Dušan Pavlović's book is a rare insider look at the economic policy-making process in Serbia, where most academic eyes over the last decades have been focused on politics alone, as if wars, nationalism, and persistent authoritarian tendencies could be abstracted from both domestic and international economic concerns. Pavlović's book was first published in Serbian, where it quickly became a bestseller by local standards. It is now available to English-speaking audiences in the excellent translation by Goran Gocić.
Between September 2013 and January 2014, Pavlović served as an advisor to Saša Radulović, Minister of Economy in the cabinet of Ivica Dačić, leader of Serbian Socialist Party and once Minister of Information under Slobodan Milošević. The government was, however, dominated by the rising star of Aleksandar Vučić, at that time a Deputy Prime Minister, and the head of Serbian Progressive Party, the largest party in the parliament. Pavlović entered the government incited by the prospect of substantial economic reforms, following upon the many broken promises by the Serbian democratic opposition to do so. Pavlović resigned, along with Radulović, just five months later, when it became obvious that political interests—and politicians’ and parties’ self-interests—would continue to override what Pavlović saw as much-needed economic and market rationality in Serbia.
Pavlović's analysis focuses on the work of “extractivist institutions,” which “lie at the core of the money-wasting machine” (29) of the Serbian state. Citing Daron Acemoglu and James A. Robinson, (Why Nations Fail: The Origins of Power, Prosperity, and Poverty, New York, 2012; 76), he calls them extractive “because such institutions are designed to extract incomes and wealth from one subset of society to benefit a different subset” (37). They are characterized by rent-seeking, soft budget constraint, and party patronage (15). In Serbia, according to Pavlović, the primary culprit in such transfer of wealth and resources are socially-owned enterprises entwined with party clientelism, but also state subsidies to foreign investors doled out without any accountability or conditionality. Delayed restructuring of large socially-owned enterprises resulted in perpetual economic losses covered by the state—but also in the perpetual delivery of votes to any and all parties in government. Botched privatization and sale of companies to foreign investors often entailed guarantees of tax breaks or other subsidies without any demands for delivery in return. Within the Ministry of Economy itself, several agencies—Development Fund, the Serbian Export and Promotion Agency (SIEPA), The Serbian Export Credit and Insurance Agency, the Bankruptcy Supervision Agency, and the Privatization Agency, acted as midwifes to the recurring extractivism. In Pavlović's view, the durability of these institutions and their malleability to whatever political party might be in power ensures that private interests always dominate over public good while simultaneously guaranteeing that meaningful market reforms in Serbia would be constantly delayed.
One does not need to agree with Pavlović's faith in the market's perfect rationality or with his relative disinterest in entanglements of Serbia's aggressive nationalism with political and economic processes that he describes to still find this book a fascinating and insightful read. Written with a scholarly mind yet accessible to all audiences, the book is a persuasive window into the workings of a political machine, nurtured by wars, sanctions, and isolation, and perpetuated by the simulacra of democratization. That too many of the post-communist states have become such money wasting operations or mafia states contradicts one of Pavlović's key premises—that “in some cases the causes for a country's poverty predominantly lie in domestic institutions and political decisions” (1). At the same time, an incisive and surgical analysis of the local extractivist institutions, such as Pavlović's, enables informed comparisons and serves as an excellent foundation for better understanding the transnational processes that might have allowed such parasitic and politically illiberal institutions to flourish in the European periphery and beyond.
