Pre-Election Prosperity

Graft the ears, fix the derriere!

This is the simplest description of the pre-election philosophy of the economic policies of the ruling parties (SPS, JUL, ND) in Serbia, led by Slobodan Milosevic, new president of the Federal Republic of Yugoslavia and old political potentate in these territories. As in a semi-private deal, personally initiated by Mr. Milosevic, the Serbian Government got its hands on a billion dollars with the sale of domestic telecommunications, it is now spending that money in its pre-election spending spree. And its only pouring money into a bottomless bucket because, beside the fact that 49% of Serbian telecommunications are in the hands of foreigners, no other economic reforms are being implemented.

THERE ARE; THERE AREN’T: "There will be no reforms", Dusan Vujanovic, former Expert Associate of the Economics Institute and present expert for the World Bank, is warning us from Washington. "Milosevic desires reforms", claims Danko Djunic, former Director of the Economics Institute and present Vice-President of Federal Government. Dusan Vujovic backs his comments with the observation that serious economic reforms would bring into question the positions of the economic-political elite (Marjanovic, Tomic-Simpo, Tomic-Jugopetrol, Matkovic, Sainovic...). Doubting the sincerity of the choice for reform, Mr. Vujovic also cites the fact that "it is never discussed what will be better after reforms". As reforms must include the rebuilding of an even moderately liberal market economy, Dr. Dragoslav Avramovic adds to the list of doubts with his observation that the desire for control of economic flows is a dominant character trait of Mr. Milosevic. "So what? Milosevic is a South American type of dictator which does not exclude privatization as a reform option with markets that are controlled by monopolies", states one well known economist close to the Serbian government.

And while Mr. Djunic bases his opinion of the FRY President’s sincerity in wishing for economic reforms on a personal impression, a good number of economists think that a renewal of relations with the International Monetary Fund and with the World Bank will force the present government into rebuilding an economic system that is compatible with the world.

STORM BEHIND THE SCENES: If history is a teacher, than it is on the side of Mr. Vujovic: everything which the Socialist Party of Serbia, headed by Milosevic and his Ministers (otherwise backbench directors of large enterprises), promised so far in the way of economic reforms has consistently proven humbug which would persist for as long as we did not cast our vote in the favor of whatever it is they wished us to vote in favor of.

The latest humbug has been observed by Professor Miroljub Lubus who sums it up in the following succinct sentence: "On the economic front everything is calm; behind the scenes there is a storm brewing!"

On the one hand, record trade deficits are being reached (it grew by 20% in the first seven months of this year, reaching 1.35 billion dollars), along with record increases in earnings of public officials (whose real value has jumped by 24% since July) and record amounts of money in circulation (over eight billion dinars). While on the other, prices are relatively stable (annual inflation for July amounts to a mere 14.6%), along with a relatively stable dinar exchange rate. It is clear to economists that the situation is unnaturally pent up and must sooner or later explode. Readers will understand best what is in question from the graph prepared by Professor Labus (see graph): Dragoslav Avramovic started from zero on January 24, 1994, and contentedly kept printing dinars until their real value leveled off at 2 billion marks. He continued to print money after that, but it kept dropping in value because it had no real backing. After his departure, the Yugoslav government more or less constantly kept increasing the amount of primary money (M1), over and above which Avramovic’s program cracked (a higher level permits for a higher GNP). One of the co-authors in an Economic Institute’s publication stated in a lucid way that "the government conveniently arranged for the crack to occur after the elections".

JEWELRY AS SALVATION: For the Socialists (backed by JUL) to continue to humbug us, they will be forced to draw on fresh foreign funds from time to time of the sort which came in the sale of PTT. Many think that no reforms will be necessary for that, nor a renewal of membership in IMF or the World Bank. "Our economy thirsts for five to six billion marks annually. Such a system can be maintained on the lowest level through sales of family jewels", states Bojan Dimitrijevic, Vuk Draskovic’s economic advisor.

Mr. Dimitrijevic is not the only economist who thinks that the present government could sustain itself through sales of natural resources. Electricity and oil are the two industries most closely affected by this; after that sales of highways, the railway and such would be next in line.

The idea of selling electricity has been current for over six months now, ever since his Excellency Aver Roberts, the British Ambassador to Belgrade, and the Union Director of EPS were seen lunching at the Zemun restaurant Reka. It is also known that numerous representatives of Germany, Italy and Greece have been seeking information on investing in EPS (according to one of the stories, Germans were even prepared to erect an electrical dam in Kosovo).

As VREME has learned, the Serbian Government is not inclined at the present toward the sale of electricity, but rather toward what is called decapitalization (it is expected that the foreign partner will become part owner of EPS stock through financing of the modernization and increase of capacity of this system).

According to experts, even if a decision to privatize were reached today, the process itself would last at least a year (just as with PTT), so that nothing spectacular should be expected soon.

In an interview for VREME, Professor Miroljub Labus notes that the possibility of "selling family jewels" is limited because resources are limited. "Our greatest problem is unemployment and bad economic organization, which cannot be changed without foreign capital. This money is only a short breather, and we are due to enter a terrible crisis once we begin paying off foreign debts. Even if those debts were to be written off by 80%, we would need an annual trade surplus of over a billion to a billion and a half dollars. The present economy cannot achieve that because it generates a deficit of a billion dollars", states Professor Labus who thinks that reforms are not to the liking of Milosevic nor his ruling elite, but that they will have to initiate them "because the current situation will begin to destroy them".

"It is ironic, but inefficiency of state and public enterprises is the biggest asset of reformers because it will result in a collapse, but I would personally not wish to find myself in the role of someone who is governing the economy", concludes Dr. Labus.

SECURITY EQUATION: Unfortunately the Opposition is also not offering much. The Democratic Party as a rule ascribed greatest importance to the economy and had for a while the most consistent economic program. Today economic programs are at the margins of the political activities of this party, even though this party has the greatest concentration of economists (is it because Messrs. Ivan Vujacic, Bosko Mijatovic and Labus have grown tired?). Until the recent transfer of Mr. Bojan Dimitrijevic from the Democratic Party of Serbia into the Serbian Renewal Movement, Vuk Draskovic did not have anyone who could say anything intelligent about the economy. And it appears that Mr. Draskovic was not listening to Mr. Dimitrijevic when the latter was saying that the Russians will give us a billion dollars (what can they give us when they themselves are penniless?). Beside being among those "loosely made statements", this is as comical as the those promises of a 1000 DM’s to every pensioner, or those of a Swedish standard of living of $10,000 U.S. per capita. DSS paid a lot of attention to economic questions as a rule, but Mr. Dimitrijevic’s departure is being felt. For the greater ambitions of the Civil Union of Serbia, the capacities of an engaged Aleksandra Posarac are not sufficient.

Mr. Dusan Vujotic clearly notes this: "The Opposition has no alternative; it would need to have a vision of the economic and political future of the country".

Along with the Socialists, the Radicals are also exploiting the present situation, with their leader Vojislav Seselj amassing in recent years certain economic catch phrases which he has vulgarized to such an extent that they are more appropriate to economic liberalism which was to be found only in the Wild West. "He wishes to make a country of kiosks out of Serbia", stated Mladjan Dinkic, Assistant at the Economics Faculty, in an interview for Studio B. What needs to be done should not be imagined and pondered over. That has already been done by others. "It is original to not be original", thinks Mladjan Dinkic. Given that Professor Mira Markovic, whose influence on present developments should at no time be doubted, has been inclining toward "a yet another alternative" of a better and more prosperous life (which is being parroted by numerous sycophants), there is no indication that ruling circles have understood the idea behind Mr. Dinkic’s comments.

It is as if no one here has considered the comment in the book Basis of U.S. Trade Policy by Stephen Cohen, professor at an American university: "There is growing consensus that the economic strength of a nation is an integral part of the equation for national security"! That equation evidently destroys those whose rhetoric is full of patriotism.