Think through strategy: New vision for industrialization of economy and modernization of society

Abstract

In strategizing about Serbia's economy, there are two related questions. Where is it now? What it could be in the future? As far as the answer to the first question is concerned, Serbia is microscopic economy in long regression, late developer with delay in transition toward the road to higher development. Strategic audit of Serbia's position reveals long list of vulnerability indicators. Dangerous mix of structural imbalances and geopolitical stuck in the middle exists. In import and debt dependent country, high financialization undermines its economy in many ways. In the last 25 years, Serbia lost roughly 1/10 of population and approximately 1/6 of its territory rich with significant natural resource endowment. Output in constant prices in 2014 is almost 1/3 lower in comparison with 1989 level. The previous facts raise fundamental question: Why do people in the long period act against their own interest? The answer is simple: wrong system. We do not want to fix it up. We must change it. It is not easy because in the age of discontinuity great strategy and efficient model of economic growth are moving targets. In the new context the core competence for each national economy, small or large, early developer or late developer, stagnating or fast-growing, is going to be strategic flexibility. In thinking through strategy, the key question is not what is right? But, what would have to be right? In the new context, the role of government is not only to achieve greater geopolitical positioning and maintain political stability and social cohesion, but also, and predominantly, to encourage development of new model of economic growth and related economic policy platform. The orthodoxies governing the economy in Serbia are so entrenched that we need breakthrough to articulate the paradigm change in theory and policy. In quest for solution, pendulum should not be shifted from one extreme institutional choice that the market is the best regulator to the other which assumes that the state is the only master. In our previous articles [2], [3], and [4] we opt for heterodox approach which realigns development model and economic policy platform based on conceptually more complex approach of new structural economics. Industrial policy is a crucial element of the new wisdom. In this article, we concentrate on the strategy for economic growth in Serbia supporting previous choices.