Library:To kill a nation/Slovenia: somewhat out of step

The first breakaway republic of the former Yugoslavia was Slovenia. Often hailed as a success story, even an "economic miracle," Slovenia escaped the hyperinflation that afflicted much of Yugoslavia. It also managed to redirect the bulk of its foreign trade to greener pastures. In 1991, on the eve of Slovenia's independence, nearly two-thirds of its commerce was with the other five Yugoslav republics. By the end of the decade almost 70 per cent was with the European Union. And its per capita income of $10,000 was close to that of Portugal and Greece. In 1998, it enjoyed a steady GDP growth of 4 per cent, while inflation remained in single digits. Slovenia's currency was stable, its budget balanced, and its public debt not a crushing one. Unemployment, almost unknown during the socialist era, was 7 per cent, still low compared to most Eastern European countries, including the rest of Yugoslavia.

Before ascribing this economic performance to the wonders of the free-market, we should note that Slovenia resisted most of the drastic "reforms" avidly pushed by free-marketeers. Barely half of state-run enterprises have been privatized, and the new owners are mainly managers and workers, rather than large corporations. Foreign takeovers of industry and land, like those in Hungary and elsewhere, were prohibited—at least until 1999. In addition, pension and welfare programs remained reasonably good. Wages were higher than in most Eastern European countries. Because state welfare was generous and Slovenia had not subjected itself to the shock therapy of the free-market, the gap between the poor and the newly rich was markedly less drastic.

Given all this, one would think that Western leaders would hail Slovenia for having the good sense to develop a relatively successful mixed economy, and for not leaving itself open to the tender mercies of unbridled capitalist restoration. Here was a country taking a route somewhat different from the buccaneer profit-and-plunder road traveled by most other ex-Communist nations, and with good effect upon the living standard of its people. But it was this very thing that bothered the freemarketeers, whose concerns have little to do with the wellbeing of any particular population, and whose focus is on investment opportunities, cheap-labor markets, readily accessible natural resources, and high rates of profit. It was Slovenia's very success, its unwillingness to go the harsh neoliberal route that incurred displeasure among big investors. If Slovenia wants to join the European Union, warned the Economist, it will have to drop "a lot of protectionist and nationalist rules of its own.... [T]here is not enough shock in Slovenia's economic therapy.

Other things about Slovenia irritated the free-marketeers. Companies were too slow to revamp themselves. Pay was too high, driving out low-wage industries. It was difficult to fire workers. Pension and welfare budgets had to be "overhauled" (read: drastically cut)—even though Slovenia's budget deficit was relatively small compared to many other countries caught in the IMF debt trap. Banking, insurance, and utilities had to be privatized.

In early 1999, under pressure from Western advisors, the Slovene government passed legislation allowing foreign ownership of land and freer movement of capital. But Slovenia would have to make still more "painful decisions," said the Western critics: fewer public protections, more unemployment to bring down income, lower wages for the many, and higher profits for the few; in other words, Third Worldization.

As of 2000, a coalition consisting of the centrist Liberal Democrats and the populist People's Party ruled Slovenia. The government was eager to join the EU and NATO. But the desire among the populace to join EU dropped from 80 to 60 per cent by 1999, as people began realizing the sacrifices they would have to make to "improve" economic performance—not for themselves but for Western investors.

One free-market "reform" developing in Slovenia was cultural imperialism, as might be expected. By 2000 the country was awash in US movies, music, and television shows—inundating whatever Slovene culture was trying to emerge. In keeping with its westernization, Slovenia also was experiencing a marked rise in youth crime. A Slovene woman, identified as a "social researcher" with a degree from the University of Colorado, said, "We want to develop Slovene citizens who would care for Slovene citizens and not just sell their souls to Beverly Hills. She and her compatriots may never be given that choice.

As of mid 2000, the new republic's future did not look too bright. Once Slovenia's protectionist walls are completely battered down by the forces of free trade and globalization, it is only a matter of time before its land—which is not all that vast or that expensive—is bought up by a few giant cartels. This could mean the end of Slovenia's success in agricultural exports. Furthermore, once in the EU, the country will have less ability to protect itself from transnational corporate dumping. Slovenian markets will no longer belong to Slovenian producers, and underemployment will climb.

As the economy recedes, many younger people at the height of their productive years are likely to migrate abroad to greener pastures, as has happened in other Third Worldized nations. This brain drain, in turn, will have a further depressive effect on domestic productivity, which only creates a still greater inducement for migration. In time, Slovenia may start losing production, markets, and population itself as is already happening in Croatia, Bosnia, Russia, and a half-dozen other countries. This Eastern European variation of Third Worldization seems to be what Slovenia's erstwhile allies in the West have in mind when they talk of a "more thorough reform program."