
A Socialist Country that Relied on the Market
War, Sanctions and Hyperinflation
Slobodan Milošević became the President of Serbia on May 8, 1989. Though his goal was to restore Serbian supremacy in Yugoslavia, he was instrumental in destroying Yugoslavia. The collapse of the country may have been inevitable, but the collapse of the economy and currency were not. In January 1991, Slobodan Milošević ordered the Serbian National Bank to issue $1.4 billion in credit to his friends. After Milošević resigned from power, he would be charged with corruption and embezzlement because of this and other actions. In 1992, the United Nations imposed sanctions on what was left of Yugoslavia as a result of the carnage that was occurring in Bosnia and Herzegovina. Consequently, both GDP and fiscal revenue declined while the cost to Milošević of fighting his wars with Yugoslavia’s former republics rose. Milošević had already raided the Serbian National Bank and by this time, most of the country’s hard currency was gone. The sanctions hit Yugoslavia hard, and its financial resources dried up. Milošević saw only one solution to survive: print money. Inflation was nothing new to Yugoslavia. Yugoslavia had suffered double-digit inflation in every year save one between 1969 and 1986. Inflation rose to even higher levels after 1985, moving from 87% in 1985 to 162% in 1987 and to 2719% in 1989. When the United Nations imposed sanctions on Yugoslavia in 1992, the country quickly collapsed into hyperinflation. Prices increased 17,200% in 1992, and an incredible 3 quadrillion percent in 1993. Inflation was 1788% in December 1993 and 4139% in January 1994, though one wonders how the government arrived at such exact figures. The hyperinflation finally ended in March 1994, and by 1995, the annual inflation rate was a more “normal” 122%.The Government Tries to Regulate Inflation but Causes the Economy to Collapse
The government tried to contain the inflation through bureaucratic measures, such as imposing price controls, though this only exacerbated the situation because bakers and slaughter houses stopped producing food rather than produce at a loss. Yugoslavia’s gas stations were closed and gasoline could only be bought from black market entrepreneurs on the sides of the roads. When the government required firms to file paperwork every time they raised prices, this measure hastened inflation because firms would raise their prices by more than was needed in order to reduce the amount of paperwork they had to file.
Milošević Is Kicked Out of the Country He Destroyed
Despite destroying the economy, Slobodan Milošević battled on and remained in power for another six years. He resigned from office following the disputed elections of September 24, 2000, and he was arrested on March 31, 2001 on suspicion of corruption, abuse of power and embezzlement. The Serbian authorities were unable to prove their case, and Milošević was extradited to the International Criminal Tribunal for the Former Yugoslavia in The Hague where he remained until he died in his prison cell on March 11, 2006.
Did Milošević receive a just punishment? Notes issued by colonial Georgia warned that “To counterfeit is death without benefit of clergy.” During the French Revolution when “la loi punit de mort le contrafacteur”, more people were put to death for counterfeiting than for any other offense. In England two hundred years ago, counterfeiting was punishable by hanging, not only for counterfeiting currency, but even for passing a counterfeit bill to another person, a law which put a number of innocent people to death.