The economic consequences of national independence: The case of Slovenia

Abstract

The post-communist optimism in Eastern Europe generated several unrealistic expectations. Among these was the belief in a fast and imme? diately profitable conversion to a market economy. This paper analyzes the difficulties Slovenia1 has had in making this transition and explains the re? lationship between her economic experience since 1950 and the unique privatization policies finally adopted. Included will be a discussion of how independence euphoria blinded most Slovenes to the economic conse? quences of losing the captive Yugoslav market. Slovenia had been the most prosperous of the Yugoslav republics. With one-twelfth the population, Slovenes accounted for more than one third the country's exports to the west. Her income per capita was seven times that of Kosovo in Serbia. Her economic and political views were closer to Vienna than to Belgrade. In 1980 her standard of living ap? proached that of her western neighbors. For these reasons, many thought Slovenia would have the best opportunity among socialist states for a smooth or swift transition to the private market economy. First, however, the events leading to Slovenia's secession must be out? lined. Then the difficulties faced by the new Slovene government will be put in the context of a broader discussion of goals, methods, and ap? proaches to privatization.