To me, a statement of a minister caused an interesting reaction; he called upon buyers to spend less in order to restrain prices. It is so inappropriate that everybody laughed. However, everybody agrees with the statements of ministers, central bank’s governors, and even the president of this state, saying that the best response to the crisis is – saving. What is, globally speaking, the exact difference between these two advices? It’s obvious that there is not much sense in telling people not to buy hard goods or consumer goods when the prices are rising, but that goes as a general rule for saving. The thing is that people understand this concept when it comes to individual cases, but not in political terms. Therefore, what seems senseless when applied to a person seems wise when applied to an economic policy. Besides failing to see the big picture, we are missing the most important thing – why are the prices increasing in Serbia if the entire world is afraid they might fall because of the global financial crisis? And, what’s more important: do we need to save during crisis? These are two crucial questions. It is easier to give an answer for the first question. If the prices are rising, it pays out to buy things because money is losing its value. If prices are going down, it doesn’t pay out to spend because money is becoming more valuable in real terms – each of the two things will be cheaper by tomorrow. So, what are we going to do in Serbia where prices are increasing in stead of decreasing? Individually – we know what to do: spend while the prices are rising, and save when prices begin to decrease. Is this ok, from the point of view of economic policy?

It should work in the opposite direction (contra-cyclic, as some say). When the prices are going up, central bank should stabilize them and, in this way, restrain spending. What did the National Bank of Serbia do? It encouraged spending by maintaining low key policy rate until elections in May and than encouraged import by appreciating dinar. Interests increased at the beginning of Q2 and dinar moved to somewhat above RSD 75 for one euro during summer. Now, when we are entering crisis and when prices are to experience a downward trend because of decrease in spending, because there is less demand for export and the growth of loans is reduced, it is recommendable to save. Both central bank’s policy and the state’s budget will be directed towards this goal. Regardless of peoples individual actions, the central bank and Finance Ministry are to act according to the proposal of the Finance Minister, whose statement is, as everybody say, pointlessly comical.

Consequently, Serbia and Serbs will accept the obligation of compulsory saving. Households will save because they are not certain how much money they will have tomorrow since many will lose jobs. Government and ministries will save because they haven’t been doing this when they should have. Nevertheless, saving will lead to a decrease in production volume and leave people without jobs. This is the reason why all economic authorities in the rest of the world are trying to encourage spending, because they fear the harsh consequences of decline of prices, i.e. inflation. It’s interesting that one can read a positive thought about Keynes almost everywhere and, on the other side, advocate saving. However, we’ll come to Keynes later.

One more interesting thing is the reaction to the crisis. According to general belief, it is imported, as everything else. At the moment, one other minister is using Serbian people’s inclination to blame foreigners for everything bad that happens. The same goes for the crisis. Most of other countries are discussing their governments’ readiness and capacity to face negative economic trends; they are discussing whether their authorities did everything in their power to complete preparations in time. Those governments would also be inclined to transfer responsibility to others, let’s say Americans, but their people is not going to accept that. Firstly, this is happening because none of these countries have nurtured the ‘victim cult’ as Serbia did. One can have a very hard time trying to find a nation which considers self-respect, dignity and all values supported by strong individual sense of responsibility to be extremely important, and which, on the other hand, blames others’ unfairness for everything claiming to be their victim as people and as individuals. Of course, tabloids’ favorite topic – domestic traitors – perfectly fits in the picture. This topic is also extremely popular among intellectuals, at universities and, occasionally, among the members of the Serbian Academy of Sciences and Arts.

However, Serbia’s problem is simple: it wasn’t ready for the crisis. This happened because of political reasons. Public spending increased because they had to buy votes; furthermore, monetary and exchange rate policy assisted political goals. We have to pay the price of such economic policy now; no one else can pay it in stead of us – it has to be done by households and individuals (who were advised to save in order to survive the crisis). The fact that other countries are trying to dissuade their banks, companies and households from saving (while Serbian authorities are advising just the opposite) is not subject to explanation – because nobody is asking.

This is supported by a very particular way to explain changes not typical only for intellectuals in Serbia. They asked a famous Chinese economist why he chose to translate Hume while he was on forced labor in the time of Cultural Revolution. It is widely spread in China to appreciate causal explanations, and Hume was, according to them, skeptic. This is interesting for many reasons and one of them is how it can be easy to explain things. A small amount of time is spent on gathering information and one can immediately proceed to explaining. There are two methods which are, maybe, more prominent than others.

The first usually starts with: “It’s not because of that, but because…” This is useful when one doesn’t wish to see the cause of problem which is right in front his or her nose. For example: there is a statement according to which Serbia is not having problems because it is not cooperating with Hague Tribunal, but because Holland has internal issues when it comes to Srebrenica genocide. This group also includes the statements such as those that Serbia’s accession to the EU is slow not because Serbia is failing to fulfill its obligations but because the EU doesn’t want Serbia (please, remember all those who said we will not “give in under the burden of blackmails”). All ministers learned this lesson well and are prone to use it in their statements. The most commonly used method for confirming the causality is: if they wanted us, they wouldn’t be setting conditions; blackmailing would, certainly, be out of the question.

The second method is the one which describes the situation as a forest which cannot be seen as such because of too many trees. One of the versions is that Americans are to be blamed for everything. For example, this is used to explain why Serbia’s neighbors acknowledged Kosovo – why, because of Americans, of course! Why are Americans doing this? Now, in this case everybody has an answer in accordance with the thing he or she considers a problem. For those who believe that they achieved big, almost incomparable diplomatic victory in the United Nations, the reason is: they are doing this in order to spoil our victory. Those who think ill about their neighbors believe that this happened because the neighbors were blackmailed or bribed or both things (by the Americans, naturally).

This method relies on the same ‘counter-fact’ case: would those neighbors acknowledge the independence of Kosovo if they weren’t intimidated or bribed by Americans? The answer is obvious. The Chinese economist believed that people need a lot of time and persistent study of David Hume’s teachings in order to free themselves from the magnetism of opposite judgments. They are very appealing and even those who make them are inclined to start believing. One of the examples is the belief which represents the foundation of Serbian foreign policy according to which Albanians would never even consider independence if there weren’t for Americans. Or, if someone wants to dive deeper into the past, if there weren’t for Americans and their marionette Tito; and, of course, if there weren’t for domestic traitors, non-patriots and others from the same payroll.

The second example could be recent reaction to the decision of the International Court of Justice regarding Croatia’s charges. The court wouldn’t reach this decision if it had only known the truth behind all this. Naturally, the truth can only be analyzed in the appropriate context; for example, in the context of the twentieth century. This is how the unfortunate Commission for Truth, founded by the former president of the Federal Republic of Yugoslavia, defined its goal. Its aim was to establish historical causes of what happened in Vukovar, Duborvnik or Srebrenica. If there had not been a context, these things wouldn’t have happened. How can anyone say all of this would happen if there wasn’t for the World War II? The answer is more than obvious.

Since we are explaining things this easily, there is no need to gather information and make effort to establish facts. This, on the other hand, leads to errors in politics which are hard to correct. Consequently, we can once again listen to Vucic’s fraction of radicals inviting us to come closer to Russia and save ourselves from the crisis in this way. This is the solution for the crisis, as it would be a valid solution for anything else. Because of this, everybody is insisting on South Stream gas pipeline project, which will bring along incredible benefits, as if the construction will start tomorrow and as if the agreement will be signed when Serbian government gives its consent. As it seems to me, persons saying these things haven’t noticed that a serious global economic crisis hit everybody in the meanwhile and that it hasn’t bypassed Russia and its oil and gas sector.

Similar thing happened twenty years ago when Serbian politicians haven’t noticed that Soviet socialist system is sinking and that the Soviet Union is in the state of decomposition. On the contrary, everybody expected the Soviet model to replace America-Tito model, because it was as clear as day that liberalism was finished. Some were interested in Keynes and his teachings, since the country was in crisis. However, everything was taken second or even third-hand. As there was no interest for facing the facts, there was not interest to understand Keynes’s moral and economic theory. Consequently, everybody believed he was a supporter of one or other totalitarian group, and, by all means a strong supporter of socialism.

Of course, none of this is true. What is true and important is that he believed that deflation represents much greater problem than inflation. This concept of his dates back to his earliest works. According to him, during deflation, savings is a problem and not a solution, because there is the ‘paradox of saving’: if everybody saves the overall saving can be lower than before because there will also be a decrease in GDP and the decline of prices, which will then cause a decrease in investments and production. Saving has sense if the country expects an increase in export, which is not a probable thing to happen if the trade partners are suffering from global recession even if dinar is being devaluated, as it is currently. This can only lead to decrease in import, which does not have to be good for production. The thing that could help Serbia in this situation is a boost in public investments, but it depends on whether we have the money to finance it. By all means, we shouldn’t be counting on expensive commercial loans; this leads to the conclusion that we have limited capacity for public investments. If they plan to finance public investments from private saving, it means that economic policy has lead us to the point where we need stronger public sector and we have crisis in private sector. This will, of course, serve as a proof for all of the abovementioned explanations.

If the explanations were not true, how on earth could we be having this crisis and everything else which, as the Declaration of Reconciliation says, “befell Serbia”?

Translated by Nevena Damjanovic

Pešč, 04.12.2008.

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Vladimir Gligorov (Beograd, 24. septembar 1945 – Beč, 27. oktobar 2022), ekonomista i politikolog. Magistrirao je 1973. u Beogradu, doktorirao 1977. na Kolumbiji u Njujorku. Radio je na Fakultetu političkih nauka i u Institutu ekonomskih nauka u Beogradu, a od 1994. u Bečkom institutu za međunarodne ekonomske studije (wiiw). Ekspert za pitanja tranzicije balkanskih ekonomija. Jedan od 13 osnivača Demokratske stranke 1989. Autor ekonomskog programa Liberalno-demokratske partije (LDP). Njegov otac je bio prvi predsednik Republike Makedonije, Kiro Gligorov. Bio je stalni saradnik Oksford analitike, pisao za Vol strit žurnal i imao redovne kolumne u više medija u jugoistočnoj Evropi. U poslednje dve decenije Vladimir Gligorov je na Peščaniku objavio 1.086 postova, od čega dve knjige ( Talog za koju je dobio nagradu „Desimir Tošić“ za najbolju publicističku knjigu 2010. i Zašto se zemlje raspadaju) i preko 600 tekstova pisanih za nas. Blizu 50 puta je učestvovao u našim radio i video emisijama. Bibliografija