economy. The way our companies and banks are conducting business, the way some system institutions react to the obvious economic problems and so on speaks to the continuity of economic life well known to us from the previous etatistic-self-managing period. This gap between the normative system and the old practice has been in many ways boosted during the sanctions, although it somewhat decreased from 1994 to 1996 when considerable economic revival has been achieved.

In short, we were long hesitant with crucial changes. Much has accumulated over time. The transition process does not occur overnight. Nobody expects it either, but what can be achieved overnight is the political will and decision that the transition will be accelerated and conducted. The cold waters must be entered, sooner or later.