Serbia After Milosevic

Let the Neoliberal Games Begin

Jeremy Scahill

This article is from the January/February 2001 issue of Dollars and Sense: The Magazine of Economic Justice available at

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This article is from the January/February 2001 issue of Dollars & Sense magazine.

BELGRADE-It's October 5th. The fires at the federal parliament and Radio Television Serbia sparked during the start of the revolt hours earlier have begun to die down. Gangs of people run through the streets smashing symbols of the Milosevic regime. Bricks are hurled through Socialist Party buildings; the headquarters of the Yugoslav United Left, or JUL (the party of Milosevic's wife, Mirjana Markovic) are being ransacked. Unfortunate officials and "government collaborators" are being physically assaulted. A large cloud of black smoke hovers over the city as the sun sets on Belgrade. People are drinking and dancing in the streets, celebrating what they have declared "the people's victory."

At a popular hamburger joint downtown called Loki, dozens are devouring gurmanska sandwiches, drinking bottles of Jelen beer and listening to small hand-held radios broadcasting the speeches of the country's new leaders. A woman of about 65, clearly out of place at the gathering, pushes her way to the counter. In her hand are a few tattered Yugoslav dinars. "How much for a piece of bread?" she asks. "You can't buy just a piece of bread - you have to buy it with Kajmak [a cheese spread]," the young woman behind the counter replies. "But my grandson is hungry and doesn't like Kajmak. Can't you just sell me one piece of bread?" "I can, but you still have to pay for the Kajmak." The older woman looks at her money. "I don't have that much." "Then I can't help you," the young woman replies, as she calls for the next person in line to step forward. The old woman looks around at the bystanders as though appealing for support. None is forthcoming. "I'll remember this," she says and walks away. So ended day one of Serbia's revolution. Since then, the gap between promise and reality has widened further, with visions of democracy giving way to a harsh Western model of economic reform.

Prelude to the "People's Victory"

On September 24, 2000, Serbia held its first elections since the NATO bombing, and President Slobodan Milosevic was voted out. Once it was clear that he wasn't going to accept the outcome, calling instead for a second round, tens of thousands of people occupied the streets of Serbia's cities and demanded that he step down. The opposition parties launched the nation's first general strike since World War II, which brought the country to a virtual standstill and led to the October 5 revolt. In a stunning move, Milosevic appeared on national television to congratulate opposition candidate Vojislav Kostunica on his victory. The opposition forces had long been divided, suffering defeat after defeat for a decade. Their time had finally come.

Twenty years ago, when Yugoslavia's longtime Communist leader Josip Broz Tito died, there was a popular expression in government circles for the period after his death: "I Posle Tita, Tito." (After Tito, Tito.) The country was ill-prepared for the death of the man who had ruled from the top for four decades. For many, it marked the beginning of the end of relative economic, political, and social stability.

After years of chaotic governance in Yugoslavia, Milosevic rose to power in Serbia in 1987. Using fiery nationalist rhetoric, he moved quickly to roll back Tito's de facto philosophy that the only way to keep Yugoslavia's six republics united was to keep Serbia, the most powerful one, weak. Milosevic wanted a greater Serbia. His ambitions, coupled with those of the equally nationalistic Croatian government and the independent-minded Bosnian government, launched the bloodbath that ultimately ended in the break-up of the Yugoslav Federation. In the end, only Serbia and Montenegro remained united in the Federation.

Now, after 13 years and four wars, Milosevic's rule has come to an end. There is no catchy phrase calling for a continuation of Milosevic's legacy, and frankly, not many are hoping for that. Milosevic's political death wasn't nearly as noble as Tito's physical demise. Nonetheless, the country remains largely frozen, this time in a state of suspended euphoria that "He" is no longer in power. Even now, months after the revolt that brought down the government, people remain on a honeymoon, as one young activist put it, of "something, anything but Milosevic."

Free Serbia, or Serbia for Free?

Not everyone is taking time to smell the flowers. A small group of neoliberal economists, in collaboration with key politicians from the new power structure, are working diligently to push through stringent economic reforms. They are meeting almost no public resistance, while enjoying praise from a largely uncritical domestic media (which is receiving substantial sums of money from private sources in the West).

Meet the men of G-17 (short for "Group of 17 Economists"), a Belgrade-based group of maverick capitalists who have almost overnight soared to become the new economic power brokers in Yugoslavia. Its leaders wear expensive suits and use cocky rhetoric. "We want to implement Polish shock therapy, Scandinavian social security systems, and Slovenia's model of privatizations," says Mladjan Dinkic, a top G-17 official and new governor of the Yugoslav Central Bank. "We will start to make an economic environment favorable for private and other investments." The promise of social security seems disingenuous, considering how G-17 intends to proceed.

The economists of the "new" Yugoslavia vow to bring a swift death to what they call "the old political establishment." That seems benign enough, if they are talking about crony capitalism, corruption, and economic mismanagement, all of which were prevalent under Milosevic. But in Yugoslavia, killing the old system also means ending state subsidies and price controls. The Milosevic government, for all its corruption, protected public utilities, public transportation, and energy as well as basic consumer goods, keeping prices affordable to average people. G-17's official program, currently being enacted by the new government, threatens to "abolish all types of subsidies." "This measure must be implemented without regrets or hesitation," the program states, "since it will be difficult if not impossible to apply later, in view of the fact thatÉstrong lobbies may appear and do their best to block these measures."

Within days of the new government taking office, the effects of these measures sharply kicked in. The prices of basic food items doubled and tripled: A gallon of milk rose from $1.01 to $2.32; a kilogram of sugar, from $.25 to $.55; and a liter of vegetable oil, from $.15 to $.71. Gasoline prices skyrocketed from $1.15 to $2.27 a gallon. These were devastating jumps, considering that the average monthly wage is about 3,000 Yugoslav dinars, the equivalent of U.S. $45. Economists appeared on the "new" state-run media to explain that the Milosevic government had kept prices "artificially low" to quell "dissatisfaction with his regime."

In fact, it was after the new ruling coalition, the Democratic Opposition of Serbia (DOS), began seizing state-run factories that the system of controls collapsed and prices started to shoot up. These takeovers, which have subverted the authority of existing worker-management and state-management structures, are unconstitutional. Also, many institutions were run by the Serbian Republic, not the federal government. Since the DOS currently holds power only at the federal level (as of this writing), it technically has no right to seize those enterprises. The new Minister of Foreign Trade (and head of G-17) Miroljub Labus concedes that these actions are illegal, but, he says "they are needed to consolidate victory over Mr. Milosevic."

Then there is the issue of the gangster-like tactics of opposition leader Zoran Djinjic. Djinjic is a powerful yet unpopular figure, whose credibility has suffered tremendously over the last decade for deal-making with the Milosevic regime and for leaving the country to meet with Western officials during the NATO bombing. After the October revolt, he led many of the early takeovers of state-run factories and government ministries, in some cases sending armed men to procure "resignations." In one instance, he attempted to replace the head of Customs with a personal friend, an action that President Kostunica quickly moved to reverse.

All of this in the midst of a seemingly endless flurry of meetings with U.S. and Western European officials, representing governments, corporations, and Western-based non-governmental organizations (NGOs). Privatizing state-owned industries is a high priority, and as G-17's Dinkic says, "The country shall be opened for foreign banks." Western newspapers praise the reforms, declaring that Yugoslavia is finally beginning the process of "catching up" with other countries in the region.

These changes represent a sharp break with the past. During Tito's reign, many people saw Yugoslavia as a leading force in the fight against global domination by both the United States and the Soviet Union. Yugoslavia's workers were officially protected, and its industries were state-owned. Though Tito's government accrued a sizeable debt (mainly in credits from the United States and its allies), the economy was stable throughout.

Even under Milosevic in the post-Cold War era, Yugoslavia did not go the same route as many former Eastern Bloc countries, which opened their markets to multinational corporations, privatized industry, and deregulated their economies. Milosevic's government did enact laws allowing limited privatization. But even his critics point out that these laws were used primarily to enrich a small circle of loyalists. "It was South American style," says Antonije Antic, 56, a newly elected member of the Belgrade City Council on the opposition ticket. "Under Milosevic's privatization program, a few families owned the country and they were in control of all the so-called private enterprises."

Milosevic was no Tito. His regime used left-wing rhetoric to justify duplicity and theft. His wife's party, JUL (which enjoyed almost no public support), employed the strongest anti-imperialist language while reaping enormous benefits from the limited privatization. Nonetheless, Yugoslavia was not Bulgaria, whose economy was ravaged by foreign investors after the Soviet Union fell.

But if the first visit of a high-level World Bank delegation to Belgrade is any indication, Yugoslavia could be in for a bumpy ride. The Bank's Christian Poortman arrived in mid-October, calling his visit a "reconnaissance mission." He was quick to insist on the settlement of Yugoslavia's $1.7 billion debt to the International Bank for Reconstruction and Development as a prerequisite for the country's World Bank membership, which was canceled in 1993.

Poortman addressed a press conference in Belgrade, accompanied by G-17 leaders Dinkic and Labus. Asked about the negative impact of the World Bank and International Monetary Fund (IMF) on other countries in the region, Labus declared, "We absolutely have no need to protect ourselves from the World Bank, quite the opposite. We will have very successful and useful cooperation and we are sharing the same goals." Dinkic was more direct. "We need the help of international financial institutions," he said. "We are dependent on foreign aid."

G-17 knows quite a bit about foreign aid. Indeed, at least three of its members are on the payroll of the IMF in Washington, D.C. These men played key roles in enacting the IMF "reforms" in other Central and Eastern European countries that sparked mass protests in Prague last fall. Additionally, the group's budget is made up largely of foreign funders, like the Washington-based Center for International Private Enterprise, an affiliate of the National Endowment for Democracy. According to one source, G-17 is also seeking more than $1 million from a consortium of NGOs working with the U.S. government, in order to pay the salaries of economists it hopes will advise President Kostunica.

Behind the scenes, sources say, Dinkic, Labus, and other G-17 officials have been meeting with U.S. and Western European government and business officials. In one such meeting, Labus, according to a source who was present, assured a U.S. representative that the new government would win workers' support for widespread privatization and foreign investment by giving them vouchers. The vouchers, to be touted as "shares" in private corporations, w ould be worth little more than the paper they are printed on.

Whose Yugoslavia

The 18 parties that make up the DOS are hardly a unified bunch. They chose Kostunica as their candidate because they thought he had the best chance of defeating Milosevic, not because they all supported his views. "[The Milosevic regime] could not attack him," says University of Belgrade historian and

Kostunica advisor Dusan Batakovic, "because he was firmly against the NATO bombing, condemning [it] as illegal and anti-humanitarian. On the other hand, he was telling people that Milosevic is the largest part of the problem we have with the rest of the world. Therefore, he is one of those few who offered a useful synthesis of being anti-Milosevic and being a strong and devoted Serb at the same time." But the very qualities that made Kostunica a desirable candidate also make a majority of the coalition parties nervous. Most analysts say the coalition will soon divide into two clusters, one led by Kostunica, the other by Djinjic. Kostunica makes many Western officials nervous too. He seldom mentions the United States when he talks of rebuilding ties with the international community. He has said he will not turn Milosevic and other indicted war crimes suspects over to The Hague, calling it "a private court for American interests." Independence for Kosovo, he says, is not on the table. Kostunica has challenged the presence of UN and NATO forces in the province, accusing them of failing to prevent the ethnic cleansing of Serbs. Additionally, Kostunica never traveled abroad appealing for assistance from foreign governments to unseat Milosevic. In fact, he criticized other opposition figures for such meetings during the NATO bombing.

Though the new Yugoslav leader has publicly backed the reforms being enacted by G-17 economists, advisors say he is privately very concerned. "Kostunica will distance himself very soon from them," said one close advisor. "He is fully aware of what they are trying to do," The advisor, who requested anonymity, asserts that Kostunica is in principle opposed to the IMF and World Bank. Indeed, in an interview on Serbian television soon after the election, Kostunica said he intends to "protect Western political values in Serbia from Western policy."

This stance may set Kostunica at odds with the very figures who propelled him into the presidency - politicians he criticized during the NATO bombing, who are working diligently to put Yugoslavia on the globalization fast track. G-17 and politicians like Zoran Djinjic have moved swiftly to puncture the side of Yugoslavia. If Kostunica is not with this program, he will have an uphill battle to fight.

Meanwhile, foreign investors are clamoring to get a piece of the newest meat on the market. They see cheap labor and largely untapped markets. They see dollar signs.

"Take a hint from [international financier] George Soros," says Esad Zaimovic of the Ex Mont investment consulting firm. "He was the first foreigner to start a bank in postwar Bosnia, jointly with the European Bank for Reconstruction and Development. He sold the stake for almost twice as much as he invested and has now moved into Montenegro." Indeed, Soros is in a prime position to profit in the current situation. For years, his Fund for an Open Society has funded or controlled numerous NGOs in Yugoslavia; currently, it is financing nearly every privately run newspaper in the country.

The devastation of the NATO bombing also has foreign investors seeing big dollar signs. After the bombing, G-17 estimated that the 78 days of air strikes had caused $60 billion in damage to the country, with $3 billion in direct damage to Yugoslav industry. NATO Secretary General George Robertson recently declared that NATO has no intention of paying for the damage. Consequently, Yugoslavia will be forced to borrow money to pay mainly foreign contractors to rebuild. U.S. companies, including the engineering firm Brown & Root (a division of the Texas-based Halliburton) and manufacturing giant General Electric, are already making inroads, looking to profit from an estimated $4 billion in projects. Britain's Department of Trade and Industry is also preparing to get into the act.

Despite all of this, some of the forces that brought down Milosevic are now downplaying the NATO bombing's responsibility for the destruction. "We have to explain to the Serbian people that our real friends are the United States, the European Union - I want to say the modern world," says Slobodan Homen, a leader of the student resistance during the Milosevic era. "We are really looking now to the West. We had support in the process of democratization, but I think assistance for this transitional period and the future are much more important."

Kostunica, however, is not so gung-ho. While he is traveling around Europe, shoring up support and aid from countries like France, Sweden, and Greece, he retains a cool posture toward U.S. officials. Last November, at a ceremony in Vienna to welcome Yugoslavia back into the Organization for Cooperation and Security in Europe, Kostunica refused to meet face to face with outgoing Secretary of State Madeleine Albright, a leading proponent of the NATO bombing.

The Conflict Yet to Come

There is no doubt that the revolt that brought Slobodan Milosevic down was a popular mobilization, even though the United States and other foreign powers were blatantly involved in toppling the government. (They funneled some $77 million to the opposition before the September election.) But the forces that were united against the old regime represent a fractured panorama of views on what should happen next. G-17 and other members of the new ruling coalition are taking extensive liberties in interpreting just what people were fighting for. The economic reforms they are pushing through may not sit well with the broader population who bravely stood up for change.

The reality for Yugoslavia may not be the "wine and roses" Western leaders promise "democracy" is made of. In the post-Cold War world, many countries in the region have learned the hard way that reform doesn't necessarily mean a better life. In Poland, Bulgaria, and Romania, workers earn Eastern European salaries and pay Western European prices. IMF austerity measures have gutted social welfare programs. For the most vulnerable people in these countries, the future is bleak.

"The rhetoric here right now is about integrating with Western Europe," says political analyst Novak Gajic, "but the reality is that, with the planned economic reforms, Yugoslavia will look more like the newest members of the Third World, the countries of Central and Eastern Europe, than France or Britain. As a region, we in the Balkans are quickly becoming part of the Third World." This transition has already started. In the last 13 years, Serbia's per capita gross domestic product (GDP) has plunged from $3,200 to $1,700, placing it on a par with countries like El Salvador.

The desperate economic situation in Yugoslavia is fertile ground for a neoliberal takeover. Official Milosevic-era statistics put unemployment at around 30%; unofficial sources place the figure much higher. Many industrial plants lay idle, devastated by Western economic sanctions (and corrupt management) and unable to export goods or import spare parts. Those workers who are employed often receive salaries hardly adequate to support a family. As a result, many are selling or importing goods for the black market. To make matters worse, NATO's air strikes left more than 150,000 people jobless (according to G-17) and pierced the heart of an already-teetering economic base. The promise of better wages from private firms will be difficult to resist.

On the other hand, the effects of the current reforms could well spur the emergence of a democratic left opposition. Critical supporters of the new government, such as leaders of the trade union federation Independence, say they are preparing their own economic blueprint for the country which, in the words of union head Branislav Canak, will propose solutions "without overall neoliberal attitudes and approaches."

"In the case that the government does not accept [our] approach," Canak says, "a lot of the population will realize that, with a long-term neoliberal program, there will not be room for new jobs because new jobs and neoliberal policies are in a contradictory position. We already have 60% unemployment. We are giving the new government a chance in the short term to recover from the economic situation, but in the long term we will fight."

Jeremy Scahill is an independent journalist based in Belgrade. He reported live daily for Pacifica Radio's Democracy Now! during the 1999 NATO war and was one of the few foreign journalists in Belgrade to witness the overthrow of Slobodan Milosevic in October. © Jeremy Schahill

Resources: Democracy Now!'s archived Yugoslavia coverage; Radio B-92; Yahoo's daily news on Yugoslavia; official Yugoslav news service Tanjug ; G-17; Blagovesta Doncheva, "In Bulgaria, 10 Years of Misery," New York Times, November 11, 1999; United Nations Development Programme, Human Development Report 2000.