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Quandaries Of Privatization In A Market Adverse Environment - Major Inconsistencies In The Transition Strategy Of Serbia


  • Ljubomir Madzar


Deeply rooted traditional values, specific and long drawn collective memories, ethnic heterogeneity and the egalitarian syndrome make Serbia a particularly inimical environment for privatization and other undertakings meant to transform the system into a market economy. Both political elites and the broad public have their - though distinct and evidently separate - reasons to oppose privatization. At the same time, political pressures from abroad and the declaratory effect of pronouncements for modernization make it attractive to produce the semblance of a determination to change the structure of ownership and allegedly to modernize the society. The resulting set of interacting forces is quite complex. The actual resistance to privatization manifests itself in obligating the buyers to adopt additional duties in the form of so called social and investment programs. These programs proved to be quite effective in complicating the privatization and slowing it down. The insoluble problem of finding the trade-offs between the purchasing price and each of these programs arose. It turned out that the state and its bureaucracy - true, contractually - took it upon themselves to determine how much should be invested in each privatized company. The government has neither the motivation nor expertise, and not even incentives to acquire the needed knowledge, for a proper carrying out of these functions. Had the government been able to play successfully the roles of manager, investor, innovator and the entrepreneur, privatization itself would not be necessary and would in fact be counterproductive. A further area covered by the paper is the set of economic and social factors underlying the opposition towards privatization and making it slower in relation to how it unfolded in the comparable countries in transition. Such are, among other, aging population and almost unbearable magnitude of the fiscal burden, the inclination of the elites to preserve the collectively held enterprises as their power base, the exceptionally high share of the grey economy, the entropy approaching the virtual break-up of the financial system, with unbelievably high amount of arrears, and prolonged appreciation of the national currency which impaired exports heavily and wiped out a number of material production sectors because of the unjustifiably tough competition on the part of imports. A number of comments were made on the sad state and low level of economic science which, rather than clarifying the perilous consequences of the described policies, has uncritically endorsed them.

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  • Ljubomir Madzar, 2012. "Quandaries Of Privatization In A Market Adverse Environment - Major Inconsistencies In The Transition Strategy Of Serbia," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 8(2), pages 99-114.
  • Handle: RePEc:mje:mjejnl:v:8:y:2012:i:2:p:99-114

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    References listed on IDEAS

    1. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135-135.
    2. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753.
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