Economic aspects of the war in the Balkans and its impact on workers

Peace Movement Aotearoa

A couple of weeks ago you may have heard NATO spokesperson, Jamie Shea, outlining the four key elements of the non negotiable Rambouillet Accords. Coming in at number four behind the demand for autonomy for Kosovo, the complete withdrawal of troops and the welcoming of the NATO invasion force was the very reasonable and entirely relevant demand that:

the economy of Kosovo shall function in accordance with free market principles.

Even shameless Jamie tended to mumble a bit on this one and it was soon dropped from star billing. Presumably someone else in NATO's PR company noticed that the whole world might not immediately see what a reasonable and relevant demand this was. A look at the text of the Rambouillet agreement, however, confirms that this simple formula is indeed paragraph 1 of article 1 of Chapter 4a: the economy of Kosovo shall function in accordance with free market principles. (The full text of the Rambouillet agreement is available at: http://www.monde-diplomatique.fr/dossiers/kosovo/rambouillet.html )

Paragraph 4 gives a clear idea of the exact nature of the economic autonomy the Kosovars might expect to enjoy in their new state.

The Federal Republic of Yugoslavia shall be responsible for the collection of all customs duties at the international borders in Kosovo. There shall be no impediment to the free movement of persons, goods, services and capital to and from Kososvo.

Paragraphs 6 and 7 elaborate:

6. Federal and other authorities shall within their respective powers and responsibilities ensure the free movement of persons, goods, services and capital to Kosovo, including from international sources. They shall in particular allow access to Kosovo without discrimination for persons delivering such goods and services.

7. If expressly required by an international donor or lender, international contracts for reconstruction projects shall be concluded by the Authorities of FRY which shall establish appropriate mechanisms to make such funds available to Kosovo authorities. Unless precluded by the terms of contracts, all reconstruction projects that exclusively concern Kosovo shall be managed and implemented by the appropriate Kosovo authority.

Earlier in the year, in a speech made the day before he informed the nation that NATO was bombing the Federal Republic of Yugoslavia, President Clinton stated:

If we're going to have a strong economic relationship that includes our ability to sell around the world , Europe has got to be a key ... that's what this Kosovo thing is all about. (Quoted in "The Case Against Intervention in Kosovo", Benjamin Schwarz and Christopher Layne, The Nation Magazine, April 19, 1999 issue)

I wonder if the formula of global imperialism has ever been put more plainly than in those paragraphs just quoted from the Rambouillet ultimatum. "Give us your country or we'll destroy it" as a recent pamphlet in Auckland succinctly paraphrased it. Although, of course, these aren't really alternatives. The bombing is only an extension of the process of economic destruction of the former Yugoslavia which has taken place since the early eighties under the name of the free market economy and which will, with news of the IMF's preparation of a rescue package, continue after the war in Kosovo and whatever remains of Serbia as a whole. President Milosovich did not, of course, object to Chapter 4 of the ultimatum - under the circumstances he no doubt saw this as a futile gesture. For the former Yugoslavia is a paradigm of the new model of globalisation. And it is this process which underlies most of the conflicts which have broken out around the world in the last twenty years as the destruction of national economies and the subsequent poverty and famine aggravate racial and ethnic tensions and destroy democratic processes.

I recently read an account of quite a large conference in the United States called Globalisation from Below. This conference threw up some surprising themes: Globalisation is not new, globalisation does not overwhelm local culture, globalisation is often developed and harnessed by people who may on the surface seem powerless. By this account globalisation began five centuries ago when massive flows of people, goods and disease began to cross the Atlantic. By many measures, such as capital flow or investment, globalisation was as massive before world war one as it is now, a keynote speaker claimed - the only difference now is that we are more aware of the sources of the global commodities that arrive on our doorstep. (Michel -Rolph Trouillot, quoted in International Labour and Working Class History, No. 55, p.146). With respect I - and indeed the organisation I represent - have to disagree with this view. It is essential to identify the distinct character of the latest phase of globalisation and recognise that it poses a threat to the peace and prosperity of nations on an unprecedented scale. One of its features is the hyper-mobility of capital. I'm not sure what is meant by "capital flow" in the quotation I gave above. In New Zealand, at least, Foreign Direct Investment has increased by about 50% since 1983 and accounts for about 50% of all operating surpluses or gross profits by companies in New Zealand. (Bill Rosenberg in Enderwick ...). The transaction of more than $US 1,490 bil. per day on currency exchanges worldwide, or $NZ 13 bil. per day in New Zealand (Bank of International Settlements, Position of Foreign Exchange Investments, April 1998) and the explosion in the use of derivative financial instruments is also something new and perilous as evidenced by the crisis in Asia and elsewhere. But this development is linked to something more fundamental. In the words of the Canadian economist, Michel Chossudovsky:

Since the debt crisis of the early 1980s, the search for maximum profit has been engineered by macro-economic policy ... Macro-economic management adopted at the national and international level levels plays a central role in the emergence of a new global economic order: the reforms "regulate" the process of capitalist accumulation at a world level. (The Globalisation of Povert: Impacts of IMF and World Bank Reforms, Michel Chossudovsky Pluto Press Australia, 1997 p.15)

For Chossudovsky, the so-called "structural adjustment programme" sponsored by the Bretton Woods institutions, (The IMF and the World Bank), while supported by neoliberal discourse, constitutes a new interventionist framework:

The IMF, the World Bank, and the WTO are regulatory bodies operating within a capitalist system and responding to dominant economic and financial interests. What is at stake is the ability of this international bureaucracy to supervise national economies through the deliberate manipulation of market forces. (Ibid.)

The immediate aim of the structural adjustment programme is to minimise wages through the growth of unemployment. However this impoverishment of large sections of the population contracts their purchasing power. This has a backlash on production leading to further plant closures and bankruptcies. At each stage there is a movement toward overproduction and the decline of consumer demand. Under this system international corporations and trading companies can only expand their markets by destroying the domestic productive base of the countries in question. So there is this fundamental contradiction at work:

The consolidation of a global cheap-labour economy on the one hand and the search for new consumer markets on the other. The extension of markets for the global corporation requires the fragmentation and destruction of the domestic economy. Barriers to the movement of money and goods are removed, credit is deregulated, land and state property are taken over by international corporations and so on. (Ibid.)

We are, of course, familiar with the Washington concensus or IMF prescription here in New Zealand. But our own experience is but a shadow of the "reforms" unleashed on the former Yugoslavia. These were explicitly intended to support Washington's strategic objectives which were stated formally in two National Security Decision Directives of 1982 and 1984 and included:

"expanded efforts to promote a "quiet revolution" to overthrow communist governments and parties while re-integrating the countries of Eastern Europe into a market-oriented economy." (Quoted in Sean Gervasi, "Germany, US and the Yugoslav Crisis", Covert Action Quaterly, No. 43, Winter 1992-3.) Gervasi's "Why is NATO in Yugoslavia", 1996, available at iww-news@iww.org is particularly informative.)

The development of oilfields in Bosnia and Croatia were also specific objectives. (Chossudovsky, Op.Cit. p.258)

In 1980 Yugoslavia was said to have operating a form of "market socialism". It already enjoyed extensive trading relations with Europe and the United States. In the twenty years between 1960 and 1980 GDP growth averaged 6.1 % per annum, there was free medical care with one doctor per 550 population, literacy was 90% and life expectancy was 72 years according to a World Bank World Development report of 1991. In 1966 -79 GDP averaged 7.1%. Again according to the World Bank, after the initial phase of macro-economic reform initiated in 1980, shortly before the death of Marshal Tito growth dropped to 2.8% in the 1980-87 period then went to zero and to -10.6% in 1990. In 1988 Slobodan Milosevic said that interest rates were wearing out the economy.

In 1990, following the collapse of the Berlin Wall in 1989, the reforms took hold. Real wages collapsed by 41% in the first six months. Hyperinflation set in rising to 1,134% in 1993. The stages of the economic medicine, it's legal and financial instruments are detailed in Chossudovsky's account of the dismantling of former Yugoslavia and the recolonisation (literally) of Bosnia-Herzogovina, an account on which I have relied heavily in these paragraphs. (Ibid.) In 1989 a financial aid package was promised by the United States in exchange for sweeping economic reforms including a new devalued currency, a freeze of wages, the curtailment of Government expenditure and the abrogation of the socially owned enterprises under self management. (Ibid.)

The so called enterprise reforms constituted an astonishing bankruptcy programme and played a central role in collapsing GDP. A law was passed in 1989 requiring the abolition of the so-called "Basic Organisations of Associated Labour" (BOAL). These are described as socially owned productive units under self management with a workers' council constituting the main decision making body. These were privatised and the control of the workers councils ended. According to one account, this massive privatisation and dismantling of the public sector was carried out by the Communist Party bureaucracy, most notably it s military and intelligence sector who offered political and economic backing on the condition that wholesale scuttling of social protections for Yugoslavia's workforce was impose. (Ralph Schoenman, "Divide and Rule Schemes in the Balkans", THe Organiser, 11 Sept. 1995, quoted in Chossudovsky ibid.)

The second phase of this process involved the Financial Operations Act of 1989. The IMF-World Bank reforms froze credit and the Act instituted a "trigger mechanism" which compelled the declaration of Bankruptcy within 30 days of insolvency while the state was prohibited from intervening.

This mechanism allowed creditors (including national and foreign banks) to convert their loans into a controlling equity in the insolvent enterprise. In less than two years from 1989 more than 600,000 workers out of a total industrial workforce of some 2.7 million had been made redundant without compensation. In 1990 the World Bank estimated that there were a further 2,435 "loss-making enterprises", most of these the largest of their kind so that 1.9 million workers were classified as redundant. Even the most conservative account by the World Bank reckoned that over 20% of the total workforce was surplus to requirements. This process forms the background to the secession of Croatia and Slovenia in June 1991.

Diana Johnstone in an excellent article puts it this way:

After the 1948 break with Moscow, the Yugoslav communist leadership emphasised its difference from the Soviet Bloc by adopting a policy of "self management" supposed to lead by fairly rapid stages to the "withering away of the state". Tito repeatedly revised the Constitution to strengthen local authorities while retaining final decision making power for himself. When he died in 1980 he thus left behind a hopelessly complicated system that could not work without his arbitration . Serbia in particular was unable to enact vitally necessary reforms because its territory had been divided up with two "autonomous provinces", Voivodina and Kosovo, able to veto measures taken by Serbia while Serbia could not intervene in their affairs. (Yugoslavia: Politics, Media, NGOs and the Ideology of Globalisation, Covert Action Quarterly, No. 65 Fall 1998)

The1990 IMF Economic package imposed expenditure cuts equivalent to 5%of GDP together with a number of other austerity measures including floating the currency, deregulating interest rates and further trade liberalisation. The creditors had gained control of monetary policy: the agreement signed with the IMF and other creditors prevented the Federal Government from having access to credit from its own Central Bank, the National Bank of Yugoslavia. At the same time a freeze on transfer payments from the Federal Government to the republics and autonomous provinces, enforced so that debt repayments could take place, created a situation of de facto secession. Local communist leaders were also aware that they could obtain a greater share of the spoils of privatisation in the context of the division of Yugoslavia into separate small states.

It was at this time that the anti-Serb propaganda campaign was launched in Germany and Johnstone argues that the political - and economic - motives are obvious:

Claiming that it was impossible to stay in Yugoslavia because the Serbs were so oppressive was the pretext for the Nationalist leaders in Slovenia and Croatia to set up their own little statelets which, thanks to early and strong German support, could "jump the queue" and get into the richmen's European club ahead of the rest of Yugoslavia. (Ibid.)

This description is offered of the situation following the war in Bosnia:

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 IMF 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 nomenclatura. (Ralph Schoenman, Ibid.)

GDP declined by as much as 50% in the case of Macedonia in the four years 1990-1993. In Croatia 95% of the socially owned enterprises had been transformed into joint stock companies. (World Bank figures, quoted in Chossudovsky, ibid. In April 1995 Macedonian Minister of Finance Mr Ljube Trpevski stated proudly in a press conference that "the World Bank and the IMF place Macedonia among the most successful countries in regard to current transition reforms".

In Bosnia a genuine colonial administration was installed by the Dayton Peace accords of 1995 with its head being an appointed "High Representative" who is a non Bosnian citizen and 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. It is stated in the Dayton Accord that the Governor of the Central Bank will be appointed by the IMF and "shall not be a citizen of Bosnia and Herzegovina or a neighbouring state ..."

The Rambouillet agreement appears to reflect the Dayton accords in most respects while taking advantage of the leverage provided by the previous agreement. A "Chief of the Implementation Mission" has supreme authority enforceable through KFOR or the occupying force and the OSCE. A constitutional court likewise keeps the elaborate pretence of democratic Government check while a Claims Settlement Commission overseas the distribution of Government assets and revenues and rules on disputes on these matters.

So very roughly, this is how the war in Yugoslavia fits into contemporary economic history, a history which is completely dominated by a specific phase of capitalist accumulation operating through National Governments by means of macro-economic control. I haven't attempted, for lack of sources, to describe the process since 1995 in Kososvo in which it is claimed by some that freedom fighters were put in place by NATO and a narcotics trade established to provide for their funding. (Chossudovsky makes this claim in a recent statement.) An important statement on this aspect of the war comes in an article on 27 May in the Washington Post by Victor Chernomyrdin, President Yeltsin's special envoy to Kosovo:

Now a few words about the ethnic Albanian paramilitaries. They are essentially terrorist organisations. Of this Russia is sure. They are making money chiefly from drug trafficking , with an annual turnover of $3 billlion. As it maintains close contact with theses paramilitaries and modernizes their weaponry, the West - directly or indirectly - encourages the emergence of a major new drug trafficking centre in that part of the world. It also encourages the paramilitaries to extend their influence to neighbouring countries. The Greater Albania motto may soon start to take hold. This will mean more bloodshed more wars and more redrawing of borders.

There are other economic aspects to the war which should be noted, however. One group of commentators, STRATFOR Inc. of Austin, Texas, place great emphasis on the role of Russia in the conflict. In one notable passage they argue:

Neither the air campaign, nor a ground attack, nor Clinton or Albright's ferocious rhetoric worries Milosevic. The loss of Russia as an ally does worry him. The mere hint of Russian softness could cause Milosevic to become more flexible in his terms. But Russia needs to be motivated to turn soft and the color of motivation remains green. If we were cynical, we would be tempted to say that Russia encouraged Miosevic in order to put Russia in a strong position vis a vis Germany and other nations able to extend credit. However, since we are not cynical, we will be simply startled at the sudden opportunity the West has to work closely with the Russians in solving their financial problems.

Of course, the relationship between Russian co-operation and the power which the IMF and other international creditors now exerts over that country - and other's they have brought to crisis - is well remarked in the media. It is a safety valve version of the real economic story, an amusing sidebar. But another aspect of the global economy at work in the war is undoubtedly the role of United States based PR companies working for secessionist causes. Diana Johnstone notes:

Albanian secessionists in Kosovo or "Kosovars", the Croatian secessionists and the Bosnian Muslims hired an American public relations firm, Ruder Finn, to advance their causes by demonising the Serbs. Ruder Finn deliberately targeted certain publics, notably the American Jewish community, with a campaign likening Serbs to Nazis.

I can't establish this for certain, but I suspect that the term "ethnic cleansing" was itself invented by Ruder Finn, making it the 90's version of the mythical "ploughman's lunch" which Ian McKuen used so effectively in his film of that name about the Suez crisis. In any case, in view of the deliberate and complete blurring of the meaning of the term so that it could refer to anything from ethnically motivated murder to assisted evacuation, it is clearly not a term that can be used in any responsible account as though it named a specific or unique historical phenomenon. Johnstone goes on from an account of the tremendous success of this PR campaign to consider the effect this has had on civil society, particularly when combined with the ideology of globalisation. And I think that brings me to consider the second question posed by the topic of this contribution today and that is the impact of the war on workers.

The immediate impact is obvious. The structural adjustment programme created massive poverty and unemployment. In 1990 when the Federal Government imposed budget cuts and an austerity programme as a condition of a new IMF loan the government of Serbia rejected the measures outright. This led to a walk out in protest of some 650,000 Serbisn workers against the federal government. By one account the trade union movement was united in this struggle.

Worker resistance crossed ethnic lines , as Serbs, Croats , Bosnians and Slovenians mobilised shoulder to shoulder with their fellow workers ... (Gervasi, quoted in Chossudovsky Op.Cit.)

In terms of the current conflict the effects are fairly well known and I hope that others will have covered the systematic bombing of civilian targets. A fax to the TUF from the Trade Union of the Electric Power Industry of Serbia on the 15th day of NATO aggression Serbian Electrical Workers Union describes first hand the destruction of their plants and cities together with their actions in forming a human shield under the bridge connecting the old part of the city of Belgrade with the new. The writer states that the union is: continuously receiving letters of support and union solidarity. All of them are finished by the message that only negotiations can bring peace.

Worldwide however, the union movement has been slow to respond and this is a symptom of the power of the globalisation ideology especially in the hands of the supposedly left-leaning Governments that pre-dominate. So, for example the AFL-CIO has condemned the murder of Gim Hjrizi, a leader of the independent Kosovo Trade Union BSPK and the disappearance of another BSPK leader, Dr Hajrullah after Serbian police raided his home. Their general statement is far from satisfactory, however, and may yet, in its concluding sentence, become notorious. It reads:

"The AFL-CIO calls upon the international community to make protection of civilians and of human rights a priority of the NATO operations and to declare that the continuing atrocities in Kosovo constitute war crimes on the part of Serbian political and military leaders, as well as those who are taking innocent lives in this senseless slaughter. We urge working Americans of religions and faiths to offer prayers for the refugees from Kosovo and to send contributions to: American Red Cross International Response Fund..." (Organised Labour and the War in Kosovo, Znet Commentary, May 14 1999. Available at SMTP:shniad@sfu.ca)

This call to prayer by a major central labour organisation appears to be unprecedented. In Canada the Canadian Labour congress has a better position but makes no outright call for an end to the bombing. Individual unions in the US and Canada have stated more progressive positions and the San Francisco labour council of the AFL-CIO makes a clear and unequivocal statement calling for an immediate end to the NATO/US and an end to the intervention. Significantly it notes:

The NATO forces under the leadership of the United states have unleashed massive air strikes against Yugoslavia designed in the words of US General Wesley Clark to "demolish, destroy, devastate, degrade and ultimately eliminate the essential infrastructure of the country".

Of course there are an abundance of better informed statements from other groups and trade union centres. The New Zealand Trade Union Federation has, of course, condemned the NATO aggression:

This conference deplores the NATO bombing of Yugoslavia and calls on the NZ Government to seek immediate UN intervention in order to avert all further hostilities in the region.

The NZCTU has no stated position at this stage. Clearly, good quality information is the key. In Europe, and significantly in Germany it is reported that left wing intellectuals are busy building a new anti-war movement based on solid legal, historical and political arguments.

If we are to do the same here, then it is clear that we have to overcome what Diana Johnstone has identified in a carefully argued piece as a disturbing complicity between many NGO's and the leading institutions of the new world order, particularly NATO. This takes place under cover of a human rights agenda. So for example, Johnstone examines the case of Human Rights Watch/Helsinki, based in Vienna, which by creating a completely false picture of human rights abuses in Serbia helped to prepare the ground for the NATO bombing. These groups, argues Johnstone, seek to break down the defences and authority of weaker States and replace their democratic structures with those of the so-called international community.

In conclusion, we of the TUF believe that it is essential that these conflicts be understood in the context of the current model of globalisation. This should not be difficult to do in New Zealand. In reviewing economic history in Yugoslavia one is struck at every stage by the resemblance between the economic programme imposed there since the 1980's and that enacted in our own country. Everything, of course, is scaled up and enacted in an extreme in Yugoslavia, just as it is in Russia. But, while still in its egg, the serpent is already fully formed. The process described by the late Bruce Jesson in his recent book, is recognisable at every stage, ("Only Their Purpose is Mad", One World Books, Auckland,1999): An existing elite whose interests have been identified since the last war with a relatively autonomous national economy is overwhelmed and/or co-opted by the influx of funds. Privatisation, cuts to social spending , trade liberalisation, replacement of domestic production with the illusion of export grow th, an explosion of foreign direct investment, foreign exchange gambling, degradation of democratic structures, massive debt increases, job losses and wage cuts follow. We have not yet begun to grasp the significance of the recent call from key institutions such as the Reserve Bank, the Manufacturers Federation and the Employers Federation for currency union with Australia - a call effectively to abandon our own currency, our own central bank and eventually control of our own economy.

What the actions of NATO in Yugoslavia teach us is that we an uncompromising toward the so called free market, that "free market" of the Rambouillet accords.. We need desperately to unyoke the youthful idealism of our country from this immensely deceptive and destructive project. It is for this reason, for example that the Trade Union Federation along with a number of other pressure groups has adopted a policy of non-engagement with APEC. APEC, as its name is intended to suggest, is the ideological spearhead of trade and investment liberalisation. The lures of engagement and funding for NGOs, the cynical appeals to feminist agendas, the social clauses in the MAI, the promise of social safety nets - all these only disguise the most bitter pill that the independent nation state has yet been asked to swallow. There is no hope for peace in this new world order because there is no peace in global subjection.

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