Whistles for the New Government

The authors' team of the Yugoslav economic experts from the most respectable research and financial institutions of Belgrade, Podgorica and Washington (named Group 17 by Vreme weekly) promoted their suggestions on the measures for getting out of the crisis over the past several weeks.

We continue the series of conversations about our economic reality and the measures that have to be implemented. This time we talk to Stojan Babic, professor of the School of Economics in Belgrade.

Immediately following the letter of the Group 17 and the measures for overcoming the crisis, remarks were made that there is nothing original about it.

Yes, the commentator of Radio Belgrade scornfully said that our letter to the public did not offer anything new, i.e. that we have rediscovered the wheel. True, but not entirely. Our proposal was created by well informed economic experts. The transitional societies of the former communist world have demonstrated that the solutions should not be sought through experiments so dear to those in possession of power but lacking competency.

Due to the absolute lack of confidence in the state, there are no savings in banking sector, no investments, thus there is neither economic growth nor recovery. That is why the precondition for economic recovery is a political one: the departure of the nomenclature which destroyed this country, its economy and lost confidence. In our letter we said that it is about the leading circles of the SPS, JUL and New Democracy. The Marjanovics, Kontics, Sainovics, Tomics, Kundaks and those like them certainly can not win back public confidence.

What are the major elements of the "architecture" offered by the program?

The prospect of economic recovery is preconditioned by the processes of macroeconomic stabilization, liberalization and privatization, as well as the relations with the international economic institutions all in one "package".

Privatization, i.e. discontinuing "social" ownership is the crucial economic foundation lever of a democratic society. Ours is the only country in the world with "social" ownership. This ownership form is the least efficient and, even worse, it is the basis of illegitimate usurpation of social and therefore, political power. This ownership form represents the basis of obscure ownership and legal mode of economic activities, and finally, the basic element for the usurpation of the entire judiciary and legal system. On the other hand, in order that privatization becomes politically maintainable, it must be accepted as just. Further, this means that macroeconomic stability must be achieved and monopolies removed.

The arguments of the members of the team presented in the crowded amphitheaters of the School of Economics and the School of Philosophy were supported by applause. Were you surprised?

No, why would I be? The current government dishonestly keeps those who are uninformed (the students certainly are not) about the real conditions for the elevation of the "outer wall" of the sanctions, whose existence controls the American administration through its dominant position in the mentioned institutions. The precondition for the elevation of the "outer wall" of the sanctions is the respect of the human rights, i.e. the democratization and the solution of the problem of Kosovo in a way that is acceptable for all interested parties. This is the reality. Without the solution of these political issues economic recovery is not possible. This should be clearly said to all the citizens of this country, so that they also know and not only the students. This way we come to the conclusion that the way out of the economic crisis is completely dependent on the capability to come to a political agreement with the main participants on the global political scene. In my deepest belief, the measure of this capability will be also the measure of true patriotism. It was said that "Serbia would not bend". And it did not, but many started bending to pick up cigarette butts. The one that speaks about the national dignity amidst the overall misery, while himself gathering millions, is plainly a bum.

Another general remark to the Group 17 is that the measures are not fully developed, for instance the program of privatization.

It should be said that the public was offered the set of essential measures which define the philosophy of the reconstruction for the new economic system and that, in fact, is just the framework for seeking public consensus. It is about the foundations of an operational program that is yet to be created. Before that a public consensus among all internal factors must be achieved - political parties, unions, etc. An establishment of a consensus involves defining the rules, among other things, of privatization. Conversely, it would be like jumping the gun. Also, it is well known that there are three essential forms of privatization: selling to the strategic investors, internal privatization (in which managers and workers become stockholders), privatization through vouchers and random privatization. Random privatization bears the weakest results (state revenue, economic efficiency and equity), and yet this is the form that we have today. Our idea is that the privatization process should be immediately institutionalized, to become the subject of political agreements and an open process, one subject to public control. Our previous experience of the transitional countries demonstrates that the consistency of the process is more important than the choice of the privatization model itself (for example, internal privatization, privatization through vouchers or a combination) because it strengthens confidence of the population in the permanency and maintenance of the entire enterprise. Finally, the direct sale to the strategic investors is clearly the best because they bring enterpreneurship, technological enhancements and cash for the treasury. But the problem is that this must not be done in the way that was attempted with the telephone system of the Serbian postal service (PTT) - practically incognito, with no control, tenders and competition and without previously regulating the entire sector, or in other words, without its liberalization.

Your platform is liberal?

To the extent that it is about the liberal "program" directed to bringing down all monopolies. For example, what does the liberalization of the PTT service mean? It is a monopoly and it is not unimportant whether the strategic investor will have the complete freedom to set up the price for the impulse. This freedom must be limited, and the best way is through competition. Liberalization means the freedom to let any interested and economically able party enter the market. For example, the measures estimate the abolition of import and export quotas except for the negligible percentage of articles. In that way, anyone will have the chance to import the whistles for the demonstrations against the government. No extra profit will be gained.

Finally, if the offered program gets the green political light, would it be successful?

The Nobel Prize winner Robert Lucas developed his economic theory of rational expectations based on the simple fact that people can make errors, but not persistently and systematically. The people are simply rational creatures, not donkeys. Another way to metaphorically describe this theory is that in an economy where all its subjects believe in the yearly inflation rate of 10%, the inflation rate at the end of the year really is 10%. When there are mass protests during the three winter months, that are peaceful, when the students in full consciousness sacrifice the school year in the name of the "abstract" goals of justice, for me it all means that they have decided to seek their fortune here in this country, and that they believe it is achievable, that they believe that they can live in a normal society. The program that we have offered defines the economic foundation of such a society. That is why this program is rational and real.