The Domestic Blockade

The advertisement pages of a Belgrade newspaper ran an ad last week calling bricklayers, carpenters and workers to try their luck at construction sites in Slovenia; master bricklayers can earn 1.5 Deutsche Marks per hour, workers 1 DM; food and board are covered by the investor. Earnings of 200-300 DM are not small even by Slovenian standards, where the currently average salary of 600 DM will soon start sliding down. Compared to Yugoslavia, a Serb bricklayer can earn ten average salaries in Slovenia and count on being paid in a healthy currency. And the Slovenians do not mind hearing Serbian spoken anymore.

Gorana Bozovic, an associate of the Yugoslav Institute of Statistics, says that three-quarters of the population of the Federal Republic of Yugoslavia are living at subsistence level or below. The following comparisons give a clearer idea: in the undeveloped parts of Africa this percentage stands at 49%, in southern Africa 47%, and in Latin America 26%.

Promises have died down: the standard of living has dropped at such speed that even man's proverbially short memory is sufficient to compare today's reality with that which some official guaranteed only yesterday.

But, surprises do happen. The federal government forecast a 120% rise in prices for March, which was amusing considering the unchanged circumstances, and especially after February's inflation of nearly 212%. The majority of experts expected an acceleration of 400% and even 500% in March. On the other hand, director of the Serbian Statistical Office Milovan Zivkovic forecast a price rise of "only" 220%. Zivkovic underscored that during the last week when the growth of March prices had been calculated, the hard currency black market was stable. In other words, the state has stopped printing all that much money.

A new explosion of hard currency prices was expected with the announcement of the federal government's measures. The federal government packed its measures into three time packages. The first concerns the duration of international sanctions (until the end of March this year!!!) and concentrates on alleviating the drop in production and consequences of sanctions on future development. The second package deals with the period after the lifting of sanctions, when major problems will be dealt with: the lack of foreign capital for the economy. The third package covers deals with the International Monetary Fund (IMF) and the start of a macro-economic stabilization, so that the full effects of the government's last policy phase can be expected in the following year. This humorous time projection has been alleviated with the remark that if sanctions last until the end of this year, we can count on state intervention in all fields of the economy.

Even those who do not have a very high opinion of the current economic authorities, do not believe that they are so incapable as to have drawn up this program in all innocence. In other words, sanctions are only a screen for the planned nationalization of the economy. This syndrome, whether it comes from the authorities or the opposition, can be found in all the states which grew out of the former Socialist Yugoslavia.

At a conference held at the Economic Institute, the federal government representative tried to convince those present that the government was not antagonistic towards market economy, saying that in the unfavorable circumstances, it was trying to save what had been built up for decades. "Built up?! You have been destroying the market for decades," remarked a doctor of economic sciences. In his introductory speech Nebojsa Savic presented a concept for curbing hyperinflation and warned of possible strategic mistakes in the federal government's policy. Savic insisted on the abandoning of illusions that sanctions would be lifted before the end of the year, and underscored the vital role of monetary policy (curbing monetary expansionism and its causes, above all public deficit), and in general on retaining the market character of the economy as much as possible. If a blockade has been enforced on us, said Savic, then it is not necessary to add new rigid and administrative measures to an already repressed situation. The announced public works must be abandoned immediately, because there is no economic justification for them. It is necessary to start breaking monopolies, and estimate the risks for the economy which will result from not doing anything to curb hyperinflation, said Savic.

There were various views regarding the proposed concept, and different opinions concerning certain parts dealing with curbing hyperinflation, including disbelief in the success of any model while sanctions are in force. There were also open political approaches. Slobodan Komazec said "those who are offering a Western European economic model, are spreading defeatism, disorder and a deepening of the crisis... I am ashamed of this situation, I am ashamed of being an economist." There were no reactions to this emotional outburst.