Serbia and Kosovo: the Balkan powder-keg could flare up again – Part One

The process of capitalist restoration in Serbia has been brutal. Hundreds of thousands of workers in the old industries have lost their jobs. The old social buffers provided by the planned economy have been dismantled. In this atmosphere a sombre mood dominates the working class. The only outlet the ruling class can offer is to keep whipping up nationalist sentiment.

After 15 years of conflict and hundreds of thousands dead, wounded and refugees the national question in the Balkans remains unresolved. It is now clear how far from reality was the idea that a multitude of "clean" bourgeois nation states could resolve this historical issue. After an initial euphoria over the newly gained independent territories, the ruling classes are now discovering that development along capitalist lines is impossible without stepping on the toes of one's neighbours.

The present situation bears a striking resemblance to the atmosphere at the beginning of the 20th century. The contradictions created by the capitalist system in those days lead to a series of Balkan wars, followed by the First World War and an attempt to put the situation under control with the formation of bourgeois Yugoslavia under the Serbian crown.

The Second World War again unleashed an unprecedented level of carnage and ethnic cleansing coming to an end only after a social revolution brought about by the multiethnic Partisan movement. We can frankly state that under capitalism the Balkans have known no peace, only periods of frozen conflict. The present period fits this description perfectly.

Serbia represents the central and most important piece of the Balkan puzzle. Landlocked and surrounded by smaller states with considerable Serbian populations, the Serbian ruling class historically had big ambitions in dominating the scattered Balkan mini-states under its military might behind the retreating imperial powers (Turkey and Austro-Hungary).

Today, Serbia remains the biggest country to come out of the former Yugoslavia and a potential local power. Even with the Serbian population purged in the 1990's, from the territories they historically inhabited in the Krajina region of Croatia, Republika Srpska still remains a constituent part of the imperialist controlled Bosnia and Herzegovina and half of the population of recently independent Montenegro remains oriented towards Belgrade. Kosovo is inhabited by some 150.000 Serbs with a further 200,000 living as refugees inside Serbia itself.

Relative stability, despite the uneasy ethnic set up of newly created Balkan (semi) states, was made possible through the interference of imperialist powers who managed to find a compromise between each other's interests in the region under strong American domination at the end of the last century.

Today, with Russia coming back into the world political arena and the EU trying to formulate its own foreign policy independent from its Atlantic ally and the US speeding up its militarism, rumours and tension are in the air again. The Balkans are heating up once again before they have even had a chance to cool down.

Inside Serbia

GDP growth in Serbia has averaged 6.8% over the last three years, after the period of sluggish recovery following the NATO bombings and the regime change. Some government officials now refer to the country as a "Balkan Tiger" to describe this phenomenon.

The older generations, however, are able to testify just how different this new capitalist growth is from the one experienced after the Second World War under the planned economy. While the latter was based on the unprecedented development of the productive forces in all areas of life, this new one is based on the dismantling and selling off of the very substance created in the period of planned economy. Furthermore, the effects of the growth are concentrated geographically and socially to limited areas and to a tiny privileged layer of the population.

No matter which coalition has been in government since Milosevic, one thing has remained certain in Serbia since 2000. Economic power remains in the hands of a group of economists from the "G17 Plus", a think-tank under Milosevic which evolved into a political party led by economic "experts" sacrificing their well-paid positions in global multinationals to work for a state bureaucrat's wage and "help" their country in need.

Their leader and Minister of Economy and Regional Development in the current Serbian government, Mladjan Dinkic, has recently been awarded the prestigious "Financial Minister of the Year" award by the Euromoney magazine. In explaining its decision, Euromoney states that Dinkic conducted "the most shocking of shock therapy tactics" in the financial sector by simply taking away operating licenses of 25 domestic banks and laying-off its employees; thus clearing the way for foreign banks to enter the market. This move gives one an idea of Dinkic's economic philosophy!

A strict "neo-liberal" growth model has been followed in the last couple of years. The government is proud of the fact that Serbia, along with Bulgaria, has the lowest flat corporate profit tax in Europe of only 10%. After the saturation of Eastern European markets, multinationals now find uncovered gems in Serbia's late transition. In 2006, a record $4,387billion of foreign direct investment was achieved, almost one half of total foreign investment recorded in the previous five years.

Most of the investment is obtained through privatizations and acquisitions of sure shot profit making enterprises in banking, telecommunications, the alcohol and tobacco industry and the energy sector. Countries with the biggest interest in the Serbian economy so far have been Austria, Germany, Greece and Slovenia. The state energy monopoly, oil and gas industry and the airline carrier-JAT, are among the last top-ranking assets expected to be privatized in the future. The process is entering its final phase, as all the major state owned enterprises are planned to be sold off by the end of next year.

A good "investment climate" is maintained through tight monetary policy. Inflation is kept down to single digits (6.6%). Taxation and social insurance contributions for potential investors are among the lowest in Central and Eastern Europe and growth of real wages is kept under strict control with planned increases to account only for inflation despite the positive growth figures. Public spending was completely covered in 2006 and the state budget ended up with a surplus. At the same time, 10% of the population lives below the poverty line with minimal social handouts. Access to social care has been made much harder, the retirement age has been prolonged and school fees have been introduced. The official unemployment rate stands at 20.8%. Since privatization started to gain momentum in 2002 until present, more than 350,000 workers have been sacked.

The layer most hit by economic restructuring is the traditional working class employed in the productive sector through large-scale state owned companies. New jobs being created are mostly opened in small-scale firms in the service sectors, finance and telecommunications. The opening of new workplaces created up to 60,000 jobs in the last four years, not nearly enough to compensate for the previously lost jobs.

Many former industrial cities are turning into ghost towns. Growth is concentrated mostly in Belgrade and a few other areas in the north with good infrastructure and geographical position. Unemployment in Southeast Serbia is more than three times higher than in Belgrade. Poverty levels can reach up to 23% in the south while it remains around 4% capital.

Last month, an epidemic of jaundice broke out in the southern city of Nis. So far, 700 people have caught the virus resulting from poor living conditions and inadequate water supply.

Working Class in Transition

Despite unprecedented neo-liberal attacks from above, so far there seems to be no organized response from the masses. We have witnessed a stabilization of ruling structures, strike figures are at the lowest in years and there is no political articulation of the majority of the "losers" from the transition to capitalism. How is this to be explained?

The old Yugoslav working class is deep into the process of dissolution. The present wave of privatizations comes after a turbulent decade of economic meltdown, international sanctions and war, which had already atomized and disoriented the working class. There is no trade union presence in the private service sector. New generations of workers are finding themselves in small scale, privately owned firms of up to 50 people, cut off from one another and from any organizing traditions from the past, under the strict discipline of ruthless domestic petty capitalists formed in the war years. The older workers, who managed to keep their places in the restructured companies, are kept in check by the army of unemployed below them. They may not be satisfied with their position but it is still better than being in the street.

The rest have worked out different ways of surviving during the nineties such as the existence of black markets and the informal sector. Serbia is experiencing a trend of de-urbanization where a section of the working class is returning to the countryside. The Titoist regime gave up forced mass collectivization in the countryside relatively early on, thus leaving many privately owned small land plots which have served as a social safety net over the last decade. This property structure is changing fast now as capitalist landowners are buying up fertile land, as the economy is re-orienting from industry back to agriculture and export of raw materials.

A similar market exists in the cities where living patterns are changing fast. During the 1990's, in a quest for quick money, the Milosevic regime enabled the workers to buy their state flats, leading to a situation where many own their real estate. This fact, along with the entrance of foreign banks and credit lines, paved the way for a huge real estate boom. Prices of flats in Belgrade range from 1,000 to 2,5000 euros per square metre in the more trendy areas. Once socially mixed, Belgrade neighbourhoods are witnessing families selling their flats in more central areas or leasing them and moving to the suburbs instead.

The financial market, kept virgin during the war years, has offered great opportunities for foreign banking corporations such as Austrian Raiffeisen to make juicy profits and offer credit spending to the public. Unlike Croatia or Hungary, indebtedness of the Serbian public has been relatively low thanks to isolation. In the last couple of years credit to the value of around 2.5 billion euros has been extended to 874,885 clients. Access to easy credit has meant a short-term relief for many families but also represents a time bomb waiting to explode. It seems as if the money pumped into the economy disappears into thin air. Production has not been re-established, export growth is modest, while the foreign trade deficit increases. Total Serbian debt currently stands at 22 billion dollars and is rising fast.

The government has been trying to gather public support for the privatisation process by issuing certain percentage of the shares of sold companies to the workers in a voucher-type privatisation scheme. The social programme for those laid off in the restructuring process also consists of pay outs, in accordance with the years worked. Those who willingly resign from their jobs are also encouraged to do so, in the form of monetary compensations. Everything must go and the workers are promised crumbs form the table if they do not obstruct the process.

The government's official tactic to combat unemployment is to encourage workers to use this money to set up their own small private businesses. Stories about a few lucky workers from the top ranking privatised companies buying new houses and cars after selling their shares are hyped up. Most of the trade union discussions recently have been focused on the issue of what percentage should the workers receive from the total number of shares put up for sale. A new programme of voucher privatisation was announced a few days ago through which all the citizens will receive their share of the remaining big privatisations in stocks. These manipulating tactics have placed the workers in a very difficult situation, contributing to a further deterioration of the old class-consciousness and solidarity.

Former Yugoslav car producing giant Crvena Zastava, from the city of Kragujevac, provides a good example of this. In August this year, the government decided to liquidate the social programme set up for the workers of Zastava after NATO bombed the factory in 1999 which preserved their jobs and a minimum level of wages even though they were out of work. Around 4,400 workers, still left on this programme, were offered compensation of 250 euros for each year spent in the factory in exchange for terminating their work contracts. The Trade Union rejected the offer, families and workers from neighbouring Kragujevac plants joined in solidarity protests and for a few days it seemed the city was ready for resistance. The government however called the bluff and stated that anyone who failed to show up before the deadline the next day for registration would simply be sacked without any compensation money. Next day, the whole nation witnessed humiliating scenes of people standing in queues, pushing each other not to be left behind the closed door of the registration office.

The pride that was once felt thanks to the unique situation in the world, where workers "owned" their own factories under Titoist "self-management" is gone. Of course, few people have any illusion that they will be able start up a small business with the money they receive. But faced with the alternatives of either retaining "ownership" of a rusty old factory that has not been functioning for years or giving it up for a few thousand euros after a decade of starvation, it is not hard to guess what the choice will be. The only companies who have started production up again seem to be the privatised ones. The feeling is that there is no alternative. It is not uncommon that even after the experience of a shady privatisation deal, the workers occupy the factory and demand a repeated privatisation, but this time a "fair one". That is how far the process has gone.

Then, there are those right at the bottom, who have nothing to hustle on the side or offer to the market, those with no possession to sell, no land, no flats, no left-over jobs for which to be compensated ‑ workers or unemployed in constant threat of falling below the poverty line and being forgotten.

This situation has given birth to a relatively new phenomenon of a series of hunger strikes. The most common form of strike in Serbia today is the one in which workers lock themselves up in the factory and start hunger strikes demanding to speak with the authorities. These are not tactics of an offensive strike in a heated class struggle, but desperate acts of people trying to draw attention to themselves.

Suicide rates have also increased. A case of a 50-year-old metal worker Dragica Simic caught the media attention in April. After hearing the news that she would be fired along with 190 of her colleagues labelled as "labour surplus", she desperately tried to talk with the boss. The boss denied all her appeals to talk with him. The morning after, fellow workers found her body hanging inside the plant. A few years earlier, Dragica has been commended as one of the best workers in the city. Her recognition diploma was found lying next to her corpse!

The bitter experience of the last 15 years and the general demoralisation has lead to scepticism towards any kind of political agenda, a questioning of the motives behind calls to organise and a lack of confidence in the prospects of collective action. Workers are looking for individual solutions the best way they can in order to feed their families. "Solidarity" is a word rarely heard in Serbia today. It is the war of all against all, the bare face of capitalism where only the strong manage to survive.

The new infrastructure being built has little to do with the general benefit of the population but everything to do with the interests of foreign investors. Highway routes for international trade are being constructed while many neighbourhoods still do not have paved streets; city centres are turned into exclusive business areas of steel and glass while working class neighbourhoods still rot in the infrastructure inherited from the 1970's. No sound foundations are being laid for the continuing growth in the future. The nature of the capital entering the country is mostly speculative and parasitic. What will happen once there is nothing left to sell? This is the uncomfortable question nobody is posing for now.

The people are going through a paradox of economic boom in which they can participate only superficially and in the short term. It is becoming obvious that economic growth does not automatically produce better general living standards. For years the official line was that everyone must make sacrifices in order to attract foreign capital and investment which will then trickle down to the rest. This is obviously not happening for the majority.

Current economic growth is not based on the continuing advance of infrastructure of the productive forces, built during the decades of planned economy, which enabled the general emancipation of society but, quite the opposite, on the anarchic destruction of these foundations, the transfer of capital outside of the country and limited new investment in privileged niche sectors and monopolies which can be turned into milch cows for foreign capitalists. If the growth continues at this present pace, it will take at least seven more years for Serbia to reach the GDP level it had before the introduction of capitalism in 1991.

Political Scene

However, there is a layer of the population that seems to be benefiting from the transition. The coming in of foreign capital is creating new customs. People in business suits working late hours in glass towers seem to be omnipresent. Illusions in capitalism are probably the highest among the youth. Young educated people with foreign language skills find it easier to find jobs now than ever before. Foreign companies find highly qualified people ready to work long hours for a few hundred euros and the prospect of advancement in their careers.

State university fees have increased significantly in the last few years, and may now go up to 2.000 euros per year, not to mention the books and living expenses. Those who cannot afford this end up in lower paid jobs in services such as cashiers and security guards. Others, with enough money to study, see the school fees as a cost they are willing to pay to gain access to the upper echelons of employment.

This up-and-coming social layer is on the offensive. It found political expression in the Liberal Democratic Party (LDP), a splinter from the main reformist party - the Democratic Party (DS) of the assassinated Prime Minister Zoran Djindjic. The LDP ran an aggressive campaign accusing the Democratic Party of making compromises with the nationalists and the elements of the former regime not willing to pull Serbia faster towards the EU. It entered parliament attracting a number of disappointed voters and youth in the urban centres.

Apart form this, there have not been any significant changes in the Serbian political scene in the last few years. The most striking feature is still the fact that no organized political force exists left of centre. The losers from transition have nobody to vote for. The Democratic Party has established contacts with the European Social Democracy, but it remains a centre party with a clear anti-working class orientation. The Serbian Radical Party has managed to exploit this vacuum for quite some time, with its populist anti-reform messages, until they became the biggest force in the country and started being more cautious. They are stagnating and will explode as an overblown balloon the moment they are forced to take office. Their sole purpose is to cushion domestic dissatisfaction and play the role of ultra-nationalist threat for the Serbian ruling class in its negotiations with the West.

In the absence of any movement form below, the political parties are constantly switching coalitions at the top while the essence of the regime remains the same. The Democratic Party is currently ruling in a coalition with the "G17 Plus" and Prime Minister Vojislav Kostunica's conservative Democratic Party of Serbia. After a few rough years of battle for positions before the process of privatisation started, everybody seems to have found their place and is ready to share the cake now.

In this general atmosphere, the ideological offensive from the right that seemed so threatening in the 1990's became the norm. The Orthodox Church is occupying an important place in the media and the state. It was allowed to enter the schools and the armed forces. How far things have been rolled back can be seen by the fact that the royal family has been given back its possessions in Belgrade and its members parade as prominent public figures.

The history of the Partisan movement and the Second World War has been completely re-written. Unlike in Zagreb, where a section of the ruling class is trying to incorporate the partisan movement into an ideology of independent capitalist Croatia, the Serbian ruling class has chosen to erase this chapter from the history books completely and bases itself on the legacy of the pre- war Serbian bourgeoisie.

The names associated with communism and the partisans have been removed from all institutions and streets and new monuments have been built along with fresh symbols and a new anthem. Culturally the country is back where it was at the beginning of the last century. The ground is now being prepared ideologically for a turbulent future in which the Serbian ruling class must push its way through and impose itself as an imperialist partner in the region just like it did after the First World War, when it was rewarded with domination over the old bourgeois Yugoslavia for sacrificing a quarter of its population.

This is preparing the ground for a new belligerent stance of the Serbian ruling elite over the question of the status of Kosovo, which we will look at in Part Two. What is also being prepared is an almighty explosion of the class struggle in Serbia at some point in the future. They have managed to tighten the lid on working class struggles. In this a section of the population is suffering terribly, while another is beginning to reap some material benefit from capitalism. What we have is social polarisation, with wealth being extremely unevenly distributed.

However, if we look at Slovenia we see the future of Serbia too. With capitalist development comes a strengthening of the working class and with this also class struggle. The strike going on at present at the Ford plant in St. Petersburg in Russia, after 12 years of almost total silence on the part of the Russian working class is also an indication of what the working class is capable of. In many respects the situation in Serbia resembles that of Russia until the recent past. As class struggle is coming back onto the agenda in Russia, so will it return to Serbia, when the workers will rediscover the glorious traditions of their own past. For now all that is like the embers of a fire that seems almost to have gone out. It will flare up with a vengeance in the future.


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