The Washington Post December 15, 1983, Thursday, Final Edition Economic, Political Woes Bring Mood of Gloom To Post-Tito Yugoslavia By Bradley Graham, Washington Post Foreign Service Belgrade-- All the lights in the book-cluttered study were off, save for the soft glow of an old oil lamp atop a desk. "No need to worry," Milovan Djilas, Yugoslavia's most celebrated dissident, said with a smile during one of the disorienting power cuts that have become regular occurrences here recently. "After all, Karl Marx used to work under a lamp like this. We're just going back to our roots." The quip was a black-humor poke at the widely perceived regression and disintegration that have plagued this communist state since the death of marshal Josip Broz Tito in May 1980. In the world's eyes, Yugoslavia became something of a backwater after Tito's death. But what happens here still has considerable ripple effects in both East and West--for both symbolic and strategic reasons. An economic slump that began in the late 1970s has generated a prolonged atmosphere of political and financial crisis. Dependent on a massive infusion of western assistance, Yugoslavia's one-party leadership is under increasing pressure to curb the power of local bosses and state bureaucrats, to integrate the country's regional markets and to allow greater democracy in its decision-making. A recent series of austerity measures apparently has helped turn Yugoslavia's current accounts toward balance. But last month, living conditions fell another notch when the lights literally went out in major cities for eight or more hours a day. In an ironic touch, someone recently clambered up the statue in central Belgrade of physicist Nikola Tesla, a pioneer of high tension electricity, and stuck a candle in his hand. The outages, caused by Yugoslavia's shortage of western currency to buy oil and a drought that cut water supplies for hydroelectric plants, prompted fears that candles and flashlights might be necessities at the winter Olympics, to be held in February in the central Yugoslav city of Sarajevo. But Yugoslav officials, their national pride on the line, have assured that means will be found to keep the Olympics lit. Whether Yugoslavia succeeds has importance beyond its own borders. For the people of the Soviet Bloc, this Balkan nation's political independence and economic achievements have long served as a reminder that there is an alternative to Soviet repression. For East European governments, Yugoslavia is a closely observed experiment in the devolution of economic power under communism. For the West, Yugoslavia's geographic position--commanding the eastern end of the Mediterranean--makes Belgrade's friendship, or at least its continued nonaligned status, crucial to the strategic balance in Europe and along the Mediterranean littoral. To this end, a U.S.-initiated effort to stave off a Yugoslav bankruptcy was launched, involving 15 western governments, the International Monetary Fund, the World Bank, the Bank of International Settlements and about 600 commercial lending institutions. More than $4.5 billion in new credits and rescheduled payments were provided this year, buying time for the Belgrade leadership to draft a new economic plan. But no sooner was the final part of the 1983 support package signed last month than Belgrade authorities announced they were seeking another financial assistance deal for 1984. Western officials involved in the first rescue knew that restoring Yugoslavia's solvency required more than one year's effort, but this is only now dawning on the general public. It raises some touchy questions. Can Yugoslavia be expected to pull itself out of crisis? Are western governments and banks being falsely lulled by Belgrade's assurances of coming reforms and by a few tentative signs of economic improvement? Does the West have any other choice but to support Yugoslavia, given the alternative of watching it fall back into the Soviet lap? So far, the Soviets have kept a relatively low profile here, according to western diplomats. Moreover, after Tito's break with Stalin in 1948, most Yugoslavs would strongly resist getting sucked back into a Soviet orbit. But the danger of a drift eastward was underscored recently when Yugoslavia announced it would turn to the Soviet Union, already a major supplier of oil, for substantial extra oil deliveries in coming months. While external circumstances--oil shocks, rising western interest rates and world recession--were damaging for Yugoslavia, the decline here has been primarily a failure of domestic management. Keeping the diverse Yugoslav people together has never been a simple task. The country is pieced together from the pre-World War I kingdoms of Serbia and Montenegro and parts of the crumbled Turkish and Austro-Hungarian empires. Its census lists more than a dozen large national groups. Today the country is divided into six constituent republics and two autonomous provinces. Economic tensions are contributing to festering nationalist strains, accenting the differences between the poorer regions of Kosovo and Macedonia and the richer ones of Slovenia and Serbia. Demands by separatists in Kosovo for unification with Albania have not quieted and in Bosnia, Moslem fundamentalists have received stiff jail terms for campaigning to establish an Islamic state. Tito's power and charisma provided a strong central authority for three decades. After he died, no other emerged to fill the void. A representative of a different republic or province heads the Communist Party each year--a procedure devised to reconcile regional disputes but which results in a rotation of mostly faceless political chiefs. In the absence of firm national leadership, the republics have tended to place their own development ahead of national needs. Influential local bosses, eager to install large factories in their own territories, raised the hard-currency loans in the 1970s that piled Yugoslavia's debt to the current $20 billion and caused costly duplications of steel, oil and other industrial plants. Last summer, long after economic warning signs appeared in the late 1970s, a government commission produced a long-term economic stabilization program. The report urged a revamping of pricing and foreign exchange rules, a liberalization of tax policy and other measures aimed at cutting administrative interference in the economy and realizing the vaunted ideal of worker self-management. Its publication was accompanied by a marathon session of parliament at which Prime Minister Milka Planinc gave a rousing do-or-die speech to the nation. She said the report should signal "deep economic changes in our life," adding though that these changes might require some time to take hold. Since then, not much has happened. A political study, paralleling the economic report, is now being written by a party-appointed commission. A public debate about the need for political reforms began a year ago after Najdan Pasic, president of the Serbian Constitutional Court, wrote an open letter to the party presidium saying that the best new economic program would be in vain unless accompanied by a democratization of the political system. But the party's deliberations are going slowly. "There are still arguments being made, which I can't agree with, insisting that the institutional structure of the system need not be changed, only the behavior of certain people must be altered," Pasic explained. The ideological conflict is being waged with mounting ferocity and openness in the press. The fight is mainly between a relatively liberal-thinking contingent centered in Serbia and orthodox forces in Bosnia and Croatia. "We no longer have the situation at least where, if the leadership quarreled privately over what to do, they would brook no public criticism," observed Zagorka Golubovic, a philosopher and sociologist who belonged to the dissident Praxis group active in the 1970s. "Now there are some who say openly what we've been saying, who believe that serious thought should be given to changing elements of the system." In defending continued special assistance for Yugoslavia, U.S. officials point to several tentative indications of an upturn as evidence that the Belgrade leadership is coming to terms with its crisis. For instance, goods in such short supply earlier this year that they had to be rationed are now available--although considerably more expensive. Inflation is running at around 45 percent for the year. Perhaps most impressive has been Yugoslavia's success this year in redirecting exports from communist countries to western and Middle Eastern markets to earn hard currency. Exports to the West are up about 27 percent over last year, helped by a 60 percent devaluation of the dinar since January. Industrial production began to pick up in the second half of the year when new western credits became available, enabling the resumption of imports of necessary components. Some West European officials would still prefer to treat Yugoslavia's debt problems more conventionally through a formal rescheduling of debts by western governments. But the Reagan administration opposes that approach, contending it would overdramatize Yugoslavia's predicament and could complicate the situation by virtually freezing new supplier credits for Yugoslav enterprises. Some Yugoslavs criticize the rescue effort as too piecemeal and improvisational. Others allege that the aid is simply encouraging authorities here to put off implementing reforms. "Maybe if we were faced with no foreign aid, we'd be better off in having to choose between survival or collapse," said Pasic, a member of the party's Central Committee. "But this position of neither survival nor success has been protracted for too long, and what is dangerous is that people's patience may run out." Many Yugoslavs still live better than other Eastern Europeans. They continue to consume freely, cushioned by family savings, extra incomes from moonlighting and hard currency sent home by the large number of Yugoslavs working in Western Europe. Still, real incomes here dropped 10 percent this year, on top of a 20 percent decline since 1980. Warning of the volatile, often unpredictable, Yugoslav mood, Svetozar Stojanovic, a noted dissident sociologist, remarked: "A typical mistake of rulers here has been to think they still had time. Pressures pile up, though, and one day people just explode, destroying things around them." © 1999, LEXIS®-NEXIS®, a division of Reed Elsevier Inc. All Rights Reserved. Louis Proyect (http://www.panix.com/~lnp3/marxism.html)