We sold our car and have reduced all of our expenses, even the utilities on which we save by paying them until the 16th in the month so we get a five percent off. That is how, in a simple sentence, Boban Ljubic explains his three year struggle with crisis. The Ljubics, which you can see in the picture, are not exactly your average Serbian family, but are typical for many reasons because they have the same problems as 90 per cent of the families in Serbia.
It is not an average family because it has one member more than the average one. Statistically speaking, an average family in Serbia has 3 family members (precisely – 2,97), a number our family exceeds by having two sons (Srdjan and Ilija). In such a case even an above average overall family income per family member gives an under average result. Secondly, living in a metropolis, at least in one of New Belgrade’s blocks (which is of course far from a life of glamour) combined with working on the other side of the city, produces costs which one doesn’t have in smaller towns.
On the other hand, living in a big city gives an opportunity for a better education, which the Ljubics are trying to achieve, but that also brings higher costs of life. For example, if the younger son enrolls in the music high school in the fall, he will need an accordion (second hand, of course) which costs four thousand Euros. Where will they get the money? That is the question which is burdening the Ljubics the most at this time.
This time three years ago the situation was a lot different. So much, that they even started building a summer house on a piece of land they received as a present in one village in Sumadija. But, since then their standard of living has started to decline, luckily not precipitously, but it has been going for a while. And last year, with the big rise of the prices of food, it speeded up.
In that way, the Ljubics fit perfectly into the state statistic. The data for Serbia show that the salaries were going up until the middle of 2008, when they started going down, and that is still practically the case. On the other hand, the prices have, sometimes slower and at times faster, continuously and irrevocably been rising.
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Let’s start with the external causes, i.e. with the growth of the prices of food and energy (oil and gas mainly) on the world market, which transfer to the domestic conditions. But it brings up a question of how come those causes do not influence other countries. The answer should firstly be sought in the inappropriate agrarian politics, which has made possible the creation of monopoly and oligopoly on the market of the most important agricultural products (wheat, corn, oil, sugar) in Serbia.
The next cause is the exchange rate. The fall of the dinar immediately reflects on the prices. The essence of the “aimed inflation”, which has been lead by the NBS for years, is that the influence of the exchange rate should be eliminated or at least lower significantly and that the main lever for managing the inflation should be (so called, referent) the interest rate of the central bank. That failed. The above mentioned interest rate went for 8 to 17 per cent and back, but the dragon of inflation has not been tamed.
The National Bank is not the only one to blame for this. It’s true that it has been too lenient towards the pressure from the government, but the pressures that were coming from the economical systems were even bigger. Financial indiscipline is the structural flaw of our economy. In other words, companies can last on the economy scene for years without paying their basic obligations, whether they are debt to the suppliers, employee’s salaries or state taxes.
With such a system, the number of illiquid and bad firms has gotten bigger. And that is the main difference between Serbia and her neighbors. “Illiquidity and mutual debits are lower in other countries. You can rarely see in any other country the chaos you see in Serbia,” says Vladimir Gligorov from the Institute for Comparative Economical Studies in Vienna, specialized especially for the ex-Yugoslav states.
The public sector had a key role in it. Unreformed and unreconstructed public companies, with a great number of excess workers and the same amount of efficiency and productivity, have been pulling the entire economy down. In addition, their workers have been able to get from the government (which is weak and divided) a salary increase and with which they increased an already high public consumption, which, in effect, made the life of the rest of the economy even harder.
And with that we get to the basic, and already mentioned, cause of the inflation and also of the low standard of living in Serbia: dictatorship of the (low term) political interests over the (long term) interests of the (healthy part) of the economy and the society.
The heroes of our story, Verica and Boban Ljubic, are, to their misfortune, employed at the private sector, where you work more and earn less, but at least there are no strikes there. Because they know it wouldn’t have sense. Instead they are looking to find one more job in order to raise their income. But that is a whole different story.