Radical Ruin

Do you know who “Papa Doc” was?  Have you forgotten?  Francois Duvalier, doctor, voodoo mystic, self-proclaimed visionary and staunch nationalist who, before coming to power, had his representatives in six Haitian governments which were formed in the space of ten months, and who, beginning with September 1957, was president of Haiti for 14 years.  He’s the man who organized so-called bogeymen, private groups which terrorized opponents of the regime, the man who prolonged his mandate from 1961 to 1967 with election manipulations, because of whose corrupt and despotic regime, the USA discontinued aid to Haiti, a dictator and self-proclaimed visionary who was diplomatically isolated, who was excommunicated by the Vatican because of the torture of priests, who was threatened with conspiracies, and who, despite it all, including the conspiracies, ruled in stability to the end of his life, with the title of president for life toward the end — the government being handed over to his son, Jean-Claude, called “Baby Doc”, after his death.

We won’t tickle your fears any longer with things that might appear to be similar to what is happening among us, but they need not correspond exactly.  We are mentioning this strange biography only because of the so-called “Duvalier paradox” which reads thus: “Minimal economic growth, maximum regime stability.”  Last week in the Belgrade Media Center, this paradox was invoked by the political scientist Slobodan Antic in an attempt to illustrate that authoritarian regimes can continue in power for a long time despite economic stagnation and ruin, and owing to the fact that they redistribute money among the police, propaganda and the maintaining of the regime.  Here the situation is somewhat more complicated.

Upon the expiration of the first hundred days of the Serbian Government’s rule, the span within which in normal countries political opponents withhold from criticizing the government, there were many statements and newspaper reports on the catastrophic isolationist, contradictory and risky policies of the ruling Radical-Leftist Coalition, but all of them more or less contained the observation that this government, despite evident social decay, is more stable now than at the beginning.  The transfer of the “supreme-party” Vice-President for Privatization, Milan Beko, to Zastava Automotive Industry only increased convictions that Serbia will have to wait for transition.
The President of the Serbian Government, Mirko Marjanovic, and Vice-President Milutin Bojic, stated in interviews held on the occasion of the first hundred days of the Leftist-Radical Coalition that the Serbian Government has maintained policies of increased economic activity, of currency and price stability, and of maintaining state sovereignty, etc., but this did not cause laughter because of the present serious state crisis.

What are the actual results of the SPS-JUL-SRS coalition government?

THE CONSTANT AND THE VARIABLE: The curtest definition was offered by Zarko Jokanovic, from New Democracy, when he invoked the formula of “inflation and mobilization”.  Otherwise, this party holds to the opinion that among the elements which contributed to the worsening of the Kosovo crisis is the abandonment of attempts to negotiate with the Albanians, and the fact that the Serbian Government adopted the Radical Party’s variant of solving the Serbian-Albanian national conflict.
Ratomir Tanic, Advisor to the President of New Democracy, correctly observed that a change of government would not have resulted in a change of the Serbian approach to Kosovo.  However, despite the political consensus among all the relevant political powers on the territorial integrity of Serbia, the Radical-Leftist way of stifling the insurgence of Kosovo’s Albanians contributed negatively to the development of events and worsened the state situation.

Prior to the formation of this government, about fifty terrorist acts had already been committed in Kosovo, so that it sounds naive, and is not even correct, to accuse this Government of intentionally opening up the Kosovo crisis in order to get away from economic and social problems.  Its fault lies in the fact that it adhered non-selectively to the principle of “applying bitter medicine to a bitter wound” (Rados Smiljkovic, 1987) in stifling rebellion.

It is possible that Albanians, when they decided to radicalize and increase their armed activities, were calculating on the fact that the coalition with the Radical Party in Belgrade allows for the Serbian side to be easily disqualified in the West.  The Government did not know how to avoid this trap.  After the military action in Prekaz, in which, according to the convictions of the international community, non-selective use of disproportionate force was used with consequent civilian casualties, the government promised to investigate the matter, after international pressures.  But it did not carry out this promise in a timely fashion, which perhaps contributed to the placement of an impossible demand on Serbia — that it withdraw its armed forces from Kosovo at a time when rebellion is raging.

The answer to this ultimatum, as was expected, was in the negative: the country found itself in danger of war, while its right to defend its sovereignty and territorial integrity were denied with serious threats.  After this, the President of FRY was obligated to commit himself to a moderate course in the Moscow Declaration, a written international document.  The rebellion has gotten out of hand, hundreds of civilians and tens of policemen are dead, while hundreds of policemen are seriously wounded.
It is speculated that the armed force in Kosovo cost a million dollars per day, but the Kosovo problem has such weight in Serbian politics that this price should not worry any government, because the room for maneuvers is very open in this — right up to instituting a war economy, to rationing goods, to appropriating land, etc.

Would the situation in Serbia be better today if the Government and the Parliament, after the problematic action in Drenica, in January and February, for instance, had demanded from the Chief of Police to answer for his responsibility?

CRISIS AND OPTIONS: There are those who believe that the President of FRY could fall if, after everything, he were to become too accommodating on the question of Kosovo.  Who would depose him?  Ph.D. Vojislav Seselj, who was given wide publicity as the Vice-President of the Government, had practically become the Government’s spokesman on the question of Kosovo.  In this regard, it appears that it was very skillful in the long-term on the part of the Socialists that Seselj was included in the Government once Kosovo became topical.  Not only is he accessory, but also the front-man for the Government’s policies.  Slobodan Antonic, Editor of Nova Politika Misao (New Political Thought), believes the Socialists also did not have any long-term plan in this.  They opted for Seselj because the negotiations with Draskovic fell through.  Of course, in this sense, they will attempt to exploit him, just as he will attempt to exploit them.  According to established tradition, Seselj watches out for the back of the police and the army, while he sends warnings to diplomacy.  For instance, he states that for him personally Holbrooke is unacceptable as a negotiator because of his contacts with the Kosovo Liberation Army (UCK), but that his coalition partner is tolerant toward this Yankee.  Seselj also keeps repeating that the Kosovo question is decisive for the fate of the coalition Government.

Slobodan Antonic realizes that there is a simmering fight for power among the Radicals and the Socialists within the state apparatus, and assesses that the Socialists will gradually lose out in this Government, while Seselj will grow stronger, because the Socialists entered into a coalition with him out of gain, but have since lost control over him.  The warped Law on Universities, the fruit of the political marriage between close relatives from the same authoritarian political family, illustrates how these two authoritarianisms strengthened each other.

In 1997, Seselj realized that he needs to have insider people in the Government in order to win power, so that it is not beyond the realm of imagination that from this position of power he will perform an infusion in his party membership by signing up experts and bureaucrats into SRS ranks, since anyway his Party is fairly scarce.  For his part, Vojislav Seselj became a member of the executive councils of many faculties and institutes.  He decided to train his team in government participation, which is not as easy as it seems, and he evidently wants to get information about his opponent before it comes to a decisive show down between the Radicals and the Socialists, which, looked at in the coming period, is the main political conflict in Serbia.

In this context, the division of political forces is such that, after many battles, public opinion in Serbia is most akin to the Dead Sea.

IRRELEVANCE: Ljubisa Sekulic, member of the Forum on International Relations in the mentioned Press Club, described with an imposing dose of nihilism how that which is being done in institutions here, and which is being publicly stated, is in complete opposition to the real situation: devaluation of the dinar was carried out, while it was promised that there would be no devaluation; the objective because of which devaluation was carried out, increased exports, was not accomplished; voters indicated that they do not want foreign intervention in Kosovo, and now everyone is participating in negotiations on Kosovo, while Serbia is the only one which is not participating; peace and stability are being invoked, while what is happening is only the escalation of the crisis in Kosovo; sanctions have been imposed, while the Government keeps talking about international cooperation; regional cooperation keeps being mentioned, while our neighbors are bracing for organizing emergency intervention forces...  The list which illustrates the state crisis is fairly lengthy: universities have lost their autonomy, there is clear conflict between the federal republics...

In every country this would result in great upheaval, while in this country the Government is now stronger than at the beginning of its mandate.

Mirko Marjanovic’s Government promised at the beginning of its mandate that the economy will be at the top of the list, but it did not stick to this promise.  When the dinar was devalued by 82 percent (announced on April 2, which means that it was “cooked up” on April 1, that is April’s Fools Day), the Government of Serbia stated that “the change in the exchange rate of the dinar is accompanied by all encompassing, consistent package of measures in all areas of economic policy.”  Devaluation was under the jurisdiction of Kontic’s Federal Government; the Montenegrins protested because of their own calculations, while the Serbian Government claimed that the change in the exchange rate, along with the accompanying measures, would contribute to increased exports and production, to competitiveness of our manufacturers, to a drop in the foreign trade deficit, to decreases in tax burdens on the economy and more regular paying out of pensions and social security.  New stability of the currency was being mentioned, along with price stability and speedy economic growth, as well as increased G.N.P., a higher standard of living and increased exports.

What happened with all of that?

In the first five months, exports are lower than planned by about 20 percent, while the trade deficit has already exceeded a billion dollars.  In May, exports amounted to 13.3 million dollars, which is at the lowest level since the lifting of the first sanctions.  With the change in the Income Tax Law, taxes on every dinar paid out as salary has been reduced by 15 percent — from 1.24 dinars to 0.98 dinars.  Finance Minister Borislav Milicic assessed that these changes “have resulted in the first step toward a reform of the tax system”, and announced a new set of measures in the area of tax policy.  But there was no further mention of them, perhaps because of sanctions, but also perhaps because it turned out that funds are empty, and all attempts at populist politics have gone to shambles, and that pensions and salaries cannot be paid out regularly.  Off and on, demonstrators attempted to remind Seselj of his election promise that when the Radicals enter the Government, no single government official will get their salary until doctors, teachers and pensioners get their dues.  It became clear that the Government is unable to meet the obligations it committed to.

Sekulic thinks that it is not a matter of how long the Government will last, but how long can this people endure, and that is something no one knows.  Sekulic thinks that instead of fingering political and professional activities, one simple truth should be repeated constantly — that this country has a national debt of 18.7 billion dollars, which means that 3.5 million dollars of interest are being racked up every day, and that the condition of all conditions is the influx of foreign capital, and that the Government must fulfill the conditions for that.

TEQUILA EFFECT: Goran Pitic from the Economics Faculty thinks that foreign capital will not come to a country in which domestic capital is not functioning.  The influx of foreign funds is not a solution — that is something that can only bridge the lack of domestic capital in the service of economic development.  If domestic conditions are not secured, then we will enter the so-called tequila effect — well known in Mexico and other Latin American states, where all foreign capital was practically eaten up.  Just as we ate our telecommunications industry, in the same way they ate, that is to say, drank theirs.

Goran Pitic answers with black humor to the association that the present situation is reminiscent of the Titanic — that the music is playing, that waiters are serving drinks all the while the ship is letting in water: the association is good, but the scene is not the right one from that drama.  He states that non-transparency continues to be the characteristic of the Government’s policies, that even experts have a difficult time of finding out what the Government is actually doing and what assets it has at its disposal, and that they can partly speculate and guess as to how long all that can last.  On the basis of certain indirect unofficial and even official information, he assesses that resources are still at a level which permits the situation to be kept at a level prior to the coming apart of the Titanic.

The economy is not as important for the Government as are other aspects of politics — it has been relegated to less than secondary importance.  That is why we are only left with attempts at putting out the fire with gasoline.

The only measure which the Government has undertaken is devaluation, which is done by all countries.  However, the problem is that devaluation was used to accomplish something that is done with other instruments of the economy.  We also see that this government has attempted to carry out one aspect of populist politics: two months after the Government was formed, public spending, salaries, pensions, etc. were all increased, even though anyone who understands economics even remotely should know that such a state of affairs cannot continue for long, which already proved true in May, and will also be confirmed in the coming months.

Pitic observes that we have two long-term problems which will come to light, but are also apparent in everyday policies: on the one hand there are fiscal problems associated with salaries and budget-balancing, and on the other, there is the fact that soon we will have to deal with the problem of the overaged disposition of our population, with the large number of pensioners, and the influx of new pensioners in the coming few years.  Along with that, we will also be faced with servicing the old national debt in the coming seven to eight years, which means that it is possible that we will enter one kind of difficult, debtors crisis.

This Government is also trying to plug the holes which crop up.  It cannot manage this through taxes, but it can do it through the price of gasoline, which has resulted in speculation waves and everything else which we already saw.

We have already learned to live with inflation, which has hardly been negligible — 2 to 3 percent per month.  Pitic observes that this is a high level of inflation and of economic instability, while we are perceiving this almost as an accomplishment, and it is as if we are happy with the fact that inflation is not at a level of 15 percent per month.
The policies which this Government is leading are policies of transferring costs onto future generations, so that in the coming months we will have some version of populist politics with many false dilemmas, and with a further impoverishment of the population.