Title: After the Rain : how the West lost the East
Author: Vaknin, Samuel
Language: English
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After the Rain

How the West

Lost the East



1st EDITION



Sam Vaknin, Ph.D.



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Lidija Rangelovska

A Narcissus Publications Imprint, Skopje 2001


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ISBN: 9989-929-07-6

Print ISBN: 80-238-5173-X

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C O N T E N T S


I n t r o d u c t i o n


The P E O P L E


The Author of this Article is a Racist

The Cavemen and the Alien

Is Transition Possible?

Can Socialist Professors of Economics Teach Capitalism?

The Poets and the Eclipse

The Rip van Winkle Institutions

Inside, Outside - Diasporas and Modern States

The Magla Vocables

The Elders of Zion

The Last Family

Rasputin in Transition

The Honorary Academic

Quis Custodiet Ipsos Custodes?

Who is Guarding the Guards?

Herzl's Butlers

The Phlegm and the Anima

An Impressionistic Canvass

The Dance of Jael

Homo Balkanus

The MinMaj Rule

The Balkans between Omerta and Vendetta

On the Criminality of Transition

The Myth of Great Albania

The Bad Blood of Kosovo

The Plight of the Kosovar

The Black Birds of Kosova

The Onset of Cultural Imperialism

The Defrosted War

Russia's Role in a Brave, New World

The Bones of the Grenadier

Endgame in the Balkans

Millenarian Thoughts about Kosovo

NATO's Next War

Why did Milosevic Surrender?

The Deadly Antlers

NATO, the EU and the New Kids on the Block

The Treasure Trove of Kosovo

Lucky Macedonia or Macedonia's Serendipity

The Good Fortune of Neighbouring a Human Catastrophe

Black Magic, White Magic - Managing our Future

The Friendly Club

The Books of the Damned

The PCM Trail

The Mind of Darkness


The E C O N O M Y


Central Europe - The New Colonies

New Paradigms, Old Cycles

Lessons in Transition

Lucky Russia

Russian Roulette

Foreigners do not Like Russia

Russia's New Economy

IMF - Kill or Cure

The IMF Deconstructed

Financial Crisis, Global Capital Flows and the International Financial
Architecture

The Shadowy World of International Finance

The Typology of Financial Scandals

The Revolt of the Poor

The Demise of Intellectual Property

Scavenger Economies, Predator Economies

Market Impeders and Market Inefficiencies

Public Procurement and very Private Benefits

Liquidity or Liquidation

The Predicament of the Newly Rich

The Solow Paradox


E p I l o g u e


The A u t h o r



I N T R O D U C T I O N


This is a series of articles written and published in 1996-2000 in
Macedonia, in Russia, in Egypt and in the Czech Republic.

How the West lost the East. The economics, the politics, the
geopolitics, the conspiracies, the corruption, the old and the new, the
plough and the internet - it is all here, in prose, as provocative and
vitriolic and loving and longing as I could make it.

From "The Mind of Darkness":

"'The Balkans' - I say - 'is the unconscious of the world'. People stop
to digest this metaphor and then they nod enthusiastically. It is here
that the repressed memories of history, its traumas and fears and
images reside. It is here that the psychodynamics of humanity - the
tectonic clash between Rome and Byzantium, West and East,
Judeo-Christianity and Islam - is still easily discernible. We are
seated at a New Year's dining table, loaded with a roasted pig and
exotic salads.

I, the Jew, only half foreign to this cradle of Slavonics. Four Serbs,
five Macedonians. It is in the Balkans that all ethnic distinctions
fail and it is here that they prevail anachronistically and
atavistically. Contradiction and change the only two fixtures of this
tormented region.

The women of the Balkan - buried under provocative mask-like make up,
retro hairstyles and too narrow dresses. The men, clad in sepia
colours, old fashioned suits and turn of the century moustaches. In the
background there is the crying game that is Balkanian music: liturgy
and folk and elegy combined. The smells are heavy with musk-ular
perfumes. It is like time travel. It is like revisiting one's
childhood."

How were the articles and essays contained herein - many of them
translated and published in local languages - received by people
everywhere?

My readers from the Balkans reacted to these essays with an admixture
of rage and indignation. They erected defensive barricades of
self-aggrandizement and of my devaluation. And they let their ingrained
paranoia run rampant (Jewish conspiracies, Western spies, world plots).
I asked a resident of this tortured region to write the foreword to
this book. People from other parts, from Central and Eastern Europe,
were more argumentative and contemplating, though much less passionate.
And Westerners - especially those with interest in these regions of the
world - reacted with great, cathartic enthusiasm.

In reading this book, I wish upon you the joy and the revulsion, the
dark fascination of this region and its surrealist dreams and
nightmares. This is what I experience daily here and it is my hope that
I succeeded to convey the siren's song, the honeyed trap, the lure and
the allure of this tortured corner of the earth.


Dr. Sam Vaknin

Skopje, February 2000


Return



After the Rain

How the West

Lost the East



The PEOPLE


The Author of this Article is a Racist

Or, so say many of the readers, who react vehemently - not to say
minaciously - to my articles. They insist that I demonise, chastise,
disparage, deride and hold in contempt groups of people simply and
solely because they are born in a given geographical area or are of a
given genetic stock. Few stop sufficiently long to notice that the
above two accusations contravene each other. A territory as vast as CEE
cannot and is not inhabited by one "race". It is an historical cocktail
of colours and origins and languages and bloodlines. Disregarding the
pan-Slavic myth for a minute, a racist would find the CEE a very
discouraging neighbourhood.

Am I a racist? If this is taken to mean "do I believe in the inherent
inferiority or malevolence or impurity of any group of people (however
arbitrarily defined or capriciously delimited) just because of their
common origin or habitation" - then of course I am not. I am not an
adherent of genetic predetermination and I think that there is very
little point in discussing fictitious entities such as "pure races".
That people are what they are made out to be by their up-bringing,
society, and history and by the reactions of other humans to them - is
what I subscribe to.

Yet I do believe in the temporary inferiority, malevolence and impurity
of groups of people who experienced and were subjected to prolonged
corrupting and pathologising influences. Historical processes exact an
exorbitant toll. Ideologies, indoctrination, totalitarianism,
authoritarianism, command economies, statism, militarism, malignant
nationalism, occupation - all carry a hefty price tag. And the currency
is the mind of the people: their mental health, their socialization
processes and, ultimately, the social fabric. Beneath a thin veneer of
kultur - the masses were savaged, the individual was crushed into a
moral pulp. I do believe in mass pathology: mass hysteria, mass
personality disorders, mass psychoses. I do believe in common
depravity, all-pervasive venality and inescapable subornation of whole
societies and of each of the individuals who comprise them. I do
believe in the osmosis of evil, in the diffusion of villainy, in the
corruption of the soul. In short: I do believe in terminally sick
societies, whose prospects of recovery are nil. The only hope lies in
their demise. Not in the abstract sense of the word - but in the actual
death and decomposition of each and every individual until the whole
"generation of the desert" is done with and a new, less contaminated
one, emerges to take its place.

This is why I believe that the future of Africa, the Middle East and
the countries of the CEE and NIS is, for the time being, behind them.
Their horizon is dim and empty. They are looking forward to the past.
They are the zombies of the international arena, the walking dead and
it is death that they multiply. Their growth is stunted, their speech
is stifled, their leaders a vicious lot, the states that they inhabit
are dens of barbarous criminality and lawlessness. Their institutions
are a travesty, their parties nests of avarice and vile. Their media
prostituted and defiled. The farce of elections and the newspeak of
democracy and human rights and freemarketry are props to hide the vast
wilderness of moral bankruptcy. These are Potemkin states run by
Chicago mobs. Instruments of extortion and coercion no different to
their predecessors - only they provide less security, both physical and
economic. They know no different. They think no different. They swear
by their malaise and by their malaise they shall die.

And die they shall. The signs are auspicious. Biology, the West and
international financial institutions all conspire to retire the beast.
New blood, new ideas, new hopes and aspirations are in evidence. Still
overwhelmed by the abrupt and cruel exposure of their elders, still
taken aback by the enormity of the project of rehabilitating the very
psyche of their people, still torn between illegal self enrichment and
service to their fellow citizens - but there they are, the young ones.
The battle is on. The consensus of the baksheesh and the political
assassination is replaced, ever so gradually, by the dissension of the
market place. Wars are fought with spreadsheets, experience imported
from afar, new knowledge craved, corruption decried. It is a
refreshing, gargantuan, change. And it will consume yet one more
generation. But it has started and it is irreversible. And it is in the
eyes of the youth, a flickering flame, so ephemeral, so vulnerable and
yet, so irresistible. This flame is called the future.


(Article written on January 15, 2000 and published January 31, 2000

in "Central Europe Review" volume 2, issue 4)


Return



The Caveman and the Alien

"'Life' must be curious, alert, erudite and moral, but it must achieve
this without being holier-than-thou, a cynic, a know-it-all or a
Peeping Tom."

(Edward K. Thompson, managing editor of "Life", 1949-1961)


When Chancellor Kohl's party and Edith Cresson are suspected of gross
corruption - these are labelled "aberrations" in an otherwise honest
West. When NASA in collaboration with its UK counterpart blow a 130
million US dollars spacecraft to smithereens having confused the metric
system for its pound/feet archaic predecessor - people nod their head
in disapproval: "accidents happen". When President Clinton appoints his
wife to suggest an overhaul of the multi-hundred billion dollars US
health system - no one thinks it odd. And when the (talented) son of
the police investigated, rumoured to be hyper-corrupt Minister of
Interior Affairs of Israel becomes a Minister himself, no one bats an
eyelash. Yet, when identical events happen in the decrepit countries of
Eastern, Central, or Southern Europe - they are subjected to heaps of
excoriating scorn, to vitriolic diatribes, to condescending preaching,
or to sanctions. It is, indeed, a double standard, a hypocrisy and a
travesty the magnitude of which is rarely to be encountered in the
annals of human pretensions to morality.

The West has grossly and thoroughly violated Thompson's edict. In its
oft-interrupted intercourse with these forsaken regions of the globe,
it has acted, alternately, as a Peeping Tom, a cynic and a know it all.
It has invariably behaved as if it were holier-than-thou. In an
unmitigated and fantastic succession of blunders, miscalculations, vain
promises, unkept threats and unkempt diplomats - it has driven Europe
to the verge of war and the region it "adopted" to the verge of
economic and social upheaval.

Enamoured with the new ideology of free marketry cum democracy, the
West first assumed the role of the omniscient. It designed ingenious
models, devised foolproof laws, imposed fail-safe institutions and
strongly "recommended" measures. Its representatives, the tribunes of
the West, ruled the plebeian East with determination rarely equalled by
skill or knowledge. Velvet hands couched in iron gloves, ignorance
disguised by economic newspeak, geostrategic interests masquerading as
forms of government characterized their dealings with the natives.
Preaching and beseeching from ever-higher pulpits, they poured
opprobrium and sweet delusions on the eagerly deluded, naive,
bewildered masses. The deceit was evident to the indigenous cynics -
but it was the failure that dissuaded them and all else. The West lost
Eastern and Southeast Europe not when it lied egregiously, not when it
pretended to know for sure when it surely did not know, not when it
manipulated and coaxed and coerced - but when it failed. To the peoples
of these regions, the king was fully dressed. It was not a little child
but an enormous debacle that exposed his nudity. In its
presumptuousness and pretentiousness, feigned surety and vain clichés,
imported models and exported cheap raw materials - the West succeeded
to demolish beyond reconstruction whole economies, to ravage
communities, to bring ruination upon the centuries-old social fabric,
woven diligently by generations. It brought crime and drugs and mayhem
but gave very little in return, only a horizon beclouded and thundering
with eloquence. As a result, while tottering regional governments still
pay lip service to the Euro-Atlantic structures, the masses are enraged
and restless and rebellious and baleful and anti-Western to the core.
They are not likely to acquiesce much longer - not with the West's
neo-colonialism but with its incompetence and inaptitude, with the
nonchalant experimentation that it imposed upon them and with the abyss
between its proclamations and its performance.

In all this time, the envoys of the West - its mediocre politicians,
its insatiably ruthless media, its obese tourists and its armchair
economists - continued to play the role of God, wreaking greater havoc
than even the original. While knowing it all in advance (in breach of
every tradition scientific), they also developed a kind of world weary,
unshaven cynicism interlaced with fascination at the depths plumbed by
the local's immorality and amorality. The jet-set Peeping Toms resided
in five star hotels (or luxurious apartments) overlooking the communist
shantytowns, drove utility vehicles to the shabby offices of the native
bureaucrats and dined in $100 per meal restaurants ("it's so cheap
here"). In between sushi and sake they bemoaned and grieved over
corruption and nepotism and cronyism ("I simply love their ethnic food,
but they are so..."). They mourned the autochtonal inability to act
decisively, to cut red tape, to manufacture quality, to open to the
world, to be less xenophobic (while casting a disdainful glance at the
sweaty waiter). To them it looked like an ancient natural phenomenon, a
force of nature, an inevitability and hence their cynicism. Mostly
provincial people with horizons limited by consumption and by wealth,
they adopted cynicism as shorthand for cosmopolitanism. They
erroneously believed it lent them an air of ruggedness and rich
experience and the virile aroma of decadent erudition. Yet all it did
is make them obnoxious and more repellent to the residents than they
already were.

Ever the preachers, the West - both Europeans and Americans - upheld
themselves as role models of virtue to be emulated, as points of
reference, almost inhuman or superhuman in their taming of the vices,
avarice up front. Yet the disorder in their own homes was broadcast
live, day in and day out, into the cubicles inhabited by the very
people they sought to so transform. And they conspired and collaborated
in all manner of corruption and crime and scam and rigged elections in
all the countries they put the gospel to. In trying to put an end to
history, they seem to have provoked another round of it - more vicious,
more enduring, more traumatic than before. That the West will pay the
price for its mistakes I have no doubt. For isn't it a part and parcel
of their teaching that everything has a price and that there is always
a time of reckoning?


(Article written on November 23, 1999 and published December 6, 1999

in "Central Europe Review" volume 1, issue 24)


Return



Is Transition Possible?


Can Socialist Professors of Economics

Teach Capitalism?



Lest you hold your breath to the end of this article - the answers to
both questions in the title are no and no. Capitalism cannot be
"learned" or "imported" or "emulated" or "simulated". Capitalism (or,
rather, liberalism) is not only a theoretical construct. It is not only
a body of knowledge. It is a philosophy, an ideology, a way of life, a
mentality and a personality.

This is why professors of economics who studied under Socialism can
never teach Capitalism in the truest sense of the word. No matter how
intelligent and knowledgeable (and a minority of them are) - they can
never convey the experience, the practice, the instincts and reflexes,
the emotional hues and intellectual pugilistics that real, full scale,
full-blooded Capitalism entails. They are intellectually and
emotionally castrated by their socialist past of close complicity with
inefficiency, corruption and pathological economic thinking.

This is why workers and managers inherited from the socialist-communist
period can never function properly in a Capitalist ambience. Both were
trained at civil disobedience through looting their own state and
factories. Both grew accustomed to state handouts and bribes disguised
as entitlements were suspicious and envious at their own elites
(especially their politicians and crony professors), victims to
suppressed rage and open, helpless and degrading dependence. Such
workers and managers - no matter how well intentioned and well
qualified or skilled - are likely to sabotage the very efforts whose
livelihood depends on.

When the transition period of post-communist economies started,
academics, journalists and politicians in the West talked about the
"pent up energies" of the masses, now to be released through the twin
processes of privatisation and democratisation. This metaphor of humans
as capitalistically charged batteries waiting to unleash their stored
energy upon their lands - was realistic enough. People were, indeed,
charged: with pathological envy, with rage, with sadism, with
pusillanimity, with urges to sabotage, to steal, and to pilfer. A
tsunami of destruction, a tidal wave of misappropriation, an orgy of
crime and corruption and nepotism and cronyism swept across the
unfortunate territories of Central and Eastern Europe (CEE). Transition
was perceived by the many either as a new venue for avenging the past
and for visiting the wrath of the masses upon the heads of the elites -
or as another, accelerated, mode of stripping the state naked of all
its assets. Finally, the latter propensity prevailed. The old elites
used the cover of transition to enrich themselves and their cronies,
this time "transparently" and "legally". The result was a repulsive
malignant metastasis of capitalism, devoid of the liberal ideals or
practices, denuded of ethics, floating in a space free of functioning,
trusted institutions.

While the masses and their elites in CEE were busy scavenging, the West
engaged in impotent debate between a school of "shock therapists" and a
school of "institution builders". The former believed that appearances
will create reality and that reality will alter consciousness (sounds
like Marxism to me). Rapid privatisation will generate a class of
instant capitalists who, in turn, will usher in an era of real,
multi-dimensional liberalism. The latter believed that the good wine of
Capitalism could be poured only to the functioning receptacles of
liberalism. They advocated much longer transition periods in which
privatisation will come only after the proper institutions were
erected. Both indulged in a form of central planning. IMF-ism replaced
Communism. The international financial institutions and their hordes of
well-paid, well-accommodated experts - replaced the Central Committee
of the party. Washington replaced Moscow. It was all very familiar and
cosy.

Ever the adapters, the former communist elites converted to ardent
capitalism. With the fervour with which they recited Marxist slogans in
their past - they chanted capitalist sobriquets in the present. It was
catechism, uttered soullessly, in an alien language, in the marble
cathedrals of capitalism in London and Washington. There was commitment
or conviction behind it and it was tainted by organized crime and
all-pervasive corruption. The West was the new regime to be suckered
and looted and pillaged and drained. The deal was simple: mumble the
mantras of the West, establish Potemkin institutions, keep peace and
order in your corner of the world, give the West strategic access to
your territory. In return the West will turn a blind eye to the worst
excesses and to worse than excesses. This was the deal struck in Russia
with the "reformists", in Yugoslavia with Milosevic, the "peacemaker",
in the Czech Republic with Klaus the "economic magician" of Central
Europe. It was communism all over: a superpower buying influence and
colluding with corrupt elites to rob their own nations blind.

It could have been different.

Post-war Japan and Germany are two examples of the right kind of
reconstruction and reforms. Democracy took real root in these two
former military regimes. Economic prosperity was long lived because
democracy took hold. And the ever tenuous, ever important trust between
the citizens and their rulers and among themselves was thus enhanced.

Trust is really the crux of the matter. Economy is called the dismal
science because it pretends to be one, disguising its uncertainties and
shifting fashions with mathematical formulae. Economy describes the
aggregate behaviour of humans and, in this restricted sense, it is a
branch of psychology. People operate within a marketplace and attach
values to their goods and services and to their inputs (work, capital,
natural endowments) through the price mechanism. This elaborate
construct, however, depends greatly on trust. If people were not to
trust each other and/or the economic framework (within which they
interact) - economic activities would have gradually ground to a halt.
A clear inverse relationship exists between the general trust level and
the level of economic activity. There are four major types of trust:

a. Trust related to Intent - the market players assume that other
players are (generally) rational, that they have intentions, that these
intentions conform to the maximization of benefits and that people are
likely to act on their intentions;

b. Trust related to Liquidity - the market players assume that
other players possess or have access, or will possess, or will have
access to the liquid means needed in order to materialize their
intentions and that - barring force majeure - this liquidity is the
driving force behind the formation of these intentions. People in
possession of liquidity wish to maximize the returns on their money and
are driven to economically transact;

c. Trust related to knowledge and ability - the market players
assume that other players possess or have access to, or will possess,
or will have access to the know-how, technology and intellectual
property and wherewithal necessary to materialize their intention (and,
by implication, the transactions that they enter into). Another
assumption is that all the players are "enabled": physically, mentally,
legally and financially available and capable to perform their parts as
agreed between the players in each and every particular transaction. A
hidden assumption is that the players evaluate themselves properly:
that they know their strengths and weaknesses, that they have a
balanced picture of themselves and realistic set of expectations,
self-esteem and self-confidence to support that worldview (including a
matching track record). Some allowance is made for "game theory"
tactics: exaggeration, disinformation, even outright deception - but
this allowance should not overshadow the merits of the transaction and
its inherent sincerity;

d. Trust related to the Economic horizon and context - the market
players assume that the market will continue to exist as an inert
system, unhindered by external factors (governments, geopolitics,
global crises, changes in accounting policies, hyperinflation, new
taxation - anything that could deflect the trajectory of the market).
They, therefore, have an "investment or economic horizon" to look
forward to and upon which they can base their decisions. They also have
cultural, legal, technological and political contexts within which to
operate. The underlying assumptions of stability are very much akin to
the idealized models that scientists study in the accurate sciences
(indeed, in economy as well).

When one or more of these basic building blocks of trust is fractured
that the whole edifice of the market crumbles. Fragmentation ensues,
more social and psychological than economic in nature. This is very
typical of poor countries with great social and economic polarization.
It is also very typical of countries "in transition" (a polite way to
describe a state of total shock and confusion). People adopt several
reaction patterns to the breakdown in trust:

a. Avoidance and isolation - they avoid contact with other people
and adopt reclusive behaviour. The number of voluntary interactions
decreases sharply;

b. Corruption - People prefer shortcuts to economic benefits
because of the collapse of the horizon trust (=they see no long term
future and even doubt the very continued existence of the system);

c. Crime - Criminal activity increases;

d. Fantastic and Grandiose delusions to compensate for a growing
sense of uncertainty and fear and for a complex of inferiority. This
nagging feeling of inferiority is the result of the internalisation of
the image of the people in their own eyes and in the eyes of others.
This is a self-reinforcing mechanism (vicious circle). The results are
under-confidence and a handicapped sense of self-esteem. The latter
undulates and fluctuates from overvaluation of one's self and others to
devaluation of both;

e. Hypermobility - People are not loyal to the economic cells
within which they function. They switch a lot of jobs, for instance, or
ignore contracts that they made. The concepts of exclusivity, the
sanctity of promises, loyalty, future, and a career path - all get
eroded. As a result, there is no investment in the future (in the
acquisition of skills or in long term investments, to give but two
examples);

f. Cognitive Dissonance - The collapse of the social and economic
systems adversely affects the individual. One of the classic defence
mechanisms is the cognitive dissonance. The person involved tells
himself that he really chose and wanted his way of life, his decrepit
environment, his low standard of living, etc. ("We are poor because we
chose not to be like the inhuman West");

g. The Pathological Envy - The Cognitive Dissonance is often
coupled with a pathological envy (as opposed to benign jealousy). This
is a destructive type of envy, which seeks to deprive others of their
successes and possessions. It is very typical of societies with a
grossly unequal distribution of wealth;

h. The Mentality (or the Historical) Defences - these are defence
mechanisms, which make use of an imagined mentality problem ("we are
like that, we have been like this for ages now, nothing to do, we are
deformed") - or build upon some historical pattern, or invented pattern
("we have been enslaved and submissive for five centuries - what can
you expect");

i. The Passive-Aggressive reaction: occurs mainly when the market
players have no access to more legitimate and aggressive venues of
reacting to their predicament or when they are predisposed to
suppressing of aggression (or when they elect to not express it). The
passive-aggressive reactions are "sabotage"-type reactions: slowing
down of the work, "working by the book", absenteeism, stealing from the
workplace, fostering and maintaining bureaucratic procedures and so on;

j. The inability to postpone satisfaction - The players regress to
a child-like state, demanding immediate satisfaction, unable to
postpone it and getting frustrated, aggressive and deceiving if they
are required to do so by circumstances. They engage in short term
activities, some criminal, some dubious, some legitimate: trading and
speculation, gambling, short-termism.

The results are, usually, catastrophic: A reduction in economic
activity, in the number of interactions and in the field of economic
potentials (the product of all possible economic transactions). An
erosion of the human capital, its skills and availability. Brain drain
- skilled people desert, en masse, the fragmented economic system and
move to more sustainable ones. Resort to illegal and to extra-legal
activities Social and economic polarization. Interethnic tensions and
tensions between the very rich and the very poor tend to erupt and to
explode.

And this is where most countries in transition are at right now. To a
large extent, it is the fault of their elites. Providing orientation
and guidance is supposed to be their function and why society invests
in them. But the elites in all countries in transition - tainted by
long years of complicity in the unseemly and the criminal - never
exerted moral or intellectual authority over their people. At the risk
of sounding narcissistic, allow me to quote myself (from "The Poets and
the Eclipse"). Replace "intellectuals of the Balkan" with
"intellectuals of the countries in transition":


(Article written on October 31, 1999 and published November 15, 1999

in "Central Europe Review" volume 1, issue 21)


Return



The Poets and the Eclipse



Poets in Somalia hold an inordinate sway over the indigenous
population. They sing the praises of war with the same alacrity and
vehemence that they invest in glorifying peace. And the population
listens and follows these dark skinned pied pipers. Lately, they have
been extolling peace and peace prevails in Somaliland and the other
state-like enclaves in this tortured shadow of a country.

In the evening we celebrate a birthday party under deciduous trees, in
floodlit darkness, somewhere in the Balkans. The voices of industrious
crickets, of late chirping birds, of the cesma - the fabled Balkan
water fountain - all intermingle to produce an auditory magic. A famous
satirist and poet catapults slurred, vitriolic diatribes at a guest
from the West that I brought with me. His words ring inebriatedly
authentic. He need not learn the language, he exclaims, of people
without a spirit and without a mind. He is referring to English. His
country - he triumphantly shrills - is the best, an island of
civilization among the barbarians at the gates. He enumerates his
neighbours and proceeds to describe in vivid, gut wrenching detail what
he would do to them all, given the opportunity. "The rotten core of our
national apple" - a melancholy contribution from a professor of
psychiatry.

Another day. As the moon bit into the otherwise scorching sun - the
streets emptied. Shops closed, the traffic halted, workers remained
cooped up in steamy offices. Why all this - I asked my friend. He is a
leading journalist, an author, an editor and a media personality. He
looked at me warily and proceeded to expound upon the health risks
entailed in being exposed to the eclipse. He was serious as was
evidenced by his subsequent descent into his basement and by the
resounding bolting of the anti-nuclear double plated armoured door. He
offered me to join him and was appalled to hear that I had every
intention of watching the eclipse - and from the street.

The intellectuals of the Balkans - a curse, not in disguise, a
nefarious presence, ominous, erratic and corrupt. Sometimes, at the
nucleus of all conflict and mayhem - at other times (of ethnic
cleansing or suppression of the media) conspicuously absent. Zeligs of
umpteen disguises and ever changing, shimmering loyalties.

They exert no moderating, countervailing influence - on the contrary,
they radicalise, dramatize, poison and incite. Intellectuals are
prominent among all the nationalist parties in the Balkans - and rare
among the scant centre parties that have recently sprung out of the
ashes of communism.

They do not disseminate the little, outdated knowledge that they do
possess. Rather they keep it as a guild would, unto themselves,
jealously. In the vanity typical of the insecure, they abnegate all
foreign knowledge. They rarely know a second language sufficiently to
read it. They promote their brand of degreed ignorance with religious
zeal and punish all transgressors with fierceness and ruthlessness.
They are the main barriers to technology transfers and knowledge
enhancement in this wretched region. Their instincts of
self-preservation go against the best interests of their people. Unable
to educate and teach - they prostitute their services, selling degrees
or corrupting themselves in politics. They make up a big part of the
post communist nomenclature as they have a big part of the communist
one. The result is economics students who never heard of Milton
Friedman or Kenneth Arrow and students of medicine who offer sex or
money or both to their professors in order to graduate.

Thus, instead of advocating and promoting freedom and liberalization -
they concentrate on the mechanisms of control, on manipulating the worn
levers of power. They are the dishonest brokers of corrupted
politicians and their businessmen cronies. They are heavily involved -
oft times the initiators - of suppression and repression, especially of
the mind and of the spirit. The black crows of nationalism perched upon
their beleaguered ivory towers.

They could have chosen differently. In 1989, the Balkans had a chance
the likes of which it never had before. In Yugoslavia, the government
of the reformist (though half hearted) Ante Markovic. Elsewhere,
Communism was gasping for a last breath and the slaughter of the beast
was at hand. The intellectuals of Central Europe, of the Baltic States
- even of Russia - chose to interpret these events to their people, to
encourage freedom and growth, to posit goals and to motivate. The
intellectuals of the Balkans failed miserably. Terrified by the sights
and sounds of their threatened territory - they succumbed to
obscurantism, resorted to the nostalgic, the abstract and the
fantastic, rather than to the pragmatic. This choice is evident even in
their speech. Marred by centuries of cruel outside domination - it is
all but meaningless. No one can understand what a Balkanian has to say.
Both syntax and grammar are tortured into incomprehensibility. Evasion
dominates, a profusion of obscuring verbal veils, twists and turns
hiding a vacuous deposition.

The Balkan intellectuals chose narcissistic self-absorption and navel
gazing over "other-orientation". Instead of seeking integration (as
distinct from assimilation) - they preach and practice isolation. They
aim to differentiate themselves not in a pluralistic, benign manner -
but in vicious, raging defiance of "mondialism" (a Serbian propaganda
term). To define themselves AGAINST all others - rather than to compare
and learn from the comparison. Their love affair with a (mostly
concocted) past, their future-phobia, and the ensuing culture shock -
all follow naturally from the premises of their disconsolate
uniqueness. Balkan intellectuals are all paranoids. Scratch the
surface, the thin, bow tied, veneer of "kultur" - and you will find an
atavistic poet, fighting against the very evil wrought by him and by
his actions. This is the Greek tragedy of this breathtaking region.
Nature here is cleverer than humans. It is exactly their conspiracies
that bring about the very things they have to conspire against in the
first place.

All over the world, intellectuals are the vanguard, the fifth column of
new ideas, the resistance movement against the occupation of the old
and the banal. Here intellectuals preach conformity, doing things the
old, proven way, protectionism against the trade of liberal minds. All
intellectuals here - fed by the long arm of the state - are
collaborators. True, all hideous regimes had their figleaf
intellectuals and with a few exceptions, the regimes in the Balkans are
not hideous. But the principle is the same, only the price varies.
Prostituting their unique position in semi-literate, village-tribal
societies - intellectuals in the Balkans sold out en masse. They are
the inertial power - rather than the counterfist of reform. They are
involved in politics of the wrong and doomed kind. The Balkan would
have been better off had they decided to remain aloof, detached in
their archipelago of universities.

There is no real fire in Balkan intellectuals. Oh, they get excited and
they shout and blush and wave their hands ever so vigorously. But they
are empty. It is full gas in neutral. They get nowhere because they are
going nowhere. They are rational and conservative and some are
emotional and "leftist". But it is all listless and lifeless, like the
paces of a very old mechanism, set in motion 80 years ago and never
unwound.

All that day of the eclipse of the last millennium, even the
intellectuals stayed in their cellars and in their offices and did not
dare venture out. They emerged when night fell, accustomed to the
darkness, unable to confront their own eclipse, hiding from the evil
influence of a re-emerging sun.


(Article written on August 14, 1999 and published August 30, 1999

in "Central Europe Review" volume 1, issue 10)


Return



The Rip van Winkle Institutions



The West - naive, provincial and parochial - firmly believed that the
rot was confined to the upper echelons of communist and socialist
societies. Beneath the festering elites - the theory went - there are
wholesome masses waiting to be liberated from the shackles of
corruption, cronyism, double-talk and manipulation. Given half a decent
chance, these good people will revert to mature capitalism, replete
with functioning institutions. It was up to the West to provide these
long deprived people with this eagerly awaited chance.

What the West failed to realize was that communism was a collaborative
effort - a symbiotic co-existence of the rulers and the ruled, a mutual
undertaking and an all-pervasive pathology. It was not confined to
certain socio-economic strata, nor was it the imposed-from-above
product of a rapacious nomenclature. It was a wink and nod social
contract, a co-ordinated robbery, and an orgy of degeneration,
decadence and corruption attended by all the citizenry to varying
degrees. It was a decades long incestuous relationship between all the
social and economic players. To believe that all this can be erased
virtually overnight was worse than naive - it was idiotic.

Perhaps what fooled the West was the appearance of law and order. Most
communist countries inherited an infrastructure of laws and
institutions from their historical predecessors. Consider the Czech
Republic, East Germany, Poland, Yugoslavia and even Russia. These
countries had courts and police and media and banks long prior to the
calamitous onset of communism. What the latter did - ingeniously - was
to preserve the ossified skeletons of these institutions while draining
them from any real power. Decisions were made elsewhere, clandestinely,
the outcome of brutal internecine power struggles. But they were
legitimised by rubber stamp institutions: "parliaments", "judicial
system", "police", "banks", and the "media". The West knew that these
institutions were dysfunctional - but not to which breathtaking extent.
It assumed that nothing more than technical assistance was needed in
order to breathe life into the institutional infrastructure. It assumed
that market forces, egged on by a class of new and increasingly wealthy
shareholders, will force these institutions to shape up and begin to
cater to the needs of their constituencies. Above all, it assumed that
the will to have better and functioning institutions was there - and
that the only thing missing was the knowledge.

These were all catastrophically wrong assumptions. In all
post-communist countries, with no exception, one criminal association
(the communist or socialist party) was simply replaced by another
(often comprised of the very same people). Elections were used (more
often, abused) simply to queue the looters, organized in political
parties. The mass devastation of the state by everyone - the masses
included - proceeded apace, financed by generous credits and grants
from unsuspecting (or ostrich-like) multilaterals and donor conferences
(recall Bosnia). If anything, materialism - the venal form of
"capitalism" that erupted in the post communist planet - only
exacerbated the moral and ethical degeneracy of everyone involved.
Western governments, Western banks, Western businessmen and Western
institutions were sucked into the maelstrom of money laundering,
illicit trading, corruption, shoddiness and violence. To perpetuate
their clout and prowess, the new rulers did everything they could to
hinder the reform of their institutions and their restoration to
functionality.

In communist societies, banks were channels of political patronage
through which money was transferred from the state to certain
well-connected, enterprises. Bankers were low-level clerks, who handled
a limited repertoire of forms in a prescribed set of ways. Communist
societies had no commercial credits, consumer credits, payment
instruments, capital markets, retail banking, investment banking, or
merchant banking. The situation today, a decade after the demise of
communism is not much improved. In most countries in transition, the
domestic powers that be conspired to fend off foreign ownership of
their antiquated and comically (or, rather, tragically) politicised
"banks". The totally inept and incompetent management was not replaced,
nor were new management techniques introduced. The state kept bailing
out and re-capitalizing ailing banks. Political cronies and family
relatives kept obtaining subsidized loans unavailable to the
shrivelling private sector.

The courts, in the lands of socialism, were the vicious long arms of
the executive (actually, of the party). A mockery of justice, law and
common sense - judges were ill trained, politically nominated,
subservient and cowed into toeing the official line. Of dubious
intellectual pedigree and of certain unethical and immoral lineage -
judges were widely despised and derided, known to be universally
corrupt and ignorant even of the laws that they were ostensibly
appointed to administer. This situation hasn't changed in any post
communist society. The courts are slow and inefficient, corrupt and
lacking in specialization and education. The legal system is heavily
tilted in favour of the state and against the individual. Judges are
identified politically and their decisions are often skewed. The
executive, in many countries, does not hesitate to undermine the
legitimacy of the courts either by being seen to exploit their
political predilections, or by attacking them for being amenable to
such use by a rival party. This sorry state is only aggravated by the
frequent and erratic changes in legislation.

In communist times, the law enforcement agencies - primarily the
police, the customs and the secret service - were instruments of naked
aggression against dissidents, non-conformists and those who fell out
of favour. In the centre of immeasurable corruption, policemen were
often more dreaded than criminals. Customs officers enriched themselves
by resorting to extortion, bribe taking and acts of straightforward
expropriation. The secret services often ran a state within a state,
replete with militias, prisons, a court system, a parallel financial
system and trading companies. Again, the situation hasn't changed much.
Perhaps with the exception of the secret services, all these phenomena
still exist and in the open.

And then there is the media - the wastebasket of post communist
societies, the cesspool of influence peddling and calumny. Journalists
are easily bought and sold and their price is ever decreasing. They
work in mouthpieces of business interests masquerading as newspapers or
electronic media. They receive their instructions - to lie, to falsify,
to ignore, to emphasize, to suppress, to extort, to inform, to
collaborate with the authorities - from their Editor in Chief. They
trade news for advertising. Some of them are involved in all manner of
criminal activities, others are simply unethical in the extreme. They
all have pacts with Mammon. People do not believe a word these
contortionists of language and torturers of meaning write or say. It is
by comparing these tampered and biased sources that people reach their
own conclusions within their private medium.

One should hope that the disillusionment of the West is near. Post
communist societies are sick and their institutions are a travesty. As
is often the case with the mentally ill, there is a strong resistance
to treatment and recovery. The options are two: to disengage - or to
commit to an asylum with force-feeding, forced administering of
medication and constant monitoring. The worst behaviour is to go on
pretending that the problem does not exist, or that it is much less
serious than it really is. Denial and repression are the very sources
of dysfunction. They have to be fought. And sometimes the patient's own
welfare - not to mention that of his environment - requires
arm-twisting or the infliction of pain. There is a kernel of good
people in every society. In the post communist societies, this kernel
and suppressed and mocked and sometimes callously silenced. To give
these people a voice should be the first priority of the West. But this
cannot be done by colluding with their oppressors. The West has to
choose - and now.


(Article written on December 10, 1999 and published January 10, 2000

in "Central Europe Review" volume 2, issue 1)


Return



Inside, Outside


Diasporas and Modern States



A speech given at the meeting of the Canada-Macedonia Chamber of
Commerce in Toronto, Canada on December 4th, 1999



Distinguished Guests,

I was born to parents of the working class in Israel, in 1961. It was a
grim neighbourhood, in a polluted industrial area, a red bastion of the
"socialist" labour party. The latter would have easily qualified as
Bolshevik-communist anywhere else. It exerted the subtly pernicious
decadently corrupt kind of all-pervasive influence that is so typical
in one party states. Sure, there were a few token fringe opposition
parties but Labour's dominance went uninterrupted for more than 90
years. And corruption was both rife and rampant - nepotism, cronyism,
outright bribery. During the 70s, the recently appointed governor of
the central bank was imprisoned and a minister committed suicide. Many
more immolated themselves or ended serving long sentences in
over-crowded jails. Massive scandals erupted daily. Some of them cost
the country more than 10% of its GDP each (for example, the crisis of
the bank shares in 1983). In the 80s, privatisation turned into an orgy
of privateering, spawning a class of robber barons. Red tape is still a
major problem - and a major source of employment. And then there were
the wars and armed conflicts and vendettas and retributions and mines
and missiles and exploding buses and the gas masks. In its 52 years of
independence the country has gone through 6 major official wars and
more than 10 war-sized conflicts.

Yet, despite all the above, Israel emerged as by far the most
outstanding economic miracle. Its population was multiplied by 10 by
surges of immigrants. During the 50s, it tripled from 650,000 (1948 -
Jewish population figures only) to 2,000,000. The newcomers were all
destitute, the refugees of the geopolitics of hate from both the
Eastern block and from the Arab countries. The cultural, social and
religious profile of the latter stood in stark contrast to that of
their "hosts". Thus the seeds of long term inter-ethnic,
inter-cultural, social and religious conflicts were sown, soon to
blossom into full-fledged rifts. During the 90s - 800,000 Russian
immigrants flooded a Jewish population of 4,500,000 souls. But these
demographic upheavals did not disturb a pattern of unprecedented
economic growth, which led to a GDP per capita per annum of 17,000 USD.
Israel is a world leader in agriculture, armaments, information
technology, research and development in various scientific fields. Yet,
it is a desert country, smaller in area than Macedonia and with much
fewer and lesser natural endowments. It was subjected to an Arab
embargo for more than 40 consecutive years. On average it had c. 3
million inhabitants throughout its existence.

Israel's secret was the Jews in the Jewish Diaspora the world over.

From its very inception - as a budding concept in the febrile brain of
Herzl - the Jewish State was considered to be the home of all Jews,
wherever they are. A Law of Return granted them the right to
immediately become Israeli citizens upon stepping on the country's
soil. The Jewish State was considered to be an instrument of the Jewish
People, a shelter, an extension, a long arm, a collaborative and
symbiotic effort, an identity, an emotional apparatus, a buffer, an
insurance policy, a retirement home, a showcase, a convincing argument
against all anti-Semites past and present. There was no question
whatsoever regarding the implicit and explicit contractual obligations
between these two parties. The Jews in the Diaspora had to disregard
and ignore Israel's warts, misdeeds and disadvantages. They had to turn
a public blind eye to corruption, nepotism, cronyism, the inefficient
allocation of economic resources, blunders and failures. They had to
support Israel financially. In return, the Jewish State had to ensure
its own successful survival against all odds and to welcome all the
Jews to become its citizens whenever they chose to and no matter what
their previous record or history is. Hence the constant arguments about
WHO is a Jew and which institution should be allowed to monopolize the
endowment of this lucrative and, potentially, life saving status. Hence
the bitter resentment felt in many circles toward the 200,000 or so
non-Jewish immigrants, the relatives of the Jewish ones who flooded
Israel's shores in the last decade.

But the consensus was and is unharmed, appearances notwithstanding. And
the Jews supported Israel in numerous straightforward and inventive
ways. They volunteered to fight for it. They spied for it. They donated
money and built hospitals, schools, libraries, universities and
municipal offices. They supported students through scholarships and
young leaders through exchange programs. They managed and financed a
gigantic network of educational facilities from youth summer camps to
cultural exchanges. They bought the risky long-term bonds of the
nascent state, which was constantly fighting for its life (and they did
an excellent business in hindsight). Some of them invested money in
centrally planned, periphery bound, lost economic causes - ghost
factories that produced shoddy and undemanded goods. Year in and year
out they poured an average of half a billion US dollars a year annually
(about 200 million US dollars a year in net funds). Most of the money
did not come from the stereotypical Jewish billionaires. Most of it
came through a concerted effort of voluntary (though surely peer
pressured) money raising among hundreds of thousands of poor Jews the
world over. The Jewish people set up a horde of organizations whose aim
was collection of funds and their application to the advancement of
Zionist and Jewish causes. Every Jew deposited a few weekly cents into
the "Blue Box" - "for the cause": to redeem land, to establish
settlements, to open educational institutions, to publish a Jewish
newspaper, to act against anti-Semitism, to rebrand Judaism and fight
nefarious stereotypes. It was a grassroots movement directed only by
the dual slogans of "No Other Choice" and "The Whole World is Against
Us". Emanating from posttraumatic and paranoiac roots - it later became
a groundswell of goodwill, enthusiastic co-operation and pride.

And all this time, the Jews knew. Not only the sophisticated, worldly
Jewish moneymen. Not only the cosmopolitan, erudite Jewish
intellectuals. But also the more typical small time tailors and
shoemakers and restaurateurs and cab drivers and plumbers and sweatshop
textile workers. They all knew - and it did not sway them one bit. It
did not drive them away. They did not gripe and complain or abstain.
They kept coming. They kept pouring money into this seemingly
insatiable black hole. They kept believing. They kept waiting and they
kept active. And all these long decades - they knew.

They knew that Israel was ruled by a caste of utterly corrupt
politicians whose avarice equalled only their incompetence. They knew
that central planning was going nowhere fast. They knew that elections
were rigged, that red tape was strangling entrepreneurship and
initiative, that inter ethnic tension was explosive. They knew that
Israel lost its not to a demographically exploding Arab population
coupled with endless acts of terrorism. They knew that Israel's conduct
was not fair, not always democratic, and often unnecessarily
aggressive. They knew that tenders were won by bribes, that
transparency was a mockery, that the courts were negligent and
inefficient. They knew that property rights were not protected and that
people were pusillanimous and greedy and petty and self-occupied (not
to say narcissistic). They witnessed the waste of scarce resources, the
indefinitely protracted processes, the bureaucratic delays, the free
use of public funds for private ends. They watched as ministers and
members of the Knesset and top law enforcement agent conspired to
engage in crime and then colluded in covering it up. And they felt
betrayed and agonized over all this.

Yet, they NEVER - NEVER - not even for a second, considered giving up.
They NEVER - NEVER - stopped the money coming. They did not discontinue
the dialogue intended to make things better, over there, the land of
their so distant fathers. They always donated and invested and financed
and visited and cajoled and argued and opined and hoped and dreamed.

Because this was THEIR country, as well. Because it was a partnership
and the inexperienced, stray partner was given the benefit of
indefinite doubt. Because they saw the opportunity - the economic
opportunity, for sure - but, above all, the historical opportunity.
When Israel did mature, when it became a law state, orderly,
transparent, efficient, forward looking, the high tech Israel we all
know - it repaid them over and over again. They all made money on their
decades of patience and endurance. The rich made big money. The small
guys made less. But there is no Jew today who can say that he lost
money in Israel because he became financially or economically active
there in the long run.

They stuck to Israel primarily because they were Jews (and, by easy
extension, Israelis). And this is what being a Jew meant. And they were
richly rewarded by the Justice Minister of history. Perhaps there is a
lesson to be learnt here by Macedonians in the Diaspora. I, for one, am
sure there is.

Thank you.


Return



The Magla Vocables



The Macedonians have a word for it - "Magla", fog. It signifies the
twin arts of duplicity and ambiguity. In the mental asylum that the
swathe of socialist countries was, even language was pathologised. It
mutated into a weapon of self-defence, a verbal fortification, a medium
without a message, replacing words with vocables. Easterners (in this
text, the unfortunate residents of the Kafkaesque landscape which
stretches between Russia and Albania) don't talk or communicate. They
fend off. They hide and evade and avoid and disguise. In the planet of
capricious and arbitrary unpredictability, of shifting semiotic and
semantic dunes that they inhabited for so many decades (or centuries) -
they perfected the ability to say nothing in lengthy, Castro-like
speeches. The ensuing convoluted sentences are Arabesques of
meaninglessness, acrobatics of evasion, lack of commitment elevated to
an ideology. The Easterner prefers to wait and see and see what waiting
brings. It is the postponement of the inevitable that leads to the
inevitability of postponement as a strategy of survival.

It is impossible to really understand an Easterner. The syntax fast
deteriorates into ever more labyrinthine structures. The grammar
tortured to produce the verbal Doppler shifts essential to disguise the
source of the information, its distance from reality, the speed of its
degeneration into rigid official versions. Buried under the lush flora
and fauna of idioms without an end, the language erupts, like some
exotic rash, an autoimmune reaction to its infection and contamination.
And this newspeak, this malignant form of political correctness is not
the exclusive domain of politicians or "intellectuals". Like vile weeds
it spread throughout, strangling with absent minded persistence the
ability to understand, to agree, to disagree and to debate, to present
arguments, to compare notes, to learn and to teach. Easterners,
therefore, never talk to each other - rather, they talk at each other.
They exchange subtexts, camouflage-wrapped by elaborate, florid, texts.
They read between the lines, spawning a multitude of private languages,
prejudices, superstitions, conspiracy theories, rumours, phobias and
mass hysterias. Theirs is a solipsistic world - where communication is
permitted only with oneself and the aim of language is to throw others
off the scent.

This has profound implications. Communication through unequivocal,
unambiguous, information-rich symbol systems is such an integral and
crucial part of our world - that its absence is not postulated even in
the remotest galaxies, which grace the skies of science fiction. In
this sense, Easterners are nothing short of aliens. It is not that they
employ a different language, a code to be deciphered by a new
Champollion. The Cyrillic alphabet is not the obstacle. It is also not
the outcome of cultural differences. It is the fact that language is
put by Easterners to a different use - not to communicate but to
obscure, not to share but to abstain, not to learn but to defend and
resist, not to teach but to preserve ever less tenable monopolies, to
disagree without incurring wrath, to criticize without commitment, to
agree without appearing to do so. Thus, Eastern contracts are vague
expressions of intentions at a given moment - rather than the clear
listing of long term, iron-cast and mutual commitments. Eastern laws
are loopholed incomprehensibles, open to an exegesis so wide and so
self-contradictory that it renders them meaningless. Eastern
politicians and Eastern intellectuals often hang themselves by their
own verbose Gordic knots, having stumbled through a minefield of
logical fallacies and endured self inflicted inconsistencies.
Unfinished sentences hover in the air, like vapour above a semantic
swamp.

In some countries (the poorer ones, which were suppressed for centuries
by foreign occupiers), there is the strong urge not to offend. Still at
the tribal-village stage of social development, intimacy and
inter-dependence are great. Peer pressure is irresistible and it
results in conformity and mental homogeneity. Aggressive tendencies,
strongly repressed in this social pressure cooker, are close under the
veneer of forced civility and violent politeness. Constructive
ambiguity, a non-committal "everyone is good and right", an atavistic
variant of moral relativism and tolerance bred of fear and of contempt
- are all at the service of this eternal vigilance against aggressive
drives, at the disposal of a never ending peacekeeping mission.

In other countries, language is used cruelly and ruthlessly to ensnare
one's enemies, to saw confusion and panic, to move the masses, to leave
the listeners in doubt, in hesitation, in paralysis, to gain control,
or to punish. There, symbols are death sentences in both the literal
and the figurative senses. Poets, authors and journalists still vanish
regularly and newspapers and books are compiled into black lists with
dreadful consequences. In these countries, language is enslaved and
forced to lie. There is no news - only views, no interest - only
interests, no facts - only propaganda, no communication - only
ex-communication. The language is appropriated and expropriated. It is
considered to be a weapon, an asset, a piece of lethal property, a
traitorous mistress to be gang raped into submission.

And yet in other places in the East, the language is a lover. The
infatuation with its very sound leads to a pyrotechnic type of speech
which sacrifices its meaning to its music. Its speakers pay more
attention to the composition than to the content. They are swept by it,
intoxicated by its perfection, inebriated by the spiralling complexity
of its forms. Here, language is an inflammatory process. It attacks the
social tissues with artistic fierceness. It invades the healthy cells
of reason and logic, of cool-headed argumentation and level headed
debate. It raises the temperature of the body politic. It often kills.
It moves masses. Submerged in and lured by the notes issued forth by
the pied piper of the moment - nations go to war, or to civil war,
resonating with the echoes of their language.

Language is a leading indicator of the psychological and institutional
health of social units. Social capital can often be measured in
cognitive (hence, verbal-lingual) terms. To monitor the level of
comprehensibility and lucidity of texts is to study the degree of
sanity of nations (think about the rambling "Mein Kampf"). There can
exist no hale society without unambiguous speech, without clear
communications, without the traffic of idioms and content that is an
inseparable part of every social contract. Our language determines how
we perceive our world. It IS our mind and our consciousness. The
much-touted transition starts in the mind and consciousness determines
reality. Marx would have approved.


 (Article written on December 8, 1999 and published December 13, 1999

in "Central Europe Review" volume 1, issue 25)


Return



The Elders of Zion



I was shown the same book in Yugoslavia, in Macedonia and in Bulgaria -
"The World Conspiracy" - a shabby tome written by an ageing "scholar".
The main, unabashedly anti-Semitic, hypothesis (presented as undisputed
fact) is that the Jews rule the world supreme - always have, probably
always will. Lists of prominent Jews in the world of international
finance reprinted with lists of influential Jews in the Soviet
communist regime. And it all amounts to a well-organized secretive
machinery of illicit power, claims the author with all the persuasion
of a paranoid. In here, trash magazines dwell endlessly on these and
similar themes.

Yet, anti-Semitism is only one species in a zoo of rumours, conspiracy
theories, Meta histories and metaphysics. Superstitions, prejudices and
calumny thrive in the putrid soil of disinformation, mis-information
and lack of information. In the void created by unreliable, politicised
and corrupt media - rumour mills spring eternal. It is a malignant
growth, the outcome of a breakdown of trust so compleat - that
communication is rendered impossible. This is the main characteristic
of the East (from Russia to Albania): distrust. Citizens and
politicians, businessmen and government, the media and its consumers,
manufacturers and service providers, the sick and their doctors - all
suspect each other of ulterior motives and foul play. All are more
often than not quite right to do so.

It is a Kafkaesque, sealed universe in which nothing is, as it appears
to be. This acrimonious divorce between appearances and essence, facade
and truth, the Potemkin and the real - is a facet of daily life, of the
most mundane exchanges, of the most trivial pursuits. Motives are
sought with increasing urgency - why did he do it, what did he try to
achieve, why had he not chosen a different path, why here, why with us,
why now, what can it teach us. Information is pursued frantically,
appearances discarded, data juggled, heated debates ensue, versions
erupt, only to subside and be replaced by others. It is a feverish
ritual, the sound of clashing exegeses, of theories constructed and
demolished in vacuo.

At the heart of it all, is the unbearable uncertainty of being.
Political uncertainty under communism was replaced by economic
uncertainty under the insidious and venal form of capitalism that
replaced it. Tucked in identical cubicles, the citizens of planet
communism were at least assured of a make belief job in a sprawling
bureaucracy or in a decrepit factory, manufacturing redundant documents
or shoddy goods. Subsistence was implicitly guaranteed by the
kleptocracy that ruled them and, in principle, it was always possible
to ignore the moral stench and join the nomenklatura, thereby
developing instant upward mobility. Corruption, theft and graft were
tolerated by the state as means of complementing income. Life was drab
but safe as long as one abstained from politics and subserviently
consumed the bitter medicines of acquiescence and collaboration. The
vast majority (with the exception of the USSR under Stalin) were not
affected by the arbitrary capriciousness of history. They decayed
slowly in their housing estates, morally degenerate, possession-less
but certain of a future that is the spitting image of their past.

Under the spastic orgy of legalized robbery of state assets that passed
for privatisation, millions were made redundant while thousands
enriched themselves by choreographed looting. The results were
instability, unpredictability, uncertainty and fear. In a world thus
unhinged, the masses groped for reason, for a scheme, for a method in
the madness, for an explanation, however sinister and ominous. Anything
was preferable to the seemingly random natural forces unleashed upon
them with such apparent vengeance. Even a "World Government" (a
favourite), the Illuminati (a Freemasonry-like movement but much more
odious), the Jews, the USA, aliens. The greatest conspiracy theory of
them all - the Phoenix of religion - sprang back to life from the ashes
it was reduced to by communism. A host of mystical beliefs and sects
and cults mushroomed noxiously in the humid shadows of irrationality.

Thus, every event, no matter how insignificant, any occurrence, no
matter how inconsequential and any coincidence, no matter how
coincidental - assume heraldic meaning. People in these domains carry
their complex jigsaw puzzles with them. They welcome each new piece
with the zeal of the converted. They bellow triumphantly with every
"proof" of their pet theory, with every datum, with each rumour. Things
don't just happen - they whisper, conspiratorially - things are
directed from above, ordained, regulated, prevented, or encouraged by
"them". A group of 400 rule the world. They are Jews, they are the Serb
mafia, or the Bulgarian. Or the Americans who plan to dominate (which
obviously puts Kosovo in context). They are the rich and powerful, the
objects of envy and frightened admiration, of virulent hate and rage.
They are responsible. We pay the price - we, the small and powerless
and poor. And it is hopeless, it has been like that forever. The
disparity between them and us is too great. Resistance is futile.

Why was this president elected? Surely, the West demanded it. Or
political parties conspired to rig the vote. Or rich businessmen
supported him. What is the real aim of foreign investors in coming to
these godforsaken places, if not to infiltrate and penetrate and
establish their long-term dominion? And wouldn't it be safe to assume
that al the foreigners are spies, that all the Jews collaborate, that
the neighbours would have liked to conquer and to subjugate us, that
the world is a colossal puppet show? In other words, is it not true
that we are puppets - victims - in a theatre not of our making? They
filter out that which does not conform to their persuasion, does not
accord with their suspicions, and does not fit within their schemes.

This deferral of responsibility brings relief from shame and blame.
Guilt is allayed by symbolically and ritually passing it onto another.
Fear is quelled by the introduction of schemata. These are potent
psychological incentives. They provide structure to the amorphous,
bring order to the chaos that is the brave, new world of the economies
in transition. Flux is replaced by immutable "truths", possibilities by
certainties, threats by "knowledge". It is a re-construction and
reconquest of a paradise lost by giving up the fruit of the tree of
knowledge.

It is this hyper-vigilance, this elevated suspicion, these instant
certainties fabricated from frail pseudo-theories and conspiracies -
that make the Man of the East so easy to manipulate, so vulnerable, so
amenable to collude in his own downfall. Bewitched by his self-spun
myths, captivated by his own paranoia, under the spell of his magical,
immature, thinking - non critical, non analytical, non discriminating -
he is exquisitely susceptible to crooks and charlatans, to manipulators
and demagogues, to the realization of the very threats he tried to fend
off in the first place.

Here is what the DSM ("Diagnostics and Statistics Manual") IV (1994)
published by the APA (American Psychiatric Association) has to say
about paranoids and schizotypals:

The Paranoid Personality Disorder

A pervasive distrust and suspiciousness of others such that their
motives are interpreted as malevolent, beginning by early adulthood and
present in a variety of contexts, as indicated by four (or more) of the
following:

1. Suspects without sufficient basis, that others are exploiting,
harming, or deceiving him or her;

2. Is preoccupied with unjustified doubts about the loyalty or
trustworthiness of friends or associates;

3. Is reluctant to confide in others because of unwarranted fear
that the information will be used maliciously against him or her;

4. Reads hidden demeaning or threatening meanings into benign
remarks or events;

5. Persistently bears grudges, i.e., is unforgiving of insults,
injuries, or slights;

6. Perceives attacks on his or her character or reputation that
are not apparent to others and is quick to react angrily or to
counterattack;

7. Has recurrent suspicions, without justification, regarding
fidelity of spouse or sexual partner.

Schizotypal Personality Disorder

A pervasive pattern of social and interpersonal deficits marked by
acute discomfort with and reduced capacity for close relationships as
well as by cognitive or perceptual distortions and eccentricities of
behaviour beginning by early adulthood and present in a variety of
contexts as indicated by five (or more) of the following:

1. Ideas of reference (excluding delusions of reference) - (SV:
the delusional belief that others are looking at him pointing at him,
talking about him, especially in a derogatory manner);

2. Odd beliefs or magical thinking that influences behaviour and
is inconsistent with subcultural norms (e.g., superstitiousness, belief
in clairvoyance, telepathy, or "sixth sense"; in children and
adolescents, bizarre fantasies or preoccupations);

3. Unusual perceptual experiences, including bodily illusions;

4. Odd thinking and speech (e.g., vague, circumstantial,
metaphorical, over-elaborate, or stereotyped);

5. Suspiciousness or paranoid ideation;

6. Inappropriate and constricted affect;

7. Behaviour, or appearance that is odd, eccentric, or peculiar;

8. Lack of close friends or confidants other than first-degree
relatives;

9. Excessive social anxiety that does not diminish with
familiarity and tends to be associated with paranoid fears rather than
negative judgements about self.


(Article written on December 9, 1999 and published December 13, 1999

in "Central Europe Review" volume 1, issue 25)


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The Last Family



"One man cannot be a warrior on a battlefield"

(Russian proverb)


There is no word for it in Russian. Platon Karatayev, the typical
"Russian soul" in Tolstoy's "War and Peace", extols, for pages at a
time, the virtues of communality and disparages the individual - this
otherwise useless part of the greater whole. In Macedonia the words
"private" or "privacy" pertain to matters economic. The word "intimacy"
is used instead to designate the state of being free of prying,
intrusive eyes and acts of meddling. Throughout Central and Eastern
Europe, the rise of "individualism" did not give birth to its
corollary: "privacy". After decades (and, in most cases, centuries) of
cramped, multi-generational shared accommodation, it is no wonder.

To the alienated and schizoid ears of Westerners, the survival of
family and community in CEE sounds like an attractive proposition. A
dual-purpose safety net, both emotional and economic, the family in
countries in transition provides its members with unemployment
benefits, accommodation, food and psychological advice to boot.
Divorced daughters, saddled with little (and not so little) ones, the
prodigal sons incapable of finding a job befitting their
qualifications, the sick, the unhappy - all are absorbed by the
compassionate bosom of the family and, by extension the community. The
family, the neighbourhood, the community, the village, the tribe - are
units of subversion as well as useful safety valves, releasing and
regulating the pressures of contemporary life in the modern,
materialistic, crime ridden state. The ancient blood feud laws of the
kanoon were handed over through familial lineages in northern Albania,
in defiance of the paranoiac Enver Hoxha regime. Criminals hide among
their kin in the Balkans, thus effectively evading the long arm of the
law (state). Jobs are granted, contracts signed and tenders won on an
open and strict nepotistic basis and no one finds it odd or wrong.
There is something atavistically heart-warming in all this.

Historically, the rural units of socialization and social organization
were the family and the village. As villagers migrated to the cities,
these structural and functional patterns were imported by them, en
masse. The shortage of urban apartments and the communist invention of
the communal apartment (its tiny rooms allocated one per family with
kitchen and bathroom common to all) only served to perpetuate these
ancient modes of multi-generational huddling. At best, the few
available apartments were shared by three generations: parents, married
offspring and their children. In many cases, the living space was also
shared by sickly or no-good relatives and even by unrelated families.

These living arrangements - more adapted to rustic open spaces than to
high rises - led to severe social and psychological dysfunctions. To
this very day, Balkan males are spoiled by the subservience and
servitude of their in-house parents and incessantly and compulsively
catered to by their submissive wives. Occupying someone else's home,
they are not well acquainted with adult responsibilities. Stunted
growth and stagnant immaturity are the hallmarks of an entire
generation, stifled by the ominous proximity of suffocating, invasive
love. Unable to lead a healthy sex life behind paper thin walls, unable
to raise their children and as many children as they see fit, unable to
develop emotionally under the anxiously watchful eye of their parents -
this greenhouse generation is doomed to a zombie-like existence in the
twilight nether land of their parents' caves. Many ever more eagerly
await the demise of their caring captors and the promised land of their
inherited apartments, free of their parents' presence.

The daily pressures and exigencies of co-existence are enormous. The
prying, the gossip, the criticism, the chastising, the small agitating
mannerisms, the smells, the incompatible personal habits and
preferences, the pusillanimous bookkeeping - all serve to erode the
individual and to reduce him or her to the most primitive mode of
survival. This is further exacerbated by the need to share expenses, to
allocate labour and tasks, to plan ahead for contingencies, to see off
threats, to hide information, to pretend and to fend off emotionally
injurious behaviour. It is a sweltering tropic of affective cancer.

Newly found materialism brought these territories a malignant form of
capitalism coupled with a sub-culture of drugs and crime. The
eventuating disintegration of all polities in the ensuing moral vacuum
was complete. From the more complex federations or states and their
governments, through intermediate municipalities and down to the most
primitive of political cells - the family - they all crumbled in a
storm of discontent and blood. The mutant frontier-"independence" or
pioneer-"individualism" imported from Western B movies led to a
functional upheaval unmatched by a structural one. People want privacy
and intimacy more than ever - but they still inhabit the same shoddily
constructed, congested accommodation and they still earn poorly or are
unemployed. This tension between aspiration and perspiration is
potentially revolutionary. It is this unaccomplished, uneasy
metamorphosis that tore the social fabric of CEE apart, rendering it
poisoned and dysfunctional. This is nothing new - it is what brought
socialism and its more vicious variants down.

But what is new is inequality. Ever the pathologically envious, the
citizens of CEE bathed in common misery. The equal distribution of
poverty and hardship guaranteed their peace of mind. A Jewish proverb
says: "The trouble of the many is half a consolation." It is this
breakdown of symmetry of wretchedness that really shook the social
order. The privacy and intimacy and freedom gained by the few are bound
to incite the many into acts of desperation. After all, what can be
more individualistic, more private, more mind requiting, more
tranquillizing than being part of a riotous mob intent of implementing
a platform of hate and devastation?


(Article written on January 9, 2000 and published January 24, 2000

in "Central Europe Review" volume 2, issue 3)


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Rasputin in Transition



The mad glint in his eyes is likely to be nothing more ominous than
maladjusted contact lenses. If not clean-shaven, he is likely to sport
nothing wilder than a goatee. More likely an atheist than a priest,
this mutation of the ageless confidence artist is nonetheless the
direct spiritual descendent of Rasputin, the raving maniac who governed
Russia until his own execution by Russian noblemen and patriots.

They are to be found in all countries in transition. Wild and insidious
weeds, the outcome of wayward pollination by mutated capitalism. They
prey on their victims, at first acquiring their confidence and love,
then penetrating their political, social and financial structures
almost as a virus would: stealthily and treacherously. By the time
their quarry wakes up to its infection and subjugation - it is already
too late. By then, the invader will have become part of the invaded or
its master, either through blackmail or via tempting subornation.

This region of the CEE and the Balkans provides for fertile grounds. It
is a Petrie dish upon which cultures of corruption and scandalous
conduct are fermented. The typical exploiter of these vulnerabilities
is a foreigner. Things foreign are held in awe and adulation by a
populace so down trodden and made to feel inferior in every way, not
least by foreign tutors and advisors. The craving to be loved, this
gnawing urge to be accepted, to be a member of the club, to be
distinguished from one's former neighbours - are irresistible. The
modern Rasputin doles out this unconditional acceptance, this
all-encompassing affinity, the echoes of avuncularity. In doing so, he
evokes in the recipients such warmth, such relief, such fervour and
reciprocity - that he becomes an idol, a symbol of a paradise long
lost, a golden braid. Having thus completed the first phase of his
meticulous attack - he moves on to the second chapter in this book of
body snatching.

Armed with his new-fangled popularity, the crook moves on and leverages
it to the hilt. He does so by feigning charity, by faking interest, by
false "constructive criticism". To his slow forming army, he recruits
the media, the flower children, the bleeding hearts, reformers,
dissidents and the occasional freak. By holding old authority in
disdain, by declaring his contempt for the methods of the "tried and
true", by appearing to make war upon all rot and immorality - this
creature of expediency emerges as a folk hero. It is the more cynical
and world weary and "sophisticated" members of society that lead the
way, succumbing to his ardour and conviction, to his child-like
innocence, to his unwavering agenda. He cleverly thrusts at them the
double edge of their own disillusionment and disappointment. Thus
mirrored, they are transformed and converted into his camp of renewal
and clean promises by this epiphany. They hand him the keys to every
medium, the very codes and secrets that make him so powerful. They
pledge their alliance and allegiance and render to him the access they
possess to the nerve centres of society. The castle gates thus opened
from inside, his victory assured, the rogue moves on to consummate this
unholy marriage between himself and the deceived.

Always in fear of light, he surreptitiously and cunningly begins to
interact with the foci of power and money in the land. However
loathsome he is to them, however repulsive the experience, however
undesirable the effects of their surrender - they are made to recognize
him as their equal. With the might of the media and a large part of the
people behind him, he can no longer be ignored. Their conspiracy-prone
mind, awash with superstitions and its attaching phobias, tries to
comprehend his meteoric rise, the forcefulness with which he treads,
his unmitigated, inane, self-confidence. Is he a spy? A member of a
secret order? The latent agent of a hyperpower? The heart of a world
conspiracy? Has he no fear of retribution and no remorse? Before this
great unknown, they kneel and yield, an atavistic reaction to atavistic
fears. Now all doors are thrown open, all deals are made available, all
secrets are revealed. The more he learns, the mightier he becomes - the
more his might, the more he learns. To him, a virtuous cycle, to his
hosts - a vicious one.

In all this tumult, he does not lose sight of his original goals -
power, money, fame, all three. It is a relentless pursuit, an obsessive
hunt, a ruthless and unscrupulous chase. In his war, no prisoners are
taken, no price too dear, no human in his orbit left untouched. He will
manipulate and threat and beg and promise and plead and blackmail and
extort to accomplish that which he set out to achieve: decision making
powers, wealth, clout, exposure and resultant fame. It is at this stage
that the latter day Rasputin emerges from the shadows and joins
officialdom or concludes lucrative transactions based on favourably
deflated prices and insider dealing. By now, his shady past is no
longer a hindrance. His prowess far exceeds his invidious biography.
Well installed, he ignores both media and the people. He brushes aside
contemptuously all criticism and enquiry. His true, narcissistic, face
is exposed and it is hideous to behold. But there is nothing to be done
and all resistance is futile. The con man now is in a haste to maximize
his hard earned profits and exit the scene, on his way to another realm
of guile and naiveté.


(Article written on January 25, 2000 and published February 14, 2000

in "Central Europe Review" volume 2, issue 6)


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The Honorary Academic



Mira Markovic is an "Honorary Academic" of the Russian Academy of
Science. It cost a lot of money to obtain this title and the Serb
multi-billionaire Karic was only too glad to cough it up. Whatever else
you say about Balkan cronies, they rarely bite the hand that feeds them
(unless and until it is expedient to do so). And whatever else you say
about Russia, it adapted remarkably to capitalism. Everything has a
price and a market. Israel had to learn this fact the hard way when
Russian practical-nurse-level medical doctors and
construction-worker-level civil engineers flooded its shores.
Everything is for sale in this region of opportunities, instant
education inclusive.

It seems that academe suffered the most during the numerous shock
therapies and transition periods showered upon the impoverished
inhabitants of Eastern and Central Europe. The resident of decrepit
communist-era buildings, it had to cope with a flood of eager students
and a deluge of anachronistic "scholars". But in Russia, the CIS and
the Balkans the scenery is nothing short of Dantesque. Unschooled in
any major European language, lazily content with their tenured
positions, stagnant and formal - the academics and academicians of the
Balkans are both failures and a resounding indictment of the rigor
mortis that was socialism. Economics textbooks stop short of mentioning
Friedman or Phelps. History textbooks should better be relegated to the
science fiction shelves. A brave facade of self-sufficiency covers up a
vast hinterland of inferiority complex fully supported by real
inferiority. In antiquated libraries, shattered labs, crooked buildings
and inadequate facilities, students pursue redundant careers with the
wrong teachers.

Corruption seethes under this repellent surface. Teachers sell exams,
take bribes, and trade incestuous sex with their students. They refuse
to contribute to their communities. In all my years in the Balkans, I
have yet to come across a voluntary act - a single voluntary act - by
an academic. And I have come across numerous refusals to help and to
contribute. Materialism incarnate.

This sorry state of affairs has a twofold outcome. On the one hand,
herds of victims of rigidly dictated lectures and the suppression of
free thought. These academic products suffer from the twin afflictions
of irrelevance of skills and the inability to acquire relevant ones,
the latter being the result of decades of brainwashing and industrial
educational methods. Unable to match their anyhow outdated knowledge
with anything a modern marketplace can offer - they default on to
menial jobs, rebel or pull levers to advance in life. Which leads us to
the death of meritocracy and why this region's future is behind it.

In the wake of the downfall of all the major ideologies of the 20th
century - Fascism, Communism, etc. the New Order, heralded by President
Bush, emerged as a battle of Open Club versus Closed Club societies, at
least from the economic point of view.

All modern states and societies must choose whether to be governed by
merit (meritocracy) or by the privileged few (oligarchy). It is
inevitable that the social and economic structures be controlled by
elites. It is a complex world and only a few can master the knowledge
it takes to govern effectively. What sets meritocracy apart is not the
number of members of its ruling (or leading) class, usually no larger
than an oligarchy. No, it is distinguished by its membership criteria
and by the mode of their application.

The meritocratic elite is an open club because it satisfies three
conditions:

1. The process and rules of joining up (i.e., the criteria) are
transparent and widely known;

2. The application and membership procedures are uniform, equal to
all and open to continuous public scrutiny and criticism;

3. The system alters its membership requirements in direct
response to public feedback and to the changing social and economic
environment.

To belong to a meritocracy one needs to satisfy a series of demands,
whose attainment is entirely up to he individual. And that is all that
one needs to do. The rules of joining and of membership are cast in
iron. The wishes and opinions of those who happen to comprise the club
at any given moment are of no importance and of no consequence.
Meritocracy is a "fair play" by rules of equal chance to derive
benefits. Put differently, is the rule of law.

To join a meritocratic club, one needs to demonstrate that one is in
possession of, or has access to, "inherent" parameters, such as
intelligence, a certain level of education, a potential to contribute
to society. An inherent parameter must correspond to a criterion and
the latter must be applied independent of the views and predilections
of those who sometimes are forced to apply it. The members of a
committee or a board can disdain an applicant, or they might wish not
to approve a candidate. Or they may prefer someone else for the job
because they owe her something, or because they play golf with him.
Yet, they are permitted to consider only the applicant's or the
candidate's "inherent" parameters: does he have the necessary tenure,
qualifications, education, experience? Does he contribute to his
workplace, community, and society at large? In other words: is he
"worthy" or "deserving"? Not WHO he is - but WHAT he is.

Granted, these processes of selection, admission, incorporation and
assimilation are administered by mere humans and are, therefore,
subject to human failings. Can qualifications be always judged
"objectively, unambiguously and unequivocally"? Can "the right
personality traits" or "the ability to engage in teamwork" be evaluated
"objectively"? These are vague and ambiguous enough to accommodate bias
and bad will. Still, at least appearances are kept in most cases - and
decisions can be challenged in courts.

What characterizes oligarchy is the extensive, relentless and ruthless
use of "transcendent" (in lieu of "inherent") parameters to decide who
will belong where, who will get which job and, ultimately, who will
enjoy which benefits. The trouble with transcendent parameters is that
there is nothing much an applicant or a candidate can do about them.
Usually, they are accidents, occurrences absolutely beyond the reach or
control of those most affected by them. Race is such a transcendent
parameter and so are gender, familial affiliation or contacts and
influence.

In many corners of the globe, to join a closed, oligarchic club, to get
the right job, to enjoy excessive benefits - one must be white
(racism), male (sexual discrimination), born to the right family
(nepotism), or to have the right political (or other) contacts
(cronyism). And often, belonging to one such club is the prerequisite
for joining another.

In France, for instance, the whole country is politically and
economically run by graduates of the Ecole Normale d'Administration
(ENA). They are known as the ENArques (=the royal dynasty of ENA
graduates).

The privatisation of state enterprises in most East and Central
European countries provided a glaring example of oligarchic
machinations. In most of these countries (the Czech Republic,
Macedonia, Serbia and Russia are notorious examples) - state companies,
the nation's only assets, were "sold" to political cronies, creating in
the process a pernicious amalgam of capitalism and oligarchy, known as
"crony capitalism" or privateering. The national wealth was passed on
to the hands of relatively few, well connected, individuals, at a
ridiculously low price. The nations involved were robbed, their riches
either squandered or smuggled abroad.

In the affairs of humans, not everything falls neatly into place. Take
money, for instance. Is it an inherent parameter or an expressly
transcendent one? Making money indicates the existence of some merit,
some inherent advantageous traits of the moneymaking individual. To
make money consistently, a person needs to be diligent, resilient, hard
working, to prevail and overcome hardships, to be far sighted and to
possess a host of other - universally acclaimed - traits. On the other
hand, is it fair when someone who made his fortune through corruption,
inheritance, or luck - be preferred to a poor genius?

That is a contentious issue. In the USA money talks. Being possessed of
money means being virtuous and meritorious. To preserve a fortune
inherited is as difficult a task as to make it in the first place, the
thinking goes. Thus, the source of the money is secondary.

An oligarchy tends to have long term devastating economic effects.

The reason is that the best and the brightest - when shut out by the
members of the ruling elites - emigrate. In a country where one's job
is determined by his family connections or by influence peddling -
those best fit to do the job are likely to be disappointed, then
disgusted and then to leave the place altogether.

This is the phenomenon known as "Brain Drain". It is one of the biggest
migratory tidal waves in human history. Capable, well-trained,
educated, young people leave their oligarchic, arbitrary, influence
peddling societies and migrate to less arbitrary meritocracies (mostly
to be found in what is collectively known as "The West").

This is colonialism of the worst kind. The mercantilist definition of a
colony is a territory, which exports raw materials only to re-import
them in the form of finished products. The Brain drain is exactly that:
the poorer countries are exporting raw brains and buying back the
finished products masterminded, invented and manufactured by theses
brains.

Yet, while in classical colonialism, the colony at least received some
recompense for its goods - here the poor country is actually the poorer
for its exports. The bright young people who depart (most of them never
to return) carry with them an investment of the scarce resources of
their homeland - and award it to their new, much richer, host
countries. This is an absurd situation, a subsidy granted reluctantly
by the poor to the rich. This is also one of the largest capital
transfers (really capital flight) in history.

Some poor countries understood these basic, unpleasant, facts of life.
They extracted an "education fee" from those emigrating. This fee was
supposed to, at least partially, recapture the costs of educating and
training the immigrants. Romania and the USSR imposed such levies on
Jews immigrating to Israel in the 1970s. Others despairingly regard the
brain drain as a natural catastrophe. Very few countries are trying to
tackle the fundamental, structural and philosophical flaws of the
system, the roots of the disenchantment of those who leave.

The Brain Drain is so serious that some countries lost up to a third of
their total young and educated population to it (Macedonia in
South-eastern Europe, some less developed countries in South East Asia
and in Africa). Others were drained of almost one half of the growth in
their educated workforce (for instance, Israel during the 1980s).

Brains are an ideal natural resource: they can be cultivated, directed,
controlled, manipulated, regulated. They are renewable and replicable.
Brains tend to grow exponentially through interaction and they have an
unparalleled economic value added. The profit margin in knowledge and
information related industries far exceeds anything common to more
traditional, second wave, industries (not to mention first wave
agriculture and agribusiness).

What is even more important:

Poor countries are uniquely positioned to take advantage of this third
revolution. With cheap, educated workforce - they can monopolize basic
data processing and telecommunications functions worldwide. True, this
calls for massive initial investments in physical infrastructure. But
the important input is the wetware, the brains. To constrain them, to
disappoint them, to make them run away, to more merit-orientated places
- is to sentence oneself to a permanent disadvantage and deprivation.

This is what the countries in the Balkans are doing. Driving away the
best part of their population by encouraging the worst part. Abandoning
their future by dwelling on their past. Caught in a fatal spider web of
family connections and political cronyism of their own design. Their
factories and universities and offices and government filled to the
brim with third-rate relatives of third-rate professors and
bureaucrats. Turning themselves into third-rate countries in a
self-perpetuating, self-feeding process of decline. And all the while
eyeing the new and the foreign with the paranoia that is the result of
true guilt.


(Article written on September 8, 1999 and published September 27, 1999

in "Central Europe Review" volume 1, issue 14)


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Quis Custodiet Ipsos Custodes?


(Who is Guarding the Guards?)



Izetbegovic, the nominal president of the nominal Bosnian state, the
darling of the gullible western media, denies that he and his cronies
and his cronies' cronies stole 40% of all civilian aid targeted at
Bosnia - a minor matter of 1 billion US dollars and change, in less
than 4 years. The tribes of the Balkans stop bleeding each other to
death only when they gang up to bleed another. In this, there are no
races and no traces - everyone is equal under the sign of the dollar.
Serbs, Bosnians and Croats divided the loot with the loftiest of
egalitarian instincts. Honour among thieves transformed into honour
among victims and their murderers. Mammon is the only real authority in
this god forsaken, writhing rump of a country.

And not only there.

In Russia, billions (3 to 5) were transferred to secret off shore bank
accounts to be "portfolio managed" by mysterious fly-by-night entities.
Many paid with their jobs when the trail led to the incestuous Yeltsin
clan and their Byzantine court.

Convoys snake across the mountainous Kosovo, bringing smuggled goods at
exorbitant prices to the inhabitants of this parched territory - all
under the avuncular gaze of multinational peacekeepers.

In Romania, Hungary and Greece, UN forces have been known to take
bribes to allow goods into besieged Serbia. Oil, weapons and strategic
materials, all slid across this greasy channel of the international
brotherhood of cash.

A lot of the aid, ostensibly intended to ameliorate the state of
refugedom imposed upon the unsuspecting, harried population of Kosovo -
resurfaced in markets, white and black, across the region. Food,
blankets, tents, electrical equipment, even toys - were on offer in
bazaars from Skopje to Podgorica and from Sofia to Thessalonica,
replete with the stamps of the unwitting donors. Aid workers scurried
back and forth in expensive utility vehicles, buzzing mobile phones in
hand and latest model, officially purchased, infrared laptops humming
in the air conditioned coolness of their five star hotel rooms (or
fancy apartments). In their back pockets they safeguarded their first
class tickets (the food is better and the stewardesses...). The
scavengers of every carnage, they descended upon this tortured land in
redundant hordes, feeding off the misery, the autoimmune deficiency of
the syndrome of humanism.

Ask yourselves: how could one of every 3 dollars - 50% of GNP - be
stolen in a country the size of a tiny American state - without the
knowledge and collaboration of the international organizations which
ostensibly manage this bedlam? Why did the IMF renew the credit lines
to a Russia, which cheated bold-facedly regarding its foreign exchange
reserves? How was Serbia awash and flush with oil and other goods
prohibited under the terms of the never-ending series of embargoes
imposed upon it?

The answer is that potent cocktail of fear and graft. First came fear -
that Russia will collapse, that the Balkans will spill over, that
Bosnia will disintegrate. Nuclear nightmares intermingled with Armenian
and Jewish flashbacks of genocide. The west shut its eyes tight and
threw money at the bad spirits of irredentism and re-emergent
communism. The long arm of the USA, the "international" financial
institutions, collaborated in constructing the habit forming dole house
that Eastern and Southern Europe has become. This conflict-reticence,
these approach-avoidance cycles led to an inevitable collusion between
the ruling mob families that pass for regimes in these parts of the
planet - and the unilateral institutions that pass for multilateral
ones in the rest of it. An elaborate system of winks and nods, the sign
language of institutional rot and decaying governance, took over.
Greasy palms clapped one another with the eerie silence of conspiracy.
The world looked away as both - international financial institutions
and corrupt regimes - robbed their constituencies blind. This was
perceived to be the inevitable moral cost of stability. Survival of the
majority entailed the filthy enrichment of the minority. And the west
acquiesced.

But this grand design backfired. Like insidious bacteria, corruption
breeds violence and hops from host to host. It does not discriminate,
this plague of black conscience, between east and west. As it infected
the indigenous, it also affected their guardians. They were all
engulfed by raging greed, by a degradation of the inhibitions and by
the intoxicating promiscuity of lawlessness. Inebriated by their newly
found powers, little Caesars - natives and financial colonialists -
claimed their little plots of crime and avarice, a not so secret order
of disintegration of the social fabric. A ghoulish landscape, shrouded
in the opaque mist of the nomenclature, the camaraderie of the
omnipotent.

And corruption bred violence. The Chicago model imported lock, stock
and the barrel of the gun. Former cronies disappeared mysteriously,
bloated corpses in stale hotel rooms - being the only "contracts"
honoured. Territories were carved up in constant, unrelenting warfare.
One billion dollars are worth a lot of blood and it was spilled with
glee, with the enthusiasm of the inevitable, with the elation of
gambling all on a single spin of the Russian roulette.

It is this very violence that the west tried to drown with its credits.
But unbeknownst to it, this very violence thrived on these pecuniary
fertilizers. A plant of horrors, it devoured its soil and its
cultivators alike. And 120,000 people paid with their lives for this
wrong gamble. Counting its losses, the west is poised to spin the wheel
again. More money is amassed, the dies are cast and more people cast to
die.


(Article written on August 23, 1999 and published September 13, 1999

in "Central Europe Review" volume 1, issue 12)


Return



Herzl's Butlers



James Cook misled the British government back home by neglecting to
report about the aborigines he spotted on the beaches of New Holland.
This convenient omission allowed him to claim the territory for the
crown. In the subsequent waves of colonization, the aborigines
perished. Modern Australia stands awash in their blood, constructed on
their graves, thriving on their confiscated lands. The belated efforts
to redress these wrongs meet with hostility and the atavistic fears of
the dispossessor.

In "Altneuland" (translated to Hebrew as "Tel Aviv"), the feverish tome
composed by Theodore Herzl, Judaism's improbable visionary - Herzl
refers to the Arabs as pliant and compliant butlers, replete with
gloves and tarbushes. In the book, a German Jewish family prophetically
lands at Jaffa, the only port in erstwhile Palestine. They are welcomed
and escorted by "Briticized" Arab gentlemen's gentlemen who are only
too happy to assist their future masters and colonizers to disembark.

In between these extremes - of annihilation and assimilation - modern
Europe has come up with a plethora of models and solutions to the
question of minorities, which plagued it and still does. Two schools of
thought emerged: the nationalistic-ethnic versus the cultural.

Europe has always been torn between centrifugal and centripetal forces.
Multi-ethnic empires alternated with swarms of mini-states with
dizzying speed. European Unionism clashed with brown-turning-black
nationalism and irredentism. Universalistic philosophies such as
socialism fought racism tooth and nail. European history became a
blood-dripping pendulum, swung by the twin yet conflicting energies of
separation and integration. The present is no different. The dream of
the European Union confronted the nightmare of a dismembered Yugoslavia
throughout the last decade. And ethnic tensions are seething all across
the continent. Hungarians in Romania, Slovakia, Ukraine and Serbia,
Bulgarians in Moldova, Albanians in Macedonia, Russians in the Baltic
countries, even Padans in Italy and the list is long.

The cultural school of co-existence envisaged multi-ethnic states with
shared philosophies and value systems, which do not infringe upon the
maintenance and preservation of the ethnic identities of their
components. The first socialists adopted this model enthusiastically.
They foresaw a multi-ethnic, multi-cultural socialist mega-state. The
socialist values, they believed, will serve as the glue binding
together the most disparate of ethnic elements. In the event, it took a
lot more than common convictions. It took suppression on an
unprecedented scale and it took concentration camps and the morbid
application of the arts and sciences of death. And even then both the
Nazi Reich and the Stalinist USSR fell to ethnic pieces.

The national(istic) school supports the formation of ethnically
homogenous states, if necessary, by humane and gradual (or inhuman and
abrupt) ethnic cleansing. Homogeneity is empirically linked to
stability and, therefore, to peace, economic prosperity and oftentimes
to democracy. Heterogeneity breeds friction, hatred, violence,
instability, poverty and authoritarianism. The conclusion is simple:
ethnicities cannot co-exist. Ethnic groups (a.k.a. nations) must be
left to their own devices, put differently: they must be allocated a
piece of land and allowed to lead their lives as they see fit. The land
thus allocated should correspond, as closely as possible, with the
birthplace of the nation, the scenery of its past and the cradle of its
culture.

The nationalist school depended on denial and repression of the
existence of heterogeneity and of national minorities. This was done by:

a. Ethnic Cleansing

Greece and Turkey exchanged population after the First World War.
Czechoslovakia expelled the Sudeten Germans after the Second World War
and the Nazis rendered big parts of Europe Judenrein. Bulgarians forced
Turks to flee. The Yugoslav succession wars were not wars in the
Clausewitz sense - rather they were protracted guerrilla operations
intended to ethnically purge swathes of the "motherland".

b. Ethnic Denial

In 1984, the Bulgarian communist regime forced the indigenous Turkish
population to "Bulgarize" their names. The Slav minorities in the
Hungarian part of the Austro-Hungarian Empire were forced to
"Magyarize" following the 1867 Compromise. Franco's Spain repressed
demands for regional autonomy. Other, more democratic states fostered a
sense of national unity by mass media and school indoctrination. Every
facet of life was subjected to and incorporated in this relentless and
unforgiving pursuit of national identity: sports, chess, national
holidays, heroes, humour. The particularisms of each group gained
meaning and legitimacy only through and by their incorporation in the
bigger picture of the nation. Thus, Greece denies to this very day that
there are Turks or Macedonians on its soil. There are only Muslim
Greeks, it insists (often brutally and in violation of human and civil
rights). The separate identities of Brittany and Provence were
submerged within the French collective one and so was the identity of
the Confederate South in the current USA. Some call it "cultural
genocide".

The nationalist experiment failed miserably. It was pulverized by a
million bombs, slaughtered in battlefields and concentration camps, set
ablaze by fanatics and sadists. The pendulum swung. In 1996, Hungarians
were included in the Romanian government and in 1998 they made it to
the Slovakian one. In Macedonia, Albanian parties took part in all the
governments since independence. The cultural school, on the ascendance,
was able to offer three variants:

1. The Local Autonomy

Ethnic minorities are allowed to use their respective languages in
certain municipalities where they constitute more than a given
percentage (usually twenty) of the total population. Official
documents, street signs, traffic tickets and education all are
translated to the minority language as well as to the majority's. This
rather meaningless placebo has a surprisingly tranquillizing effect on
restless youth and nationalistic zealots. In 1997, police fought local
residents in a few Albanian municipalities precisely on this issue.

2. The Territorial Autonomy

Ethnic minorities often constitute a majority in a given region. Some
"host" countries allow them to manage funds, collect taxes and engage
in limited self-governance. This is the regional or territorial
autonomy that Israel offered to the Palestinians (too late) and that
Kosovo and Vojvodina enjoyed under the 1974 Yugoslav constitution
(which Milosevic shredded to very small pieces). This solution was
sometimes adopted by the nationalist competition itself. The Nazis
dreamt up at least two such territorial "final solutions" for the Jews
(one in Madagascar and one in Poland). Stalin gave the Jews a decrepit
wasteland, Birobidjan, to be their "homeland". And, of course, there
were the South African "homelands".

3. The Personal Autonomy

Karl Renner and Otto Bauer advanced the idea of the individual as the
source of political authority - regardless of his or her domicile.
Between the two world wars, Estonia gave personal autonomy to its Jews
and Russians. Wherever they were, they were entitled to vote and elect
representatives to bodies of self-government. These had symbolic
taxation powers but exerted more tangible authority over matters
educational and cultural. This idea, however benign sounding,
encountered grave opposition from right and left alike. The right wing
"exclusive" nationalists rejected it because they regarded minorities
the way a sick person regards his germs. And the left wing,
"inclusive", nationalists saw in it the seeds of discrimination, an
anathema.

How and why did we find ourselves embroiled in such a mess?

It is all the result of the wrong terminology, an example of the power
of words. The Jews (and Germans) came up with the "objective",
"genetic", "racial" and "organic" nation. Membership was determined by
external factors over which the member-individual had no control. The
French "civil" model - an 18th century innovation - regarded the nation
and the state as voluntary collectives, bound by codes and values,
which are subject to social contracts. Benedict Anderson called the
latter "imagined communities".

Naturally, it was a Frenchman (Ernest Renan) who wrote:

"Nations are not eternal. They had a beginning and they will have an
end. And they will probably be replaced by a European confederation."

He was referring to the fact that nation STATES were nothing but (at
the time) a century old invention of dubious philosophical pedigree.
The modern state was indeed invented by intellectuals (historians and
philologists) and then solidified by ethnic cleansing and the horrors
of warfare. Jacob Grimm virtually created the chimeral Serbo-Croat
"language". Claude Fauriel dreamt up the reincarnation of ancient
Greece in its eponymous successor. The French sociologist and
anthropologist Marcel Mauss remarked angrily that "it is almost comical
to see little-known, poorly investigated items of folklore invoked at
the Peace Conference as proof that the territory of this or that nation
should extend over a particular area because a certain shape of
dwelling or bizarre custom is still in evidence". Archaeology,
anthropology, philology, history and a host of other sciences and arts
were invoked in an effort to substantiate a land claim. And no land
claim was subjected to a statute of limitations, no subsequent conquest
or invasion or settlement legitimised. Witness the "Dacian wars"
between Hungary and Romania over Transylvania (are the Romanians latter
day Dacians or did they invade Transylvania long after it was populated
by the Hungarians?). Witness the Israelis and the Palestinians. And,
needless to add, witness the Serbs and the Albanians, the Greeks and
the Macedonians and the Macedonians and the Bulgarians.

Thus, the modern nation-state was a reflection of something more
primordial, of human nature itself as it resonated in the national
founding myths (most of them fictitious or contrived). The
supra-national dream is to many a nightmare. Europe is fragmenting into
micro-nations while unifying its economies. These two trends are not
mutually exclusive as is widely and erroneously believed. Actually,
they are mutually reinforcing. As the modern state loses its major
economic roles and functions to a larger, supranational framework - it
loses its legitimacy and its raison d'etre.

The one enduring achievement of the state was the replacement of
allegiance to a monarch, to a social class, to a region, or to a
religion by an allegiance to a "nation". This subversive idea comes
back to haunt itself. It is this allegiance to the nation that is the
undoing of the tolerant, multi-ethnic, multi-religious, abstract modern
state. To be a nationalist is to belong to ever smaller and more
homogenous groups and to dismantle the bigger, all-inclusive polity,
which is the modern state.

Indeed, the state is losing in the battlefield of ideas to the other
two options: micro-nationalism (homogeneous and geographically
confined) and reactionary affiliation. Micro-nationalism gave birth to
Palestine and to Kosovo, to the Basque land and to Quebec, to
regionalism and to local patriotism. It is a fragmenting force. Modern
technology makes many political units economically viable despite their
minuscule size - and so they declare their autonomy and often aspire to
independence.

Reactionary Affiliation is cosmopolitan. Think about the businessman,
the scholar, the scientist, the pop star, the movie star, the
entrepreneur, the arbitrageur and the Internet. People feel affiliated
to a profession, a social class, a region, or a religion more than they
do to their state. Hence the phenomena of ex-pats, mass immigration,
international managers. This is a throwback to an earlier age when the
modern state was not yet invented. Indeed, the predicament of the
nation-state is such that going back may be the only benign way of
going forward.


(Article written on September 5, 1999 and published September 20, 1999

in "Central Europe Review" volume 1, issue 13)


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The Phlegm and the Anima


An Impressionistic Canvass



The Calamity

It often rains in Skopje nowadays. Sudden, thunderous outpourings of
acidulous and gluey fluid. People say it is the pollution from 12,000
tonnes of bombs dropped 20 km from here. The unions warn of a hot
autumn. The omens are ominous. It looks like an economic crash rather
than a soft landing. Tony Blair was here a while ago. He photo
opportunities with photogenic refugees and promised the soft spoken and
dreamy eyed Prime Minister of Macedonia 20 million British Pounds. The
money never came. Blair's promise went the way of thousands of other
promises made by the good and the mighty throughout the history of this
melancholy part of the globe.

Emir Kusturice compared the Balkans to an island, drifting listlessly,
receding wedding music in the background. It is heart rending and often
provokes in me a tsunamic pity, an earthquake of goodwill. The locals
are adept at using this resonance, at taking advantage of foreigners
vulnerable to their music, to their costumes, to their rustic
shrewdness.

In 1963, upon the occasion of a particularly malicious earthquake,
which levelled Skopje - they rebuilt it from generous foreign
donations. The message sank in: foreigners love disasters, natural and
manmade. Foreigners are willing to shell hard currency for this
indulgence. The harder the catastrophe - the harder the currency. Thus,
calamities became an export industry, a major earner of foreign
exchange, the opportunity of a lifetime for a few in exchange for the
misery of the many.

The Aftermath

Music drifts in with the fragrances of decaying blossoms and with
corpulent mosquitoes. The fragmented echoes of animated discussions.
People here talk with their whole bodies. They lean forward and touch
their conversants. When they meet or depart they kiss each other on the
cheeks and hug passionately. It was, therefore strange to see the body
language of the octogenarian president of Macedonia with his much
younger Albanian counterpart. They stood apart and made diametrically
opposed declarations about the future of Kosovo. Watching the old
communist apparatchik Gligorov, I was reminded or Milosevic when he
announced the Serb victory in operation Allied Force. He stood so
rigid, as though about to break and leaned towards the camera, creating
an eerie fish lens effect. Balkanians are not proud people, they are
adaptable. But, in an effort to compensate for a deep-set inferiority
complex, they react with vanity and narcissism. Co-existence here has
never been an easy proposition and the Americans forced strange
bedfellows upon each other. Accustomed to the imposing ways of
superpowers, the Balkan bowed its head. But it is a contemptuous
gesture. Balkanians aim to win through their surrender. They always
harbour hidden agendas. Knowing this, they are also paranoid but, as
distinct from the classic pathology, they do have enemies. The Balkan
will wait until America joins Rome and Turkey. The only commodity it
has aplenty is time. So now Gligorov and Mejdani shake hands but they
both know the long knives are drawn. They both will wait for the
intruders to depart, which will them go on with that traditional
pastime of Balkan rulers: slaughtering each other.

The War Chests

Thaci found himself with plenty of returning refugees, meddlesome
peacekeepers and houses burned to their basements. He also found
himself with very little money. Rugova and Bukoshi, on the other hand,
have access to funds but very few adherents. Rugova's decline did not
start in March 1999. It started long ago when he objected even to
peaceful student demonstrations (which the Serbs found tolerable). It
was then clear that if there ever was any distinction between his
pacifism and traitorous, collaborationist cowardice - it has long
vanished. People deserted him in droves and in Rambouillet, it was
Thaci who headed the Kosovar delegation, not his elder rival.

So now Thaci needs money. One way is to collect taxes, as Rugova did.
Another is to monopolize the business interests of Kosovo. He set
himself upon this task no less ferociously than he did fighting the
Serbs. In collaboration with Albanian politicians (government
supporters) and with Macedonian politicians of Albanian descent, he
began to take over lucrative trades and economic activities both in
Kosovo and in its neighbours. The Berisha (Albanian opposition) crowd
regard him as an imminent danger. They believe his aim is to become the
President of a Greater Albania comprising Albania and Kosovo (though
not Macedonia, a new found and perhaps short lived ally). This is a
recipe for a civil war, the second one within two years in Albania. The
first one erupted after the life savings of one third of the population
were squandered by a cronyist group of investment houses in pyramid
schemes.

The Spoils

The Greeks are grabbing Macedonian property: real estate, banks,
factories, and a refinery, perhaps the Macedonian Telecom. They pay
outlandishly cheap prices. The Macedonians are on their knees, reduced
by the war to a loosely connected network of bartering businesses.
While plundering, the Greeks do not refrain from political
arm-twisting. They vetoed Macedonia's application to become the centre
of the reconstruction of Kosovo and then proceeded to propose
Thessalonica (Saloniki) - a proposal adopted by the EU. They also
refuse to call Macedonia by its constitutional name, forcing the
impossible acronym FYROM on the international community. The next
logical target is Serbia. To the Greek businessmen, Kosovo is lost due
to the brutal treatment of Albanian refugees in Greece and the
expressed pro-Serb sympathies of the Greek main street.

Thus, strange, chimeral alliances emerge. They are likely to prove as
ephemeral as their predecessors, to melt away in the searing heat of
the Balkanian summer. But while they last they give one pause. The
Russians and two NATO members, Greece and Italy, are likely to defy
America and enthusiastically embark upon the lucrative reconstruction
of devastated Serbia. Financed by German money through the inefficient
and corrupt money transfer mechanism known as the EU, German businesses
are not likely to tolerate this Christian Orthodox monopoly. They will
join the fray, to America's increasing dismay and chagrin. American
firms, on the other hand, will probably not be allowed to undo the
damage their government wrought. Left out of the game, America will try
to spoil it. It might well succeed, for it controls the strings of the
American purses known as IMF and World Bank. Americans never hesitate
to bully and to blackmail where money is involved.

The Russians are preparing to supply Serbia with new military
technology as do other rogue states. Greece is secretly negotiating
with Iran. Serb leaders visit Iraq. Russians are meeting North Koreans.
So do the Chinese. Russian aircraft breach NATO's airspace. The
Europeans are hastily forming their own defence alliance and finally
appointed Mr. PESC, the long awaited EU foreign policy supremo. The
ramblings of a new cold war (the world against the USA) are clearly
audible to the attentive ear. In the margins more minor players such as
Israel position themselves to counter what they regard as dangerous
liaisons between Pakistani, Afghani and Albanian Islamic
fundamentalist, terrorist cum drug concerns (sometimes in the guise of
aid organizations). Bin Laden is in the area. Every secret service,
every crime organization, every terrorist group, every liberation
movement, every weapons dealer, every drug pusher are here, eager not
to miss the unfolding action.

These wrangles will surely depress investors' appetites. They will not
increase the pledges in bow tied donor conferences either. Good money
(investments and international aid) rarely follows bad one (crime and
weapons trading, for example).

The Balkan countries stand to get a small fraction of the magnificent
and magnanimous and generous promises made to them in the heat of the
battle. The Balkan will be forgotten because it refuses to reform,
because it is obstreperous. The number of officials visiting will
decline. The journalists will beat a path to other blazes. The local
politicians, pampered by the likes of Clinton and the CNN will revert
unwillingly to their petty squabbles and ragged local papers. In a few
months, it is will all seem like a mirage. It will all sink into the
fertile soil of this luscious region, fertilized by countless bodies
and bloody rivulets. The great togetherness will evaporate leaving
behind the putrid fumes of re-emerging, centuries old, grudges and
suspicions. The people will complain. The leaders will thieve and
collaborate with organized crime. The criminals will prosper. The
farmers will toil their land and intellectuals will conspire. It is the
Balkans where nothing changes.

And nothing ever will.


(Article written on July 11, 1999 and published July 19, 1999

in "Central Europe Review" volume 1, issue 4)


Return



The Dance of Jael



"Envy is forever looking upwards. It does not look sideways. In 'Facial
Justice' Hartley (1960) describes a life after a catastrophic war. A
Dictator has decreed that envy is so destructive that it has to be
eliminated. The citizens are coerced to be as alike each other as
possible. The worst crime is not envy itself but to excite envy.
'Equality and Envy - the two E's were...the positive and negative poles
on which the New State rotated' (p.12). In order to exterminate envy
everything that was enviable has been destroyed. Of course that in
itself is the very essence of envy. Neither envy nor equality are
spoken of as words but referred to as Good and Bad E. All tall
buildings had been destroyed in the war except the tower of Ely
Cathedral and none are allowed to be built - a horizontal view of life
is required. No comparisons are to be made, women are encouraged to
undertake an operation so they all looked alike, to be pretty would
excite envy. The result is that the populace loses its humanity and
becomes a non-thinking mass. The independently minded heroine, Jael,
visits the Ely and looks up at the tower and leads a dance round it.
She pays the price of having her more than averagely pretty face (an
Alpha face) changed to a Beta face by cosmetic surgery and so made
indistinguishable from the others."

(From "Cronos and His Children - Envy and Reparation" by Mary Ashwin -
Chapter II "Everyday Envy")


The distinction between fiction and non-fiction became ever subtler in
the "Underground" world of post-socialism, "After the Rain" of
communism. In a lethal embrace, in an act of unprecedented intercourse,
literature penetrated reality as only the most fervent lovers or the
most avid haters do. A topsy-turvy continent adrift among the gales of
newspeak, under the gaze of a million grey bureaucrats passing for big
brothers. A motion picture gone awry: the plot long forgotten, the
actors wondering forlornly on a dilapidated scene and the credits
flashing over and again, in an endless loop.

This crazed landscape, this party of mad hatters, where time stood
still was the result of the two great equalizers: oppression and
ideology. The substrate of numerous experiments of groups without
control, the inhabitants of these feverish lands internalised their own
predicament. The broken toys of spoiled imperial children, the guinea
pigs of scientific materialism and then of materialism only - they
strutted around, eyes wide shut, ears clogged, mouths stapled, lips
sown with the wire of terror. Everyone was equal under their occupiers,
their tormentors, and their slave masters. And everyone was equal by
decree, on pain of death or exile, by the horror-stricken conviction
called ideology. To succumb to the former was to survive - to subscribe
to the latter was to flourish. Many flourished.

The New Oxford Dictionary of English defines envy as: "A feeling of
discontented or resentful longing aroused by someone else's
possessions, qualities, or luck." And an earlier version (The Shorter
Oxford English Dictionary) adds: "Mortification and ill will occasioned
by the contemplation of another's superior advantages."

Pathological envy - the second deadly sin - is a compounded emotion. It
is brought on by the realization of some lack, deficiency, or
inadequacy in oneself. It is the result of unfavourably comparing
oneself to others: to their success, their reputation, their
possessions, their luck, and their qualities. It is misery and
humiliation and impotent rage and a tortuous, slippery path to nowhere.
The effort to break the padded walls of this self-visited purgatory
often leads to attacks on the perceived source of frustration.

Pathological envy is THE driving force of post-communist Central and
Eastern Europe. Unable to cope with the sudden shift in values from
enforced and artificial equality to primitive, pirate capitalism - the
populace retreated to acrimony and bitterness. Faced with the chasmic
inequalities engendered by the serial collective robberies known as
"privatisation" - it reacted with suppressed rage, with despair, with
the multiple sadness which is nostalgia. The land has split between a
colourful, dynamic, rapacious and omnivorous class - and the sepia-like
and quaint backdrop of their compatriots. As the castles of the former
rose - so were the abodes of the latter humbled.

The resentment led to fears of abandoning one's self-control, of
confronting one's rulers and their cronies, of losing even the little
one was allowed to possess. It was a muted mutiny, a rebel-less
rebellion, a static trip from guilt to hate. To maintain these seething
undercurrents from erupting, to avoid the volcanic tremors that precede
every revolution - behaviour was formalized and ritualised. Speech
became ever vaguer and ambiguous. Effective communication was halted.
The community splintered and the very fabric of society was consumed by
this massive act of dissociation.

Pathological envy mutated into solutions the envious could live with.

Some sought to imitate or even emulate the newfound heroes of the
capitalist revolution. They immersed themselves in conspicuous
consumption, the badly matched purchases of the nouveaux riches replete
with the vulgar manners of unrefined power. They adhered to coarse
materialism with its confusion of ends and means. They suffered the
ever-present agitation of envy, the constant comparison to one's
superiors, the plagued rat race. To get rich quick through schemes of
crime and corruption is thought by these people to be the epitome of
cleverness (providing one does not get caught), the sport of living, a
winked-at vice, a spice.

Yet others embarked on paths of rivalry and enmity and destruction.
This hydra has many heads. From scratching the paint of new cars and
flattening their tyres, to spreading vicious gossip, to media-hyped
arrests of successful and rich businessmen, to wars against advantaged
neighbours. The stifling, condensed vapours of envy cannot be
dispersed. They invade their victims and snatch their rageful eyes,
their calculating souls, they guide their hands in evil doings and dip
their tongues in vitriol. This is the day-to-day existence in places as
far apart as Moscow and the Balkans. A constant hiss, a tangible
malice, the piercing of a thousand eyes. The imminence and immanence of
violence. The poisoned joy of depriving the other of that which you do
not or cannot have.

There are those who idealize the successful and the rich and the lucky.
They attribute to them super-human, almost divine, qualities. They
think of serendipity as earned, of work as bestowed, of success as
deserved and reserved to the deserving. In an effort to justify the
agonizing disparities between themselves and others, they humble
themselves as they elevate the others. They reduce and diminish their
own gifts, they disparage their own achievements, they degrade their
own possessions and look with disdain and contempt upon their nearest
and dearest, who are unable to discern their fundamental shortcomings.
They feel worthy only of abasement and punishment. Besieged by guilt
and remorse, voided of self-esteem, self-hating and self-deprecating -
this is by far the more dangerous species. For he who derives
contentment from his own humiliation cannot but derive happiness from
the downfall of others. Indeed, most of them end up driving the objects
of their own devotion and adulation to destruction and decrepitude.

But the most common reaction is the good old cognitive dissonance. In
Central and Eastern Europe, entire societies are in its grip. It is to
prefer the belief that the grapes are sour to the admission of their
desirability. These people devalue the source of their frustration and
envy. They find faults, unattractive features, high costs to pay,
immorality in everything they really most desire and aspire to and in
everyone who has attained that which they so often can't. They walk
around critical and self-righteous, inflated with a justice of their
making and secure in the wisdom of being what they are rather than what
they could have been and really wish to be. They make a virtue of
abstention, of wishful constipation, of judgmental neutrality, this
oxymoron, the favourite of the disabled.

Topped by a thin layer of coagulated fat, a bubble of enraged and
maddened envy is boiling underneath - from Murmansk to Athens and from
Prague to Dresden. Will it burst and spill over or will it only noisily
release its steam is anybody's guess. It is a force to reckon with. The
tide of capitalism has lifted few yachts and no one else's boats.
People feel cheated. They feel used and abused. They feel conned out of
their dignity and their possessions and their future. They look around
and see island castles surrounded by oceans of physical and moral
filth. This is no decadence because it has no aesthetic values to
ameliorate it. It is as ugly as the survival of the thiefest. As
Central and Eastern Europe engages, for the first time, in serious
restructuring - the social costs will mount dramatically and so will
inequality. The process can be reversed only by the redistribution of
wealth. But that it will be achieved through progressive taxation
rather than through a bloodbath is not a foregone conclusion.


(Article written on September 26, 1999 and published October 11, 1999

in "Central Europe Review" volume 1, issue 16)


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Homo Balkanus



How does one respond to a torrent of belligerent correspondence from
Balkanians arguing against the belligerence of Balkanians asserted by
one in one's articles? Were it not sad, it surely would have been
farcical. Only yesterday (August 17th, 1999 - five months after the
Kosovo conflict) Macedonian papers argued fiercely, vehemently and
threateningly against an apparently innocuous remark by Albania's Prime
Minister. He said that all Albanians, wherever they are, should share
the same curriculum of studies. A preparatory step on the way to a
Greater Albania perhaps? In this region of opaque mirrors and "magla"
(fog) it is possible. And what is possible surely IS.

I do not believe in the future of this part of the world only because I
know its history too well. Every psychologist will tell you that past
violent behaviour is the best predictor of future recidivism. Homo
Balkanus is lifted straight off the rustling pages of the Diagnostic
and Statistics Manual (DSM) version IV (1994) - the bible of the
psychiatric profession:

"A pervasive pattern of grandiosity (in fantasy or behaviour), need for
admiration, and lack of empathy, beginning by early adulthood and
present in a variety of contexts, as indicated by five (or more) of the
following:

1. Has a grandiose sense of self-importance (e.g., exaggerates
achievements and talents, expects to be recognized as superior without
commensurate achievements);

2. Is preoccupied with fantasies of unlimited success, power,
brilliance, beauty, or ideal love;

3. Believes that he or she is 'special' and unique and can only be
understood by, or should associate with, other special or high-status
people (or institutions);

4. Requires excessive admiration;

5. Has a sense of entitlement, i.e., unreasonable expectations of
especially favourable treatment or automatic compliance with his or her
expectations;

6. Is interpersonally exploitative, i.e., takes advantage of
others to achieve his or her own ends;

7. Lacks empathy: is unwilling to recognize or identify with the
feelings and needs of others;

8. Is often envious of others or believes that others are envious
of him or her;

9. Shows arrogant, haughty behaviours or attitudes."

Narcissism is a result of stunted growth and of childhood abuse. It is
a reactive pattern, the indelible traces of an effort to survive
against all odds, against bestial repression and all-pervasive decay.
Brutally suppressed by the Turks for hundreds of years and then by
communism in some countries and by cruel, capricious banana republic
regimes in others - Homo Balkanus has grown to be a full-fledged
narcissist.

The nation state structure and ideology enthusiastically adopted by
Homo Balkanus in the wake of the collapse of the rotten Ottoman edifice
- has proven to be a costly mistake. Tribal village societies are not
fit for the consumption of abstract models of political organization.
This is as true in Africa as it is in the Balkans. The first allegiance
of Homo Balkanus is to his family, his clan, and his village. Local
patriotism was never really supplanted by patriotism. Homo Balkanus
shares an Ottoman unconscious with his co-regionists. The "authorities"
were and are always perceived to be a brutal, menacing and
unpredictable presence, a natural power, to be resisted by the equal
employment of cunning and corruption. Turkish habits die hard. The
natives find it difficult not to bribe their way through their own
officialdom, to pay taxes, not to litter, to volunteer, in short: to be
citizens, rather than occupants or inhabitants. Their
passive-aggressive instincts are intact and on autopilot.

The Balkanian experiment with nation states has visited only misery and
carnage upon the heads of its perpetrators. Borders tracked
convulsively the movements of half-nomad populations. This instability
of boundaries led to ethnic cleansing, to numerous international
congresses, to fitful wars. In an effort to justify a distinct
existence and identity, thousands of "scholars" embarked on Herculean
efforts of inventing histories for their newly emergent nations.
Inevitably, these histories conflicted and led to yet more bloodshed. A
land fertilized by blood produces harvests of bloated corpses.

In the Balkans people fight for their very own identity. They aspire to
purity, albeit racial, and to boundaries, albeit of the abstract kind.
It is, perhaps, the kernel of this Greek tragedy: that real people are
sacrificing real people on the altar of the abstract. It is a battle of
tastes, a clash of preferences, an Armageddon of opinions, judgements,
and lessons. Armies are still moved by ancient events, by symbols, by
fiery speeches, by abstract, diffuse notions. It is a land devoid of
its present, where the past and future reign supreme. No syllogism, no
logic, no theory can referee that which cannot be decided but by the
compelling thrust of the sword. "We versus They" - they, the aliens.
Threatened by the otherness of others, Homo Balkanus succumbs to the
protection of the collective. A dual track: an individualist against
the authorities - a mindless robot against all others, the foreigners,
the strangers, the occupiers. The violent acting out of this
schizophrenia is often referred to as "the history of the Balkans".

This spastic nature was further exacerbated by the egregious behaviour
of the superpowers. Unfortunately possessed of strategic import, the
Balkan was ravaged by geopolitics. Turks and Bulgarians and Hungarians
and Austrians and Russians and Britons and Germans and Communists and
the warplanes of NATO - the apocalyptic horsemen in the mountains and
rivers and valleys and sunsets of this otherworldly, tortured piece of
land. Raped by its protectors, impregnated by the demon seeds of global
interests and their ruthless pursuit - the Balkan was transformed into
a horror chamber of amputated, zombie nations, a veritable hellish
scene. Many a Pomeranian grenadier bequeathed their bones to the
Balkans but Pomeranian grenadiers came and went while the people of the
Balkan languished.

Thus, it was not difficult to foster a "We" against every "They" (or
imagined "They"). A crossroads of fault lines, a confluence of tectonic
clashes - the Balkan always obliged.

Religion came handy in this trade of hate. Orthodox Serbs fought Muslim
Serbs in Bosnia (the latter were forced to convert by the Turks
hundreds of years ago). Catholic Croats fought Orthodox Serbs. And
Bulgarians (a Turkic tribe) expelled the Turks in 1989, having
compelled them to change their Muslim names to Bulgarian sounding ones
in 1984.

Race was useful in the agitated effort to prevail. Albanians are of
Illyrian origin. The Greeks regard the Macedonians as upstart Slavs.
The Bulgarians regard the Macedonians as rebel Bulgarians. The
Macedonian regard the Bulgarians as Tartars (that is, Barbarian and
Turkish). The Slovenes and the Croats and, yes, the Hungarians claim
not to belong in this cauldron of seething, venomous emotions.

And culture was used abundantly in the Balkan conflicts. Where was the
Cyrillic alphabet invented (Macedonia, Greece, Bulgaria) and by whom
(Greeks, Macedonians, Bulgarians). Are some nations mere inventions?
(The Bulgarians say this about the Macedonians). Are some languages one
and the same? Minorities are either cleansed or denied out of
existence. The Greek still claim that there are no minorities in
Greece, only Greeks with different religions. The Bulgars in Greece
used to be "Bulgarophone Greeks". The Balkan is the eternal hunting
grounds of oxymorons, tautologies and logical fallacies.

It is here that intellectuals usually step in (see my article: "The
Poets and the Eclipse"). But the Balkan has no intelligentsia in the
Russian or even American sense. It has no one to buck the trend, to
play the non-conforming, to rattle, to provoke, to call upon one's
conscience. It does not have this channel to (other) ideas and view
called "intellectuals". It is this last point, which makes me the most
pessimistic. The Balkan is a body without a brain.


(Article written on August 8, 1999 and published September 6, 1999

in "Central Europe Review" volume 1, issue 11)


Return



The MinMaj Rule



I have a Roma (gypsy) cleaning lady. She cleans my house every
fortnight. She is nice and well spoken. She values education and good
manners. She is spotless, obsessively purgatory, and compulsively tidy.
And she hates "shiptars" (the derogatory name assigned to Macedonian
Albanians). They are dirty, she says, and criminal and they have too
many children. They don't respect their women. She is afraid of them.
Her eyes glow with the gratification of the underdog turned top dog, if
only verbally, if only for a while, if only while cleansing my house.
This is the way it is, a chain of abuse, a torrent of prejudice, an
iron curtain of malice and stereotyping. Czechs portray "their" gypsies
with the same lingual brushstrokes, the same venomous palette, a
canvass of derision and atavistic, reflexive hatred.

In the Balkans reigns supreme the Law of the MinMaj. It is simple and
it was invariably manifested throughout history. It is this: "Wars
erupt whenever and wherever a country has a minority of the same
ethnicity as the majority in its neighbouring country."

Consider Israel - surrounded by Arab countries, it has an Arab minority
of its own, having expelled (ethnically cleansed) hundreds of thousands
more. It has fought 6 wars with its neighbours and (good intentions
notwithstanding) looks set to fight more. It is subjugated to the Law
of the MinMaj, enslaved by its steady and nefarious domination.

Or take Nazi Germany. World War Two was the ultimate manifestation of
the MinMaj Law. German minorities throughout Europe were either used by
Germany - or actively collaborated with it - to justify one Anschluss
after another. Austria, Czechoslovakia, Poland, France, Russia - a
parade of Big Brotherly intervention by Germany on behalf of allegedly
suppressed kinfolk. Lebensraum and Volkdeutsch were twin pillars of
Nazi ideology.

And, of course, there is Yugoslavia, its charred remnants agonizingly
writhing in a post Kosovo world. Serbia fought Croatia and Bosnia and
Kosovo to protect besieged and hysterical local Serbs. Croats fought
Serbs and Bosnians to defend dilapidated Croat settlements. Albanians
fought the Serbs through the good services of Kosovars in order to
protect Kosovars. And the fighting is still on. This dismembered
organism, once a flourishing country, dazed and scorched, still
attempts to blindly strike its former members, inebriated by its own
blood. Such is the power of the MinMaj.

There are three ways out from the blind alley to which the MinMaj Rule
inevitably and invariably leads its adherents. One exit is through
ethnic cleansing, the other via self-determination, the third is in
establishing a community, a majority of minorities.

Ethnic cleansing is the safest route. It is final, irreversible, just,
fast, easy to carry out and preventive as much as curative. It need not
be strewn with mass graves and smouldering villages. It can be done
peacefully, by consent or with the use of minimal force. It can be part
of a unilateral transfer or of a bilateral exchange of population.
There are many precedents - Germans in the Ukraine and in
Czechoslovakia, Turks in Bulgaria, Jews in the Arab countries. None of
them left willingly or voluntarily. All were the victims of
pathological nostalgia, deep, disconsolate grieving and the
post-traumatic shock of being uprooted and objectified. But they
emigrated, throngs of millions of people, planeloads, trainloads,
cartloads and carloads of them and they reached their destinations
alive and able to start all over again - which is more than can be said
about thousands of Kosovar Albanians. Ethnic cleansing has many faces,
brutality is not its integrated feature.

The Wilsonian ideal of self-determination is rarely feasible or
possible - though, when it is, it is far superior to any other
resolution of intractable ethnic conflicts. It does tend to produce
political and economic stillborns, though. Ultimately, these offspring
of noble principle merge again with their erstwhile foes within customs
unions, free trade agreements, currency unions. They are subsumed in
other economic, political, or military alliances and gladly surrender
part of that elusive golden braid, their sovereignty. Thus, becoming an
independent political entity is, to most, a rite of passage,
adolescence, heralding the onset of political adulthood and
geopolitical and economic maturity.

The USA and, to a lesser degree, the UK, France and Germany are fine
examples of the third way. A majority of minorities united by common
rules, beliefs and aspirations. Those are tension filled structures
sustained by greed or vision or fear or hope and sometimes by the very
tensions that they generate. No longer utopian, it is a realistic model
to emulate.

It is only when ethnic cleansing is combined with self-determination
that a fracturing of the solutions occurs. Atrocities are the vile
daughters of ideals. Armed with stereotypes - those narcissistic
defence mechanisms that endow their propagators with a fleeting sense
of superiority - an ethnic group defines itself negatively, in
opposition to another. Self-determination is employed to facilitate
ethnic cleansing rather than to prevent it. Actually, it is the very
act of ethnic cleansing which validates the common identity, which
forms the myth and the ethos that is national history, which
perpetrates itself by conferring resilience upon the newly determined
and by offering a common cause and the means to feel efficient,
functional and victorious in carrying it out.

There are many variants of this malignant, brutal, condemnable,
criminal and inefficient form of ethnic cleansing. Bred by manic and
hysterical nationalists, fed by demagogues, nourished by the hitherto
deprived and humiliated - this cancerous mix of definition by negation
wears many guises. It is often clad in legal attire. Israel has a Law
of Return, which makes an instant citizen out of every spouse of every
Russian Jew while denying this privilege to Arabs born on its soil.
South Africa had apartheid. Nazi Germany had the Nuremberg Laws. The
Czech Republic had the infamous Benes Decrees. But ethnic cleansing can
be economic (ask the Chinese in Asia and the Indians in Africa). It can
be physical (Croatia, Kosovo). It has myriad facets.

The West is to blame for this confusion. By offering all three
solutions as mutually inclusive rather than mutually exclusive - it has
been responsible for a lot of strife and misery. But, to its credit, it
has learned its lesson. In Kosovo it defended the right of the indigent
and (not so indigent but) resident Albanians to live in peace and
plough their land in peace and bring forth children in peace and die in
peace. But it has not protected their right to self-determination. It
has not mixed the signals. As a result the message came through loud
and clear. And, for the first time in many years, people tuned in and
listened. And this, by far, is the most important achievement of
Operation Allied Force.


(Article written on July 4, 1999 and published July 12, 1999

in "Central Europe Review" volume 1, issue 3)


Return



The Balkans between Omerta and Vendetta


On the Criminality of Transition



In a State Department briefing on Thursday, August 5th, 1999, the
spokesman of this venerable and ever-so-truthful organ of the American
administration, James Rubin, said:

"We have supported and continue to support the regime in Montenegro
that is a democratic regime that has pursued a democratic course. We do
believe that Milosevic's efforts to consolidate power have led to
repeated violations of the Yugoslav federal constitution, in particular
the rights and privileges of Montenegro.

In particular, Belgrade has sought to strip Montenegro's constitutional
rights and powers and has prevented Montenegro from playing its
constitutional role in the federal government. We continue to believe
that Montenegro's leaders have demonstrated a measured and rational
approach to political and economic reform, which we support. We commend
their efforts to work within the FRY for reforms that would bring
democracy and a better life to all Yugoslav citizens.

To achieve that objective, we've been providing them assistance, we've
been exempting them from the effect of certain policies that apply to
Belgrade and the people of Serbia. We worked very, very hard during the
war to avoid any unnecessary damage to facilities or people in
Montenegro as a result of the air war. So we have been showing, I
think, great efforts to try to build up the democratic efforts that
President Djukanovic has shown in Montenegro. We think that they should
continue to work within Yugoslavia to ensure their rights are
protected."

The war in Kosovo and the impending war in Montenegro and the wars that
were in Croatia and Bosnia - were all gangland warfare. These were
skirmishes between gangs of criminals, disguised as statesmen,
politicians, members of "parliaments" and businessmen. Some of them
were protecting their turf - others were trying to usurp it and they
all made a killing, often literally. It is the same the world over -
from Lebanon to Myanmar, from Sierra Leone to Nigeria and from Sarajevo
and its ephemeral Stability Pact to the killing fields of Pristina.
Crime gangs, Mafiosi, local versions of omertas and vendettas, black
hands and red rivulets of the cheapest liquid of them all: blood.

Shadowy dealings, drug trafficking, white slavery, smuggling and
forfeit goods are all intertwined with political power in the Balkans.
Thaci we discussed elsewhere. Milosevic we discussed everywhere. But
Djukanovic is portrayed as different - more gentlemanly, "democratic",
a protector of civil rights.

Nothing can be further from the truth. The West - notably the USA - is
in the habit of creating pairs of villains and heroes, monsters and
saints where there are none. It provides for good soundbites, it raises
the fighting spirits at home and it focuses attention and energy on the
enemy. Very often, the spin-doctors are caught in their own whirlwind
and with them - if they happen to be American - the rest of the world.
Shrewd villagers such as all Balkan politicians are, have caught on to
this self-delusion. They pose as democrats, autocrats, strong men,
underdogs - anything to get Western aid and investment flowing. It is
currently very fashionable and expedient to be a democrat - so Mr.
Djukanovic is a democrat. And the West duly delivers the goods:
international recognition, money, and political support.

Milka Tadic is the Editor of the popular (and, as you will see,
independent) Montenegrin magazine "Monitor". This week, she wrote about
Djukanovich (in "Currency Wars", in IWPR number 63):

"Whenever Djukanovic, then Montenegro's Prime Minister, demanded
economic liberalization and more economic independence, Milosevic would
close the border and block trade between Serbia and Montenegro. In
retaliation, Djukanovic opened Montenegro's borders with Italy, to
cigarette smuggling, and with Albania, for oil imports. Djukanovic also
liberalized the import of foreign, second-hand cars - many of them
stolen vehicles from Western Europe that Montenegrins bought from the
Bosnian-Croat mafia, in border towns in Bosnia. Taxes from imported
cars, the smuggling of cigarettes and oil, provided Djukanovic with the
hard currency to replenish the republic's coffers and begin to chart an
independent course away from Belgrade. In economic terms, this tiny
republic was becoming less and less dependent on its partner in the
Yugoslav federation. ... As NATO launched its bombing campaign, the
Yugoslav Army took over control of the Montenegrin border crossings and
custom posts, banning even the entrance of humanitarian aid; speed
boats smuggling cigarettes between Montenegro and Italy could no longer
break the blockade; and the border with Albania was also closed.
Djukanovic was facing economic disaster and was only saved by the end
of the war, since when Montenegro has resumed its dubious trade with
its neighbours."

Hence the love affair with the West.

Human vice is the most certain thing after death and taxes, to
paraphrase Benjamin Franklin. The only variety of economic activity,
which will surely survive even a nuclear holocaust, is bound to be
crime. Prostitution, gambling, drugs and, in general, expressly illegal
activities generate c. 400 billion USD annually to their perpetrators,
thus making crime the third biggest industry on Earth (after the
medical and pharmaceutical industries).

Many of the so-called Economies in Transition and of HPICs (Highly
Indebted Poor Countries) do resemble post-nuclear-holocaust ashes. GDPs
in most of these economies either tumbled nominally or in real terms by
more than 60% in the space of less than a decade. The average monthly
salary is the equivalent of the average daily salary of the German
industrial worker. The GDP per capita - with very few notable
exceptions - is around 20% of the EU's average. These are the telltale
overt signs of a comprehensive collapse of the infrastructure and of
the export and internal markets. Mountains of internal debt, sky-high
interest rates, cronyism, other forms of corruption, environmental,
urban and rural dilapidation - characterize these economies.

Into this vacuum - the interregnum between centrally planned and free
market economies - crept crime. In most of these countries criminals
run at least half the economy, are part of the governing elites
(influencing them behind the scenes through money contributions,
outright bribes, or blackmail) and - through the mechanism of money
laundering - infiltrate slowly the legitimate economy.

What gives crime the edge, the competitive advantage versus the older,
ostensibly better established elites?

The free market does. Criminals are much better equipped to deal with
the onslaught of this new conceptual beast, the mechanism of the
market, than most other economic players in these tattered economies
are.

Criminals, by the very nature of their vocation, were always private
entrepreneurs. They were never state owned or subjected to any kind of
central planning. Thus, they became the only group in society that was
not corrupted by these un-natural inventions. They invested their own
capital in small to medium size enterprises and ran them later as any
American manager would have done. To a large extent the criminals,
single handedly, created a private sector in these derelict economies.

Having established a private sector business, devoid of any involvement
of the state, the criminal-entrepreneurs proceeded to study the market.
Through primitive forms of market research (neighbourhood activists)
they were able to identify the needs of their prospective customers, to
monitor them in real time and to respond with agility to changes in the
patterns of supply and demand. Criminals are market-animals and they
are geared to respond to its gyrations and vicissitudes. Though they
were not likely to engage in conventional marketing and advertising,
they always stayed attuned to the market's vibrations and signals. They
changed their product mix and their pricing to fit fluctuations in
demand and supply.

Criminals have proven to be good organizers and managers. They have
very effective ways of enforcing discipline in the workplace, of
setting revenue targets, of maintaining a flexible hierarchy combined
with rigid obeisance - with very high upward mobility and a clear
career path. A complex system of incentives and disincentives drives
the workforce to dedication and industriousness. The criminal rings are
well run conglomerates and the more classic industries would have done
well to study their modes of organization and management. Everything -
from sales through territorially exclusive licences (franchises) to
effective "stock" options - has been invented in the international
crime organizations long before it acquired the respectability of the
corporate boardroom.

The criminal world has replicated those parts of the state, which were
rendered ineffective by unrealistic ideology or by pure corruption. The
court system makes a fine example. The criminals instituted their own
code of justice ("law") and their own court system. A unique - and
often irreversible - enforcement arm sees to it that respect towards
these indispensable institutions is maintained. Effective - often
interactive - legislation, an efficient court system, backed by ominous
and ruthless agents of enforcement - ensure the friction-free
functioning of the giant wheels of crime. Crime has replicated numerous
other state institutions. Small wonder that when the state
disintegrated - crime was able to replace it with little difficulty.
The same pattern is discernible in certain parts of the world where
terrorist organizations duplicate the state and overtake it, in time.
Schools, clinics, legal assistance, family support, taxation, the court
system, transportation and telecommunication services, banking and
industry - all have a criminal doppelganger.

To secure this remarkable achievement - the underworld had to procure
and then maintain - infrastructure and technologies. Indeed, criminals
are great at innovating and even more formidable at making use of
cutting edge technologies. There is not a single technological advance,
invention or discovery that criminals were not the first to utilize or
the first to contemplate and to grasp its full potential. There are
enormous industries of services rendered to the criminal in his
pursuits. Accountants and lawyers, forgers and cross border guides,
weapons experts and bankers, mechanics and hit-men - all stand at the
disposal of the average criminal. The choice is great and prices are
always negotiable. These auxiliary professionals are no different to
their legitimate counterparts, despite the difference in subject
matter. A body of expertise, know-how and acumen has accumulated over
centuries of crime and is handed down the generations in the criminal
universities known as jailhouses and penitentiaries. Roads less
travelled, countries more lenient, passports to be bought, sold, or
forged, how to manuals, classified ads, goods and services on offer and
demand - all feature in this mass media cum educational (mostly verbal)
bulletins. This is the real infrastructure of crime. As with more
mundane occupations, human capital is what counts.

Criminal activities are hugely profitable (though wealth accumulation
and capital distribution are grossly non-egalitarian). Money is stashed
away in banking havens and in more regular banks and financial
institutions all over the globe. Electronic Document Interchange and
electronic commerce transformed what used to be an inconveniently slow
and painfully transparent process - into a speed-of-light here-I-am,
here-I-am-gone type of operation. Money is easily movable and virtually
untraceable. Special experts take care of that: tax havens, off shore
banks, money transactions couriers with the right education and a free
spirit. This money, in due time and having cooled off - is reinvested
in legitimate activities. Crime is a major engine of economic growth in
some countries (where drugs are grown or traded, or in countries such
as Italy, in Russia and elsewhere in CEE). In many a place, criminals
are the only ones who have any liquidity at all. The other, more
visible, sectors of the economy are wallowing in the financial drought
of a demonetised economy. People and governments tend to lose both
their scruples and their sense of fine distinctions under these unhappy
circumstances. They welcome any kind of money to ensure their very
survival. This is where crime comes in. In Central and Eastern Europe
the process was code-named: "privatisation".

Moreover, most of the poor economies are also closed economies. They
are the economies of nations xenophobic, closed to the outside world,
with currency regulations, limitations on foreign ownership,
constrained (instead of free) trade. The vast majority of the populace
of these economic wretches has never been further than the neighbouring
city - let alone outside the borders of their countries. Freedom of
movement is still restricted. The only ones to have travelled freely -
mostly without the required travel documents - were the criminals.
Crime is international. It involves massive, intricate and
sophisticated operations of export and import, knowledge of languages,
extensive and frequent trips, an intimate acquaintance with world
prices, the international financial system, demand and supply in
various markets, frequent business negotiations with foreigners and so
on. This list would fit any modern businessman as well. Criminals are
international businessmen. Their connections abroad coupled with their
connections with the various elites inside their country and coupled
with their financial prowess - made them the first and only true
businessmen of the economies in transition. There simply was no one
else qualified to fulfil this role - and the criminals stepped in
willingly.

They planned and timed their moves as they always do: with shrewdness,
an uncanny knowledge of human psychology and relentless cruelty. There
was no one to oppose them - and so they won the day. It will take one
or more generations to get rid of them and to replace them by a more
civilized breed of entrepreneurs. But it will not happen overnight.

In the 19th century, the then expanding USA went through the same
process. Robber barons seized economic opportunities in the Wild East
and in the Wild West and really everywhere else. Morgan, Rockefeller,
Pullman, Vanderbilt - the most ennobled families of latter day America
originated with these rascals. But there is one important difference
between the USA at that time and Central and Eastern Europe today. A
civic culture with civic values and an aspiration to, ultimately,
create a civic society permeated the popular as well as the highbrow
culture of America. Criminality was regarded as a shameful
stepping-stone on the way to an orderly society of learned, civilized,
law-abiding citizens. This cannot be said about Russia, for instance.
The criminal there is, if anything, admired and emulated. The language
of business in countries in transition is suffused with the criminal
parlance of violence. The next generation is encouraged to behave
similarly because no clear (not to mention well embedded) alternative
is propounded. There is no - and never was - a civic tradition in these
countries, a Bill of Rights, a veritable Constitution, a modicum of
self rule, a true abolition of classes and nomenclatures. The future is
grim because the past was grim. Used to being governed by capricious,
paranoiac, criminal tyrants - these nations know no better. The current
criminal class seems to them to be a natural continuation and extension
of generations-long trends. That some criminals are members of the new
political, financial and industrial elites (and vice versa) - surprises
them not.


(Article written on August 11, 1999 and published August 23, 1999

in "Central Europe Review" volume 1, issue 9)


Return



The Myth of Great Albania



Introduction

To the politicians of the Balkans - almost without exception corrupt
and despised by their own constituencies - the myth of Great Albania
comes handy. It keeps the phobic Macedonians, the disdainful Serbs and
the poor and crime ridden Albanians united and submissive - each group
for differing reasons.

To reiterate, it is the belief that people of Albanian extract,
wherever they may be, regard their domicile as part of a Great Albania
and undertake all efforts necessary to secure such an outcome. Thus, to
mention one example, Kosovo should be part of this Great Albania, so
the myth goes, because prior to 1912, when the Serbs occupied it,
Kosovo has administratively been part of an Ottoman mandated Albania.
Sali Berisha - a former Prime Minister of Albania - talks ominously
about an "Albanian Federation". The younger, allegedly more urbane
Pandeli Majko, the current Prime Minister of Albania, raises the idea
(?) of a uniform curriculum for all Albanian pupils and students,
wherever they may reside. Albanians in Macedonia make it a point to fly
Albanian flags conspicuously and of every occasion. This could have
well been a plausible scenario had it not been for two facts. First
that there is no such thing as homogeneous "Albanians" and second that
Great Albania is without historical precedent.

Albanians are comprised of a few ethnic groups of different creeds.
There are catholic Albanians - like Mother Theresa - and Muslim
Albanians - Like Hashim Thaci. There are Tosks - southern Albanians who
speak a (nasal) dialect of Albanian and there are Gegs - northern
Albanians (and Kosovars) who speak another dialect, which has little in
common with Tosk (at least to my ears). Tosks don't like Gegs and Gegs
detest Tosks. In a region where tribal and village loyalties
predominate these are pertinent and important facts.

The Kosovars are considered by their Albanian "brethren" (especially by
the Tosks, but also by Albanian Gegs) to be cold, unpleasant, filthy
rich cheats. Albanians - Tosks and Gegs alike - are considered by the
Kosovars to be primitive, ill-mannered bandits. There is no love lost
between all these groups. When the crisis brought on by Operation
Allied Force started, the local Albanian population charged the
refugees amidst them with exorbitant (not to say extortionate) prices
for such necessities as a roof over their head, food and cigarettes.
When the UN mandate (read: the KLA mandate) was established, the
Albanians rushed to export their brand of crime and banditry to Kosovo
and to prey on its local population. No Macedonian - however radical -
will dare say about the Albanians what my Kosovar contacts say. They
nonchalantly and matter of factly attribute to them the most heinous
crimes and uncivilized behaviour. Kosovars had - and are still having -
an excruciating experience in Albania during this crisis. The lesson
(being learned by Kosovars since Albania opened up to them in 1990)
will not be easily forgotten or forgiven. Albanians reciprocate by
portraying the Kosovars as cynical, inhuman, money making terminators,
emotionless wealthy predators.

This is not to say that Albanians on both sides of the border do not
share the same national dreams and aspirations. Kosovar intellectuals
were watching Albanian TV and reading Albanian papers even throughout
the Stalinist period of Enver Hoxha, the long time Albanian dictator.
Albanian nationalists never ceased regarding Kosovo as an integral part
of an Albanian motherland. But as the decades passed by, as the
dialects metamorphesized, as the divide grew wider, as the political
systems diverged and as the political and cultural agendas became more
distinct - Kosovars became more and more Kosovars and less and less
mainland Albanians.

This historical, 80 year-old rift was exacerbated by the abyss between
the Enver Hoxha regime and its Tito counterpart. The former -
impoverished, paranoiac, xenophobic, hermetically isolated, violent.
The latter - relatively enlightened, economically sprightly, open to
the world and dynamic. As a result, Kosovar houses are three times as
big as Albanian ones and Kosovars used to be (up to the Kosovo
conflict) three times richer (in terms of GDP per capita). Kosovars
crossing into Albania during the Hoxha regime were often jailed and
tortured by its fearsome secret police. A Kosovar - Xhaferr Deva -
served as Minister of the Interior in the hated WW2 government in
Albania, which collaborated wholeheartedly with the Nazis. Albanians,
in general, were much more reserved and suspicious towards the Germans
(who occupied Albania from 1943, after the Italian change of heart).
Only Kosovars welcomed them as liberators from Serb serfdom (as did
Albanians in Macedonia to a lesser extent). This aforementioned Deva
was responsible for the most unspeakable atrocities against the
Albanian population in Albania proper. It did not render the Kosovars
more popular. In Albania proper, three anti-fascist resistance
movements - the Albanian Communist Party, Balli Kombetar (the National
Front) and Legaliteti (Legality, a pro-Zug faction) fought against the
occupiers since 1941. The Communists seized control of the country at
the end of 1944.

Thus, the forced re-union was a culture shock to both. The Kosovars
were stunned by the living conditions, misery and lawlessness of
Albania proper. The Albanians were envious and resentful of their
guests and regarded them as legitimate objects for self-enrichment.
There were, needless to say, selfless exceptions to the egotistic rule.
But I cannot think of any right now.

Historically, there was never a "Great Albania" to hark back to.
Albania was created in 1912 (its borders finally settled in 1913) in
response to Austro-Hungarian demands. It never encouraged Kosovo to
secede. The Albanian King Zog suppressed the activities of Kosovar
irredentist movements in his country in between the two world wars.
Albania, mired in the twin crises of economy and identity - had little
mind or heart for Kosovo.

But this was the culmination of a much longer, convoluted and
fascinating history.

From Illyrium to Skanderberg

There is very little dispute among serious (that is, non-Greek,
non-Macedonian and non-Serb) scholars that the Albanians are an ancient
people, the descendants of the Illyrians or (as a small minority
insists) the Thracians. The Albanian language is a rather newer
development (less than 1500 years-old) - but it is also traced back
either to Thracian or to Illyrian. In a region obsessed with history,
real and (especially) invented, these 4000 year-old facts are of
enormous and practical import.

Ironically, the Illyrians were an ethnic mishmash that inhabited all of
the former Yugoslavia and parts of Greece (Epirus). There were also
major differences between the Illyrians of the highlands (the current
Albania) - isolated and backward - and those of the lowland, the
worldly and civilized. But these distinctions pale in comparison to the
praise heaped on the Illyrians by their contemporaries. They were
considered to be brave warriors and generous hosts. They mined their
rich land for iron, copper, gold and silver and, despite being pagan,
they buried their dead because they believed in the afterlife and its
rewards or punishments. In their liburnae - slim lined, very fast
galleys - they sailed and developed marine trade. The Romans adopted
the design of their vessels and even kept the name Liburnian.

Durres and Vlore were really established by the Greeks 2500 years ago.
The former was called Epidamnus, the latter (actually, a settlement a
few kilometres away) Apollonia. It was part of a Greek colonization
drive that effected lands as far away as Asia Minor in today's Turkey.
As was the usual case, the Greeks traded their superior civilization
and culture for the superior administrative and economic skills of the
natives. It was no coincidence that Illyrian political organization was
concurrent with the Greek presence. It started as defence alliances and
ended as kingdoms (the Enkalayes, the Taulantes, the Epirotes, the
Ardianes). And the enemy - even then - were the Macedonians under
Philip the Second and his son Alexander the Great.

But the Macedonian empire was short lived and was superseded by the far
superior and self-conscious Romans. In 229, the Illyrians (commanded by
a woman, Queen Teuta) were almost wiped out by Roman armies advancing
to the Adriatic. It was the beginning of the damaging involvement of
the superpowers in the area. Exactly 60 years later, Illyrium was no
more. Rome prevailed and ruled the land now known as Illyricum.

Those were a good 600 years. Rome - as opposed to Ottoman Empire - was
a benign, enlightened, laissez faire type of loose assemblage of
taxpayers and tax collectors. Art and culture and philosophy and even
the Illyrian tongue and Illyrian civilization flourished. It was a
rich, materially endowed period in which citizens found sufficient
leisure to indulge in all manner of Eastern cults, such as Christianity
or the cult of Mithra (the Persian god of light). Christianity competed
head on with the Illyrian pagan divinities and by 58 AD it was so
strong that it was able to establish its own bishopric in Dyrrhachium
(formerly Apollonia). This was followed by a few Episcopal seats. It
was also followed by intolerance, bigotry, hypocrisy and persecution,
as all institutional religions go. The Roman and Greek heritage of live
and let live, of art, of the aesthetics of the human body, of nature -
in short: Hellenism - was strangled by the ever more obscure and
dogmatic brand of Christianity that pervaded Byzantium until the
Iconoclastic Controversy of 732. The emperor Leo III actually did the
Albanian Church a great favour by detaching it from under the authority
of the Roman Pope and placing it under the more humane patriarch of
Constantinople. Still, the dividing line between north and south in
Albania was as much religious as economic. The south maintained its
allegiance to Constantinople while the north looked south, to Rome for
spiritual guidance. When the church split in 1054 (to East and West) -
these affiliations remained intact.

It is very little known but the Illyrians actually ruled the Roman
Empire in its last decades. There were a few Illyrian emperors (Gaius
Decius, Claudius Gothicus, Aurelian, Probus, Diocletian, even
Constantine the Great). And most of the officers of the by now fabled
though dilapidated Roman army were Illyrians. In 395, in the
cataclysmic split of the dying empire to East (later, Byzantium) and
West, Albania became finally and firmly a part of the East. The
Illyrians continued to exercise great influence of the amputated East,
some of them becoming influential and historically significant emperors
(Anastasius I, Justin I, Justinian I). As a result, Illyria was the
favourite target of all manner of barbarian tribes: the Visigoths, the
Huns, the Ostrogoths. When the Slavs appeared on the heels of these
invasions, the Illyrians regarded them as just another barbarian tribe.

The interaction between the Illyrians and the Slavs was a love-hate
relationship and has remained so ever since. Some Illyrian groups
assimilated, intermarried and assumed the culture of the invaders. In
300 years, between the 6th and the 8th centuries AD, all the Illyrians
in today's former Yugoslav republics vanished only to re-appear as
Slavs. But the Illyrians of the south (Albania, Western Macedonia)
resisted this process of dilution bitterly and preserved their identity
and culture fiercely. To distinguish themselves from the "assimilated"
- they invented Albania. The name itself is much older. Ptolemy of
Alexandria mentioned it 600 years before the Illyrians began to apply
it to their dwindling polity. And another 300 years were needed - well
into the 11th century AD - before the Illyrians were fully accepted
their reinvention as Albanians - the successors to the Albanoi tribe,
which used to occupy today's central Albania (formerly called Arberi).
Five centuries later, the Albanians themselves renamed their territory
and began to call it Shqiperia. No one really knows why, not even
Albanian scholars, though they like to attribute it (on flimsy
etymological grounds) to Shqipe, the Albanian word for Eagle. Thus,
Albania was transformed to the Land of the Eagle.

It is an irony of history that the Middle (or Dark) Ages were the best
period ever in Albania's history. Powerful cities proliferated,
inhabited by a class of burghers who engaged in trading. Albanian
merchant houses established outposts and branches all over the
Mediterranean, from Venice to Thessalonica. Albanians were the epitome
of education and cultivated the arts. They conversed only in Greek and
Latin, letting the auld language die. The Byzantine Empire was divided
to military provinces (themes). One thing led to another and military
commanders transformed feudal lords administered serfdom to the
population. Feudalism co-existed and then supplanted urbanism and the
big estates became so autonomous that they ignored the Byzantine court
altogether.

But Albania was never peaceful. It was conquered by Bulgarians,
Normans, Italians, Venetians and Serbs in 1347. Many Albanians
immigrated when the Serbs took over, led by Stefan Dusan. They went to
Greece and the Aegean Islands. It was not until 1388 that Albania was
invaded by the Turks. By 1430 it was Turkish. By 1443 it was Albanian.
To this incredible turn of events, the Albanian had Skanderberg to
thank. A military genius (real name Gjergj Kastrioti), he drove the
rising superpower of the Balkans out in a series of humiliating defeats
administered by a coalition of Albanian princes. From his mountainous
hideout in Kruje, he frustrated the Turkish efforts to regain Albania
(they were planning to use it as staging ground for the invasion of
Italy and, thereafter, Western Europe). The Italians (even the Pope,
then the long arm of various shady Italian principates) supported
Skanderberg monetarily and militarily - but he did by far the lion's
share of the work.

But it was a personality-dependent achievement. Like all great leaders,
Skanderberg's fault is that he refused to admit his own mortality and
to nurture the right successor. Following his death, the Turks
recaptured Albania in 1506. But Skanderberg's heroic fight had two
important consequences. One outcome was a considerable weakening of the
Turkish drive towards the heart of Europe and its West. They will never
regain the momentum again and the war was lost. The second momentous
consequence was that his struggle moulded an Albanian NATION where
there was none before.

From the Ottomans to the Americans

The Ottoman occupation was an unmitigated misfortune. Albania -
culturally, a veritable part of Italy in the past - was cut off from it
and from the Renaissance it spawned. The Turks brought with them their
venal type of devastation, not only economic, not only physical, not
only in human lives - but also cultural. A gangrenous paralysis ensued.
The lucky quarter of the population escaped to Italy. The others were
left to fight it out through civil disobedience (refusal to pay taxes,
to serve in the army, to surrender their weapons) and in open
rebellion, time and again, indefatigably and resourcefully, often in
the name of the Christian faith. To put an end to the nuisance, the
Turks islamised the lot (at any rate, two thirds of the lot) during the
16th and 17th centuries. To ensure conversion, the Turks tortured,
killed, raped and taxed the Christians. It worked and people crossed to
the other side in droves. Now there were Catholic Albanians and Muslim
Albanians. It was a replay of the old, 11th century, religious
fragmentation. Albanian political leaders in the 19th century - aware
of the potential of these fractures to denationalise - insisted on
"Albanianism" - a substitute, unifying political "religion". The
rallying cry was: "The religion of Albanians is Albanianism."

Nothing much changed in Albania since the time of feudalism. The Turks
awarded local warlords with land estates to administer (timars). These
warlords - the centres of real power both political and military -
subverted the authority and dominion of the empire. The more the latter
tried to appease them with endowments - the more potent and ambitious
they became. The Bushati family, the eccentric Ali Pasa Tepelene (who
also ruled Northern Greece) and others. In convulsive feats of
reassertion of authority, some sultans deposed of these pashas - but
this did not anything to diminish the autonomy of their estates. In
1831, Turkey abolished the timar system altogether. This bold reform
backfired as the old estates fragmented even further and power devolved
to even lower levels of communal organizations run by beys (in the
north) and bajraktars (everywhere) - bloodthirsty, rigidly patriarchal
and primitive mini rulers. Paradoxically, Albanians who emigrated
(mainly to Turkey itself) rose to prominence. Turkey had 27 (!) grand
viziers (=prime ministers) of Albanian extract.

It was in Kosovo that discontent, unrest and revolt coagulated into the
League of Prizren in 1878. Originally, a narrow local interest northern
group, it fast adopted an expansive agenda, seeking to unify the four
parts of Albania in the four vilayets (Kosovo, Shkoder, Monastir,
Janina) into one political unit. But it wrong to attribute to it the
birth of the delirium of a Great Albania. The League sought an
administrative solution - not a political one. All they wanted was to
create an Albanian zone - but WITHIN the Ottoman Empire. They were more
focussed on benign, less threatening things like culture, art,
literature and education. In short, it was a cultural movement with
administrative aspirations - not the beast of untethered expansionism
it was made out to be by latter day (and rather interested) historians.
It was in Monastir (today's Bitola in Macedonia) that a national,
Latin, alphabet was adopted in 1908. More convenient than Greek or
Arabic - used until then - it triumphed.

History moves in quirkily agonizing twists and turns. It was the
League's involvement with the Albanian language and the strong
opposition by the Turks to its use (the League's activities in this
respect were banned in 1881) that transformed the League from a rather
local affair to a modern national movement along the Italian or German
lines. The Albanian language was indeed suffused by nationalism,
immersed in dreams and aspirations unfulfilled. Its reawakening
signalled the reawakening of Albanianism. When the last great hope,
sealed by Young Turk (broken) promises of autonomy and democracy, was
lost - the Albanians rebelled and forced the Sick Man of Europe to
swallow yet another dose of medicine. In 1912 Turkey granted the
Albanians their wishes only to face the Greek, Serb and Montenegrin
armies, which conquered Albania and divided it among them.

This trauma of division is a recurring trauma in the Albanian psyche.
How ironic that the only people who can empathize with them are the
Macedonians who share the same fear of being quartered. Faced with the
annihilation of Albania so soon after its birth, Albanian leaders met
in Vlore, led by Ismail Kemal, a former high-ranking Ottoman official
of Albanian origin. With nothing much to lose, they decelerated
independence (the Vlore Proclamation) on November 28, 1912.

In December 1912, the Great Powers (the forerunners of NATO) - Britain,
Germany, Russia, Austro-Hungary, Italy and France - met in London to
divide the unexpected spoils. The conference handed an independent
Albanian state to Austro-Hungary and Italy. But the price was a great
diminishment in its geographical scope. Kosovo was given to Serbia,
Cameria to Greece, the most luscious and productive lands and more than
half of all Albanians were left out of the new independent homeland.
Such was the nature of territorial comprises at that time that it
created more problems than it solved. Two news ones were born that day
and hour: a Yugoslav-Albanian flaring animosity and a Greek-Albanian
mutual denial. The unfortunate and tragicomic German who was appointed
to administer Albania (Wilhelm zu Wied) departed soon thereafter with
the outbreak of the First World War.

This first European bloodbath provoked all of Albania's neighbours into
an uncontrolled binge of invasions. Austro-Hungary, France, Italy,
Greece, Montenegro, Serbia - they all marched in with no plan in mind
but to occupy and plunder. The country turned chaotic and it took a
Woodrow Wilson in the Paris Peace Conference to avert an abolition of
the Albanian independent state. It was not the first time Albania
descended into chaos - nor was this to be the last time the Americans
would come to the help of the Albanians. Britain, France and Italy
planned to partition it, Wilson vetoed it and that was the end of the
plan and the beginning of Albania.

In Lushnje, in 1920, the Albanians convened a national congress and
established a government. That year, Albania was admitted to the League
of Nation, sponsored by the very Britain that sought its partition only
the year before. Secure in its sovereignty and international
recognition, Albania inverted its attention. Society was polarized
between land-owning fat cats, the beys and militant archconservative
bajraktars led by Ahmed Bey Zogu from Mat in the north. These
reactionaries were opposed by an uncomfortable coalition of merchants,
intellectuals, progressive politicians and assorted democrats led by an
improbable American-educated bishop of the Orthodox(!) church, one Fan
S. Noli, middle initial and all. The conflict ended 4 years later when,
in 1924 Zogu fled to Yugoslavia. But the entrenched power of the land
gentry was not to be discounted so easily. Noli, now a prime minister,
ruled over the Albanian equivalent of the Republic of Weimar. Radical
land reform, modernization, westernisation. But he was personally
unstable, he won no international recognition (he was considered a
revolutionary leftist) and he had no money to buy his way with. Zogu
came back, this time with a Yugoslav-backed army. He won.

From King Zog to a Brave, New World

Zog commenced his 14 years long reign first as president and then as
king (Zog the first, needless to add). He ruled over a time bomb. The
forces he suppressed with his foreign backed army were rather alive and
well, though in an underground sort of way. In dire need of funds,
after the self-inflicted destruction of his country, Zog resorted to
mortgaging it to foreign powers such as Italy. Italy collected on its
loans in 1939, when it invaded Albania on the way to its Balkan
treasure hunt. King Zog rule of beys and bajraktars aided by a ruthless
police, a Byzantine bureaucracy (a major employer) and Italian money
did stabilize the country, including to the bandit and brigand-ridden
highlands. Many schools were established during his reign. He even
turned a blind eye to western fashions. But this stability was brittle
and fake. Underneath the ornamental surface, the populace was seething.
Peasants aggrieved by the absence of land reform. Democrats opposed to
a dictatorship, however benign. Liberals opposed to the police state.
Nationalists opposed to the undue influence of foreign powers. Albania
imported grain to feed its impoverished population - and exported
people in search of a better life. Periodic revolts interspersed with
labour unrest led directly to the formation of the communist party, the
standard bearer of the educated classes.

In October 1940, Italy invaded Greece from Albania only to be folded
back to whence they came. Nazi Germany had to complete the job as it
swept through Yugoslavia and Greece. In 1941, Albania was rewarded for
its collaboration with the annexation of Kosovo from Yugoslavia and
Cameria from Greece. Having been nearly eliminated by the Allies
(Britain and France) at least twice - and having been rewarded by the
Axis (Austro-Hungary, Germany and Italy) numerous times throughout
their history, the Albanian's loyalty was not in doubt. Though never
the great ideologues - they were althesame instrumental in facilitating
the wartime hegemony of Germany and Italy over the Balkans. The
resistance movement was not uniform, nor was it very effective (though
Albanians like to portray it differently). Finally, in 1944, the
communists took over and their secretary general, Enver Hoxha, became
the leader of a new People's Republic of Albania, later adding the word
"Socialist" to its name (1976).

Nothing seems to have changed in Albania from the 14th century to the
Hoxha days. Burdened by the malaise it contracted from the Ottoman
Empire, it was plagued by poverty, banditry, illiteracy, blood feuds,
disease and the slavery of women and of peasants. At first, the
communist tried to tackle all these ills simultaneously. They drafted a
grand plan of modernization. They vowed to liberate Albania
economically and socially, now that it has been liberated politically
(their reference point was, strangely enough, the bourgeoisie war of
1912). Peasants were handed tiny plots of land taken from the broken
estates of the former beys in an ambitious agrarian reform. Industry,
banks and all foreign property were nationalized. Agriculture was
collectivised in the best Stalinist traditions, though far less swiftly
(it was completed only in 1967). Hoxha subjugated the wild highlands
and strove to eliminate blood feuds and other feudal habits, taking on
the hitherto invincible bajraktars in the process. Women were granted
legal equality with men and were encouraged to participate actively in
their society.

Albania was promiscuous in its foreign affairs, changing partners often
and seemingly whimsically. It paired with Yugoslavia under Tito until
1948, then with the Soviet Union during the days of Stalin and
Khrushchev (until 1961) and then with Maoist China (until 1978). It
expected to receive monetary and military aid - and it did. It received
enormous infusions of credits relative to its economy and it was
virtually invaded by regiments of technical experts who provided
assistance with the various aspects of running a modern state.
Gradually, agriculture was mechanized, industry was modernized and
standards of living increased. It was a golden age and many were happy.

But Hoxha was unhappy. He accused each ally of Albania in its turn of
betraying unadulterated Marxism-Leninism in favour of the wiles of the
capitalistic West. His allies were as disenchanted with his growing
paranoia and geopolitical sado-masochism. Isolated, paranoiac,
obsessive and phobic - Hoxha promulgated an ideology of
self-sufficiency, go-it-alone and the world-is-against-us. Thus, while
Albania made impressive leaps of technology in draining swamps, while
it unified its dialects into a uniform literary language, while it
industrialized and mechanized and reformed and transformed - and it has
- it did so in splendid isolation, often re-inventing the wheel. And it
had a nightmare called Sigurimi.

The Sigurimi was the shadowy, quasi-criminal state security apparatus.
It was a snake raised in the warm bosom of the party. It was
omnipotent. Real or imaginary rivals of the party (really of Hoxha)
were publicly humiliated, dismissed from job, imprisoned in a system of
hideous Gulags, or summarily executed. These bulimic purges were
coupled with growing schizoid tendencies. Travel abroad was prohibited
except on official business, religion (a backward, unprogressive,
disuniting force) was banned.

When Hoxha died in 1985, he was succeeded by a crony, Ramiz Alia, an
Albanian Gorbachev who introduced local versions of Perestroika and
Glasnost even before the Soviet leader did. He legalized foreign
investments and established diplomatic relations with the hitherto
reviled West. But, despite his courage and relative openness, he shared
the fate of other reformers, falling victim to the very forces he
unleashed. In 1989, the workers, the intellectuals and the Albanian
youth were all against the regime. In a spasmodic act of
self-preservation, Alia granted Albanian citizens the right to travel
abroad, limited the reach and powers of the Sigurimi, restored
religious freedom, freedom of political association and adopted free
market reforms. Nothing much was left of Hoxha's heritage. Several
governments later, the Democratic Party, an anti-communist hodgepodge
alliance of interests won the elections (1992). Berisha succeeded Alia.
The communist rule was no more.

It was the beginning of a new Albania. Facing west, it hoped, as it
always has, to modernize, to reform, to belong.

But it was not meant to be.


(Article published October 18-29 - November 1-8

in "Central Europe Review" volume 1, issues 17-20)


Return



The Bad Blood of Kosovo



The old Montenegrins, tall as their mountains, their rocky faces
ravaged by an unforgiving weather define "osveta" thus:

"Osveta, that means... a kind of spiritual fulfilment. You have killed
my son, so I killed yours; I have taken revenge for that, so I now sit
peacefully in my chair."

Milovan Djilas, who helped Tito become Tito and then was imprisoned for
trying to be Djilas, wrote in his book "Land Without Justice"
(Harcourt, Brace 1958):

"Vengeance - this a breath of life one shares from the cradle with
one's fellow clansmen, in both good fortune and bad, vengeance from
eternity. Vengeance was the debt we paid for the love and sacrifice our
forebears and fellow clansmen bore for us. It was the defence of our
honour and good name, and the guarantee of our maidens. I t was our
pride before others; our blood was not water that anyone could spill.
It was, moreover, our pastures and springs - more beautiful than anyone
else's - our family feasts and births. It was the glow in our eyes, the
flame in our cheeks, the pounding in our temples, the word that turned
to stone in our throats on our hearing that our blood had been shed. It
was the sacred task transmitted in the hour of death to those who had
just been conceived in our blood. It was centuries of manly pride and
heroism, survival, a mother's milk and a sister's vow, bereaved parents
and children in black, joy and songs turned into silence and wailing.
It was all, all."

And this is what Margaret Durham had to say in her celebrated
ethnography of Albania, a long time ago ("Some Tribal Origins of Laws
and Customs of the Balkans" - Allan and Unwin, 1928):

"A certain family had long been notorious for evil-doing - robbing,
shooting, and being a pest to the tribe. A gathering of all the heads
condemned all the males of the family to death. Men were appointed to
lay in wait for them on a certain day and pick them off; and on that
day the whole seventeen of them were shot. One was but five and another
but twelve years old. I protested against thus killing children who
must be innocent and was told: 'It was bad blood and must not be
further propagated.' Such was the belief in heredity that it was
proposed to kill an unfortunate woman who was pregnant, lest she should
bear a male and so renew the evil."

In the second century BC, Kosovo was populated by people with
picturesque names: the Iliyrians, Thracians, the Celts. The whole area
was under Roman rule and was subjected to the industriousness and
meticulousness of Empire. Roads were paved, cities built, populations
moved and commerce flourished. This lasted two hundreds years. Slav
tribes descended from the Carpathian Mountains and ended it in orgies
of blood and fire. Until this very day, serious Greek politicians
invoke this primordial invasion in their effort to convince an
incredulous world that the (current) Macedonians are not the (True)
Macedonians. "They are the off spring of invading Slavs" - they claim,
passionately, as is the habit in the Balkans. It took another two
centuries and a Byzantine brief occupation to force the reluctant Slavs
to settle along the Sava River and to form the poor semblance of a
civilization in the making. Roving "saints" of fervent disposition
taught them a new alphabet. Cyril and Methodius were succeeded by
disciples all over Central and Eastern Europe - from the period of
Kliment Ohridski in today's territories of Macedonia and Bulgaria to
Amos Comenius, the 17th century educator, considered in the Balkans to
be their spiritual descendant in the Czech Lands.

This ability to cast their myths in paper in the vernacular, to hand
the national memory down the generations, the newfound Christian
religion - all coagulated into an emergently distinct culture. Come the
12th century, Kosovo was entirely Slav.

Or, to be more precise: entirely Serb. The Slavs fractured into three
groups. The Croats and Slovenes, baptized by Rome, became ardent Roman
Catholics. The Serbs - introduced to the faith by Byzantium - remained
Eastern Orthodox. This division was to last a thousand years as the
Croats and the Slovenes came under the influence and rule of the
Catholic Habsburgs while the Serbs were subjected to the crumbling
Ottoman chaos. Geography mirrored a tormented topography of
mentalities, religious persuasions and political affiliations. The
Serbs occupied today's Serbia, Montenegro and Bosnia Herzegovina. The
Croats and Slovenes occupied the rest of latter day Yugoslavia. The
Tito generated unity of Serbs, Croats and Slovenes was but a brief and
false note. It could not have lasted - and, indeed, it hasn't.

The Serbs established a principality in Kosovo - the nucleus of what
later came to be known as the Serbian Golden Age. It was situated in
the rustic but magnificent valley of Ibar and controlled most of the
Sandzak. Gradually, the whole of hitherto empty Kosovo became theirs
and they felt sufficiently at home to form a Serbian Orthodox Church
with its seat in Raska, just north of Kosovo. It took 19 years
(1200-1219) to complete this feat of independence and all this time
Kosovo was fought over by Serbs, Bulgarians, Hungarians, Romans and
Byzantines. Hundreds of years of strife, veiled conspiracies, invasions
and rotting corpses in sun drenched battlefields.

To the Serbs it was a Golden Age. Under the Nemanje dynasty, luck
struck thrice in the figures of kings Stephen (1169-89), Milutin
(1281-1321) and Dusan (1331-55). Workers were brought in from
Transylvania to mine the wealth of the land. Ever more prosperous,
Kosovo became the throbbing heart of Serbland. The splendid royal
court, ravishing in gold and red, radiated power north of Kosovo and
unto today's Slovenia, up to the Adriatic Sea, making Pec the new seat
of the Serbian Orthodox church. When Dusan died, history held its
breath, the nation poised precariously on a precipice of internecine
conflict. But the stability was fake. The question of inheritance,
translated into the currency of power plays, tore the land apart. The
Turks were there to pick up the pieces in the masochistically
celebrated battle of Kosovo Polje in June 28th 1389. But not for
another 70 years did they exert real control over this newly gained
territory - so powerful and ferocious were their Serb adversaries even
in their decline. Besieged by Mongols from the east, the Turks, already
the sick man, retreated and left the Serbs to their own
self-destructive devices.

All this time, there are no Albanians in the historiography of this
cursed land. It is, therefore, almost startling to find them there,
sufficiently armed and organized t oppose the... Turks!

Having dealt the Mongols some mortal blows, the Turkish beast shifted
its attention to another bruise in its by now writhing body, to Kosovo.
The Turkish armies conquered Prizren, driving before them the
dilapidated and depleted Serb forces. It was an Albanian king,
Skanderberg, who rebelled against them there. Albanians then were
Catholics (as many of them are to this very day), their war against
their future allies, a holy war. This was in 1459 and only 250 years
later did the Turks embark upon a policy of actively encouraging the
(by now Muslim) Albanians to emigrate to Kosovo - not before the Serbs
were expelled following an unsuccessful rebellion in 1690.

This Turkish propensity was nothing extraordinary. Empires throughout
history settled "loyal" populations where they displaced restive ones.
But in Kosovo a confluence of fault lines led to especially bitter
sediments, which went on to poison the waters of co-existence for
centuries to come. Converted Moslem Albanians versus Christian Serbs;
Albanian collaborators and traitors (as perceived by the Serbs) versus
Serb mythical heroes (again as perceived by the Serbs); a nation of the
ascendance versus a nation dispersed and the last European defence line
against Islam traitorously compromised by fellow Christians and
Christian kingdoms. Serbs fleeing from Kosovo, from Serbia itself, from
Bosnia and Herzegovina and Macedonia - moved due north, to refugee
camps set up by the Habsburg empire. Serbs settled in Vojvodina and
Krajina, thus sowing the seeds of 20th century conflicts with Croatia
and Hungary. And all this time they carried with them a baggage of
hatred and revenge, a lethal, bloodied promise to be back and to exact
the price of betrayal from the Albanians. In 1737 they established a
Serbian homeland in Vojvodina. In 1738 they rebelled, again to be
defeated in the scene of their national trauma, in Kosovo Polje.
Another wave of immigrants followed and another wave of Albanians took
over their abandoned property in Metohia. The Turks abolished the seat
of the Serb church in Pec in 1766. It seemed that the Serb nation has
been all but eradicated.

But this was not to be. In one of the more magnificent sleights of hand
that history is so famous for - the Russians forced the beaten Ottoman
Empire to grant the Serbs autonomy. It was nothing like the hallowed
past sovereignty and glory of the Dusan court but it was a step that
rekindled nationalistic sentiments in the most humble and humbled Serb
throughout the land. This flame has since never been extinguished and
it is at the blazing heart of the Milosevic Yugoslav Wars of
Inheritance. That - and the belief that history is cyclical and that
there is always hope.

Kosovo was by now entirely "Alabanized". Pristina was the hub of
transport and the seat of the administration. Names of places, which
resounded both in the 14th century and at the close of the 20th, recur.
In Prizren in 1878 the Albanians established their first national
movement. There they came of age. The infancy of Serbhood and the
adulthood of Albanianism clashed in the same region, the prelude to the
tragedy of 1999.

Under the Treaty of Berlin in 1878, Serbia became de jure an
independent country. Its anguished delegation, eager and paranoid, gave
up Kosovo in dealings behind the gilded scenes. It was a tactical move,
which the Serbs reversed in the First Balkan War (1912) - when they
regained Kosovo - and in the Second Balkan War (1913) when they
regained Macedonia. In these bloody rehearsals of the World Wars, the
Serbs succeeded to redefine the borders - but also to give birth to
Albania. It is an irony of history that Serb bellicosity and
nationalistic dreams gave rise to the modern Albanian state. But then
this IS the nature of the Balkans - a hazy nightmare in which enemies
give birth to one another. An intricate commerce of Christian death and
resurrection, the gifts of death and life exchanged among Gregorian
chants and the prayer cries of Muezzins. In 1926 the Serbs and the
Albanians drew the borderline between their sovereign states. It was a
bad invention, this line of demarcation. It separated close to 600,000
Albanians in Kosovo and Macedonia from Albania proper. The disgruntled
populace did not engage in acts of terror or in gestures of
nationalistic indignation. Instead, they emigrated to Albania and to
Turkey - tens of thousands of Albanians, perhaps as many as three
hundred thousand, or half the population. And the Serbs came in their
stead. The wheel has been reversed, or so it seemed.

Nothing in the Balkans is what it seems to be. Every surface is teeming
underneath with hidden meanings, obscure interpretations and exegetic
excesses. They who are up go down, bringing in their wake, through the
sheer force of their own fall - the rise of their adversaries. Delicate
laws of conservation preserve all grudges balanced, all the accounts
settled and all agony equally distributed. It is an entropy of history
itself, slowly decaying into chaotic repetition.

And thus when Italy conquered Kosovo (it, with Ethiopia being the only
thing it ever conquered) - it gave it to Albania. Germany, which
dominated Yugoslavia, consented. For a brief four years, the Albanian
nation was completely united, territorially, at least.

But this did not last long. After the war, Yugoslavia re-acquired
Kosovo and the communist regime embarked on a Turkish-like brutal
suppression of the Albanian population. For twenty-one years, secret
units of the police hunted, executed and mutilated free spirited
Albanians all over Kosovo. In more ways than one, Albanians were the
first true dissidents in the entire communist bloc. How ironic, if one
recalls the Albanian Enver Hoxa, the leader of next-door Albania and
the fiercest of all communist leaders. In 1968 Albanian students joined
their colleagues the world over and demonstrated against Serb
repression. These particular outbursts were easily squashed but in 1974
Kosovo was made an autonomous province of Yugoslavia by constitutional
reforms. School instruction in Albanian was legalized. During all this
period, Serbs - especially battle hardened war veterans - were
economically encouraged to migrate to Kosovo. Albanians were encouraged
to go the other way and many did. About 200,000 Albanians left between
the years 1954-7 alone!!!

By now, these human waves and military trampling left Kosovo
dilapidated to the core, a backwater both economically and culturally.
People left Kosovo in this period because it offered no present work
and no future prospects. One hundred thousand Serbs left between
1961-87. Much later many would claim that they were harassed by the
Albanian majority but this sounds fake, a re-writing of history.
Albanians left as well. Everyone who had a choice chose to leave
impoverished Kosovo.

Then Tito died and nothing was the same. The 1981 riots in Kosovo led
to the imposition of martial law. As students from Pristina University
rampaged in the streets, the government sealed Kosovo off, sent in the
militia to restore order (which it did with vehement cruelty and
bestiality) and closed down educational institutions. Pristina
University was always a hotbed of nationalism - witness its
Maoist-Marxist graduate, the head of the KLA and the self-appointed
Prime Minister of Kosovo, Hashim Thaci. But that particular spring was
exceptional. Public disorder was coupled with grave acts of economic
sabotage. The students demanded an end to discrimination and certain
freedoms but really they demanded jobs commensurate with their
training, jobs, which they believed went to the Serbs.

Five years later, a hitherto obscure communist leader (he was just
elected Serbia's party secretary) visited Kosovo. In a chance encounter
with angry Serb mobs in the streets of Pristina he accused the
Albanians of genocide. "No one should do this to you" - he said, grim
faced, visibly shaken, cunningly calculating.

His name was Milosevic.


(Article published August 16, 1999 in "Central Europe Review"

volume 1, issue 8)


Return



The Plight of the Kosovar



Rumour has it that from now on, citizens of the Former Yugoslav
Republic of Macedonia will need a hard-to-obtain visa to enter the
Czech Republic. This already is the case with Bosnians, for instance.
Officials in Macedonia believe that this is intended to stem a flow of
future Kosovar immigrants. If so, the Czech government holds a grim
view of the prospects of peace there and rightly so. Discounting the
Second World War and numerous other skirmishes, the developing war in
Kosovo is the Fourth Balkan War. The Czech Republic already hosts a
great number of "Former Yugoslavs" and of Albanians, for measure.
Ordinary Czechs believe them to be responsible - together with Russians
and Ukrainians - to the uncontrollable and intimidating wave of street
crime. This intuition, it seems, is based less on statistics than on
plain old xenophobia.

The situation is shrouded in myths and misconceptions. The Albanians in
Albania are not related to the Albanians in Macedonia (known as
"Shiptars"). The former are mostly Christians - the latter Moslems
(like their brethren in Kosovo). Even the Albanians in Albania are not
a cohesive lot - they are divided to Northerners and Southerners with
bitter mutual enmity the only thing connecting them. Witness the recent
near disintegration of the Albanian state over regional politics
(disguised as a financial scandal). The risk of a spillover of the
conflict into Albanian territory is small. Not so with Macedonia. This
is why NATO is flexing its muscles on Macedonian territory. The message
is ostensibly intended for Yugoslav ears. Really, NATO hopes that it
will echo far north, in the Kremlin. The Balkans is a strategic area -
says NATO - and we will bomb to pieces anyone who wishes to meddle in
it. Cold war rhetoric and not from Russian lips, this time.

The Slav Macedonians loathe and fear the Albanians. The latter do not
hide their desire to tear Macedonia apart and establish a Greater
Albania, comprising Macedonia's Western parts. Radical new leaders -
such as the now imprisoned Rufi Osmani, mayor of Gostivar - hoisted
Albanian flags on municipal buildings. This led to bloody riots. Slav
students counter-rioted when Albanians demanded bilingual education.
Things are explosive even without Kosovo.

But this is part of a larger picture. The Macedonian political elite
never really wanted to separate itself from the Yugoslav Federation. In
the first years of the embargo on Yugoslavia, Macedonia was the main
route of smuggling into the beleaguered country (from Greece, through
the Vardar river). Macedonia is torn between supporting Serbia and the
Slav cause (championed by Russia) - and complying with Western
pressures. The West finances the gigantic trade and current account
deficits of Macedonia, without which the economy and the currency would
have long crashed even beyond their incredibly depressed levels. Other
factions still dream about a Greater Bulgaria. The opposition,
IMRO-DPMNE is accused of being the creation of the Bulgarian secret
service, or the Bulgarian mob, depending on the speaker. Persistent
rumours have it that Milosevic signed a secret pact with the Macedonian
ruling (former socialist) party, the SDSM, using the mediation of
Arkan, a particularly ferocious militia commander in the good old days.
Serbia undertook to heat the border with Macedonia just before the
October elections and thus to allow the government either to postpone
them or to declare a state of emergency. The SDSM stands to lose big in
the elections following economic mismanagement and colossal corruption
charges. The main beneficiary is a repatriated politician (whose vote,
by the way, was crucial in dismantling the Yugoslav Federation), Vasil
Tupurkovski. He is perceived as "Mr. Clean Hands", though backed, from
the shadows, by Big Business. He is also pro-American (he lived in the
States many years and his family is still there). Russian hands don't
like this, probably.

Gradually, anti-Western feelings are emerging in Macedonia. The USA is
perceived as automatically anti-Serbian (read: anti-Slav) and
pro-Albanian. Emotions run high against Germany and the United Kingdom,
as well. Russia benefits from all this. If it plays its cards wisely,
it could achieve two goals: (a) Destabilize the Southern flank of NATO
and (b) transform Macedonia into its agent. If the conflict escalates,
Greece and Turkey could be easily drawn in. Both are NATO members. They
will not be fighting on the same side, though. And maybe they will
carry the fighting into Cyprus. Though far fetched, this is the first
opportunity in a decade to seriously dent the NATO facade. Russia is
not likely to miss it. Milosevic, in many respects, is a pain. In other
respects, though, he is a strategic gift from heaven.

The Kosovo situation is a blessing, not in disguise, for Macedonia. It
is through this - and other Serb-induced crises - that Macedonia
attained geopolitical importance. The West pampers Macedonia and
finances its fiscal and trade excesses precisely because of its
strategic location and because of its Albanians. The potential for
inter-ethnic tension is deemed to be sizeable by the West. To avert it,
the West is willing to bribe all parties involved into tense calm and
strained civility.

The Kosovo crisis has just started. The Serbs are a resilient, cunning
bunch. Their withdrawal following the US-mediated accord is tactical,
not strategic. They will be back. They will do their best to present
the Albanians as intransigent, irrational and belligerent during the
process of negotiating autonomy for the province. This will not be
difficult. The recent crisis radicalised even the moderate Albanians
(like Rugova). Their demands ARE likely to be zany and unacceptable.
This will be Milosevic's chance to convert the West to his side. He
will act the peacemaker, the moderate, the conciliator - and let the
Albanians do the dirty work of threats, walkouts and occasional terror.

There will be war in Kosovo. It is only a matter of time and nerves.
Milosevic has plenty of both - the Albanians and their Western
supporters none. The incident has escalated into a mini cold war.
Russia has mobilized select units of its army and moved its anti
aircraft missiles to counter a possible NATO strike. The new rulers of
the Kremlin are old cold war hands and habits die hard in Russia.
Kosovo is a golden opportunity to destabilize NATO (by provoking Turkey
against Greece, for instance). I have expounded upon this elsewhere.

Once a real war breaks, the Albanians in Macedonia will be tempted to
join in the fray. Though ethnically different - they are not
nationalistically indifferent. Hitherto, KLA has failed to establish a
presence on Macedonian soil and inter-ethnic clashes have been
surprisingly limited and subdued. Still, the potential is there. The
Albanians in Macedonia are concentrated in a well-defined geographical
triangle. They could demand the same autonomy that their northern
brothers are trying to extract from Milosevic. Moreover, they are
better integrated into the political and economic life in Macedonia.
Following the next elections (18/10) they are likely to hold the
balance of power. And they are getting more and more adept at using it.
They feel like second class Macedonians. They would like to become
first class Albanians. So, there will be clashes and tension in
Macedonia over Albanian demands for greater autonomy.

Then there is the Serb-Macedonian tortured relationship. As I said,
Macedonia was the last to (reluctantly) secede from the Yugoslav
Federation. It escaped harm by aiding and abetting the Serbs during the
siege. Macedonia was a vital (also corrupt and lucrative) bloodline,
connecting Greece to Serbia (through the Vardar river). Politicians and
businessmen (in Macedonia, these are linked vocations) made fortunes.
Smugglers and other criminal elements flooded the country, never to go
back. The two regimes are not friends but they maintain the
Hillary-Bill marriage: power sharing, convenience, the occasional
extramarital fling. Serbia will not attack Macedonia as long as it
maintains express neutrality. NATO will not compromise this neutrality
because it does not want additional trouble in its hinterland if it
invades Serbia. As long as this (admittedly shaky) tacit understanding
prevails - there is no "Serbian risk".

To sum up: I do not see Macedonia flaring up. A guerrilla type war of
attrition is conceivable but with limited targets (autonomy for the
Albanians within a well defined swathe of territory). These demands
will be finally met because the Macedonians are hedonists, peaceful and
easygoing as opposed to the neurotically tense Albanians and Serbs.
Blood may be spilled in the process - but sparsely and symbolically. No
major disruption will occur. The economy will thrive on the conflict.
It is a pathological, parasitic, short-term kind of prosperity - but it
is prosperity, althesame.

It is when the area clams down sufficiently for the West to lose
interest - that Macedonia should begin to worry. Who will then finance
the insane trade deficit? Who will support the eerily strong currency?
Who will cater to the military needs of this nascent democracy? Who
will save it from its own robber barons, crony capitalists, corrupt
politicians and outright criminals?

The only hope is foreign investments. It is worth repeating. Macedonia
can achieve market discipline, functioning public institutions, a
tolerable level of corruption and internal economic (and thereby
political) stability only through the discipline imposed by foreigners.
Perhaps the Yugoslav Federation was not such a bad idea after all.

It is said that Tito drank only Czech beer. But Tito is dead and the
list of preferred immigration targets among all these warring
nationalities does not include Prague. They would rather go to Germany
or Russia. There is no real risk of a wave of refugees knocking down
Czech border defences. But with its depressed economy and surging
crime, Prague regards every potential immigrant as a potential threat.
If the gates are not opened to them willingly - the refugees might
choose to knock them down.


(Article published September 19-25, 1998 in "Middle East Times")


Return



The Black Birds of Kosova


The Onset of Cultural Imperialism



The real war over Kosovo hasn't even started yet. When NATO coerces
Yugoslavia into submission, when the smoke clears and the charred
remains of corpses and houses cleared - then the REAL conflict will
erupt. It will be a conflict between moderate Albanians (as represented
by Ibrahim Rugova) and radical Albanians (the outlandish
Maoist-Islamist admixture represented by the KLA). And it will be
bloodier by far.

This is because this new type of war can never be decided, not even by
way of weapons. It is a clash of cultures, a battle enjoined by
civilizations. And it cuts across the Kosovars as sharply as it
separates the West from Yugoslavia. Thus the Kosovo war will be
continued by the Kosovars themselves because they, too, are culturally
split along the same inflamed lines (Liberal versus Non-liberal). "But,
surely" - you would say - "there is nothing new about THIS". But there
is.

In the past, nations or clusters of nations or tribes went to war ONLY
in order to protect national or tribal or group interests. More food,
more space, control over important lines of transport and
communications, access to markets, women (to ensure reproduction), the
elimination of a foe or a potential foe, loot, weaponry - hard, cold
interests underlied all armed conflicts.

Culture and religion were used as fig leaves to disguise the true
nature of wars. The colonial wars of the 18th and 19th century were
ostensibly fought with the aim of educating the savages, converting
them to the right religion and bestowing upon them the blessings of
civilization. Mineral wealth, routes of transport, strategic vantage
points - were all presented as secondary afterthoughts or side
benefits. This is the way it was presented to the public. The truth, of
course, was absolutely the opposite.

The Kosovo conflict is the first war in history where WYSIWYG (what you
see is what you get). Europe in general and NATO in particular have no
interests in the godforsaken piece of land known as Kosovo and
Metoxhia. It is not strategically located (it is all but inaccessible).
It is poor (except some minerals of which there is a world glut). It is
not strictly "European". It is partly Moslem and allied with the likes
of Iran, Osama Bin Laden and Albania. It involves a small number of
people (1.8 million). Operation Allied Force is NOT about the defence
or furthering of self-interests. It is about conflicting cultures.

The West is trying to impose its culture - liberal and capitalist -
upon other societies. Whenever popular opinion (even if expressed
democratically and peacefully) does not conform to Western values - the
West does its best to undermine the choice as well as the chosen. The
West's definition of a legitimate regime is very peculiar and not very
rigorous logically. A legitimate regime is one chosen by the people
providing its values are Western values or closely conform to them. All
other regimes - no matter how strongly upheld by free public opinion -
are not legitimate, even illegal and can be deposed and disposed of
with moral impunity. Khomeini came to power on the crest of a wave of
unprecedented popular support and he supplanted a cruel and corrupt
dictator. Milosevic was freely elected by a majority wider than
Clinton's. In Algeria and Turkey freely elected Islamists governments
were toppled (or prevented from taking office, in the case of Algeria)
by the army with the West's enthusiastic though mute consent. This
"Allende Syndrome" is in play now in Kosovo.

It is politically very incorrect, I am sure, to say that only a small
minority of humans adhere to Western values (and most of the adherents
only pay lip service to them). Human rights are an alien concept in
Africa and the Balkans. Individualism is an alien - even repulsive -
concept in China, Japan and most of South East Asia. Competition is a
value derided in most parts of the world. Income disparity and the
toleration of abject poverty as an inescapable consequence of
capitalism (the "Anglo-Saxon Model") are rejected even in Continental
Europe itself. Freedom of Speech is much more curtailed in France than
in the USA. Privacy is less respected in the USA than in France.
Western values are not universal even in the West.

The nations and societies of the Balkans are used to solving their
problems by employing ethnic cleansing, armed brutality, suppression of
civilian population and decimation of the elites of the enemy. This is
not a value judgement. It is a statement of historical fact. Bulgaria
has done it to its Turkish citizens as late as 1995. It used to be the
same (and much worse) in Western Europe until 1945. Nations - like
human beings - have a growth trajectory. It cannot be hastened or
imported. It must grow from within, by integrating experiences,
including painful and traumatic ones. Peaceful co-existence often
follows and is the result of a devastation so great that no other
alternative but peaceful co-existence is left. Any foreign intervention
serves only to exacerbate the situation by increasing the number and
intensity of inter-ethnic grudges. The seeds of the current conflict in
Kosovo were sown by the Ottoman Turks as early as 1912. Foreign
interventions tend to boomerang in the Balkans. Actually, they
boomerang everywhere. Ask Israelis how they fared in the Lebanese
quagmire.

The West should have respected the Balkanian way of conducting their
affairs and resolving their differences. It should have left them to
slaughter each other in peace. These are young nations (having been
freed from all foreign occupation only as late as 1945 after centuries
of subjugation). They need to learn from their OWN experiences. They
need to reach the point of exhaustion beyond which there is only
peaceful co-existence. Violence solves nothing, on the contrary, it
just reinforces the Balkanian conviction that he who carries the big
stick has justice on his side.

But how did this apparent transition from interest-wars to culture-wars
transpire?

Indeed, the transition is only apparent. The key is the transformation
of culture from something ethereal and transcendent - to a strong
self-interest as any other. Once culture became an asset to protect,
cultural wars were certain to erupt. Thus, it is still self-interest at
the basis of it all but this time the self-interest protected and
furthered is cultural dominance and hegemony.

It started rather innocuously and inadvertently. The Americanisation of
the world was perceived to be the historical equivalent of the Pox
Romania. This was a false analogy. The Pox Romania was rampant
pluralism. The Pox Americana is rampant homogeneity.

Then the West (notably America) suddenly realized the economic
dividends on cultural homogeneity (for instance as evident in various
forms of intellectual property - movies, music, software, TV,
internet). Culture - the oft-neglected stepsister of economics - became
an INDUSTRY. A money-spinner. It was well worth the West's while not
only to sell mass produces culture to homogenized markets - but also to
make sure that these markets were peaceful, stable, accessible and
free. If necessary, this was to be secured by force.

Paradoxically, in this age of moral relativity and political
correctness - the West is ASHAMED to admit that this is a cultural war
where one of the parties is trying to impose its cultural values on the
other for utterly utilitarian reasons. Instead, the war is presented as
a matter of national interest of the OLD TYPE.

But then what IS the OLD TYPE of the national interest of the USA,
Europe, EU and NATO? Isn't it the preservation and immutability of
existing borders? The suppression of irredentist and separatist
movements? The abolition of terror? The prevention of large-scale
dislocations of endemic populations? And if so, wasn't the best way to
ensure all the above - to allow Milosevic to cruelly and ruthlessly
eradicate the KLA and intimidate the local population into submission?
Hasn't the West adopted these very tactics (of encouraging local
bullies to suppress and even eliminate local restive populations) in
Latin America in the 70's and 80's and in Africa in the 60's and 70's?
Didn't the West (wisely) turn a blind eye on China, Russia, Israel,
Iraq (prior to 1990) and others only recently when they did to their
population what Milosevic did not dare to do to his?

The Kosovo war - it is clear - is CONTRARY to any conceivable OLD TYPE
self-interest of the West. It costs the West dearly and will cost it
even more - and not only in monetary terms. The loss of prestige, moral
standing, world support, economic resources, world trade (the blocking
of the Danube) far outweighs any possible rendition of the old school
"national interest". It is the protection and propagation of the West's
culture that is at stake, replete with human rights, civil rights,
capitalism, individualism and liberalism. It is a defining war - not
only militarily (the future of NATO) but also culturally (the identity
of the future global market). Poor Milosevic, look what he got himself
into.


(Article published May 10, 1999 in "The New Presence")


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The Defrosted War


Russia's Role in a Brave, New World



A president (almost) impeached. An important politician sacked due to
incompetence. Business tycoons under investigation. The USA? No, this
is the new, post-communist, Russia. Many firsts, meagre experience,
numerous blunders. Is it democracy in action? No, it is simply
autocracy exposed. The same machinations went on in Ivan the Terrible's
court, the same conspiracies enshrouded Peter the Great's cabin, the
same conflicts besieged Stalin. Ask Khrushchev.

The great mistake of the West is the deeply ingrained naive belief in
progress. History is cyclical. Otherwise we could have learned nothing
from it. The nations of the Balkans will still be dividing and
re-dividing their blood stained enclaves and the Russians will still be
under autocratic rule and the Americans will still be moralizing in the
year 3000. History teaches us fatalism or, at least, determinism.

Russian autocrats refined the art of divide et impera (divide and
rule). They always had a keen eye for conflicting interests. They
pitted one group against another dangling carrots aplenty in front of
the drooling vassals. The recent shuffle was no different.

There are three major camps in Russia today. There are the "Reformists"
- young, well-educated, pro Western, with economic savvy,
forward-looking, corrupt. There is the "Old Guard" - old, guarded,
backward, centralist, anti Western (actually, anti American), corrupt.
And there are the nationalists - ideologically eclectic, rigid,
radical, dangerous, corrupt.

Yeltsin is the ultimate puppet master. The Old Guard was good to
stabilize a nose-diving economy and a disintegrating body politic. They
new where the levers are and how to use them, they possessed all the
right dossiers, they were chums with the Communist Duma. But they
proved to be too independent and too dangerous. They aspired to the
presidency (Primakov). They were too anti-Western and, thus, risked the
only reliable source of financing in the absence of tax collection (the
IMF funds). They espoused geopolitical brinkmanship. They were cold war
in an era of defrosted war. There is no money in cold war mantras. In
an age when money is the only ideology - they did not adhere to the
party line. They posed a threat not only to Yeltsin's authority - but
also to the economic well being of Russia.

Having looked into the abyss in the early stages of the Kosovo crisis
(remember the re-directed ballistic nuclear missiles) - Yeltsin engaged
in a surprisingly elegant volte-face. He appointed Chernomyrdin, a
pro-Western, quasi-Reformist, to contain the Kosovo damage. And he
fired Primakov, the hawk. The IMF gave Russia 4.5 billion dollars that
it swore blue in the face not to give Russia only a month before. A
coincidence, needless to add.

Yeltsin doesn't give a hoot about Kosovo. All he wanted was to
re-establish his domestic authority and to quash especially insolent
and increasingly dangerous investigations into his murky financial
dealings. Kosovo was an added bonus. A joker in an already excellent
hand. Yeltsin put it to deft use.

By sending Chernomyrdin to sort out the Balkan mess, Yeltsin killed a
flock of birds with nary a stone. He signalled to the West that a
pro-Western, pro-Reformist team is in control again and that the bad
guys have been consigned to oblivion. He signalled to the Duma and to
politicians of every colour and denomination who is the boss. The Duma
took the hint and promptly dropped the impeachment charges and
confirmed the nondescript (but very ominous) Stepashin as the next
scapegoat. He enhanced the geopolitical standing of Russia and already
converted some of it into hard cash, averting an otherwise certain
default of the Russian Federation. He allied himself with most of the
"progressives" and "liberals" of the world from China to the Guardian
in London. And, in his role as peacekeeper, he effectively extricated
Russia from the war psychosis that Messrs. Primakov et al. were trying
to plunge Russia into.

But why did the West - especially the USA - collaborate with this St.
Vitus dance?

Because they wanted Yeltsin o achieve all the above goals. Because it
served to neutralize Russia as a potential, backdoor combatant, a-la
Vietnam. Because they really had no more effective channel of
communication to Milosevic. Because it is better to have your dependent
as mediator - then a real independent. Because they had o choice: many
NATO members would have protested had Russia's help been rejected. And
because Russia has to be part of any future settlement.

Sometimes, as Freud said, a cigar is just a cigar. Only this time it is
a smoking cigar. There is more to the intricate USA-Russian
choreography than meets the eye. The USA is in no hurry to finish this
particular "air campaign". Meetings are scheduled a week apart. The
same proposals and the same envoys keep shuttling back and forth.

This is because Russia and the USA see eye to eye. They want Serbia
weakened and Milosevic dead (if possible). They understand that "Great
Serbia" is Milosevic's dream - but the world's nightmare. Everyone is
holding out. Everyone - Russia included - want the Serbs to cease to be
a viable fighting force. As time passes, Russia will become more and
more confrontational but this time the culprit and the recipient of
their vitriolic diatribes is likely to be Milosevic. It is good for the
West and it is good for Russia because it is Russia that will fill in
the vacuum left by the debris of the Milosevic regime. The USA couldn't
be happier. It wants out of the Balkan - never to come back.

At this stage, the poor nations of the Balkan are deluded into
believing in a future, Western sponsored, "Balkan Marshal Plan". They
are in for a rude awakening. The minute the war ends - the USA will
vanish, leaving the resulting mess to the natives, to a fragmented
Europe and to Russia, who asked for it by getting involved.

The only money likely to be invested in the region by the USA is in the
reconstruction of the Chinese embassy.


(Article written on May 19, 1999 and published May 24, 1999

in "The New Presence")


Return



The Bones of the Grenadier


Endgame in the Balkans



The (cyclical) victory of capitalism led westerners of all colours and
stripes to believe in solving problems by throwing money at them.
Prosperity, international trade, foreign investment, globalisation and
joint ventures are the new magic formulas. Mathematically put this
superstition is often presented thus: the propensity to fight decreases
in direct proportion to the amount of economic common interests of the
potential rivals. Thus, instead of tackling core issues - the West
tries to drown them in a green deluge of US dollars. Where the west
should have tackled a corrupt and autocratic mentality (Russia) - it
commits funds through the IMF instead. Where it should have applied
itself to interethnic tensions and rivalries (the politically correct
phrase denoting racism) - it rebuilds infrastructure.

If the "throw money at the problem" theorem were right - and it never
was, not even once in human history - the Yugoslav wars of secession
and succession would have never erupted. Former Yugoslavia was
economically independent and prosperous. It constituted an effective
and dynamic free trade zone between its six constituent republics.
Resources were allocated within it with reasonable efficiency.
Macedonia produced raw materials. Slovenia processed them. Croatia
consumed them, added some industrial products of its own and all of
them traded with Serbia, the seat of the administration. Yugoslavia was
rather self sufficient and conducted much of its value added and
trading activities in-house. The gap between its GDP and GNP only a
decade ago, reflects what used to be this rather efficient and
lucrative market, a mini-EU in the Balkans. The envy of all other
socialist countries it was mooted to become member of the EU (then, the
EEC) when the thought of the Czech Republic as a member would have
elicited condescending smiles. Heavy industry, light manufacturing,
construction and engineering all flourished. Yugoslavia's exports
boomed. It had a proto-capitalistic system of ownership and a
Japanese-style system of management. It introduced the IMF and its
reforms in 1980, when Tito was still alive and years before any other
socialist country. The reforms of Ante Markovic (the 1989-91 federal
prime minister) are still a model of "free enterprise with a socialist
bend". On purely economic grounds, the Yugoslav wars were and are a
colossal insanity.

The new Yugoslavia endured economic devastation to fight a losing war
aimed at securing the interests and safety of Serb minorities in the
newly formed Republics of former Yugoslavia (NOT to establish a
"Greater Serbia" as Western propaganda has it). Macedonia withstood a
multiple embargo by its neighbours Greece and Bulgaria because it
wouldn't change its name or the historical status of its language. The
economic price that Macedonia was forced to pay was mind boggling (the
affair with Greece is dormant now but far from over) - and it was
nothing compared to the Serb tally. The Jews, in contrast, were busy
signing economic agreements with Germans less than 6 years after the
holocaust. A different order of priorities, surely.

Having lived in the Balkans and worked there for almost a decade, I am
forced to conclude that economic arguments are absolutely meaningless
when they clash with the proud and romantic nationalism of the likes of
the Serbs. If offered in isolation, economic incentives will do nothing
to reduce future conflicts or contain them. Marshal plans, future EU
membership (or current EU "new" association), IMF soft loans, World
Bank effective grants - will all fail to preclude future armed
conflicts as they have always failed in the past.

Take Bosnia-Herzegovina. By now, the West - through the various organs
of its global financial architecture - has committed well over 5
billion USD to this godforsaken piece of land in the middle of nowhere.
This is almost 3 times the official GDP of this country. It is the
equivalent of 20 trillion US dollars invested in the USA in four years
time. All this was in order to cement the cohesiveness of this
artificial concoction of a state and to secure its future as a
political (read: economic) unit. It failed, miserably so. The Republika
Srpska is nowhere nearer to integrating with its Moslem and Croat
neighbour. The common currency did nothing to foster a common identity.
And the place represents an abysmal reversion to old colonial habits
with a governor to regulate the unruly and unyielding natives, by the
application of force if need be.

Indeed, the ethnic wars of the modern era are a direct result of said
colonial period. Borders, drawn at random and with a minimal and
arbitrary knowledge of the terrain and its inhabitants - led to a
hundred years of correctional warfare by the victims of this
patronizing ignorance. The rule of thumb is simple: people cannot live
together. Humans are misanthropes, they love to hate the different, the
other. Therefore, it is best to encourage the formation of ethnically
homogenous political units - where ethnic affiliation counts and of
ideologically homogenous political units where ideology matters and of
racially homogenous political bodies where race equals identity. A
simple rule derived from the 5000 years of trials and errors called
"human history".

The USSR disintegrated peacefully because it disintegrated into
ethnically homogenous entities (or entities with clear ethnic
identities and majorities). In the process Russia gave up oil reserves,
mineral riches, space launching sites, strategic locations and much of
its nuclear and conventional weaponry. Despite all these incredible
sacrifices, it was a peaceful process.

The Czechs separated from the Slovaks in a bloodless break-up of their
common state because the two resulting entities were ethnically
homogenous. Well, almost - hence the persecution of the Roma in both
countries.

Slovenia and Macedonia seceded from the Yugoslav Federation without as
much as a shot (except for the first few days of Slovenia's
independence when confusion ruled supreme) - because there were very
few Serbs in either. Slovenia and Macedonia are ethnically homogeneous
(Macedonia with a sizeable Albanian minority, though). Hence their
status as islands of peace and tranquillity in an impossible region.
The war with Croatia and more so in Bosnia was a direct result of
ethnic heterogeneity.

The not-so-implicit deal in the case of the USSR and the Czech Republic
was simple to grasp and very effective. "You will peacefully break up
into ethnically homogeneous units - and we will support you financially
and initiate you into our economic superstructures." It worked. It
still is working. But it was not the deal offered to the former
Yugoslav republics. To them the West's message was: "You will
peacefully break up into ethnically HETEROGENEOUS units - and we will
support you financially, subject to painful and sustained reforms."

It is time to recognize the folly and the fallacy of this last message.
Yugoslavia in particular and the Balkans in general must be
"re-designed" into ethnically homogeneous political units. If this
necessitates the re-drawing of now dangerously obsolete borders - let
it be so. It would make a lot more sense to dismantle Bosnia and unite
the Republika Srpska with Yugoslavia (Serbia) and the Croat bit with
Croatia. The Muslims can have their political unit, if they wish. Parts
of Kosovo must go to Albania. The borders have to be redrawn. The
result should be a series of ethnically homogeneous states - viable,
cohesive, peaceful and able to concentrate on economic warfare rather
than on the economics of war.

To achieve this goal, colonialism must be revived. Operation Allied
Force is a colonial war without the mercantilist emphasis of days gone
by. It is a coalition of rich countries, led by a superpower, attacking
and subduing a regional bully. As in the good old days, borders are
effectively redrawn (Kosovo's "extensive self government"), new
political entities formed, alliances with one group of natives against
another abound, military hardware coupled with economic prowess are
pitted against local aspirations which do not conform with a moralistic
"global view" of the world. The absurd is that - because colonialism is
not politically correct and is condemned by all with great vehemence -
the colonial powers of today are castrated. These eunuchs of
geopolitics do not dare to carry their military and economic clout to
its logical and beneficial conclusion. In other words: they do not dare
to DICTATE a solution and impose it rather than engage in endless
consultations with local parties and amongst themselves.

We need a new Berlin Congress. We need a new Bismarck. He said that the
whole Balkan is not worth the bones of one Pomeranian grenadier - but
this did not prevent the newly born (and recently victorious) Germany
from engaging in the redesign of South Europe. Unfortunately, the
Berlin Congress was a shoddy job, more influenced by the narrow
self-interests of the participants than by any grand vision or
integrity of intentions. To the reshapers of Europe of that time it was
more important to adversely affect the interests of Russia and Turkey
than to create a long lasting peace and the conditions for prosperity.
It was bound to fail and it did and it still does.

This is the second chance (not counting communism). This is the time to
redefine South Europe and the Balkans. This is the time to draw logical
borders, which reflect not whims and eccentricities, paranoias and
ignorance, condescension and malice - but demography and history,
national aspirations and disparate cultures and narratives. Let each
ethnic group live within safe and internationally guaranteed borders.
Let them work in harmony across borders - rather than engage in
conflicts within them. Let the Albanian lands go to Albania, the
Serbian lands to the Serbs - as the Czech lands are to the Czech and
Russian lands are to the Russian. Only then will peace prevail as it
does in Western Europe and in Scandinavia today - the scenes of
centuries of battles and bloodshed.


(Article published May 31, 1999 in "The New Presence")


Return



Millenarian Thoughts about Kosovo



"English persons, therefore, of humanitarian and reformist disposition
constantly went out to the Balkan Peninsula to see who was in fact
ill-treating whom, and, being by the very nature of their perfectionist
faith unable to accept the horrid hypothesis that everybody was
ill-treating everybody else, all came back with a pet Balkan people
established in their hearts as suffering and innocent, eternally the
massacree and never the massacrer."

("Black Lamb and Grey Falcon - A Journey through Yugoslavia" by Rebecca
West - Penguin Books 1994 edition p.20)


Rebecca West's book was first published in 1940. By that time, it was
common wisdom that the Balkans is the place where the destiny of our
world is determined or, at the very least, outlined. Had she lived
today, she would have had no reason to revise this particular judgement
of hers.

The Kosovo "air campaign" exposed and brought to culmination a series
of historical processes whose importance cannot be exaggerated.

The Russian Revolution

Forced to choose between nationalist delusions of imperial grandeur and
modern capitalism and its attendant, individualism - Russia chose the
latter. The ever-surprising Yeltsin completed the revolution he started
in 1990 by deposing of the last vestiges of stagnation personified by
Primakov. The remnants of the former nomenclature, the establishment
figures, the fossils in the ideological swamp that communism has become
- were given the penultimate slip. Russia was forced to peer into the
abyss of its own corruption, nepotism, criminality, social and
political disintegration and military impotence. It was forced to do so
by the developments in the Kosovo crisis. It was made to elect between
pan-Slavism and pan-capitalism. For a while, it seemed to have been
choosing the former - leading to an inevitable and suicidal
confrontation with the victorious civilization of the West. Then it
recoiled and chose the IMF over the KGB, material goods over
ideological fervour, the new myths of modernity over the old ones of
blood-steeped patriotism.

It is a momentous event, the consequences of which cannot yet be fully
fathomed. Extrapolating Russian history, it would be reasonable to
expect a backlash in the form of a counterrevolution. A communist
counter-revolution being unlikely - we can expect a fascist-criminal
counter-revolution. But it is as safe to assume that the revolution is
irreversible, setbacks aside. It is irreversible because for the first
time it generated vested interests not only for a select elite - but
also for everyone. Prosperity tends to trickle down and, as it does
(forming a middle class in its wake) - it knows no boundaries of class.
The real revolution has just been completed in Russia, 70 years after
Lenin's death. And all classes are about to win.

The Second Cold War

The outlines of the second cold war have emerged. It is to be fought
between a prosperous, almighty, vainglorious, narcissistic,
self-righteous, contemptuous and increasingly disintegrating USA and an
equally disintegrating China on the economic ascendant.

The second cold war (already in progress) is fought not between foes -
but between partners. The extent of economic interests common to the
two current combatants far exceeds anything achieved in the high
moments of detente between the USA and its previous rival, Russia. This
cold war is about markets and cultural dominance - not sheer,
projected, military prowess. It is a throwback to earlier days of
colonialism and mercantilism and it is laden with historical memories
and sensitivities.

The aims are different, as well. China wishes to force the USA to throw
open the gates of the global marketplace, currently zealously guarded
by the only superpower. The IMF, the World Bank, the WTO are all
believed to be extensions of the American economic clout, put to the
use of its geopolitical interests. Russia forced its way into the G8
but China has much loftier ambitions. It is not in pursuit of
membership in gentlemen's clubs - it aspires to real, raw power. It
wants to carve the world between itself and the West. In short, it
wants to dominate and to export and it wants the West to help it do so.
In return, it promises regional and internal stability and access to
its markets. To convince the West of the quality of its wares, China
demonstrates its capacity to destabilize in various corners of the
world. It transfers weapons technology, support international terrorism
and rogue states and, in general, places formidable obstacles in the
path to Pax Americana, the New World Order.

The Americans regard this as a reasonable deal but they wish to reverse
the cause and the effect. First, they want to gain unhindered access to
the potentially infinite Chinese market and to have the Chinese deliver
the regional and international stability they claim to be able to
deliver. Only then are they willing to contemplate the coveted prize of
graduating to the co-ownership of the world financial and economic
architecture.

China is fighting for legitimacy, recognition, access to markets,
capital and technology and the ability to reshape the world in its
favour. The USA is fighting to check progress of the Chinese on all
these fronts. Such fundamental differences are bound to lead to
conflict - as, indeed, they have.

In this sense, the bombing of the Chinese embassy has been an
auspicious event because it allowed both parties to break through, to
unlock and a deadlock and to make progress towards a fuller integration
of China into the WTO, for instance. It also legitimised the airing of
grievances against the style and conduct of the USA in world affairs.
In short, it was cathartic and useful.

The Demise of the Client States

The concept of the client states is so well entrenched in our
historical consciousness that its demise has been denied and repressed.
There are no longer alliances between powerful political units (such as
the USA) and smaller, dependent, satellites. The kaleidoscopically
shifting interests of the few remaining global powers dictate
geopolitical transigence and ideological transparency. These adaptive
processes lead to a myriad of alliances, forever changing to fit the
needs and interests of the moment or to cater to future contingencies.
Thus, Russia ignores Yugoslavia's pleas for help, China allows the USA,
Japan and South Korea to conduct direct negotiations with North Korea,
America bullies Israel into a settlement with the Palestinians (who
support Iraq), the UK and the USA impose a peace plan on the IRA,
Russia respects an embargo imposed on both Iraq and Yugoslavia and so
on. These are the roots of a truly global order. It is also the death
knell for rogue and "insane" states. Devoid of their patronage, these
countries are gradually tamed by the awesome twin forces of the global
market and international capital and information flows. Iran moderates,
Libya surrenders, Yugoslavia succumbs, the only exception being Iraq.

This is NOT to say that warfare is a thing of the past. On the very
contrary. In the absence of the overwhelmingly restraining impulses and
impositions of the superpowers - ethnic strife, border skirmishes, the
proliferation of weapons of mass destruction - all are likely to
increase. But these are already affairs of limited importance, confined
to parts of the world of limited importance, and fought amongst people
of ever more limited importance. War marginalizes the warriors because
it takes them out of the circulation of capital, information and goods.
Decoupled from these essential flows, warring parties wither and
shrivel.

The Convergence of Economic and Military Alliances

The Kosovo crisis started as an exercise in self re-definition. NATO
used it to successfully put its cohesiveness to test. It acted sanely
and its hypercomplex set of checks and balances and more checks scored
an impressive success. As a result, the limited aims and means of the
campaign were maintained and NATO was not dragged into either British
belligerence or Italian and Greek defeatism. It was the second time in
recent history (the first being another multilateral military campaign
in the Gulf in 1991) - that a military move did not degenerate into
full-scale insanity of carnage and bloodshed.

NATO emerged as a self-restrained, well-choreographed, well
co-ordinated body of professionals who go through motions and off the
shelf plans with lifeless automatism. While somewhat aesthetically
repulsive, this image is a great deterrent. We fear cold-blooded,
impartial machines of war more than we do any hot-blooded,
sword-wielding fanatic. NATO acted with the famous German industrial
efficiency that gave warfare a bad name. It was "surgically precise"
and civilian casualties were alchemically converted into "collateral
damage". The well-practised Jamie Shea is an exceptionally chilling
sight.

Thus, a policeman was born to police the emerging world of
international commerce, true multinationals, boundary-less flows of
data and chaotic reactions to changes in local variables. This
policeman is NATO and it wields an awesome club. As it chooses which
criminals to discipline, it transforms the nature of previously unruly
neighbourhoods. For this, at least, we should be grateful.


(Article published June 6, 1999 in "The New Presence")


Return



NATO's Next War



The real, protracted, war is about to start. NATO and the international
peacekeeping force against an unholy - and, until recently, improbable
- alliance. Milosevic (or post-Milosevic Serbia) and the KLA against
the occupying forces. It is going to be ferocious. It is going to be
bloody. And it is going to be a Somali nightmare.

Why should the KLA and Serbia collaborate against NATO (I use NATO here
as shorthand for "The International Peacekeeping Force - KFOR")?

Serbia - because it wants to regain its lost sovereignty over at least
the northern part of Kosovo. Because it virulently hates,
wholeheartedly detests, voluptuously despises NATO, the "Nazi
aggressor" of yester month. Serbia has no natural allies left, not even
Russia, which prostituted its geopolitical favours for substantial IMF
funding. Its only remaining natural ally is the KLA.

The KLA stands to lose everything as a result of the latest bout of
peacemaking. It is supposed to be "decommissioned" IRA-style, disarmed
("demilitarised" in the diplomatic argot) and effectively disbanded.
The KLA's political clout rested on its ever-growing arsenal and body
of volunteers. Yet volunteers have a strange habit of going back whence
they came once a conflict is over. And the weapons are to be
surrendered. Devoid of these two pillars of political might - Thaci may
find himself unemployed, a former self-declared Prime Minister of a
shadow government in Albanian exile. Rugova has the coffers, filled to
the brim with tens of millions of US dollars and DM raised from the
Albanian Diaspora worldwide. Money talks, KLA walks. Bad for the KLA.
Having tasted power, having met cher Albright on a regular basis,
having conversed with Tony Blair and Robertson and even Clinton via
expensive high tech gadgets - Thaci is not likely to compromise on a
second rate appointment in a Rugova led administration.

And the bad news is that he doesn't have to. Bolstered by a
short-sighted and panicky NATO, the KLA post-bellum is not what it used
to be ante-bellum. It is well equipped. It is well financed. Its ranks
have swelled. It has been transformed from an agglomeration of
desperadoes - to a military guerrilla force to be reckoned with. Even
the Serbs found that out at a dear price.

With the Serb pullout from Kosovo, Serbia is no longer the KLA'a enemy
of choice. The KLA has seen the enemy and it is NATO. The pro-Rugova
demonstrations in the camps (despite Rugova's Quisling show with
Milosevic and his refusal to explain his motives and to adopt a stern
position against the Serbs) - sounded loud and clear. Thaci picked up
the signal.

No Kosovar autonomy can do without Serbia. Kosovo is connected to
Serbia by way of infrastructure. All its trade is with Yugoslavia. It
is absolutely dependent on Serbia for its energy needs. Rugova knows
this. Thaci knows this. And Milosevic knows this. Only NATO pretends
that Kosova can survive as an independent, economically viable entity.
It cannot. It is a part of Serbia, willy-nilly and it will continue to
be so. Rugova and Thaci will be positioning themselves accordingly and
will seek the favours of the only regional force that really matters:
Serbia. Rumour has it that discussion have already commenced in Prague
between Yugoslav low-level officials and Rugova and Thaci
representatives of their competing administrations.

In conducting these discussions, Milosevic's aim is two-fold. Divide et
impera - he intends to do his best to inflame the nascent internecine
civil war about to erupt in Kosovo. By offering goodies to both camps,
Serbia pits them against one another. By being inconsistent and
unpredictable (remember Serbia's refugees policy?) - the Serbs enhance
a Kosovar personality disorder. Dazed by the arbitrariness and
capriciousness of a vicious neighbour - the Kosovars will lash at each
other in an effort to offload their frustration and aggression.

Lucky Serbia. Its infrastructure all but eradicated - it will enjoy the
best and latest replacements courtesy a multitude of international
financial institutions and NGOs. Materially revamped, nationally
revived, militarily vindicated, an invigorated power that withstood the
mightiest alliance in history - Serbia is in an excellent position to
emerge as an important, nay, indispensable, regional, pivotal player.
It can have its choice. In Rugova it will find a genteel, compliant,
respectable and submissive partner. In Thaci - a fellow bully. Serbia
can conduct business with both. As it tramples over internal dissent,
suppresses Montenegro and tightens its grip on its minorities - Serbia
will strive to split Kosovo. It will be content with the mineral-rich,
historical north. Thaci will be content with any kind of foothold, a
stepping-stone on the way to a Greater Albania. There are grounds for
doing business and business will be done, indeed.

Poor Kosova. Lucky Serbia. With such opponents, one need not have
friends. And, in the background, NATO stumbles on into its worst
nightmare, into an apocalyptic tapestry of exploding mines, KLA sniper
fire and mortar attacks, Serb revanchism, material devastation, mass
starvation and geopolitical destabilization. It is this war: gradual,
nerve wrecking, multi-annual, expensive, replete with body bags and
horror scenes - that will do NATO in. It is the end of NATO, only it
does not know it. It has contracted the humanitarian cancer and its
days are numbered.

Milosevic is smiling. He won the war. Completely. And the world has yet
to learn it.

Post Scriptum

It is ever so easy and rational to disregard the above scenario. It is
abrupt, illogical, paradoxical. The Serbs and Milosevic are surely the
KLA's worst enemies. No peace - even one mediated by a confluence of
interests - can blossom among the ruins of coexistence and trust
shredded. A KLA supported by the Serbs against NATO is as outlandish as
an Iraq supported by the USA against Israel.

But the Balkan is a region characterized by its fluid alliances and
structures. Rebecca West, in her masterpiece, "Black Lamb and Grey
Falcon" tells of an alliance no less unholy and no more improbable than
a KLA-Milosevic one (pages 840-1 in the 1994 Penguin edition):

"It happened that the Slavs who had become Janissaries, especially the
Bosnian Serbs, who had been taken from their Christian mothers and
trained to forswear Christ and live in the obedience and enforcement of
the oppressive yet sluttish Ottoman law, had learned their lesson too
well. When the Turks themselves became alarmed by the working of that
law and attempted to reform it, the Janissaries rose against the
reformation. But because they remembered they were Slavs in spite of
all the efforts that had been made to force them to forget it, they
felt that in resisting the Turks, even in defence of Turkish law, they
were resisting those who had imposed that Turkish law on them in place
of their Christian system. So when the rebellious Janissaries defeated
the loyal Army of the Sultan in the fourth battle of Kosovo in 1831,
and left countless Turkish dead on the field, they held that they had
avenged the shame laid on the Christian Slavs in the first battle of
Kosovo, although they themselves were Moslems. But their Christian
fellow-Slavs gave them no support, for they regarded them simply as
co-religionists of the Turkish oppressors and therefore as enemies. So
the revolt of the Janissaries failed; and to add the last touch of
confusion, they were finally defeated by a Turkish marshal who was
neither Turk nor Moslem-born Slav, but a renegade Roman Catholic from
Dalmatia. Here was illustrated what is often obscured by historians,
that a people can be compelled by misfortune into an existence so
confused that it is not life but sheer nonsense, the malignant nonsense
of cancerous growth."

This is reminiscent of the Gorani Moslems in 1999 Kosovo who
collaborated with the Serbs against their co-religionists, the
Albanians. They persecuted the Albanian population - looted, burned
houses and worse - more tenaciously and more ferociously than any Serb.

In hindsight, Milosevic would have done well to co-opt the KLA. By
pitting it against Rugova and provoking Rugova's camp against a
strengthened KLA - Milosevic could have incited a veritable, full
fledged civil war among the Albanians. The West would have then begged
him to intervene in his by now traditional role of peacemaker. But
history took a different turn. The returning Albanians will not forgive
or forget. Retaliation has many faces, some less bloodied than others.
But retaliation will come. And while Milosevic may have won this battle
- he may, indeed, have lost the war. Only history will tell.


(Article published June 14, 1999 in "The New Presence")


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Why did Milosevic Surrender?



Not because of NATO. Ground damage assessment based on the number of
withdrawing troops and their hardware and on a detailed inventory of
charred remains in most of Kosovo - prove that this air campaign was no
different to its predecessors. Only 10% of Serb artillery, tanks, APCs
and so on were affected. The Yugoslav (read: Serb) army - ostensibly
the side that lost the war - is vibrant and defiant. It does not look
like it has been subjected to the equivalent of 12 Hiroshima size
nuclear bombs in 11 weeks. It looks like it knows something that the
rest of us don't.

And it does.

Milosevic did not surrender. He entrapped the West in his usual, wily
style. He lured the west into a fatal hornets' nest, an unmanageable
capsule of centuries-old conflicts, a terrorists' lair, replete with
drug deals, gun smuggling and organized crime. Kosovo constitutes a
major drugs route from the Golden Triangle, via Turkey, Afghanistan and
Iran to Europe. It is an integral part of the path leading - via the
polluted Vardar River - from Greece to Montenegro. It is swarming with
weapons traders, drug dealers, "freedom fighters", Muslim fanatics,
spies, con artists, smugglers and common criminals. Every
self-respecting mob is heavily represented there - from the ruthless
Bulgarian mafia to the murderous Russian one. The civilian population
has long been intimidated into co-operation in all these loathsome
(though lucrative) activities. Many are only too happy to collaborate.

Milosevic withdrew his forces - this is an undeniable fact. He did so
after he lost the backing of Russia. Russia sold him to the West and
disposed of the Old Guard, which supported him in the Kremlin. It was
handsomely rewarded by that long arm of the USA - the IMF. But Russia's
betrayal is not sufficient to account for the Serbian volte-face. The
turnaround in Milosevic's position was too sudden and Russia's support
has always been more moral than military. Something else was at play.

Notice the following hitherto unimaginable developments:

Milosevic surrenders Kosovo to NATO occupation, including all its holy
sites and lucrative mines. There is a conspicuous absence of domestic
reaction by the likes of Seselji, the Serb ultra-nationalist. He quits
the government - a response eerily civilized judging by his previous
record.

The stunning rapprochement between the Macedonian Prime Minister, an
erstwhile nationalist and Albanian-buster, Ljubco Georgievski and the
self-proclaimed KLA Kosovar "Prime Minister" Hashim Thaci. The two
agree to open liaison offices in each others' capital cities and to
collaborate with Albania in the forthcoming reconstruction of the
Balkan region. All this is happening as the Macedonian Minister of the
Interior is accusing both the Serbs and the KLA of conducting
subversive activities on Macedonian soil with the aim of splitting
Macedonia apart. All this happens as NATO begins to clash militarily
with an ever more defiant and cocksure KLA.

The Russians flex their 200-men muscles in an enclave in the Pristina
airport. Yugoslavia looks upon the developing East-West choreography
with a profound lack of interest. The Serb forces are withdrawing
together with tens of thousands of Serb civilians, the new refugees in
this never-ending saga. This, despite the FACT that Milosevic could
have dragged the war on indefinitely without incurring too much damage
either to his military or to his regime. Had he done so, NATO would
have been the first to blink.

Why did Milosevic surrender? Why so suddenly and so surprisingly? Why
did he surrender when the West and NATO were on the verge of breaking
apart (recall the acrimonious public exchanges between Blair, Clinton
and Schroeder just prior to the auspicious Serb capitulation)? This is
very reminiscent of the German surrender in 1918. The forces in the
field felt victorious. The politicians wavered. The result was a sense
of betrayal and backstabbing exploited by the corporal-Fuhrer Hitler.

Sherlock Holmes used to say: "When you eliminate the impossible, what
remains, however improbable, must be the truth." And what remains is a
secret deal. A hidden agenda. A missing protocol. It is a wild
reconstruction of bizarre events. It is improbable. But Milosevic's
surrender was impossible - so it must be the truth or a close
approximation thereof.

I think that the only reasonable explanation to this week's events is
the following:

Milosevic agreed to withdraw from Kosovo and to turn it over to NATO
for a limited period of time.

NATO (not too eager to remain in the province and police it forever)
agreed to disarm the KLA and transform it into a docile police force
cum political party. It agreed, in other words, to do Milosevic's
bidding and dirty work.

The KLA agreed not to pursue its anti-Serb, pro-independence strategy.
Coming from Rugova, such a policy would have been judged treasonable.
The KLA was the only force, which could have delivered the climbdown.

Serbia agreed to recognize the KLA as THE legitimate force in Kosovo
once demilitarised and converted. It actually agreed to support the KLA
against the now discarded Rugova. The KLA needed Serbia, a natural ally
in the absence of others.

The KLA and NATO agreed to let Serbia back into a KLA-dominated Kosovo
later. The exact form of the final political-military arrangement has
not been made clear. But it always was evident that it must - and will
- include Serb sovereignty and military presence in the province.
Kosovo's political future remained undetermined: a province? An
autonomy? In a federation? A confederation with Serbia and a more
independent Montenegro? No one knows, not even the main players. But
the Serbs and the KLA and NATO are in cahoots. There is more to the
"capitulation" than meets the eye.

Macedonia - informed about these backstage accords - hurried to
establish good neighbourly relations with the real winners of the war:
with the KLA. In this it served as both Serbia's AND NATO's long arm. A
perfect venue and communication channel, Macedonia established itself
as the arena of future reconstruction and future political
negotiations. Incidentally, it also secured its own territorial
integrity. A happy KLA in a self-governed Kosovo will have little
incentive to re-engage in subversive activities in Albanian-populated
Western Macedonia.

All the participants in this tragicomedy are now going through the
motions. The Serbs are withdrawing. The KLA is taking over. NATO
half-heartedly tries to disarm the more flagrant KLA units. Serbia is
biding its time. In a few months, it will be asked to re-enter Kosovo
by both NATO and the KLA. A political phase will then begin which will
result in final status negotiations. Macedonia will host, convey
messages between the parties, apply pressure together with Albania and
its own Albanian politicians, make promises, hold secretive meetings,
and diplomatically gesticulate. If all goes well - everyone will emerge
victorious. If not - all the parties are steeling themselves for a
second Kosovo war, much more inevitable than the first one.


(Article published June 21, 1999 in "The New Presence")


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The Deadly Antlers


NATO, the EU and the New Kids on the Block



The Irish elk roamed the earth 10,000 years ago. They had the largest
pair of antlers ever grown - 3.6 meters (12 feet) across. Every year
they grew new antlers from nubs prominently displayed on their heads.
They were awesome to behold. They fought ferociously. They seemed
eternal.

Then the weather changed. The earth shed its forests for new Tundra
attire. The Irish elk ignored this creeping revolution. It continued to
grow its antlers and, by doing so, to deplete its own reserves of
calcium and phosphorus. Drained of vital minerals, unable to find
enough food to restore themselves they died out, their magnificent
antlers intact.

NATO has emerged from its Pyrrhic victory in Kosovo shell shocked and
riven by internal strains. The European Union (EU), in the name of
"Euro-Atlantic Structures", hurries to join NATO in the minefield it so
unwisely occupies. Both are in danger of growing antlers too big for
their own survival. There are three pairs of lethal antlers involved:

a. Europe and Uncle Sam

The misnomered Operation Allied Force employed little force (much less
than during the Gulf War) and tore the alliance apart. NATO has split
into a nascent European military structure (the former defunct West
European Union which was officially absorbed by the EU a fortnight ago)
- and an American (rather, an Anglo-Saxon) avuncularly benevolent
umbrella. Europeans have yet to recover from the detached, callous and
off-handed manner of the mismanagement of the whole crisis by the
amateurs in Washington. Their trust in America's insight, foresight and
sagacious hindsight has been shattered by American strategic mistakes,
intelligence errors, diplomatic gaffes and internal squabbling in a
poll-orientated administration. The Europeans emerged with a "never
again" pledge. America is not likely to be invited to Europe's parties
any time soon. Europe is too much of a China shop and America - whether
Republican or Democratic - too much of an elephant. As it were, there
was no love wasted between these two constituents of NATO. Now they are
effectively divorcing or, at least, going through a phase of not so
amicable separation.

To this one should add the conflicting interests of members in this
uncomfortable ménage a 19. Greece (aided and abetted by Iran) is
already fighting proxy wars with Turkey throughout Central Eastern Asia
(the Asian Republics of the former USSR), in Cyprus and in the former
Yugoslavia. France is uneasy with the German-British Third Way and what
it regards as a rapprochement between the two, which threatens its
privileged status in the EU. The poorer countries and the EU regional
aid beneficiaries (not always the same group) are dead set against EU
enlargement to the east. The list is very long.

b. Central Europe

Disgusted by what they regarded as a superfluous and unnecessarily
brutal war - the Central Europeans had the rudest awakening imaginable.
They were forced to participate in a war effort within what they
believed to be a defensive alliance. They joined NATO the introverted
giant - and woke up to NATO the agile, hyperactive and violent
neighbourhood cop. Hungary was forced to risk its ethnic kinfolk in
Serbia's Vojvodina region. The Czechs engaged in bruising internal
verbal fistfights. It was not a seemly sight. The new Central European
entrants joined the likes of Greece and Italy and recoiled from
assisting the war effort in any meaningful way. The shock waves are
likely to reverberate for longer and transform NATO's commitment in
Central Europe. It is not inconceivable to end up with a two-tier NATO:
the fighting goons and the battle-shy, logistics-only allies.

This uneasy co-existence is made even less cosy by the clear reluctance
of the EU to absorb the poor relatives to its east and south. Entry
deadlines are habitually postponed, bureaucratic hurdles gleefully
presented, sadistic reports about the Central Europeans' lack of
progress periodically issued. No wonder the six eternal candidates feel
rejected and abused. This humiliating misbehaviour on the part of the
EU resulted in a turning of the tide. Opinion polls show growing
opposition to the idea of Europe (in the Czech Republic, for instance)
- unthinkable just two years ago. The countries of the Balkan area -
the "New Associates" - constitute ominous competition for funds,
attention and orientation, as far as the current future members are
concerned. The Lucky Six (the Visegrad Trio, Slovenia, Cyprus) are
likely to be relegated to the backburner now that the EU found a new
toy, the Balkans. This will engender great bitterness and enmity
between the EU and Central Europe and between Central Europe and the
Balkanians. Hardly a recipe for orderly transition, for democracy, or
for market economy.

c. The Balkan Sore

The EU is known for its verbal pyrotechnics, its unlimited pool of
enticing vision and its great spinning and marketing techniques. This
arsenal is fully employed now to bedazzle the Balkan natives into happy
submission to the seductive harmonies of the common market. The EU is
dangling a cornucopian promise of eternal economic bliss in front of
the bleeding, limb-torn statal rumps, which comprise the former glory
of Yugoslavia. But the targets of this brainwashing will do well to
look to their Central European neighbours for an antidote. The "New
Association" status offered to the likes of Macedonia, Albania,
Bulgaria and Romania and, later, Montenegro and perhaps, post-Milosevic
Serbia is an ingenious piece of camouflage, a fata morgana, devoid of
content. It is an evocation of hitherto repressed desires and it leads
to self-delusion but it will amount to no serious attempt at
integration by the EU.

The economic disparity between the aspirants and the current members is
numbing. The average GDP per capita in Macedonia is c. 2000 USD per
annum. This is the GDP produced by a Slovenian in 10 weeks, by a Greek
and Portuguese in 8, by a German in 3 weeks. There is no convergence to
talk of - the gap is increasing, not decreasing, especially following
the Kosovo debacle. The legal system in these countries is biased
against the individual, antiquated and totalitarian. Human and civil
rights are foreign implants, inflammatorily rejected by the body
politic. The economy is corrupt, nepotistic and cronyist. Crime
organizations constitute a big part of the trading activities and
maintain a heavy grip upon the political class. The media is mostly
government-owned and manipulated. The Balkan simply is not European. It
is Byzantine, Ottoman, Eastern, and Orthodox. It belongs to Turkey and
the Middle East, not to Frankfurt and Paris. It is closer to Moscow
than to Leningrad. It will never be successfully subsumed by the West.
Turkey has been trying for decades now and has been consistently (and
perfunctorily) rejected by the EU. And Turkey is an important member of
NATO and a country much more developed than the likes of Macedonia or
Albania.

As these unpleasant truths emerge, the bitterness, resentment and
disillusionment will grow and a backlash will develop. It might wear
the guise of internal strife, of isolationist policies, of wounded
retreat, of terrorism - all weapons of the deceived and trampled upon
underdogs. It was wrong of the EU to promise what it can never deliver
and couch it in deceptively ear soothing phrases. It will pay the price
in added instability and ruin.

The Euro-Atlantic structures are evolving, assuming ever more ambitious
and comprehensive goals, and growing ever more impressive antlers. They
roam the whole earth, administering human rights and free marketry.
They impose their will. They are awesome to behold. But from within
they are being depleted and consumed by their very own incoherence. It
is the eternal cycle of prowess and vanquishment. NATO, struggling to
redefine itself and perpetuate its totally superfluous existence. The
EU struggling to secure peaceful markets to its east and south. Europe
struggling to assert itself. The USA struggling to secure its
superiority in an emerging multi-polar, multi-ethnic, fractured world.
All are fighting losing battles, wagging their antlers to and fro.


(Article written on June 22, 1999 and published June 28, 1999

in "Central Europe Review" volume 1, issue 1)


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The Treasure Trove of Kosovo



Nothing like a juicy, photogenic human catastrophe to enrich corrupt
politicians and bottom-line-orientated, stock-option-motivated
corporate executives. The Balkan is teeming with both these sad days.
Even as the war was raging, shortages of food and other supplies led to
the dispensation of political favours (in the form of import licences,
for instance) to the chosen few. Bulgarian, Greek and Albanian firms,
owned by ruthless criminals and criminals-turned-politicians benefited
mightily. Millions were made and shared as artificially high prices
were maintained by various means while cronies and crime controlled
firms shared the spoils. This orgiastic intercourse between the corrupt
and the criminal was not confined to one country. The whole region
partook in robbing the most impoverished populations in Europe by
"legal" means.

Their more refined and perfumed Western brethren were never far behind
in taking advantage of American largesse on the one hand and
re-emerging alarmist tendencies, on the other. Thus, American, German,
Greek, French and Italian firms enjoyed funds allocated to
international humanitarian aid by the likes of the US government, the
United Nations, the World Bank, the IMF and other long arms of the
American octopus. Defence contractors and the dubious characters known
as weapons intermediaries stoked the atavistic fires of war in securing
defence contracts. And aid workers resided in six star hotels, driving
the latest sports utility vehicles and brandishing futuristic laptop
computers as they went about the business of dispensing aid. In the
meantime, at least one half of all aid money was pilfered - not to use
a harsher term. Aid rations were freely available in Macedonian,
Albanian, Greek and Bulgarian markets - offered at a discount by aid
workers who stole them from their supposed recipients. The refugees
were never given mattresses, were short of blankets, water, showers and
toilets (I visited the camps - this is an eyewitness account). Only
bread was abundant.

Now that the war is over, some people are counting their dead - while
others are counting their blessings. But this has all been a prelude.
It is the next wave of aid, which is the main course in this
bacchanalia. Outlandishly feverish numbers are tossed around. Kosovo's
immediate reconstruction (housing and infrastructure) will require well
over 2 billion US dollars in the next 2 years. Of this, 1.5 billion
dollars has already been raised. A further 2 billion USD is slated as
direct aid to the shattered economies of Macedonia and Albania. But the
real booty lies in Serbia. A minimum of 10-13 billion dollars will be
required simply to restore Serbia's infrastructure to its former,
inglorious self. To resuscitate the whole languishing area, a
staggering 30 billion dollars is touted as the minimal bill.

Rest assured that at least one third of this generous cornucopia would
end up lining the pockets of the rich and mighty. At least 1 billion
dollars will end up festering in Swiss, Cypriot, South African and
Israeli bank accounts. The politicians know it, the "grupirovki"
(business cartels controlled by mafia-style organizations) know it, and
Western governments know it. This is the REAL stability pact.
Financially inebriated politicians are better motivated to maintain
peace and stability, or so the thinking goes.

The history of the Balkans will play a major role in determining the
topography and geography of this flood of cronyism, nepotism,
criminality and vice. The Balkan is composed of states run by crime
organizations and crime organizations run by states. Old alliances last
long (as opposed to the Middle East where alliances, dune-like, shift
with the winds). Bulgaria and Macedonia, for instance. Serbia and
Greece. Albania and Kosovo. And now Albania and Macedonia. Meetings of
regional "leaders" in the Balkans were always reminiscent of scenes
from "The Godfather". The dons, uncomfortably clad in expensive
business suits and wearing golden rings, deciding life and death and a
jovial yet vaguely menacing atmosphere. Only the leaders of the New
Balkans are much younger, less experienced, more prone to superstition,
extremism and moodiness. The old tensions are bound to re-emerge, this
time in the employ of business interests. Expect a flare up of
animosity between Greece and Macedonia. Despite its Bulgarophile
regime, expect uneasy moments between Bulgaria and Macedonia. And
expect an unholy alliance of business interests between Mr. Thaci and
his sprawling business empire and the governments of Albania and
Macedonia. If not assassinated before, Thaci is definitely the Man to
watch. Young, well educated, ruthless, involved in business (read:
corrupt to the core) - an aptly dangerous man in dangerous times.

The problem is that everyone holds high expectations. This is a poor
recipe for an amicable carving of the cake of international funding.
Macedonia expects to lead the reconstruction effort of Kosovo. It was
offended greatly by the decision to base the Kosovo reconstruction
agency in Pristina. Greek and Italian firms expect to snatch profits
out of the jaws of their near treacherous behaviour during the war.
Turkish firms except to be rewarded for the loyalty of Turkey during
the same. American and German firms expect to exclude all else in
gaining access to American and German (=EU) funds (as they have done in
Bosnia). These all are mutually incompatible expectations and they will
lead to mutually exclusive behaviour. Expect some very ugly scenes,
including spilt doses of this cheap, red liquid, blood.

Albania, already governed by the ungovernable crime gangs it spawned in
the last few years, has formed an alliance with the KLA, never a moral
standard-bearer. This expanded amusement park of drug trafficking,
prostitution, weapons smuggling, contraband and much worse is now
threatening to take over its more virtuous (though by no means
virginal) neighbour, Macedonia. A flare up of hitherto unimaginable
brotherly love has indicated this sacrilegious rapprochement. The
Macedonian Prime Minister - encumbered by a demanding Albanian
coalition partner - has met Thaci and the encounter had all the
trappings of a state visit. Soon after senior Albanian politicians
started talking about a Macedonian recognition of an independent state
of Kosovo and an Albanian language university (the reason for student
riots just two years before).

To a large extent, the Kosovo war was gang warfare. The Serb criminal
organization known as Yugoslavia against the Albanian gang known as the
KLA. It was a war over turf and lucrative businesses. In what used to
be the Third World and more so in the post-communist countries in
transition, criminal activities often accompany "wars of liberation".
In Congo, in Sierra Leone, in Chechnya, in Kashmir - wars are as much
about diamonds, oil and opium poppies as about national aspirations.
Kosovo is no exception but it was here that the West was duped into
intervention. NATO was called upon to arbiter between two crime gangs.
There is no end to the mischievous irony of history.

Perhaps the following incidents are more telling than any learned
analysis:

In late April, the Albanian telecom switched off the roaming facility
of cell phones in Albania. Foreigners - including aid workers - had to
pay the company 1000 dollars for a special roaming-enabled chip.

Rumour has it that the post of the Chief of Police in the Tirana
Airport was "sold" at the beginning of April for an undisclosed amount
(presumably 250,000 US dollars). The reasons: all shippers (including
NATO and aid organizations) have to pay enormous kickbacks to airport
and customs officials to release their goods.

Most Albanian families charged refugee families an average of 500 DM a
month for their accommodation in subhuman conditions. Refugees who
could not pay (or who had no relatives in Germany and Switzerland to
pay for them) were evicted, often cruelly.

As Serbs were murdering their supposed brothers in Kosovo, Albanian
crime gangs laid an oil pipeline (through Lake Shkoder) to Serbia and
supplied the Serb army with the oil it was deprived of by NATO.

Welcome to the Balkans.


(Article written on June 27, 1999 and published July 5, 1999

in "Central Europe Review" volume 1, issue 2)


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Lucky Macedonia or Macedonia's Serendipity


The Good Fortune of Neighbouring a Human Catastrophe



In October 1998, the unreformed communists of the SDSM - the Socialists
- lost the elections in Macedonia by a wide margin to an improbable
coalition. It consisted of the VMRO - fervent nationalists with
Bulgarian roots, headed by the poet-politician Ljubco Georgievski - and
the Democratic alternative (DA). The latter was a hastily assembled
party headed by Vasil Tupurkovski, a pro-US former member of the old
Yugoslav nomenclature. DA enjoyed grassroots support especially by
young professionals, businessmen and liberals. It imported Western
campaigning techniques and made bold promises to revitalize and
energize the economy.

When the news of the unequivocal victory of the VMRO-DA coalition
arrived, the nation was swept by an unprecedented wave of enthusiasm,
optimism and joy. Unprecedented because the young nation's history (its
independence was declared in 1991) provided it with very little reason
to be joyful. Its main trading partners were either boycotted by the
world (the rump Yugoslavia) or themselves boycotted Macedonia - Greece
in the wake of outlandish dispute regarding Macedonia's official name
(hence the impossible FYROM) and Bulgaria because it refused to allow
the use of the Macedonian language in bilateral documents. The economy
collapsed, unemployment soared, investment all but vanished, corruption
erupted and the Albanian ethnic minority became restive.

Macedonia was laid to economic waste by powers beyond its control. Its
entrepreneurial inhabitants - fresh from 500 years of Ottoman training
followed by 50 years of communism - resorted to smuggling (from Greece
to Serbia through the Vardar river) and established a reasonably
functioning underground economy. The IMF and the Central Bank
maintained macro-economic stability (following years of hyperinflation)
at an excruciating social cost. Trade was liberalized, inflation tamed,
the currency was made freely convertible and the exchange rate eerily
sustained (rather, suspended).

But under-currents seethed below the tattered facade. Disenchantment
with the ruling classes and their mafia-like structure increased
dramatically. Intricate webs of village and family loyalties were
tested to the limit in affairs such as TAT, the collapse of a savings
bank in a pyramid scheme in which some top level officials were
implicated. Cronyism and nepotism led to the legalized robbery of the
assets of the state through bogus privatisation schemes. Some people
grew exceedingly rich - others became inordinately poor. The tension
was palpable. The youth felt trapped, facing a dead end future. Many
emigrated.

Albanian nationalism was introduced into this explosive vapour in
1997-8. It existed long before (the KLA, for instance, became a force
to reckoned with as early as 1993). It constituted the main concern of
the ethnic Macedonians (of Slav extract). People spoke ominously of an
Armageddon to be waged between the two ethnicities.

The two communities exist separately. There are no inter-marriages,
very few common business ventures and the Albanians either live in
ghettos within the main cities - or in Albanian dominated cities of
their own (such as Gostivar and Tetovo) in western Macedonia, across
the border from Kosovo. The ground was shaking long before 1997. The
mutual hatred, loathing and, above all, fear of domination and cultural
subjugation were real and under a very thin veneer of civility. The
inclusion of a national Albanian party (there are three) in the
government was greeted as a welcome omen and respite. But this was not
to be.

The ethnic Macedonian's main fear is that the Albanians are aiming to
recreate a "Greater Albania" comprising the current Albania, Kosova and
Western Macedonia. A natural Islamic axis (Albania-Bosnia-Central Asia)
would then form and threaten the Slav peoples wherever they are (Serbs,
Russians, Bulgarians). What started as the normal friction between two
ethnic groups in close physical proximity ended as a mythical
re-enactment of the Islamic (Ottoman) invasion of Europe in the 14th
century. A nightmare revived fraught with the fears of an economically
languishing Christian-Orthodox, Slav, Byzantine civilization. A very
concrete issue of land and autonomy assumed the dimensions of a cosmic
clash between the titans of religion.

Officially, the Albanians constitute 23% of the population in
Macedonia. But Albanian did not take well to what they regarded as
coercion: the population census. They refused to be counted and evaded
the census takers - to their great detriment. As a result, their
numbers are severely understated. It is safe to say that well over ONE
THIRD of the population was of Albanian origin long BEFORE the wave of
refugees swept over this 25,000 square kilometres country. Should one
third of the refugees be absorbed by Macedonia - another 80,000
Albanians - the Albanian population stands to constitute more than 40%
of the population. The Albanians marry younger, have double the number
of children of the ethnic Macedonian (it is a much younger population)
and almost never divorce. Their families are very cohesive and tend to
stick together geographically. In the year 2015 - the majority of the
population in Macedonia will be of Albanian origin, if this trend
continues unperturbed and one third of the refugees remain. In 1912
Kosovo had a sizeable Serb majority. In 1972 this was no longer true.

The ethnic Macedonians are appalled by this demography. They are
scared. They do not believe that they can co-exist with the Albanians.
Stereotypes abound: the Albanians are backward, criminal elements,
illiterate, violent and expansive, say the Macedonians. And their main
goal in life - for which no sacrifice is too great - is to seize land
from their neighbours. Kosova is a first step - the Macedonians are
convinced - Western Macedonia is next, a civil war is imminent.

Marginal efforts at reconciliation aside - the Albanians themselves did
not make any special effort to assuage the fears of the Macedonians.
Quite the contrary. Radical, young and nationalistic leaders abound.
Rufi Osmani, the former Mayor of Gostivar, was jailed for his
activities and pardoned by the President after the new government
threatened a constitutional crisis. He and his associates demanded the
right to use Albanian in official transactions with state and municipal
institutions - which is a reasonable demand. But they also demanded the
right to hoist the Albanian flag and sing the Albanian anthem rather
than the Macedonian one. Then they disobeyed the rulings of the Supreme
Court and instigated violent clashes with the Police (which resulted in
deaths). The establishment of a Tetovo "university" in the Albanian
language did not help matters much. Regarded by Macedonian as a hotbed
of much nationalism but little learning - the Macedonians refused to
accredit it. Riots and counter-riots ensued, culminating in violent
demonstrations of Macedonian students in the streets of Skopje, the
capital.

The average salary in Macedonia is 200 Euro (=180 US dollars) a MONTH.
There are c. 300,000 unemployed in a total working age population of
930,000. There is a constant balance of payments deficit of 8% of GNP.
Macedonia is POOR - real poor, not relatively poor. It is poorer than
any other country in Europe, with the exception of Albania. It is also
insecure. Albanians and Serbs from within and from without threaten its
very existence. It would do wisely to remain on good terms with
Yugoslavia - not only because 50% of its trade is conducted with it -
but also because Yugoslavia is THE big neighbour of the north. Long
after Clinton is gone and perhaps NATO in its current form as well -
Macedonia will have to deal with its perceived betrayal of Serbia.
Serbs never forget and rarely forgive. They visit the sins of the
battle of Kosovo (1389) upon other Moslems - 610 years later, in the
same location. They are a dangerous, tenacious, resilient, ruthless and
unrelenting foe to have. Macedonia is so small and helpless (no army to
speak of) that it is terrified and caught between the NATO rock and the
Serbian hard place. It feels blackmailed, used and exploited without
real regard to its problems now and after the war is over. NATO showed
its real face when it placed Macedonia (with Albania) in the last
category of NATO applicants. Macedonia is a military base to NATO -
here today, gone tomorrow. Who will protect Macedonia from Yugoslavia
when the foreign media circus is engaged elsewhere? This is the age of
the soundbite and the videoclip. It is the generation of expediency.
Macedonia can - and will - easily be forgotten. Hence its refusal to
allow ground warfare from its soil (a position shared by many,
including, for instance, Hungary, a NATO member, with less to lose than
Macedonia).

And this is where Macedonia made a mistake. It did not manage its
public relations properly. It absorbed as many refugees as Albania (10%
of the population - the equivalent of 25 million Mexican refugees in
the USA) and treated its refugees with reasonable decency - under
hellishly impossible circumstances. The USA and the EU reneged on all
their commitments: financial as well as humanitarian. It costs
Macedonia (UNHCR figures) c. 300,000 US dollars a day in direct
expenses to host the human outcome of the NATO blunder. That's
15,000,000 US dollars in direct costs since the war started - or almost
1% of the GDP. Add to this a drop of 50% in exports and 26% in
industrial production and the costs are already at least 10-15% of the
GDP. These are surreal, mind-boggling numbers. It is the equivalent of
the Great Depression in the USA.

Macedonia received hitherto 3 million US dollars (2 from Taiwan and 1
from UNHCR after a LOT of pressure). Oh, I forgot: and a gigantic pile
of promises - to reschedule debts by one year (not to write them off,
which would have constituted real help). The West lies through its
teeth and when exposed it wags a moral finger at this poor, crumbling,
neophyte of a country. It is a disgrace of unprecedented proportions.

Albania behaved more slickly - perhaps because its government is more
veteran and perhaps because it really empathized more heartily with its
suffering kin. They made the right noises and posed to the camera using
the right, complimentary, angles. It won much more help than Macedonia
and is universally accoladed by the West.

This is what Macedonia SHOULD have done. Open its borders in a great
display of camaraderie and human passion. Wine and dine the bored,
frustrated journalists on its turf, pose for the cameras, hair
dishevelled, Tony Blair-like. Instead its leadership went about the
business of absorbing a human wave of unheard of proportions while, at
the same time, trying to defuse tensions from within and from without.
No one informed them that in today's world it matters not what one does
- as what one is SEEN to be doing. This is the vital lesson. Albania
will rebuild its future on the back of the serendipitous refugees of
Kosovo. Macedonia will pay the price of its lack of savvy.


(Article published July 26, 1999 in "Central Europe Review"

volume 1, issue 5)


Return



Black Magic, White Magic


Managing our Future



An address given to the Council of the VMRO-DPMNE, Macedonia's ruling
party, chaired by Minister of Defence and Former Prime Minister of the
Republic of Macedonia, Mr. Nikola Kljusev on July 16, 1999



Germany's economy collapsed following a reparations agreement, which
sapped and consumed less than 10% of its GDP. America's economy
collapsed, its unemployment soared, its stock exchange vanished and it
entered a deflationary cycle, which necessitated the most pervasive
federal intervention in its history - mainly because of multilateral
trade restrictions.

Macedonia has endured trade embargoes, international isolation, wars,
and an influx of refugees - and still survives as an intact,
functioning economy. There is no civil war, no hyperinflation, a stable
currency and no famine. It is nothing less than a miracle. No textbook
economist would have predicted this outcome.

But Macedonia is trying to cope with its predicament in wrong ways. It
is trying to change other countries, or to force or convince them to
change their policies, or to engage in "Voodoo Economics". An economy
cannot be run on the bases of promises, contingencies, gifts, aid and a
Lotaria na Makedonija approach. Economic policy must not be based on
the usual but rather on the normal. In politics, most magic is black
and mostly bad things tend to happen. Macedonia is situated in an
accident-prone area. It cannot and need not pretend (as Slovenia more
successfully and Croatia with less success do) that it is part of
Western Europe. This denial of the painful truth - that we are at the
mercy of forces beyond our control in a region resembling a mental
asylum - is at the root of our economic malaise. What if Montenegro
erupts tomorrow?

Macedonia cannot change other countries, nor can it influence them to
change their policies. It is too small and insignificant and it has no
policy options. Will it really deny NATO next time around if it does
not receive the compensation it requested from it? Will the nature of
its relationship with the EU change if the EU will not honour its
promises and obligations? Macedonia is constrained to a very limited
set of diplomatic and economic choices.

Instead of changing others - we must change ourselves. We must force
Macedonians to change and let ourselves be convinced to change our
policies. We must, in other words, introduce magic - the magic of
trust. Trust in our banks will encourage domestic savings and domestic
investments. It will draw out 1-2 billion dollars from under mattresses
and into deposits. This amount is equal to 5 years of aid or FDI
(foreign direct investment). Trust in our courts will attract foreign
investments. Trust in our government will end the current civil
disobedience. Our citizens are rebellious. They don't pay their taxes,
they do not collaborate with their own government. They don't trust it
to do the good and the right thing.

Macedonia is not perceived by the Europeans to be European. It is too
poor to become a member of the EU, public relations exercises (the
stability and Growth Pact) notwithstanding. It is too needy and donor
weariness is setting in. Money will be harder and harder to come by.
And our products compete head on with European products protected and
promoted by the strongest lobbies in Brussels.

And with these FACTS we have to live. A sound, prosperous economy is
the result of minute, mundane, routine and boring activities - not the
result of rabbits pulled out of a hat. Even if the rabbits are European.


Return



The Friendly Club



Cyprus, that beacon of political stability and financial rectitude, was
invited to negotiate its membership. Bulgaria, the epitome of good
governance and civil society as well as Malta the undisputed friend of
the West (remember Qaddafi?) - were among the list of new candidates
handed down in the Helsinki meet of the most desired economic club on
earth: the EU. To these were added Romania and its collapsing economy.
Macedonia was relegated to the "West Balkan" group - a revolutionary
re-definition of historical affiliations. In this assemblage, it found
itself rubbing shoulders with the disintegrating Albania and the pariah
Yugoslavia. Croatia was ejected from this leper colony by virtue of the
death of its megalomaniac autocrat and his replacement by ex-communists.

Things have been very different only a few months ago, when the EU and
NATO needed the good and naive services of Macedonia. It was a honeyed
courtship. Macedonia was then virtually besieged by a flood of
world-class politicians, all eager to make the acquaintance of the
charming political class of the Balkans. Promises were doled out with
abandon. Blair promised tens of millions. Clinton topped this by
pledging hundreds of millions. And the grateful West offered billions.
In the meantime, Macedonia's infrastructure was pulverized by heavy
armour and light-footed refugees - a quarter of a million of them.

The people of the Balkans are the off spring of broken promises. Their
village shrewdness (which is not to be confused with worldly
sophistication) predisposed them not to trust the kindness of
strangers. Their in-bred paranoia led them to attribute prophetic
foresight, sharp planning and intricate conspiracy to what were mere
stumbling and bumbling on the part of the West and its mighty NATO. The
disillusionment came fast and painlessly. To live in fantasy is often
more rewarding than to have it fulfilled and many Macedonians were
grateful for the intermission in their hundred years of solitude. The
hangover, the bitter aftertaste, the sore muscles of the morning after
- the Macedonians accepted all these with unusual grace.

But as insults were added to injuries, a sense of betrayal evolved.
They felt exploited and discarded, objectified and dehumanised by
super-powers of mythical proportions. They felt abused and deceived.
Used to getting the short end of every stick - this time there was no
stick at all. Having been thus manipulated and largely unable to direct
their anger at the veritable sources of their frustration - they turned
upon themselves in internecine squabbling, disgraced and flouted. This
was further exacerbated by incessant preaching and hectoring of the
representatives of those powers, which thus forsake them. By the very
people who reneged on promises. By countries and politicians whose own
domestic politics and personal conduct were an object and abject lesson
not to be emulated. Countries imbued with corruption preached to the
Macedonians about good governance. Countries which suppressed their
minorities in bloody campaigns reprimanded Macedonia for its treatment
of its own minorities. Countries, which sold weapons to every
despicable dictator in every corner of the earth - prevented Macedonia
from trading with its neighbours.

Of the money promised - very little materialized. The blazing trail of
West European and American movie stars and presidents became a trickle
of East European politicians and Brussels bureaucrats. Membership
became association, association became new association and new
association went nowhere as dates were postponed and dates kept were
used as photo-opportunities by synthetic Western leaders.

If anyone should have been invited to join the EU it is poor Macedonia.
Poor - but not as poor as Romania, for instance. Any comparison of the
two bespeaks volumes about the West's betrayal. Romania's official
inflation is 40% - Macedonia's is around 1% and has been, on average,
less than 3% in the last 3 years. Romania's depleted GDP is collapsing.
Macedonia has survived the Kosovo crisis with its GDP intact and is
poised to grow by 4-6% in the year 2000 according to the IMF. Romania's
average wage is less than 90 dollars a month - Macedonia's is 160 US
dollars. The lei is as unstable as Yugoslavia's denar was prior to the
Kosovo crisis - Macedonia's currency held stable throughout the
external shock-ridden last three years and is trusted by its citizens.
Romania's governments change frequently and with little reason, often
succumbing to the wishes of an ominously violent street. Macedonia's
government has changed once in the last 5 years and that following a
fair and democratic election. Admittedly, Romania's market is much
bigger than Macedonia's and its location closer to the EU. But
Macedonia is an important bridgehead to the Balkans and beyond (Turkey)
and its web of trading agreements and arrangements makes it a virtual
market of more than 110 million people.

But Macedonia is friendless in the EU. It has no patron saint, no
Germany (Croatia, Czech Republic), no France (Romania), no Greece
(Cyprus). It is too small to fear and small enough to ignore
comfortably. It is a peaceful and docile nation. It is co-operative. It
is trustworthy and has proven its devotion to the idea of the West in
times good and bad, mainly the latter. Perhaps these qualities
disqualified it. Perhaps being taken for granted does not grant being
taken. Whatever the explanation, the people of this tiny country grieve
this short romance, so fleeting, so sweet, so dreamy and, as they are
finding now, so surreal.


(Article written on January 15, 2000 and published February 7, 2000

in "Central Europe Review" volume 2, issue 5)


Return



The Books of the Damned



"I have gone into the outer darkness of scientific and philosophical
transactions and proceedings, ultra-respectable, but covered with the
dust of disregard. I have descended into journalism. I have come back
with the quasi-souls of lost data."

(Charles Hoy Fort in "The Book of the Damned")

"Let me have the three major American networks and three leading
newspapers for a year and I'll bring back public lynchings and racial
war in the US."

(Charles Simic quoting a Belgrade journalist)

"We do not have censorship. What we have is a limitation on what
newspapers can report."

(Louis Nel, Deputy Minister of Information, South Africa)


In the country of ex-Nazi officer Kurt Waldheim and current
Nazi-sympathizer Jorg Haider, the xenophobic and anti-Semitic offering
of local media come as little surprise. Austria, after all, contributed
disproportionately to the Nazi death machine. But what seems to be a
unique Austrian phenomenon is not. The media outlets in Central,
Eastern and Southern Europe are easily interchangeable. In the same
week of Austrian derision and paranoia, "Start", a trash weekly in
Macedonia attacked the British Ambassador and the Americans for
conspiring to dismantle Macedonia with the collaboration of its local,
disloyal and haughty Albanian minority.

The media in the countries in transition is taxonomically not
dissimilar to its brethren in the West. It, too, can be divided to five
categories of ownership and agenda. What sets it apart, though, is its
lack of (even feigned) professionalism, its venality and its tainted
ulterior motives. I wrote about it elsewhere, in "The Rip van Winkle
Institutions":

"And then there is the media - the waste basket of post communist
societies, the cesspool of influence peddling and calumny. Journalists
are easily bought and sold and their price is ever decreasing. They
work in mouthpieces of business interests masquerading as newspapers or
electronic media. They receive their instructions - to lie, to falsify,
to ignore, to emphasize, to suppress, to extort, to inform, to
collaborate with the authorities - from their Editor in Chief. They
trade news for advertising. Some of them are involved in all manner of
criminal activities, others are simply unethical in the extreme. They
all have pacts with Mammon. People do not believe a word these
contortionists of language and torturers of meaning write or say. It is
by comparing these tampered and biased sources that people reach their
own conclusions within their private medium."

The commercial media - the likes on "Nova" TV in the Czech Republic -
are poor people's imitations of the more visible aspects of American
mass culture. Overflowing with lowbrow talk shows, freaks on display,
malicious gossip which passes for "news" and glitzy promos and quizzes
- these TV stations and print magazines derive the bulk of their income
from advertising. While ostensibly politically innocuous, they exert a
subtle and cumulative influence on the numbed and dwindling minds of
their spectators and readers. By conditioning their consumers to ever
lower fare of pulp common denominators, they set a standard of no holds
barred and no standards observed. They are the opium for the masses
that religion once was, diverting potentially dangerous attention from
real events and personalities to the staged alarms of public enemies
and the artificial crises of bingo lotteries. No less persecutory than
any totalitarian regime, these mass media are ominous symptoms of the
social malaise of disillusionment with the realities of life and with
more institutionalized modes of expression. They are escapism embodied,
a dreamland, a scape of fantasy, the vale of telenovellas. Whole
nations are in thrall. In Macedonia, the protagonist of a servant's
saga, "Kassandra", was given a hero's welcome upon her visit to this
impoverished and bitter land. Whole families consume hours of this
visual Ritalin, hypnotized by cheap scenery built to resemble
unattainable riches.

Then there is the mercenary media. These are groups of hired pens and
keyboards - so called journalists who offer their services to the
highest bidder. Their price is often pathetic: a lunch a month, one
hundred deutschmarks, a trip abroad and a dingy hotel room. They
collaborate with their editors and share the spoils with them. They are
the whores of the profession, ever the hungry look, ever the hat in
hand, ever the submissive and furtive glances of the serfs of capital.
They often publish other people's self-serving communiqués without
altering a word. I, myself, provided them with "interviews" which I,
solely, have authored, questions and all. Too lazy to or embittered to
invest in their profession, consumed by self-loathing and by general
disdain - they let themselves be passively abused in the dirty
intercourse of money and of influence.

The mercenaries often work in brothels known as "business-backed
media". These are TV stations, daily papers and periodicals owned by
the oligarchs of malignant capitalism and used by them to rubbish their
opponents and flagrantly and unabashedly further their business
interests. This phenomenon is most pronounced in this land of
depredation and depravity, in Russia, where virtually all the media is
now identified with and digested by business, mafia-like interests.
Despite their infamous one-sidedness, they still claim neutrality and
objectivity but these spurious claims are met with revolt by a hostile
population, long trained to distrust the printed word and even the
broadcast image. Thus the art of "reading between the lines" is
flourishing again and the very language is distorted by its media
rapists (see: "The Magla Vocables"). This - the abyss opening between
the people and their language, the demise of true communication and the
ensuing rupture in the social fabric - are the veritable damages of
enlisted journalism.

Political vehicles are less pernicious in that their masters are well
known and their itinerary clear. Always one sided, always half truthed,
forever the righteous - these rags produce no riches and they preach to
the converted, serving as bulletins and message boards rather than as
media in any known sense. A rallying point, a flag, an emblem, a
collective memory, the group's unconscious and conscience - these
papers and TV channels are often widely read, even by rivals and
adversaries. They are so self-absorbed, so narcissistic, so sickeningly
partial that they make for fine amusement in dreary times. There are
the coalition papers and the opposition papers, the left wing and the
right wing and the centre ones. It is a colourful admixture of
indignation and triumphalism, veiled threats and promises, trial
balloons and drama, the daily equivalent of the romance.

Thus, Central, Eastern and Southern Europe do have daily papers and
magazines and periodicals and television. What they do not have is
media even remotely resembling the Western ideal. In some countries,
this ideal is disparaged as a Western manipulative ploy or, worse,
naive idealism. In others, it is a kind of holy grail to be pursued
only in myths and narratives. Yet others view it with envy and aspire
to it, but without much hope. To them, it is an ever-receding mirage.
Perhaps that other phantasmagoria, the Internet, is the solution. In
it, budding, fresh beginnings of irreverence and courage seem to
coalesce into recognizable - though virtual - media. The small number
of web surfers currently limits both their outreach and their
survivability. But if Western trends are anything to go by, this is a
temporary state of affairs. The Internet, this immaterial and ethereal
medium might yet spawn the first real media and a return to reality. It
might yet liberate the prisoners of all the telenovellas, foreign and
domestic. It might yet win.


(Article written on February 5, 2000 and published February 21, 2000

in "Central Europe Review" volume 2, issue 7)


Return



The PCM Trail



It is a typical bar in a typical Balkan or East European country in a
typical yellow haze, air-polluted, very late evening. The din of
raucous and numbingly repetitive music reverberates through the
smoke-enshrouded joint. It is an external pandemonium intended to
silence internal ones and to obviate the silences of solitude. Sofas
with shabby, mutilated upholstery in bordello scarlet. A dim, bawdy
luminescence. Huntresses and prey study each other wearily over oily
drinks. The former scantily clad in cheap imitations of haute couture,
lips enclosed in heart shaped, provocative, lipstick, their make up
invitingly gross. The latter - foreigners, owners of coveted passports,
cars and money (PCM), a ticket out of hell, a path to paradise, a
promise.

In the near and paranoiac past of most countries in transition,
terror-filled xenophobia was both a wise survival tactic and an
indoctrinated instinct. Self-insulated and psychotically suspicious
regimes quarantined their populations and portrayed all foreigners as
carriers of the malaise of social disintegration and the perpetrators
of espionage and sabotage. In a classic cognitive dissonance,
foreigners were denounced by the people and women who befriended them
were pronounced whores. Only a select few could interact with the
capitalistic plague and these were especially trained to prevent
contagion.

These prejudices and perceptions changed fast with the dawn of the post
transition purgatory. Economic collapse, massive unemployment, social
dislocation, growing disparities between rich and poor, the educated
and the unskilled - led to societies increasingly permeated by crime,
drugs and prostitution. A grey cloud of hopelessness and neglect
descended upon vast territories populated by zombie-like herds of
people, eyes with extinguished light, adrift in the uncharted waters of
a new, ominous reality. The physical deterioration of infrastructure
and public services reflected the inner state of its ever more
desparate consumers. Venality erupted like a giant suppuration.
Everything was on sale, especially one's self.

In this increasingly whorish atmosphere, the perception of foreigners
was dramatically re-cast. With more of them around and with most of
them on generous income - they constituted a tempting target, a prize,
salvation embodied. Women everywhere made it a point to meet them, to
work with them, to associate with them, to know them biblically and -
above all other goals - to marry them and leave their country. All
means justified these ends. Women studied foreign languages, applied to
work for non-government organizations, hung out in the appropriate
watering holes, learned to dress and talk assertively and to make their
availability - their complete obtainability and accessibility - beyond
doubt.

Some set about securing the desired trophy methodically and
scientifically, calculating each step in a tortuous and highly
competitive environment. They invested years in graduating from the
right faculties and in mastering the right languages. They watched
films intently, read books, clipped magazine articles, surfed the
internet, questioned well-travelled relatives and acquaintances,
emulated more senior and more seasoned stalkers. Others relied on their
good looks, their make up, their ruthlessness, their promiscuousness,
their connections, or the exotic allure of their very differentness.

But all of them pursued their prey doggedly and commitedly, with the
quite perseverance and patience of the dejected, with the unflagging
determination of the terminally ill in tracking a wonder drug. Often,
they got pregnant, which in many local cultures would have brought on a
marriage. Sometimes, they got raped, or dumped, or worse. But none of
these dissuaded them - such was the ejecting power of the wretchedness
of their lives. They knew that the foreigner they aspire to acquire
will finally go away and carry them with him, a (sometimes white)
knight on a shining vehicle. Vehemently committed to securing the
future of their children and the present of their extended family -
they ploughed on, ignoring diversions, never digressing, never wavering
in the face of setbacks and defeats.

Some of them grew old and bitter in their refusal to countenance a
local, inferior, brand of husband. It time they so identified with
their purported quarry - that they held their own kind in contempt.
They disdained their kin, derided their customs, haughtily dismissed
their own culture as backward and oppressive, worthy only of
discarding. In their unmitigated effort to be worthy of their future
saviours, they disowned their very selves, their society, their
upbringing, their mores and their relations. Thus uprooted, they lost
both worlds - rejected by those they rejected so condescendingly as
well as by foreign men who found them to be embarrassing, clunky
imitations of B-movie characters.

But others went on to marry foreigners, to give birth to their children
and, in time, to travel to far, affluent lands. They keep in touch,
sending home photographs of sumptuous houses and shiny cars and of
suburban lawns. From time to time, they wire some money or deliver
gifts. They visit once or twice a year, clad in new, faddish clothes,
their accents strangely inflected, their speech suffused by foreign
words. They made it, the envy of their sisters, the objects of much
adulation and emulation, lean and lustrous proofs that dreams come
true. A sigh and then the chase goes on. Meticulous dressing, hours of
make up, the right shine but not too vulgar, the flesh exposed but not
repulsively, both offered and withdrawn, a little exercise of English
and to the bar. The hunting grounds where smoke and alcohol and the
occasional lascivious look or comment should do the trick. And often do.


(Article written on February 8, 2000 and published February 28, 2000

in "Central Europe Review" volume 2, issue 8)


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The Mind of Darkness



"The Balkans" - I say - "is the unconscious of the world". People stop
to digest this metaphor and then they nod enthusiastically. It is here
that the repressed memories of history, its traumas and fears and
images reside. It is here that the psychodynamics of humanity - the
tectonic clash between Rome and Byzantium, West and East,
Judeo-Christianity and Islam - is still easily discernible. We are
seated at a New Year's dining table, loaded with a roasted pig and
exotic salads. I, the Jew, only half foreign to this cradle of
Slavonics, four Serbs and five Macedonians. It is in the Balkans that
all ethnic distinctions fail and it is here that they prevail
anachronistically and atavistically. Contradiction and change the only
two fixtures of this tormented region.

The women of the Balkan - buried under provocative mask-like make up,
retro hairstyles and too narrow dresses. The men clad in sepia colours,
old-fashioned suits and turn of the century moustaches. In the
background there is the crying game that is Balkanian music: liturgy
and folk and elegy combined. The smells are heavy with musk-ular
perfumes. It is like time travel. It is like revisiting one's childhood.

The Serbs - a family - are tall and ruggedly handsome. He was a soldier
in the para-military Serb militias that sprang from the ashes of the
JNA (Yugoslav National Army) in 1991. As the disintegration of the
uneasy co-existence that once was Yugoslavia became more painfully
evident, he and others seized the weapons in the depots of the JNA. In
the administrative twilight zone that ensued they fought in JNA
uniforms against a growing army of Croats (wearing initially the same
uniforms) and Moslem Bosniaks. It was surrealistic, a Bosch nightmare.
"We were near victory in Bihac" - he says, his voice a wistful
admixture of melancholy and anger. "Politics" - an old spark in his
eyes and, for a moment, I can see the erstwhile fighter - "All
politics. We lost the war because of politics, because our leaders sold
themselves to the West." This myth has a familiar ring to it, the ring
of knife-stabbed backs and war. It is the ground being prepared for the
next round - the war was nearly won had it not been for the traitors
and their Western masters. The sound of clicking heels and marches and
creaking gates of concentration camps.

And so? "Milosevic should go" - he is adamant - "we paid enough." He
leans back and lets fatigue take over. His wife interjects: "He drives
a milk truck. He collects milk from the villages and delivers it to
Nis. The company he works for makes 1000 DM daily - and his salary is
80 DM monthly. How can you survive on 80 DM? I don't work. So, one has
to steal." "There is nowhere to steal from" - I say. A moment of comic
relief, bringing identical sad smiles to their faces. "During the war
(he means the Kosovo conflict), I drove the truck - it is a big truck,
you see - and was bombed from behind by NATO planes. It was like that
every day, for more than three months but I had to deliver the milk to
town." Matter of factly, he lights a cigarette, his hand unshaken.

"All the politicians benefited from these wars, except Arkan (the
infamous militia military commander - SV). His son joined us and fought
with us as our commander..." - the sentence tapers off among blue
clouds of cheap smoke. "And what did NATO achieve?" - his brother in
law (who is married to a Macedonian and lives in Skopje) asks. "NATO
went in for a year and is stuck for a decade in Bosnia." "And that is
the way it is going to be in Kosovo." "They (the West - SV) don't know
what they want and they don't know how to achieve it, they have no
plans, they stumble, only making matters worse among us. They are
ignorant and ill-prepared."

I sound incredulous: "Do you seriously think that there would have been
no wars without NATO? After all, when Yugoslavia started falling apart,
the West (with the exception of Germany) tried to preserve its unity.
America was very unhappy and discouraged the independence of the
constituent states." "Don't you believe it" - he is livid but not
aggressive, there is more pain in his voice than threat - "Croatia
would have never embarked on its war against us had it not been for the
West. I was there, I know. And we were winning the war there when
suddenly Belgrade ordered us to stop. The commander in chief of the
whole front came to us, tears in his eyes, and said: I didn't give this
order, I want you to know. It comes from above, from Belgrade, not from
me."

"But couldn't all this have been settled differently, without
bloodshed?" - I wonder. "Of course it could, without the meddling of
the West and its two puppets in the region (Milosevic and Tudjman -
SV)." And then, somewhat incoherently - "They (the world - SV) should
have let us fight it out. Winner takes all the territory, that's the
only way to settle it. But Serbia has no friends anywhere in the world
and we trust no one." "And Kosovo?" "Maybe that could not have been
prevented" - he concedes - "because Milosevic regarded Kosovo as the
cornerstone of his regime."

We talk about nothing else. The wounds are too fresh and too prominent
to politely ignore. We enter the New Millennium with the blood dripping
baggage of the old one. He fought three years in Bosnia, in Sarajevo,
near Banja Luka. He is a war criminal, wanted by the international
tribunal in The Hague. "Milosevic determined our ultimate borders in
Dayton" - he spits the words bitterly, a look of bewilderment in his
eyes - "Who gave him the mandate to represent us? Someone else should
have gone there, like Karadzic, maybe..." "But Milosevic gave you
weapons and food and supplies. Without him surely you could not have
survived as long as you did?" "No weapons" - he protests - "Weapons we
appropriated, we took them ourselves, from the JNA depots, he deserves
no credit for that. Food, maybe... But this does not give him the right
to determine our borders and our future without as much as consulting
us. He sold us to the West. Now look at the situation. I can't go back
to my home in a town that was 100% Serb and now is 100% Moslem and the
Moslems can't go back to their towns who are now 100% Serb. And all
towns - Serb and Moslem alike - are deserted ghost towns, where no one
lives and nothing grows. Now I have to live in Serbia."

I don't ask him what he did to become wanted and hunted by the Hague
tribunal. I can't imagine him murdering cold bloodedly or raping. He
has a good face, the wrinkles of many smiles and kindly eyes. When he
laughs softly, they light up in black fire and his handshake is warm
and firm. Instead I say: "And now it's Montenegro's turn should they
declare independence?"

There is uneasy silence. The Serbs among us move in their chairs,
glance warily at each other, as though co-ordinating an as yet unspoken
answer. Finally: "There will be no war in Montenegro. The Serbs will
not attack the Montenegrins - but there will be a civil war among the
Montenegrins themselves, if they declare independence."

"Today" - says the ex militiaman - "they are all better off than the
Serbs in Serbia. The Slovenes, the Croats. Look what we achieved in a
decade of 'Great Serbia' - shortly, only Belgrade will remain in the
Federation, even Sandjak and Vojvodina will leave." "The problem is
that we have no leadership. There is no one to replace Milosevic.
Avramovic is way too old. Dzindzic and Draskovic we cannot trust..."
"Political whores" - says someone - "Once with Milosevic, once
without..." "...and who else is there? All the young, capable people
are out and away, far far away as they can get..."

Like in all the other countries of transition, they are adherents of
the cult of youth. The belief that the old - old people, old culture,
old institutions - have been so heavily corrupted that they must be
discarded thoroughly and mercilessly. That all has to start over again.
That only the young can cope with the timeless riddles that Balkanian
sphinxes are in the habit of posing. That the young are the only bridge
to the promised land of the zeitgeist of capitalism.

"And Macedonia?" - I ask.

"Macedonia" - a Serb chorus around the dinner table - "Every village
wants to become a country. Macedonia cannot survive on its own, it is
too dependent on Serbia, it is too tiny."

"But only 17% of its trade is with Serbia" - I correct them, as gently
as I can. "Including Kosovo?" - says one in great astonishment - "I see
only Macedonian trucks in Serbia, it cannot be..."

"It cannot be" - they all conclude - "Macedonia is nothing without
Serbia."

As the clock strikes midnight, we kiss each other on wine flushed
cheeks and shake hands solemnly. In the rest of the world, a new
millennium may have dawned. But in the Balkans it is perhaps the end of
the beginning - but hardly the beginning of the end.


(Article written on January 8, 2000 and published January 17, 2000

in "Central Europe Review" volume 2, issue 2)


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After the Rain

How the West

Lost the East



The ECONOMY



Central Europe


The New Colonies



Mercantilism was the intellectual correlate of colonialism. The idea,
roughly, was to physically conquer territories (colonies), subjugate
their people, transform them into cheap labour, get hold of all the raw
materials and ship them to the colonizer's territory, there to be
processed to yield finished products. The beauty in the concept was the
"closed circuit" logic. The inhabitants of the colonies (also known as
"natives") had to consume finished goods and products. The colonial
power forced upon them (through tariff and quota regimes or violence
when needed) the finished products produced from their very own raw
materials! Thus, the colonies were prevailed upon to sell cheap raw
materials and to buy expensive finished goods.

If it sounds like colonialism and has the same economic effects - it is
colonialism. The relationship between the European Union and Central
Europe is colonialism. Central Europe provides the European Union with
raw materials and cheap labour. It buys from the European Union
finished goods, products and services. In the process, it incurs
enormous trade and balance of payments deficits. Incidentally, it also
serves as the EU's dumping grounds for anything from toxic waste to
shoddy or outmoded products.

Let us examine the case of the Czech Republic. It is the assembly plant
of Volkswagen and the export launching pad of other multinationals. And
the workers are supposed to consume heavily subsidized agricultural
produce (such as pork).

For this the Czech Republic is to blame. The previous government did
everything it could to alienate its natural allies in the Vysehrad
Triangle. It did a good job of it. Instead of negotiating with the EU
as a bloc of c. 70 million consumers - it ended up representing an
ever-diminishing number of Czecho-Slovaks. Its haughty and
corruption-laden behaviour did not acquire too many friends in the
West, either.

The approach should have been different. In the West, the client is
always right. The Czechs are CONSUMERS. They are the clients of the
huge corporation called EU. As a consumer club or group, they could
have dictated terms, rather than be subjected to them. The current
Hungarian government understands this. Consumers have a single,
irresistible power: they can stop consuming. Imagine if 30-40 billion
USD were to be deleted from the EU's books by angry consumers - it
would have come begging and negotiating, instead of dictating and
condescending. The EU does not hesitate to pull every lever - however
illegitimate, ridiculous, or downright dangerous - in its negotiations
with the new applicants. The new applicants did not assimilate yet
their dual role as applicants (an inferior position) and as markets (a
very superior position).

This inferiority complex has to do with history. The Hussite Wars were
perhaps glorious - but they were also irrevocably destructive. Not only
were the Czech Lands physically demolished - they were also cut from
the rest of Europe for centuries to come. The only times they were
reincorporated into it were traumatic (the Nazi occupation, for
instance). Having glimpsed the first real opportunity to become a part
of the big west dream (and to be redeemed from the clutches of the
wounded Russian bear to the East) - the Czechs lost all judgement,
self-esteem, self-confidence and negotiating skills. So did all the
other Central and Eastern (and Southern) European nations. It was
security and safety they were after - not prosperity.

This basic misunderstanding underlies the great European project. The
EU's thinking was mainly economic and marginally geopolitical (though
it was presented differently). The Czech's motivation was mainly
geopolitical and marginally economic (though it was presented
differently). The resulting malentendues are worthy of Moliere's pen.

Moreover, the Czechs have always been a religious breed. True, they are
the most vehement atheists in Europe - but this is because they adopted
other deities. They have always been zealous, intellectual fanatics.
One of my Czech friends calls many periods in his nation's history
"intellectual terrorism". The swings some people made lately from being
youthful communists to being vengeful ultra-capitalists are indeed
breathtaking. Personality cults are supplanted only by fanatic
ideologies, which are replaced only by religious zeal. This, of course,
does not tend to enhance the realpolitik instincts of the nation.
Czechs have always been a few years too early. They had their own
reformation long before Luther. They had the Spring of 68 long before
Gorbachev. Every such intellectual transition was followed by a Jacobin
disposal and by purges of whole classes and elites. These "new
religion-personality cult-purges" cycles were not absent from the
Velvet Revolution.

Simply, the EU got frightened. Excessive zeal can give anyone - let
alone the Brussels amphibian bureaucrats - cold feet. Dates are being
pushed back. Commitments hushed or rehashed. Now the Czechs "enjoy" the
worst of both worlds: they are being treated as a colony and their date
of entry is ceaselessly postponed.

This should and could have been different. The Czechs should not have
shown any enthusiasm or anxiety. These are bad negotiating tactics.
They should have negotiated with the EU as consumers (markets) do with
producers elsewhere in the world. They should have extracted at least a
commitment regarding the date of accession and detailed timetables. And
they should have kept these timetables.


(Article published December 14, 1998 in "The New Presence")


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New Paradigms, Old Cycles



New paradigms die hard. It took a looming global recession to convince
wild-eyed optimists that old cycles are more reliable guides than new
paradigms.

Business cycles - from the smallest to the biggest - go through seven
phases. Centuries of cumulative economic experience allow us to
identify these stages more accurately than ever before.

An economic cycle invariably starts with inflation. The previous cycle
having ended - and the new one just began - the economic environment is
as uncertain as can be. The fundamental component is the scarcity of
goods and services (following recession or deflation) and the
maladapted money supply. Too much money chases fewer commodities. The
general price level rises. But this constant, ubiquitous, all pervasive
rise (known as "inflation") is also the result of mass psychology.
Households and firms compensate for the growing uncertainty (=growing
risk) by raising prices. They have no idea what should the appropriate
or optimal equilibrium price level be. Market signals are garbled by
psychological noise. Everyone is trying to stay ahead of perceived
economic threats and instabilities by raising the risk premiums that
they demand from their clients. Consumers, on the other hand, are
willing to pay more today because they are convinced that the price
trend is unidirectional and irreversible: up. The psychological
underpinnings and bearings of inflation have been studied deeply in the
last few decades. It is the source of the uncertainty that remained
obscure. My hypothesis is that the end of every economic cycle fosters
this panicky uncertainty, which is monetarily reflected as inflation.
In more technical terms, inflation is a market pathology, a market
failure.

Inflation disguises bad economic performance of firms and of the
economy as a whole. "Paper" profits make up for operational losses. The
incentives to innovate, modernize, and enhance productivity suffer.
Economic yardsticks and benchmarks get distorted and do not allow for
meaningful analysis of the performance of the economy. Inflation leads
to technological and economic stagnation. Plants do not modernize, the
financial aspects of the firm's operations are emphasized, the
industrial and operational aspects de-emphasized and neglected.
Economies are seized by the pathological economic condition known as
"stagflation" - zero or negative growth, coupled with inflation. A
sense of urgency and crisis sets in and clears the path towards the
next, second phase.

In an effort to overcome the pernicious effects of inflation,
governments liberalize, deregulate and open their economies to
competition. Firms innovate and streamline. Efficiency, productivity
and competitiveness are the buzzwords of this phase. As trade barriers
fall, cross border capital flows (=investment) increase, productivity
gains and new products are introduced - the upward price spiral is
halted and contained. The same money buys better products (more
reliable, more functions, more powerful). The same wages generate more
products. This is technological deflation. It is beneficial to the
economy in that it frees economic resources and encourages their
efficient allocation. Real incomes rise and generate increased demand
and production.

Inevitably, technical deflation leads to a restraint in the general
price level. Increased consumption (both public and private) coupled
with moderate asset price inflation prevents an outright monetary
deflation (=a downward spiral in the general price level). Inflation is
kept to sustainable levels. This phase is known as "disinflation". It
is a transitory phase. The transition from hyperinflation or high
inflation to a supportable level of inflation is a matter of one or two
decades. This period is bound to be shortened by the revolutions in
information, communications and transportation technologies. In fact,
the whole cycle is hastened due to the more rapid dissemination of
information. It is the availability and accessibility of information,
which determines the values of important parameters such as the
equilibrium general price level and other parameters of expectations
(such as equity prices). The more information is available more readily
- the more efficient the markets and the shorter the cycles. This
enhances the false perception of instability inherent in modern
markets. But speed does not necessarily a imply lack of stability. On
the contrary, the faster and more violent the adjustments in the market
mechanism - the more efficient it is.

The psychological well-being and assurance brought on by disinflation
generate demand for assets, especially yielding assets (such as real
estate or financial assets). The more certain the future value of
streams of income, the more open the economic environment, the shorter
the economic cycle, the more frequent and rapid the economic
interactions - the more valuable assets become. Assets are mainly
stores of expectations regarding future values. An assets bubble is
created when the current value (=price) of money is low and the future
value of money is certain and likely to grow through stable or
decreasing prices. Stock exchanges, real estate, and financial
transactions - all balloon out of proportion in a kind of irrational
exuberance.

All bubbles burst in the end - and so do these assets bubbles. This is
the fifth phase. It is crucial because it signifies the termination of
the bull part of the cycle. The prices of assets collapse
precipitously. There are no buyers - only sellers. Firms find it
impossible to raise money because their obligations (commercial paper
and bonds) are rendered valueless. A credit crunch ensues. Investment
halts.

The collapse of assets bubbles generates asset price deflation. The
psychological counterpart of this deflation is the disappearance of the
"wealth effect" and its replacement by a "thrift effect". This
influences consumption, inventories, sales, employment and other
important angles of the real economy. If not countered by monetary and
fiscal means - a lowering of interest rates, a fiscal Keynesian
stimulus, an increase in money supply targets - a monetary deflation
might set in. Admittedly, a full-fledged deflation is rare. More
frequent are a recession, a slump, a credit crunch, a slowdown, a
growth recession and other less exotic variants. It is also possible to
have differentiated or discriminatory deflation. This is a deflation in
certain sectors of the economy or in certain territories of the globe -
but not in others. In any case, a monetary deflation is a monstrous,
venomous economic beast. Due to reversed expectations (that prices will
continue to go down), people postpone their consumption and spending.
Real interest rates skyrocket because in an environment of negative
inflation, even a zero interest rate is high in real terms. Investment
and production slump - inventories shoot up, further depressing prices.
The decline in output is accompanied by widespread bankruptcies and by
a steep increase in unemployment. The real value of debt increases.
Coupled with declining prices of assets, it leads to bank failures as a
result of debts gone sour. It is a self-perpetuating state of affairs
and it calls for the implementation of the seventh and last phase of
the cycle.

This is the phase of reflation. The market failure, at this stage, is
so pervasive that all the self-balancing and allocation mechanisms are
rendered dysfunctional. State intervention is needed in order to
restart the economy. An injection of money through a fiscal stimulus, a
monetary expansion, a lowering of interest rates, firm support of the
financial system, tax and other incentives to consume and to import.
Unfortunately, all these goals are best achieved by engaging in
warfare. It is often the case: a convenient war reflates the economy,
re-ignites the economic engine, generates employment, and increases
consumption, innovation and modernization. But with or without war -
people sense the demise of an old cycle and the imminent birth of a new
one, fraught with uncertainty and ignorance. They rush to buy things.
Because the economy is just recovering from deflation - there aren't
usually many things to buy. A lot of money chasing few goods - this is
a recipe for inflation. Back to phase one.

But the various phases of the cycle are not only affected by psychology
- they affect it. During periods of inflation people are willing to
take on risk. The risk of inflation is clear to them and the only
compensation is through higher yields (returns, profits) on financial
instruments. Yet, higher returns inevitably and invariably imply higher
risks. Thus, people are forced to offset or mitigate one type of risk
(inflation) with another (credit or investment risk). Paradoxically, an
inflationary period is a period of certainty. Inflation is certain.
People tend to develop an ideological type of economics. Based on the
underlying and undeniable certainty of ever-worsening conditions, the
intellectual elite and decision-makers resort to peremptory, radical,
rigid and sometimes coercive solutions backed by an ideology disguised
as "scientific knowledge". Communism is a prime example, of course -
but so is the "Free Marketry" variant of capitalism, as practised by
the IMF and by central bankers.

Deflation, on the other hand, is usually a much shorter period. People
do not expect it to last. They fully expect it to be followed by
inflation - they just do not know when. Thus, its nature is more
transitory. Assured of low prices and preoccupied with economic
survival - people become strongly risk averse. While in times of
inflation people are seeking to protect the value of their money - in
times of deflation people are in pursuit of sheer livelihood. A
dangerous "stability" sets in. People invest in land, cash and, the
more daring, in bonds. Banks do the same. In such times, ideologies are
the first victims. They are replaced by philosophies and worldviews.
People become much more pragmatic. They look to the possible rather
than to the ideal. Communism is replaced by Socialism, Capitalism
replaces Free Marketry. Perhaps this is the only good outcome of
deflation.


(Article published November 9, 1998 in "The New Presence")


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Lessons in Transition



Question: What have been the most successful approaches to attracting
direct foreign investments: offering prospective investors tax breaks
and similar benefits, or improving the overall investment climate of
the country?

Answer: Empirical research has demonstrated that investors are not
lured by tax breaks and monetary or fiscal investment incentives. They
will take advantage of existing schemes (and ask for more, pitting one
country against another). But these will never be the determining
factors in their decision-making. They are much more likely to be
swayed by the level of protection of property rights, degree of
corruption, transparency, state of the physical infrastructure,
education and knowledge of foreign languages and "mission critical
skills", geographical position and proximity to markets and culture and
mentality.

Question: What have been successful techniques for countries to improve
their previously negative investment image?

Answer: The politicians of the country need to be seen to be
transparently, non-corruptly encouraging business, liberalizing and
protecting the property rights of investors. One real, transparent (for
instance through international tender) privatisation; one case where
the government supported a foreigner against a local; one politician
severely punished for corruption and nepotism; one fearless news medium
- change a country's image.

Question: Should there be restrictions on repatriation of foreign
investment capital (such restrictions could prevent an investment
panic, but at the same time they negatively affect investor's
confidence)?

Answer: Short term and long term capital flows are two disparate
phenomena with very little in common. The former is speculative and
technical in nature and has very little to do with fundamental
realities. The latter is investment oriented and committed to the
increasing of the welfare and wealth of its new domicile. It is,
therefore, wrong to talk about "global capital flows". There are
investments (including even long term portfolio investments and venture
capital) - and there is speculative, "hot" money. While "hot money" is
very useful as a lubricant on the wheels of liquid capital markets in
rich countries - it can be destructive in less liquid, immature
economies or in economies in transition. The two phenomena should be
accorded a different treatment. While long-term capital flows should be
completely liberalized, encouraged and welcomed - the short term, "hot
money" type should be controlled and even discouraged. The introduction
of fiscally oriented capital controls (as Chile has implemented) is one
possibility. The less attractive Malaysian model springs to mind. It is
less attractive because it penalizes both the short term and the
long-term financial players. But it is clear that an important and
integral part of the new International Financial Architecture MUST be
the control of speculative money in pursuit of ever-higher yields.
There is nothing inherently wrong with high yields - but the capital
markets provide yields connected to economic depression and to price
collapses through the mechanism of short selling and through the usage
of certain derivatives. This aspect of things must be neutered or at
least countered.

Question: What approach has been most useful in best serving the needs
of small businesses: through private business support firms, business
associations, or by government agencies?

Answer: It depends where. In Israel (until the beginning of the 90s),
South Korea and Japan (until 1997) - the state provided the necessary
direction and support. In the USA - the private sector invented its own
enormously successful support structures (such as venture capital
funds). The right approach depends on the characteristics of the
country in question: how entrepreneurial are its citizens, how
accessible are credits and microcredits to SMEs, how benign are the
bankruptcy laws (which always reflect a social ethos), how good is its
physical infrastructure, how educated are its citizens and so on.

Question: How might collective action problems among numerous and
dispersed small and medium entrepreneurs best be dealt with?

Answer: It is a strange question to ask in the age of cross-Atlantic
transportation, telecommunication and computer networks (such as the
Internet). Geographical dispersion is absolutely irrelevant. The
problem is in the diverging self-interests of the various players. The
more numerous they are, the more niche-orientated, the smaller - the
lesser the common denominator. A proof of this fragmentation is the
declining power of cartels - trade unions, on the one hand and business
trusts, monopolies and cartels, on the other hand. The question is not
whether this can be overcome but whether it SHOULD be overcome. Such
diversity of interests is the lifeblood of the modern market economy,
which is based on conflicts and disagreements as much as it is based on
the ability to ultimately compromise and reach a consensus. What needs
to be done centrally is public relations and education. People,
politicians, big corporations need to be taught the value and
advantages of small business, of entrepreneurship and intrapreneurship.
And new ways to support this sector need to be constantly devised.

Question: How might access of small business to start-up capital and
other resources best be facilitated?

Answer: The traditional banks all over the world failed at maintaining
the balancing act between risk and reward. The result was a mega shift
to the capital markets. Stock exchanges for trading the shares of small
and technology companies sprang all over the world (NASDAQ in the USA,
the former USM in London, the Neuemarkt in Germany and so on).
Investment and venture capital funds became the second most important
source quantitatively. They not only funded budding entrepreneurs but
also coached them and saw them through the excruciating and dangerous
research and development phases. But these are rich world solutions. An
important development is the invention of "third world solutions" such
as microcredits granted to the agrarian or textile sectors, mainly to
women and which involve the whole community.

Question: Women start one-third of new businesses in the region: now
can this contribution to economic growth be further stimulated?

Answer: By providing them with the conditions to work and exercise
their entrepreneurial skills. By establishing day care centres for
their children. By providing microcredits (women have proven to be
inordinately reliable borrowers). By giving them tax credits. By
allowing or encouraging flexitime or part time work or work from home.
By recognizing the home as the domicile of business (especially through
the appropriate tax laws). By equalizing their legal rights and their
pay. By protecting them from sexual or gender harassment.


(Article written on October 15, 1999 and published November 22, 1999

in "Central Europe Review" volume 1, issue 22)


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Lucky Russia



As early as August 17th, a few minutes following the devaluation, the
financial markets predicted that the Rouble would stabilize around
18-20 Roubles to the US dollar. This was the price quoted for CME
forward Rouble contracts. Moreover, not everyone think that
hyperinflation is imminent. Simply, there is not enough purchasing
power to generate this kind of surge in prices.

Russia is lucky. I am not being cute: this crisis could not have come
at a more opportune time. Russians have witnessed (if not actively
enjoyed) the advantages of a consumer capitalist economy. For one
thing, most of them have some kind of private property and the
abundance of all types of products together with the elimination of
queues and shortages served to provide a foretaste of the "capitalist
heaven". They are not likely to go back, politically or economically.
That capitalism is not well entrenched is a blessing in no disguise:
this crisis does not deprive people sufficiently to foster a
revolution. Social unrest, a dramatic rise in crime rates, more crony
capitalism and other malignant forms of "get rich quick" schemes -
perhaps. But not another revolution.

Russia and Russians are prone to dramatic extremes. Russia is simply
going through a crisis which will ultimately engulf all of Eastern,
Central and Southern Europe and, more generally, all the protective,
etatist economies. From Macedonia to the Czech Republic, from
Kazakhstan to China, from Slovenia to Bulgaria - all are likely to
experience a similar shock. This is because none has really reformed.
Under the banner of "capitalism" a small, corrupt elite of oligarchs
and politicians robbed the assets of the state. Industry is still
protected against outside competition, tax collection is a farce, the
banking system a shambles, Western handouts the only pillar of the
economy. This cannot and will not go on. The invisible hand of the
market will devalue overvalued currencies, force industry to
restructure, force the banking system to amalgamate, force inept and
corrupt politicians out. The Day of Judgement is here. Russia is lucky
to go through all this now - because it will be uniquely positioned, as
a result.

The Russian banking system will be forced to restructure. Hundreds of
banks will go insolvent and bankrupt. The rest will consolidate. But
this will only result in the formation of a few "bad banks". The next
stages will involve the formation of healthy retail activities, where
none exist today. Banks will begin to compete for savings. They will
diversify their portfolio and, as a result, their exposure (risk) will
diminish. Then they will have to invest this money to generate the kind
of returns that will attract the savers. They will not risk another
asset bubble. They will not invest in brokerage operations, speculate,
or bet against the Rouble anymore. Their future profits will be the
result of investments in real assets: industry, the services sector,
new and small businesses. These are very good news: the banks have been
taught a lesson they will not easily forget. It is: paper profits and
paper assets are on paper only. Here today, gone tomorrow.

A devalued Rouble will enhance the competitiveness of the Russian
industrial and commodity production sectors. Rouble inflation will not
fully reflect the devaluation for a long time. This difference will
allow Russian manufacturers and commodity producers to compete
vigorously.

Russia was long subjected to the quack "medical experiments" of the
IMF. It was led down the path of deflation, which the IMF has plunged
half the world into. It needed to reflate urgently. It could not have
"chosen" a better way to do so. The devaluation will reflate the
economy. It is equivalent to the infusion of new blood to a body
dilapidated by endless austerity and economic bloodletting.

It might sound outlandish - but Russia is showing the way to other
countries in the Third World as it has so often done in the past. It,
in effect, has acted against the IMF dictates and by devaluing its
currency it has readopted the path of John Maynard Keynes. It was about
time.


(Article published August, 1998 in "The New Presence"

and October 28, 1998 in "Argumenti i fakti")


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Russian Roulette



The more involved the IMF gets in the Russian economy - the more
controversy surrounds it. True, economies in transition, emerging
economies, developing countries and, lately, even Asian Tigers all feel
the brunt of the IMF recipes. All are loudly complaining. Some
economists regard this as a sign of the proper functioning of the IMF -
others spot some justice in some of the complaints. The IMF is supposed
to promote international monetary cooperation, establish a multilateral
system of payments, assist countries with Balance of Payments (BOP)
difficulties under adequate safeguards, lessen the duration and the
degree of disequilibrium in the international BOPS of member countries
and promote exchange rate stability, the signing of orderly exchange
agreements and the avoidance of competitive exchange depreciation.

It tries to juggle all these goals in the thinning air of the global
capital markets. There is little dispute that the IMF is indispensable.
Without it, the world monetary system would have contracted more
readily and many countries would be worse off. It imposes monetary and
fiscal discipline, forces governments to plan, and introduces painful
adjustments and reforms. It serves as a convenient scapegoat: the
politicians can blame it for the economic woes that their voters
endure. Lately, it began to lend credibility to countries and to manage
crisis situations. But, this scapegoat role allows politicians in
Russia to hide behind the IMF leaf and blame the results of their
incompetence and corruption on it. Where a reformed market economy
could have provided a swifter and more resolute adjustment - the
diversion of scarce human and financial resources to negotiating with
the IMF seems to have prolonged the agony. The abrogation of
responsibility by decision makers poses a moral hazard: if successful -
the credit goes to the politicians, if not - the IMF is always to
blame. Negative feelings, which would have normally brought about a
real, transparent, corruption-free, efficient market economy are vented
and deflected.

The IMF money in Russia encourages corrupt and inefficient spending
because it cannot really be controlled and monitored. The rule is: the
more resources the Federal and regional governments have - the more
will be lost to corruption and inefficiency. The IMF cannot rationalize
spending in Russia because its control mechanisms are flawed: they rely
too heavily on local, official input and they are remote (from
Washington). They are also underfunded.

Despite these shortcomings, the IMF assumed - and not only in the case
of Russia - two roles which were not historically allocated to it. It
became a country credit risk-rating agency. The absence of an IMF seal
of approval could - and usually does - mean financial suffocation.
Russia experienced it last month. No banks or donor countries extend
credit to a country lacking the IMF's endorsement. On the other hand,
as authority (to rate) shifted - so did responsibility. The IMF became
a super-guarantor of the debts of both the public and private sectors.
This encourages irresponsible lending and investments ("why worry, the
IMF will bail me out in case of default"). This is the "Moral Hazard":
the safety net is fast being transformed into a licence to gamble. The
profits accrue to the gambler - the losses to the IMF. This does not
encourage prudence or discipline. There is no better example than the
bloated and wrongly priced Russian market for short-term government
obligations, the GKOs.

The IMF is too restricted in both its ability to operate and in its
ability to conceptualise and to innovate. It, therefore, resorts to
prescribing the same medicine of austerity to all the sovereign
patients, which are suffering from a myriad of economic diseases. And
it is doing so with utter disregard and ignorance of the local social,
cultural (even economic) realities. Add to this the fact that the IMF's
ability to influence the financial markets in an age of globalisation
is dubious (the daily turnover in the foreign exchange markets alone is
6 times the total resources of the IMF). The result is fiascos like
South Korea and Indonesia where 40-60 billion USD aid packages was
consumed by sick economies in days to no avail. More and more, the IMF
looks anachronistic and its goals untenable. The IMF also displays the
whole gamut of problems which plague every bureaucratic institution:
discrimination (why help Mexico, which shares a border with the USA and
not Bulgaria, which doesn't?), politicisation (South Korean and
Indonesian officials complained that the IMF officials tried to
surreptitiously introduce trade concessions to the USA into an
otherwise financial package of measures) and too much red tape.

The problem is that the IMF forces governments to restrict flows of
capital and goods, and to reduce budget and balance of payments
deficits. Consequently, governments find themselves caught between
non-compliance with the IMF performance criteria - and addiction to its
assistance. The crusader-economist Michel Chossudowski wrote once that
the IMF's adjustment policies "trigger the destruction of whole
economies". This looks a trifle overblown. But the process that he
describes is, to some extent, true and fully applicable to Russia.

The inevitable devaluation of the Rouble (supposed to encourage exports
and stabilize the currency) will lead to increased inflation. The
higher prices will burden businesses and increase their default rates.
The banks will increase their interest rates to compensate for higher
risks and for inflation. Wages in Russia are never fully indexed or
paid timely so the purchasing power of households will be further
eroded. Despite recent posturing, tax revenues will fall as a result of
a decrease in wages and the collapse of many businesses. Thus, the
budget will be either cruelly cut or the budget deficit will increase.
The options of raising taxes or improving the collection methods are
fantastic in the chaotic environment euphemistically known as the
Russian Economy. The Rising costs of manufacturing (fuel and freight
are denominated in foreign currencies and so do many of the tradable
inputs) will lead to the pricing out of the local markets of many local
firms. A flood of cheaper imports will ensue. The comparative
advantages of Russia will disappear as it slides into ever growing
trade deficits. Finally, The Russians believe, Western creditors will
take over the national economic policy. Communism will be replaced by
IMF-ism. No country is independent if the strings of its purse are held
by others. Russians, too nationalistic to acquiesce, will rebel. The
price will be partly paid by the likes of the Prague Stock Exchange.


(Article published October 2, 1998 in "The New Presence")


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Foreigners do not Like Russia


Russia's New Economy



With no Russian in sight, foreigners like to belittle and mock Russia.
"It is a criminal gangland" (an American term which better fits Italy),
"corrupt" (Belgium is more corrupt), "bureaucratic" (try Germany). They
point to its 160 billion USD in foreign debt. But this is one of the
lowest rates in the world (c. 40% of GDP). The USA owes almost twice as
much per its GDP.

Foreigners do not like Russia. Russia should stop relying on them so
heavily. Not because of nationalistic reasons. Because of realistic
ones. It is not realistic to expect foreign institutions and lenders
(such as the IMF) to provide Russia with another 45 billion roubles. It
was the IMF that de-monetised the Russian economy. Its outlandish
demands to limit the money supply reduced the amount of roubles in
circulation to a dangerous, life-threatening, level (15% of GDP). The
result was an unprecedented barter economy (more than 75% of all
transactions) and a collapse of the popular trust in the rouble.

There has never been a post-communist "Russian Economy". There was a
"Moscow Economy" and a "Rest of Russia Economy". The first was a bubble
of consumption, novelty seeking, vanity and financial assets. The
"crisis" in August was merely the bursting of the MUSCOVITE bubble. How
come I consider this to be good for Russia?

First, it will weed out the weak economic players. Shady companies, the
manufacturers of shoddy goods, financial leeches and parasites - all
will vanish together with easy, corrupt and criminal money. Foreign
firms, which came over to ride the wave of unbridled consumerism and to
make a quick buck, will go home. The export revenues of oligarchs and
robber barons will revert back to the nation. In time, their
inefficient and corrupt fiefdoms and monopolies will crumble. They may
even begin to pay taxes.

Multinationals committed to the still promising Russian market will not
go away. They will invest more and provide even more credits to local
suppliers and partners. They will hire good staff, reduce costs and
finally acknowledge the existence of life (and markets) outside Moscow.
The crisis in Moscow is blessing for the rest of Russia, as has often
been the case in history.

This is also the chance of domestic industry and services. With
unemployment up, wage costs are down by half. So are rent and security
costs and other overhead. Many good people are available today at a
reasonable price. Companies have rationalized, cut the fat, sacked
unneeded people, become lean and mean. They are fast becoming
competitive in their own markets and, later on, perhaps, in export
markets.

Additionally, imports are down by 45%. Domestic firms face much less
competition, on the one hand, and less choosy clients, on the other
hand. This is their chance to capture market share. Russian businesses
are used to operating without a banking system, or in hyperinflation.
Foreigners are not. Shops will prefer to stock cheaper domestically
produced goods. Both product quality and the attention to the
consumer's needs and demands need to improve. But the prize is
enormous: control of the Russian market.

But is there a Russian market? This is the only cloud in the silver
lining. Russia is being regionalized, broken down. The movement of both
people and goods is gradually restricted. The fragmentation of a
hitherto unified market is detrimental. This is the real risk facing
Russia. Whatever the POLITICAL arrangements - the economy must remain
united. The various oblasts, mini-states and fiefdoms are simply not
economically viable on their own.


(Article published November 23, 1998 in "The New Presence")


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IMF - Kill or Cure



This was the title of the cover page of the prestigious magazine, "The
Economist" in its issue of 10/1/98. The more involved the IMF gets in
the world economy - the more controversy surrounds it. Economies in
transition, emerging economies, developing countries and, lately, even
Asian Tigers all feel the brunt of the IMF recipes. All are not too
happy with it, all are loudly complaining. Some economists regard this
as a sign of the proper functioning of the International Monetary Fund
(IMF) - others spot some justice in some of the complaints.

The IMF was established in 1944 as part of the Bretton Woods agreement.
Originally, it was conceived as the monetary arm of the UN, an agency.
It encompassed 29 countries but excluded the losers in World War II,
Germany and Japan. The exclusion of the losers in the Cold war from the
WTO is reminiscent of what happened then: in both cases, the USA called
the shots and dictated the composition of the membership of
international organization in accordance with its predilections.

Today, the IMF numbers 182 member-countries and boasts "equity" (own
financial means) of 200 billion USD (measured by Special Drawing
Rights, SDR, pegged at 1.35 USD each). It employs 2600 workers from 110
countries. It is truly international.

The IMF has a few statutory purposes. They are splashed across its
Statute and its official publications. The criticism relates to the
implementation - not to the noble goals. It also relates to turf
occupied by the IMF without any mandate to do so.

The IMF is supposed to:

A. Promote international monetary cooperation;

B. Expand international trade (a role which reverted now to the
WTO);

C. Establish a multilateral system of payments;

D. Assist countries with Balance of Payments (BOP) difficulties
under adequate safeguards;

E. Lessen the duration and the degree of disequilibrium in the
international BOPS of member countries;

F. Promote exchange rate stability, the signing of orderly
exchange agreements and the avoidance of competitive exchange
depreciation.

The IMF tries to juggle all these goals in the thinning air of the
global capital markets. It does so through three types of activities:

Surveillance

The IMF regularly monitors exchange rate policies, the general economic
situation and other economic policies. It does so through the (to some
countries, ominous) mechanism of "consultation" (with the countries'
monetary and fiscal authorities). The famed (and dreaded) World
Economic Outlook (WEO) report amalgamates the individual country
results into a coherent picture of multilateral surveillance.

Sometimes, countries, which have no on-going interaction with the IMF
and do not use its assistance do ask it to intervene, at least by way
of grading and evaluating their economies. The last decade saw the
transformation of the IMF into an unofficial (and, incidentally,
non-mandated) country credit rating agency. Its stamp of approval can
mean the difference between the availability of credits to a given
country - or its absence. At best, a bad review by the IMF imposes
financial penalties on the delinquent country in the form of higher
interest rates and charges payable on its international borrowings.

The Precautionary Agreement is one such rating device. It serves to
boost international confidence in an economy. Another contraption is
the Monitoring Agreement, which sets economic benchmarks (some say,
hurdles) under a shadow economic program designed by the IMF. Attaining
these benchmarks confers reliability upon the economic policies of the
country monitored.

Financial Assistance

Where surveillance ends, financial assistance begins. It is extended to
members with BOP difficulties to support adjustment and reform policies
and economic agendas. Through 31/7/97, for instance, the IMF extended
23 billion USD of such help to more than 50 countries and the
outstanding credit portfolio stood at 60 billion USD. The surprising
thing is that 90% of these amounts were borrowed by relatively well-off
countries in the West, contrary to the image of the IMF as a lender of
last resort to shabby countries in despair.

Hidden behind a jungle of acronyms, an unprecedented system of
international finance evolves relentlessly. They will be reviewed in
detail later.

Technical Assistance

The last type of activity of the IMF is Technical Assistance, mainly in
the design and implementation of fiscal and monetary policy and in
building the institutions to see them through successfully (e.g.,
Central Banks). The IMF also teaches the uninitiated how to handle and
account for transactions that they are doing with the IMF. Another
branch of this activity is the collection of statistical data - where
the IMF is forced to rely on mostly inadequate and antiquated systems
of data collection and analysis. Lately, the IMF stepped up its
activities in the training of government and non-government (NGO)
officials. This is in line with the new credo of the World Bank:
without the right, functioning, less corrupt institutions - no policy
will succeed, no matter how right.

From the narrow point of view of its financial mechanisms (as distinct
from its policies) - the IMF is an intriguing and hitherto successful
example of international collaboration and crisis prevention or
amelioration (=crisis management). The principle is deceptively simple:
member countries purchase the currencies of other member countries
(USA, Germany, the UK, etc.). Alternatively, the draw SDRs and convert
them to the aforementioned "hard" currencies. They pay for all this
with their own, local and humble currencies. The catch is that they
have to buy their own currencies back from the IMF after a prescribed
period of time. As with every bank, they also have to pay charges and
commissions related to the withdrawal.

A country can draw up to its "Reserve Tranche Position". This is the
unused part of its quota (every country has a quota which is based on
its participation in the equity of the IMF and on its needs). The quota
is supposed to be used only in extreme BOP distress. Credits that the
country received from the IMF are not deducted from its quota (because,
ostensibly, they will be paid back by it to the IMF). But the IMF holds
the local currency of the country (given to it in exchange for hard
currency or SDRs). These holdings are deducted from the quota because
they are not credit to be repaid but the result of an exchange
transaction.

A country can draw no more than 25% of its quota in the first tranche
of a loan that it receives from the IMF. The first tranche is available
to any country, which demonstrates efforts to overcome its BOP
problems. The language of this requirement is so vague that it renders
virtually all the members eligible to receive the first instalment.

Other tranches are more difficult to obtain (as Russia and Zimbabwe can
testify): the country must show successful compliance with agreed
economic plans and meet performance criteria regarding its budget
deficit and monetary gauges (for instance credit ceilings in the
economy as a whole). The tranches that follow the first one are also
phased. All this (welcome and indispensable) disciplining is waived in
case of Emergency Assistance - BOP needs which arise due to natural
disasters or as the result of an armed conflict. In such cases, the
country can immediately draw up to 25% of its quota subject only to
"cooperation" with the IMF - but not subject to meeting performance
criteria. The IMF also does not shy away from helping countries meet
their debt service obligations. Countries can draw money to retire and
reduce burdening old debts or merely to service it.

It is not easy to find a path in the jungle of acronyms, which sprouted
in the wake of the formation of the IMF. It imposes tough guidelines on
those unfortunate enough to require its help: a drastic reduction in
inflation, cutting back imports and enhancing exports. The IMF is
funded by the rich industrialized countries: the USA alone contributes
close to 18% to its resources annually. Following the 1994-5 crisis in
Mexico (in which the IMF a crucial healing role) - the USA led a round
of increases in the contributions of the well-to-do members (G7) to its
coffers. This became known as the Halifax-I round. Halifax-II looks all
but inevitable, following the costly turmoil in Southeast Asia. The
latter dilapidated the IMF's resources more than all the previous
crises combined.

At first, the Stand By Arrangement (SBA) was set up. It still operates
as a short-term BOP assistance financing facility designed to offset
temporary or cyclical BOP deficits. It is typically available for
periods of between 12 to 18 months and released gradually, on a
quarterly basis to the recipient member. Its availability depends
heavily on the fulfilment of performance conditions and on periodic
program reviews. The country must pay back (=repurchase its own
currency and pay for it with hard currencies) in 3.25 to 5 years after
each original purchase.

This was followed by the General Agreement to Borrow (GAB) - a
framework reference for all future facilities and by the CFF
(Compensatory Financing Facility). The latter was augmented by loans
available to countries to defray the rising costs of basic edibles and
foodstuffs (cereals). The two merged to become CCFF (Compensatory and
Contingency Financing Facility) - intended to compensate members with
shortfalls in export earnings attributable to circumstances beyond
their control and to help them to maintain adjustment programs in the
face of external shocks. It also helps them to meet the rising costs of
cereal imports and other external contingencies (some of them arising
from previous IMF lending!). This credit is also available for a period
of 3.25 to 5 years.

1971 was an important year in the history of the world's financial
markets. The Bretton Woods Agreements were cancelled but instead of
pulling the carpet under the proverbial legs of the IMF - it served to
strengthen its position. Under the Smithsonian Agreement, it was put in
charge of maintaining the central exchange rates (though inside much
wider bands). A committee of 20 members was set up to agree on a new
world monetary system (known by its unfortunate acronym, CRIMS). Its
recommendations led to the creation of the EFF (extended Financing
Facility), which provided, for the first time, MEDIUM term assistance
to members with BOP difficulties, which resulted from structural or
macro-economic (rather than conjectural) economic changes. It served to
support medium term (3 years) programs. In other respects, it is a
replica of the SBA, except that that the repayment (=the repurchase, in
IMF jargon) is in 4.5-10 years.

The 70s witnessed a proliferation of multilateral assistance programs.
The IMF set up the SA (Subsidy Account), which assisted members to
overcome the two destructive oil price shocks. An oil facility was
formed to ameliorate the reverberating economic shock waves. A Trust
Fund (TF) extended BOP assistance to developing member countries,
utilizing the profits from gold sales. To top all these, an SFF
(Supplementary Financing Facility) was established.

During the 1980s, the IMF had a growing role in various adjustment
processes and in the financing of payments imbalances. It began to use
a basket of 5 major currencies. It began to borrow funds for its
purposes - the contributions did not meet its expanding roles.

It got involved in the Latin American Debt Crisis - namely, in problems
of debt servicing. It is to this period that we can trace the emergence
of the New IMF: invigorated, powerful, omnipresent, omniscient, mildly
threatening - the monetary police of the global economic scene.

The SAF (Structural Adjustment Facility) was created. Its role was to
provide BOP assistance on concessional terms to low income, developing
countries (Macedonia benefited from its successor, ESAF). Five years
later, following the now unjustly infamous Louvre Accord, which dealt
with the stabilization of exchange rates), it was extended to become
ESAF (Extended Structural Adjustment Facility). The idea was to support
low-income members, which undertake a strong 3-year macroeconomic and
structural program intended to improve their BOP and to foster growth -
providing that they are enduring protracted BOP problems. ESAF loans
finance 3-year programs with a subsidized symbolic interest rate of
0.5% per annum. The country has 5 years grace and the loan matures in
10 years. The economic assessment of the country is assessed quarterly
and biannually. Macedonia is only one of 79 countries eligible to
receive ESAF funds.

In 1989, the IMF started linking support for debt reduction strategies
of member countries to sustained medium term adjustment programs with
strong elements of structural reforms and with access to IMF resources
for the express purposes of retiring old debts, reducing outstanding
borrowing from foreign sources or otherwise servicing debt without
resorting to rescheduling it. To these ends, the IMF created the STF
(Systemic Transformation Facility - also used by Macedonia). It was a
temporary outfit, which expired in April 1995. It provided financial
assistance to countries, which faced BOP difficulties, which arose from
a transformation (transition) from planned economies to market ones.
Only countries with what were judged by the IMF to have been severe
disruptions in trade and payments arrangements benefited from it. It
had to be repaid in 4.5-10 years.

In 1994, the Madrid Declaration set different goals for different
varieties of economies. Industrial economies were supposed to emphasize
sustained growth, reduction in unemployment and the prevention of a
resurgence of by now subdued inflation. Developing countries were
allocated the role of extending their growth. Countries in transition
had to engage in bold stabilization and reform to win the Fund's
approval. A new category was created, in the best of acronym tradition:
HIPCs (Heavily Indebted Poor Countries). In 1997 New Arrangements to
Borrow (NAB) were set in motion. They became the first and principal
recourse in case that IMF supplementary resources were needed. No one
imagined how quickly these would be exhausted and how far sighted these
arrangement have proven to be. No one predicted the area either:
Southeast Asia.

Despite these momentous structural changes in the ways in which the IMF
extends its assistance, the details of the decision-making processes
have not been altered for more than half a century. The IMF has a Board
of Governors. It includes 1 Governor (plus 1 Alternative Governor) from
every member country (normally, the Minister of Finance or the Governor
of the Central Bank of that member). They meet annually (in the autumn)
and coordinate their meeting with that of the World Bank.

The Board of Governors oversees the operation of a Board of Executive
Directors, which looks after the mundane, daily business. It is
composed of the Managing Director (Michel Camdessus from 1987 till
2000) as the Chairman of the Board and 24 Executive Directors appointed
or elected by big members or groups of members. There is also an
Interim Committee of the International Monetary System.

The members' voting rights are determined by their quota which (as we
said) is determined by their contributions and by their needs. The USA
is the biggest gun, followed by Germany, Japan, France and the UK.

There is little dispute that the IMF is a big, indispensable, success.
Without it the world monetary system would have entered phases of
contraction much more readily. Without the assistance that it extends
and the bitter medicines that it administers - many countries would
have been in an even worse predicament than they are already. It
imposes monetary and fiscal discipline, it forces governments to plan
and think, it imposes painful adjustments and reforms. It serves as a
convenient scapegoat: the politicians can blame it for the economic
woes that their voters (or citizens) endure. It is very useful. Lately,
it lends credibility to countries and manages crisis situations (though
still not very skilfully).

This scapegoat role constitutes the basis for the first criticism.
People the world over tend to hide behind the IMF leaf and blame the
results of their incompetence and corruption on it. Where a market
economy could have provided a swifter and more resolute adjustment -
the diversion of scarce human and financial resources to negotiating
with the IMF seems to prolong the agony. The abrogation of
responsibility by decision makers poses a moral hazard: if successful -
the credit goes to the politicians, if failing - the IMF is always to
blame. Rage and other negative feeling, which would have normally
brought about real, transparent, corruption-free, efficient market
economy are vented and deflected. The IMF money encourages corrupt and
inefficient spending because it cannot really be controlled and
monitored (at least not on a real time basis). Also, the more resources
governments have - the more will be lost to corruption and
inefficiency. Zimbabwe is a case in point: following a dispute
regarding an austerity package dictated by the IMF (the government did
not feel like cutting government spending to that extent) - the country
was cut off from IMF funding. The results were surprising: with less
financing from the IMF (and as a result - from donor countries, as
well) - the government was forced to rationalize and to restrict its
spending. The IMF would not have achieved these results because its
control mechanisms are flawed: they rely to heavily on local, official
input and they are remote (from Washington). They are also underfunded.

Despite these shortcomings, the IMF assumed two roles, which were not
historically identified with it. It became a country credit risk-rating
agency. The absence of an IMF seal of approval could - and usually does
- mean financial suffocation. No banks or donor countries will extend
credit to a country lacking the IMF's endorsement. On the other hand,
as authority (to rate) is shifted - so does responsibility. The IMF
became a super-guarantor of the debts of both the public and private
sectors. This encourages irresponsible lending and investments (why
worry, the IMF will bail me out in case of default). This is the "Moral
Hazard": the safety net is fast being transformed into a licence to
gamble. The profits accrue to the gambler - the losses to the IMF. This
does not encourage prudence or discipline.

The IMF is too restricted both in its ability to operate and in its
ability to conceptualise and to innovate. It is too stale: a scroll in
the age of the video clip. It, therefore, resorts to prescribing the
same medicine of austerity to all the country patients, which are
suffering from a myriad of economic diseases. No one would call a
doctor who uniformly administers penicillin - a good doctor and, yet,
this, exactly is what the IMF is doing. And it is doing so with utter
disregard and ignorance of the local social, cultural (even economic)
realities. Add to this the fact that the IMF's ability to influence the
financial markets in an age of globalisation is dubious (to use a gross
understatement - the daily turnover in the foreign exchange markets
alone is 6 times the total equity of this organization). The result is
fiascos like South Korea where a 60 billion USD aid package was
consumed in days without providing any discernible betterment of the
economic situation. More and more, the IMF looks anachronistic (not to
say archaic) and its goals untenable.

The IMF also displays the whole gamut of problems which plague every
bureaucratic institution: discrimination (why help Mexico and not
Bulgaria - is it because it shares no border with the USA),
politicisation (South Korean officials complained that the IMF
officials were trying to smuggle trade concessions to the USA in an
otherwise totally financial package of measures) and too much red tape.
But this was to be expected of an organization this size and with so
much power.

The medicine is no better than the doctor or, for that matter, than the
disease that it is intended to cure.

The IMF forces governments to restrict flows of capital and goods.
Reducing budget deficits belongs to the former - reducing balance of
payments deficits, to the latter. Consequently, government find
themselves between the hard rock of not complying with the IMF
performance demands (and criteria) - and the hammer of needing its
assistance more and more often, getting hooked on it.

The crusader-economist Michel Chossudowski wrote once that the IMF's
adjustment policies "trigger the destruction of whole economies". With
all due respect (Chossudowski conducted research in 100 countries
regarding this issue), this looks a trifle overblown. Overall, the IMF
has beneficial accounts, which cannot be discounted so off-handedly.
But the process that he describes is, to some extent, true:

Devaluation (forced on the country by the IMF in order to encourage its
exports and to stabilize its currency) leads to an increase in the
general price level (also known as inflation). In other words:
immediately after a devaluation, the prices go up (this happened in
Macedonia and led to a doubling of the inflation which persisted before
the 16% devaluation in July 1997). High prices burden businesses and
increase their default rates. The banks increase their interest rates
to compensate for the higher risk (=higher default rate) and to claw
back part of the inflation (=to maintain the same REAL interest rates
as before the increase in inflation). Wages are never fully indexed.
The salaries lag after the cost of living and the purchasing power of
households is eroded. Taxes fall as a result of a decrease in wages and
the collapse of many businesses and either the budget is cruelly cut
(austerity and scaling back of social services) or the budget deficit
increases (because the government spends more than it collects in
taxes). Another bad option (though rarely used) is to raise taxes or
improve the collection mechanisms. Rising manufacturing costs (fuel and
freight are denominated in foreign currencies and so do many of the
tradable inputs) lead to pricing out of many of the local firms (their
prices become too high for the local markets to afford). A flood of
cheaper imports ensues and the comparative advantages of the country
suffer. Finally, the creditors take over the national economic policy
(which is reminiscent of darker, colonial times).

And if this sounds familiar it is because this is exactly what is
happening in Macedonia today. Communism to some extent was replaced by
IMF-ism. In an age of the death of ideologies, this is a poor - and
dangerous - choice. The country spends 500 million USD annually on
totally unnecessary consumption (cars, jam, detergents). It gets this
money from the IMF and from donor countries but an awful price: the
loss of its hard earned autonomy and freedom. No country is independent
if the strings of its purse are held by others.


(Article written in January, 1998)


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The IMF Deconstructed


A Dialogue with Mr. Tom Rodwell



The following is a standard IMF document, taken from its own website.
Underlined phrases are related to categories A and/or B (see below).
The phrases here are general examples as part of general criticism of
the ideological tone and "aesthetic" of the IMF. This dialogue is a
combination of philosophy and economics: does/can the IMF (or any
organization) "facilitate the expansion and balanced growth of
international trade?"


The IMF is the cornerstone and centrepiece of the financial
architecture of the world. Long a sacred cow, it has lately become the
eye of a controversy. Its prescriptions to ailing countries as diverse
as Zimbabwe and Russia have, at times, proven to be inadequate, some
say: ruinous. The IMF is a result of an ideology and its instrument.
This is clearly revealed in its intentionally vaguely phrased
documents. Tom and Sam, a philosopher/journalist/composer and a
philosopher and physicist turned economist, try to read between the
lines (in the best of East European traditions...).

The IMF:

Statutory Purposes

The IMF was created to promote international monetary co-operation; to
facilitate the expansion and balanced growth of international trade; to
promote exchange stability; to assist in the establishment of a
multilateral system of payments; to make its general resources
temporarily available to its members experiencing balance of payments
difficulties under adequate safeguards; and to shorten the duration and
lessen the degree of disequilibrium in the international balances of
payments of members.

Areas of Activity

Surveillance is the process by which the IMF appraises its members'
exchange rate policies within the framework of a comprehensive analysis
of the general economic situation and the policy strategy of each
member. The IMF fulfils its surveillance responsibilities through:
annual bilateral Article IV consultations with individual countries;
multilateral surveillance twice a year in the context of its World
Economic Outlook (WEO) exercise; and precautionary arrangements,
enhanced surveillance, and program monitoring, which provide a member
with close monitoring from the IMF in the absence of the use of IMF
resources. (Precautionary arrangements serve to boost international
confidence in a member's policies. Program monitoring may include the
setting of benchmarks under a shadow program, but it does not
constitute a formal IMF endorsement.)

IMF IDEOLOGICAL TONE

Tom:

The nature of the IMF is inextricably linked with its controlling
member state and staff's economic and political viewpoints. The IMF
talks about itself, and about economic/political phenomena generally,
in precisely the same terms. The kind of economics it discusses is one
of authority, monitoring, and, dare I say it, intervention. While the
IMF allegedly intends to promote "international monetary co-operation"
and to "facilitate the expansion and balanced growth of international
trade" (standard free-market shibboleths), it consistently refers to
"enhanced surveillance", "close monitoring", and "precautionary
arrangements". Orwellian undertones are hardly muffled.

Sam:

The IMF has yet to adopt the "client-orientated" approach. It harbours
deep (and oft-justified) distrust of the willingness of governments to
blindly follow its dictates. It is a paranoid organization, based on
authoritarian techniques of "negotiations" and "agreement". Euphemisms
rule. Normally, the IMF holds "consultations" with the host
governments. These are rather one-sided affairs. The governments are
needy and impoverished ones. They lack the cadre of educated people
needed in order to truly engage the IMF in constructive discourse. They
are intimidated by the bullying tactics of the IMF and of its
emissaries. The tone is imperial and impatient.

Tom:

The IMF clearly sees itself as the authority on international
development ideology. International development becomes an ideological
construction, with subsets of subjective terms: free trade, financial
contact, and economic vision. Many of these terms are defined in such a
way that they enframe that which they discuss. The ideological position
of the influential members is often significantly different from the
developing countries. Sadly, the ideology only becomes reality when it
is part of every day life in the developing nations.

Sam:

Worse still, the IMF's language is riddled with contradictions in terms
and logical fallacies. Let us review a few: International monetary
co-operation in IMF lingo means exchange (rate) stability. But with
such stability the expansion and balanced growth of international trade
is not achievable. Trade is based on dynamic exchange rate disparities.
Moreover, there is nothing inherently wrong in such dynamism. The
changing disparities reflect the relative advantages of the countries
involved. In a world of fixed exchange rates - trade stagnates. And
what is "balanced" growth anyhow? Trade has been growing at 3-5%
annually for a few years now. Is this balanced, overdone or
insufficient, as some free trade zealots cry out?

Additionally, a regime of stable exchange rates won't go far towards
facilitating the second result: to shorten the duration and lessen the
degree of disequilibrium in the international balances of payments of
members. If a country runs a gigantic balance of payments deficit but
is not permitted by the IMF to devalue its currency, in the name of
exchange rate stability - its balance of payments is only likely to
worsen. Take Macedonia: with a 14% of GDP deficit in its BOP - it MUST
devalue and URGENTLY. Its currency is HEAVILY overvalued and the whole
economy is deflating. Yet, the IMF is about to repeat there the same
grave error it committed in Russia: to protect the currency, the whole
system is drained of liquidity (demonetised), interest rates are kept
insanely high and the balance of payments deficit skyrockets, until the
inevitable collapse. If the IMF is interested in self-perpetuating
crisis situations in order to preserve its clout - it is doing a fine
job indeed.

The IMF was never authorized to rate the creditworthiness of its
shareholders (=the countries). It is acting ultra vires in providing
clean or soiled bills of financial health. Its ability to strangle a
country financially if it does not comply with its programmes - no
matter what the social or economic costs are - is very worrying.

LANGUAGE

Tom:

The language in the IMF document can be roughly divided into two
sections.

A Phrases concerning the-history-role/activities-nature of the IMF B
Phrases concerning - subjective economic and political concepts - local
policy - international policy.

Here's my summary of the kind of language used:

1. Quasi-intellectual terms ("big words for a dismal science"),
e.g. disequilibrium, comprehensive analysis, policy strategy;

2. Spin-doctoring euphemisms, e.g. promote, facilitate, balance,
co-operation, safeguards, monitoring, responsibilities, precautionary
arrangements, endorsement, benchmarks. This also includes intimidating
terms such as "surveillance";

3. Distancing terms, e.g. members, general economic situation,
policy strategy.

(1) Is simply pretension. The average "comprehensive analysis"
undertaken by the IMF is often curiously selective and self-serving.

Sam:

Not to mention cursory "kangaroo-court" economic judgements replete
with clear contempt and disregard for the "natives". The latter are
held to be cheats who are merely trying to extort as much money as they
can and probably stash it in Swiss bank accounts (private ones,
needless to say).

Tom:

(2) Is the most obnoxious section. These phrases mislead. They paint a
picture of the stability and democracy that supposedly is Western
capitalism. They paint an image of the IMF as a fair, unbiased, caring,
and democratic organisation. These phrases also confuse in that they
connect "nice terms" (like balance, co-operation and safeguards) with
complicated and subjective economic terms. Thus the language often
functions as a "pacifier", or perhaps as a "chaser", softening the blow
of the "hard stuff".

(3) Indicates the insular attitude of the IMF. Their "grand scheme" is
apparently removed from localised activities and concerns.

Sam:

There is one place, which absolutely complies with the IMF utopia.
There is no inflation there. People do not particularly care if the
exchange rate never changes or what is the outlandish level of interest
rates needed to ensure this eerie stability. It is the cemetery.

The IMF's deadly sin, yet to yield its grapes of wrath, is not to
understand that economics is a branch of psychology and should be at
the service of humans and society. When setting economic goals one must
always act with pragmatism and compassion. In the realm of humans, to
be compassionate IS to be pragmatic. Otherwise, reality is bound to
frustrate the most rigorous planning. If social costs are not accounted
for - unemployment will bring about crime and a black market, which
will render the official market and its statistics meaningless, for
instance. If exchange rate stability supported by inanely high interest
rates prevails over the goals of industrial reconstruction and
export-enhancement, the result is erosion of the very fabric of
society. Lack of liquidity translates into a lack of trust in fellow
citizens and in institutions. If public expenditures are harnessed too
strenuously - corruption will flourish. The IMF's propensity to provide
a "catchall" one-measure-fits-all panacea is nothing short of
shortsighted and disastrous. It cannot be that the same financial
recipe will apply to Pakistan, Macedonia, Estonia and Russia. Yet, a
close scrutiny of the four IMF programmes imposed upon these countries
(Estonia wriggled out) - demonstrates striking similarities. It is a
fact that there are conflicting CAPITALIST economic models. Not because
human nature is so diverse - and it is - but because different people
have different preferences. Americans prefer profits and self-reliance
to social justice. Not so the French. Paradoxically, this is exactly
why markets exist: to trade in disparate preferences. The IMF is a
central planning agency but as opposed to previous models it believes
that it is omniscient - and knows that it is omnipotent.

Tom:

The IMF's desire to paint a kind of stasis on the world economy is, as
you have said, a kind of religious-ideological defence mechanism. The
language employed by the IMF is an attempt to give form to the
haphazard and contradictory nature of international trade and
development. This language functions in a similar way to their
policies, in that both seek to describe and promote a uniform
concept/practice of international economics.

The reference to economics as a branch of psychology is spot-on. It is
ignorant, unethical and unworkable to attempt to impose or promote any
kind of exclusive and conformist concept of "the economy". Indeed, the
IMF's bizarre language and policies reveal a mistaken view (commonly
held) that there is such a single practice or entity called "The
Economy", or "International Trade". Absolutist and limiting concepts of
economy (communism, now capitalism) are increasingly being shown to be
unworkable. The language used by the IMF is evidence of the
impractical, restrictive and unethical nature of an elitist
concept/practice of economics.

FINAL STATEMENT

Tom:

The IMF is a part of the industry of "trade", "development", and
"economics" in general. This criticism of the language found in their
promotional documents is, in some ways, a criticism of the
aforementioned "economics industry" in general. When I first read the
IMF's comments/reports, I was struck by the combination of arrogance
and defensiveness (in a tone of barely muted desperation). I now
believe that these documents were written with the first whiff of fear
in the NYC air-conditioned office ambience. No doubt that those miners,
steel workers, farmers, and manufacturers whose own industries were
flattened by free trade hysteria will feel a tiny degree of
satisfaction, if we really are seeing the decline of the "economics
industry".

The IMF is unethical because it espouses an abstract concept "free
trade" that influences the complex process of "development" (too often
defined with insufficient complexity) while being unconcerned with
specific and local realities and interactions. It is simply too
abstract: international development is not assisted on a truly local
level by investment in the military, state, or heavy industry. It is
ridiculous for a third world country to build massive steel-plants, or
allow foreign companies to extract vast amounts of timber or oil, when
local people are concerned with finding clean drinking water. This
abstraction criticism stands for the entire "economics industry", and
will continue to do so while it has an insufficiently perceptive and
complex understanding of localised realities.

The language of economics is murky, and our criticism of it will remain
justified as long as the IMF (et al) produce officious and misleading
documents. The practice of economics is also murky, and our criticism
of it too will remain justified as long as policies that are illogical,
impractical and unethical are produced and enforced.

Sam:

The IMF is an essential institution. There must exist a multilateral
organization geared towards the maintenance of the marketplace itself.
But the IMF should get rid of its Multiple Personality Disorder. It
must first decide WHAT is it: a lender of last resort? A
creditworthiness-rating agency, sort of an ominous Moody's? A
missionary organization, preaching a particular brand of the religion
known as capitalism? A commercially-orientated, return-on-investment
based financial organization? Dumping grounds for aging politicians and
third-rate bankers doing the USA's bidding? Whatever the definition, it
is bound to be far superior to the current muddled state of affairs.

Second, the IMF must maintain transparency. It controls vast resources.
It is prone to be inefficient (not to say corrupt). Transparency
humbles, ensures the injection of fresh intellectual blood, improves
performance, and gives taxpayers a good feeling. The IMF needs to be
humbled. Its actions have been politicised lately. It intervenes in the
internal affairs of dozens of sovereign, reasonably managed countries -
and its intervention is not confined to matters economic. It develops
an internal "Organizational cult" (we know best and always). It is one
of the most rigid and intellectually handicapped organizations in the
world, yet it considers itself a bastion of economic ingenuity and
righteousness. Delusions of grandeur are dangerous on such a scale.

Third, the revamped, no-longer-haughty, IMF must be able to fine tune
to different social and cultural constraints in different spots of the
world. It must strive at least to BE SEEN to be trying to minimize the
social costs of its often-botched plans. It must not behave as a
colonial power, which it often does. It must establish trust rather
than impose discipline. Otherwise, it stands no chance to laugh last.
Actually, it stands no chance even to survive.


(Article published January 4, 1999 in "The New Presence")


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Financial Crisis, Global Capital Flows and the International Financial
Architecture



The recent upheavals in the world financial markets were quelled by the
immediate intervention of both international financial institutions
such as the IMF and of domestic ones in the developed countries, such
as the Federal Reserve in the USA. The danger seems to have passed,
though recent tremors in South Korea, Brazil and Taiwan do not augur
well. We may face yet another crisis of the same or a larger magnitude
momentarily.

What are the lessons that we can derive from the last crisis to avoid
the next?

The first lesson, it would seem, is that short term and long-term
capital flows are two disparate phenomena with very little in common.
The former is speculative and technical in nature and has very little
to do with fundamental realities. The latter is investment oriented and
committed to the increasing of the welfare and wealth of its new
domicile. It is, therefore, wrong to talk about "global capital flows".
There are investments (including even long term portfolio investments
and venture capital) - and there is speculative, "hot" money. While
"hot money" is very useful as a lubricant on the wheels of liquid
capital markets in rich countries - it can be destructive in less
liquid, immature economies or in economies in transition.

The two phenomena should be accorded a different treatment. While
long-term capital flows should be completely liberalized, encouraged
and welcomed - the short term, "hot money" type should be controlled
and even discouraged. The introduction of fiscally oriented capital
controls (as Chile has implemented) is one possibility. The less
attractive Malaysian model springs to mind. It is less attractive
because it penalizes both the short term and the long-term financial
players. But it is clear that an important and integral part of the new
International Financial Architecture MUST be the control of speculative
money in pursuit of ever-higher yields. There is nothing inherently
wrong with high yields - but the capital markets provide yields
connected to economic depression and to price collapses through the
mechanism of short selling and through the usage of certain
derivatives. This aspect of things must be neutered or at least
countered.

The second lesson is the important role that central banks and other
financial authorities play in the precipitation of financial crises -
or in their prolongation. Financial bubbles and asset price inflation
are the result of euphoric and irrational exuberance - said the
Chairman of the Federal Reserve Bank of the United States, the
legendary Mr. Greenspan and who can dispute this? But the question that
was delicately sidestepped was: WHO is responsible for financial
bubbles? Expansive monetary policies, well-timed signals in the
interest rates markets, liquidity injections, currency interventions,
and international salvage operations - are all co-ordinated by central
banks and by other central or international institutions. Official
INACTION is as conducive to the inflation of financial bubbles as is
official ACTION. By refusing to restructure the banking system, to
introduce appropriate bankruptcy procedures, corporate transparency and
good corporate governance, by engaging in protectionism and
isolationism, by avoiding the implementation of anti competition
legislation - many countries have fostered the vacuum within which
financial crises breed.

The third lesson is that international financial institutions can be of
some help - when not driven by political or geopolitical considerations
and when not married to a dogma. Unfortunately, these are the rare
cases. Most IFIs - notably the IMF and, to a lesser extent, the World
Bank - are both politicised and doctrinaire. It is only lately and
following the recent mega-crisis in Asia, that IFIs began to "reinvent"
themselves, their doctrines and their recipes. This added conceptual
and theoretical flexibility led to better results. It is always better
to tailor a solution to the needs of the client. Perhaps this should be
the biggest evolutionary step:

That IFIs will cease to regard the countries and governments within
their remit as inefficient and corrupt beggars, in constant need of
financial infusions. Rather they should regard these countries as
CLIENTS, customers in need of service. After all, this, exactly, is the
essence of the free market - and it is from IFIs that such countries
should learn the ways of the free market.

In broad outline, there are two types of emerging solutions. One type
is market oriented - and the other, interventionist. The first type
calls for free markets, specially designed financial instruments (see
the example of the Brady bonds) and a global "laissez faire"
environment to solve the issue of financial crises. The second approach
regards the free markets as the SOURCE of the problem, rather than its
solution. It calls for domestic and where necessary international
intervention and assistance in resolving financial crises.

Both approaches have their merits and both should be applied in varying
combinations on a case by case basis.

Indeed, this is the greatest lesson of all:

There are NO magic bullets, final solutions, right ways and only
recipes. This is a trial and error process and in war one should not
limit one's arsenal. Let us employ all the weapons at our disposal to
achieve the best results for everyone involved.


(Article written on August 18, 1999)


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The Shadowy World of International Finance



Strange, penumbral, characters roam the boardrooms of banks in the
countries in transition. Some of them pop apparently from nowhere,
others are very well connected and equipped with the most excellent
introductions. They all peddle financial transaction,s which are too
good to be true and often are. In the unctuously perfumed propinquity
of their Mercedesed, Rolex waving entourage - the polydipsic natives
dissolve in their irresistible charm and the temptations of the cash:
mountainous returns on capital, effulgent profits, no collaterals,
track record, or business plan required. Total security is cloyingly
assured.

These Fausts roughly belong to four tribes:

The Shoppers

These are the shabby operators of the marginal shadows of the world of
finance. They broker financial deals with meretricious sweat only to be
rewarded their meagre, humiliated fees. Most of their deals do not
materialize. The principle is very simple:

They approach a bank, a financial institution, or a borrower and say:
"We are connected to banks or financial institutions in the West. We
can bring you money in the form of credits. But to do that - you must
first express interest in getting this money. You must furnish us with
a bank guarantee/promissory note/letter of intent that indicates that
you desire the credit and that you are willing to provide a liquid
financial instrument to back it up." Having obtained such instruments,
the shoppers begin to "shop around". They approach banks and financial
institutions (usually, in the West). This time, they reverse their
text: "We have an excellent client, a good borrower. Are you willing to
lend to it?" An informal process of tendering ensues. Sometimes it ends
in a transaction and the shopper collects a small commission (between
one quarter of a percentage point and two percentage points - depending
on the amount). Mostly it doesn't -and the Flying Dutchman resumes his
wanderings looking for more venal gulosity and less legal probity.

The Con-Men

These are crooks who set up elaborate schemes ("sting operations") to
extract money from unsuspecting people and financial institutions. They
establish "front" or "phantom" firms and offices throughout the world.
They tempt the gullible by offering them enormous, immediate, tax-free,
effort-free, profits. They let the victims profit in the first round or
two of the scam. Then, they sting: the victims invest money and it
evaporates together with the dishonest operators. The "offices" are
deserted, the fake identities, the forged bank references, the
falsified guarantees are all exposed (often with the help of an inside
informant).

Probably the most famous and enduring scam is the "Nigerian-type
Connection". Letters - allegedly composed by very influential and
highly placed officials - are sent out to unsuspecting businessmen. The
latter are asked to make their bank accounts available to the former,
who profess to need the third party bank accounts through which to
funnel the sweet fruits of corruption. The account owners are promised
huge financial rewards if they collaborate and if they bear some
minor-by-comparison upfront costs. The con-men pocket these "expenses"
and vanish. Sometimes, they even empty the accounts of their entire
balance as they evaporate.

The Launderers

A lot of cash goes undeclared to tax authorities in countries in
transition. The informal economy (the daughter of both criminal and
legitimate parents) comprises between 15% (Slovenia) and 50% (Russia,
Macedonia) of the official one. Some say these figures are a deliberate
and ferocious understatement. These are mind boggling amounts, which
circulate between financial centres and off shore havens in the world:
Cyprus, the Cayman Islands, Liechtenstein (Vaduz), Panama and dozens of
aspiring laundrettes.

The money thus smuggled is kept in low-yielding cash deposits. To
escape the cruel fate of inflationary corrosion, it has to be
reinvested. It is stealthily re-introduced to the very economy that it
so sought to evade, in the form of investment capital or other
financial assets (loans and credits). Its anxious owners are
preoccupied with legitimising their stillborn cash through the conduit
of tax-fearing enterprises, or with lending it to same. The emphasis is
on the word: "legitimate". The money surges in through mysterious and
anonymous foreign corporations, via off-shore banking centres, even
through respectable financial institutions (the Bank of New York we
mentioned?). It is easy to recognize a laundering operation. Its
hallmark is a pronounced lack of selectivity. The money is invested in
anything and everything, as long as it appears legitimate.
Diversification is not sought by these nouveau tycoons and they have no
core investment strategy. They spread their illicit funds among dozens
of disparate economic activities and show not the slightest interest in
the putative yields on their investments, the maturity of their assets,
the quality of their newly acquired businesses, their history, or real
value. Never the sedulous, they pay exorbitantly for all manner of
prestidigital endeavours. The future prospects and other normal
investment criteria are beyond them. All they are after is a mirage of
lapidarity.

The Investors

This is the most intriguing group. Normative, law abiding, businessmen,
who stumbled across methods to secure excessive yields on their capital
and are looking to borrow their way into increasing it. By cleverly
participating in bond tenders, by devising ingenious option strategies,
or by arbitraging - yields of up to 300% can be collected in the
immature markets of transition without the normally associated risks.
These sub-species can be found mainly in Russia and in the Balkans.

Its members often buy sovereign bonds and notes at discounts of up to
80% of their face value. Russian obligations could be had for less in
August 1998 and Macedonian ones during the Kosovo crisis. In cahoots
with the issuing country's central bank, they then convert the
obligations to local currency at par (=for 100% of their face value).
The difference makes, needless to add, for an immediate and hefty
profit, yet it is in (often worthless and vicissitudinal) local
currency. The latter is then hurriedly disposed of (at a discount) and
sold to multinationals with operations in the country of issue, which
are in need of local tender. This fast becomes an almost addictive
avocation.

Intoxicated by this pecuniary nectar, the fortunate, those privy to the
secret, try to raise more capital by hunting for financial instruments
they can convert to cash in Western banks. A bank guarantee, a
promissory note, a confirmed letter of credit, a note or a bond
guaranteed by the Central Bank - all will do as deposited collateral
against which a credit line is established and cash is drawn. The cash
is then invested in a new cycle of inebriation to yield fantastic
profits.

It is easy to identify these "investors". They eagerly seek financial
instruments from almost any local bank, no matter how suspect. They
offer to pay for these coveted documents (bank guarantees, bankers'
acceptances, letters of credit) either in cash or by lending to the
bank's clients and this within a month or more from the date of their
issuance. They agree to "cancel" the locally issued financial
instruments by offering a "counter-financial-instrument" (safe keeping
receipt, contra-guarantee, counter promissory note, etc.). This
"counter-instrument" is issued by the very Prime World or European Bank
in which the locally issued financial instruments are deposited as
collateral.

The Investors invariably confidently claim that the financial
instrument issued by the local bank will never be presented or used
(which is true) and that this is a risk free transaction (which is not
entirely so). If they are forced to lend to the bank's clients, they
often ignore the quality of the credit takers, the yields, the
maturities and other considerations, which normally tend to interest
lenders very much.

Whether a financial instrument cancelled by another is still valid,
presentable and should be honoured by its issuer is still debated. In
some cases it is clearly so. If something goes horribly (and rarely,
admittedly) wrong with these transactions - the local bank stands to
suffer, too.

It all boils down to a terrible hunger, the kind of thirst that can be
quelled only by the denominated liquidity of lucre. In the post nuclear
landscape of this part of the world, a fantasy is shared by both
predators and prey. Circling each other in marble temples, they switch
their roles in dizzying progression. Tycoons and politicians,
industrialists and bureaucrats all vie for the attention of Mammon. The
shifting coalitions of well-groomed man in back stabbed suits, an
hallucinatory carousel of avarice and guile. But every circus folds and
every luna park is destined to shut down. The dying music, the frozen
accounts of the deceived, the bankrupt banks, the Jurassic Park of
skeletal industrial beasts - a muted testimony to a wild age of mutual
assured destruction and self deceit. The future of Eastern and South
Europe. The present of Russia, Albania and Yugoslavia.


Return



The Typology of Financial Scandals



Tulipmania - this is the name coined for the first pyramid investment
scheme in history.

In 1634, tulip bulbs were traded in a special exchange in Amsterdam.
People used these bulbs as means of exchange and value store. They
traded them and speculated in them. The rare black tulip bulbs were as
valuable as a big mansion house. The craze lasted four years and it
seemed that it would last forever. But this was not to be.

The bubble burst in 1637. In a matter of a few days, the price of tulip
bulbs was slashed by 96%!

This specific pyramid investment scheme was somewhat different from the
ones, which were to follow it in human financial history elsewhere in
the world. It had no "organizing committee", no identifiable group of
movers and shakers, which controlled and directed it. Also, no explicit
promises were ever made concerning the profits, which the investors
could expect from participating in the scheme - or even that profits
were forthcoming to them.

Since then, pyramid schemes have evolved into intricate psychological
ploys.

Modern ones have a few characteristics in common:

First, they involve ever growing numbers of people. They mushroom
exponentially into proportions that usually threaten the national
economy and the very fabric of society. All of them have grave
political and social implications.

Hundreds of thousands of investors (in a population of less than 3.5
million souls) were deeply enmeshed in the 1983 banking crisis in
Israel.

This was a classic pyramid scheme: the banks offered their own shares
for sale, promising investors that the price of the shares will only go
up (sometimes by 2% daily). The banks used depositors' money, their
capital, their profits and money that they borrowed abroad to keep this
impossible and unhealthy promise. Everyone knew what was going on and
everyone was involved.

The Ministers of Finance, the Governors of the Central Bank assisted
the banks in these criminal pursuits. This specific pyramid scheme -
arguably, the longest in history - lasted 7 years.

On one day in October 1983, ALL the banks in Israel collapsed. The
government faced such civil unrest that it was forced to compensate
shareholders through an elaborate share buyback plan, which lasted 9
years. The total indirect damage is hard to evaluate, but the direct
damage amounted to 6 billion USD.

This specific incident highlights another important attribute of
pyramid schemes: investors are promised impossibly high yields, either
by way of profits or by way of interest paid. Such yields cannot be
derived from the proper investment of the funds - so, the organizers
resort to dirty tricks.

They use new money, invested by new investors - to pay off the old
investors.

The religion of Islam forbids lenders to charge interest on the credits
that they provide. This prohibition is problematic in modern day life
and could bring modern finance to a complete halt.

It was against this backdrop, that a few entrepreneurs and religious
figures in Egypt and in Pakistan established what they called: "Islamic
banks". These banks refrained from either paying interest to depositors
- or from charging their clients interest on the loans that they doled
out. Instead, they have made their depositors partners in fictitious
profits - and have charged their clients for fictitious losses. All
would have been well had the Islamic banks stuck to healthier business
practices.

But they offer impossibly high "profits" and ended the way every
pyramid ends: they collapsed and dragged economies and political
establishments with them.

The latest example of the price paid by whole nations due to failed
pyramid schemes is, of course, Albania 1997. One third of the
population was heavily involved in a series of heavily leveraged
investment plans, which collapsed almost simultaneously. Inept
political and financial crisis management led Albania to the verge of
disintegration into civil war.

But why must pyramid schemes fail? Why can't they continue forever,
riding on the back of new money and keeping every investor happy, new
and old?

The reason is that the number of new investors - and, therefore, the
amount of new money available to the pyramid's organizers - is limited.
There are just so many risk takers. The day of judgement is heralded by
an ominous mismatch between overblown obligations and the trickling
down of new money. When there is no more money available to pay off the
old investors, panic ensues. Everyone wants to draw money at the same
time. This, evidently, is never possible - some of the money is usually
invested in real estate or was provided as a loan. Even the most stable
and healthiest financial institutions never put aside more than 10% of
the money deposited with them.

Thus, pyramids are doomed to collapse.

But, then, most of the investors in pyramids know that pyramids are
scams, not schemes. They stand warned by the collapse of other pyramid
schemes, sometimes in the same place and at the same time. Still, they
are attracted again and again as butterflies are to the fire and with
the same results.

The reason is as old as human psychology: greed, avarice. The
organizers promise the investors two things: (1) that they could draw
their money anytime that they want to and (2) that in the meantime,
they will be able to continue to receive high returns on their money.

People know that this is highly improbable and that the likelihood that
they will lose all or part of their money grows with time. But they
convince themselves that the high profits or interest payments that
they will be able to collect before the pyramid collapses - will more
than amply compensate them for the loss of their money. Some of them
hope to succeed in drawing the money before the imminent collapse,
based on "warning signs". In other words, the investors believe that
they can outwit the organizers of the pyramid. The investors
collaborate with the organizers on the psychological level: cheated and
deceiver engage in a delicate ballet leading to their mutual downfall.

This is undeniably the most dangerous of all types of financial
scandals. It insidiously pervades the very fabric of human
interactions. It distorts economic decisions and it ends in misery on a
national scale. It is the scourge of societies in transition.

The second type of financial scandals is normally connected to the
laundering of capital generated in the "black economy", namely: the
income not reported to the tax authorities. Such money passes through
banking channels, changes ownership a few times, so that its track is
covered and the identities of the owners of the money are concealed.
Money generated by drug dealings, illicit arm trade and the less exotic
form of tax evasion is thus "laundered".

The financial institutions, which participate in laundering operations,
maintain double accounting books. One book is for the purposes of the
official authorities. Those agencies and authorities that deal with
taxation, bank supervision, deposit insurance and financial liquidity
are given access to this set of "engineered" books. The true record is
kept hidden in another set of books. These accounts reflect the real
situation of the financial institution: who deposited how much, when
and under which conditions - and who borrowed what, when and under
which conditions.

This double standard blurs the true situation of the institution to the
point of no return. Even the owners of the institution begin to lose
track of its activities and misapprehend its real standing.

Is it stable? Is it liquid? Is the asset portfolio diversified enough?
No one knows. The fog enshrouds even those who created it in the first
place. No proper financial control and audit is possible under such
circumstances.

Less scrupulous members of the management and the staff of such
financial bodies usually take advantage of the situation. Embezzlements
are very widespread, abuse of authority, misuse or misplacement of
funds. Where no light shines, a lot of creepy creatures tend to develop.

The most famous - and biggest - financial scandal of this type in human
history was the collapse of the Bank for Credit and Commerce
International LTD. (BCCI) in London in 1991. For almost a decade, the
management and employees of this shady bank engaged in stealing and
misappropriating 10 billion (!!!) USD. The supervision department of
the Bank of England, under whose scrutinizing eyes this bank was
supposed to have been - was proven to be impotent and incompetent. The
owners of the bank - some Arab Sheikhs - had to invest billions of
dollars in compensating its depositors.

The combination of black money, shoddy financial controls, shady bank
accounts and shredded documents proves to be quite elusive. It is
impossible to evaluate the total damage in such cases.

The third type is the most elusive, the hardest to discover. It is very
common and scandal may erupt - or never occur, depending on chance,
cash flows and the intellects of those involved.

Financial institutions are subject to political pressures, forcing them
to give credits to the unworthy - or to forgo diversification (to give
too much credit to a single borrower). Only lately in South Korea, such
politically motivated loans were discovered to have been given to the
failing Hanbo conglomerate by virtually every bank in the country. The
same may safely be said about banks in Japan and almost everywhere
else. Very few banks would dare to refuse the Finance Minister's
cronies, for instance.

Some banks would subject the review of credit applications to social
considerations. They would lend to certain sectors of the economy,
regardless of their financial viability. They would lend to the needy,
to the affluent, to urban renewal programs, to small businesses - and
all in the name of social causes, which, however justified - cannot
justify giving loans.

This is a private case in a more widespread phenomenon: the assets
(=loan portfolios) of many a financial institution are not diversified
enough. Their loans are concentrated in a single sector of the economy
(agriculture, industry, construction), in a given country, or
geographical region. Such exposure is detrimental to the financial
health of the lending institution. Economic trends tend to develop in
unison in the same sector, country, or region. When real estate in the
West Coast of the USA plummets - it does so indiscriminately. A bank,
whose total portfolio is composed of mortgages to West Coast Realtors,
would be demolished.

In 1982, Mexico defaulted on the interest payments of its international
debts. Its arrears grew enormously and threatened the stability of the
entire Western financial system. USA banks - which were the most
exposed to the Latin American debt crisis - had to foot the bulk of the
bill, which amounted to tens of billions of USD. They had almost all
their capital tied up in loans to Latin American countries. Financial
institutions bow to fads and fashions. They are amenable to "lending
trends" and display a herd-like mentality. They tend to concentrate
their assets where they believe that they could get the highest yields
in the shortest possible periods of time. In this sense, they are not
very different from investors in pyramid investment schemes.

Financial mismanagement can also be the result of lax or flawed
financial controls. The internal audit department in every financing
institution - and the external audit exercised by the appropriate
supervision authorities are responsible to counter the natural human
propensity for gambling. The must help the financial organization
re-orient itself in accordance with objective and objectively analysed
data. If they fail to do this - the financial institution would tend to
behave like a ship without navigation tools. Financial audit
regulations (the most famous of which are the American FASBs) trail way
behind the development of the modern financial marketplace. Still,
their judicious and careful implementation could be of invaluable
assistance in steering away from financial scandals.

Taking human psychology into account - coupled with the complexity of
the modern world of finances - it is nothing less than a miracle that
financial scandals are as few and far between as they are.


Return



The Revolt of the Poor


The Demise of Intellectual Property



A year ago I published a book of short stories in Israel. The
publishing house belongs to Israel's leading (and exceedingly wealthy)
newspaper. I signed a contract, which stated that I am entitled to
receive 8% of the income from the sales of the book after commissions
payable to distributors, shops, etc. A few months later, I won the
coveted Prize of the Ministry of Education (for short prose). The prize
money (a few thousand DMs) was snatched by the publishing house on the
legal grounds that all the money generated by the book belongs to them
because they own the copyright.

In the mythology generated by capitalism to pacify the masses, the myth
of intellectual property stands out. It goes like this: if the rights
to intellectual property were not defined and enforced, commercial
entrepreneurs would not have taken on the risks associated with
publishing books, recording records and preparing multimedia products.
As a result, creative people will have suffered because they will have
found no way to make their works accessible to the public. Ultimately,
it is the public, which pays the price of piracy, goes the refrain.

But this is factually untrue. In the USA there is a very limited group
of authors who actually live by their pen. Only select musicians eke
out a living from their noisy vocation (most of them rock stars who own
their labels - George Michael had to fight Sony to do just that) and
very few actors come close to deriving subsistence level income from
their profession. All these can no longer be thought of as mostly
creative people. Forced to defend the intellectual property rights and
the interests of Big Money, Madonna, Michael Jackson, Schwarzenegger
and Grisham are businessmen at least as much as they are artists.

Economically and rationally, we should expect that the costlier a work
of art is to produce and the narrower its market - the more its
intellectual property rights will be emphasized. Consider a publishing
house. A book which costs 50,000 DM to produce with a potential
audience of 1000 purchasers (certain academic texts are like this) -
would have to be priced at a minimum of 100 DM to recoup only the
direct costs. If illegally copied (thereby shrinking the potential
market - some people will prefer to buy the cheaper illegal copies) -
its price would have to go up prohibitively, thus driving out potential
buyers. The story is different if a book costs 10,000 DM to produce and
is priced at 20 DM a copy with a potential readership of 1,000,000
readers. Piracy (illegal copying) will in this case have been more
readily tolerated as a marginal phenomenon.

This is the theory. But the facts are tellingly different. The less the
cost of production (brought down by digital technologies) - the fiercer
the battle against piracy. The bigger the market - the more pressure is
applied to clamp down on the samizdat entrepreneurs. Governments, from
China to Macedonia, are introducing intellectual property laws (under
pressure from rich world countries) and enforcing them belatedly. But
where one factory is closed on shore (as has been the case in mainland
China) - two sprout off shore (as is the case in Hong Kong and in
Bulgaria).

But this defies logic: the market today is huge, the costs of
production and lower (with the exception of the music and film
industries), the marketing channels more numerous (half of the income
of movie studios emanates from video cassette sales), the speedy
recouping of the investment virtually guaranteed. Moreover, piracy
thrives in very poor markets in which the population would anyhow not
have paid the legal price. The illegal product is inferior to the legal
copy (it comes with no literature, warranties or support). So why
should the big manufacturers, publishing houses, record companies,
software companies and fashion houses worry?

The answer lurks in history. Intellectual property is a relatively new
notion. In the near past, no one considered knowledge or the fruits of
creativity (art, design) as "patentable", or as someone "property". The
artist was but a mere channel through which divine grace flowed. Texts,
discoveries, inventions, works of art and music, designs - all belonged
to the community and could be replicated freely. True, the chosen ones,
the conduits, were honoured but were rarely financially rewarded. They
were commissioned to produce their works of art and were salaried, in
most cases. Only with the advent of the Industrial Revolution were the
embryonic precursors of intellectual property introduced but they were
still limited to industrial designs and processes, mainly as embedded
in machinery. The patent was born. The more massified the market, the
more sophisticated the sales and marketing techniques, the bigger the
financial stakes - the larger loomed the issue of intellectual
property. It spread from machinery to designs, processes, books,
newspapers, any printed matter, works of art and music, films (which,
at their beginning were not considered art), software, software
embedded in hardware and even unto genetic material.

Intellectual property rights - despite their noble title - are less
about the intellect and more about property. This is Big Money: the
markets in intellectual property outweigh the total industrial
production in the world. The aim is to secure a monopoly on a specific
work. This is an especially grave matter in academic publishing where
small- circulation magazines do not allow their content to be quoted or
published even for non-commercial purposes. The monopolists of
knowledge and intellectual products cannot allow competition anywhere
in the world - because theirs is a world market. A pirate in Skopje is
in direct competition with Bill Gates. When selling a pirated Microsoft
product - he is depriving Microsoft not only of its income, but of a
client (=future income), of its monopolistic status (cheap copies can
be smuggled into other markets) and of its competition-deterring image
(a major monopoly preserving asset). This is a threat, which Microsoft
cannot tolerate. Hence its efforts to eradicate piracy - successful
China and an utter failure in legally-relaxed Russia.

But what Microsoft fails to understand is that the problem lies with
its pricing policy - not with the pirates. When faced with a global
marketplace, a company can adopt one of two policies: either to adjust
the price of its products to a world average of purchasing power - or
to use discretionary pricing. A Macedonian with an average monthly
income of 160 USD clearly cannot afford to buy the Encyclopaedia
Encarta Deluxe. In America, 100 USD is the income generated in average
day's work. In Macedonian terms, therefore, the Encarta is 20 times
more expensive. Either the price should be lowered in the Macedonian
market - or an average world price should be fixed which will reflect
an average global purchasing power.

Something must be done about it not only from the economic point of
view. Intellectual products are very price sensitive and highly
elastic. Lower prices will be more than compensated for by a much
higher sales volume. There is no other way to explain the pirate
industries: evidently, at the right price a lot of people are willing
to buy these products. High prices are an implicit trade-off favouring
small, elite, select, rich world clientele. This raises a moral issue:
are the children of Macedonia less worthy of education and access to
the latest in human knowledge and creation?

Two developments threaten the future of intellectual property rights.
One is the Internet. Academics - fed up with the monopolistic practices
of professional publications - already publish there in big numbers. I
published a few book on the Internet and they can be freely downloaded
by anyone who has a computer or a modem. There are electronic
magazines, trade journals, billboards, professional publications,
thousand of books are available full text. Hackers even made sites
available from which it is possible to download whole software and
multimedia products. It is very easy and cheap to publish in the
Internet, the barriers to entry are virtually nil, pardon the pun. Web
addresses are provided free of charge, authoring and publishing
software tools are incorporated in most word processors and browser
applications. As the Internet acquires more impressive sound and video
capabilities it will proceed to threaten the monopoly of the record
companies, the movie studios and so on.

The second development is also technological. The oft-vindicated
Moore's law predicted the doubling of computer memory capacity every 18
months. But memory is only one aspect. Another is the rapid
simultaneous advance on all technological fronts. Miniaturization and
concurrent empowerment of the tools available has made it possible for
individuals to emulate much larger scale organizations successfully. A
single person, sitting at home with 5000 USD worth of equipment can
fully compete with the best products of the best printing houses
anywhere. CD-ROMs can be written on, stamped and copied in house. A
complete music studio with the latest in digital technology has been
condensed to the dimensions of a single software. This will lead to
personal publishing, personal music recording and the digitisation of
plastic art. But this is only one side of the story.

The relative advantage of the intellectual property corporation was not
to be found exclusively in its technological prowess. Rather it was in
its vast pool of capital and its marketing clout, market positioning,
sales and distribution. Nowadays, anyone can print a visually
impressive book, using the above-mentioned cheap equipment. But in an
age of an information glut, it is the marketing, the media campaigns,
the distribution and the sales that used to determine the economic
outcome.

This advantage, however, is also being eroded. First, there is a
psychological shift, a reaction to the commercialisation of intellect
and spirit. Creative people are repelled by what they regard as an
oligarchic establishment of institutionalised, lowest common
denominator art and they are fighting back. Secondly, the Internet is a
huge (200 million people), truly cosmopolitan market with its own
marketing channels freely available to all. Even by default, with a
minimum investment, the likelihood of being seen by surprisingly large
numbers of consumers is high.

I published one book the traditional way - and another on the Internet.
In 30 months, I have received 2500 written responses regarding my
electronic book. This means that well over 75,000 people read it (the
industry average is a 3% response rate and my Link Exchange meter
indicates that 160,000 people visited the site by February 2000, with
well over 630,000 impressions in the last 15 months alone). It is a
textbook (in psychopathology) - and 75,000 people (let alone 160,000)
is a lot for this kind of publication. I am so satisfied that I am not
sure that I will ever consider a traditional publisher again. Indeed,
my next book is being published in the very same way.

The demise of intellectual property has lately become abundantly clear.
The old intellectual property industries are fighting tooth and nail to
preserve their monopolies (patents, trademarks, copyright) and their
cost advantages in manufacturing and marketing.

But they are faced with three inexorable processes, which are likely to
render their efforts vain:

The Newspaper Packaging

Print newspapers offer package deals of subsidized content (sold for a
token amount) and subsidizing advertising. In other words, the
advertisers pay for content formation and generation and the reader has
no choice but be exposed to commercial messages as he or she studies
the contents.

This model - adopted earlier by radio and television - rules the
Internet now and will rule the wireless Internet in the future. Content
will be made available free of all pecuniary charges. The consumer will
pay by providing his personal data (demographic data, consumption
patterns and preferences and so on) and by being exposed to advertising.

Thus, content creators will benefit only by sharing in the advertising
cake. They will find it increasingly difficult to implement the old
model of royalties paid for access or ownership of intellectual
property. The venerable (and expensive) "Encyclopaedia Britannica" is
now fully available on-line, free of charge. Its largesse is supported
by advertising.

Disintermediation

A lot of ink has been spilt regarding this important trend. The removal
of layers of brokering and intermediation - mainly on the manufacturing
and marketing levels - is a historic development (though the
continuation of a long term trend). Consider music for instance.
Streaming audio on the Internet or MP3 files, which the consumer can
download will render the CD obsolete. The Internet also provides a
venue for the marketing of niche products and reduces the barriers to
entry previously imposed by the need to engage in costly marketing
("branding") campaigns and manufacturing activities.

This trend is also likely to restore the balance between artist and the
commercial exploiters of his product. The very definition of "artist"
will expand to include all creative people. Everyone will seek to
distinguish oneself, to "brand" himself and to auction her services,
ideas, products, designs, experience, etc. This is a return to
pre-industrial times when artisans ruled the economic scene. Work
stability will vanish and work mobility will increase in a landscape of
shifting allegiances, head hunting, remote collaboration and similar
labour market trends.

Market Fragmentation

In a fragmented market with a myriad of mutually exclusive market
niches, consumer preferences and marketing and sales channels -
economies of scale in manufacturing and distribution are meaningless.
Narrow casting replaces broadcasting, mass customisation replaces mass
production, a network of shifting affiliations replaces the rigid
owned-branch system. The decentralized, intrapreneurship-based
corporation is a late response to these trends. The mega-corporation of
the future is more likely to act as a collective of start-ups than as a
homogeneous, uniform (and, to conspiracy theorists, sinister)
juggernaut it once was.


Return



Scavenger Economies, Predator Economies



The national economies of the world can be divided to the scavenger and
the predator types. The former are parasitic economies, which feed off
the latter. The relationship is often not that of symbiosis, where two
parties maintain a mutually beneficial co-existence. Here, one economy
feeds off others in a way, which is harmful, even detrimental to the
hosts. But this interaction - however undesirable - is the region's
only hope.

The typology of scavenger economies reveals their sources of sustenance:

Conjunctural - These economies feed off historical or economic
conjunctures or crises. They position themselves as a bridge between
warring or conflicting parties. Switzerland rendered this service to
Nazi Germany (1933-1945), Macedonia and Greece to Serbia (1992 to the
present), Cyprus aided and abetted Russia (1987 to the present), Jordan
for Iraq (1991 to the present), and now, Montenegro acts the part for
both Serbia and Kosovo. These economies consist of smuggling, siege
breaking, contraband, arms trade and illegal immigration. They benefit
economically by violating both international and domestic laws and by
providing international outcasts and rogues with alternative routes of
supply, and with goods and services.

Criminal - These economies are infiltrated by criminal gangs or
suffused with criminal behaviour. Such infiltration is two phased: the
properly criminal phase and the money laundering one. In the first
phase, criminal activities yield income and result in wealth
accumulation. In the second one, the money thus generated is laundered
and legitimised. It is invested in legal, above-board activities. The
economy of the USA during the 19th century and in the years of
prohibition was partly criminal. It is reminiscent of the Russian
economy in the 1990s, permeated by criminal conduct as it is. Russians
often compare their stage of capitalist evolution to the American "Wild
West".

Piggyback Service economies - These are economies, which provide
predator economies with services. These services are aimed at
re-establishing economic equilibrium in the host (predator) economies.
Tax shelters are a fine example of this variety. In many countries
taxes are way too high and result in the misallocation of economic
resources. Tax shelters offer a way of re-establishing the economic
balance and re-instating a regime of efficient allocation of resources.
These economies could be regarded as external appendages, shock
absorbers and regulators of their host economies. They feed off market
failures, market imbalances, arbitrage opportunities, shortages and
inefficiencies. Many post-Communist countries have either made the
provision of such services a part of their economic life or are about
to do so. Free zones, off shore havens, off shore banking and
transhipment ports proliferate, from Macedonia to Archangelsk.

Aid economies - Economies that derive most of their vitality from aid
granted them by donor countries, multilateral aid agencies and NGOs.
Many of the economies in transition belong to this class. Up to 15% of
their GDP is in the form of handouts, soft loans and technical
assistance. Rescheduling is another species of financial subsidy and
virtually all CEE countries have benefited from it. The dependence thus
formed can easily deteriorate into addiction. The economic players in
such economies engage mostly in lobbying and in political manoeuvring -
rather than in production.

Derivative or Satellite economies - These are economies, which are
absolutely dependent upon or very closely correlated with other
economies. This is either because they conduct most of their trade with
these economies, or because they are a (marginal) member of a powerful
regional club (or aspire to become one), or because they are under the
economic (or geopolitical or military) umbrella of a regional power or
a superpower. Another variant is the single-commodity or single-goods
or single-service economies. Many countries in Africa and many members
of the OPEC oil cartel rely on a single product for their livelihood.
Russia, for instance, is heavily dependent on proceeds from the sale of
its energy products. Most Montenegrins derive their livelihood,
directly or indirectly, from smuggling, bootlegging and illegal
immigration. Drugs are a major "export" earner in Macedonia and Albania.

Copycat economies - These are economies that are based on legal or
(more often) illegal copying and emulation of intellectual property:
patents, brand names, designs, industrial processes, other forms of
innovation, copyrighted material, etc. The prime example is Japan,
which constructed its whole mega-economy on these bases. Both Bulgaria
and Russia are Meccas of piracy. Though prosperous for a time, these
economies are dependent on and subject to the vicissitudes of business
cycles. They are capital sensitive, inherently unstable and with no
real long term prospects if they fail to generate their own
intellectual property. They reflect the volatility of the markets for
their goods and are overly exposed to trade risks, international
legislation and imports. Usually, they specialize in narrow segments of
manufacturing which only increases the precariousness of their
situation.

The Predator Economies can also be classified:

Generators of Intellectual Property - These are economies that
encourage and emphasize innovation and progress. They reward
innovators, entrepreneurs, non-conformism and conflict. They spew out
patents, designs, brands, copyrighted material and other forms of
packaged human creativity. They derive most of their income from
licensing and royalties and constitute one of the engines driving
globalisation. Still, these economies are too poor to support the
complementary manufacturing and marketing activities. Their natural
counterparts are the "Industrial Bases". Within the former Eastern
Bloc, Russia, Poland, Hungary and Slovenia are, to a limited extent,
such generators. Israel is such an economy in the Middle East.

Industrial Bases - These are economies that make use of the
intellectual property generated by the former type within industrial
processes. They do not copy the intellectual property as it is. Rather,
they add to it important elements of adaptation to niche markets, image
creation, market positioning, packaging, technical literature,
combining it with other products or services, designing and
implementing the whole production process, market (demand) creation,
improvement upon the originals and value added services. These
contributions are so extensive that the end products, or services can
no longer to be identified with the originals, which serve as mere
triggers. Again, Poland, Hungary, Slovenia (and to a lesser extent,
Croatia) come to mind.

Consumer Oriented economies - These are Third Wave (Alvin Toffler's
term), services, information and knowledge driven economies. The
over-riding set of values is consumer oriented. Wealth formation and
accumulation are secondary. The primary activities are concerned with
fostering markets and maintaining them. These "weightless" economies
concentrate on intangibles: advertising, packaging, marketing, sales
promotion, education, entertainment, servicing, dissemination of
information, knowledge formation, trading, trading in symbolic assets
(mainly financial), spiritual pursuits, and other economic activities
which enhance the consumer's welfare (pharmaceuticals, for instance).
These economies are also likely to sport a largish public sector, most
of it service oriented. No national economy in CEE qualifies as
"Consumer Oriented", though there are pockets of consumer-oriented
entrepreneurship within each one.

The Trader economies - These economies are equivalent to the
cardiovascular system. They provide the channels through which goods
and services are exchanged. They do this by trading or assuming risks,
by providing physical transportation and telecommunications, and by
maintaining an appropriately educated manpower to support all these
activities. These economies are highly dependent on the general health
of international trade. Many of the CEE economies are Trader economies.
The openness ratio (trade divided by GDP) of most CEE countries is
higher than the G7 countries'. Macedonia, for instance, has a GDP of
3.6 Billion US dollars and exports and imports of c. 2 billion US
dollars. These are the official figures. Probably, another 0.5 billion
US dollars in trade go unreported. Additionally, it has one of the
lowest weighted customs rate in the world. Openness to trade is an
official policy, actively pursued.

These economies are predatory in the sense that they engage in zero-sum
games. A contract gained by a Slovenian company - is a contract lost by
a Croatian one. Luckily, in this last decade, the economic cake tended
to grow and the sum of zero sum games was more welfare to all involved.
These vibrant economies - the hope of benighted and blighted regions -
are justly described as "engines" because they pull all other
(scavenger) economies with them. They are not likely to do so forever.
But their governments have assimilated the lessons of the 1930s.
Protectionism is bad for everyone involved - especially for economic
engines. Openness to trade, protection of property rights and
functioning institutions increase both the number and the scope of
markets.


Return



Market Impeders and Market Inefficiencies



Even the most devout proponents of free marketry and hidden hand
theories acknowledge the existence of market failures, market
imperfections and inefficiencies in the allocation of economic
resources. Some of these are the results of structural problems, others
of an accumulation of historical liabilities. But, strikingly, some of
the inefficiencies are the direct outcomes of the activities of "non
bona fide" market participants. These "players" (individuals,
corporations, even larger economic bodies, such as states) act either
irrationally or egotistically (too rationally).

What characterizes all those "market impeders" is that they are value
subtractors rather than value adders. Their activities generate a
reduction, rather than an increase, in the total benefits (utilities)
of all the other market players (themselves included). Some of them do
it because they are after a self-interest, which is not economic (or,
more strictly, financial). They sacrifice some economic benefits in
order to satisfy that self-interest (or, else, they could never have
attained these benefits, in the first place). Others refuse to accept
the self-interest of other players as their limit. They try to maximize
their benefits at any cost, as long as it is a cost to others. Some do
so legally and some adopt shadier varieties of behaviour. And there is
a group of parasites - participants in the market who feed off its very
inefficiencies and imperfections and, by their very actions, enhance
them. A vicious cycle ensues: the body economic gives rise to parasitic
agents who thrive on its imperfections and lead to the amplification of
the very impurities that they prosper on.

We can distinguish six classes of market impeders:

1. Crooks and other illegal operators. These take advantage of
ignorance, superstition, greed, avarice, emotional states of mind of
their victims - to strike. They re-allocate resources from (potentially
or actually) productive agents to themselves. Because they reduce the
level of trust in the marketplace - they create negative added value.
(See: "The Shadowy World of International Finance".)

2. Illegitimate operators include those treading the thin line
between legally permissible and ethically inadmissible. They engage in
petty cheating through misrepresentations, half-truths, semi-rumours
and the like. They are full of pretensions to the point of becoming
impostors. They are wheeler-dealers, sharp-cookies, Daymon Ranyon
characters, lurking in the shadows cast by the sun of the market. Their
impact is to slow down the economic process through disinformation and
the resulting misallocation of resources. They are the sand in the
wheels of the economic machine.

3. The "not serious" operators. These are people too hesitant, or
phobic to commit themselves to the assumption of any kind of risk. Risk
is the coal in the various locomotives of the economy, whether local,
national, or global. Risk is being assumed, traded, diversified out of,
avoided, insured against. It gives rise to visions and hopes and it is
the most efficient "economic natural selection" mechanism. To be a
market participant one must assume risk, it in an inseparable part of
economic activity. Without it the wheels of commerce and finance,
investments and technological innovation will immediately grind to a
halt. But many operators are so risk averse that, in effect, they
increase the inefficiency of the market in order to avoid it. They act
as though they are resolute, risk assuming operators. They make all the
right moves, utter all the right sentences and emit the perfect noises.
But when push comes to shove - they recoil, retreat, defeated before
staging a fight. Thus, they waste the collective resources of all that
the operators that they get involved with. They are known to endlessly
review projects, often change their minds, act in fits and starts, have
the wrong priorities (for an efficient economic functioning, that is),
behave in a self defeating manner, be horrified by any hint of risk,
saddled and surrounded by every conceivable consultant, glutted by
information. They are the stick in the spinning wheel of the modern
marketplace.

4. The former kind of operators obviously has a character problem.
Yet, there is a more problematic species: those suffering from serious
psychological problems, personality disorders, clinical phobias,
psychoneuroses and the like. This human aspect of the economic realm
has, to the best of my knowledge, been neglected before. Enormous
amounts of time, efforts, money and energy are expended by the more
"normal" - because of the "less normal" and the "eccentric". These
operators are likely to regard the maintaining of their internal
emotional balance as paramount, far over-riding economic
considerations. They will sacrifice economic advantages and benefits
and adversely affect their utility outcome in the name of principles,
to quell psychological tensions and pressures, as part of
obsessive-compulsive rituals, to maintain a false grandiose image, to
go on living in a land of fantasy, to resolve a psychodynamic conflict
and, generally, to cope with personal problems which have nothing to do
with the idealized rational economic player of the theories. If
quantified, the amounts of resources wasted in these coping manoeuvres
is, probably, mind numbing. Many deals clinched are revoked, many
businesses started end, many detrimental policy decisions adopted and
many potentially beneficial situations avoided because of these
personal upheavals.

5. Speculators and middlemen are yet another species of parasites.
In a theoretically totally efficient marketplace - there would have
been no niche for them. They both thrive on information failures. The
first kind engages in arbitrage (differences in pricing in two markets
of an identical good - the result of inefficient dissemination of
information) and in gambling. These are important and blessed functions
in an imperfect world because they make it more perfect. The
speculative activity equates prices and, therefore, sends the right
signals to market operators as to how and where to most efficiently
allocate their resources. But this is the passive speculator. The
"active" speculator is really a market rigger. He corners the market by
the dubious virtue of his reputation and size. He influences the market
(even creates it) rather than merely exploit its imperfections. Soros
and Buffet have such an influence though their effect is likely to be
considered beneficial by unbiased observers. Middlemen are a different
story because most of them belong to the active subcategory. This means
that they, on purpose, generate market inconsistencies, inefficiencies
and problems - only to solve them later at a cost extracted and paid to
them, the perpetrators of the problem. Leaving ethical questions aside,
this is a highly wasteful process. Middlemen use privileged information
and access - whereas speculators use information of a more public
nature. Speculators normally work within closely monitored, full
disclosure, transparent markets. Middlemen thrive of disinformation,
misinformation and lack of information. Middlemen monopolize their
information - speculators share it, willingly or not. The more
information becomes available to more users - the greater the
deterioration in the resources consumed by brokers of information. The
same process will likely apply to middlemen of goods and services. We
are likely to witness the death of the car dealer, the classical retail
outlet, the music records shop. For that matter, inventions like the
internet is likely to short-circuit the whole distribution process in a
matter of a few years.

6. The last type of market impeders is well known and is the only
one to have been tackled - with varying degrees of success by
governments and by legislators worldwide. These are the trade
restricting arrangements: monopolies, cartels, trusts and other illegal
organizations. Rivers of inks were spilled over forests of paper to
explain the pernicious effects of these anti-competitive practices. The
short and the long of it is that competition enhances and increases
efficiency and that, therefore, anything that restricts competition,
weakens and lessens efficiency.

What could anyone do about these inefficiencies? The world goes in
circles of increasing and decreasing free marketry. The globe was a
more open, competitive and, in certain respects, efficient place at the
beginning of the 20th century than it is now. Capital flowed more
freely and so did labour. Foreign Direct Investment was bigger. The
more efficient, "friction free" the dissemination of information (the
ultimate resource) - the less waste and the smaller the lebensraum for
parasites. The more adherence to market, price driven, open auction
based, meritocratic mechanisms - the less middlemen, speculators,
bribers, monopolies, cartels and trusts. The less political involvement
in the workings of the market and, in general, in what consenting
adults conspire to do that is not harmful to others - the more
efficient and flowing the economic ambience is likely to become.

This picture of "laissez faire, laissez aller" should be complimented
by even stricter legislation coupled with effective and draconian law
enforcement agents and measures. The illegal and the illegitimate
should be stamped out, cruelly. Freedom to all - is also freedom from
being conned or hassled. Only when the righteous freely prosper and the
less righteous excessively suffer - only then will we have entered the
efficient kingdom of the free market.

This still does not deal with the "not serious" and the "personality
disordered". What about the inefficient havoc that they wreak? This,
after all, is part of what is known, in legal parlance as: "force
majeure".

Note

There is a raging debate between the "rational expectations" theory and
the "prospect theory". The former - the cornerstone of rational
economics - assumes that economic (human) players are rational and out
to maximize their utility (see "The Happiness of Others", "The
Egotistic Friend" and "The Distributive Justice of the Market"). Even
ignoring the fuzzy logic behind the ill-defined philosophical term
"utility" - rational economics has very little to do with real human
being and a lot to do with sterile (though mildly useful) abstractions.
Prospect theory builds on behavioural research in modern psychology,
which demonstrates that people are more loss averse than gain seekers
(utility maximisers). Other economists have succeeded to demonstrate
irrational behaviours of economic actors (heuristics, dissonances,
biases, magical thinking and so on).

The apparent chasm between the rational theories (efficient markets,
hidden hands and so on) and behavioural economics is the result of two
philosophical fallacies which, in turn, are based on the misapplication
and misinterpretation of philosophical terms.

The first fallacy is to assume that all forms of utility are reducible
to one another or to money terms. Thus, the values attached to all
utilities are expressed in monetary terms. This is wrong. Some people
prefer leisure, or freedom, or predictability to expected money. This
is the very essence of risk aversion: a trade off between the utility
of predictability (absence or minimization of risk) and the expected
utility of money. In other words, people have many utility functions
running simultaneously - or, at best, one utility function with many
variables and coefficients. This is why taxi drivers in New York cease
working in a busy day, having reached a pre-determined income target:
the utility function of their money equals the utility function of
their leisure.

How can these coefficients (and the values of these variables) be
determined? Only by engaging in extensive empirical research. There is
no way for any theory or "explanation" to predict these values. We have
yet to reach the stage of being able to quantify, measure and
numerically predict human behaviour and personality (=the set of
adaptive traits and their interactions with changing circumstances).
That economics is a branch of psychology is becoming more evident by
the day. It would do well to lose its mathematical pretensions and
adopt the statistical methods of its humbler relative.

The second fallacy is the assumption underlying both rational and
behavioural economics that human nature is an "object" to be analysed
and "studied", that it is static and unchanged. But, of course, humans
change inexorably. This is the only fixed feature of being human:
change. Some changes are unpredictable, even in deterministic
principle. Other changes are well documented. An example of the latter
class of changes in the learning curve. Humans learn and the more they
learn the more they alter their behaviour. So, to obtain any meaningful
data, one has to observe behaviour in time, to obtain a sequence of
reactions and actions. To isolate, observe and manipulate environmental
variables and study human interactions. No snapshot can approximate a
video sequence where humans are concerned.


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Public Procurement and very Private Benefits



In every national budget, there is a part called "Public Procurement".
This is the portion of the budget allocated to purchasing services and
goods for the various ministries, authorities and other arms of the
executive branch. It was the famous management consultant, Parkinson,
who once wrote that government officials are likely to approve a
multi-billion dollar nuclear power plant much more speedily that they
are likely to authorize a hundred dollar expenditure on a bicycle
parking device. This is because everyone came across 100-dollar
situations in real life - but precious few had the fortune to expend
with billions of USD.

This, precisely, is the problem with public procurement: people are too
acquainted with the purchased items. They tend to confuse their daily,
household-type, decisions with the processes and considerations, which
should permeate governmental decision-making. They label perfectly
legitimate decisions as "corrupt" - and totally corrupt procedures as
"legal" or merely "legitimate", because this is what was decreed by the
statal mechanisms, or because "this is the law".

Procurement is divided to defence and non-defence spending. In both
these categories - but, especially in the former - there are grave,
well founded, concerns that things might not be all what they seem to
be.

Government - from India's to Sweden's to Belgium's - fell because of
procurement scandals, which involved bribes paid by manufacturers or
service providers either to individual in the service of the state or
to political parties. Other, lesser cases, litter the press daily. In
the last few years only, the burgeoning defence sector in Israel saw
two such big scandals: the developer of Israel's missiles was involved
in one (and currently is serving a jail sentence) and Israel's military
attaché to Washington was implicated - though, never convicted - in yet
another.

But the picture is not that grim. Most governments in the West
succeeded in reigning in and fully controlling this particular budget
item. In the USA, this part of the budget remained constant in the last
35 (!) years at 20% of the GDP.

There are many problems with public procurement. It is an obscure area
of state activity, agreed upon in "customized" tenders and in dark
rooms through a series of undisclosed agreements. At least, this is the
public image of these expenditures.

The truth is completely different.

True, some ministers use public money to build their private "empires".
It could be a private business empire, catering to the financial future
of the minister, his cronies and his relatives. These two plagues -
cronyism and nepotism - haunt public procurement. The spectre of
government official using public money to benefit their political
allies or their family members - haunts public imagination and provokes
public indignation.

Then, there are problems of plain corruption: bribes or commissions
paid to decision makers in return for winning tenders or awarding of
economic benefits financed by the public money. Again, sometimes these
moneys end in secret bank accounts in Switzerland or in Luxembourg. At
other times, they finance political activities of political parties.
This was rampantly abundant in Italy and has its place in France. The
USA, which was considered to be immune from such behaviours - has
proven to be less so, lately, with the Bill Clinton alleged
election-financing transgressions.

But, these, with all due respect to "clean hands" operations and
principles, are not the main problems of public procurement.

The first order problem is the allocation of scarce resources. In other
words, prioritising. The needs are enormous and ever growing. The US
government purchases hundreds of thousands of separate items from
outside suppliers. Just the list of these goods - not to mention their
technical specifications and the documentation, which accompanies the
transactions - occupies tens of thick volumes. Supercomputers are used
to manage all these - and, even so, it is getting way out of hand. How
to allocate ever-scarcer resources amongst these items is a daunting -
close to impossible - task. It also, of course, has a political
dimension. A procurement decision reflects a political preference and
priority. But the decision itself is not always motivated by rational -
let alone noble - arguments. More often, it is the by product and end
result of lobbying, political hand bending and extortionist muscle.
This raises a lot of hackles among those who feel that were kept out of
the pork barrel. They feel underprivileged and discriminated against.
They fight back and the whole system finds itself in a quagmire, a
nightmare of conflicting interests. Last year, the whole budget in the
USA was stuck - not approved by Congress - because of these reactions
and counter-reactions.

The second problem is the supervision, auditing and control of actual
spending. This has two dimensions:

1. How to make sure that the expenditures match and do not exceed
the budgetary items. In some countries, this is a mere ritual formality
and government departments are positively expected to overstep their
procurement budgets. In others, this constitutes a criminal offence;

2. How to prevent the criminally corrupt activities that we have
described above - or even the non criminal incompetent acts which
government officials are prone to do.

The most widespread method is the public, competitive tender for the
purchases of goods and services.

But, this is not as simple as it sounds.

Some countries publish international tenders, striving to secure the
best quality in the cheapest price - no matter what is its geographical
or political source. Other countries are much more protectionist
(notably: Japan and France) and they publish only domestic tenders, in
most cases. A domestic tender is open only to domestic bidders. Yet
other countries limit participation in the tenders on various
backgrounds: the size of the competing company, its track record, its
ownership structure, its human rights or environmental record and so
on. Some countries publish the minutes of the tender committee (which
has to explain WHY it selected this or that supplier). Others keep it a
closely guarded secret ("to protect commercial interests and secrets").

But all countries state in advance that they have no obligation to
accept any kind of offer - even if it is the cheapest. This is a needed
provision: the cheapest is not necessarily the best. The cheapest offer
could be coming from a very unreliable supplier with a bad past
performance or a criminal record or from a supplier who offers goods of
shoddy quality.

The tendering policy of most of the countries in the world also
incorporates a second principle: that of "minimum size". The cost of
running a tender is prohibitive in the cases of purchases in small
amounts.

Even if there is corruption in such purchases it is bound to cause less
damage to the public purse than the costs of the tender, which is
supposed to prevent it!

So, in most countries, small purchases can be authorized by government
officials - larger amounts go through a tedious, multi-phase tendering
process. Public competitive bidding is not corruption-proof: many times
officials and bidders collude and conspire to award the contract
against bribes and other, non-cash, benefits. But we still know of no
better way to minimize the effects of human greed.

Procurement policies, procedures and tenders are supervised by state
auditing authorities. The most famous is, probably, the General
Accounting Office, known by its acronym: the GAO.

It is an unrelenting, very thorough and dangerous watchdog of the
administration. It is considered to be highly effective in reducing
procurement - related irregularities and crimes. Another such
institution is the Israeli State Reviser. What is common to both these
organs of the state is that they have very broad authority. They
possess (by law) judicial and criminal prosecution powers and they
exercise it without any hesitation. They have the legal obligation to
review the operations and financial transactions of all the other
organs of the executive branch. Their teams select, each year, the
organs to be reviewed and audited. They collect all pertinent documents
and correspondence. They cross the information that they receive from
elsewhere. They ask very embarrassing questions and they do it under
the threat of perjury prosecutions. They summon witnesses and they
publish damning reports, which, in many cases, lead to criminal
prosecutions.

Another form of review of public procurement is through powers granted
to the legislative arm of the state (Congress, Parliament, Bundestag,
or Knesset). In almost every country in the world, the elected body has
its own procurement oversight committee. It supervises the expenditures
of the executive branch and makes sure that they conform to the budget.
The difference between such supervisory, parliamentary, bodies and
their executive branch counterparts - is that they feel free to
criticize public procurement not only in the context of its adherence
to budget constraints or its cleanliness - but also in a political
context. In other words, these committees do not limit themselves to
asking HOW - but also engage in asking WHY. Why this specific expense
in this given time and location - and not that expense, somewhere else
or some other time. These elected bodies feel at liberty - and often do
- intervene in the very decision making process and in the order of
priorities. They have the propensity to alter both quite often.

The most famous such committee is, arguably, the Congressional Budget
Office (CBO). It is famous because it is non-partisan and technocratic
in nature. It is really made of experts, which staff its offices.

Its apparent - and real - neutrality makes its judgements and
recommendations a commandment not to be avoided and, almost
universally, to be obeyed. The CBO operates for and on behalf of the
American Congress and is, really, the research arm of that venerable
parliament. In parallel, the executive part of the American system -
the Administration - has its own guard against waste and worse: the
Office of Management and Budget (OMB).

Both bodies produce learned, thickset, analyses, reports, criticism,
opinions and recommendations. Despite quite a prodigious annual output
of verbiage - they are so highly regarded, that virtually anything that
they say (or write) is minutely analysed and implemented to the last
letter with an air of awe.

Only a few other parliaments have committees that carry such weight.
The Israeli Knesset has the extremely powerful Finance Committee, which
is in charge of all matters financial, from appropriations to
procurement. Another parliament renowned for its tight scrutiny is the
French Parliament - though it retains very few real powers.

But not all countries chose the option of legislative supervision. Some
of them relegated parts or all of these functions to the executive arm.

In Japan, the Ministry of Finance still scrutinizes (and has to
authorize) the smallest expense, using an army of clerks. These clerks
became so powerful that they have the theoretical potential to secure
and extort benefits stemming from the very position that they hold.
Many of them suspiciously join companies and organizations, which they
supervised or to which they awarded contracts - immediately after they
leave their previous, government positions. The Ministry of Finance is
subject to a major reform in the reform-bent government of Prime
Minister Hashimoto. The Japanese establishment finally realized that
too much supervision, control, auditing and prosecution powers might be
a Pyrrhic victory: it might encourage corruption - rather than
discourage it.

Britain opted to keep the discretion to use public funds and the clout
that comes with it in the hands of the political level. This is a lot
like the relationship between the butter and the cat left to guard it.
Still, this idiosyncratic British arrangement works surprisingly well.
All public procurement and expenditure items are approved by the EDX
Committee of the British Cabinet (=inner, influential, circle of
government), which is headed by the Ministry of Finance. Even this did
not prove enough to restrain the appetites of Ministers, especially as
quid pro quo deals quickly developed. So, now the word is that the new
Labour Prime Minister will chair it - enabling him to exert his
personal authority on matters of public money.

Britain, under the previous, Tory, government also pioneered an
interesting and controversial incentive system for its public servants
as top government officials are euphemistically called there. They
receive, added to their salaries, a portion of the savings that they
affect in their departmental budgets. This means that they get a small
fraction of the end of the fiscal year difference between their budget
allowances and what they actually spent. This is very useful in certain
segments of government activity - but could prove very problematic in
others. Imagine health officials saving on medicines, or others saving
on road maintenance or educational consumables. This, naturally, will
not do.

Needless to say that no country officially approves of the payment of
bribes or commission to officials in charge of public spending, however
remote the connection is between the payment and the actions.

Yet, law aside many countries accept the intertwining of elites -
business and political - as a fact of life, albeit a sad one. Many
judicial systems in the world even make a difference between a payment,
which is not connected to an identifiable or discernible benefit, and
those that are. The latter - and only the latter - are labelled
"bribery".

Where there is money - there is wrongdoing. Humans are humans - and
sometimes not even that.

But these unfortunate derivatives of social activity can be minimized
by the adoption of clear procurement policies, transparent and public
decision making processes and the right mix of supervision, auditing
and prosecution. Even then the result is bound to be dubious, at best.


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Liquidity or Liquidation



Large parts of the world today suffer from a severe liquidity crisis.
The famed globalisation of the capital markets seems to confine itself,
ever more, to the richer parts, the more liquid exchanges, and the more
affluent geopolitical neighbourhoods. The fad of "emerging economies"
has all but died out. Try telling the Macedonians about global capital
markets: last year, the whole world invested 8 million USD in their
poor country. Breadwinners earn 300 DM a month on average. Officially,
in excess of one third of the workforce is unemployed. Small wonder
that people do not pay their bills, employers do not pay salaries, the
banking system has a marked tendency to crash every now and then and
the average real default rate is 50%.

Illiquidity erodes the trust between the economic players. Such trust
is a precondition to the existence of a thriving, modern economy. We
all postpone the gratification of our desires: we save now and consume
later, for instance or we sell goods or services and get paid a month
later. Such postponement of gratification is at the heart of the
economic machine of the new age. It cannot be achieved, however, if the
players do not trust each other to fulfil their promises (to pay, for
example). Alternatively, the state can instate an efficient court
system, aided by active law enforcement agencies. Keeping promises can
be imposed to counter the natural tendency to ignore them.

The countries in transition lack both: liquidity necessary to keep
one's monetary word and the legal system to force him to do so if he
reneges. Small wonder that solutions are actively being sought by all
involved: the business community, the state, the courts and even by
consumers.

In this article, we will describe a few of the global trends. The
trends are global, the reaction is world-wide because the problem is
global. Bouncing checks have become a household reality in places as
rich as Israel, for instance. The mounting crisis in Southeast Asia
foreshadows bankruptcies and delinquencies on a chilling scale.

The simplest method is to revert to a cash economy. Payments are
accepted only in cash. This, naturally, slows the velocity of
money-like products and diminishes their preponderance, obstructing the
expansion of economic activity. An even more malignant variant is the
barter economy. Goods and services are swapped on a no-cash basis. It
is money that generates new value added (by facilitating the
introduction of new technology, to mention but one function). In the
absence of money, the economy stagnates, degenerates and, finally,
collapses because of massive mismatches of supply and demand aggregates
and of the types of goods and services on offer and demanded. Still,
this system has the advantages of keeping the economic patient alive
even following a massive liquidity haemorrhage. In the absence of
barter economy, the economy might have ground to a complete halt and
deteriorated to subsistence agriculture. But barter is like
chemotherapy: it is good for a limited period of time and the side
effects are, at times, worse than the disease.

In many countries (Georgia, to mention one) defaults are prevented by
demanding prepayment for projected consumption. Let us take the
consumption of electricity as an example: many heavy users and numerous
households do not pay their bills at all. To disconnect the electricity
is an effective punitive measure but it costs the electricity company a
lot of money. The solution? Programmable Electronic Meters. The
consumers buy a smart card (very similar to phone-cards). The card
allows the buyer to use a certain amount of prepaid electricity and is
rechargeable. The consumer pays in advance, electricity is not wasted,
the electricity company is happy, the tariffs go down for all the
users. Prepayment does have a contracting effect on the demand and
usage of electricity - but this is welcome. It just means that people
use electricity more efficiently.

A totally different tack is the verification approach. The person
making the payment carries with him a card that confirms that he is
creditworthy and will honour his obligations. Otherwise, the card also
serves as an insurance policy: an entity, not connected to the
transaction, guarantees the payment for a fee. This entity is
financially viable and strong enough to be fully trusted by the
recipient of the payment.

This market in credit guarantees is more developed in the USA (where
credit cards have overtaken cash and personal checks as a mode of
payment) than in Western Europe. But even in Europe there are credit
card equivalents which are very widespread: the Eurocheck card, for
instance, is really a credit card, though it usually comes with
physical checks and guarantees only a limited amount. One must
differentiate the functions of a debit card (with direct and immediate
billing of a bank account following a transaction) from those of a
credit card. The latter allows for the billing of the account to take
place in a given day during the month following the month in which the
transaction was effected or converts the payment into a series of
instalments (within the credit limits of the cardholder as approved by
his bank). But in both cases, the guarantee is there and is the most
predominant feature of the system. Such cards seem like a perfect
solution but they are not: the commissions charged by the card issuers
are outrageous. Between 2 and 10 percent of the payment made go to the
pockets of the card issuers. Cards get stolen, forged, lost, abused by
their owners, expire. But with the advent of new technologies all these
problems should be solved. Electronic POS (point of sale) cash
registers, connected through networks of communication, check the card
and verify its data: is it valid, is it presented by the lawful owner,
was it stolen or lost, is the purchase within the limits of the
approved credit and so on. Then, the billing proceeds automatically.
Such devices will virtually eliminate fraud. The credit card companies
will guarantee the payments, which will be subject to residual crime.

Another fast developing solution is the smart card. These are cards
similar to phone cards and they can be charged with money in the bank
or through automatic teller machines. These cards (in wide use in
Belgium, Austria, Germany and many other countries) contain an amount
of money, which is deducted from the cardholders account. The account
is billed for every recharge. The card is the electronic (and smart)
equivalent of cash and it can be read (=debited) by special teller
machines in numerous businesses. When payment is made, the money stored
in the card is reduced and the recipient of the payment stores the
payment on magnetic media for later delivery to his bank (and crediting
of his account).

A more primitive version exists in many countries in Eastern Europe:
depositors receive checks exactly corresponding to the amount of money
deposited in their account. These checks are as safe as the banks that
issued them because they are fully convertible to cash. They are,
really, paper "smart cards".

Credit cards and (more cheaply) smart cards are a way to restore
confidence to a shattered, illiquid economy. Macedonia should consider
them both seriously and encourage them through the appropriate
legislation and assistance of the state. For Macedonia, the choice is
to be liquid or, God forbid, to economically self-liquidate.


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The Predicament of the Newly Rich



They are the objects of thinly disguised envy. They are the raw
materials of vulgar jokes and the targets of popular aggression. They
are the Newly Rich. Perhaps they should be dealt with more
appropriately within the academic discipline of psychology, but then
economics in a branch of psychology. To many, they represent a
psychopathology or a sociopathology.

The Newly Rich are not a new phenomenon. Every generation has them.
They are the upstarts, those who seek to undermine the existing elite,
to replace it and, ultimately to join it. Indeed, the Newly Rich can be
classified in accordance with their relations with the well-entrenched
Old Rich. Every society has its veteran, venerable and aristocratic
social classes. In most cases, there was a strong correlation between
wealth and social standing. Until the beginning of this century, only
property owners could vote and thus participate in the political
process. The land gentry secured military and political positions for
its off spring, no matter how ill equipped they were to deal with the
responsibilities thrust upon them. The privileged access and the
insider's mentality ("old boys network" to use a famous British
expression) made sure that economic benefits were not spread evenly.
This skewed distribution, in turn, served to perpetuate the advantages
of the ruling classes.

Only when wealth was detached from the land, was this solidarity
broken. Land - being a scarce, non-reproducible resource - fostered a
scarce, non-reproducible social elite. Money, on the other hand, could
be multiplied, replicated, redistributed, reshuffled, made and lost. It
was democratic in the truest sense of a word, otherwise worn thin. With
meritocracy in the ascendance, aristocracy was in descent. People made
money because they were clever, daring, fortunate, and visionary - but
not because they were born to the right family or married into one.
Money, the greatest of social equalizers, wedded the old elite. Blood
mixed and social classes were thus blurred. The aristocracy of capital
(and, later, of entrepreneurship) - to which anyone with the right
qualifications could belong - trounced the aristocracy of blood and
heritage. For some, this was a sad moment. For others, a triumphant one.

The New Rich chose one of three paths: subversion, revolution and
emulation. All three modes of reaction were the results of envy, a
sense of inferiority and rage at being discriminated against and
humiliated.

Some New Rich chose to undermine the existing order. This was perceived
by them to be an inevitable, gradual, slow and "historically
sanctioned" process. The transfer of wealth (and the power associated
with it) from one elite to another constituted the subversive element.
The ideological shift (to meritocracy and democracy or to
mass-democracy as y Gasset would have put it) served to justify the
historical process and put it in context. The successes of the new
elite, as a class, and of its members, individually, served to prove
the "justice" behind the tectonic shift. Social institutions and mores
were adapted to reflect the preferences, inclinations, values, goals
and worldview of the new elite. This approach - infinitesimal,
graduated, cautious, all accommodating but also inexorable and all
pervasive - characterizes Capitalism. The Capitalist Religion, with its
temples (shopping malls and banks), clergy (bankers, financiers,
bureaucrats) and rituals - was created by the New Rich. It had multiple
aims: to bestow some divine or historic importance and meaning upon
processes, which might have otherwise been perceived as chaotic or
threatening. To serve as an ideology in the Althusserian sense (hiding
the discordant, the disagreeable and the ugly while accentuating the
concordant, conformist and appealing). To provide a historical process
framework, to prevent feelings of aimlessness and vacuity, to motivate
its adherents and to perpetuate itself and so on.

The second type of New Rich (also known as "Nomenclature" in certain
regions of the world) chose to violently and irreversibly uproot and
then eradicate the old elite. This was usually done by use of brute
force coated with a thin layer of incongruent ideology. The aim was to
immediately inherit the wealth and power accumulated by generations of
elitist rule. There was a declared intention of an egalitarian
redistribution of wealth and assets. But reality was different: a small
group - the new elite - scooped up most of the spoils. It amounted to a
surgical replacement of one hermetic elite by another. Nothing changed,
just the personal identities. A curious dichotomy has formed between
the part of the ideology, which dealt with the historical process - and
the other part, which elucidated the methods to be employed to
facilitate the transfer of wealth and its redistribution. While the
first was deterministic, long-term and irreversible (and, therefore,
not very pragmatic) - the second was an almost undisguised recipe for
pillage and looting of other people' property. Communism and the
Eastern European (and, to a lesser extent, the Central European)
versions of Socialism suffered from this inherent poisonous seed of
deceit. So did Fascism. It is no wonder that these two sister
ideologies fought it out in the first half of the twentieth century.
Both prescribed the unabashed, unmitigated, unrestrained, forced
transfer of wealth from one elite to another. The proletariat enjoyed
almost none of the loot.

The third way was that of emulation. The Newly Rich, who chose to adopt
it, tried to assimilate the worldview, the values and the behaviour
patterns of their predecessors. They walked the same, talked the same,
clad themselves in the same fashion, bought the same status symbols,
and ate the same food. In general, they looked as pale imitations of
the real thing. In the process, they became more catholic than the
Pope, more Old Rich than the Old Rich. They exaggerated gestures and
mannerisms, they transformed refined and delicate art to kitsch, their
speech became hyperbole, their social associations dictated by
ridiculously rigid codes of propriety and conduct. As in similar
psychological situations, patricide and matricide followed. The Newly
Rich rebelled against what they perceived to be the tyranny of a dying
class. They butchered their objects of emulation - sometimes,
physically. Realizing their inability to be what they always aspired to
be, the Newly Rich switched from frustration and permanent humiliation
to aggression, violence and abuse. These new converts turned against
the founders of their newly found religion with the rage and conviction
reserved to true but disappointed believers.

Regardless of the method of inheritance adopted by the New Rich, all of
them share some common characteristics. Psychologists know that money
is a love substitute. People accumulate it as a way to compensate
themselves for past hurts and deficiencies. They attach great emotional
significance to the amount and availability of their money. They
regress: they play with toys (fancy cars, watches, laptops). They fight
over property, territory and privileges in a Jungian archetypal manner.
Perhaps this is the most important lesson of all: the New Rich are
children, aspiring to become adults. Having been deprived of love and
possessions in their childhood - they turn to money and to what it can
buy as a (albeit poor because never fulfilling) substitute. And as
children are - they can be cruel, insensitive, and unable to delay the
satisfaction of their urges and desires. In many countries (the
emerging markets) they are the only capitalists to be found. There,
they spun off a malignant, pathological, form of crony capitalism. As
time passes, these immature New Rich will become tomorrow's Old Rich
and a new class will emerge, the New Rich of the future. This is the
only hope - however inadequate and meagre - that developing countries
have.


Return



The Solow Paradox



The Productive Hardware

The world is debating the Solow Paradox. Named after the Nobel laureate
in economics, it was stated by him thus: "You can see the computer age
everywhere these days, except in the productivity statistics." The
venerable economic magazine, "The Economist" in its issue dated July
24th, quotes the no less venerable Professor Robert Gordon ("one of
America's leading authorities on productivity") - p.20: "...the
productivity performance of the manufacturing sector of the United
States economy since 1995 has been abysmal rather than admirable. Not
only has productivity growth in non-durable manufacturing decelerated
in 1995-9 compared to 1972-95, but productivity growth in durable
manufacturing stripped of computers has decelerated even more."

What should be held true - the hype or the dismal statistics? The
answer to this question is of crucial importance to economies in
transition. If investment in IT (information technology) actually
RETARDS growth - then it should be avoided, at least until a
functioning marketplace is there to counter its growth suppressing
effects.

The notion that IT retards growth is counter-intuitive. It would seem
that, at the least, computers allow us to do more of the same things
faster. Typing, order processing, inventory management, production
processes, number crunching are all managed more efficiently by
computers. Added efficiency should translate into enhanced
productivity. Put simply, the same number of people can do more,
faster, more cheaply with computers than they can without them. Yet
reality begs to differ.

Two elements are often neglected in considering the beneficial effects
of IT.

The first is that the concept of information technology comprises two
very distinct economic activities: an all-purpose machine (the PC) and
its enabling applications and a medium (the internet). Capital assets
as distinct from media assets are governed by different economic
principles, should be managed differently and be the subject of
different philosophical points of view.

Massive, double digit increases in productivity are feasible in the
manufacturing of computer hardware. The inevitable outcome is an
exponential explosion in computing and networking power. The dual rules
which govern IT - Moore's (a doubling of chip capacity and computing
prowess every 18 months) and Metcalf's (the exponential increase in a
network's processing ability as more computers connect to it) - also
dictate a breathtaking pace of increased productivity in the hardware
cum software aspect of IT. This has been duly detected by Robert Gordon
in his "Has the 'New Economy' rendered the productivity slowdown
obsolete?"

But for this increased productivity to trickle down to the rest of the
economy a few conditions have to be met.

The transition from old technologies to a new one (the computer renders
many a technology obsolete) must not involve too much "creative
destruction". The costs of getting rid of old hardware, software, of
altering management techniques or adopting new ones, of shedding
redundant manpower, of searching for new employees to replace the
unqualified or unqualifiable, of installing new hardware, software and
of training new people in all levels of the corporation are enormous.
They must never exceed the added benefits of the newly introduced
technology in the long run. Hence the crux of the debate. Is IT more
expensive to introduce, run and maintain than the technologies that it
so confidently aims to replace? Will new technologies be spun off the
core IT in a pace sufficient to compensate for the disappearance of old
ones? As the technology mature, will it overcome its childhood maladies
(lack of operational reliability, bad design, non-specificity,
immaturity of the first generation of computer users, absence of user
friendliness and so on)?

Moreover, is IT an evolution or a veritable revolution? Does it merely
allow us to do more of the same only in a different way - or does it
open up hitherto unheard of vistas for human imagination and
creativity? The signals are mixed. IT did NOT succeed to do to human
endeavour what electricity, the internal combustion engine or even the
telegraph have done. It is also not clear at all that IT is a UNIVERSAL
phenomenon suitable to all climes and mentalities. The penetration of
both IT and the medium it gave rise to (the internet) is not uniform
throughout the world even where the purchasing power is similar and
even among the corporate class. Countries post communism should take
all this into consideration. Their economies may be too obsolete and
hidebound, poor and badly managed to absorb yet another critical change
in the form of IT. The introduction of IT into an ill-prepared market
or corporation can be and often is counter-productive and
growth-retarding.

The Cycle of the Internet

Then, of course, there is the Internet.

The Internet runs on computers but it is related to them in the same
way that a TV show is related to a TV set. To bundle to two, as is
often done today, obscures the true picture and can often be very
misleading. For instance: it is close to impossible to measure
productivity in the services sector, let alone is something as wildly
informal and dynamic as the internet. It is clear by now that the
Internet is a medium and, as such, is subject to the evolutionary cycle
of its predecessors. Central and Eastern Europe has just entered this
cycle while the USA is the most advanced.

The Internet is simply the latest in a series of networks, which
revolutionized our lives. A century before the Internet, the telegraph
and the telephone have been similarly heralded as "global" and
transforming.

So, what should the CEE countries expect to happen to the Internet
globally and, later, within their own territories? The issue here
cannot be cast in terms of productivity. It is better to apply to it
the imagery of the business cycle.

As we said, every medium of communications goes through the same
evolutionary cycle:

It starts with Anarchy - or The Public Phase.

At this stage, the medium and the resources attached to it are very
cheap, accessible, under no regulatory constraints. The public sector
steps in: higher education institutions, religious institutions,
government, not for profit organizations, non-governmental
organizations (NGOs), trade unions, etc. Bedevilled by limited
financial resources, they regard the new medium as a cost effective way
of disseminating their messages.

The Internet was not exempt from this phase, which is at its death
throes. It started with a complete computer anarchy manifested in ad
hoc networks, local networks, networks of organizations (mainly
universities and organs of the government such as DARPA, a part of the
defence establishment, in the USA). Non-commercial entities jumped on
the bandwagon and started sewing these networks together (an activity
fully subsidized by government funds). The result was a
globe-encompassing network of academic institutions. The American
Pentagon established the network of all networks, the ARPANET. Other
government departments joined the fray, headed by the National Science
Foundation (NSF) which withdrew only lately from the Internet.

The Internet (with a different name) became public property - with
access granted to the chosen few.

Radio took precisely this course. Radio transmissions started in the
USA in 1920. Those were anarchic broadcasts with no discernible
regularity. Non commercial organizations and not for profit
organizations began their own broadcasts and even created radio
broadcasting infrastructure (albeit of the cheap and local kind)
dedicated to their audiences. Trade unions, certain educational
institutions and religious groups commenced "public radio" broadcasts.

This is followed by the Commercial Phase.

When the users (e.g., listeners in the case of the radio, or owners of
PCs and modems in the example of the Internet) reach a critical mass -
the business sector is alerted. In the name of capitalist ideology
(another religion, really) it demands "privatisation" of the medium.
This harps on very sensitive strings in every Western soul: the
efficient allocation of resources which is the result of competition;
corruption and inefficiency which are naturally associated with the
public sector ("Other People's Money" - OPM); the ulterior motives of
members of the ruling political echelons (the infamous American
Paranoia); a lack of variety and of catering to the tastes and
interests of certain audiences; the equation private enterprise =
democracy and more.

The end result is the same: the private sector takes over the medium
from "below" (makes offers to the owners or operators of the medium -
that they cannot possibly refuse) - or from "above" (successful
lobbying in the corridors of power leads to the appropriate legislation
and the medium is "privatised").

Every privatisation - especially that of a medium - provokes public
opposition. There are (usually founded) suspicions that the interests
of the public were compromised and sacrificed on the altar of
commercialisation and rating. Fears of monopolization and cartelisation
of the medium are evoked - and justified, in due time. Otherwise, there
is fear of the concentration of control of the medium in a few hands.
All these things do happen - but the pace is so slow that the initial
fears are forgotten and public attention reverts to fresher issues.

A new Communications Act was legislated in the USA in 1934. It was
meant to transform radio frequencies into a national resource to be
sold to the private sector, which will use it to transmit radio signals
to receivers. In other words: the radio was passed on to private and
commercial hands. Public radio was doomed to be marginalized.

The American administration withdrew from its last major involvement in
the Internet in April 1995, when the NSF ceased to finance some of the
networks and, thus, privatised its hitherto heavy involvement in the
net.

A new Communications Act was legislated in 1996. It permitted
"organized anarchy". It allowed media operators to invade each other's
territories.

Phone companies will be allowed to transmit video and cable companies
will be allowed to transmit telephony, for instance. This is all phased
over a long period of time - still, it is a revolution whose magnitude
is difficult to gauge and whose consequences defy imagination. It
carries an equally momentous price tag - official censorship.
"Voluntary censorship", to be sure, somewhat toothless standardization
and enforcement authorities, to be sure - still, a censorship with its
own institutions to boot. The private sector reacted by threatening
litigation - but, beneath the surface it is caving in to pressure and
temptation, constructing its own censorship codes both in the cable and
in the internet media.

The third phase is Institutionalisation.

It is characterized by enhanced activities of legislation. Legislators,
on all levels, discover the medium and lurch at it passionately.
Resources, which were considered "free", suddenly are transformed to
"national treasures not to be dispensed with cheaply, casually and with
frivolity".

It is conceivable that certain parts of the Internet will be
"nationalized" (for instance, in the form of a licensing requirement)
and tendered to the private sector. Legislation will be enacted which
will deal with permitted and disallowed content (obscenity? incitement?
racial or gender bias?).

No medium in the USA (not to mention the wide world) has eschewed such
legislation. There are sure to be demands to allocate time (or space,
or software, or content, or hardware, or bandwidth) to "minorities", to
"public affairs", to "community business". This is a tax that the
business sector will have to pay to fend off the eager legislator and
his nuisance value.

All this is bound to lead to a monopolization of hosts and servers. The
important broadcast channels will diminish in number and be subjected
to severe content restrictions. Sites, which will not succumb to these
requirements - will be deleted or neutralized. Content guidelines
(euphemism for censorship) exist, even as we write, in all major
content providers (CompuServe, AOL, Prodigy).

The last, determining, phase is The Bloodbath.

This is the phase of consolidation. The number of players is severely
reduced. The number of browser types will be limited to 2-3 (Netscape,
Microsoft and which else?). Networks will merge to form privately owned
mega-networks. Servers will merge to form hyper-servers run on
supercomputers. The number of ISPs will be considerably diminished.

50 companies ruled the greater part of the media markets in the USA in
1983. The number in 1995 was 18. At the end of the century they will
number 6.

This is the stage when companies - fighting for financial survival -
strive to acquire as many users/listeners/viewers as possible. The
programming is shallowed to the lowest (and widest) common denominator.
Shallow programming dominates as long as the bloodbath proceeds.

In hindsight, 20 years hence, we might come to understand that
computers improved our capacity to do things differently and more
productively. But one thing is fast becoming clear. The added benefits
of IT are highly sensitive to and dependent upon historical,
psychosocial and economic parameters outside the perimeter of the
technology itself. When it is introduced, how it is introduced, for
which purposes is it put to use and even by who it was introduced -
largely determine the costs of its introduction and, therefore, its
feasibility and contribution to the enhancement of productivity. The
CEE countries better take note.


(Article written on July 26, 1999 and published August 9, 1999

in "Central Europe Review" volume 1, issue 7)


Return



E P I L O G U E



The Balkans, an eternal crossroad of different civilizations and
cultures even today, is considered to be the "navel of the world" or as
Sam Vaknin puts it in his erratic, eruptive, intellectual volcano of a
book, "After the Rain - How the West Lost the East" - "is the
unconscious of the world" ("The Mind of Darkness") or worse, probably a
navel, but "the Balkan is a body without a brain" ("Homo Balkanus").

There are a few other, similarly neuralgic points on Earth, but what
distinguishes the Balkans from the rest is that it is precisely via its
central part - Macedonia - that Christianity and modern literacy
invaded Europe. The Byzantine civilization - traceable in today's
Balkans as a junction of the Hellenic spirit and the wisdom of
Byzantium, deeply rooted in the cultures of Babylon and the old
Mesopotamian civilizations - is still of high interest to modern
scholars of the Balkans.

Dr. Sam Vaknin is one of these contemporary detectors of the
"transitions" in the East, who is trying to discover, understand and
direct the Balkans and the East through his publicist work. In his book
"After the Rain - How the West Lost the East", Dr. Sam Vaknin is a
sincere investigator of the "Homo Balkanus", of the Easterner, his
mind, culture and way of living, defining him "a full fledges
narcissist". Immediately after that, in "The Magla Vocables" he says
that even linguistically "it is impossible to really understand an
Easterner", mocking or more precisely reaching the level of real
offence in portraying the image of the intellectuals of the East ("The
Poets and Eclipse").

Reading this large book of essays, however, one should bear in mind
that the author is limited by the clichés of his framework of values
and thinking given to him by the culture and system of rules from which
he originated. Thus, his articles are provocative, turbulent,
irritating, revolting. The impact of his writing is terrible with the
strength of hurricane. His word often kill, his defeatism nullifies.
Sometimes pretentious, still "After the Rain" represents a serious,
lucid and transcendent effort to make the Balkan closer, to introduce
the East to the West, ignoring for a moment the pessimistic assertion
that the West already lost the East.

But if this were right, it would have meant that the West is lost, had
disappeared in the East. The truth is completely the opposite: The West
has yet to find the East. The East, which provided the foundation of
contemporary Western civilization, literacy and Christianity, still
hibernates within its traditional values as an essential element of the
endurance of the people and perhaps as the unique salvation of mankind.
The West has to burst into the wisdom of the East to keep the very
roots of life, the wisdom to live in peace and in harmony with God and
with nature. If this should not happen, we will all finish like in
Aldous Huxley's "Brave New World".

Consequently, when reading these essays, it will not be asking for much
to have a dose of restraint towards Dr. Vaknin's sometimes lethal
"absolute truths" regarding the Balkans and the East. After you finish
reading this book, you can find out not only what the East is - but
also what the East is, indeed, not. This is because Dr. Vaknin observes
the Balkan and the East only from the dark side, regarding its people
as zombies who do not have any idea at all why they are walking on this
Earth. Unfortunately for him, life, neither in the Balkans in
particular, nor in the East in general, is a pathology as he enjoys
saying. That is why some of his articles contain an overly heavy-handed
personal touch, momentary sensations and impressions too strong,
amounting to exaggeration, or, in other words, he puts things headlong.

In "The MinMaj Rule" his paranoiac fear of the "nation-state" can be
felt. His perversity reaches a climax when he finds a justification for
the West and its three months long NATO bombing of Yugoslavia (an act
without precedent in modern history, which indeed resulted in the same
pitiless kind of bombing in Chechnya) and in the acknowledgment that
for the Albanian residents of Kosovo "it has not protected their right
to self-determination".

Dr. Vaknin likes to see the state as "a community, a majority of
minorities united by common rules, beliefs and aspirations ... no
longer utopian, it is a realistic model to emulate". In "Herzl's
Butlers", he even goes further and in the modern nation state he sees
"a reflection of something more primordial, of human nature itself as
it resonated in the national founding myths (most of them fictitious or
contrived)". Still, he is sufficiently honest to admit that "the Jews
(and Germans) came up with the 'objective', 'genetic', 'racial' and
'organic' nation". Indeed, through the periodically harsh critique of
the West's actions in the East, transferring into its body Western
malignant cells of mafia, drugs, organized crime, corruption etc., the
careful reader will discover the glorification of the subjugation of
the East by the West.

Dr. Sam Vaknin is not the first one to try to put all the books which
deal with the so called "world conspiracy" in the domain of illusion or
man's gullibility ("The Elders of Zion"). That was done before in a
fine literary manner mixed with factography by another Jew (by father),
the writer Danilo Kish from ex-Yugoslavia, in his novel "A Book about
Kings and Fools". But if Danilo Kish was exploring the world archives
to prove that it is only by coincidence or through an accidental knot
of circumstance that "the book of Nillus" about a "world conspiracy"
was created, thus far Dr. Vaknin is not only mocking the intellectuals
and ordinary mortals of the East, but he humiliatingly attributes the
existence of that "conspiracy" to the "paranoiac and schizoid nature"
of their minds.

It is interesting that the author uses a tour of the abundant history
of the region just to explain the "darkness" of today's. Or, without
necessity and astonishingly, he is giving a huge treatment only to the
idea of the - in essence illusory and never existing - "Great Albania",
adapting history for his own needs. He even smoothly, in only few
lines, gives "the definite historical truths" about the Illyrians and
their descendents, a subject on which historians composed large tomes
and which they investigated all their lives and about which they still
have dilemmas.

Finally, where does Dr. Vaknin think that the West lost the East? Is it
on its way from Babylon towards some new "promised lands"? Or, is it
maybe - After the Rain - in a Biblical flood?

Although both in the West as well as in the East, it is precisely the
Jewish version of the Bible out of the thirteen existing ones that is
the dominant (a version which is rather a copy of the prehistoric Bible
text of the Sumerians from Mesopotamia) - nevertheless God promised
himself: "Never again will I curse the ground because of man, however
evil his inclinations may be from his youth upwards" and God said:
"This is the sign of the covenant which I establish between myself and
you and every living creature with you, to endless generations:

My bow I set in the cloud,

Sign of the covenant

Between myself and earth.

When I cloud the sky over the earth,

The bow shall be seen in the cloud.

Then will I remember the covenant which I have made between myself and
you and living things of every kind. Never again shall the waters
become a flood to destroy all living creatures. The bow shall be in the
cloud; when I see it, it will remind me of the everlasting covenant
between God and living things on earth of every kind."

In the Balkans, all things aside, this blessing of God - the bow - can
be often felt and enjoyed. Or as one of our proverbs says - After the
Rain always cometh the Sun!


Emilija Geleva

Skopje, February 2000


Return



T H E   A U T H O R



SHMUEL (SAM) VAKNIN


Curriculum Vitae



Born in 1961 in Qiryat-Yam, Israel.

Education

Graduated a few semesters in the Technion - Israel Institute of
Technology, Haifa.

Ph.D. in Philosophy (major: Philosophy of Physics) - Pacific Western
University, California, USA.

Graduate of numerous courses in Finance Theory and International
Trading.

Certified E-Commerce Concepts Analyst.

Certified in Psychological Counselling Techniques.

Full proficiency in Hebrew and in English.

Business Experience

1980 to 1983

Founder and co-owner of a chain of computerised information kiosks in
Tel-Aviv, Israel.

1982 to 1985

Senior positions with the Nessim D. Gaon Group of Companies in Geneva,
Paris and New-York (NOGA and APROFIM SA):

- Chief Analyst of Edible Commodities in the Group's Headquarters in
Switzerland

- Manager of the Research and Analysis Division

- Manager of the Data Processing Division

- Project Manager of the Nigerian Computerised Census

- Vice President in charge of RND and Advanced Technologies

- Vice President in charge of Sovereign Debt Financing

1985 to 1986

Represented Canadian Venture Capital Funds in Israel.

1986 to 1987

General Manager of IPE Ltd. in London. The firm financed international
multi-lateral counter-trade and leasing transactions.

1988 to 1990

Co-founder and Director of "Mikbats-Tesuah", a portfolio management
firm based in Tel-Aviv.

Activities included large-scale portfolio management, underwriting,
forex trading and general financial advisory services.

1990 to Present

Free-lance consultant to many of Israel's Blue-Chip firms, mainly on
issues related to the capital markets in Israel, Canada, the UK and the
USA.

Consultant to foreign RND ventures and to Governments on macro-economic
matters.

President of the Israel chapter of the Professors World Peace Academy
(PWPA) and (briefly) Israel representative of the "Washington Times".

1993 to 1994

Co-owner and Director of many business enterprises:

- The Omega and Energy Air-Conditioning Concern

- AVP Financial Consultants

- Handiman Legal Services - Total annual turnover of the group: 10
million USD.

Co-owner, Director and Finance Manager of COSTI Ltd. - Israel's largest
computerised information vendor and developer.

Raised funds through a series of private placements locally, in the
USA, Canada and London.

1995 on

Publisher and Editor of a Capital Markets Newsletter distributed by
subscription only to dozens of subscribers countrywide.

In a legal precedent - studied in business schools and law faculties
across Israel - was tried for his role in an attempted take-over of
Israel's Agriculture Bank.

Was interned in the State School of Prison Wardens.

Managed the Central School Library, wrote, published and lectured on
various occasions.

Managed the Internet and International News Department of an Israeli
mass media group, "Ha-Tikshoret and Namer".

Assistant in the Law Faculty in Tel-Aviv University (to Prof. S.G.
Shoham).

1996 to 1999

Financial consultant to leading businesses in Macedonia, Russia and the
Czech Republic.

Collaborated with the Agency of Transformation of Business with Social
Capital.

Economic commentator in "Nova Makedonija", "Dnevnik", "Makedonija
Denes", "Izvestia", "Argumenti i Fakti", "The Middle East Times", "The
New Presence", "Central Europe Review", other periodicals and in the
economic programs on various channels of Macedonian Television.

Chief Lecturer in courses organised by the Agency of Transformation, by
the Macedonian Stock Exchange and Ministry of Trade.

1999 to Present

Economic Advisor to the Government of the Republic of Macedonia.

Web Activities

Author of extensive web sites in:

Psychology ("Malignant Self Love") - An Open Directory Cool Site,
Philosophy ("Philosophical Musings"), Economics and Geopolitics ("After
the Rain").

Owner of the Narcissism Revisited Announcement and Study List (more
than 830 members) and the After the Rain CEE and Balkans Announcement
and Study List.

Editor of mental health disorders and Central and Eastern Europe
categories in web directories (Open Directory, Suite 101, Go.com,
Search Europe).

Weekly columnist in "The New Presence" and "Central Europe Review".

Publications and Awards

"Managing Investment Portfolios in States of Uncertainty", Limon
Publishers, 1988;

"The Gambling Industry", Limon Publishers, 1990;

"Requesting my Loved One - Short Stories", Yedioth Aharonot, 1997;

"The Macedonian Economy at a Crossroads - On the Way to a Healthier
Economy", (Dialogues with Mr. Nikola Gruevski), 1998;

"Malignant Self Love - Narcissism Revisited", Narcissus Publications,
1999;

"The Exporters' Pocketbook", Ministry of Trade, Republic of Macedonia,
1999;

"The Suffering of Being Kafka" (electronic book of Hebrew Short
Fiction);

"After the Rain - How the West Lost the East", Narcissus Publications
in association with Central Europe Review / CEENMI, 2000.

Winner of numerous awards, among them the Israeli Education Ministry
Prize (Literature) - 1997, The Rotary Club Award for Social Studies -
1976, and the Bilateral Relations Studies Award of the American Embassy
in Israel - 1978.

Hundreds of professional articles in all fields of finances and the
economy.

Numerous articles dealing with geopolitical and political economic
issues.

Many appearances in the electronic media on subjects in philosophy and
the sciences and concerning economic matters.

Write to Me:

palma@unet.com.mk

samvak@briefcase.com

My Web Sites:

Economy / Politics:

http://samvak.tripod.com/guide.html

Psychology:

http://samvak.tripod.com/index.html

Philosophy:

http://samvak.tripod.com/culture.html

Poetry:

http://samvak.tripod.com/contents.html


Return



After the Rain

How the West

Lost the East



The Book

This is a series of articles written and published in 1996-2000 in
Macedonia, in Russia, in Egypt and in the Czech Republic.

How the West lost the East. The economics, the politics, the
geopolitics, the conspiracies, the corruption, the old and the new, the
plough and the internet - it is all here, in colourful and provocative
prose.

From "The Mind of Darkness":

"'The Balkans' - I say - 'is the unconscious of the world'. People stop
to digest this metaphor and then they nod enthusiastically. It is here
that the repressed memories of history, its traumas and fears and
images reside. It is here that the psychodynamics of humanity - the
tectonic clash between Rome and Byzantium, West and East,
Judeo-Christianity and Islam - is still easily discernible. We are
seated at a New Year's dining table, loaded with a roasted pig and
exotic salads. I, the Jew, only half foreign to this cradle of
Slavonics. Four Serbs, five Macedonians. It is in the Balkans that all
ethnic distinctions fail and it is here that they prevail
anachronistically and atavistically. Contradiction and change the only
two fixtures of this tormented region. The women of the Balkan - buried
under provocative mask-like make up, retro hairstyles and too narrow
dresses. The men, clad in sepia colours, old fashioned suits and turn
of the century moustaches. In the background there is the crying game
that is Balkanian music: liturgy and folk and elegy combined. The
smells are heavy with muskular perfumes. It is like time travel. It is
like revisiting one's childhood."


The Author

Sam Vaknin was born in Israel in 1961. A financial consultant and
columnist, he lived and published in 11 countries. An author of short
stories, the winner of many literary awards, an amateur philosopher -
he is a controversial figure. This is his tenth book.





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