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Kostunica Coalition Drives Up Prices & Blames...Milosevic

by Michel Chossudovsky (10-19-2000)

www.tenc.net
[Emperor's Clothes]

"Immediately after taking the office, the new government shall abolish all types of subsidies. This measure must be implemented without regrets or hesitation, since it will be difficult if not impossible to apply later, in view of the fact that in the meantime strong lobbies may appear and do their best to block such measures... This initial step in economic liberalization must be undertaken as a 'shock therapy' as its radical nature does not leave space for gradualism of any kind." (From the G-17 'Program of Radical economic Reform' www.g17.org.yu/english/programm/programr9.htm )

The Kostunica government has already started to implement deadly IMF 'economic medicine'. The first step consisted in lifting price controls on basic consumer goods, fuel and services. Prices have increased, as much as three times, causing extreme hardship for Yugoslav working people.

The country had been impoverished by years of economic sanctions, not to mention the IMF reforms applied in 1989-90 before the break-up of federal Yugoslavia. But a system of State subsidies and price controls nonetheless prevented a total collapse in the standard of living, such as occurred in neighbouring Bulgaria.

That system of price controls is now being disbanded by the DOS semi-government on orders of the International Monetary Fund (IMF):

"..when Kostunica supporters forced out most managers in state-owned shops and factories and put their own people in charge, that system of controls collapsed and prices immediately shot up. The cost of cooking oil has more than tripled since last Friday, when Milosevic announced that he was stepping aside.. The prices of sugar and cigarettes are about to jump again. After Kostunica's supporters forced out Milosevic-era factory directors, the new ones are moving quickly to make their plants more profitable. ('Los Angeles Times', October 15, 2000)

Freezing the Money Supply

To make sure the government could not finance subsidies, the G-17 economists forcefully took control of the Central Bank and immediately imposed a freeze on money creation ("printing of money"). This held up the outflow of cash which the government needed to sustain price controls on basic consumer goods.

At first, the DOS announced that 'removing controls' was a great achievement. And the Western media applauded Kostunica's determination, presented in sharp contrast to the supposedly devious Milosevic:

"One of the ways Milosevic tried to buy support among his impoverished people was by using price controls to keep down the cost of basic foods such as milk and cooking oil." ('Los Angeles Times', October 15, 2000).

According to interviews we did with Belgrade residents today, the price of milk has almost doubled from 8 to 14 dinars per liter, largely affecting children; cooking oil has more than tripled, from 13.5 to 55 dinars; sugar has gone from 8 to 45 dinars. These interviews support the earlier 'Los Angeles Times' report.

Shoppers are commenting, "Ahh, democratic prices!" The Serbian use of black humor masks rising anger among ordinary people.

Faced with this simmering rebellion, Kostunica supporters, including the G-17 economists, have performed a dazzling flip:

"The new leadership [meaning Kostunica's DOS coalition] has accused Slobodan Milosevic's supporters of trying to causing chaos on the markets with a sudden liberalisation, which they say could undermine the fledgling democracy. The Serb republic's government, still dominated by Milosevic loyalists, has started allowing the liberalisation prices of basic goods that had been state-controlled. But reformists said the liberalisation could cause suffering among a population used to state-fixed prices, and some even called for the government to regain control of part of the market." (AFP 16 October 2000)

The Western media, which just a few days earlier congratulated Kostunica for removing price controls, now uncritically trumpets the line that it's all Milosevic's fault:

"'This decision by the Serbian government is a kind of shock therapy,' said Branko Radulovic of the G-17, a group of economists close to the opposition Democratic Opposition of Serbia (DOS). 'These measures will cause a lot of suffering among the people,' Radulovic warned.

"G-17 director Mladjan Dinkic went further. The move was an 'attempt to create chaos on the market and provoke anger among the people directed at the DOS,' he said.

"'This revenge by the government will not succeed, but if an interim expert government is not formed soon we will have a lot of trouble controlling prices,' he said..

"To counter this 'sabotage' Dinkic said he favoured a 'return to regulations of prices for certain basics as well as imports of cheaper equivalents from abroad to tackle unjustified price hikes.'" (AFP 16 October 2000, my emphasis.)

G-17 economist Dinkic is worried about "suffering"? But isn't a tolerance for mass suffering the very basis of the IMF program which Mr. Dinkic negotiated in secret meetings with the IMF in Bulgaria, shortly after the elections of 24 September?

While in Bulgaria, Dinkic also met with representatives of NATO countries. He was told that Yugoslavia would have to eliminate price controls as a first step towards establishing 'a free market'. This is called 'price liberalization' and it is often an IMF precondition for loan negotiations.

"'This revenge by the [pro-Milosevic] government will not succeed, but if an interim expert government is not formed soon we will have a lot of trouble controlling prices,' he said. To counter this 'sabotage' Dinkic said he favored a 'return to regulations of prices for certain basics as well as imports of cheaper equivalents from abroad to tackle unjustified price hikes.' (Ibid.)

Note that under the guise of lowering prices Dinkic is talking about shipping in cheap 'equivalents'. In other words, dumping. This practice has destroyed local businesses and farms in Bulgaria and other countries.

Prior to the Oct. 5 coup d'état, the government made some attempt to protect domestic producers and ensure (under very difficult conditions) the
distribution of essential food staples, fuel and electricity at controlled prices. The Kostunica coalition has abolished price controls and seems to be using the suffering it has created to justify the dumping of low priced (often inferior) food and products, thus destroying small producers.

If Dinkic really wanted to go back to the price controls in existence prior to the elections why did the ''democratic" gangs who illegally seized state stores abolish all the price controls? In fact, Dinkic wants to have it both ways: get rid of the controls and try to blame the legal government for this action, taken by his men and himself. For it is Dinkic himself who has seized control of the Central Bank, and quite illegally. (See: "Yugoslav Central Bank Tries to Stabilise Public Finances", By Gordana Filipovic,
'Reuters.', Oct 12, 2000)

Concerning the rapid increase in prices, the program drafted by Mr. Dinkic's G-17 Plus is rather explicit:

"Immediately after taking the office, the new government shall abolish all types of subsidies This measure must be implemented without regrets or hesitation, since it will be difficult if not impossible to apply later, in view of the fact that in the meantime strong lobbies may appear and do their best to block such measures... This initial step in economic liberalization must be undertaken as a "shock therapy" as its radical nature does not leave space for gradualism of any kind. (From the G-17 'Program of Radical economic Reform' www.g17.org.yu/english/programm/programr9.htm )

The program they wrote attacking Milsoevic said they would do it.

They have driven Milosevic out and begun to do it.

Naturally it is Milosevic's fault.