Bosnia: Privatise to colonise

How looting of the economy led to mass social protests

In spring 2014, Bosnia-Herzegovina (BiH) was hit by a wave of social protest. At the heart of the movement was the fury over “criminal privatisations”. Corruption is indeed an important problem in BiH. But the system of capitalist privatisation in BiH showed the criminal energy of capitalism, as a whole!

For the (former) employees and the working class in BiH, the consequences are dramatic. Mass unemployment and poverty are the “blessings” that came with the restoration of capitalism. It was the process of privatization that increased dependence on foreign countries. Bosnia is now more a neo-colony than an independent capitalist state.

The process of privatisation in BiH started in 1989, under prime minister Ante Markovic. Already under Yugoslavian ‘socialism’ (which, despite of being in conflict with Stalinist Soviet Union, nonetheless was also dominated by a ruling beaucratic caste), the first steps towards capitalist restoration were taken, with, for example, the introduction of the company law in 1989. The process was halted during the Bosnian civil war but continued in the second half of the 1990s.

The active role of international capital

The process was not administrated independently by the Bosnian state. It was always led by international capitalist institutions, whose influence was strengthened massively by the war and the Dayton Agreement. During the Dayton negotiations, the World Bank, which is BiH’s biggest creditor, had observer status. Since 1995, the High Representative for BiH (as a representative of the UN and, in part, the EU) has wide-ranged powers and can influence political, legal, structural and economic developments.

A number of international structures and organisations, along with different countries, invested in BiH, with the goal to build working capitalist frameworks. The OECD worked out a phased plan for privatisation, with special attention to key industries and the banking sector. The privatisation goals of the OECD and the World Bank also included telecommunications, electricity and energy supplies, and water and forests. The goal was to close down unprofitable state-owned companies. This had massive repercussions on employment and the economy (before 1991, the 12 biggest state-owned companies made up 35% of GDP). The privatisation agenda was enforced with active participation of international organisations. In the face of the influence of the High Representative and international organisations, the Bosnian state played only a minor role, unlike in other countries. The process of privatisation in BiH, and privatization, in general, was criminal – less in a legal sense, but certainly in a political and social one.

The whole process shows that – even if capitalist propaganda says the opposite – it was never about the Bosnian people. Their well-being never bothered the agents of privatisation, who served to enforce an ideology. The attitude of society towards privatisation and state ownership has shifted in the second half of the 20th century. At the end of the post war boom, capitalism had to find new ways. Monetarism (today ‘Neoliberalism’) was born. In the 1980s, with Thatcher, Reagan and the ‘Chicago Boys’, privatisation became almost a dogma.

Since then, we saw the processes of privatisation in capitalist states in industry, infrastructure and social services. The collapse of Stalinism in the late 1980s/early 1990s, triggered new kind of privatisations, which were still based on the same ideology. State property, which at least formally was the property of workers in what had been a non-capitalist environment. Huge parts of the economy were privatised in short timespan (‘shock therapy’).

It did not just concern single companies. The agenda of privatisation was part of a fundamental reorganisation of the economy: from a bureaucratically-planned economy (in the case of Yugoslavia, mixed with elements of workers’ ‘management’ and a limited private sector) to a capitalist economy, in which the private sector becomes a central part and driving economic force.

A conscious collapse

Even though there was no capitalist master plan, the example of BiH shows that capitalist politicians include political consequences in their economic agendas. When the process of privatisation started after the war they drew on experiences from other countries. The social repercussions were known. But despite the negative experience with ‘voucher-privatisation’ in the Czech Republic, the model was repeated in BiH. From 1997-2002, shares were given to the population, as so-called “people’s privatisations”. The model failed in BiH too as the new owners did not the capital needed for modernization. But their other goals were met.

The state got rid of debts. The ‘shares’ were used to pay outstanding wages, pensions etc. The shares however immediately lost value, some sinking to 3% of their original value. This did not bother the rulers but had dramatic effects for the new owners.

A new layer was able to enrich itself. In the course of capitalist restoration and the war, a new wealthy layer developed, mostly coming from the old party bureaucracy. They profited from privatization because they were able to buy companies cheaply.

The ‘people’s privatisation’ served to prevent resistance. In Yugoslavia, considering its history of ‘workers management’ (which did not go very far, in practice, but still was rooted in workers’ consciousness), it was impossible to sell companies directly to a few rich people and foreign investors. That would have provoked resistance. That is why with the voucher-privatisation process was chosen, which seemingly distributed wealth. Of course, it failed, which created illusions in “real privatization”.

“Real” privatization

This hypothesis is supported by the fact that in the first phase of privatisations only small and medium-sized businesses were privatised. The big companies that were of central importance for the BiH economy were saved for the second phase, which looked completely different. They were sold directly, mostly to foreign investors.

These investors did not hesitate. Today, the banking and insurance sector is almost completely privatised and in foreign (mostly Austrian) hands. Many big companies have been sold but still there is no sign of a flourishing economy in BiH. There are several reasons for this.

The privatisations were implemented in the face of a weak world economy, some even during the crisis that started in 2008. One of the main problems is global overproduction (not in relation to people’s needs but their buying power). What we have seen in other countries was reproduced in BiH. So no ‘blooming landscapes’ evolved. There was no investment. Instead, BiH became a typical example for, asset-stripping and also had the effect of eliminating competition. The strong banking sector is no indicator of a strong economic base. Most of the loans are consumer loans, not investment loans.

The foreign companies did not bring higher western standards to the country. In most of the privatised companies, union rights and fundamental workers’ rights are ignored, which is also the main reason for strikes.

Collateral damages

The social repercussions of the privatisations and the restoration of capitalism are enormous. Unemployment in BiH is above 40%, according to some sources. The unions in Republika Srpska estimate that 67% of the privatised companies are not operating anymore. The social situation is drastic. Sixty per cent live on or under the poverty line, which is set at an income of 250€ per month. Large parts of the population earn less than 50€ a month. For this group, the consequences of privatisation in social services and health care are especially dramatic. Only 60% have health insurance (the poor suffer from limited access to health care). Wages are often paid late or not at all. Employers often simply refuse to pay their workers’ health or pension insurances.

These were the causes for the protests in 2013 and 2014. Capitalism did not keep its ‘promises’. The privatisations are one example of this. They not only worsened the social situation but also BiH’s dependence on foreign countries. They transformed BiH to a semi-colony.

The big protests have ebbed down at this moment. One reason for this was the devastating floods that occurred a few months ago but it also due to the lack of leadership, programme and perspective. But it is far from over. Protests could break out again if the promised help after the floods does not come or if a new government after the elections, later in the year, continues as the previous administration ended.

There are reports of the formation of new trade union structures in the Tuzla region, which is known for its strong and militant working class traditions. In the same city, the protest assemblies had the widest influence and, at least theoretically, an orientation towards working class people. So new protests will arm themselves with the lessons learned in the first round.

So the demands and methods that have been tested will be checked, changed, adopted and improved. This goes for the question of privatisation especially, as it was a central demand of the spring revolt. The demand for an end to “criminal privatisations” falls short, if it creates illusions in so-called “proper working” privatisations. It goes in the right direction, if it implies that privatisations, in general, are criminal. It can become a battle cry for improvements, if it directly challenges capitalism, which is criminal, in itself, and the base for privatisations.

During the next round of protests movements in BiH, the question of taking over the economy by working class people and its independent structures will be vital. Positive traditions of the former Yugoslavia can be used, but the programme needs to be developed to real democratic workers’ control over not only the companies, but the economy and the society, as a whole.

Recent developments in the Balkans – the mass struggles and new creation of new formations on the Left – show that the poison of reactionary nationalism does not work forever. It can be overcome by class struggle, uniting working people. And it can be finished forever with the overthrow of the criminal system of capitalism and its replacement by another society – a socialist society.

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September 2014