MONITOR: You said that Serbia and Montenegro have mutual interests to stay in a common state. What would such a state be like?
KOVAC: I envisage the common state as a combination of a full economic union and minimal political union. However, politicians disagree. Branko Horvat [Croatian economist, famous for his contribution in the last days of the former Yugoslavia] used to say that Montenegrins are big Yugoslavs, among other, so that they "could be generals".
But let me get back to your question. A full economic union would include common external customs, lack of internal customs, harmonization of economic conditions and single currency. Something similar to the European Monetary Union.
To what extent is the comparison of the Serbian-Montenegrin community with the EU meaningful at this moment?
The existing common state is nominally a full economic and political union, while in reality it is neither. The discrepancies between norm and reality could be overcome if Montenegro declared supremacy of its laws over the federal laws, as is already the case in Serbia. That act would establish the legal basis for the process of realization of a desirable project of a common state. Redefinition of relations must not be a priority as far as time is concerned. Perhaps that pendulum of relations between Serbia and Montenegro should be allowed to spontaneously oscillate, based on the method of "successive approximations", and finally provide a fixed legal framework once a stable solution is found.
Does that mean that Montenegro should give up a part of "conquered" economic sovereignty?
Yes. If we do not want to have internal duties then the external duties must be the same. Otherwise, that would generate speculative selling, and mutual export of our own taxes. A monetary union demands a single currency. And I would not be very sad to see the existing Montenegrin monetary system go. It is not a good system and that will become obvious sooner or later. This project can hardly have a theoretical and empirical basis. It will very much depend on economic relations with the neighboring countries. And the system of economic relations with the world is registering spectacular deficits in trade (coverage of imports by exports is only 40 percent). We do not know how these deficits are generated and financed. The economic policy neglects the factor of already formed debts to foreign lenders, dating from before the breakup of the former Yugoslavia, perhaps of the order of magnitude of $1 billion, which is the bankruptcy zone once that debt is activated and becomes serviceable. There is no understanding that a two currency system can not withstand mentioned deficits.
Simply, it can happen that deficits absorb internal transaction liquidity. In that context we should evaluate to what extent the recent liberalization of foreign trade was justified... The neglect of the factors I've just mentioned makes the whole project of monetary independence rather problematic and there is no space for triumphalism there.
One gets the impression that , in your opinion, an internationally recognized and independent Montenegro is from the economic point of view inferior to a common state with Serbia?
Yes!
About ten years ago, as a member of the Reform Forces, you had a different opinion?
Not a radically different one. The context at the time was different, as well. Montenegro at the time had a historical chance to distance itself from the Serb nationalist movement and help herself, both herself and Serbia, and other republics of the former Yugoslavia. Even now, I do not exclude the independence as an option, but more as an alternative in case Serbia refuses to cooperate.
It seems, however, that the tendency of the strengthening of the support for independence among the citizens of Montenegro is undeniable. What do you see as limitations of such a choice?
Taking the risk of displeasing many, I must say that a big limitation of the independent Montenegro is the lack of elite required by a state. We must recognize that the Montenegrin behavior is the result of two typical characteristics: high individual motivation to assume power and lack of readiness to work in accordance to the desired status. That results in intellectual laziness coupled with fake demonstration of almost universal competence. Thus it happens that Montenegro lacks expertise that could help her in spite of numerous academic titles that would be sufficient for a far numerous society. The appearance of fake elitism in this region is probably based on the Communist mistrust of intellectuals. Just recall the slogan "workers, peasants and honest intellectuals". The intellectuals were supposed to be weakened by making their ranks more numerous, which in the end happened. Small communities, in order to survive, nurture elites. On the other hand, in Montenegro the elite is systematically suppressed.
National elites can assume one of the following attitudes towards the relevant surroundings: conformist or, even worse, imitating, deviant and rational. Montenegrin elite imitates, unlike the Serbian, which was until recently deviant, and Slovene which is rational in the sense that is accepts the norms of its surroundings, but within that framework seeks its interests.
Let us return to the economic framework. To what extent can the privatization process be important within the framework of the issue we are talking about?
It is undeniable that there is a crisis of trust between the employees and new owners. The privatization with foreigners, besides possible advantages, implies a loss of a part of sovereignty and indeterminate outflow of profits, i.e. a part of the national income. A negative effect of the foreign currency balance is also possible. The privatization has in a way become its own justification and goal.
Influential economists believed that the understanding of stock exchange techniques is a necessary and sufficient condition for a successful privatization. I believe that in our conditions direct transfer of savings surplus will be irrelevant in comparison with the indirect transfers through banks. The privatization was used for what is referred to as "the strengthening of the state that is about to wither away", which was a Stalin's theory. Political and parapolitical lobbies dominate governing boards of companies. That is now in the worst shape than ever.
Besides, the public opinion has the tendency to accuse the privatization of some things that it cannot be blamed for, using the logic "this happened afterwards, therefore it must be a consequence". In that context privatization probably influences less the unjust distribution of property and income than it is accused of.
What do you propose? What is the solution for these problems?
Perhaps we should give a break to the ownership reform, especially the voucher-based privatization. The transition includes other, more important blocks. One of them is the liberalization of the market (goods, services, entrepreneurship, and foreign trade) and macroeconomic regulation (fiscal system, monetary system including banking and macroeconomic programs for steering of the economy). The Montenegrin economic policy hasn't made much progress in the mentioned directions of transition. Either it did not know how to do that or it felt good in the condition of "maximum confusion".
Who is responsible for that? Who forms and influences economic policy in Montenegro?
Only someone from the current authorities could answer that question. It is enough to point out the paradox that an influential group from the Economic Faculty is selling a highly conservative, rightist, economic ideology to the leftist political forces in Montenegro (Socialists and Socialdemocrats).
I should say something about the formation of the public opinion. There is a circle of people detected by journalists as close to the official opinions. They are a sort of ideologues who can be regularly found in state-controlled media. As a rule they have exemplary careers without any theoretical basis [suitable education]. I've met our people abroad who after many years of living abroad still could not speak the local language because of bad original education at home.
Therefore, at the very least Montenegrins could be accused of a lack of strategy. In spite of a lot of rhetoric we do not know what we want. Jacques Klein, the high representative for Bosnia-Hercegovina gave a well-meaning advise to the Bosnians: "If you do not have your own strategy, you will fall prey to the strategy of other systems". Something similar was told to us in Sveti Stefan ("If you are self-confident and have firm ideas about what you'd like to do, the world will help you".)
Do you think that the solution of the statehood-legal status would increase the likelihood that systems of political and economic democracy would start functioning in Montenegro?
There will be obstacles to that. Small marginal communities, in which everyone knows everyone else, are not suitable for democracy. Such communities are inclined to formation of monopolistic and oligopolistic structures. In the best case, it is likely that we shall have something that could be referred to as a "moderately authoritarian regime".
The situation with the market can hardly be better. All Montenegrin markets (labor, capital, foreign currency...) have fundamental imbalances and can hardly be regulated using internal regulation. It is more likely that there will be something we could refer to as state management of a simulated market.
There is a realistic danger that corruption or violence destroy even possible self-regulation contents of the political and economic systems. Corruption is to market systems what a "virus" is to computers. The situation is that much more difficult because the local public opinion, it seems, is more motivated for the redistribution rather than suppression of privileges ("I'm not bothered by the trumpet, but the fact that I'm not playing"). Politicians can abuse the existence of "sins" to strengthen loyalty of individuals and groups.
Therefore?
If we continue with the existing economic philosophy, Montenegro will face two problems: independence and the lack of the same!