Croatia in the period of relative economic stability

Introduction

We have received this article from Petar Pavlovic, national chairperson of the Croatian Young Socialists, in which he provides some very interesting figures on the state of the Croatian economy. These show that from the break up of the former Yugoslavia until around 2001 the economy took a nose dive, with unemployment practically doubling. In the same period, former bureaucrats in collaboration with foreign capital looted the resources of the Croatian economy for their own personal benefit. All this shows that there was nothing progressive at all in the destruction of the old Federal Republic of Yugoslavia. It confirms what we pointed out at the time. The break up took place with the backing of foreign imperialism, the purpose of which was to get control over the economy that once belonged to the state and widen the spheres of influence of the imperialist powers involved. With this all the gains of the Yugoslav revolution were destroyed.

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The life of capitalist economy is made of complicated economic cycles, which have their inherent internal contradictions, and contradictions in relation to the other cycles. There is no clear border between different cycles, and between phases of a particular cycle.

In some phases of the economic cycle the balance between elements, that are necessary for normal development of capitalist production, is established (periods of stability and periods of development), in other periods the balance is disturbed, and there is disorder between elements necessary for normal development of capitalist production (periods of depression and periods of crisis). And finally, there are periods in which the balance successively re-establishes itself.

In most cases the transformation of one period into another is not linear and "smooth ", in fact there are many fluctuations, coincidences, etc. Moreover, as we said earlier, there is no clear border between these phases, and also inside one phase of a cycle there are very often short periods that have characteristics of some other phase.

All these things make the analysis of tendencies in the economy more complicated, but they do not make it impossible.

The main purpose of this article is to show, by the analysis of macroeconomic tendencies over the past six years, that Croatia is presently in a phase of temporary stability, in a phase in which a temporary equilibrium has been established between the elements that are necessary for the accumulation of capital. But the instrument that made this situation possible, the foreign debt, will soon transform itself into its negation - from an element of stabilization it will become the main accelerator of the crisis. So it is very possible that Croatia will soon enter into period of depression and crisis.

To begin with, let us take a look at the development of GDP, which is one of the most important economic elements, and through which we can (although it is disguised) see the motion of the mass of surplus value.

According to a report of the Ministry of Finance (Statistički prikaz Ministarstva financija RH,123, Januar, 2006) the situation as far as GDP is concerned is the following in US dollars (taking the present exchange rate to the dollar of US$1 = 5.59 Kn):

2000 - 27,284.26 million

2001 - 29,631.30 million

2002 - 32,091.23 million

2003 - 34,537.92 million

2004 - 37,045.08 million

GDP in the year 2000 was double what it was in 1992. But it is still lower (or at best practically on the same level) than it was in 1990!

The motion of GDP expressed in percentage rate of growth looks like this (Statistički prikaz Ministarstva financija etc.):

2000 - 2.9

2001 - 4.4

2002 - 5.2

2003 - 4.3

2004 - 3.8

We see that after 2001 the GDP rate of growth stabilises and there is no significant or constant growth; we can only talk about fluctuations with no real importance.

Very important is, also, the movement of the rate of growth of industrial production. Here are the figures (the same source):

2000 - 1.7%

2001 - 6.0%

2002 - 5.4%

2003 - 4.1%

2004 - 3.7%

2005 - 5.1%

As in the previous example, after 2001 we observe fluctuations of a secondary significance.

It is interesting to take a brief look at the number of industrial workers after 1990. From about 550,000 in 1990, the number falls steeply, and then stabilises at around 280,000, which is the level reached in 2001. (Geografija Hrvatske, Goranka Marković, Ružica Vuk, Anita Filipčić).

The level of industrial production in 2005 was still only 85% of what it was in 1990, and we must take in to consideration that it underwent a relatively big growth in 2001 compared to the previous periods in which it had fallen steeply.

Now, let us consider the movement of the rate of unemployment, or in another words, the "reserve industrial army". This very important element is rooted in the specific conditions of the specific period of the economic cycle, as we explained briefly above.

An analysis of these figures shows the amount of the labour force which can be absorbed by capital. This means that this analysis in a certain way shows the overall accumulation of capital (not completely because we are looking only at the part of surplus value which is transformed into additional labour force, and not in additional means of production.)

With this analysis we can have an idea of which of the three periods mentioned above, the economy is passing through at present. But we must be careful, there are certain movements in the figures that can lead to changes in the rate of unemployment, that are not necessarily related with the specific conditions of a particular economic period. One of these changes that can blur the picture, for instance, is the tendency of capital to reduce the number of employed workers (so that it can reduce expenditure on wages). Another is to lengthen the working day, to increase productivity, and finally to cut the wages of employed workers. Moreover, there is a tendency towards increasing the organic composition of capital (an increase in the mass of the means of production in relation to the mass of the labour force) which comes about through the development of technology. This tendency also increases the rate of unemployment and we must take it into consideration when we are looking at the Croatian economy. So we must keep in mind that the rate of unemployment is higher than one would have expected if one considers that the rate of unemployment depends directly on the specific conditions of a certain period.

Here are the figures (Statistički prikaz Ministarstva financija etc.):

Number of unemployed workers

2000 - 378,544 (22.6%)

2001 - 395,141 (23.1%)

2002 - 366,162 (21.5%)

2003 - 318,684 (19.1%)

2004 - 317,577 (18.5%)

2005 - 307,851 (18.0%)

(The present rate of unemployment is fluctuating round 18%).

Here we see a constant lowering of the rate of unemployment that begins in 2002. According to the way things stand now, this fall in the rate of unemployment stops in 2005. After that we have oscillations of a secondary significance. In the period 1990-2001 the rate of unemployment grew constantly reaching its highest level in 2001, when it was double what it had been in 1990. (Geografija Hrvatske itd.) 2001 registered the highest rate of unemployment.

Now we need to look at a very important aspect, the growth of the foreign debt. According to the Ministry of Finance (Statistički prikaz itd.) the foreign debt in US dollars has been the following:

2000 - 11,282 million

2001 - 11,870 million

2002 - 15,680 million

2003 - 24,759 million

2004 - 30,859 million

2005 - 30,181 million

We can see that a steep growth of the foreign debt started in 2002-03.

The main element in the building of the Croatian capitalist economy was brutal privatisation, through which social property was transformed into state property, and then into private property. This criminal act was carried out through the most primitive and brutal means, with no respect even for the norms of a developed capitalist economy. According to the present estimations 95% of privatisation was against even bourgeois law.

The criteria by which individuals could become big capitalists were: a high position in the bureaucratic structure (of course only on condition that they supported the counterrevolutionary movement), personal acquaintance with the leaders of the HDZ ("Croatian Democratic Community", the main political counterrevolutionary force, a pro-fascist, ultra-nationalist party led by Franjo Tuđman), family relations with leaders of the HDZ, etc.

Of course, this process often led to economic catastrophes, corruption, financial scandals, etc. Thanks to these tendencies the whole of the Croatian economy was thrown into deep depression, and industrial production and the productive forces were decimated. One of the consequences of all this was growing unemployment, with an increase in the number of the reserve army of labour. Furthermore, the government never had a worked out strategy of development, and foreign capital, without any real struggle, took over most of the resources and the most important branches of the Croatian economy. It is clear that this economy is barely a caricature of a genuinely developed capitalist economy.

Therefore even the industrial cycles in Croatia are mere caricatures of the real thing. The shaky Croatian economy cannot achieve a long-lasting and serious stabilisation within the contradictions of capitalist economy, and enter a long period of strong growth. The Croatian economy in the period 1990-2001 went through a period of serious depression. Of course, this period was not homogeneous. There were constant oscillations, and there were short phases of crisis followed by stabilization within the overall period of serious depression. But if we approach this question of the tendencies in a global manner, and if we make the necessary approximations, we can clearly see that it was a period of serious depression.

We can see changes in the general economic tendencies in the period 2001-02. It was then that the negative developments slow down in almost all the important fields of the economy, as we have already seen above. It was then that the mass of GDP and its rate of growth start to go up, the rate of industrial production goes up, and the rate of unemployment starts to go down. Improvements in these fields are high if we look at the overall figures for 1991-2005.

We must remember that certain political changes took place in the period of 2001-02. The HDZ lost the elections, and the SDP (Social Democratic Party of Croatia) took its place. This did not change anything fundamental, but it did bring certain changes in economic policy - for instance it led to the full subordination of the economy to foreign capital.

An analysis of the economic tendencies in 2000-05 shows that Croatia is currently in a period of relative stability. We have also seen that since 2002 there has been no major growth in almost any of the sectors, but there have been oscillations around the levels reached at the end of that year. So, we can clearly see that Croatia is not in a period of fast economic growth.

The present period of temporary stability is merely a short interruption within the overall tendency that is characteristic of the Croatian economy. The main instrument that made this stabilisation possible ‑ as we have seen ‑ has been the foreign debt. We can see how massive growth of the foreign debt started at the end of 2002 and it was then that the economy entered into a period of stability.

This can hardly be a coincidence! The future consequences of this growth are very clear, and they present a nightmare to Croatian economists The contradictions that were temporarily stabilised by the growth of foreign debt, will undoubtedly explode in the future. The main factor in accelerating the future crisis, that will lead to a fall in the Croatian capitalist economy, will surely be this same foreign debt.

November 2006