Killing the Economy

The federal government's program was adopted on Wednesday and it promises a monthly inflation rate of 50 percent at the most. The next day, the government sent the Assembly a proposal for rebalancing the federal budget, which envisages a 25 times higher sum or, according to rough calculations, an increase of around 150 percent a month. The Government knows that there will be no cutting down of the monthly inflation to 50 percent, and that poverty will be shared equally. On the one side, there is the ruling regime with its state apparatus, primarily in uniform, and on the other side are all the others. Even while the federal government's measures were being prepared, while the three prime ministers /Radoje Kontic, Nikola Sainovic, Milo Djukanovic/ kept meeting over the past two weeks, with the occasional assistance of the governor of the National Bank of Yugoslavia, the public could hear that the biggest stumbling block was the cost of the state. True, the differences between the prime ministers are smaller than those between them and governor Vuk Ognjanovic, who insisted on greater cuts in public expenditures. The epilogue is: the Governor goes - the Prime Minister stays.

An unprecedented moment in the work of the federal assembly is worth noting for the sake of history. Members of parliament belonging to the Socialist Party of Serbia (SPS) proposed an amendment to the draft law on the National Bank of Yugoslavia; they practically made the passage of the law conditional on the immediate election of a new governor. Meanwhile, governor Ognjanovic has said that he is "thinking about resigning", adding that the federal government isn't really working on lowering hyper-inflation, since it is using central bank money to finance all the budgets. "We also disagree over public expenditures", said Ognjanovic, "since the National Bank of Yugoslavia believes that they must be limited, while the government's measures are not aimed at this, but rather at leaving expenditures at the same level as before".

Until the beginning of the assembly debate on Yugoslav Prime Minister Radoje Kontic's report and the announced measures, members of parliament, all except those from the ranks of the socialists and the radicals, were not sure whether Kontic would "survive" the debate. True, no one sought the reasons for a possible overthrow of Kontic's government in the economic situation and the announced policy, but rather in the Serbian leadership's calculations regarding whether it would be more convenient for it to have someone from Montenegro become head of the federal state. However, the speech by Serbian Radical Party (SRS) leader Vojislav Seselj showed that the ruling party had opted for keeping Kontic, so that he was just "sharply criticized", and given the possibility of staying on as Prime Minister until September. In any case, Seselj, just like the main SPS speaker Radoman Bozovic, viewed the sanctions against Yugoslavia as the objective and decisive reason for the economic catastrophe. Seselj reproached the federal government for not having done everything it could have in the given circumstances. For the sake of future events, it is important to mention Seselj's assessment that the main problem lies in the fact that the Government is using old methods and economic schemes - instead of which, it needs "brave economists".

No one has noticed a theoretical novelty in Kontic's report. Namely, Kontic mentioned curbing hyper-inflation as one of the government's primary goals, adding that the growth of prices should be reduced to less than 50 percent a month. The generally accepted stand in world economics is that galloping inflation becomes hyper-inflation when the monthly rate exceeds 40 percent. This is not mentioned for the sake of merely teasing the Prime Minister and his associates, all the more so since many in the world say that it is less dangerous for a national economy to be in the sphere of hyper-inflation /with a monthly rate of hundreds or thousands of percentage points/, than between 20 and 50 percent. The explanation is simple and logical: in the first case, an imminent collapse is unavoidable, which would, then, make it possible to conduct the national economy on new foundations - but in the second case, the illusion of survival can last for a long time, while, in fact, deep and long-term deviations occur in the national economy. Since neither the Government's measures nor most of the assembly debate are motivated primarily by economic reasons, it is not time for serious economic discussions.

Nevertheless, it should be noted that Kontic said in the federal parliament that "one should bear in mind the fact that the present state of our economy is not just the result of the economic blockade, but also of years of cumulative effects of many unfavorable internal and foreign factors, which have led to deep structural disorders. This inherited crisis situation was greatly aggravated by the disintegration of the unified state and economic market, and the war in the former Yugoslavia. Our economy was highly dependent on trade with other former Yugoslav republics. In the period between 1970 and 1989 Serbia's and Montenegro's trade with other republics accounted for 40 to 55 percent of the social product". On the other hand, even if the detrimental circumstances which existed before the introduction of sanctions were precisely defined, this wouldn't be sufficient to back and justify the Government's present concept of economic measures. As an illustration, apart from the allready mentioned intention to keep the present authorities in power through budgetary and public expenditures, ownership and prices should also be considered. In the first case, in spite of numerous warnings that the preservation of the system of socially-owned or, state-owned property, produces not only generally irrational state in the economy, but is also the basis for large-scale thefts. Along with words of praise for the principles of a market economy and the privatization of social ownership, the usual "this can't be done overnight" was reiterated.

In concrete terms, according to rough calculations, the federal government, in cooperation with the republican governments, has placed under one form of control or another, the prices of around 80 percent of products and services. The famous "criteria" of a real-socialist economy, such as "above average growth", "the endangered living standard" and so on are being resorted to once again, as the inevitable result of the ruling regime's policy. The population's income has dropped to below one-fifth of the national income. Put otherwise, the federal government has not abolished the free formation of prices - it has abolished prices as an economic category. The abolition of prices also eliminates the possibility of conducting an economic policy, because everyone, including the government, is left without basic information about what is happening on the market. For those naive enough, to still believe that the issue here is ignorance and not the intention of introducing total control, it is enough to recall that the Serbian Chamber of the Economy offered the federal and the republican governments an analysis of future price trends in April. The main information was that prices formed on the basis of agreement would increase by 142.1 percent and those under the state's direct control by 143 percent. Inflation in April officially stood at 114 percent. Even if this were true, it is clear that the state and its political authorities are the main culprits for the growth of inflation then and now.

According to the latest news on Friday June 18, 1993, at 1 o'clock p.m., or two days after the announcement of new hard currency exchange rates, the buying and selling of the Deutsche Mark is still the main activity on Belgrade streets. The DM is bought for 780,000 and sold for 850,000 dinars.