Slovenia: A Case Study of the Challenges of Privatization
The post-Communist optimism in Eastern Europe generated several unrealistic expectations, among them the belief that the conversion to a market economy could be fast and profitable. This chapter analyzes the difficulties Slovenia has had in making this transition and discusses the relationship between Slovenia's economic experience since 1950 and the unique privatization policies that the country finally adopted. It also explains how euphoria over independence blinded most Slovenes to the economic consequences of losing the captive Yugoslav market.
Slovenia, a country of 2 million people bordering Austria and Italy, has been independent from the former Yugoslavia since summer 1991. Its miniwar with the Yugoslav Army was just a skirmish compared to the horrific conflicts waged in Croatia and Bosnia. The homogeneity of its population and the clarity of its borders enabled Slovenia to separate from Serb-dominated Yugoslavia with a minimum loss of life and property.
Before independence, Slovenia had been the most prosperous of the Yugoslav republics, with one twelfth the country's population, and its exports accounted for more than one third of the country's exports to the West. The per capita income of Slovenia was seven times that of Kosovo in Serbia, and the economic and political views of the population were closer to Vienna than to Belgrade. In 1980, the standard of living of Slovenia approached that of its Western neighbors. Thus, many thought that Slovenia would have the best opportunity of all the socialist states for a smooth or swift transition to a market economy.
The death of Josip Tito, the leader of Yugoslavia, in 1980, coincided with