Challenge of Inflation

Without the current crisis of the federal state, people would probably give way to the enormous heat, inflation and small salaries. In that sense, it would be too bad if Dr. Vojislav Kostunica, President of the FRY, hurried to settle the dilemma of Prime Minister Zizic's office, as it would bring to light that retail prices went up by 23% in the first half of the year, while living expenses increased by 26.5% (in comparison to December last year), which invokes doubts a propos the plan that, by the end of the year, the inflation should drop to a yearly level of 40% (it is currently above 110%). In this way, while the 'negotiations' about the structure of the new Zizic's office are the state's main concern, people are making fun of the problem of the old-new prime minister designate, possible 'reconstructions' of certain ministries, whereas the most frequently discussed idea is to expand the new government to eighteen ministers, based on the principle of parity. I have recently heard that the last would not be such a good solution - having in mind the majority of 'powerful' Montenegrin candidates, which have not yet got hold of some ministerial or ambassadorial engagements, though they have proved to be 'honest unitarians' (my personal remark a propos that was contradictio in adjecto).

While journeying through Germany last week, I got the impression that our federal government crisis has not been received so seriously abroad, or more precisely, that the majority of common people in western Europe are of the opinion that Dr. Zoran Djindjic is the Prime Minister of everything here, whereas some people (particularly women) I had a chance to encounter in Berlin, are almost green-eyed for we are piloted by a 'dream team' that gives the impression of being so up-to-the-minute concerning everything, so orderly and dynamic, and which consists of leaders who have an excellent grasp of contemporary foreign languages, the rhetoric fashion regarding the economic transition, and excel in the interpretation of reform and development books. One person even told me he was sorry that Germany was short of someone like Djindjic (I restrained myself from offering a prime-minister swap, in favour of protecting the 'national interest' of our country).

In fact, when one looks at the state of affairs in a 'comparative' way, a propos other countries in transition in east Europe, our reformists appear almost fantastic. The problem is that you never know whether or not even the best art theorists are capable of putting paint onto a panel or canvas in a right way, or at least of recognising a right painter and give him a paint brush to do the work. One thing is trying to find a fitting explanation for the causes of the current inflation, while it is something completely different to devise a successful formula and halt it without inflicting any harm to society in general.

Of all traditional remedies, which must be employed at all costs, it is a priority to bear in mind that, in raw economic circumstances, money must have adequate hard currency backup and must be strictly controlled. Otherwise, if you have the best clock, but lose the pointers, you get lost in time. However, the monetary policy is not that simple - so, hard currency in the countries where there is no legal order, can hardly guarantee you the drop of interest, the availability of credits or the safety of investment. Or, for example, a rule that big foreign currency reserves can guarantee the spreading out of foreign commerce, which is supposed to settle down the domicile prices, does not have an ideal effect in the countries with distorted economies, which are in recession out of fundamental reasons (the aged industry, disabled transport and energy infrastructure, the illiterate and 'party or multiparty' selected management, the blocked system of making decisions at all levels, and particularly at the lowest, etc.).

Our additional uniqueness is that every domestic company is calling attention of the announced foreign financial support, or at least is expecting some queer conjuncture when the promised donations arrive next autumn, and therefore incorporates the loss of the previous ten years in its own price. The stagflation is even more perilous as many directors are already working for their 'future owners', i.e. they do nothing to improve the position of their firms, they are in doubt whether or not the DOS (the Democratic Opposition of Serbia) policy will have their working places secured, or do not believe that their new superiors will continue to keep them employed.

Another thing should be mentioned here, and that is a 'syndical chaos' - a phase of establishing a syndical movement which numbers a thousand syndical organisations chasing to affirm themselves before their membership and which are difficult to negotiate with in the long run.

All in all, we should not underestimate the team of economists engaged in the new state apparatus and the pleasure of having managed to present our new 'national wisdom' in its best form. They would have been much more composed and contended if they had taken less responsibility (that is personal government) for initiating a stable progress (the law on privatisation, politics of the 'previous structural consolidation' of big systems before the sale and so on) and if they had made a closer connection between the imminent transitional difficulties and the autonomous market mechanisms.

Perhaps it is too much to say that the 'Reform Team' is now compelled not only to put up with the burden of the helplessly primitive opposition and the problem of an old coalition party from the old Montenegrin film, but also a nervous and, at the same time popular, 'moderate conservatives' in its own rows - it will now have a chance to demonstrate its skills to impede a very complex inflation without the use of an absurd administrative force, especially as it is not so easy to find an appropriate cure in the manuscripts of worldwide financial institutions. If, however, Dr. Vojislav Kostunica decides to dispose of 'reformists' from the Federal Government and opts for a 'government of national dignity' - a few precious months will be lost in a combat against inflation, while that new government, alongside the old federal state, can only be treated as totally discarded.