THE CONFERENCE COMMITTEE OF RECOMMENDATION

H.E. Stjepan Mesić, President of the Republic of Croatia

Pascal Lorot, President of the Choiseul Institute for international Policy and Geoeconomics and editor in chief of the journal Geoeconomie

FOCUS

The aim of the conference has been a discussion on the efficiency of the IMF's and the WB's economic politics and recommendations in the processes of economic and social restructuring of countries in transition. The Conference seeks to improve the exchange of experiences on these politics between Croatia and Bosnia and Herzegovina. The Conference has presented the IMF and the WB as important factors of economic globalization, which have significant influence on the ways of globalization of countries in transition through the ideology of deregulation, liberalization and total privatization.
Indirectly the aim of the Conference is to make popular the idea of necessity of shaping such a model of development, which will take into consideration specific economic features of countries in transition. Croatia has adapted to the IMF's economic instructions, recommendation and politics for more than ten years with no impressive development results. The last few years its efforts are directed to the processes of accession and adaptation to the rules of European Union. In such situation there is room for discussion on alternative politics the essence of , which doesn't have to be mechanical adaptation but politics shaped in the direction of national interests and current phase of economic development of Croatia.

Working Presidency of the Conference: Vilim Ribić, Vice-President of Association of Croatian Trade Union of Civil Affairs; Dragoljub Stojanov, Professor at The Faculty of Economy, Sarajevo; Bogomir Kovač, Professor at The Faculty of Economy, Ljubljana; Dr. Željko Rohatinski, Governor of The Croatian National Bank; Dr. Jasna Plevnik, Vice-President of GEOFO; Academician Zvonimir Baletić, President of GEOFO (from left to right)

WHY THIS CONFERENCE?

Cooperation of countries in transition with the IMF and the WB is an explicitly politicized topic because opposition parties always change their opinion on taking credits from these global financial institutions when they get the power. In this way instead the image of full cooperation there is mainly pro and con the IMF and WB image.
Current situation clearly shows that the public is constantly denying to have unpolitical, factual argument discussion about these institutions, which have a deep impact on macroeconomic politics and daily life of citizens of Croatia and other countries in South-East Europe.

The GEOFO's Conference is relevant for the public, for academic and business communities, political and economic leaders, students, non-governmental organisations and media.

EXERPTS FROM THE INTRODUCTIONAL SPEECH OF DUBRAVKO RADOŠEVIĆ,Sc. D. Economic Affairs Advisor to the President

Dubravko Radošević, Sc. D. Economic Affairs Advisor to the President: "We have to work on our own program, the new Croatian development model which will be supported by all the relevant international financial institutions!"

Ownership of the development program and the support of the International Financial Institutions

(...)The topic of the consultative meeting is very interesting. I want to point out that the issue is being discussed in public, about the cooperation between Croatia and the international financial institutions. Croatia is a member of the most important economic organisations: the IMF, the World Bank, EBRD, Inter-American Bank for Development as well as the WTO.
I will comment the relationship of Croatia and the IMF and the World Bank. Let me lay out a few theses:
Croatia constructively and actively cooperates with the most important international financial institutions! The cooperation with the IMF is going on in frame of "arrangement of caution" which ensures Croatia a direct access to the international capital market so that our foreign debt can be refunded.
The aim of financial arrangement with the IMF is to decrease the so called "predictability gaps" between economic politics of foreign creditors and investors, as well as to keep the investment credit rating of the country. In short, a certain form of financial arrangement between Croatia and the IMF if a necessity at the moment.

The greatest controversy: what kind of "combinations of macroeconomic policies"?

The World Bank offers, on the other hand, a cooperation in the implementation of the so called "structural reforms". Macroeconomic stability and the structural reforms are key assumptions to the convergence of Croatia towards the economies of the European Union.
The biggest problem of cooperation with these institutions, especially with the IMF, occurs in the restrictiveness of the proposed measures.
So, an American economist Dani Rodrik brings up (in his research from November last year) that the biggest controversy is what kind of "macroeconomic policy mix" should be to remove the external unbalance of economy. According to Dani Rodrik, the most common criticism of the IMF refers to the fact that the proposed monetary and fiscal policy proposed by the Fond is too contractive and leads to the economic recession.

Development model based on "country ownership of economic program"

I will also mention the fact that the IMF has worked out an operative concept for making country ownership of economic program.
According to this concept, each economic program brought up by members of the Fund, which the IMF will support financially, has to be based on the actual economic situation in the country, has to come out of its own specific, economic, social and political circumstances, and it should be accepted and implemented in consensus as well as the national economic program.
In short, we have to work on our own economic program, a new Croatian development model, which will be supported by all the relevant international financial institutions.
Our cooperation with the European Union and all the key international financial institutions can be and must be based on this kind of a new development concept.
Today's conference could scientifically and expertly consider these aspects of the relationship with the international financial organizations.

EXCERPTS FROM INTRODUCTIONAL SPEECH OF ZVONIMIR BALETIĆ,
The President of the GEOFO

Academician Zvonimir Baletić, the president of the GEOFO; "Monetary policy is becoming international too, the key question is: Can we believe that this system of evaluation will be suitable for particular countries?"

Prof. dr. Zvonimir Baletić, President of GEOFO:
Economical science has gone too far in the apology of liberal world

(...)The main interest of GEOFO is to ground the disputes in a way, that have been going recently and to see what the actual processes which are happening today mean ad what we can expect from them.
The situation has globally considerably evolved, so that economic subjects have become more aggressive and powerful, and the state policy can hardly get away with it because economic power is political power. It has intertwined with the political power of countries and has been imposing its own rules with pretensions to take over all the public functions of the state. This conflict is greater today than ever, considering the fact that economical factors act independently apart from the state with intention to put the country into the function of their interests and their own way of action.
In the current global system the state loses the function of its own balance more and more, and on the other hand certain tasks and concerns about things private corporations don't want to deal with, are put before the state.

Not enough space for establishing the stable structure of states if left

We are not sure who is ruling today and if the ruler is willing to arrange the world according to a model which will guarantee the safety, reproduction and the stability of the society. We don't know what the aim of the ruler is, and what the obstructions are, but we only know what the new paradigm is, that it is becoming stronger, and that it is linked with a company and with the absence of social criteria. We cannot draw one company to the domain of a country to deal with social issues, and state stability issues, etc; because companies act like private institutions which are concerned with their own activities and profits. Profit became the basic criteria.
This approach doesn't leave enough space for shaping a stable structure of a country or all the countries together.
We don't know how to establish any kind of social structure, solidarity relationships, and we can't expect that something like that will develop in the world. We have international institutions, which are trying to establish order and balance, but we wonder if they are in function of private corporate bodies or particular countries. I think that we should get away from general dogma and see how this functions in the real world as it is.
Today the efficiency of economic structures is measured through profit, but the profit is private and it can't be a social category, it is a category that comes out from the behavior of companies.
For them efficiency and profit mean reducing costs, and work is an expense for a company, and not an obligation. In this sense companies consider that the best for them is to reduce expenses, to pay their workers less, to give them fewer rights, only to increase the competition.

Profit is privatized and expenses are socialized

On the other side, competition with all its uncertainty, and the forms of cooperation are not the same as they used to be. The criteria for making decisions have changed, we don't know how these networks act in their competitive space and time and how the decisions of corporations will effect the particular cases, people and particular regions and particular functions of countries. There is a growing tendency to privatize the profit and to socialize the expenses. In this way the state gets new financial liabilities but has less possibility for real actions. Only the monetary policy is left to the state. But, monetary policy is also becoming international and the question is: How can we have confidence in this system of evaluation and to what extent will it be suitable for particular countries?
Some countries can be put aside; economic balance can be formed at any level of employment. Governor Rohatinski will probably talk about that.

How to achieve development thorough the global system?

I wanted to rise the question of the real evaluation of the possibility for development; how to get it through the global system and not to neglect the interest of particular groups, to avoid the privatization of some functions of the state and the privatization of a possible annuity, not to convert the population of the country into the material which is used according to the principles of companies to pay as less as possible and to use as much as possible.
I think that there is no sign of a solution to this, so I'm putting this question to you to exchange our opinions to see in which direction we can expect the solution.
Economical science has unfortunately gone to far in the apology of liberal world, and it a priori sets certain dogma, but they were not proved in practice, and not only on the theory of balance from neoclassic school.
The country will have to set up the new additional terms and additional demands from the point of view of liberal world. We should be in a way more critical and not accept any new dogma as something given that can't be doubted or spoken about. The question is: In what way can the global system satisfy the basic needs of any society? (...)

EXCERPTS FROM INTRODUCTIONAL SPEECH OF JASNA PLEVNIK,
The Vice-President of GEOFO

Dr. Jasna Plevnik, the Vice-President of GEOFO: "The Geoeconomic forum advocates only of such a globalization of Croatia, whether we speak about the cooperation with the IMF or about the adjustment to the standards of the EU, the emphasis of which would be on economical and social interests of Croatian citizens and not of some small groups, no matter where they come from: Croatia or abroad."

GLOBALIZATION OF CROATIA WITH FOCUS ON ECONOMIC AND SOCIAL INTERESTS OF CITIZENS

The purpose of this conference in a wider sense is the conversation about the economical globalization and the results of globalization in the countries in transition like Croatia. Essential factors in this process are the International Fund and the World Bank, institutions under whose influence the main development documents of Croatia are shaped.
For years the same economic problems have shown that the existing development programmes haven't been efficient enough in ensuring the national interests.
That's why the Geoeconomic forum as an association for the research of the economic effect of globalization on small countries, is pleading for the kind of globalization of Croatia, whether we speak about the cooperation with the IMF of the adjustment to the standards of the EU, the focus of which are economic and social interests of Croatian citizens and not of some small groups, no matter where they come from: Croatia or abroad.

Government's task is to adjust Croatia to
the new phase of globalization.

Although we have been in the new century for five years only, nowadays the globalization of Croatia and the whole region as well as the EU is going on in a different direction then it was in 1990s. The main task of Croatian Government is to include these changes into the ruling system and into its own interests.
Paul A. Samuelson, the Nobel Prize winner, who has accepted his whole life as an unquestionable concept of comparative advantages, published an article last year in which he put a question if Richard's theory of comparative advantages, according to which "the countries specialized for things they are best at, benefit more from mutual trading than lose.", is over in this phase of globalization.
Research about advantages and disadvantages of this new phase of globalization should be discussed further in Croatian political arena and should overcome the disputes about globalization dilemmas from 1990s.
It is inconceivable today to expect the new classification on anti-globalization scene, but if the highly developed countries don't find enough strength for innovation of their comparative advantages, politicians may become embittered antiglobalists and then new antiglobalist movements could put a pressure on globalization to carry on.
This means that Croatia must think how to become, not what its yesterday's aim was: a leading drive in the region, but e.g. an office where all the jobs for highly educated labor from the EU would move in.
One of the reasons for this conference is arguing about advantages and disadvantages of cooperation with the IMF and the World Bank in the context of the given facts, and not in the context of a political evaluation, which is formed according to whether the political parties are in power or in opposition.

EXCERPTS FROM THE LECTURE OF
ŽELJKO ROHATINSKI, GOVERNOR OF
THE CROATIAN NATIONAL BANK

Željko Rohatinski, the Governor of the Croatian National Bank: I would say that, on the ground of work experience and on the basis of certain facts, the role and the influence of the IMF is important, but it is not determining. The IMF only provides a model but we make decisions ourselves.

ARE THE IMF AND THE WB FACTORS
OF DEVELOPMENT OR THE STATUS QUO
OF THE CROATIAN NATIONAL ECONOMY?

A simple question needs a simple answer. As we have heard a previously mentioned thesis that our economic politics is only a certain form of imposed liberal concept of economic policy.
I will refer to three questions concerning these problems:
First, the aims that the IMF had put before certain politics, which had to be implemented by certain countries, were not the reasons why the IMF later changed them. I have no intention to speak about the past, but about the affects of that past on the present.
Secondly, I will speak about the real situation in Croatian economy before and during the implementing of the stand-by arrangement and the perception that was present by the bearer of the economic policy and political power in the Republic of Croatia, and about the characteristics and formalities of the effective implementation of politics especially in the period after the year 2000.

Why and in which direction did the IMF change?

First, concerning the very focus of the IMF and its effect, different judgments have been passed by the IMF and by the independent authors and a former period can be divided in four phases:
Until 1960s the IMF had made efforts to realize what it was founded for, and that was to maintain global demand at the level of full employment. In fact the IMF was successful again and considerably contributed to the development of Western Europe, and the fact is that it also had positive implications on ex Yugoslavia and Croatia as well, since it was a part of it.
That period is definitely over. It ended only then when economic policy wasn't able to meet the needs, and that was the result of technological progress, changes of relative prices and growing competition in the world market. It definitely collapsed at the moment when fixed exchange rate of dollar in relation to gold was no longer valid. Foundation stone, which was the basis of the overall former IMF was knocked down with it. A hard, fixed point of support no longer existed.
I personally think that this kind of point will never be re-established again. At present everything is flexible and that concept isn't effective any more.

The IMF is no longer able to support development and employment

I say that because in our circumstances there is a continually present question: why the IMF doesn't support development, why doesn't it support employment, social issues? In my opinion the IMF is no longer able to do that.
Than came the period of 1970s and 1980s. We all know what that was. The price of oil went up, the times of cheap energy had passed, inflation appeared and first and foremost debtors' crisis in the world arose. The IMF adjusted itself to that, there was an expansion of neoliberalism in the highly developed countries in America and England, and later that model was spreading in other countries. As the debtors' crisis was a dominant issue, the IMF took an unpopular job of a world policeman whose only goal was to protect the creditors, and to ensure that their credits were regularly serviced. That is the picture, which many people have when they talk about the IMF: a world policeman acting exclusively in favour of creditors. At that time Croatia practically met the IMF for the first time. That was the period of the stability program from 1983, and that was the period of using coupons and driving on even and odd dates.
It was then that the IMF played the role of the world policeman in favour of our creditors. After that Marković's stability program followed, it was the first real stand-by arrangement. Would he have succeeded or not, we will never know because meanwhile the country fell apart.
The third phase was in the 1990s, and I totally agree with Mr. Baletić when he says that we cannot observe the economy, as well as the IMF, out of political context. That was the time when only one big power was left: America, that was a period when American domination came true, and first of all it was an expansion of American trade, so that American influence was crucial for the politics of the IMF. That was also the period of technological revolution considering communications and politics, which is popularly called Washington consensus.
Then followed the process of globalization and it was the IMF who became the promoter of globalization whose main instruments were: privatization, deregulation, liberalization.
The speech is simply about the forming the global conditions for free expansion of capital. This means that the aim is to stipulate for safe investments. This policy soon met some problems and failure. Two problems were significant: Asian crisis in 1997 and Argentinean in 2001.

The Fund has learned the lesson

It turned out that globalization can cause huge structural disorder and instead of creating conditions for safe investment it can also make investments very insecure, and for big creditors it can be a complete loss. The IMF started to get critics on all sides and the fund learned the lesson. It was difficult but it really did.
That was it, the spirit, the atmosphere in which a stand-by arrangement was made at the end of 2002 and it has practically lasted by today with small technical breaks and it will probably continue in the next year. Let me have a look at our side.
Račan's government made an arrangement in 2000 after the former arrangement had failed for political reasons, and the IMF wanted to play a political part and blackmailed Croatia: no funds can be drawn from the Fund before the accused from Bosnia and Herzegovina go to Hague. Croatian Government refused and broke up the arrangement. Two years later the new Government makes a new arrangement under new conditions.
First, as Mr. Radošević said, that the arrangement and all the following ones were made out of precaution, but funds were not drawn from the Fund. Everyone knew that it won't be necessary to the draw money from the Fund, so they said: No, thanks, not money!

The EU still doesn't perceive our economic credibility

But why do we make other commitments if we don't want the money? Because we want to keep and if possible, improve our rating on international financial markets.
Why did we have to make arrangements while some other countries didn't, not even our neighbour Slovenia? Because after everything that had happened in economic policy and wider in 1990s our credibility in economical and other sense, was very low. We were not trusted much. Five years have passed since then; new negotiations with the EU are beginning which give us greater credibility. But we still need an arrangement with the Fund, although we are before the entrance to the EU. It's not because other markets will perceive our closeness to the EU or not, but because the EU does not perceive our credibility.

In 2004: an arrangement for a positive avis.

After the Račan's government, the last arrangement was made in August 2004. How and why?
As far as I know, our Government was not inclined to making arrangements. It was made because the European Commission in Brussels said: You will get a positive avis in June provided that you have a stand-by arrangement with the IMF. Our delegation went hastily (helter-skelter) to Washington and tried to come to an arrangement and asked the Fund to set a precedent and announce it two months before the Committee makes a decision about the Croatian stand-by arrangement. Without the avis, the arrangement would be considerably different than it was. However, that was over. The date for the negotiations had been set for the March 2005.
The negotiations started in the beginning of the year 2005 and why should we burden ourselves with the arrangement?
European Commission appeared again with a clear message: proceed with the arrangements, or the negotiations will start in a different manner. European Committee would never say that the negotiations were stipulated by the arrangement, but we all know that they were.

The EU expects that the Croatian arrangements with the IMF will be prolonged to the year 2006.

The negotiations have begun, the EU is here now, the arrangement is on its way, and we have heard again form Brussels saying that they are expecting the arrangements to be prolonged to the year 2006 and after that, we will see.
I want to point out what I had previously said. We have made the arrangements, we are implementing them, but we still do not make any demands for money. We do all that because our credibility is still very low. Whatever the arrangements may be it gives us a little bit more credibility.
Now I would like to remind you of certain general well-known things in connection with the focus of the IMF's politics under globalization circumstances.
A very common thesis appears that the Fund makes pressure on general liberalization, deregulation and of course, directly on privatization by means of stand-by arrangements. It may or may not be so.

Croatian privatization wasn't going in the direction the IMF suggested.

Let's start with the privatization. We all know that it had started as our own autonomous work of the beginning of 1990s under the motto - private property is always and everywhere more efficient than state property. We all know that this motto was not proved as a true one, at least not in 1990s.
The Fond suggested that we go in this direction: a fresh capital, new organisation on managerial structure, but not in the way Croatian Government have carried it out, that kind of privatization haven't brought anything mentioned above. The only issue the country had achieved is the reduction of national debt, but the privatization was made by managerial credits.
The privatization of "Telecom" and "Ina" had carried out in a different way, but it was, no longer an autonomous decision made by the Republic of Croatia. The question is: Was it necessary to do that with profitable companies?
I would say that our banks were collateral damage from the 1990s, and then the downfall of firms because of war and losing markets. All the big banks had a negative capital. Those banks objectively couldn't work normally under given circumstances because they didn't have a real capital.
When we look at what was really happening during the year 2000, all the liberalizations were practically defined by our ambitions. In this issue particularly significant was the liberalization of the capital account as the most risky operation. There were two determining factors of liberalization: the agreement of stabilization and joining and bilateral contracts, which our country has made with all relevant countries in the world.

Arrangements made with the IMF didn't mean restrictive
economical politics, at least not until 2004.

The third thing was an effective economical politics, first and foremost fiscal and monetary policies, which was implemented within the frame of stand-by arrangement, which is said to be restrictive.
Let me lay out a few facts:
Remember that we had in 1999 a reduced GDP for 1% because of some indications of NATO attack on Kosovo and our tourism. We have seen how sensitive we are to some external disorders. There was an absolute decrease of money transfer to about 5 per cent.
There was a depreciation of the exchange rate, it fell 5 % in relation to Euro and 22% in relation to American dollar. Then, the year 2000 came with the general insolvency inflation of 7% and, the blockade of the account, and a general unpayment to the state. The arrangement hadn't been made at that time yet.
Croatian National Bank took the initiative and made two things: popularly said they started issuing money, we reduced the rate of obligatory reserves, "de facto" we passed on to the politics of nominal exchange rate, and those effects rapidly reflected on inflation.
In 2000 there was no arrangement, fiscal deficit was about 6.15%. In the period between 2001 and 2003, the arrangement was implemented. Was fiscal politics restrictive? I wouldn't say so. Bank rating increased from 52% to 71%. The GDP rose to 4.4%, fiscal deficit, which was the result of all the expansive politics, grew from 2.5 % up to 6.2% of GDP, and the deficit of current transactions increased from 2.5 % up to 6.2% of GDP, the external debt increased from 61% to 82%.
It is popularly said that the arrangements with the IMF equal restrictions; it really wasn't the case for the period of 2004, those politics were expansive and not restrictive.

Croatian National Bank introduces restrictive monetary politics, the IMF criticises.

And then in the year 2003 it was obvious what was happening with the national debt. Croatian National Bank acted on its own and started to hamper those actions. We also introduced 16% restriction to the growth of capital investment, 35% to cover the foreign exchange liabilities with the solvent assets; we reduced interest rates by Statements of Finances of the CNB and practically annulled these statements, which meant that we introduced restrictive monetary politics.
The IMF criticized us. They were against administrative measures that restrict the expansion of crisis and reduce the profit of foreign banks. At the same time the IMF did nothing crucial to reduce fiscal deficit and that may have been so because 2% of GDP went on building motorways, that is Bechtel.

Central point of the stand-by arrangement: foreign debt
issue and external vulnerability of the system issue.

It was only at the end of 2003 that it was obvious what was happening and the IMF changes the course, a new mission came, a new representative from the IMF with the new central point of a stand-by arrangement: foreign debt issue and external vulnerability of the system issue. With the debt of 80%, after four years of expansive politics, came the demand to reduce the fiscal deficit form 6.3 to 4.9% of GDP.
These are the facts. There was a turning point in 2004, when the crucial changes in economical politics were made, from expansive to moderately restrictive politics, so that the rate of growth of GDP continued to increase by 4%.
At the end I have to return to the initial question: Is the IMF a factor of development or the status quo? I would say that, on the basis of my work experience and some relevant facts, the role and the influence of the IMF is significant, but it's not decisive. The IMF is only modeling things, but we decide ourselves.
In this sense, the IMF has never been an obstacle for us to determine and decide on the issues and measures, which mean growth and development on sound economic grounds. When we don't succeed it is our problem.

EXTRACTS OF LECTURE OF BOGOMIR KOVAČ, Professor at The Faculty of Economy, Ljubljana

Professor Dr. Bogomir Kovač: We should direct our attention to one of the greatest global risk: global instability between demographic tensions and economic abilities of big regions, countries to manage these processes

POLITICS AND PHILOSOPHY OF THE INTERNATIONAL FINANCIAL INSTITUTIONS OF THE GLOBALIZATION IN COUNTRIES IN TRANSITION

(...)What is new in the global world? The good thing is that figures of global economy are not so bad, but the bad thing is that we don't trust them much.
Concerning the growth of GDP the world is in a good condition. On one side there are countries, which have difficulties, and these are the most developed countries like Japan, which is the second biggest economy in the world, then the USA, Middle Europe, G-10, which have the growth of GDP from 4 - 6%. A group of countries in Asia, which have a very high growth are: India 8.1% and China 10.1%, etc. It is one pleasant picture of the world, and there is one convenience more - a very low inflation. Interest rates are very low and there is a fine system of cheap financing etc. But on the other side the prices of real estate grow approximately from 13 to 20%. On the other side there are processes, which aren't so pleasant and the prices of oil go up.

Asian phenomenon

Concerning unemployment things are really pleasant, the USA has the unemployment rate of 1.5 %. But there are countries, which have fared badly like Germany, which has an unemployment rate of 11.7 per cent, and in some regions even 20 to 40%.
As to the budget positive countries are: Sweden, Australia, and New Zealand and in view of negative aspect the leading counties are: America and Japan with 6.4 per cent of budget deficit etc.
If we have a look at America, it is the leading big power, which has two deficits: the budget (4.4%) and the external deficit (5.5%) - at level of $ 1.640 billion.

Regarding European Union, it has great political and economical problems. Europe has crisis of a fiscal state, it has been present here since 1990s; that's why its political ambitions have decreased, and that's why it hasn't succeeded in carrying out all its reforms. There is one phenomenon; Asian phenomenon: Russia which has occupied the largest part of the continent and natural resources, India which is a leading country in services, Japan which is in spite of some problems, holding the second position in global world, and on the other side it has no great political ambitions, at least not so far.

India and China are developing fast, but they don't have the economic
capacity for servicing the growth and social aspiration.

The risk of managing globalization is increasing because of economic, political, social and demographic temptations. This results with regional political instability, no matter if everything is globalized, regional political knots remain. We are a part of Balkan knot. We should point at the greatest risk: global instability between demographic transitions and economic abilities of big regions, countries to manage these processes.

In view of development in demographic sense

Considering demographic development there could be 9 billion people in the world in thirty years time, two countries, which make one third of the world population are China and India. These big countries are developing very fast, but they don't have economic capacity for servicing the growth of development and social aspiration which go with it. In developed countries like European, there is a demographic tradition, but on the other side there is a great economic disproportion. Demographic retardation is also the problem of Slovenia and Croatia.
One of the problems is also the urbanization. In 1800 there was 2 % of world population in towns, in the year 2000 there was 50 %, while in thirty years it could be 63 %n. Urbanization means a great socio-economic temptation. What the town is today and what it will be in future, was the country in the past.

Global economy, but local social conditions

One more issue is a great challenge to the present processes: these are social systems. Globalization is basically an economic phenomenon, global economy is being shaped but in fact people live under local conditions. Because of that we speak about local globalization: global economy, but local social conditions. It's a great problem. Even the highly developed countries, like European Union, have a big problem how to solve these social issues.
In which direction can these changes take place? There are three possible global changes. This means, work better and work more. Americans work today 40% more than people in European Union, and of we have a look at Slovenia, an average worker doesn't work about two months a year, and somebody has to pay that. Work better and work longer. Work cheaper, it doesn't necessarily mean working with lower salaries, but lower gross earnings and that brings up the question how to lower fiscal charges, and not the net income. On the third side there is moving the production towards east, north or no matter where.

Global politics is lost without the philosophy of development changes.

All these changes ask for more risk and one of them, which is particularly important is the risk of unchangeability. If we don't accept philosophies of development changes, then we are lost in the global battle.
We must have a competitive economic system. It's very important to have a competitive system of values. The system of value is the basis of functioning. The market cannot function without value system. The countries which succeeded in doing so have won the battle. Variety in reacting faster than others or building upon our own competitions is the thing that solves basic issues.
In consideration to our local problems, there is a global concept which is given as a model, but on the other side there are reactions like nationalism, protectionism and liberalism. What are the solutions to these problems?
J Sachs's report made for the UN for this year points out that we should all work on enlightment of globalization. There is a system of institutions which can participate in the new era: America, Europe and generations of 20 most perspective countries of the third world.

European Union and Washington consensus match about 70 per cent.

Now Washington consensus effects the post socialist countries because it concerns the so called market fundamentalism which leads to economic stabilization, global liberalization. All that had to be the foundation for economic restart and stabilization which would then continue to grow.
European Union and Washington consensus match about 70 percent. The other 30 per cent is the so called social part of European Union, the rest of their politics matches almost completely. There are no inconsistencies between the European Union and Washington consensus, there is only a different scenario…

IZVODI IZ IZLAGANJA PROF.DR. DRAGOLJUBA STOJANOVA, Ekonomski fakultet Sarajevo

Prof. dr. Dragoljub Stojanov: We are following economic theories, which are often changed, by their supporters and which have destabilizing effects on economic reality in the countries in transition.

Bosnia and Herzegovina: Advantages and Disadvantages
of the Cooperation with the IMF and the World Bank

(click and have a view at the presentation in Power Point)i

EXCERPTS FROM LECTURE OF VILIM RIBIĆ,
Vice-President of Association of Croatian Trade Union of Civil Affairs

Vilim Ribić, vice-president of the headquarters of public services union: Our governments are not able to have coherent politics and negotiate on an equal footing in a competent manner. Then it happens that they ask for advice from the IMF. When they get some advice, they interpret them as conditions.

ADVOCATING TRIPARTITE DIALOGUE: THE EXPERIENCE OF THOSE WHO DIRECTLY EXPERIENCED THE IMF AND THE WB POLICY THAT WAS ADVISED TO CROATIA

Very often I participated in the talks with the IMF and our experiences are rich, but not unambiguous. Our view of the IMF in Croatia is contradictory as well as in global scene. There are things that should be supported and the useful side of the IMF should be understood, but there are also things that should be taken cautiously.
When I consider the role of the IMF in the political frame of Croatia, I can see that the IMF is the foundation of the responsibility principle in our politics. My experiences with all governments show that our politics are unbelievably irresponsible. They are irresponsible in various aspects: reforms, they aren't ready to carry them out; they are financially irresponsible - they take over the responsibilities, which they aren't able to implement. Fawning upon the voters body is the main and basic aim and motive. Of course, the unions are fawning upon their members and there is also this kind of demagogic criticism.
The IMF is an ideal institution for Croatia, it is an institution of alibis for all the failed politics and all the most difficult actions of the Government, which have to be made.

The IMF has two levels of acting: making conditions and consulting

When we have to make restrictions or carry out reforms, we should consider reforms as the shaping of the existing forms (in the society) so that it can bring the fruit in the future because reform is nothing but giving up something today in order to realize profit from them tomorrow.

When you have a look at the Government's attitude you can see that they are tending to avoid the unpleasant part of this in a hypocritical way and have the IMF as an alibi for the reforms.
The IMF acts in two levels, according to my experience and contacts with them: one level is making conditions, and the other is advising-consulting.
Our Governments can't have coherent economical politics and they are not able to run talks in an equal and competent way. When this happens they ask the IMF for advice. When they get some advice from the IMF they are interpreted as the conditions set by them.
Here is an example of the IMF's role as I see it. At present current issues are the suggestions about introducing various forms of extra payments in health services and transferring some expenses to the citizens and employees. Instead of being efficient this system appears to be intimidating. Whoever has the insight in the health system is aware of the corruption, not the one concerning the blue envelopes, but the one much worse, the cooperation of doctors' circles with the pharmaceutical industries, outflow and wasting of funds from HZZO. And what is happening? Expenses fall on the backs of citizens. The IMF asks the issue to be solved within the frame of the system; either it will be put on the backs of citizens or the Government will include them in the structural changes and functioning of the system. It was our decision to burden the citizens with these expenses and not the IMF's. The IMF only models the existing conditions and sets the basic directions for modeling.
I think that great problems have been put before the national politics and governments. Why would our Government be anything different from other governments, from Lithuania to Uganda? Probably the problem of the incompetent governments appears all over the world, so the IMF is a positive line of magnetic force which drives the governments to act responsibly. I only want to point out this aspect, my aim is not apologizing the IMF. The one who lends you the money, wants to be sure to get it back.

Keeping aloof from the issues offered by the world financial institutions

It's perfectly clear that the IMF's economical of domination of market laws, with all the intimidating effects (from Nepal to Senegal), inequality in the world, disintegration of countries and creating great differences between the nations as well as within one nation, is not the politics we support.
The IMF can also be considered as an instrument for attempt of Americanization of the world. We have witnessed a strong attempt of Americanization of Europe which has its own culture which is essentially different from American. This fact is illustrated by a survey which gave answers to the question: Should the state intervene in the economical and social life or not?
About 80% of Americans answered: NO. About 80% of Europeans answered: YES.
Rifkin once said that the American model of life is as expensive as European because two million people who are registered as unemployed are sitting in prisons, about 500 people out of 100.000 Americans are in prisons, and in Europe there are about 80. this comparison shows that we should keep aloof from what the world financial institutions offer us. Are we going to Americanize Croatia and lean to these trends, following the instructions made by the IMF?

Croatian general public should be familiar with the dangers of free market of services

Since a few very influential people from education are present here today, I would like to mention that some confusing ideas about the so called free market of services have been introduced in the field of education by the world financial institutions, to which the democratic public in Europe strongly opposed, so it would be good to sensitize the public for this issue with us too.
This is a very important issue, because introducing free trade into education, which is not the field of market, it enters the domain of human rights and basic values. These are the issues which we should be extremely sensitive to. Responsibility rests with trade unions and media to bring up this issue as a very important question.

HOST

The Regional Geoeconomic Conference is hosted by GEOFO, Association for World Economic development Studies. GEOFO has strong geoeconomic orientation, which is expressed through integration of interests, not unity, of economy, diplomacy and national security.