Licence to steal
Privatization in Serbia
"Our country has been undergoing the longest, slowest economic transition in Eastern Europe," remarked Djordje Petkovic, a Serbian rubber factory worker whose company, Rekord, recently shut down, leaving him jobless for the past 10 months. Frustrated with his country's current economic state, he continued: "We have seen nothing of the grants and loans the West has given us. The new transition laws have brought popular misery and raised the cost of living for many. My company, which has existed for 100 years, has now ceased to exist, but nobody cares."
This description may contrast with some of the popular imagery and discourse of Serbia as a successful transition country, a Balkan tiger as some have dubbed it, with a rapidly growing economy and good long-term prospects for joining the European Union. Despite high economic growth rates in the last few years (5.8 per cent in 2006 and 7.5 per cent last year), much of it has been in non-productive sectors like transportation, retail trade, and financial services, while industry, the largest employment sector in the country, has seen relatively little gains. Consequently, high growth rates have been accompanied by rising unemployment and diminishing collective rights and securities for workers.
This is the neoliberal story in many parts of the world, especially in former conflict zones and regions that have been hit by natural and human-made disasters, where political instability is seized as an opportunity for radical economic restructuring. As Naomi Klein documents in The Shock Doctrine: The Rise of Disaster Capitalism, many governments have exploited disasters -- wars, hurricanes and economic collapses -- to implement programmes of rapid privatisation, market liberalisation and fiscal tightening. The case of the Balkans also highlights the power of the ordinary in political practice; where neoliberalism has drawn its force not only from sudden change, but also from a corrupt bureaucracy that has left its imprints on every major economic sector in the country over the past two decades.
Serbia, the largest state in former Yugoslavia, has been in economic transition for the last 20 years. Political and economic developments throughout this period have accelerated the transition process: post-Cold War shock therapy programmes, the Balkan wars of the 1990s, and the constellation of political forces that were brought to power in its aftermath with support from Western allies.
Strangled by the debt crisis of the 1980s and international sanctions in the 1990s, former president Slobodan Milosevic began privatising public assets under what he termed "People's Capitalism", a model of privatisation that ensured majority shareholding for the workers of any company. The first companies to go were in food processing, metal and textile industries. In the 1990s, a constitutional amendment approved the transition to a market economy, and workers began negotiating contracts through collective bargaining rather than worker courts.
Privatisation accelerated after the October 2000 overthrow of this regime. New laws passed in 2001 regulating employment and the sale of public assets -- some under IMF and World Bank recommendations -- were promulgated. As a result, 1,852 companies have been privatised in the last seven years, according to the Serbian Privatisation Agency.
Today the workers of Rekord, based in Rakovica on the industrial outskirts of Belgrade, are locked in a battle with the company's new owners over unpaid pensions and social benefits. Many factories in Rakovica, once a highly industrialised section of the Serbian capital and centre of the country's auto industry, have suffered badly from the recent privatisation wave. The workers of Rekord boast of a time when their company was among the biggest rubber manufacturers in Europe, with an export market that included well over 150 countries. In 2005, the company was privatised and slowly driven into the ground by its new owners, who declared formal bankruptcy in October 2007.
Forced bankruptcies, now numbering in the hundreds, have become a common strategy adopted by the owners of newly privatised firms. First, they put their newly purchased companies into enormous debt to their other holdings. Owner-creditors can then either take control of company assets or restructure the company, ridding it of smaller shareholders and nullifying previous collective bargaining agreements with the workers.
Like all privatisations in Serbia, the Rekord purchase came with conditions that the new owner failed to uphold: no workers were to be fired and their collective agreement, negotiated under the previous one, was to remain unchanged for two years. Additionally, the new owner was obligated to invest in the company and keep it running for a minimum of five years.
When the workers discovered their boss had been asset-stripping the company, selling off its fixed capital and products in secret, they began an occupation of the factory, now in its third consecutive month. Last April, after an agreement with the company director to leave, 200 workers remained on the abandoned factory premises, in rotating shifts, demanding that they receive the social benefits to which they are entitled. Many employees are over the age of 50, and have worked at the company for decades. Among those guarding the factory, many have relied on family members for financial support and others still have found second jobs, insisting that they will remain until their benefits are paid. But to revive the company seems a distant hope.
Such has been the experience of many industrial and manufacturing sector workers who have found themselves dismissed from workplaces to which they were attached, economically and emotionally for decades. In short, transition for many has meant loss of jobs and economic security, often resulting from illegal business practices and forced bankruptcies. At the other end of the social ladder, an elite class has acquired new fortunes, not by production and income generation, but through a systematic process of privatisation and wealth redistribution. Reflecting on this new economic reality, one of the workers at Rekord commented, "we are no longer living under welfare capitalism, we are living under 19th century-style primitive accumulation. In this country there is no more will to undertake production, only commerce and services."
The story of Rekord is only one in a recent string of privatisations and factory occupations that began five years ago at Jugoremedija, a pharmaceutical company in Zrenjanin, one of the largest towns in the northern province of Vojvodina, and considered the second major industrial town in old Yugoslavia. Despite its economic legacy under Tito's state socialism, Zrenjanin's contribution to industry has declined during the transition process and its unemployment rate is now 36 per cent.
Jugoremedija was privatised in 2000, under Milosevic's old law, giving the workers 58 per cent of company shares, while the state retained 42 per cent. In 2002, the state sold its shares to Jovica Stefanovic, a notorious Macedonian businessman wanted by police at the time for smuggling and money laundering. Through various illegal manoeuvres -- Stefanovic indebted Jugoremedija to his other firms and then converted the debt to stocks for himself -- the ownership structure was changed. Stefanovic secured 68 per cent of the shares while the workers' portion was reduced to 32 per cent. In its 2005 report, the Anti-Corruption Council listed several concerns relating to the Jugoremedija purchase: evidence of money laundering, buyer inside knowledge, illicit transaction procedures, and evading standard registration practices. In response, the workers staged a strike and called for factory occupation in December 2003, and began a lawsuit against the company's recapitalisation.
Adamant in the face of legal proceedings and worker direct action, Stefanovic hired a private security firm to confront the striking workers, and began firing the most active employees or downgrading them to lesser jobs. In 2006, over the course of a few months, the Serbian Supreme Court, followed by the Zrenjanin Economic Court and the Belgrade Higher Economic Court, all ruled that the recapitalisation was carried out illegally. As a result, worker-shareholders restored their ownership to 58 per cent, making Jugoremedija the only worker-managed company in any Eastern European transition country.
But corruption has not been the sole source of socio-economic problems, nor is it that distinguishable from everyday market practices. Privatisation, bankruptcies, corruption, organised crime, formal and underground economic activity have been part of a single process of massive wealth redistribution and the strengthening of class power for tycoons, and their allies among the political elite, who have benefited from the breakup of the country.
The example of Jugoremedija has inspired other similar worker actions in Zrenjanin. Sinvoz, a railcar manufacturer, was privatised in 2004, under a new law on privatisation, and the new owner-creditor, Nebojsa Ivkovic, declared bankruptcy three years later. The railcar workers responded by blockading the factory, demanding that the privatisation contract be reversed and the company be bailed out. Their case is still pending with the Privatisation Agency.
BEK, a food manufacturer that was also privatised around the same time, shares a similar story -- of illegal business practices, massive job cuts, and forced bankruptcy -- with 300 workers remaining who are now unemployed and waiting to be paid their salaries.
The strike committee leaders of these three companies, along with other local trade union activists, have recently formed Ravnopravnost, a political party in support of worker and minority shareholder interests. After relative success in Zrenjanin's recent municipal elections, they now form part of the city's governing coalition.
Workers' struggles for collective rights, security and self-management in Serbia have a long road ahead. Relying on a combination of legal action, strikes and sit-ins, media pressure, and electoral politics, some successes have been achieved thus far.
But confronting a system of laws, decrees, backdoor deals, and political corruption, requires creativity and novel forms of resistance to challenge it. "We deal with things as they come" said Ivan Zlatic, a member of Ravnopravnost. "We have no grand blueprint for pushing back this wave of neoliberalisation and economic dispossession. The case of Jugoremedija has taught us that the details of each case are most important to its potential for success. What has brought us this far has been our ability to innovate, find holes in the system, and alternative channels of resistance to use in our favour."