The Destroying Policy

At the latest symposium of economists in Belgrade, Dr. Bozidar Cerovic disputed the thesis of Serbian prime minister Radoman Bozovic that the so called firm restrictions make it necessary for Serbia to conduct precisely the kind of economic policy that is currently being carried out by his government. For this reason, we begin our talk with this expert by recalling the dispute over the "pragmatic policy" and the policy of stabilization.

Mr.Cerovic, what are your arguments against the economic policy currently being conducted in Serbia under the international blockade?

We could notice two main stands at the autumn symposium of economists. According to one, we must be "pragmatic" and resolve problems in accordance with the given circumstances; the other stand is that the given situation has largely been "produced' and that, for this reason, it can be eliminated in order for the economy, which is in a deep crisis, to recover with the help of standard methods. Let's see what is meant by "firm restrictions" of the economic policy. This refers to the blockade, the war in the state's surroundings, the non-economic factors of inflation, the non-existence of competition in the economy and the "endangerment of the state's survival" (a very interesting argument if it comes from the leadership). Are these restrictions really objective? If one listens to the president of the Republic of Serbia and his prime minister it seems that they are and that everyone should continue performing their duties until something happens to these limitations, if anything happens at all. In my opinion, the blockade and the other restrictions are not such that nothing can be done. Let me start with the "easier" part: if there is no competition, it should be created, instead of having the existing state of affairs frozen through price control. Since the opening of the economy is the easiest way to create competition, someone could say - this is impossible because of the blockade. We have to analyze this major argument of the current economic policy. It is my opinion that the blockade has been produced in the context of the general policy that has been conducted in Serbia for several years now.

Does this mean that the general policy must be changed if we are to change the economic policy?

That is the bottom line and, to put it simply, one could say that this is why the economic programs that neglected the change of the general policy failed. This happened twice before elections (in 1990 and now). The Serbian economic policy, which is now being defended, is the counterpart of that general policy. Instead of competition there is price control, instead of the market it is distribution that prevails, because 65% of the social product goes through public expenditures. Since production is dropping and public expenditures are still growing, we will soon be in the absurd situation of having 100% of the social product redistributed through the state. Instead of an ownership, organizational and structural transformation, we have the creation of artificial monopolies through the merging of a large number of firms and through their turning into state property. And as the result of all this, we have uncontrolled inflation. When the program for competition, for the market and for the state's withdrawal from the position of key distributor appeared two years ago, and when its creator wanted to test it at the elections, he faced an enormous wave of political criticism. Today too a program of economic transformation is offered and today too it is requested that the program be tested at the elections; and then once again its creators will be removed. Before, the problem was that the person responsible for the program was of a different nationality, while the problem now is that he is from another country, although he is of the same nationality.

Why has then Dr.Oskar Kovac, the real creator of the program, left federal prime minister Milan Panic?

This is precisely what I am talking about - the political background of the battle over economic strategies. Because of these unsettled political disputes, even the main creator must abandon the federal program, he must leave it because of party discipline. That is how far this absurd political pressure goes... As a person who thinks about his integrity, Kovac added some other reasons, but it is clear what the real reason was.

The battle against liberal economic concepts has been launched under the pretext of protecting the interests of Serbia - both from other republics in former Yugoslavia and from exploitation by world capital. How do you assess the results this way of protecting Serbia has produced?

The story about the exploitation of the Serbian economy has been developed by a group of older economists who had good results in the fifties. There is a grain of salt in this story. In their best days these economists relied on the concept of state intervention in the economy, which was natural at the time. However, when the market started developing, and it developed faster in the northern republics of the then Yugoslavia, an anachronous way of "settling" account started being advocated. When this became the republican policy in Serbia, in 1987 the performances of the Serbian economy started rapidly dropping (after five previous years of stagnation).

Can you corroborate this opinion, which is quite wide-spread?

Here are some examples from before the war. While at the beginning of 1987 the national income per employee in Serbia accounted for 57% of that in Slovenia and 88% of the national income in Croatia, in 1990 it dropped to 54% of the Slovenian income and of 78% of that in Croatia. The lagging behind of the rate of profit is even more drastic. In 1988, this rate accounted for 54.7% of that in Slovenia and for 80.5% of the one in Croatia, while two years later, after the loan for Serbia and other actions for "renewal", it dropped to 50.7% of that in Slovenia and to 58.3% of the rate of profit in Croatia. We even have a relative drop compared to Macedonia and Bosnia-Herzegovina, so that the overall Serbian rate of profit, compared to the Yugoslav average in the period we are talking about, dropped from 87 to 67%. Did this drop just accidently coincide with the officially assessed political ascent of Serbia? I don't believe so. There is also a series of indicators, whereby the good ones have been dropping for five years now, and only those pointing to the degree of instability in the Serbian economy have constantly been growing.

The belief is spreading that we can still survive with a so called controlled inflation, which is now called the controlled emission of dinars without backing. How long can such an emission last? Can we wait with this for "the truth to win"?

Well, the truth cannot win if we live in a world of false values. Theoretically speaking, it is even healthier when the state takes the entire social product and distributes it as it wishes, than when it distributes more than is created with the help of printed dinars, because in this case the existing capital is also redistributed.

Money without backing can be printed until it "covers" all the values and then the economy ceases to exist. Then, only money circulates in trade, while goods move to the sphere of barter. The end of the economy is, unfortunately, not far away.

The hole that is being created with the printing of money is being filled up with the economy's real capital and the economy is losing its value. If this policy continues to be carried out, in a year or two, the value of the entire economy will be - zero. Then, the story about the sales of the national economy for a mere trifle will be pointless. Then, we will really be a country of the kind presented on the video clips of the Socialist Party of Serbia - a country of nice landscapes, but without people.

If I understood you correctly, instead of privatization "for a mere trifle" we have the destruction of the social capital in the name of national interests. What has, according to your opinion, stopped privatization?

If we had launched privatization two years ago, with the resources we had then, we would have made a radical turn. If employees had become shareholders, around one third of the capital would have already been privatized, and shares would today be acquiring an external nature. Now we do not have resources, so that privatization free of charge, against which I have reservations in principle, becomes a necessity. This is now an important alternative. Even now, with a well conceived ten-year program, we can create a situation in which around 70% of the socially and state-owned capital will be more efficiently managed and protected, that is, it will be privatized. I do not consider privatization to be an ideological question because why is it then also carried out in capitalist countries. This is a matter of a global return to individual interests.

Finally, I must ask you whether political pluralism has also divided economists according to party views on the economic philosophy?

I think that a large majority of professional economists is for a market economy based on private ownership. Even in the divisions over the program of stabilization, the economic profession is practically on one side, while the ruling party is on the other.