-Caveat Lector-
Post-War Reconstruction
The economic reforms now being imposed on the "successor states" are a
natural extension and continuation of those previously implemented in federal
Yugoslavia. In the tragic aftermath of a brutal and destructive War, the
prospects for rebuilding the newly independent republics appear bleak.
Despite a virtual press blackout on the subject, debt rescheduling is an
integral part of the peace process. The former Yugoslavia has been carved
up under the close scrutiny of its external creditors, its foreign debt has been
carefully divided and allocated to the republics. The privatisation
programmes implemented under the supervision of the donors, have
contributed to a further stage of economic dislocation and impoverishment of
the population. GDP had declined by as much as 50 percent in four years
(1990-93).28
Moreover, the leaders of the newly sovereign states have fully collaborated
with the creditors: "All the current leaders of the former Yugoslav republics
were Communist Party functionaries and each in turn vied to meet the
demands of the World Bank and the International Monetary Fund, the better
to qualify for investment loans and substantial perks for the leadership...
State industry and machinery were looted by functionaries. Equipment
showed up in "private companies" run by family members of the
nomenklatura".29
Even as the fighting raged, Croatia, Slovenia and Macedonia had entered
into separate loan negotiations with the Bretton Woods institutions. In
Croatia, the government of President Franjo Tudjman signed in 1993, an
agreement with the IMF. Massive budget cuts mandated under the
agreement thwarted Croatia's efforts to mobilize its own productive
resources, thus jeopardizing post-war reconstruction. The cost of rebuilding
Croatia's war-torn economy was estimated at some $23 billion, requiring an
influx of fresh foreign loans. In the absence of "debt forgiveness", Zagreb's
debt burden will be fuelled well into the 21st Century.
In return for foreign loans, the government of President Franjo Tudjman had
agreed to reform measures conducive to further plant closures and
bankruptcies, driving wages to abysmally low levels. The official
unemployment rate increased from 15.5 percent in 1991 to 19.1 percent in
1994.30
Zagreb has also instituted a far more stringent bankruptcy law, together with
procedures for "the dismemberment" of large state-owned public utility
companies. According to its "Letter of Intent" to the Bretton Woods
institutions, the Croatian government had promised to restructure and fully
privatize the banking sector with the assistance of the European Bank for
Reconstruction and Development (EBRD) and the World Bank. The latter
have also demanded a Croatian capital market structured to heighten the
penetration of Western institutional investors and brokerage firms. Under
the agreement signed in 1993 with the IMF, the Zagreb government was not
permitted to mobilise its own productive resources through fiscal and
monetary policy. The latter were firmly under the control of its external
creditors. The massive budget cuts demanded under the agreement had
forestalled the possibility of post-war reconstruction. The latter could only be
carried out through the granting of fresh foreign loans, a process which would
fuel Croatia's external debt well into the 21st Century. The cost of rebuilding
Croatia's war-torn economy was estimated at some 23 billion dollars...
Macedonia has also followed a similar economic path. In December 1993,
the Skopje government agreed to compress real wages and freeze credit in
order to obtain a loan under the IMF's Systemic Transformation Facility
(STF). In an unusual twist, multi-billionaire business tycoon George Soros
participated in the International Support Group composed of the government
of the Netherlands and the Basel-based Bank of International Settlements.
The money provided by the Support Group, however, was not intended for
"reconstruction" but rather to enable Skopje to pay back debt arrears owed
the World Bank...31
Moreover, in return for debt rescheduling, the government of Macedonian
Prime Minister Branko Crvenkovski had to agree to the liquidation of
remaining "insolvent" enterprises and the lay off of "redundant"
workers--which included the employees of half the industrial enterprises in
the country. As Deputy Finance Minister Hari Kostov soberly noted, with
interest rates at astronomical levels because of donor-sponsored banking
reforms, "it was literally impossible to find a company in the country which
would be able to (...) to cover [its] costs (...).32
Overall, the IMF economic therapy for Macedonia constitutes a continuation
of the "bankruptcy programme" launched in 1989 under federal Yugoslavia.
The most profitable assets are now on sale on the year-old Macedonian
stock market, but this auction of socially owned enterprises has led to
industrial collapse and rampant unemployment. Yet despite the decimation
of the economy and the disintegration of schools and health centres under
the austerity measures, Finance Minister Ljube Trpevski proudly informed
the press that "the World Bank and the IMF place Macedonia among the
most successful countries in regard to current transition reforms". The head
of the IMF mission to Macedonia, Mr. Paul Thomsen, concurs that "the
results of the stabilization program [under the STF] were impressive" giving
particular credit and appreciation to "the efficient wages policy" adopted by
the Skopje government.33
Rebuilding Bosnia and Herzegovina
With a Bosnian peace settlement apparently holding under NATO guns, the
West has unveiled a "reconstruction" programme which fully strips
Bosnia-Herzegovina of its economic and political sovereignty. This
programme largely consists in developing Bosnia-Herzegovina as a divided
territory under NATO military occupation and Western administration.
Resting on the November 1995 Dayton accords, the US and the European
Union have installed a full-fledged colonial administration in Bosnia. At its
head is their appointed High Representative (HR) Mr. Carl Bildt, a former
Swedish Prime Minister and European Representative in the Bosnian
Peace negotatiations. The HR has full executive powers in all civilian
matters, with the right to overrule the governments of both the Bosnian
Federation and the Bosnian-Serb Republika Srpska. The HR is to act in
close liaison with the IFOR Military High Command as well with donors
agencies.
An international civilian police force is under the custody of an expatriate
Commissioner appointed by the United Nations Secretary General Mr.
Boutros Boutros Ghali, some 1,700 policemen from fifteen countries most of
whom have never set foot in the Balkans, were dispatched to Bosnia after a
five days training programme in Zagreb.
While the West has underscored its support to democracy, the Parliamentary
Assembly set up under the "Constitution" finalised under the Dayton
Accords, largely acts as a "rubber stamp". Behind the democratic facade,
actual political power rests in the hands of a "parallel government" headed
by the High Representative and staffed by expatriate advisors.
Moroever, the Constitution agreed in Dayton hands over the reins of
economic policy to the Bretton Woods institutions and the London based
European Bank for Reconstruction and Development (EBRD). Article VII
stipulates that the first Governor of the Central Bank of Bosnia and
Herzegovina is to be appointed by the IMF and "shall not be a citizen of
Bosnia and Herzegovina or a neighbouring State..."
Just as the Governor of the Central Bank is an IMF appointee, the Central
Bank will not be allowed under the Constitution to function as a Central Bank:
"For the first six years (...) it many not extend credit by creating money,
operating in this respect as a currency board" (Article VII). Neither will the
new "sovereign" successor State be allowed to have its own currency
(issuing paper money only when there is full foreign exchange backing), nor
permitted to mobilise its internal resources. As in the other successor
republics, its ability to self-finance its reconstruction (without massively
increasing its external debt) is blunted from the outset...
The tasks of managing the Bosnian economy have been carefully divided
among donor agencies: while the Central Bank is under IMF custody, the
European Bank for Reconstruction and Development (EBRD) heads the
Commission on Public Corporations which supervises operations of all
public sector enterprises including energy, water, postal services, roads,
railways, etc. The President of the EBRD appoints the Chairman of the
Commission which also oversees public sector restructuring, meaning
primarily the sell-off of State and socially owned assets and the procurement
of long term investment funds.
One cannot sidestep a fundamental question: is the Bosnian Constitution
formally agreed between heads of State at Dayton really a constitution? A
sombre and dangerous precedent has been set in the history of international
relations: Western creditors have embedded their interests in a Constitution
hastily written on their behalf, executive positions within the Bosnian State
system are to be held by non-citizens who are appointees of Western
financial institutions. No constitutional assembly, no consultations with
citizens' organisations in Bosnia and Herzegovina, no "constitutional
amendments"...
The Bosnian government estimates that reconstruction costs will reach $47
billion. Western donors have pledged $3 billion in reconstruction loans, yet
only a meagre $518 million dollars were granted in December 1995, part of
which is tagged (under the terms of the Dayton Peace Accords) to finance
some of the local civilian costs of the Implementation Force's (IFOR) military
deployment as well as repay debt arrears with international creditors.
In a familiar twist, "fresh loans" have been devised to pay back "old debt".
The Central Bank of the Netherlands has generously provided "bridge
financing" of 37 million dollars. The money, however, is earmarked to allow
Bosnia to pay back its arrears with the IMF, a condition without which the IMF
will not lend it fresh money...35 But it is a cruel and absurd paradox: the
sought after loan from the IMF's newly created "Emergency Window" for
so-called "post-conflict countries" will not be used for post-war
reconstruction. Instead it will to be applied to reimburse the Central Bank of
the Netherlands which had coughed up the money to settle IMF arrears in the
first place... While debt is building up, no new financial resources are flowing
into Bosnia to rebuild its war-torn economy...
Multinationals have an Eye on Bosnia's Oil Fields
Western governments and corporations show greater interest in gaining
access to potential strategic natural resources than committing resources for
rebuilding Bosnia. Documents in the hands of Croatia and the Bosnian
Serbs indicate that coal and oil deposits have been identified on the eastern
slope of the Dinarides Thrust, a region retaken from rebel Bosnian Krajina
Serbs by the Croatian army in the final offensives before the Dayton Peace
accords. Bosnian officials report that Chicago-based Amoco was among
several foreign firms that subsequently initiated exploratory surveys in
Bosnia. The West is anxious to develop these regions: "The World Bank
--and the multinationals that conducted operations-- are [August 1995]
reluctant to divulge their latest exploration reports to the combatant
governments while the war continues"...36 Moreover, there are also
"substantial petroleum fields in the Serb-held part of Croatia just across the
Sava river from the Tuzla region".37 The latter under the Dayton Agreement,
is part of the US Military Division with headquarters in Tuzla.
The territorial partition of Bosnia between the Federation of
Bosnia-Herzegovina and the Bosnian-Serb Republika Srpska under the
Dayton Accords thus takes on strategic importance, the 60,000 NATO
troops on hand to "enforce the peace" will administer the territorial partition
of Bosnia-Herzegovina in accordance with Western economic interests.
National sovereignty is derogated, the future of Bosnia will be decided upon
in Washington, Bonn and Brussels rather than in Sarajevo... The process of
"reconstruction" based on debt rescheduling is more likely to plunge
Bosnia-Herzegovina (as well as the other remnant republics of former
Yugoslavia) into the status of a Third World country.
While local leaders and Western interests share the spoils of the former
Yugoslav economy, the fragmentation of the national territory and the
entrenching of socio-ethnic divisions in the structure of partition serve as a
bulwark blocking a united resistance of Yugoslavs of all ethnic origins
against the recolonization of their homeland.
Concluding Remarks
Macro-economic restructuring applied in Yugoslavia under the neoliberal
policy agenda has unequivocally contributed to the destruction of an entire
country. Yet since the onset of war in 1991, the central role of
macro-economic reform has been carefully overlooked and denied by the
global media. The "free market" has been presented as the solution, the
basis for rebuilding a war-shattered economy. A detailed diary of the war
and of the "peace-making" process has been presented by the mainstream
press. The social and political impact of economic restructuring in
Yugoslavia has been carefully erased from our social consciousness and
collective understanding of "what actually happened". Cultural, ethnic and
religious divisions are highlighted, presented dogmatically as the sole cause
of the crisis when in reality they are the consequence of a much deeper
process of economic and political fracturing.
This "false consciousness" has invaded all spheres of critical debate and
discussion. It not only masks the truth, it also prevents us from
acknowledging precise historical occurrences. Ultimately it distorts the true
sources of social conflict. The unity, solidarity and identity of the Southern
Slavs have their foundation in history, yet this identity has been thwarted,
manipulated and destroyed.
The ruin of an economic system, including the take-over of productive
assets, the extension of markets and "the scramble for territory" in the
Balkans constitute the real cause of conflict. What is at stake in Yugoslavia
are the lives of millions of people. Macro-economic reform destroys their
livelihood, derogates their right to work, their food and shelter, their culture
and national identity... Borders are redefined, the entire legal system is
overhauled, the socially owned enterprises are steered into bankruptcy, the
financial and banking system is dismantled, social programmes and
institutions are torn down... In retrospect, it is worth recalling Yugoslavia's
economic and social achievements in the post-war period (prior to 1980):
the growth of GDP was on average 6.1 per annum over a twenty year period
(1960-1980), there was free medical care with one doctor per 550
population, the literacy rate was of the order of 91 percent, life expectancy
was 72 years...37
Yugoslavia is a "mirror" of similar economic restructuring programmes
applied not only in the developing World but also in recent years in the US,
Canada and Western Europe... "Strong economic medicine" is the answer,
throughout the World, people are led to believe that there is no other solution:
enterprises must be closed down, workers must be laid off and social
programmes must be slashed... It is in the foregoing context that the
economic crisis in Yugoslavia should be understood. Pushed to the extreme,
the reforms in Yugoslavia are the cruel reflection of a destructive "economic
model" imposed under the neoliberal agenda on national societies
throughout the World...
ENDNOTES
1. See the account of Warren Zimmermann (former US Ambassador to
Yugoslavia), "The Last Ambassador, A Memoir of the Collapse of
Yugoslavia", Foreign Affairs, Vol 74, Number 2, 1995.
2. Milos Vasic et al, "War Against Bosnia", Vreme News Digest Agency, No.
29, 13 April 1992.
3. Sean Gervasi, "Germany, US and the Yugoslav Crisis", Covert Action
Quarterly, No. 43, Winter 1992-93.
4. Ibid
5. Dimitrije Boarov, "A Brief Review of Anti-inflation Programs, the Curse of
Dead Programs", Vreme New Digest Agency, No. 29, 13 April 1992.
6. World Bank, Industrial Restructuring Study, Overview, Issues and Strategy
for Restructuring", Washington DC, June 1991, p. 10 and 14.
7. Sean Gervasi, op cit.,
8. Ibid.
9. Ralph Schoenman, "Divide and Rule Schemes in The Balkans", The
Organiser, 11 September 1995.
10. World Bank, op cit., p. 10. The term GDP is used for simplicity, yet the
concept used in Yugoslavia and Eastern Europe to measure national product
is not equivalent to the GDP concept under the (Western) system of national
accounts.
11. See Judit Kiss, Debt Management in Eastern Europe, Eastern European
Economics, May-June 1994, p. 59.
12. World Bank, op cit
13. Ibid, p. viii.
14. Ralph Schoenman, "Divide and Rule Schemes in The Balkans", The
Organiser, 11 September 1995.
15. For further details see World Bank, Yugoslavia, Industrial Restructuring,
p. 38.
16. Ibid., p. 38.
17. Ibid., p. 33.
18. Ibid., p. 33
19. Ibid, p. 34. Data of the Federal Secretariat for Industry and Energy, Of the
total number of firms, 222 went bankrupt and 26 were liquidated.
20. Ibid., p. 33. These figures include bankruptcy and liquidation.
21. Ibid, p. 34.
22. Dimitrije Boarov, op. cit.
23 World Bank, Industrial Restructuring p. 13. Annex 1, p. 1.
24. "Surplus labour" in industry had been assessed by the World Bank
mission to be of the order of 20 percent of the total labour force of 8.9 million,
--ie. approximately 1.8 million. This figure seems, however, to grossly
underestimate the actual number of redundant workers based on the
categorisation of "insolvent" enterprises. Solely in the industrial sector, there
were 1.9 million workers (September 1990) out of 2.7 million employed in
enterprises classified as insolvent. See World Bank, Yugoslavia, Industrial
Restructuring, Annex 1.
25. Sean Gervasi, op. cit., p. 65
26. Ibid., p. 45
27. Zimmermann, op. cit.
28. Figure for Macedonia, Enterprise, Banking and Social Safety Net, World
Bank Public information Center, 28 November 1994.
29. Ralph Schoenman, "Divide and Rule Schemes in The Balkans", The
Organiser, 11 September 1995.
30 "Zagreb's About Turn", The Banker, January 1995, p. 38.
31 See World Bank, Macedonia Financial and enterprise Sector, Public
Information Department, November 28, 1995.
32 Statement of Macedonia's Deputy Minister of Finance Mr. Hari Kostov,
reported in MAK News, April 18, 1995.
33 Macedonian Information and Liaison Service, MILS News, 11 April 1995.
34 See International Monetary fund, Bosnia and Herzegovina becomes a
Member of the IMF, Press Release No. 97/70, Washington, December 20,
1995.
35 Frank Viviano and Kenneth Howe, Bosnia Leaders Say Nation Sit Atop
Oil Fields, The San Francisco Chronicle, 28 August 1995. See also Scott
Cooper, "Western Aims in Ex-Yugoslavia Unmasked", The Organizer, 24
September 1995.
36 Viviano and Howe, op cit.,
37 World Bank, World Development Report 1991, Statistical Annex, tables 1
and 2, Washington DC, 1991.
Michel Chossudovsky Department of Economics, University of Ottawa,
Ottawa, K1N6N5
Fax: 1-613-7892050 E-Mail: [EMAIL PROTECTED]
Alternative fax: 1-613-5625999
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