Bosnia: Behind the Democratic Facade

by Michael Chossudovsky

from the Internet


What's behind the dismantling of former Yugoslavia and the recolonizing of Bosnia? According to conventional opinion, it is the inevitable result of deep-seated ethnic tensions rooted in history. :But, as Michel Chossudovsky argues, the real roots of the conflict lie in the historic meddling of Western imperialism -- and Bosnia's future is now firmly in the hands of Western finance capital.

As heavily-armed NATO troops enforce the peace in Bosnia, the press and politicians alike portray Western intervention in the former Yugoslavia as a noble, if agonizingly belated, response to an outbreak of ethnic massacres and human rights violations. In the wake of the November 1995 Dayton Peace Accords, the West is eager to touch up its self-portrait as saviour of the Southern Slavs and get on with "the work of rebuilding" the newly sovereign states.

But following a pattern set since the onslaught of the civil war, Western public opinion has been misled. The conventional wisdom, exemplified by the writings of former US Ambassador to Yugoslavia Robert Zimmermann, is that the plight of the Balkans is the outcome of an "aggressive nationalism", the inevitable result of deep-seated ethnic and religious tensions rooted in history.

Drowned in the barrage of images and self-serving analyses are the economic and social causes of the conflict. The deep-seated economic crisis which preceded the civil war has long been forgotten. The strategic interests of Germany and the US in laying the groundwork for the disintegration of Yugoslavia go unmentioned, as does the role of external creditors and international financial institutions. In the eyes of the global media, Western powers bear no responsibility for the impoverishment and destruction of a nation of 24 million people.

But through their domination of the global financial system, the Western powers, pursuing their collective and individual "strategic interests" helped from the beginning of the 1980s to bring the Yugoslav economy to its knees, contributing to stirring simmering ethnic and social conflicts. Now, the efforts of the international financial community are channeled towards "helping Yugoslavia's war-ravaged successor states. " Yet while the world's attention is focused on troop movements and cease fires, creditors and international financial institutions are busy at work collecting former Yugoslavia's external debt, while transforming the Balkans into a safe-haven for free enterprise.

The former Yugoslavia has been carved up under the close scrutiny of its external creditors. Its foreign debt has been carefully divided and allocated to the republics. The privatization programs implemented under the supervision of the donors, have contributed to a further stage of economic dislocation and impoverishment of the population. GDP had declined by as much as 50 percent in four years ( 1990-93).

Moreover, the leaders of the newly sovereign states have fully collaborated with the creditors. Even as the fighting raged, Croatia, Slovenia and Macedonia had entered into separate loan negotiations with the Bretton Woods institutions. In Croatia, the government of President Franjo Tudjman signed, in 1993, an agreement with the IMF. Massive budget cuts mandated under the agreement thwarted Croatia's efforts to mobilize its own productive resources, thus jeopardizing post-war reconstruction. The cost of rebuilding Croatia's war-torn economy was estimated at some $23 billion, requiring an influx of fresh foreign loans. In the absence of "debt forgiveness," Zagreb's debt burden will be fueled well into the 21 st Century.

With a Bosnian peace settlement apparently holding under NATO guns, the West has unveiled a "reconstruction" program which fully strips Bosnia-Herzegovina of its economic and political sovereignty. This program largely consists in developing Bosnia-Herzegovina as a divided territory under NATO military occupation and Western administration.

Resting on the November 1995 Dayton accords, the US and the European Union have installed a full-fledged colonial administration in Bosnia. At its head is their appointed High Representative (HR) Mr. Carl Bildt, a former Swedish Prime Minister and European Representative in the Bosnian Peace negotiations. The HR has full executive powers in all civilian matters, with the right to overrule the governments of both the Bosnian Federation and the Bosnian-Serb Republika Srpska. The HR is to act in close liaison with the IFOR Military High Command as well with donors agencies.

An international civilian police force is under the custody of an expatriate Commissioner appointed by the United Nations Secretary General Mr. Boutros Boutros Ghali, some 1,700 policemen from fifteen countries most of whom have never set foot in the Balkans, were dispatched to Bosnia after a five days training program in Zagreb.

While the West has underscored its support to democracy, the Parliamentary Assembly set up under the "Constitution" finalized under the Dayton Accords, largely acts as a "rubber stamp". Behind the democratic facade, actual political power rests in the hands of a "parallel government" headed by the High Representative and staffed by expatriate advisors.

Moreover, the Constitution agreed in Dayton hands over the reins of economic policy to the Bretton Woods institutions and the London based European Bank for Reconstruction and Development (EBRD). Article VII stipulates that the first Governor of the Central Bank of Bosnia and Herzegovina is to be appointed by the IMF and "shall not be a citizen of Bosnia and Herzegovina or a neighbouring State. "

Just as the Governor of the Central Bank is an IMF appointee, the Central Bank will not be allowed under the Constitution to function as a Central Bank. Neither will the new "sovereign" successor State be allowed to have its own currency (issuing paper money only when there is full foreign exchange backing), nor permitted to mobilize its internal resources. As in the other successor republics, its ability to self-finance its reconstruction (without massively increasing its external debt) is blunted from the outset.

The tasks of managing the Bosnian economy have been carefully divided among donor agencies: while the Central Bank is under IMF custody, the European Bank for Reconstruction and Development (EBRD) heads the Commission on Public Corporations which supervises operations of all public sector enterprises including energy, water, postal services, roads, railways, etc. The President of the EBRD appoints the Chairman of the Commission which also oversees public sector restructuring, meaning primarily the sell-off of State and socially owned assets and the procurement of long term investment funds.

One cannot sidestep a fundamental question: is the Bosnian Constitution formally agreed between heads of State at Dayton really a constitution? A sombre and dangerous precedent has been set in the history of international relations: Western creditors have embedded their interests in a Constitution hastily written on their behalf, executive positions within the Bosnian State system are to be held by non-citizens who are appointees of Western financial institutions. No constitutional assembly, no consultations with citizens' organizations in Bosnia and Herzegovina, no "constitutional amendments".

The Bosnian government estimates that reconstruction costs will reach $47 billion. Western donors have pledged $3 billion in reconstruction loans, yet only a meagre $518 million dollars were granted in December 1995, part of which is tagged (under the terms of the Dayton Peace Accords) to finance some of the local civilian costs of the Implementation Force's (IFOR) military deployment as well as repay debt arrears with international creditors.

Western governments and corporations show greater interest in gaining access to potential strategic natural resources than committing resources for rebuilding Bosnia. Documents in the hands of Croatia and the Bosnian Serbs indicate that coal and oil deposits have been identified on the eastern slope of the Dinarides Thrust, a region retaken from rebel Bosnian Krajina Serbs by the Croatian army in the final offensives before the Dayton Peace accords.

Bosnian officials report that Chicago-based Amoco was among several foreign firms that subsequently initiated exploratory surveys in Bosnia. The West is anxious to develop these regions. Moreover, there are also "substantial petroleum fields in the Serb-held part of Croatia just across the Sava river from the Tuzla region". The latter under the Dayton Agreement, is part of the US Military Division with headquarters in Tuzla.

The territorial partition of Bosnia between the Federation of Bosnia-Herzegovina and the Bosnian-Serb Republika Srpska under the Dayton Accords thus takes on strategic importance, the 60,000 NATO troops on hand to "enforce the peace" will administer the territorial partition of Bosnia-Herzegovina in accordance with Western economic interests.

National sovereignty is derogated, the future of Bosnia will be decided upon in Washington, Bonn and Brussels rather than in Sarajevo. The process of "reconstruction" based on debt rescheduling is more likely to plunge Bosnia-Herzegovina (as well as the other remnant republics of former Yugoslavia) into the status of a Third World country.

While local leaders and Western interests share the spoils of the former Yugoslav economy, the fragmentation of the national territory and the entrenching of socio-ethnic divisions in the structure of partition serve as a bulwark blocking a united resistance of Yugoslavs of all ethnic origins against the recolonization of their homeland.

Macro-economic restructuring applied in Yugoslavia under the neoliberal policy agenda has unequivocally contributed to the destruction of an entire country. Yet since the onset of war in 1991, the central role of macro-economic reform has been carefully overlooked and denied by the global media. The "free market" has been presented as the solution, the basis for rebuilding a war-shattered economy.

A detailed diary of the war and of the "peace-making" process has been presented by the mainstream press. The social and political impact of economic restructuring in Yugoslavia has been carefully erased from our social consciousness and collective understanding of "what actually happened". Cultural, ethnic and religious divisions are highlighted, presented dogmatically as the sole cause of the crisis when in reality they are the consequence of a much deeper process of economic and political fracturing. This "false consciousness" has invaded all spheres of critical debate and discussion. It not only masks the truth, it also prevents us from acknowledging precise historical occurrences. Ultimately it distorts the true sources of social conflict.

The ruin of an economic system, including the take-over of productive assets, the extension of markets and "the scramble for territory" in the Balkans constitute the real cause of conflict. What is at stake in Yugoslavia are the lives of millions of people. Macro-economic reform destroys their livelihood, derogates their right to work, their food and shelter, their culture and national identity... Borders are redefined, the entire legal system is overhauled, the socially owned enterprises are steered into bankruptcy, the financial and banking system is dismantled, social programs and institutions are torn down.

Yugoslavia is a "mirror" of similar economic restructuring programs applied not only in the developing World but also in recent years in the US, Canada and Western Europe. "Strong economic medicine" is the answer, throughout the World, people are led to believe that there is no other solution: enterprises must be closed down, workers must be laid off and social programs must be slashed... It is in the foregoing context that the economic crisis in Yugoslavia should be understood. Pushed to the extreme, the reforms in Yugoslavia are the cruel reflection of a destructive "economic model" imposed under the neoliberal agenda on national societies throughout the World


Michel Chossudovsky is a professor in the Department of Economics, University of Ottawa. This article is excerpted from a longer piece which is available from the author, who can be reached by fax at (613) 789-2050 or by e-mail at


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