Abolition of Money

The situation in Belgrade today is worse than at the time of Milan Nedic, i.e, during the German occupation, Dr. Ljubomir Madzar said last Thursday in a discussion on the so-called stabilisation programme drafted by the Belgrade Economic Institute. This professor of economics was, of course, talking about the situation on the market, although one might conclude from his assessment - that the Federal Government knows what it is supposed to do but is thwarted by "certain power centers" - that an occupation, a domestic one, of course, and more wicked than the one in 1941, is now active.

The consequences are visible everywhere. If you look into Belgrade stores, you will find a wasteland; the only goods available are the ones which eluded the Government's price control, but you will also see throngs of crazed shoppers trying to rid themselves of the dinar, since the value of the national currency now drops nearly eight percent a day. It is no different in the interior of the country. Goods, whose prices are blocked, are being bought and then resold in private stores or exported. The shop-keepers are desperate. Luka Mackic, who heads the Belgrade Department Stores, told the Federal Government he would close down 42 stores because the normal daily turnover has increased 15 times overnight. No wonder it has, since the price of a shirt fell from eight German marks to one within some twenty days.

On the other hand, citizens, with average salaries amounting to 15 marks and people with even lower pensions, wait in banks for hours every day to withdraw minute doses of their earnings at a time. Certain Belgrade hospitals have posted lists of things patients must bring with them - from soap and bandages to financial donations. A doctor at the Neuro-psychiatric Ward of a Belgrade hospital brings her own light bulb to work, unscrews it and takes it back home after work so that it does not get stolen.

Statistics show another phenomenon: the drop in retail sales is now simultaneous with and even greater than the drop in real salaries. Director of the Federal Statistics Institute Dr. Srdjan Bogosavljevic says that the plunge of salaries had until recently induced lower purchasing power only after 5-6 months. In April, salaries fell 32%, while the turnover in the retail sector dropped 45% (in real terms and in comparison with the respective 1992 average). Although salaries now account for a smaller part of overall earnings, Bogosavljevic says the phenomenon is caused by the acute economic stratification of the population, even though statistics are not taking into account the turnover of goods bought by the thin wealthy stratum. Furthermore, farmers and most of their relatives living in cities have resorted to subsistence economy as much as possible, although they are not included in the statistical analysis of internal trade either. Statistics show that the stratum of greater or lesser poverty is becoming increasingly wider. The further plunge of these people's salaries is inevitable, and will in turn cause a greater drop in internal trade - and end up in the shutting down of stores on a large scale. This means that the primary issue crediting of the production for which, allegedly, demand exsists on the domestic market is nothing more than buying the social peace. This is the only explanation for the increase in employment in some branches of industry simultaneously registering a drop in output, Bogosavljevic says.

The Federal and Republican governments are still burying their heads in the sand; the reason for the chaos, they say, still lies in the failure to implement the governmental policies, not in the fact that these policies are wrong.

Thus the Federal government issued the following communique last week: "The implementation of economic goals is encountering serious obstacles and difficulties and the Government assesses that the continuation of unfavourable economic trends might endanger the whole economic policy agreed on by the Federal and Republican governments. The chief reasons for the situation predominantly arise from the inconsistent implementation of economic measures, particularly in the hard currency and monetary sectors and payment operations. In that framework, the absence of adequate control, inspection and repressive measures, as well as of efficient legal and judicial mechanisms, have considerably contributed to the perseverance of unfavourable conditions for implementing the set economic policy."

Last December, after winning the elections again, Serbian President Slobodan Milosevic cited the rising of the standard of living as "one of the three top priority tasks of our policy" and added: "I particularly assure the farmers that they will enjoy the full support of their state". A year earlier, Milosevic said the national income would reach 10,000 dollars per capita before the turn of the century. Meanwhile, national income dropped from 3,000$ in 1989 to 350$ per capita.

The chief aim of the "mini stabilisation program" is to curb hyper-inflation by the end of the year. However, Dr. Nebojsa Savic cited three pre-conditions in addition to the usual conditions for implementing such programs: 1) increasing the money supply in July by merely 70% (the word "merely" makes sense because the increase has already exceeded 70%), 2)reducing the outflow of Yugoslavia's GNP to only 5% (the word "only" makes sense because, last year, 20% of the Federation's GNP, or between 3 and 5 billion dollars, \depending on what estimate of the GNP is taken\ went to Serbian enclaves in Croatia and Bosnia) and 3) restoring the population's confidence in the state and its currency.

Dr. Miodrag Zec used the word "state" in his report and concluded that the state knew how to put an end to hyper- inflation, but was instead issuing "airy nothings". He also said that this "state" was aware there is no bottom-line in economy, no foothold from which it must begin rising anew, at least not in such a state. A kind of bottom-line is nevertheless on the horizon, i.e. the country's foreign deficit is soaring (it exceeded one billion dollars in the first six months of the year, i.e, the overall 1992 deficit). This, however, does not mean that right moves are about to be made, as Dr. Bozidar Cerovic warns: the state has squandered around 45 billion dollars in two years and is now halting privatisation which, even if it were all looting, accounts for merely 6 billion dollars. Hence, economists and businessmen alike are increasingly of the opinion that the "state" is causing economic disintegration deliberately, i.e, creating a psychological and political basis for the introduction of an emergency economic programme. That is the only way the major mistakes and wheeling and dealing of certain individuals can be hidden, at least for the time being.

The Government and Reality

Monthly inflation in Yugoslavia stands at 343% if one accepts the Federal government's estimate, based on the announced rise in the prices of wheat, that the overall increase in prices is 4.2% a day. However, if the government's estimate is absolutely correct, daily inflation of 4.2% means an annual inflation of 332 million percent.

A more realistic estimate - that daily inflation now stands between 7 and 8 percent (Wednesday, July 14, 1993) - means that annual inflation will stand this year between one and ten billion percent.