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Three Months After the Fall of Milosevic:
The Effects of So-called "Democratic Reform" on the Serbian Economy
author: Dragan Drača
date: 01/01/01

One of the first things that the opposition (DOS) did immediately after they seized power on 5 October, was to take control of the Central Bank of Yugoslavia (NBJ). The printing of money, which had been used as an instrument to rob the people by the Milosevic regime for decades, was stopped. This printing of money had been the cause of income redistribution, mainly at the expense of the working class because the wages of the workers are more or less fixed, and they could not keep pace with rising prices and the fluctuating exchange rate. Inflationary pressures caused by the expansion of the money supply led to huge losses and the syphoning off of income into private pockets - a process of initial capital accumulation sui generis. However, the printing of money became more than just that a long time ago. It became one of the means of keeping alive bankrupt state-owned companies which had been plundered by managers appointed by the regime.

One of the fundamental preconditions to meet the standards for International Monetary Fund (IMF) membership is to stop the printing of money; and that is the basic motive that lies behind this move of the DOS, nothing else. The new government could not survive for long without the support of the IMF. It is needless to explain the character of this institution and its role - it is sufficient to see how much its "stabilization" programs have damaged Russia and the other Eastern-European and Balkan countries. In the final analysis, it is only one of several levers in the hands of the main imperialist powers. But, applying for membership of this institution is an important display of loyalty on the part of the new regime towards the institutions of Western capital.

The stabilization of money supply allowed for the fixing of the foreign exchange rate (30 Dinars to the Deutschemark). This is something which the new Governor of the NBJ, Mlađan Dinkić, prides himself of. However, what is not being explained is its negative and far more damaging effect. The benefits do not make up for the losses..

The growth in the total amount of money in circulation was, to a certain degree, necessary, because it provided credit for the heavily indebted state-owned companies that were vital for the normal functioning of society. In spite of this, real wages were relatively stable, although at a very low level. Another measure which was implemented was that companies were forced to make all transactions by cheque, with cash payments limited to a maximum of 1000 dinars (about US$16) per day. This, together with a shortage of fresh cash, led to a huge crisis of liquidity on the part of the already enormously indebted state-owned conglomerates. This resulted in a major fall in output, which again led to an even greater fall in liquidity, thus accelerating the downward spiral. These companies will now also pull down with them tens and hundreds of thousands of workers as they descend into Hell.

Of course, the solution cannot be found in printing more money, nor in fixing the amount in circulation. The solution lies in placing control in the hands of the producers, the working class, in a democratically planned organization of production.

A more important measure carried out by the DOS was the lifting of all administrative price controls. In the past these used to protect, to a certain degree, the living standards of the poorer layers of society. Despite the mutual accusations that the former Milosevic regime and the new DOS regime are throwing at each other over who legalised this act, the fact remains that there is an unspoken consensus between them to continue with these measures. The old regime sees this as its chance to discredit the new one, while the new regime sees it as inevitable and the only way of being accepted into the institutions of Western capital.

This act of deregulation sent prices sky high - the prices of basic goods, like food for example, have risen between 30 and 300 per cent, and similar price increases have affected electricity, medicines and other vital goods and services. Since the nominal wages of workers have remained at the same levels as before 5 October, this measure has led to a catastrophic fall in real wages of between 30 and 60 per cent, because the workers cannot do without these basic goods. The prices of other products have also risen significantly, but this increase in price is of a totally different character from that which was experienced in the previous period: as money was printed and injected into the economy, price increases remained in line with the rate of inflation, i.e. they were motivated by the need to preserve the real value of these commodities. But, what has happened in the last two months is that real (and not just nominal) prices have risen. Not only did prices in dinars go up. They also went up in foreign currencies (in Deutschemarks). This was due to the fact that the exchange rate had now been fixed. The consequence of this is an inevitable fall in demand in the short and long-term. The prices of those raw materials and finished products that have to be imported are fixed by the world market. Now, however the prices of these products have gone up on the domestic market and this has led to increased profits at the expense of the workers.

The lifting of state control of foreign trade, announced by the new regime, will also contribute to this.

Only the capitalist class has benefited from this policy, because the rise in real prices has led to higher profits at the expense of the real wages of the working class. This has resulted in a deepening of the economic inequalities in society, and has intensified the already uneven redistribution of wealth.

The fall of already extremely low wages will lead to further social unrest, which has already manifested itself in numerous strikes and in intensified trade-union activity in the last three months. Together with political demands such as the removal of managers appointed by the old regime (some of whom even had the support of the DOS!), we have witnessed the spontaneous mobilization of the workers and also the attempt to take control of the companies into their own hands. This explains why the deputy prime minister of the federal government, Miroljub Labus, has complained that "self-management" is re-emerging, and that it must be stopped.

The level of militancy displayed by the working class is indeed impressive. Unfortunately, what is lacking at this stage is a political force capable of leading the class struggle in the right direction. At the moment, petty-burgeois ideology is deeply affecting the thinking of the workers, to whom the idealised image of the capitalist system has been portaryed as the solution to all their problems. But, this will soon change, once the workers begin to feel the effects of privatisation on their own backs. It won't take long before they turn against those to whom they handed power on 5 October.

Everything that was done in thefirst two months after the events of 5 October was only preparing the ground for what is to come once the new regime consolidates its hold over the parliament of the Serbian Republic. (Up till 23 December the DOS only controlled the Federal Parliament). For now the old regime is dead, and in the short term it will not be revived. However, a significant part of the old regime will inevitably be incorporated into the new regime, although this will not take place through elections - crossovers and realignments are very common phenomena.

The policy of the new regime is openly pro-western, pro-bourgeois. Its economic policies are absolutely crystal clear - complete the process of privatization and build a liberal capitalist economy. However, in the epoch of the decay of global capitalism, this model cannot provide what the new regime is promising. The concentration and centralisation of capital on a world level has reached unprecedented levels, and in the last few decades a small number of imperialist super-powers have been fighting among themselves for spheres of influence, for control over markets and resources. In these conditions Yugoslavia cannot have an independent policy, in economics or in any othersphere of activity.

The liberal bourgeois policies of the new regime will only facilitate the penetration of the economy of Yugoslavia by the multinational corporations, a process which had already started long ago, under Milosevic. This will result in the conquering of all available resources, with the selling off and closing down of competitive companies, and the bankrupting of inefficient ones, leading to massive job losses and thus to further social polarisation...

The DOS is fully aware of this perspective, and that is why it launched a huge media campaign immediately after it got control of the most important means of communication on 5 October. Its leaders are competing among themselves in promising greater amounts of money and aid that, supposedly, will be donated by the same imperialist forces that bombed us only yesterday. The imperialists will probably provide a certain amount of money to pacify the working class and to complete the process of privatization from which it will benefit much more than it will give. However, it won't be a significant amount, because their aim is not to revitalize the economy of Yugoslavia, but to conquer it, and to open up the market of Yugoslavia. And, how this brutal, technologically advanced competition will affect the Yugoslav economy is not too hard to guess.

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