Was Milosevic's Serbia socialist?
By Michael Karadjis
January 5, 2004
(This article is based on a six part series sent to the Marxmail list as part of an intense debate on Kosova, Bosnia, Croatia, Serbia and the process of the collapse of Yugoslavia. Michael Karadjis is the author of Bosnia, Kosova and the West The Yugoslav Tragedy: A Marxist View. Published by Resistance Books, 2000, 256 pp, $24.95.)
It is difficult to define at what precise point states formerly considered to be ‘workers’ states’ or ‘post-capitalist states’ have definitely passed over to being ‘capitalist’ states, in the context that most of them some time ago began a transformation in the direction of capitalism, or to using the market and the private sector as at least part of their economies. Which are merely carrying out some kind of ‘New Economic Policy’ or even ‘perestroika’ and which have definitely gone over to capitalism or are clearly in the process of doing so is a hotly debated topic.
Some claim they are all still ‘workers states’, though the struggle continues against resurgent capitalist tendencies. Others have always considered all of them to be ‘state-capitalist’ states. Many others see it in roughly geographical terms, with the more independent socialist revolutions in former colonial countries – China, Vietnam, Laos, North Korea and Cuba – still having, to one degree or another, the essential nature of being workers’ states despite varying degrees of market and capitalist inroads, while the former USSR and East European states have definitely gone over to capitalism, though in most cases to rather undeveloped and unstable forms.
However, there is considerable disagreement on the situation in China, where many now believe the process of capitalist restoration has passed beyond the rubicon and the Chinese bureaucracy has definitely turned to capitalism, though there is still some way to go to fully implement this program and there are many big struggles ahead. This is the view of the Democratic Socialist Party of Australia, and its explanation can be read at www.dsp.org.au/dsp/19990105.htm. An excellent article by Eva Cheng in Links (January-April 1999, ‘Is Capitalist Restoration Inevitable in China?) gives further background.
But back to Eastern Europe, a certain section of the left, while overall tending to accept the capitalist restoration in Eastern Europe, make Serbia the sole exception. Thus all the east European states, including the former Yugoslav states (for some even including Montenegro), were capitalist states, while Slobodan Milosevic still ruled a workers’ state in Serbia; this situation allegedly ended on October 5 2000 with the ejection of Milosevic and his replacement by the DOS regime of Djindjic.
I feel it is more the onus of those believing this unlikely scenario to prove it – why do we need to prove that Serbia is especially different, rather than say Bosnia, or Tudjman’s Croatia, or for that matter Uzbekistan? However, since a not insignificant part of the left poses the question this way, I will show that the trajectory in Serbia is broadly similar to that of other countries in the east bloc.
But firstly, what is the basis for this exceptional treatment of Serbia? It has a number of roots. Part of it is the highly incorrect view that Milosevic’s Serbia is the continuer of Tito’s Communist Yugoslavia, whereas in fact it was its gravedigger. It has no more inherited Tito’s Yugoslavia than Croatia, Bosnia etc have.
Part of it is also the view that, while Milosevic did begin a move to the right, there was no ‘rupture’ with the old regime, and Milosevic’s ruling Socialist Party (SP) is seen as the same old Serbian wing of the Yugoslav League of Communists (LCY). Thus while we may disagree with much of the trajectory of this Party, it is in the same category as the Chinese and Vietnamese ruling CP’s that have instituted market reforms. This alleged bureaucratic continuity is seen as some kind of insurance that it remains some kind of ‘workers’ state’ however much we may not be happy about many of its policies.
This view is incorrect on both counts. Firstly, there was a radical rupture with the old regime, and this rupture was led by Milosevic in what he called the ‘anti-bureaucratic revolution’ of 1988-89, which overthrew several constituent republics in Yugoslavia. Milosevic was thus the leader of Serbia’s version of the bourgeois trajectory of the ‘democratic revolutions’ that swept Eastern Europe at the same time. Much of the actual CP itself was purged long before he officially changed the name of the Party. Moreover, anti-Titoist dissidents, including Vojislav Seselj, Dobrica Cosic and Mihailo Markovic were brought either into the Party or its periphery, these people being the equivalents of the dissidents who became leaders of the new rightwing regimes elsewhere in Eastern Europe. This was accompanied by a sharp ideological rupture, with Communist ‘Brotherhood and Unity’ replaced by extreme Serbian nationalism as official ideology, harking back to the ideology of the Chetniks who fought against Tito’s Partisan’s in World War II. This new ideology was mixed with classic western Social Democracy, hence the same symbolic changes of the Party’s name, the flag etc as occurred elsewhere in the East. All this will be elaborated on below.
Moreover, it is simply not the case that the restoration of capitalism was always accompanied by regime rupture in the East – in some cases the transition was much smoother than in Milosevic’s anti-bureaucratic revolution. For example, in Hungary the ruling Party adopted the name Socialist and began unambiguously to institute the capitalist restoration in 1988-89 before the elections in which it was replaced by rightist parties who continued the job. In Poland, the ruling Party formed a coalition with the right-led trade union party Solidarnosc, with the CP holding two thirds of parliamentary seats, and began instituting capitalist restoration. In Bulgaria, demonstrations brought down the regime and elections brought the right to power, but they were replaced again by the CP (as elsewhere, renamed SP) in a couple of years, who continued the slow capitalist restoration. Only in Rumania, Albania, Czechoslovakia and East Germany was there sharp rupture, but in Rumania the overthrow of Ceausescu was carried out by another wing of the ruling Party which then took power and led the capitalist restoration. In Albania the rightist regime of Berisha was overthrown in another revolution in 1997 which brought the Socialist Party (ie the renamed CP) back to power and this only hastened capitalist restoration. Indeed, when NATO attacked Serbia in 1999 and some on the left were impressed that NATO was at war with a country led by a ‘Socialist’ party, few noticed that the main backer of the KLA was precisely the Albanian ‘Socialist’ party regime. In Macedonia, the SP (renamed CP) maintained power right though until 1999.
The final reason for these misconceptions is the fact that the Serbian regime did eventually end up in conflict with major imperialist powers. The reality of this conflict however no more proves the socialist nature of the Milosevic regime than the US war on Afghanistan would prove the socialist nature of the Taliban.
Nevertheless, the view persists, and Milosevic’s moves in the direction of the market and capitalism are seen as a kind of NEP or perestroika. However, as will be shown below, Milosevic in 1988-89 was not carrying out a ‘perestroika’, and the idea seems odd, because such a ‘market’ reform program had been carried out under the Tito regime since at least 1965, far more radical economically than Soviet perestroika. After decades of ‘market socialism’, it is difficult to see how Milosevic’s further bourgeois reforms in the late 1980’s were just a little more perestroika. Therefore, 1988-89 was the decisive point in capitalist restoration, as in the rest of Eastern Europe.
Under a NEP or perestroika arrangement, there may be many small businesses competing with a dominant state sector, and there may be privatisation of small state businesses, as well as in areas where small entrepreneurs bring some advantages to the economy when the state is weak, such as in consumer goods areas. It may be more extensive in agricultural economies dominated by petty production, such as 1920’s Russia, post-1978 China or today in Vietnam.
I will show below that the Milosevic regime was one where privatisation went well beyond small business or certain areas of the economy, and involved the most strategic areas of the economy. I will also show that government ministers and Socialist Party leaders were up to their eyeballs running either state or private companies or both - if leading members of the ruling party, government and bureaucracy are themselves openly taking part in the capitalist economy, it is difficult to maintain that a ‘workers’ state’ still exists in any sense. It is true that privatisation was not rapid, but it will be shown that neither was it in many eastern countries, even without war to slow down the process.
The fact that Milosevic’s Serbia was a capitalist state like its neighbours in no way changes the need to defend it against NATO aggression in 1999, in the same way as the left must oppose other imperialist aggression. On the other hand, we have to be clear about our reasons for opposing imperialism and not confuse this with crass apologetics for monstrous crimes committed by bourgeois nationalist regimes like that of Milosevic. In fact, the class nature of Serbia should also not be crucial in forming a view of the chauvinist, anti-working class and anti-internationalist nature of the actions of the Serbian regime in Croatia, Bosnia and Kosova – Stalinist ruled workers states also committed crimes like the deportation of whole nations under Stalin. However, the fact that this regime was not defending any kind of progressive social formation makes apologetics even more disgraceful, yet the fact that many consider Milosevic’s Serbia to be some kind of socialist state may be a reason for their eagerness to make these apologetics. For example, in opposing imperialist wars or interventions in Iraq, Afghanistan, Liberia, Somalia, Haiti, Panama, Sudan or the British attack on the Argentine junta in 1982, just to cite a few examples, leftists were able to oppose imperialism without being apologists for these regimes. Only in the case of Yugoslavia has some of the left reacted by giving political support to the local thug. I hope that clarifying the class nature of the state allows people to move away from such political support and use conventional arguments against imperialist intervention.
Tito’s system of market socialism
Firstly, few would deny that under Tito’s market socialism, decentralisation of power to the enterprises had reached extreme levels, with the result that much of the social product had already been in a certain sense ‘privatised’, with the individual enterprises operating far more for their own benefit and according to their own rules than what is possible for a workers’ state to maintain some kind of overall control of the social product. This is regardless of how real was ‘workers’ self-management’ within the enterprises – this was no doubt a significant advance on other East bloc states, but the wildness of market competition meant that self-management dealt mostly with local issues and promoted further atomisation and disintegration. Of course, in all such attempts at ‘NEP’ there is some devolution of responsibility to enterprises, as extreme central planning by the bureaucracy is also distorting. However, there is a rather significant question of ‘how much?’ While the market made workers self-management less meaningful, giving more power to enterpreneurial enterprise managers, likewise the extreme degree of decentralisation made the possibility of socialist central planning virtually impossible.
Moreover, there was no attempt to bring the workers’ self-management structures to the federal state, with the result that if the central bureaucracy did attempt to bring more regulation into the economy, this would be an action by the least democratically controlled part of the system, and would be rejected. While Yugoslavia was more politically liberal than elsewhere in the east, it remained strongly controlled by the Party bureaucracy and a military/police establishment which at times was rather effective at suppressing opposition.
While a layer of enterprise bureaucrats were strengthened, a legal private sector in areas the state did not consider essential was also part of the mix in Tito’s perestroika. There is nothing wrong with that, indeed it was something necessary in other workers’ states where the black market took its place. Mandel claims that Soviet perestroika’s limited opening to the private sector legalised the already powerful black market. Because it had been operating so long, and because of the powerful nexus between its mafia runners and elements of the bureaucracy, it was able to rapidly undermine any positive content in Soviet perestroika and quickly seize state assets under Yeltsin. In Yugoslavia’s case, the early legalisation of private enterprise also legalised the black market earlier, and its nexus with enterprise bureaucracy was further enhanced due to the greater decentralisation.
In such a situation – a highly decentralised bureaucracy running officially state enterprises next to a private sector, the ability of bureaucrats and mangers at various levels to divert assets from state enterprises is obvious. Without having at hand concrete information from this period, it can easily be understood that, uncontrolled either from above, or in reality from below, material interest would have pushed in this direction.
While the first decade and a half of Titoism showed impressive results, the results of the post-1965 expansion of market socialism are far from impressive. By the mid-1970’s, Yugoslavia recorded the highest unemployment in eastern OR WESTERN Europe. Regarding social differentiation, a study in 1976 which "included earnings and privileges generated outside working hours" including in "speculation and trade in real estate and building land" showed that the "spread of personal incomes in Yugoslavia today approaches 1 to 20" (Vuskovic, B, New Left Review, No. 95). To the extent that conditions were not much worse and some development continued, it largely relied on easy access to western loans – by the central apparatus, the regional and local apparatuses, and the enterprises, all of which could borrow abroad for their own projects and trade in foreign currencies. This led to the appearance of 23 billion dollars in foreign debt by Tito’s death. The IMF/World Bank programs brought in to force through repayment of the debt in the 1980’s further undermined any continuing basis of a ‘workers’ state’. It is thus highly improbable that much of any such thing remained even before Milosevic came to power. It seems unlikely that a new regime even introducing slightly more ‘socialist’ policies could have rescued much at this stage. Clearly, a regime like that of Milosevic, which brought pro-capitalist changes into this set-up, could not possibly rescue ‘socialism’ and could not but tip the balance.
However, I am not glued to all aspects of this analysis of Titoism, which I think had both positive and negative aspects. This has little relation to the question of Milosevic, whose ‘revolution’ was violently anti-Titoist to the core.
Enter Milosevic
Milosevic, with strong ties to the US politico-business elite, particularly the Eagleburger/Scowcroft/Kissinger mob that ran George Bush I’s govt, appeared on the scene in 1987. Previously, he had been head of Beobanka in the United States where he attended IMF meetings, and had been picked as a favourite by many prominent US and IMF officials from the early 1980s onwards.
The next period was crucial in ditching whatever were the remnants of a Yugoslav ‘workers’ state’. Milosevic’s program consisted of further economic liberalisation, strengthening federal Yugoslav powers at the expense of the republics, and the promotion of virulent Serb nationalism.
The strengthening of federal powers was the IMF/WB program, as this was necessary to better suck the debt out of the republics and drive through an economic liberalisation program nation wide, getting rid of ‘republican borders’ to the free market. While the above description of Titoism shows that more central planning was desirable, the problem was that this centralisation was carried out by the least democratically-controlled force in Yugoslavia. Moreover, far from a return to socialist central planning, this was merely the central bureaucracy becoming an organ of the IMF.
The aspect of promoting virulent Serb nationalism was consistent with imperialist designs and with capitalist restoration in three respects:
Firstly, as Serbia was the dominant nation, strengthening Serbian power temporarily coincided with strengthening federal power. However, there was also a contradiction here, because if Serbian nationalism went too far, it would alienate the other nations too drastically and make it impossible to keep Yugoslavia together.
Secondly, the rising Serbian bourgeois elements needed their own ideology – the infamous ‘manifesto’ of the Serb intelligentsia in 1986 was a declaration of war against the Titoist ideology of ‘Brotherhood and Unity’. Imperialism would obviously be supportive of the bourgeoisie scrapping such old ‘Communist’ ideology.
Thirdly, this nationalist ideology was ideal for bullshitting the Serbian workers into thinking all the ‘enemy’ nations were out the get the Serbs, to divert the Serbian working class from the enormous cross-ethnic strike wave against IMF austerity in 1987-88. Later expressions of nationalism in Slovenia and finally Croatia had similar goals and similar class origins.
The rise of Serbian nationalism – with hundreds of meetings all around the country organised by Milosevic to promote the glories of the ‘Serb nation’ which was now allegedly suffering ‘genocide’ at the hands of their brutally oppressed Albanian subjects, vigorously denouncing Tito and the Communists for having allegedly ‘destroyed the Serb nation’ – is not a secondary point regarding the changing class character of Serbia. In the context of the long term decay of ‘socialism’ as described above, this movement and the destruction of class solidarity could not but further facilitate capitalist restoration, even before large scale privatisation was carried out. Strong state sectors in and of themselves do not define socialism – strong state sectors exist in many countries from the Myanmar of the SLORC tyranny to the former Brazilian junta to modern Turkey.
For state enterprises to be used by a workers government in the interests of the majority, rather than a device for criminal capitalist accumulation via the mafia or simply being commercial enterprises where the social product is not under social control, requires either some kind of ideological commitment by a ruling party or control by the working class. The ruling party was clearly junking its ideology. Meanwhile, the ability of enterprise bureaucrats and capitalists to seize more of the social product semi-legally could only be enhanced while the masses were being blinded by this fight against all these phantom ‘enemies’. These bureaucrats and capitalists were, after all, part of the same glorious Serb nation, unlike workers of other ‘enemy’ or ‘backward’ nations. To jump to the future, even if some remain convinced that Milosevic’s Socialist Party did remain ‘socialist’, it is not of secondary importance that this party twice ruled in coalition with a fascist party of Le Pen admirers – the Serbian Radical Party of Seselj. This is not possible in a state in transition to socialism.
Imperialism’s support for Milosevic, but concern about how far Serb nationalism may turn out to be counterproductive, were well spelled out in an NYT article ("US Aides Express Concern Over Yugoslav Crisis," The New York Times, October 12, 1988), which claimed top US policy makers were "torn between their appreciation of Mr. Milosevic as a catalyst forcing through sorely needed political and economic changes and their fear that playing on nationalist passions might create unbridgeable antagonisms in Yugoslavia's other republics."
So what were the key “sorely needed economic changes” brought about by Milosevic and lauded by US policy makers?
Milosevic gathered around himself the cream of the liberal economic intelligentsia in May 1988, in the "Commission of the Presidency of the Republic of Serbia: The Commission for Questions of Economic Reform", usually known as the ‘Milosevic Commission’.
The commission launched a series of IMF-supported economic "reforms", in which the Yugoslav economy was opened up to 100% foreign ownership rights (previously foreign investment had been geared more to joint ventures) - Milosevic called on Yugoslavs to abandon their "unfounded, irrational and primitive fear of exploitation by foreign capital" (Lenard J. Cohen, ‘Broken Bonds: Yugoslavia's Disintegration and Balkan Politics in Transition’); private property was given full constitutional equality with public property (RFE/RL Research, Situation Report, Yugoslavia, no. 11, December 2, 188, pp3-6, and no. 12, December 23, 1988, pp3-7) and banks were deregulated; enterprises were allowed to collapse and create unemployment; and "workers' self-management" was downgraded and eventually abolished (Woodward, Balkan Tragedy, p96 - including removing procedural protections against large-scale unemployment), workers being encouraged to become shareholders (RFE/RL, Situation Report, Yugoslavia, No.11, p5), while enterprise managers were given still greater flexibility to act without restraint by the workers. Workers’ councils were to be replaced by ‘social boards’ controlled by enterprise owners and creditors (World Bank, Industrial Restructuring, op cit, p8). Milosevic exhorted these enterprises to "function on economic principles, strive to create profits and constantly struggle for their share and place in the market" (Cohen, op cit, from Foreign Broadcast Information Bulletin-Eastern Europe (FBIS-EU), p39). In 1990, Milosevic formerly abandoned election of managers by workers’ committees, replacing this 40-year-old system with appointment of managers by the regime. The Financial Operations Act allowed for the closing of "bankrupt" enterprises - in 1989, 248 firms were steered into bankruptcy or liquidated, with 89,400 workers laid off (World Bank, Industrial Restructuring Study, op cit, p34, quoted by Chossudovsky). The first stock exchanges in Eastern Europe were set up in 1990 in Serbia and Slovenia.
The Commission declared that the "world market and world competition represents the strongest generator of economic operation." Yugoslavia had to become "a unified economic area where identical system-related solutions exist and where products and services, money and capital, people and knowledge move freely" (Cohen).
These changes, including constitutional changes in December 1988, were the decisive point, to the extent that it is actually possible to find an exact point that a heavily degenerated workers’ state actually passes on to the capitalist road.
Milosevic’s ‘anti-bureaucratic revolution’ – the name of the hundreds of nationalist ‘truth’ meetings across the republic – now turned to the somewhat more ‘Stalinist’ governments in the ‘autonomous province’ (within Serbia) of Vojvodina and the republic of Montenegro. There is no doubt that these governments were corrupt and unpopular and there was genuine opposition to them, in the same way as the Stalinist governments of Poland, Czechoslovakia, East Germany, Bulgaria etc were also genuinely bureaucratic monstrosities which provoked genuine mass opposition.
The contradiction was that many of the people Milosevic was using to carry through his nationalistic demonstrations were those most affected by his economic reform program - many unemployed and others willing to grasp at the view that their economic woes were due to various "corrupt bureaucrats" (other than Milosevic) who were "enemies of the Serb nation" and "obstructing" the economic reform program. This allowed him to use them against such bureaucrats of other republics and provinces who opposed his centralising plans. By mobilising those of the Serb ethnic group on a nationalistic basis against others, such as the chronically poor Albanian masses in Kosova, the working class movement was divided and critically disarmed - and pushed to support a supposedly "real" economic reform, which was being obstructed by "bureaucrats" - ie those of them not in Milosevic’s group.
For example, in a discussion on the Marxism List, moderator Louis Proyect posted a story about the Montenegro events, trying to show that not all protests were of a nationalist nature (The Guardian (London), October 11, 1988, ‘Protesters turn their sights on dismal economic record / The widening demands of Yugoslav demonstrators’, by Misha Glenny):
"Emboldened by the power of popular protest, Yugoslavs have shifted the focus of their three-month street campaign from nationalist demands to complaints over their country's economic disarray, and the incompetent Communist Party leadership which they blame for their woes. Although Serbs, the initiators of the current unrest, and Montenegrins still complain of alleged harassment by Albanian separatists in Kosovo, nationalism is no longer the issue which fires the protestors. During last week's protests in Novi Sad, the Vojvodina capital, and in Montenegro, the wrath of the demonstrators was directed at the local Communist leaderships, which they consider corrupt and incompetent."
This is well and good, but of course Louis would know there were a great many such demonstrations across eastern Europe around this time, against "corrupt and incompetent Communist governments". The language is identical, which makes it odd that Louis sent this post, because I know he is deeply cynical of the ‘democratic’ revolutions which overthrew “corrupt and incomptent Communist governments.” It is simply that many like Louis have trouble with the fact that Milosevic at that time was the Serbian equivalent of Havel, Walesa, Yeltsin etc in supporting such protests. These protests throughout Eastern Europe were ultimately derailed by new pro-capitalist leaders, often emerging from elements of the former dissident movement. So how did the Milosevic forces, likewise incorporating many former anti-Titoist dissidents, use these demonstrations?
According to Branka Magas, "their slogans included "We want to work and earn our living," "we demand bread" and "long live the LCY." Yet by nightfall, through intervention of Milosevic activists, who linked Montenegro’s corrupt leadership to its opposition to Milosevic’s centralist drive and its slowness on "economic reform," the slogans had changed to ones such as "Long live the Serbian leadership" and "Slobodan, we are your soldiers - we shall kill or we shall die." As the Montenegrin government collapsed, the steelworkers’ council, which had led the action, released a list of demands which included both those relevant to their situation (end to price rises, resignation of leadership), those irrelevant (suppression of the "counterrevolution" in Kosovo, ie their fellow striking miners!) and those against their own interests (speedy economic reform, which in the circumstances meant precisely the "reforms" which were hitting them).
Milosevic’s people in the local party machine took power. A representative of this new guard from the party’s youth organisation, Ljubisa Stankovic, gave an interview in which he claimed what was important now that the old leadership was gone was promotion of the "economic reform," the creation of a proper market economy (Magas, ‘The Destruction of Yugoslavia’, p171-72).
Similar derailing of genuine worker protests to support ‘economic reform’ took place in Serbia itself. For example, when on October 5, 1988 , 2000 striking workers from the Rekord tyre factory in Belgrade broke into the National Assembly, protesting the austerity caused by the federal government’s economic reform, they were addressed by Milosevic. He told them to place their trust in the proposed economic reform program, and then they dispersed while chanting praise to Milosevic - somehow getting across a message that only his leadership could carry out ‘economic reform’ properly, unlike all the enemies of the Serb nation that ran the other republics and provinces and the federal government (Andrejevic, M, "Workers Demand Leadership Changes," Radio Free Europe/Radio Liberty, Situation Report, Yugoslavia, October 11, 1988, p16).
The final act of the ‘anti-bureaucratic revolution’ was the demolition of Kosovar autonomy, ripping up the Yugoslav constitution in early 1989, slaughtering the striking miners and sacking 13,000 – the entire Albanian workforce. Noted Milosevic apologist Diana Johnstone put this into political perspective, seeing it as a confrontation between the ‘reform socialism’ of Milosevic promoted by the West versus the Kosova miners carrying out "the last Titoist demonstrations in Yugoslavia,” who represented ‘old-style communism’ which ‘protected unproductive jobs’ (Johnstone, ‘Fools Crusade’, p 219) Apart from her disparaging tone and right-wing politics on this event, this description of a confrontation of workers protecting socialist rights against the ‘modernising’ bourgeois liberals under Milosevic is correct.
Privatisation in Serbia and other republics
Just how fast changes such as privatisation actually take hold is a different question. Throughout eastern Europe, the speed varied greatly; in many countries it was rather slow, not only in the countries of the former Yugoslavia. Reasons include the undesirability of many former Stalinist-run industries to investors, preference for assets that gave more immediate gains (import-export, construction and a great deal of criminal ‘business’), struggles among the elite over who should get the lion’s share of the spoils, the ability of sections of the elite to milk enterprises still officially in ‘state’ hands to transfer wealth to new private concerns run by other family members, and in Yugoslavia’s case, political instability, ethnic conflict and ultimately war – investors do not rush to invest in a war zone.
A widespread view on the left is that Croatia and Slovenia were more pro-capitalist than Serbia and the federal government. According to another noted apologist, Sean Gervasi, "The new separatist governments in the north (Croatia and Slovenia) wished to join Europe and the parade towards capitalism. The federal government and some of the republics, including Serbia, balked" (Gervasi, ‘Germany, the US and the Yugoslav Crisis’). In reality, the divide was the radical federal government versus the "balking," after 1990, for very non-socialist reasons, of the three major republics, Serbia, Croatia and Slovenia.
The Western-backed centralising federal government of Prime Minister Ante Markovic pushed the most radical economic "reforms", while the republics slowed it down as they squabbled over the spoils. Economic warfare between the republics resulted from the devastating economic situation, particularly after Markovic introduced the January 1990 IMF-World Bank package, which suspended transfer payments by Belgrade to the republics, redirecting it all to the foreign debt, advocated the closure of a further 889 enterprises with a workforce of 525,000 workers, and imposed a 6 month wage freeze (World Bank, Industrial Restructuring Study, op cit, p33, quoted by Chossudovsky).
In December 1989 Serbia banned Slovenian imports into Serbia, a measure which directly cut across the whole logic of the program of opening the Yugoslav market. Indeed, this was perhaps one of the earliest steps indicating a drift from the goal of a more centralised Yugoslavia to greater Serbia (Woodward, p101). This was followed by further such measures by Serbia and countermeasures by Slovenia and Croatia (for example, on October 23, 1990, Serbia imposed a tax on all goods from Slovenia and Croatia, and Croatia responded with a tax on all assets owned by individuals and firms from Serbia). Serbia rejected the federal package, a stance often seen on the left as ‘standing up to the IMF’, while in fact Slovenia and Croatia also flouted federal restrictions on wages and budgets and ignored tax obligations to the federal government (Address by The President of the Federal Executive Council, Mr. Ante Markovic, at the Meeting of Both Houses of the Assembly of the SFRY, Review of International Affairs, Belgrade, April 19, 1991, pp10-15). Ironically, it was following the elections of Centre-Right governments in Slovenia and Croatia in April 1990 - bringing to power people more "pro-western" and "pro-market" - that these republics further sabotaged Markovic’s federal pro-market program. Elected governments had more need to show their people they would not suffer too much from market radicalism. In November 1990, Slovenia and Serbia announced they would make no further tax payments to the federation (Sabrina Ramet, ‘Balkan Babel’, Westview 1996, p 45). While all these measures were in the interests of the emerging republican bourgeoisie in their fight with each other, they were obviously not reassuring to investors, domestic or foreign, and so inevitably slowed down privatisation.
The myths about who was supposedly ‘more socialist’ or more ‘liberal’ are unmasked when it comes to privatisation. Markovic’s program proposed large scale privatisation of Yugoslav industry, by giving shares in firms directly to the workers and managers. His aim, an all-Yugoslav path "from below", was to bypass the republican bureaucracies. The republican leaders Milosevic, Kucan and Tudjman aimed to "re-nationalise" the enterprises as a step towards privatisation (Woodward, op cit, p128), meaning to remove them from any control of their "self-managing" workers first, as this would ensure the ruling circles a large say over how the spoils of privatisation were to be distributed. Markovic claimed such "restatisation" was a step back compared to self-management, which the republican bureaucracies aimed at in order to "nominate management teams, to decide upon the distribution of income..." to grab the spoils for themselves. For Markovic, "social ownership is a step forward" because "ownership democracy" would be created by distributing shares among the workers (Address by Ante Markovic, op cit, pp 16-17). Markovic’s ‘pro-worker’ rhetoric aside, giving out shares to workers to become ‘collective capitalists’ is always a trap – these ‘shares’ get devalued and bought up rapidly by managers and cronies, but the republican opposition was obviously not concerned about the workers.
What does the progress of the main republics regarding privatisation tell us about who is more ‘socialist’? Basically, it tells us that none of them have been success stories, and if we want to term the crony capitalist atmosphere of Milosevic’s Serbia ‘socialist’ because it did not conform to some imaginary pure neo-liberal standards, we have to say the same about Slovenia, Croatia and Bosnia – and if we look more closely, at a number of other east European states, especially in the Balkans, the Caucasus and Central Asia.
First Slovenia, which in 1990 suspended its application of Markovic’s privatisation program, and then did not pass its own legislation until November 1992, the last country in Eastern Europe to do so (Bacanac, I, in Jeffries, I (Ed), ‘Problems of Economic and Political Transformation in the Balkans’, Pinter Publishers, London, 1996, p135, 141-42). Even then, the new government elected straight after did nothing about it as it searched for a new formula, first flirting with and then rejecting the Jeffrey Sachs’ line. In 1993, FDI accounted for a mere 0.1 percent of Slovenian GDP (Lawrence Godtfredsen, ‘Enterpreneurship in Slovenia: Assessing the Impact of Public Policy’, Communist Economies and Economic Transformation, Vol. 8, No. 3, 1996). Even by 1995, only 200 of the 1500 enterprises scheduled for privatisation had passed into private hands (Ramet, S, "The Slovenian Success Story," Current History, March 1998), and even this number scheduled is hardly a huge number of enterprises. Catherine Samary writing in 2002 still describes the "relative weakness of the privatisations and of FDI" (foreign direct investment) in Slovenia, due partly to "domestic resistance to outside advisors" (Samary, ‘Foreign Investment and Capitalist Enterprise’, International Viewpoint, March 2002). US professor Peter Rutland even expresses surprise that "Slovenia refused to privatise, but ... enjoys the highest living standard in the region and is on the fast track for entry into the EU" (Boris Kagarlitsky, ‘The New Periphery’, Links, May-August 1999).
An article in the Alternative Information Mreza (‘Privatization: 'No' to Foreigners?’, by Svetlana Vasojevic and Igor Mekina, AIM Ljubljana, October 12, 2000) claims "the larger, unprofitable firms, wanted by no one, were mostly left to the state … the economy has only been half-privatized". In addition, while Milosevic’s Serbia is often depicted as, if not ‘socialist’, then at least not an outright lackey of foreign capitalist interests, with the implication that other neighbouring states are, this article asserts that "various obstacles to the penetration of foreign capital are not looked upon with favor by Slovenia's foreign trade partners, who demand a removal of restrictive regulations as a precondition for full membership in the EU. The good news about Slovenia's standoffishness is that it has not allowed its state and national resources to be sold for peanuts to foreigners. Thus, the Slovenian economy managed to avoid turbulence in global financial markets. The majority of large state systems and industries, media and public companies (the post office, Telekom, the power company) have been partially modernized, and are now facing the challenges of serious privatization, partnership with foreign investors, or sale in the market." In other words, "the majority of large state systems and industries, media and public companies" had not yet been privatised in 2000.
Next Croatia, which in October 1990 slapped an embargo on the federal privatisation scheme and introduced its own in April 1991, but its main results were with small enterprises, with a deadline of June 1992 set for applications, relatively few of which were approved. Those not meeting the deadline were transfered from "social" to state ownership, ie "nationalised" and removed from workers’control, as were the bulk of large "social" enterprises (Bacanac, I, op cit, p141-42). According to Radio Free Europe/Radio Liberty in 1994, "efforts on the part of old interest groups to maintain their pre-existing privileges have contributed to preserving economic-administrative structures virtually intact" (RFE/RL News Briefs, August 11 1994). Hardly a ringing endorsement by RFE/RL. A neo-liberal German source condemns Tudjman’s “post-Communist populism” and asserts that “to a large extent the elite of the former communist regime remains in power, and this elite and the large socialist dinosaur enterprises remain the dominant political forces” (Bruno Schonfelder, ‘Croatia Between Reform and Post-Communist Populism’, Communist Economic and Economic Transformation, Vol. 5, No. 4, 1993). Yet this crony capitalist slowness towards open privatisation does not prove that Tudjman was a closet socialist – it was essentially identical to the Serbian case.
As of November 1994, Croatia had only privatised about one fifth of social capital according to the most optimistic estimates (Globus, November 11, 1994, quoted in Ramet, p 208), while the Croatian Privatisation Fund estimated that only 10 percent of “all formerly socialist Croatian enterprises (in terms of assets) have been privatised” (Schonfelder, op cit). As late as 1996, the World Bank reported that "The largest enterprises, accounting for some two-thirds of social assets and employment, remain in state hands, and their privatisation has virtually stalled" (World Bank, ‘Trends in Developing Economies’, 1996, p139).
Bosnia did not even pass its own legislation and slowed down the application of the federal one (Bacanac, I, op cit, p135). To date it has been an extremely slow privatiser, certainly behind Serbia. According to the right-wing US think-tank the Heritage Foundation, "a lack of privatization caused the United States to suspend aid in December 1999" (Index of Economic Freedom, Bosnia).
Hence if Serbia’s program was no amazing success with large enterprises, it was little different to the "separatist" republics. Nevertheless, at the time, Serbia was considered in some circles to be more advanced than Croatia - "There have been rather more economic innovations in Serbia ...There has been some sort of effort to privatise industries in Serbia, the like of which there has not been in Croatia." (UK House of Commons Foreign Affairs Committee, ‘Central and Eastern Europe: Problems of the Post-Communist Era’, February 1992, Volume II, p 87). Similarly, according to Misha Glenny, privatization had gone further in Serbia than in Croatia or Slovenia as of the opening of the war in June 1991 (Misha Glenny, The Fall of Yugoslavia, p 63).
Regarding private sector development in general, the number of private firms in Serbia doubled in 1991 to 42,697, about 50 per cent of all firms. In Belgrade, the number rose from 754 in 1989 to 21,182 by 1991 (Adamovic, L, "Economic Transformation in Former Yugoslavia," in Ramet and Adamovic, op cit, p271). Of course, few of these were yet in the major sectors of the economy, and the growth of the private sector outside of the state sector is not in itself evidence of overall capitalism. However, as we see below, this is little different to elsewhere in E. Europe at this stage, certainly no different to other Yugoslav republics.
Also, "foreign capital has also made a contribution to the process of structural transformation of the Serbian economy...In 1991 there were 370 private businesses fully owned by foreigners" (Adamovic, L, "Economic Transformation in Former Yugoslavia," in Ramet and Adamovic, op cit, p271). This was a substantial advance since the new law in 1988, given that in the whole decade of the 1970’s, despite active canvassing of foreign capital for joint ventures, a total of 170 joint ventures came into being, with foreign capital supplying only one-fifth of their capital (Catherine Verla, ‘Mounting Economic Difficulties in Yugoslavia’, Intercontinental Press, March 12, 1979). In March 1992, Serbia even established a “free economic zone” for foreign business (Politika - International Weekly, Belgrade, April 4-10, 1992).
But how far did privatisation of state firms progress, bearing in mind from 1991 onwards, this was a war zone? Serbia introduced its own privatisation legislation in August 1991, which aimed to convert large ‘social’ enterprises to "joint-stock companies" in preparation for privatisation ("Serbia Adopts Privatisation Law – No More Internal Shares," Politika - International Weekly, Belgrade, August 17-30, 1991). It was based on Markovic’s share model, allowing workers and managers to buy out firms, but was slightly more restrictive: Markovic’s scheme gave workers a 30 percent discount on shares and first choice on up to 70 percent of enterprise shares, while the new Serbian law reduced the discount to 20 percent and the amount insiders could buy to 60 percent.
In the first phase, 1220 SOEs began privatisation under the Federal Yugoslav privatisation law between December 1989 and 1991, and then another 684 privatisations took place after the Serbian privatisation law was introduced in August 1991 up until 1994, a total of some 2000 enterprises. This was 70 percent of all SOEs, and on average private capital accounted for 80 percent of share ownership of mixed enterprises (Zec, Miodrag, Bosko Mijatovic, Dragan Djuricin and Nebojsa Savic (eds), Privatizacija – Nuznost ili sloboda izbora, Belgrade, Jugoslovenska Knjiga and Economics Institute, 1994, p 239-41).
While real figures are murky (see below), the 70 percent figure is backed up by another source which describes the way such ‘workers’ share’ ownership worked. According to the Alternative Information Mreza (AIM), by 1994 "half of Serbian industry has been quietly privatised at a rapid rate ... already in 72.6% of state enterprises, 660,000 employees have bought shares. Behind these shares, however, hide several hundred managers, from the Socialist Party, who make business dealings of a frankly capitalist character and virtually thieving manner, taking the lion's share" (AIM Report, Belgrade, May 1994). The last part of this excerpt should ring true to anyone familiar with schemes for workers and managers to buy out their companies, which normally means ‘managers’ who manipulate the system and workers sell off their largely worthless shares.
What of the figures for the extent of privatisation? Of course, 70-72 percent of enterprises, and 80 percent of their assets, does not tell us the total size of these assets within the whole state economy, though the source above claims “half of Serbian industry” was privatised. In the murky world of crony capitalism, ‘joint-stock’ enterprises and insider buy-outs, the exact definition of what is state and what is private becomes difficult, as in Tudjman’s Croatia.
Moreover, in 1994, the government carried out a ‘revaluation’ of stocks. Since stocks had not been revalued during the 1993 hyper-inflation, any workers who were not forced to sell out to managers during this hyper-inflation (see below) now lost their shares when the stock prices were greatly revalued – naturally, the richer share-holders were the ones who could keep their shares at the revalued prices. However, unlike the 1993 sell-out of workers’ private shares to managers’ private shares, the 1994 further loss by workers officially meant a restatisation of part of privatised shares. Just how much is in dispute, as with everything else about this process. According to the post-Milosevic Serbian Finance Ministry, the 2000 enterprises “covered by one of the methods and models of transformation of social into private ownership” under Milosevic, "accounted for about 40% of the then total number of socially owned enterprises in Serbia”, and the “transformed capital of these enterprises registered so far makes up about 15% of the total (initial) socially owned capital in Serbia," meaning “a little more than a third” of the total capital of these enterprises had on average remained privatised (www.mfa.gov.yu/ForeignInvest/2ys_privatizacija.htm).
While at this point, the article indicates that shares to workers were classified as part of this amount ‘transformed’, further in the article a table seems to classify share distribution under Milosevic’s second privatisation law (in 1997) separately to ‘transformation’, and adds a rather large extra percentage to ‘transformation’. Whatever the case, if we simply take the 15 percent figure of privatised assets of the initial total state sector, this is only 5 percent less than that quoted above for Croatia in the same period. If we take the 40 percent figure for the number of enterprises privatised, it is far above the 10 percent figure above for Croatia. And 2000 enterprises are far more than Slovenia’s 200 quoted above.
Moreover, what did the ‘restatisation’ of former ‘workers’ shares’ mean in practice? For the left apologists for Milosevic, this presents a quandary, as many have claimed the law allowing workers first choice on 60 percent of shares was a ‘socialist’ aspect or a leftover of ‘self-management’ which blocked ‘real’ privatisation (eg, Neil Clarke, ‘The Spoils of Another War’, Guardian, September 21, 2004), but they cannot have it both ways: here the ‘state’ seized back the ‘shares’ of the poorest, so Milosevic boosted ‘socialist’ property precisely at the expense of these worker-shareholders. But at least that part became ‘state’ property again, so perhaps that is a good thing anyway?
Yet what did it mean? It meant that, as the richer shareholders were mostly managers, the state-appointed managers were now also the dominant private share-holders of an average of a third of the shares of the ‘state’ companies they managed. As they were also allowed to own private companies, what would have happened to ‘state’ assets should be no surprise to anyone who understands material interest. But even worse, the sanctions imposed on Serbia in mid-1992 allowed a far bigger grab by the managerial elite, meaning the part of enterprise assets allegedly ‘restatised’ was in fact stolen in a colossal private robbery. According to AIM, "An international study has indicated that the capital of large social firms has been transferred to hundreds of private accounts abroad, under the pretext that it was easier to do business that way because of sanctions ... Among the privileged few are also the former socialist managers who have become private entrepreneurs overnight, the owners of their own social firms" (Igric, G, ‘Dress Rehearsal of Dying’, Belgrade, AIM, January 20 1994).
In general, the sanctions provided the perfect atmosphere for the rise of a criminal-capitalist class from inside the regime, those who had the right connections to engage in sanctions busting and other illegal trade, helped on by state-propelled inflation and currency rorts, and the flagrant illegal stripping of state assets, making all figures for legal privatisation meaningless.
Many of these private accounts were in Greece, Cyprus, Russia or of course Switzerland. Chris Hedges provides much detail of diversion of foreign exchange owned by citizens, under the cover of needing it to be in more secure places abroad, in US News and World Report (‘The Looting of Yugoslavia,’ July 21, 1997). No doubt many will claim that such a source can only be imperialist propaganda, but the facts about Serbian cronies having huge stashes in Greece and Cyprus is no secret in the media in those two rabidly pro-Serbian nationalist countries where I lived for several years. The Cyprus operation was run by Borka Vucic, who had been a leading Beogradska Banka official under Milosevic when he ran the US branch in the late 1970’s, and used to accompany him to IMF meetings (Le Bor, p 208).
Further, Hedges talks only of the theft of 3.8 billion dollars. Serbian oppositionist Slavko Curuvija, murdered in the street in the early weeks of the Kosova war in 1999, put the figure at $6.5 billion via "financial pyramid schemes, loans and confiscated foreign currency deposits," (Curuvija, S and Tijanic, A, "What’s Next Mr Milosevic?" Institute of War and Peace Reporting, April 1999). And even this is dwarfed by the $30 billion figure indicated by the post-Milosevic ‘Investigating Commission of Economic and Financial Abuses of the Milosevic Regime’ as the total amount stolen by the plutocracy in various schemes. Then of course comrades will say that is just Djindjic framing up Milosevic supporters – the poor plutocrats! – but on this, see below.
Milosevic also grabbed the hard currency that thousands of Yugoslav workers had accumulated over years of slaving as guest workers abroad. Hyperinflation was created so that by January 1994, it ran at 310 million percent! People had to sell their hard currency for undervalued dinars to survive, kind of. This also facilitated insider privatisation, as managers bought up undervalued workers’ shares who had no choice but to sell. There were also two prominent (and many smaller) pyramid schemes of exactly the type that Berisha’s Albania was famous for. Gazda Jezda, who had no banking experience, was given permission to set up a ‘credit coop’ in Milosevic’s home town of Pozarevac, and promoted by the state-controlled media. 100 million DM of citizens’ money went missing when it crashed, and he fled to Israel. The bigger scheme, the Dafiment bank, was run by Dafina Milanovic, selected again by the Boss, though she had been previously imprisoned for financial malpractice. Again the media heavily promoted it, and 500-600 million DM were stolen (Le Bor, p 209-212).
Of course all this mafiosi stuff is far from any imaginary pure ‘neo-liberal model’, but in reality no such model exists. The link between massive corruption and ‘legal’ capitalism in both developing and ‘transitional’ countries is more or less complete, despite the fairy-tales of the neo-liberals. My aim is not to show that Milosevic’s Serbia, any more than Tudjman’s Croatia, Berisha’s Albania, the Uzbek dictatorship, Yeltsin’s mafiosi Russia or the SLORC’s Myanmar correspond to an imaginary neo-liberal model, but to show that to the extent that they do not, it has nothing to do with ‘socialism’.
The war and sanctions were necessary for this massive primitive accumulation of capital in private hands via the criminalisation of the state, so that when fuller privatisation was later to be carried out, there would be someone to buy it.
This criminalisation of the state and massive illegal accumulation of capital was in fact remarkably similar to the case of Berisha’s Albania. Described in detail by Chossudovsky in Labor Focus on Eastern Europe (No. 57, ‘The Albanian Crisis’), we see that legal privatisation did not even get started until the mid-1990’s, the stock exchange was only set up in 1996 and a privatisation ministry was only set up that year "in response to western demands after the rigged June 1996 elections", when the regime reaffirmed its determination "to conclude this undertaking to privatise the economy." A schedule to sell strategic industries was established with the World Bank, to get started in 1997. While no-one denies the capitalist nature of Berisha’s state, it is clear that legal privatisation lagged as far behind criminal privatisation, if not more so, than in Serbia.
While the criminalisation of the privatization process makes any real figures impossible to come by, what is clear is that the figure widely quoted by left apologists for Milosevic, that 60 percent of Serbian GDP was “state” or “social” firms, was nonsense even from a legal point of view: this figure includes 28.2 percent which was “mixed”, ie part-state, part-private, “joint-stock” companies. Thus 33 percent, not 60 percent, of Serbian GDP remained “state” or “social” under Milosevic. The difference between the latter two, by the way, was not that workers any longer managed “social” firms after 1990, as I noted above, but rather, that these now non-worker managed firms were more independent of the state than “state” firms. That is, that the dictatorial managers, who usually also owned private companies, were appointed by the state but less controlled by it than ‘state’ firms, and hence their surpluses were less available to cover overall societal needs outside the enterprise. That is, “managers” were in an even better position to rip them off. And what was the division between “state” and “social” firms? 1.75 percent of Serbian GDP were “state” firms, 31.4 percent were “social” firms (Data of the Federal Statistical Office, “Drustveni proizvod i narodni dohodak 1998,” Statisticki Bilten no. 2259, Belgrade).
The existence of such a massive ‘mixed’ sector virtually assured an enormous transference of state assets to private hands via this mechanism. But even the maintenance of a significant percentage in officially ‘social’ or ‘state’ hands in a corrupt and opaque environment was often little different from the reality of ‘mixed’ and ‘joint-stock’ companies, but, as in Croatia, was a cover for illegal privatisation as members and relatives of the ruling parties, legally owning private companies while "managing" state ones, looted the latter to build the former.
Examples are legion. At the small-scale end, Malapanis in ‘The Militant’ reports on the role of the insurgent workers after the October 2000 revolt in stopping this mafia-capitalist accumulation: "While workers at these (vegetable oil) factories received very low pay, managers organized in the last decade for most production to be diverted to the black market, where company officials and middlemen made a bundle from exorbitant prices. As part of the rebellion, workers guards formed in these factories to stop this "diversion" of products … From Monday, October 2, although the production was not stopped, our workers guards did not allow a single bottle to go out of the factory" (Malapanis, A, The Militant, October 2000).
State assets were not only diverted to the ‘black market’. Jonathon Steele gives an example of diversion to the legal private sector: "In the early 1990s, as a crude market economy and phoney privatisation spread through Eastern Europe, Mr Milosevic joined the bandwagon. He allowed large companies to break into smaller units and fix their own commercial contracts. Under privatisation the trade union secretary (of the semi-state, semi-privatised construction giant Trudbenik) formed a (private) company called Sind which built upper-income flats in Belgrade." Sind paid workers DM5 an hour, while workers in the ‘state’ enterprise got DM100 for a whole month (Jonathan Steele, ‘Spirit of Serbian revolution reaches the shop floor’, The Guardian, October 13 2000).
The ‘joint-stock’ cover was also useful for the largest enterprises. The massive Trepca mining and metallurgy complex, based in Kosova, was made a “joint-stock” company in 1992. Initially, shares were given to a number of state or social firms, which were themselves however transformed into joint-stock companies. So for example, one part-owner of Trepca was the joint-stock bank Jugobanka Mitrovica, which itself is half owned by French capitalist Pierre Rozan, owner of French multi-national Societe Commercial des Metaux et Minerais (SCMM) and the Belgrade firm Meding International, thus giving him a stake in Trepca. Moreover, the Trepca manager, Novak Bjelic (appointed by Milosevic in 1996), was also the owner of two private firms, INOS and FAGAR, to which he routinely transferred work and funds from Trepca, steadily bankrupting it to feed his private firms. FAGAR had also been a state-owned construction materials firm to which Bjelic was appointed manager in 1991, who then privatised it. One of its largest share-holders was INOS, Bjelic’s other private concern. INOS had also been a ‘social’ firm, engaged in metals recycling, which had been privatised under Gavrilo Ivanovic, another top Trepca official, while Bjelic was head of its management board. In 1996, the Trepca management committee awarded Bjelic the right to dispose of investment and procurement funds of up to $5 million at a time without reference to the committee. Bjelic was also given a seat in government by Milosevic (a good thorough description of the entire Trepca system is in Michael Palairet, ‘Trepca 1965-2000’, Lessons Learned and Analysis Unit/European Stability Initiative).
After Dayton - Privatisation of strategic sectors
Nevertheless, the war and sanctions themselves, while hastening all this illegal privatisation, slowed the legal version. So it is not surprising that the more decisive measures began following the end of the Bosnian war and lifting of international sanctions at the end of 1995.
Almost as soon as Dayton was signed and sanctions lifted, the British consultancy firm Nat-West Industries, signed a contract with Milosevic to help privatise the Serbian economy, for a fee of 10 million dollars, and to manage the Yugoslav debt, for a further nice sum. On the board of Nat-West is Douglas Hurd, former British Foreign Secretary who was chiefly responsible for Britain’s pro-Serbian position on the Bosnian war, and his former intelligence committee chair, Pauline Neville-Jones. Hurd earns 250 thousand pounds a year in this career. (Wheen, F, "Return of the Gruesome Twosome," The Guardian, June 24, 1998; "M16 Lies on Bosnia to Media," Workers International Press, February 1999).
In October 1997, the Serbian regime announced a new privatisation law, aiming to sell off major chunks of strategic Serbian industries, including oil industries, the electric company, cement works, the Trepca complex and the 75 largest companies (Petkovic, R, "Privatisation in Serbia," Alternative Information Mreza, March 24, 1998). The ruling elite, having amassed so much wealth during the years of war and sanctions via all this asset stripping, in-house privatisation, sanction-busting and other mafia-style methods, now wanted to further legitimise their wealth. A scramble for posts in state industries about to be privatised began, to make sure the clique around party leaders grabbed the lion's share. The ‘Yugoslav Left’ leader, Todorovic, one of Serbia’s biggest capitalists, was assassinated, as part of a similar wave of killings, just after the privatisation plan was announced and this scramble for spoils began (Schwarm, op cit; Boarov, D, "Struggle for Capital Began with Assassinations and Inflation," Alternative Information Mreza, November 5, 1997). Just before his assassination, he had privatised Beopetrol, the second largest state oil company, which he had been ‘managing’.
Nat-West aided the sale in 1997 of half of Serbian Telecom to Greek and Italian investors. To sell the same percentage of such a strategic concern as Telstra, the Australian arch-neo-liberal regime of John Howard required two elections and endless parliamentary manoevuring and public debate; the ‘socialist’ Milosevic required the stroke of a pen. Notably, Tudjman did not get around to selling 33 percent of Croatian Telecom to German capital until 1999, and it was not till his regime was ousted that the Social-Democrats replacing him sold another 16 percent in 2001. And Slovenia is still well behind both.
This Greek-Italian investment was only part of the heavy involvement of these two powers. Italy developed an interest in the construction of an oil pipeline from the Caspian reserves to run from Russia through Yugoslavia along the Danube to the Italian port of Trieste, and the construction of an electric power cable under the Adriatic Sea, Serbia being the largest producer of electricity in the region, through an integrated system which includes Kosova’s massive lignite reserves (Hodge, C, "Potential Wealth Plays Hidden Role in Conflict," The Scotsman, April 7, 1999). Negotiations opened with Italian capital for the privatisation of the Serbian state Electric Company. Greek capital has played a major role in Serbia and Kosova, as in the rest of the southern Balkans. A host of giant Greek companies - Telecom, Mytilinaos, the National Bank, Kokkalis, Delta, Viochalko and others - became a major force in the region.
Meanwhile, negotiations opened to sell the massive Beocin Cement Industry to French investors in 1998 for 350 million, while the giant Pancevo Petrochemical Industry was evaluated at a billion marks and was ready to offer shares for sale at the London capital market as the 1999 war opened. (Boarov, D, "Serbia: Forced Privatisation," Alternative Information Mreza, December 23, 1998). The handover of Beocin did not go ahead at the time, not because of any ‘socialist’ inclinations of the regime, but because of renewed western sanctions on investment in mid-1998 due to the Kosova conflict – a conflict which in itself again slowed down foreign investment into a war zone. In other words, imperialism was not ‘fighting socialism’ in Yugoslavia, but itself put such investment opportunities on hold due to their fear of regional instability which is bad for business.
The other complication was that opposition to the sale arose from leading *opponents* of the regime – the Vojvodina Social Democrats. Again the ‘autonomists’ slowing down a centralisers’ privatisation plan. Nenad Canak, chairman of Voivodina's Assembly, threatened the Milosevic regime that following any election victory, he would nullify the sale of the cement works to the French company Lafarge, and likewise later warned Djindjic that he would interrupt the sale by physically blocking Beocin. Canak finally agreed once Vojvodina got a better deal and only as long as the French company "offers high-quality manufacturing, and a social and environmental program of reconstruction" of the industry. Beocin is no small plant – it has a capacity of almost three million tons of cement a year, is located on the Danube, and can supply the entire European market for 100 years (Dimitrije Boarov, ‘Privatisation of Cement Works’, AIM Belgrade, October 23, 2001).
The whole of Kosova was put up for sale at bargain basement prices (Rexhepi, I, "Revival of a Corpse – Ownership Transformation in Kosova," Alternative Information Mreza, Pristina, November 11, 1997). The Greek company Mytilinaos AG bought a $500 million dollar concession in the famous Trepca lead and zinc mines in Kosova, as a step towards buying a share. Mytilinaos is a major metal export-import firm with links right throughout the Balkans (INVgr, Greek business digest, March 29, 1999, May 20, 1999). The French company Societe Commerciale de Metaux et de Mineraux also bought into Trepca (Rexhepi, F, "Kosovo: Ownership, Politics, Economy," Alternative Information Mreza, October 11, 1999 - this source claiming the French company bought a 20 percent stake; see also International Crisis Group, Trepca: Making Sense of the Labyrinth, www.crisisweb.org/projects/sbalkans , November 26, 1999, which claims SCMM had only a 2.8 percent stake). Greece and Italy were also given the right to exploit Kosova‘s PTT telephone network as part of Serbian telecom privatisation. The Albanian majority, thrown out of all public sector jobs in 1989-90, was thus to be excluded from their legitimate right to take shares in any privatisations; neither were they consulted about these deals.
Kosovar leaders called on foreign companies to not take part in Milosevic’s fire sale of Kosova’s assets. According to Ibrahim Rugova in 1998 "the Serbian regime has put on sale the major economic facilities of Kosovo, like Trepca, the Electric Company, Feronikl etc. We appeal to the international community and the UN to exert pressure on Belgrade to terminate this process. Legitimate institutions of the Republic of Kosova avail themselves of the opportunity to warn foreign companies that every contract signed with this intention, as the Greek company Mytilinios did, will be null and void" (Rexhepi, "Revival of a Corpse, op cit). In January 1998, the underground Kosova parliament denounced such "flagrant violations of the rights of Kosovar employees and citizens" and warned foreign governments and businessmen that "the Albanian people will treat them as neo-colonialists and demand reparations" (Parliament of the Republic of Kosova, Pronouncement, January 7, 1998).
None of this leaves much "socialism". Western imperialism did not attack Serbia in 1999 for "socialism," but despite these considerable opportunities for capitalist investment. If anything, the main impediment to such opportunities in Kosova was this Albanian resistance. According to the ICG source quoted above, today both the former Rugova-aligned leaders and former KLA-aligned leaders advocate returning Trepca to its status under the pre-1989 constitution, before the bourgeois constitutional changes introduced by Milosevic.
The subsequent war slowed the process, though privatisation continued. In the last three-and-a-half years of the Milosevic government, only around 400 state-owned companies were sold off. But then there was a sudden speed-up between losing the Yugoslav elections in October 2000 and the Serbian elections in December, when Milosevic’s SPS shared power and most ministries with president-elect Kostunica’s Democratic Opposition of Serbia (DOS) coalition. Significantly, the Ministry of Economic and Property Privatisation was left only to the SPS.
During this period, the SPS privatised 217 valuable state-owned enterprises, 50 per cent more than it had privatised in the first ten months of 2000 (ie, 140 had been privatised in 2000 alone while Milosevic had full power). Many of these companies are economic giants, including Simpo, Hemofarma, Hotel Metropol, Vital, Trudbenik and Bambi. These companies were sold off to their former managers from the SPS or the bogus ‘Yugoslav Left’ party of Milosevic’s wife (which got less than one per cent of the vote). One example was the giant Simpo company, sold to its Milosevic-era ‘manager’, Dragan Tomic. DOS economist Milan Kovacevic ruled out revoking these privatisations because this "does not happen in democratic states" (Vesna Bjekic, ‘Sell Offs Bolster Milosevic Cronies’, IWPR 16-Feb-01)
What is clear from all the above is that neither the amount of privatisation scheduled, nor the areas where privatisation was taking place, can easily be fitted into some imaginary ‘socialist’ government making necessary NEP-type concessions. The kinds of companies being put up for privatisation under Milosevic – Telecom, cement works, electric power companies, oil companies, mines, the Trepca complex, pharmaceutical companies – are not only way beyond cafes, small scale trade and services and small businesses, they are also way beyond allowing an element of capitalism into the consumer goods area. These are strategic industries – one cannot get more strategic than these. That is even leaving aside the whole question of whether NEP-style concessions to capitalism, essential in agricultural or developing countries like Russia in the 1920’s, China in 1978 and Vietnam and Cuba today, are really the way to go in highly industrialised countries such as Serbia, Croatia and Slovenia.
Nevertheless, some have claimed that the Milosevic regime remained an impediment to deeper privatization or at least foreign investment because the 1997 privatisation law still stipulated that in sell-offs, workers and managers got first picks at 60% of enterprise shares, which they believe left little for foreign capital (Clarke, op cit).
The problem, however, is that the 60 percent “workers’ and managers’ shares” rule in the 1997 Milosevic law did NOT apply to the 75 leading strategic companies that were opened to privatization. The 1997 law put forward three methods of privatization: the one noted by Clarke with up to 60 percent of shares initially going to workers; the 75 ‘strategic’ firms to be privatised according to a special government program; and some 514 enterprises whose activities were of “public interest,” to be privatised “with the approval of the founder” (ie the government). No “workers shares” to interfere for all these crucial large companies in the last two groups.
The 75 strategic firms to be privatised included Telecom, the Beocin cement works, oil companies, the State Electric Company, Trepca, Ferronikl, the Pancevo petro-chemical complex etc. When Greek and Italian investors bought 49 percent of Telecom, 60 percent did not go to “workers’ shares”. In negotiations with French companies over Beocin, in negotiations with the Italian ENI over buying the State Electric Company, there was no impediment of workers shares. There were no workers shares in Trepca – both because the bulk of the workforce, being the wrong (Albanian) ethnic group, had been sacked in 1989-90, but also because it was one of the ‘strategic’ firms – even the small Serb workforce remaining were not offered shares.
Rather, these micro-shares was for less important companies – those that foreign capital would have less interest in and the state would have difficulty privatizing at all unless it offered maximum conditions for workers to “buy shares” in their enterprises (this is aside from the issue of whether ‘workers’ shares’ have anything in common with socialism). So all we can say is that in the non-strategic companies, there was a plan to ensure the bureaucrat-mafia kleptocracy, ie the “national” bourgeoisie, a dominant position.
In fact, a very large percentage of ‘workers’ shares’ was also the rule in both Croatian and Slovenian privatization in the 1990s, again making there nothing exceptional about Serbia (since there was virtually no privatization at all in Bosnia, the question barely exists). Like the Serbian case, they were fraudulent.
In Slovenia, the Privatisation Law of late 1992 “provided for the sale of 40 percent of the enterprise … and specifically gives employees the first option to buy shares at a 50 percent discount. An additional 20 percent of shares are distributed free to employees by means of vouchers.” That is, employees get the first option on 60 percent of shares, as in Milosevic’s Serbia. “The results have so far been that the vast majority of privatized firms are internal buyouts enabling employees, managers and former employees to obtain majority holdings of shares on very favourable terms … In over 80 percent of the companies approved for privatization, internal owners will have a 60 percent shareholding, and in 85 percent of the companies a 50 percent shareholding” (Godtfredsen, p. 41).
In Croatia, “according to the 1991 legislation employees were granted considerable discounts when buying the shares in ‘their enterprises’ and the possibility of payment in installments over a long period of time (20 years) … the discount was granted for the purchase of up to 50 percent of the estimated value of the total social capital of the company” (Drago Cengic, ‘Privatisation and Management Buy-Out: The Example of Croatia’, Communist Economic and Economic Transformation, Vol. 8, No. 4, 1996). The most popular model was that “the workforce bought some 45 percent of the shares (on credit) and the management 6 percent (also on credit) … Croatian critics have argued that this privatization frequently amounts to little else but a new guise for self-management … revenues has been much less than it could have been, since a number of valuable companies were given to their workers even though foreign investors signaled their desire to buy them at relatively high prices” (Schonfelder, op cit).
Moreover, the issue of the percentage of “workers shares” in various Serbian privatization laws had no bearing on privatization in Kosova, where Milosevic had already performed the biggest prize to future buyers: 90 percent of the workers, virtually the entire ethnically Albanian Kosovar workforce, had been sacked from all state and social companies. The bulk of the workers involved no longer had jobs, let alone any chance of buying shares. This service for future investors was reversed after Serbian troops were driven out in 1999: there was little the new UN authorities could do to prevent Albanian workers from attempting to return to their former places of employment after June 1999. Moreover, Albanians would settle for noting less than the reintroduction of the old Titoist enterprise law on self-management, which had been abolished by Milosevic in 1990, if only in order to bring back a situation that existed when they had autonomy. Ironically, the charade of “liberating” the Kosovars initially meant that the UN authorities accepted this, leading to workers committees reinventing ‘self-management’ of ‘social’ property and blocking privatization, a policy for which the UN authorities were condemned by the European Union ‘liberalising’ hawks (‘The Ottoman Dilemma: Power And Property Relations Under The United Nations Mission In Kosovo’, 8 August 2002).
SPS and JUL leaders – snouts in the trough
But if the nature of the industries targeted for privatisation tells us clearly that socialism had been decisively dumped, the relationship between the regime and private capital makes it even clearer that it is completely absurd to pretend that Milosevic’s Serbia remained in any sense a ‘workers’ state’.
Most state ministers were big business people, owning private companies or ‘managing’ state companies or both, while other well-known giant capitalists were extremely close to the regime. No amount of ‘necessary concessions’ can justify these open and celebrated connections. There is not the remotest parallel in 1920’s Russia, in Cuba today, in the USSR under Gorbachev; in Vietnam it occurs at an illegal and hidden level which causes public outrage when revealed and is the object of a fierce ongoing struggle within the CP leadership; parallels with China are however obvious, and it is little wonder that Milosevic’s wife, Mira Markovic, began pushing the ‘Chinese model’ after the Chinese CP’s 1997 Congress which resolved to push through the biggest privatisation in history.
Among Serbia’s biggest capitalists are the Kosovo-Serb Karic brothers, who started their fortune in Kosova, with Milosevic’s anti-autonomy "reforms" there and economic “reforms” throughout Serbia. In September 1988, Boguljub Karic, already a large capitalist but also a member of the ruling League of Communists, was decorated with the Order of Labour with Silver Wreath, which he claimed was ‘recognition of the private sector.” At the time he claimed his company was the biggest capitalist firm in Eastern Europe. He was invited by the then Politburo to preside over a conference on the role of the private sector, which drew up a draft pro-capitalist law, of which in October 1988 Karic claimed “the Politburo has accepted it but the administrative bureaucracy opposes it”, as at the time, “eight regional party and government hierarchies must each give its consent” (Henry Kamm, ‘A Poor Marxist Makes Good; Now He’s a Magnate’, New York Times, September 29, 1988). Milosevic dealt with this via launching his nationalist “anti-bureaucratic revolution” crowds, sacking the governments of Vojvodina and Montenegro, and thus made sure the eight “hierarchies” voted for Karic’s proposed legal changes in December 1988.
The Karic brothers went on to own the multi-national BK group of companies, a private telecommunications, media, banking, mineral and oil empire, rather strategic sectors. The Karic Brothers also took over banks, mobile phone networks, construction companies and media holdings in at least 15 countries (Zeljko Cvijanovic, ‘Serbia: Karic Affair Rocks Belgrade - Finance officials take on Serbia's corrupt nouveau riche’, IWPR, 25-Oct-01). Boguljub Karic built his house next door to the Milosevic residence in Dedinje, was the family’s private banker and made extra bucks hawking Mira Markovic’s inane writings. In 1997, his private BK television company was given the right to use transmitters owned by the Yugoslav army to broadcast throughout Serbia, which must begin to give some idea of the class nature of the state. He became minister without portfolio and later vice-president of the regime of Milosevic-Seselj in 1998-2000, and later an acolyte of Djindjic. He has now set up his own party, much like that of Italy’s Berlusconi. The Karic companies, directly allied to the Milosevic regime and its economic policy, are the biggest private capitalist companies in the Balkans, which must surely say something about the class nature of the regime.
Then there is Vladimir Bokan, who was given the private monopoly license by Milosevic in the early 1990’s to import cigarettes. With his fortunes, he had bought out the "Stampa" company to which belong over 700 kiosks in Belgrade and Novi Sad, a chain of clothing stores, a real estate company, a shipyard in Novi Sad, a sizable share in a chemicals and fertiliser factory and in the Bor mine, while running Panama and Cyprus registered shipping companies. Somewhat beyond a ‘small scale enterprise’ owner it seems. He also owned property and other assets in Greece worth tens of millions of dollars. His fortunes were increased during the sanctions, as he led the smuggling of oil and cigarettes to Serbia and Montenegro, making some ten thousand dollars a day. Marko Milosevic, son of the Boss, had stayed at his Athens mansion, yet he was also very close to business partner Milo Djukanovic, president of Montenegro (Macedonian Press Agency 9/10/2000; ‘Vladimir Bokan, Milosevic's Front Man in Greece, Killed After His Revelations’, AIM Athens, October 26, 2000; ‘Probe into Montenegro's role at illegal cigarette trade’, Nicholas Forster and Sead Husic, August 9 2001).
Then there was Zoran Todorovic, former general-secretary of the "Yugoslav Left" (JUL) set up by Milosevic’s wife Mira and her closest friend. An early protagonist of the "anti-bureaucratic revolution", playing a decisive role in helping Milosevic seize power, he was appointed head of the Socialist Alliance of Workers (SSRN) of Belgrade in 1989. Economic and political power were fused as he summarily dismissed the worker-elected managers of large companies like Jugopetrol (petrol company), RK Beograd (chain of department stores), Belgrade Airport, BIGZ (publishing company), Centrokop (trading company) and Putnik (travel agency) and appointed his closest associates. He then set up his own company, ATL, which dealt in oil products and foreign currencies, and became astonishingly rich. He later quit ATL, left it bankrupt, and the workers lost their jobs.
He then founded the giant private T & M Trade company, becoming one of the richest men in Serbia. He got easy access to the information about a great number of companies in financial trouble which he then bought cheaply, like the state farming company "Zikica Jovanovic" from which he bought 3,500 hectares of land at the price of around 60 DM ($30) per hectare, and 4,000 head of cattle for about $165,000, prices several times lower than the market prices. In 1997 he became general manager of Beopetrol, the second largest state petrol company. In September the managing board decided to privatize the company and it was registered as a joint-stock company, the process of privatization started immediately (Schwarm, P, "Showdown on the Left," Alternative Information Mreza, November 2, 1997; Free Serbia Bulletin, ‘All the Presidents Dead Men - Zoran Todorovic- Kundak’). The "Yugoslav Left" - part of Milosevic’s ruling coalition - is ironically named, being the major party of Serbian big business controlled by tycoon government ministers and their mega-capitalist cronies.
Vlada Kovakevic Tref, close associate of Milosevic’s son Marko, was one of the founders of the Interspid shipping company which owned ten other companies in Yugoslavia, four companies abroad, a radio and TV station and a chain of duty-free shops (which Marko also had a stake in). It was via these duty free shops and the Interspid company that much of the sanctions busting took place, and in particular Interspid had the monopoly on cigarette import. Marko was famous for being the biggest cigarette dealer in Yugoslavia, though that later brought him into conflict with a rival group associated with Djindjic and Djukanovic. Marko also owned the "Madonna" discotheque, a chain of bakeries, the "Madonna" Internet service provider and opened the "Bambyland" amusement center at the very end of the NATO war – just to prove that the war, killing and impoverishing Serb workers, had no impact on the private wealth of the president’s son (Free Serbia Bulletin, ‘All the Presidents Dead Men - Vlada Kovakevic Tref’).
Dusan Mihajlovic, head of Milosevic’s former coalition partner New Democracy and top government minister, had meanwhile founded the trading company Lutra, which profited from petrol trading during the war. Milan Panic, a Serbian-American millionaire and head of the pharmaceutical multinational ICN, bought Galenika - the biggest pharmaceutical factory in the Balkans - with Milosevic's help in the early 1990s as he was appointed Yugoslav prime minister. Mihajlovic and Panic are now both acolytes of Djindjic, the former prominent in the DOS government. Former vice premier Slobodan Radulovic ran a retail chain, and was accused by workers of ripping off $372 million from the company. Then of course the notorious gangster Arkan, head of paramilitary gangs that terrorised Croatia, Bosnia and Kosova, was given gas stations by the State Security Service.
It is hardly less problematic that some government ministers ran ‘state’ enterprises. Surely, such ‘conflicts of interests’ are obvious even in most western capitalist countries, let alone states claiming to be socialist. What better way for those with political power to steal state assets with impunity? Milosevic’s Prime Minister Mirko Marjanovic was believed to own something in the area of $50 million dollars, largely through questionable deals done by the state trading firm ‘Progres’ which he managed - he issued to himself permits for the sale of the state wheat reserves and the import of oil and oil derivatives. He left the government in 1999 to concentrate on his ‘business interests’.
The even more blatant case of Trepca manager Novak Bjelic was noted above: being concurrently appointed manager of a major semi-state firm, given a seat in government and a position in the ruling Socialist Party, and owning two private companies, both of which he had formerly been involved in privatising, in a similar area of work as Trepca.
Under the DOS regime in 2001, former Titoist general Vuk Obradovic, who split with Milosevic in 1992 and now heads the Social Democratic Party, introduced a bill to tax profits and property of those who acquired their fabulous wealth during the Milosevic era, through illegal currency trading, abusing the privatisation process, looting state companies, embezzling "solidarity funds" etc. The commission was to investigate all privatizations between December 25, 1989, and February 14, 2001. He had promised to publish the names of 7,000 companies eligible for the tax, including the 200 wealthiest individuals and companies. Tax rates would range up to 90 percent, raising 5 billion marks.
In the context of DOS’s neo-liberal orientation, which has served to bolster the fortunes of the same capitalist class that were promoted by Milosevic, this initiative certainly was the best possible ‘social-democratic’ move one could expect.
However, given that some leading DOS parties – above all Djindjic’s Democrats and Mihajlovic’s New Democracy – which had both been in previous coalition governments with Milosevic – were famous for their corrupt links to the same Milosevic-era mob who had now changed hats, it is hardly surprising that the initiative was squashed.
Of all people, petrol trader Mihajlovic found his way into the investigation team - his role was to investigate the cigarette, petrol and alcohol trade! Obradovic claimed Mihajlovic had obstructed its work. The Karic media ran a fierce campaign against Obradovic, playing up sexual harassment charges which conveniently appeared right at this point. He was dismissed from his position as head of the team at the initiative of Djindjic, who denounced the entire investigation of Milosevic-era gangster-capitalists as a ‘witch-hunt’. It appears Obradovic’s anti-corruption campaign might have been getting too close to the bone.
Among those accused by Obradovic are Panic (the team disputed the privatisation of ICN Galenika with Milosevic's help), Dragan Tomic, the manager of Simpo, one of those privatised in late 2000 (where did his son get DM35 million to buy the Skopje steel mill), Karic (Karic paid too little for his 51 percent stake in Mobitel, the main mobile phone company in Serbia, along with many other charges), Marjanovic, Arkan and many others.
(Information from the above 7 paragraphs from Aleksandar Ciric, ‘The New Government's Challenges: Hunting Down the Rich’, AIM Belgrade, May 6, 2001; Zeljko Cvijanovic, ‘Serbian Sexgate’, Belgrade IWPR, 23-May-01; ‘Serbian Commission to Probe Financial Crimes’, Reuters, Belgrade, Feb 17, 2001; ‘Brothers Karic and Brothers Obradovic - Scent of Money and Politics’, Dragan Belic, Banja Luka, May 16, 2001; Zeljko Cvijanovic, ‘Serbia: Karic Affair Rocks Belgrade - Finance officials take on Serbia's corrupt nouveau riche’, Belgrade, IWPR, 25-Oct-01; Hedges, S, "The Looting of Yugoslavia," US News and World Report, July 21, 1997).
Comparison with Eastern European pattern
If after all the above makes abundantly clear the capitalist nature of the Milosevic regime, what of the fact that privatisation had still not become a resounding success? Is it due to some underlying ‘socialist’ pretensions of the regime? Or is it rather connected to the East European reality?
Even the most successful "transformers" in Eastern Europe started off slow - by late 1991 only 10-15 per cent of Hungary’s state assets had been sold, and this was far and away the most successful. Only 2 per cent had been sold in Czechoslovakia (UK House of Commons, Foreign Affairs Committee, ‘Central and Eastern Europe...’, Volume I, pp xi-xii). In the latter, most privatisation throughout the 1990’s was "merely simulated – the privatised enterprises were bought up by state investment banks" (Boris Kagarlitsky, ‘The New Periphery’, Links, May-August 1999). There were not many locals to buy, and foreign capital was far more cautious than many imagine, who think it couldn’t wait to ‘rush in’. According to Catherine Samary (‘Foreign Investment and Capitalist Enterprise’, International Viewpoint, March 2002), till the mid-1990’s, Hungary received half of all FDI in eastern Europe. As she points out, ‘private money, in its quest for purchasing power, goes first to the wealthy regions’. By 1998, 58 percent of all FDI to the former East bloc was going to the rich five – Poland, Hungary, Czech Republic, Slovakia and Slovenia - 80 percent to the first three. Only 29 percent was going to the entire CIS, while a mere 2 percent was going to the Balkans.
If only 2 percent is going to the Balkans, small wonder Serbia does not register big time – none of the countries of the former Yugoslavia do, though considering the amount of FDI going into Serbia-Montenegro was 0.97% of the total amount invested in all transition economies (Kekic, Laza, “Foreign direct investment and the east European transition”, paper presented at conference The European Future of FR Yugoslavia, Belgrade, November 2001), it was obviously not doing too badly. In fact, according to estimates of the Economist Intelligence Unit, by 2000, FDI in Yugoslavia accounted for almost 17 percent of Yugoslav GDP, compared with the average for all other “transition” countries of only 19.8 percent, ie the average including those handful (Hungary, Poland, Czech Republic) that had far more FDI than anyone else (Kekic, Laza, “Foreign direct investment and the east European transition”, paper presented at conference The European Future of FR Yugoslavia, Belgrade, November 2001). And it is no coincidence that this is the region that has had the most political turmoil and war. With so little interest in the region from FDI, this is an additional reason to doubt the view that imperialist intervention is about breaking a heroic socialist resistance of Serbia to FDI just itching to get in. And it is evidence that imperialist intervention is primarily motivated by the desire to bring about a stabilisation of the region to make it more attractive to investors.
Furthermore, according to Samary, other than Hungary, "the principal form of privatisation in the early 1990’s in the Czech Republic, Slovenia, Russia and Poland was what was referred to as ‘mass privatisation’ of public companies: the distribution to citizens or employees of ‘coupons’ with which they could purchase shares in the enterprises". This enabled "the former managers of the firms and the party/state to allocate to themselves substantial shares in these privatisations." This ‘creates millions of powerless shareholders allowing a concentration of assets in hands that are often almost invisible." If this is the "dominant form of privatisation in E.Europe" as she claims, then it looks remarkably similar to the process described in Serbia.
Also, growth in E.Europe "is primarily the result of the increase in the number of small businesses, while often core sectors of the economy, grouped around the huge enterprises of the past, remain stricken ... it is much more costly, both economically and socially, to restructure them." Again, there is no question of the number of small private enterprises in Serbia, and the fact that many large enterprises from the past "remain stricken", unattractive to investors, which even the openly pro-capitalist governments find “socially costly to restructure”, thus appears to be an East European, not merely Serbian, phenomenon.
In fact, it may have been precisely the realisation among Balkan elites that foreign capital would not rush in and restructure, despite the strong appeals of leaders like Milosevic in the late 1980’s, that turned many of them, particularly under Milosevic, Tudjman, Berisha and their puppets, inwards towards gangster-capitalism and outwards towards primitive accumulation via raw conquest.
Imperialism and economic ‘reform’
Nevertheless, some ask why some of the western media criticise the ‘slowness’ of economic reform and privatisation under Milosevic, with some also scoring propaganda points by occasionally slandering the good name of communism by calling this gangster-capitalist and pogromist regime ‘Communist’ (though this remains rare). For example, the Washington Post (July 03, 1996) writes "as other East Europe nations woke up from the Communist era to restructure their economies around market reform, Serbia rebuffed measures that would upset the power structure - politically or economically - within its borders. If not Milosevic, then his wife, Mirjana Markovic, has been outspoken against change."
There are various such superficial assessments by journalists without many facts, though of course the above article was just before the arrival of Nat West, the sale of Serbian Telecom, the new 1997 privatisation law etc. Sure, much of the Serbian ‘economic reform’ was not as ‘open’ as many western liberals would like, because the kleptocrats wanted to assure themselves of the spoils, but that kind of crony capitalism is not unique to Milosevic’s Serbia; however, Tudjmans Croatia, Berisha’s Albania, Marcos’ Philippines, Suharto’s Indonesia etc are not usually called ‘socialist’ for that reason. We can find plenty of statements in the bourgeois media about ‘slowness of economic reform’ in Croatia, Bosnia, Indonesia, and I’ve been surprised to learn that even South Korea allegedly took some time to crawl out of the 1997 crisis due to slowness of ‘reform’. Imperialism is demanding ever deeper ‘reform’ from just about everywhere.
In this respect, of course the regime of Djindjic is more neo-liberal than that of Milosevic, but does that mean we "support" Milosevic against Djindjic? Likewise, the Social Democratic regime which ousted Tudjman’s HDZ kleptocracy in Croatia was also more neo-liberal than the latter. Should that have meant supporting the HDZ against the more neo-liberal ‘Left’? Those who have demonised Tudjman as a new Ustashe would have found that difficult. For that matter, the regime which replaced Shevardnadze in Georgia will be more neo-liberal than his rule, the post-Marcos and post-Suharto regimes were also more neo-liberal than the crony regimes they replaced, Brazilian ‘democracy’ is more neo-liberal than the old dictatorship etc. After all, much has been written about the intervention of Soros-funded NGO’s in helping overthrow Shevardnadze, and Wolfowitz even claims that helping get rid of Marcos was the "high point in his career". I don’t believe this, but I think his role was more one of working with the opposition to ensure it was to be thoroughly pro-imperialist once Marcos had clearly outlived his usefulness and his grip on power was doomed anyway – as in Indonesia, Serbia, Georgia etc.
In the post-cold war era, imperialism has often turned to bourgeois regimes with more ‘democratic’ features than the right-wing dictatorships they replaced, as a more effective way to implement neo-liberalism, but this does not entitle any of the replaced regimes to the label ‘progressive’. To state the obvious, these replaced regimes have nothing in common with Peronism or Nasserism – this is an entirely different wave. However, imperialism is finding this strategy only partially successful. This is because the local bourgeoisie is not conveniently divided into ‘quislings’ and those with a more genuinely ‘national’ orientation as some imagine. A very good example is the fate of DOS Serbia.
Most articles in the western media on the DOS regime over the last year at least express some degree of disappointment with the alleged lack of ... "reform"! In fact, the International Crisis Group produced a report this year which lists individuals who had amassed great wealth during the Milosevic regime, and later "found refuge within the political structures which were set up after October 5, 2000 ... these people... are financing the leading political parties, both opposition and ruling ones" (Zeljko Cvijanovic, ‘ICG row shakes Serbia-West Relations’, IWPR, July 2003; ICG, ‘Serbian Reform Stalls Again’, 17 July 2003).
It is also notable that the most neo-liberal force in Serbia, the IMF-backed G-17 group around Central bank governor Mladjan Dinkic, is in open opposition to Djindjic’s Democrats, which they denounce as corrupt (many articles, for example, Zeljko Cvijanovic, ‘Dinkic survives bid to oust him’, IWPR, late 2003, which notes that "before he was assassinated on March 12, prime minister Zoran Djindjic led the opposition to Dinkic's governorship. Beginning in 2002, the late premier (ie Djindjic!) grew uncomfortable with the free market, non-interventionist policies espoused by the chairman of the National Bank of Yugoslavia ... Dinkic's policies appear to be well in line with the International Monetary Fund"). In fact, this group strongly backed the attempt to impose taxes on the Milosevic-era plutocrats, derailed by Djindjic, from their own point of view – they believe in austerity and ‘financial health’ and know that is impossible as long as gangster-capitalists pay no tax on their theft. It is notable that both the IGC and G-17 oppose the Democrat regime because of its links to this same corrupt ruling class – as under Milosevic, the Djindjic regime remains far from any imaginary neo-liberal model. It also shows that as a good representative of the Serbian capitalist class, Djindjic’s party has no intention of being a simple ‘quisling’, despite this term being foolishly used by many on the left. Is he thus a ‘socialist’ like fellow ‘non-quisling’ Milosevic?
Few would deny the capitalist nature of the Yeltsin regime in Russia, and the criminalisation of the state and the rise of a gangster-capitalist class parallels that in Yugoslavia (a good description is provided by Kagarlitsky, ‘Political capitalism and corruption in Russia’, Links, May-August 2002). But are they more ‘quisling’ than their Yugoslav counterparts? "Unable to sell enterprises at appropriate prices, the ruling bureaucracy was doomed to take the road of ‘political capitalism’, handing out property to its partners and clients" (Kagarlitsky, p 45). "This is reflected in the privatisation process which has enriched Russian insiders, share flotations which have been restricted for foreign investors, and an opaque legal structure which makes it well nigh impossible to enforce share-ownership rights and commercial contracts. This strategy is designed to protect massive vested interests, many linked to the Kremlin and favoured insiders" (Peter Truscott, ‘Russia First: A new school of thought in Russia’, Labour Focus on Eastern Europe, No. 57). It’s a simple matter of class interest.
What do imperialists say about Croatia and Bosnia?
It is notable that much of the Belgrade-apologist wing of the left says little about some fairly direct imperialist campaigns against both Croatian leader Tudjman and Bosnian leader Izetbegovic, as this may question their assumption that the late imperialist hostility to Milosevic was motivated by opposition to his ‘socialism’.
Following the overthrow of Shevardnadze, George Soros boasted about his role in funding the opposition (does this mean Shevardnadze was some kind of closet socialist?), and also his role in funding NGO opposition leading to the overthrow of Milosevic AND of Tudjman:
“In mid-2002, Mr. Shevardnadze made his first of many complaints about Mr. Soros's political interference in the country, and shortly afterward, more than a dozen young people stormed the offices of Mr. Bokeria's Liberty Institute, smashing computers and beating up several members of the staff. Mr. Soros responded by suggesting during a news conference in Moscow that Mr. Shevardnadze's government could not be trusted to hold a proper parliamentary election in 2003.”
”It is necessary to mobilize civil society in order to assure free and fair elections because there are many forces that are determined to falsify or to prevent the elections being free and fair,” Mr. Soros said. “This is what we did in Slovakia at the time of [Vladimir] Meciar, in Croatia at the time of [Franjo] Tudjman and in Yugoslavia at the time of Milosevic” (‘Georgia revolt carried mark of Soros’, Mark MacKinnon, Toronto Globe and Mail, November 26, 2003).
But this goes back years. In mid-1998, the US government invited the five-party Croatian opposition block to Washington, organised through the US embassy in Zagreb, to support their campaign against Tudjman’s HDZ (Culic, M, "The American Tour of the Croatian Opposition," Alternative Information Mreza, July 20, 1998). Around the same time, NATO invited the eight party Bosnian opposition bloc to its headquarters in Brussels, and declared support for the campaign against the Izetbegovic regime by these parties. Izetbegovic asked if they also wanted "air force support of NATO in order to come to power" (Peranic, D, "Brussels Protocol Unites the Opposition," Alternative Information Mreza, July 24, 1998).
The reactionary Heritage Foundation produces an ‘Index of economic freedom’, assessing the progress towards open capitalism of countries throughout the world according to a US-inspired ‘model’. This list in 2003 gives Serbia very low marks, so this may be an argument for the case that Serbia is somehow semi-socialist. Cuba and North Korea have lower marks; but the US-backed Karimov dictatorship in Uzbekistan and the Burmese junta have the same marks as Serbia. I think this tells us which kinds of regimes it most resembles, and that you don’t have to be socialist to be low on the list. Bosnia and Rumania also score very low marks, though better than Serbia; but the mark of Serbia itself drastically dropped from 2002 to 2003, during the DOS regime, again indicating the slowing of DOS ‘reform’ in imperialist eyes; Croatia now has a much better score, but these marks have improved very drastically since the defeat of Tudjman, which would therefore have to tell us Tudjman was more ‘socialist’ than his Social Democrat successors according to much leftist logic. Of more interest is what it says about these countries.
On Serbia, of course it supports the Djindjic government which "is committed to far-reaching reforms." But "vast problems remain, however, most notably a corrupt judiciary that needs radical reform. Yugoslavia's fiscal burden of government and government intervention scores are both 1 point worse this year. The World Bank reports that the government consumed 25.3 percent of GDP in 2000, up from the 20.6 percent reported in the 2002 Index. As a result, Yugoslavia's government intervention score is 1 point worse this year. According to the Economist Intelligence Unit, a new privatisation law was passed ... under the new law, some 4,000 enterprises are scheduled to be sold off over the next four years."
A recent Serbian report (Vlahovic and Kalamperovic on Reform Results’, Tanjug, Belgrade, December 10, 2003) showed that the regime had privatised 1005 enterprises. Yes, 1000 enterprises in three years under Djindjic is faster than 2000 enterprises in 11 years under Milosevic. However, considering years of war, is that difference fundamental? Especially as the Heritage report continues "however, there are no plans to sell off majority stakes in the big utilities."
The same Serbian report claims "Sixty percent of the companies in Montenegro are private and 15 more companies remain to be privatized." However, this does not tell us the size of the companies. The Heritage report is more specific: "Montenegro approved a plan to sell off most of the country's state-owned industries…. By April 2001 only 4% of Montenegro's total social capital had been privatised." Thus the "pro-western" Djukanovic regime has long remained far more state-controlled than that of Milosevic.
Of interest is the fact that Serbia gets good marks for having some of the lowest personal and corporate tax rates in the world (maximum 20 percent for both), which the DOS regime inherited from Milosevic.
On Croatia, the Heritage report is scathing: "Since the death of Franjo Tudjman, Croatia has begun to change course. Former Communist Ivica Racan became premier of the moderate reformist government but inherited an economy in shambles. Tudjman and his allies had plundered the national treasury, partly by manipulating privatization of state-owned companies. The government recognizes that it needs to pursue privatization, and the parliament has approved the sale of the electricity company and several state-owned banks and oil companies (ie, in state hands under Tudjman). As a result, foreign direct investment rose to $1 billion in 2001. The Racan government has decreased subsidies to public enterprises. Another serious drain on the treasury, Croatia's pension system, is being reformed; since January 2001, Croatia has been moving toward a more market-based pension system."
"According to the U.S. Department of State, the relatively low level of foreign direct investment in Croatia ‘is due to the political instability of the last decade as well as the policies of the previous regime. The former regime under Franjo Tudjman went out of its way to obstruct foreign investors and award the spoils of industry to political cronies. In contrast, since coming to power in January 2000, the current government has taken active measures to welcome foreign investors, expedite privatization of the state monopolies, and improve the Croatian business environment.’ Croatia's bureaucracy, like other post-communist regimes, remains entrenched, and red tape abounds. The Economist Intelligence Unit cites high wage costs and ‘restrictive labour laws’ as considerable impediments to business."
On the ‘market-based pension system’, Tudjman combined gangster-capitalism with maintaining a degree of social benefits. The Social-Democrats attacked these ‘social-democratic’ hangovers from Tudjman, taking the knife to pensions, children’s allowances, veterans’ pensions and the very generous maternity allowances introduced by Tudjman, as part of its "rationalisation of social expenditures". The pro-neo-liberal source notes that "privileged pensions existed even during socialism, but metastasised under Tudjman ... Thus, the former communist Racan was left with a slightly paradoxical task: to remove all social-parasitic elements from Tudjman’s ideology, which has infected the entire society ... the Croatian citizens are not used to living in liberal capitalism and the scope of social benefits is still extremely broad" (Boris Raseta, ‘Curtailing of social benefits’, AIM, Belgrade, August 5, 2001). So "support Tudjman against Racan"?
On Bosnia, the Heritage report claims "the rule of law remains virtually nonexistent, and local courts are subject to substantial political interference. The weak central government spends freely but ineffectively; and most of the older political parties in all three ethnic communities are linked to organized crime. A lack of privatization caused the United States to suspend aid in December 1999. Since then, there has been some improvement. However, such problems as intrusive bureaucracy, long and costly registration procedures, and restrictive labor laws, along with the obvious political fragility, remain unaddressed. Overall, the economy remains controlled by a political elite at odds with reforms that would lead to greater openness."
"According to the International Monetary Fund, the high level of government expenditure results from entitlements to the elderly, invalid, and disabled; benefits to war veterans. Business regulations remain complex, cumbersome, and intrusive, providing for the maximum of bureaucratic control. Establishing a business in Bosnia can be an extremely burdensome and time-consuming process for investors. In the Federation, there are 14 different administrative approvals needed for registration. The average time to complete the process in the Federation is 95 days. However, the process can often take a year or more."
It is also interesting that while Heritage gives excellent marks to Slovenia, it has one sore point: privatisation: "The establishment has never accepted the need for radical economic reform. For a number of years, the sale of key assets to foreigners has encountered widespread hostility. The government has been slow to privatize the banking and insurance sectors, and foreign direct investment has been modest because of the high level of bureaucratic red tape. In May 2002, however, the government completed the sale of a minority stake in Slovenia's largest bank to a Belgian financial institution. Janez Drnovsek, the leader of a center-left parliamentary coalition, has moved forward with ambitious plans for privatization in 2001-2002 that include financial institutions, an aluminum firm, a port, and an airport."
So under Tudjman Croatia “went out of its way to obstruct foreign investors” and in Slovenia “the sale of key assets to foreigners has encountered widespread hostility”. If such statements were made about Milosevic’s Serbia it would be taken as a sure sign by his fan club on the left of his regime’s socialist or at least anti-imperialist nature. A little consistency would be useful.
Conclusion
In this paper, it has been established that:
§ the foundations of a workers’s state had already been drastically weakened by the later Tito and definitely post-Tito era, following over 20 years of ‘market socialism’
§ the new pro-capitalist measures introduced by Milosevic in 1988, combined with the chauvinist ‘anti-bureaucratic revolution’ which destroyed class solidarity in Yugoslavia, could not but be a decisive point burying the ‘socialist’ corpse
§ privatisation proceeded slowly in Serbia, but this was common throughout eastern Europe and especially among the other former Yugoslav republics
§ privatisation was not restricted to small firms or certain non-strategic or consumer-oriented sectors of the economy where it may help out in an NEP/perestroika, but involved highly strategic areas of the economy
§ the governing elite, in the regime and ruling parties, actively and openly engaged in large-scale private and ‘state’ business of both legal and illegal character
§ imperialism has not been satisfied with the pace of ‘economic reform’ in Serbia’s crony-capitalist state, or in the other states in the region, especially Tudjman’s Croatia, but this makes none of them socialist.
The ‘So What’ Question
Therefore, NATO’s attack on Yugoslavia did not result from an attempt to overturn ‘socialism’ or even imaginary national-bourgeois resistance to further imperialist penetration. If the war itself were evidence of any progressive character of the regime, we would have to make similar conclusions about the Taliban, the Haitian junta, the Argentine junta, Mohammed Aideed, Noriega, Saddam Hussein, Charles Taylor, the Sudanese junta etc, all of which have suffered imperialist attacks, invasions or interventions.
The view that the 1999 war was about trying to ‘break in’ to a socialist environment is highly ‘economistic’ – in reality, imperialism’s interests are broader, and it intervened to promote a regional stabilisation to improve the investment climate while promoting the need for a US-dominated NATO in the post-Cold War world. This stability was threatened both by the maximalist actions of the Milosevic regime, once the ultra-right around Vojislav Seselj’s SRS returned to the ruling coalition in March 1998, and by the emergence of the KLA. Both a massive Albanian refugee outflow to the southern Balkans due to ethnic cleansing, and an independent Kosova, were seen as major threats to imperialist enforced stability.
Previous to 1998, there had been no fundamental conflict between imperialism and Milosevic. Imperialism did not ‘break up’ Yugoslavia as is often claimed, but tried its hardest to keep it together against the odds, relying on Milosevic. Previous to the Bosnian war, economic ‘reform’ in Serbia had been going ahead smoothly. When Yugoslavia broke up anyway, and a Milosevic-Tudjman alliance attacked Bosnia with the explicit aim of partitioning the state, imperialist powers maintained an arms embargo on embattled Bosnia while trying to force one partition plan or another down its throat in the interests of Milosevic and Tudjman. These two leaders accepted every partition plan. However, with their massive superiority in arms inherited form the old Yugoslavia (Europe’s fourth military power), the Bosnian Serb rightist leaders seized an inordinate amount of Bosnia and refused to leave any of it to effect the partition plans. Thus imperialism put sanctions on Serbia so that it would pressure the Karadzic forces. This paid off, Milosevic split with the ultra-right, sanctions were lightened in 1994 and lifted in 1995 following the US-imposed Dayton Accord, which split Bosnia in two between an ethnically cleansed Serb republic and a Croatian-dominated Muslim-Croat federation. The attempt by the Kosovar Albanian leadership to have their own grievances heard at Dayton was rejected by the US. In the next couple of years, the Milosevic regime further opened up to privatisation and imperialism, so the West had no interest in undermining the regime. It was only the appearance of the KLA, gaining arms from the mass Albanian insurgency against Berisha in 1997, which upset the soup.
But now let us say that this is all wrong, and that despite everything I have shown above, some are still not convinced that Milosevic’s Serbia was capitalist. For argument’s sake, let us say you are correct. In that case, how can we make sense of Milosevic’s wars as a valiant attempt to defend Serbian "socialism"? Or for those who don’t think it was socialist, how can these wars be seen as at least defending a more national and less slavish to imperialism approach to capitalist development?
During the great multi-ethnic strike wave of the late 1980’s, Croatian and Serb workers from multi-ethnic Vukovar in Croatia descended on Belgrade in 1988 to join other workers protesting the then IMF package. This centre of multi-ethnic worker resistance was levelled by the Yugoslav army in 1991 and brutally ethnically cleansed in a 3-month siege, its Croat majority expelled, its main industries destroyed. In what way did the destruction of Vukovar in Croatia help maintain the ‘socialist’ nature of Serbian industry?
When Kosovar Albanian miners chanting ‘Yugoslavia, Yugoslavia’ and carrying portraits of Tito marched to defend the Yugoslav constitution in 1989, and Milosevic crushed the miners in blood and sacked the bulk of the workforce, while destroying the Yugoslav constitution, was this a good way of defending workers back in ‘socialist’ Serbia?
As the war threat against Bosnia mounted, tens of thousands from all ethnic groups took to the streets in April 1992, carrying Tito’s picture, "Brotherhood and Unity" slogans, and "one could see old Yugoslav flags with the red star, flags of the Yugoslav League of Communists, dissolved in 1990." War began when one such demonstration in multi-ethnic Sarajevo was fired on by Karadzic’s anti-communist Chetniks from the surrounding hills. In what way did three and a half years of such bombardment help defend the ‘socialist’ character of factories back in Serbia?
Multi-ethnic working-class Tuzla – where the miners had once given support to the great British miners’ strike of 1984-85 - played a key role in the defence of multi-ethnic Bosnia, imposing the first decisive defeat of the Chetnik assault. The Trade Union Council there consisted of nine members: 4 Bosnian Moslems, 3 Bosnian Serbs, 2 Bosnian Croats. How did the continuing Chetnik shelling of Tuzla contribute to the defence of ‘socialist’ Serbia?
When Chetnik forces destroyed Muslim religious and cultural buildings, historic libraries and museums such as the National Library of Bosnia-Herzegovina, with "a hundred thousand manuscripts and rare books, and centuries of historical records", and the Oriental Institute in Sarajevo, with more than five thousand Islamic and Jewish manuscripts, from many parts of the Middle East, and, together with their Croat chauvinist allies, dynamited 1400 mosques (Michael Sells, ‘The Bridge Betrayed’), attempting to eradicate Islamic civilisation in Europe, did this somehow magically better help preserve ‘socialist’ production relations in Serbia?
When Milosevic began trying to privatise the Trepca complex in 1997-98 and the illegal Kosovar parliament warned against such ‘neo-colonialism’, in what way was it the side of Milosevic which was ‘defending socialism’?
When NATO bombs starting falling in 1999, and Milosevic-Seselj used this war atmosphere to expel 850,000 Albanians from their country – a 1948 Palestine ‘solution’ – was this terror aimed at teaching the Albanians the meaning of ‘socialism’? In what way was this style of ‘resistance’ conducive to helping the Serbian working class protect ‘their’ factories under NATO’s bombs?
These are not rhetorical questions. The view of many on the left is precisely that these wars of aggression launched by Belgrade against its neighbours were, according to some kind of metaphysics, simply a strange way of defending ‘socialist’ Serbia against imperialism, whose attempts to destroy Serbian ‘socialism’ were allegedly reflected in the neighbouring states’ and peoples’ attempts to defend themselves. This summary makes it difficult to see how this could be.
Michael Karadjis
January 5, 2004
1 comment:
Old, excellent article, unfortunately, still very much actual and important.
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