US Script For Yugoslavia's Privatization

by Konstantin Kilibarda

March 17, 2003


[Ed. While this paper was written over one year ago its timeliness is indubitable, especially in light of the assassination of Serbian prime minister, Zoran Djindjic, on March 12, 2003, as it illustrates the neo-liberal policies that have brought Serbia into its current economic and political collapse. Beyond the recent eulogies read in the Western press -- a "strong leader," a "heralder of democracy," an "intellectual and a pragmatist," a "courageous reformer," etc. -- one should note with Neil Clark of The Guardian, that "Djindjic's much lauded reforms have led to soaring utility prices, unemployment has risen sharply to over 30%, real wages have fallen by up to 20% and over two-thirds of Serbs now live below the poverty line." (Neil Clark, "The Quisling of Belgrade," March 13, 2003.) One should also note that Djindjic was quite despised by the majority of the Serbian people, and that his poll ratings had fallen below 10%. This paper provides a clear explanation for such despise and for the horrible conditions that have relentlessly torn apart the Serbian society, even though left totally unreported in the Western media.]

In a recent Reuters report that came in over the wires, Aleksandar Vlahovic, Serbia's new privatization minister, vowed that "four years from now socially-owned capital will be completely eliminated" (1) in Yugoslavia. (2) But who is Aleksandar Vlahovic?

Vlahovic is a member of the Belgrade-based Economics Institute (EI), which is a neoliberal think-tank funded by the Center for International Private Enterprises (CIPE). (3) CIPE, in turn, is the main arm of the US government and US multinationals aimed at the promotion of free-market ideology and privatizations abroad. This is how the organization describes itself on its own website:
"The Center for International Private Enterprise (CIPE), an affiliate of the U.S. Chamber of Commerce, works to build democracy and market economies throughout the world. CIPE works in four principal areas: a grants program currently supporting over 90 indigenous organizations in developing countries, an award winning communications strategy, training programs, and technical assistance through field offices. Since its inception in 1983, CIPE has funded more than 550 projects in 70 countries and has conducted management training programs throughout the world. CIPE conducts their programs with funding from the National Endowment for Democracy and the United States Agency for International Development. CIPE has received support for specific programs from IBM, Coca-Cola, Ernst & Young, Capitol Health Partners, The Pew Charitable Trusts, RJ Reynolds Tobacco and the United States Information Agency." (4)
CIPE's track record is therefore nothing short of formidable. It has played a crucial role in directing the transformation -- or "transition" as it is referred to in the academic literature on the topic -- of former communist countries and Third World "national economies" from socialist or dirigiste systems towards market-based models during the 1980s and 1990s. In short, CIPE facilitates the "wiring" of the relevant and exploitable sectors of these economies into the processes of neoliberal globalization, while those sectors deemed expendable -- from the perspective of market fundamentalists -- are squeezed out and eliminated. In real terms this strategy translates into the further impoverishment of the population.

Alexandar Vlahovic is therefore a key component of this ideological program in the Balkans. Since the creation of the Democratic Opposition of Serbia (DOS) in the summer of 2000, CIPE has funded a series of "Economic Policy Forums" along with EI and the UK's The Economist with the aim:
"- To promote economic and democratic change in Serbia through highlighting the current weaknesses of the existing system, and to encourage the adoption of market-oriented policy;

- To promote dialogue of reform between the policy and business communities; and

- To provide those seeking change in Serbia with information and policies needed to promote change." (5)
In essence, these CIPE-sponsored Economic Policy Forums served to bolster interactions between market-oriented individuals and policy makers in Yugoslavia and without. These forums furthermore strengthened US participation in the drafting of the DOS program and ensured Washington's eventual control over the specific economic orientation of this multi-party coalition after the elections.

Besides Aleksandar Vlahovic, the EI also includes other key figures responsible for the monetary and financial policies of the current DOS government. They are Goran Pitic, Nebojsa Savic, Miroljub Labus, Jurij Bajec, Danijel Cvijeticanin, Danko Djunic, Vera Leko, Aleksandar Vlahovic, Vladimir Poznanic, Bosko Mijatovic, Gordana Matkovic, Ljiljana Pejin, and Jelena Galic.

Most of these individuals are Western-trained economists and academics that have had extensive experience and contacts working with, within, and for the major international financial institutions such as the International Monetary Fund, the World Bank, the European Bank for Reconstruction and Development, etc. (6) Besides these ties to multilateral institutions they are also linked to a variety of policy makers, journalists, thinktanks, government agencies, private institutes, and universities throughout Europe, Canada, and especially in the United States.

The EI is also closely associated with the G-17, another group of US-backed Yugoslav economists of free-market persuasions. In its founding program, the G-17 called for Yugoslavia to be ruled by a "government of experts" after Milosevic was overthrown. This "government of experts" is to be constituted by neoliberal technocrats who would effectively manage Yugoslavia's transition to a market economy. (7)

It is interesting to note that the membership of both these groups is now heavily involved in the restructuring of the Yugoslav economy and, although un-elected, have managed to monopolize a majority of the ministerial positions dealing with the economy as well as establish their dominance over the economic apparatus of the state (i.e., the Yugoslav Central Bank, the Customs bureaucracy, major state enterprises, etc.).

It is incorrect however to simply view these individuals as "paid-agents" of the West, as some have argued. Instead, it would be more precise to view them as committed ideologues well-versed in the normative predispositions of neoliberal economics. In short, their allegiance is not to Yugoslavia, Washington, or Moscow per se but more precisely to an ideology that defines itself by placing market incentives above all other considerations. However, the fact that this ideology was formulated in, and then promulgated from major centers of international financial capital like Chicago, New York, London, and Frankfurt says a lot about the direction in which these individuals are likely to steer the country and to whose influence they are likely to prove most responsive.

Western policy makers and their ideological brethren in Yugoslavia are now making the same mistakes the West made in 1989 when managing the transition of other post-socialist states from Soviet communism. That is to say they are erroneously taking for granted that the Yugoslavs who voted for the DOS also voted for IMF-imposed structural adjustment programs and a market economy. In fact, many Yugoslavs simply voted against Milosevic or for Kostunica (whom many see as uncompromised by collaboration with the leadership of NATO governments).

More importantly, DOS won because many Yugoslavs simply wanted to once again live in a "normal country," one that isn't being routinely sanctioned or bombed. Such a wish, although very powerful, is perhaps a little naïve. In reality, Yugoslavs will first have to plod down the well-trodden path of other "transition economies" before being able to imagine a future in which a Yugoslavia "in Europe" or the EU becomes a possibility.

In short, the prospects for ordinary Yugoslavs look bleak unless they begin to actively challenge the illegitimate, unpopular and unaccountable factions -- like the EI, the G-17, and the faction led by the Democratic Party's Zoran Djindjic [see note #8] -- within the DOS that are backed by the USA. (8) These factions exercise disproportionate influence over the new government and pose a serious threat to the country's continued stability and democratic traditions. Sadly, though, with the Serbian media, police, and economy now firmly in Djindjic's hands the script for Yugoslavia's privatization has entered into its final phase, one in which the character of Aleksandar Vlahovic now has a major role to play.

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References and Notes

1.  Yugoslavia continues to operate under a unique ownership structure in which capital is neither privately owned or state owned. This system lies somewhere in the middle of these two models in something that was once known as "worker's self-management." While Milosevic did appoint many managers close to him in these firms and the "self-management" models were revised, the fact is that, in contrast to other post-socialist states in Europe, the actions of the management in Yugoslavia were still constrained by certain legislative principles that guaranteed workers voice in the management of these enterprises. In fact the ruling Socialist Party's legislation was designed in such a way that any privatization procedures would not unduly disadvantage or disempower the workers of these firms.

It is important to recognize that it was originally the intransigence of these "socially owned" enterprises in the Republic of Serbia and within the Communist Party of the Republic of Serbia to the IMF backed structural adjustment programs imposed on Yugoslavia in the late 1980s that did much to alienate many key officials in the US-administration responsible for the Balkans to the Republican government then in power in Belgrade. While I am not making any unrealistic claim that Yugoslavia during the 1990s was some type of workers paradise (especially after being subjected to strict sanctions), it should be recognized that the rights of Yugoslav's to determine the direction of their economy was far greater in Yugoslavia than in most other "transition economies." This is not an insignificant fact in a world were those pushing neoliberal ideology are hegemonic.  (back)

2.  REUTERS - Bilandzic, Beti, "Serbia Eyes New Privatisation law by April" (January 28th, 2001).  (back)

3.  http://www.ecinst.org.yu/  (back)

4.  http://www.cipe.org/about/index.php3  (back)

5.  http://www.ecinst.org.yu/  (back)

6.  http://www.ecinst.org.yu/  (back)

7.  For more on the G-17, the IMF and related economists see articles by Michel Chossudovsky posted at: http://emperors-clothes.com/analysis/1.htm, http://emperors-clothes.com/articles/chuss/imfworld.htm, http://emperors-clothes.com/articles/chuss/instru.htm. Please also refer to the G-17's own website at http://www.g17.org.yu/english/index.htm.  (back)

8.  [Ed. Again, Zoran Djindjic was assassinated on March 12, 2003. This article was written long before that event.] Zoran Djindjic was the new Prime Minister of the Republic of Serbia (which along with Montenegro forms the Federal Republic of Yugoslavia) [now called the "State Union of Serbia and Montenegro]. It is important to note that Zoran Djindjic was never popularly elected to this position but was appointed by the DOS-controlled Parliament of the Republic of Serbia in the middle of January 2001. The current popularly elected President of the Republic of Serbia is Milan Milutinovic. He is a member of the Socialist Party of Serbia and is, according to the Constitution, the one still charge of the Republic. His term will end after Presidential elections scheduled in March. The situation is made strange by the fact that although Milutinovic is constitutionally mandated to exercise executive authority in the Republic all of this power has already been monopolized by Djindjic even prior to his appointment to any official position by the Parliament. The legitimacy of Djindjic's rule is rendered even more questionable when one considers that Djindjic has never scored above 10% in opinion polls and frequently garners less than 5%. Unfortunately, the United States has pressured the DOS into giving prominent positions to its favorites (including Djindjic), which has raised the specter of a split within the party as many factions in the coalition will now seek to distance themselves from those factions seen as too close to the Americans.  (back)

The Balkans and Yugoslavia on Swans


Konstantin Kilibarda is currently completing a Collaborative MA in International Relations and Political Science at the University of Toronto (U of T), Canada. He is very involved in organizing with anti-imperialist causes in Toronto and contributing to AGITATE, a radical U of T student organization hosted by Victoria Students for a Critical Consciousness.

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Published March 17, 2003
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