War and Peace: The Divergent Breakups of Yugoslavia and Czechoslovakia

Author(s): Milica Z. Bookman

Source: Journal of Peace Research, Vol. 31, No. 2 (May, 1994), pp. 175-187
Published by: Sage Publications, Ltd.
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? Journal of Peace Research, vol. 31, no. 2, 1994, pp. 175-187

War and Peace: The Divergent Breakups of

Yugoslavia and Czechoslovakia*
MILICA Z. BOOKMAN
Economics Department, St Joseph's University
Yugoslavia and Czechoslovakia are among the several countries that have broken up in the last few
years, largely as a result of the centrifugal forces associated with secessionist aspirations. Yet, the
process of that breakup has been vastly different in the two states. In the latter, the highly legalistic,
violence-free divorce was rare, as history provides us with few examples of such state creation. In the
former, a gruesome war is taking place, in which some nationalities are warring against each other for
the third time in this century. This article addresses itself to these two extreme types of breakup. It
describes the process by which the successor states of Yugoslavia and Czechoslovakia were born, and
explores the conditions which underlie the differences in the two breakups. In this study, the breakup is
divided into three phases, roughly corresponding to the before, during and after: re-evaluation,
redefinition and re-equilibration. Each of these is described for both countries. Finally, the role of noneconomic factors, such as national minorities, is explored. The aim of the study is to come to an
understanding of how to maximize the possibility of democratic and peaceful breakups, if they have to
occur, and thus to avoid the pitfalls that the former Yugoslav republics fell into.

1. Introduction
The 1990s have witnessed an increase in the
number and intensity of secessionist movements across the globe. A facile explanation
might be the loosening of central control
associated with the collapse of communism.
Yet, Eastern Europe and the Soviet Union
are not alone in experiencing drives for
regional autonomy. The early manifestations of the unraveling of national unions
can be encountered at various levels of development and under diverse economic and
political systems: India, Papua New Guinea,
Canada and the Sudan are all contending
with significant secessionist drives. These
movements exist despite odds against their
success. Indeed, over the past two centuries,
successful secessionist efforts were few
(including Belgium, Norway, Ireland and
Bangladesh),1 yet, today, the recent success
of the Soviet Baltic republics, Slovenia and
Eritrea fuels the fires in numerous regions
that struggle with their unions.
Yugoslavia and Czechoslovakia are
* The author is indebted to Tom Marzik, Zora Pryor
and Jerry Sazama, as well as to the JPR readers, for
their comments. This paper draws upon a study by the
author (The Economics of Secession, St Martin's Press,
1993) of some 35 secessionist movements worldwide.

among the countries that have broken up as

a result of the centrifugal forces associated
with secessionist aspirations.2 Yet, the process of that breakup was vastly different in
the two states: it was virtually painless in
Czechoslovakia, while it is excruciatingly
painful in Yugoslavia. In the former, the
highly legalistic, violence-free divorce was
without precedent in history. In the latter,
one of the more gruesome wars of the 20th
century is taking place. Thus, these two
cases represent extremes in the breakup of
states. This paper describes the process by
which the new states of former Yugoslavia
and Czechoslovakia were born, and
explores the conditions which underlie the
differences in the two breakups. The aim of
the study is to understand how to maximize
the possibility of democratic and peaceful
breakups, if they must occur, and thus avoid
the pitfalls that the former Yugoslav
republics fell into.

2. Recent Chronology of the Breakup

Yugoslavia and Czechoslovakia, both of
which took decades to create, broke up
abruptly in the course of two years. Yugoslavia, which was composed of six republics

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176

Milica Z. Bookman

and two autonomous regions, in which three

religions and two historical traditions coexisted, experienced movements for independence at both the republic and the
sub-republic level. Slovenia and Croatia
declared independence in June 1991, and
were followed by Bosnia-Herzegovina
and Macedonia. In April 1992, Serbia and
Montenegro declared a new federation
under the name of Federal Republic of
Yugoslavia.3 The Serbian population of
Croatia declared an independent Serbian
Republic of Krajina (December 1991), the
Albanians of Kosovo declared independence (September 1991), while the Serbs of
Bosnia-Herzegovina proclaimed the Serbian
Republic (March 1992), and the Croats
proclaimed the Croatian Community of
Herceg-Bosna (July 1992). Thus, one state
gave rise to eight, of which only three enjoy
complete international recognition. Czechoslovakia had fewer cultural, linguistic and
religious differences than Yugoslavia. It was
composed previously of the Czech lands
(Bohemia and Moravia) and Slovakia, and
on 1 January 1993 gave birth to two states
called the Czech Republic and Slovakia.
The roots of the breakup of Yugoslavia
are deep, and have been discussed in the
literature with varying foci, including the
historical, political and ethnic. In the aftermath of Tito's death, nationalist forces
emerged among all the ethnic groups in all
the republics. In 1986, the Serbian Academy
of Sciences composed a memorandum describing Serbian grievances against Titoist
Yugoslavia, leading the way for the rise
to power of Slobodan Milosevic.4 Franjo
Tudjman emerged in Croatia as the
nationalist seeking to enhance the power of
Croats. Discussion pertaining to secession
of Croatia produced fear among the Serbs in
Krajina, who refused to live under another
Croatian independent state that reminded
them of the Ustashe regime during World
War II, and thus led to their proclamation of
independence.5 The possible secession from
Yugoslavia of Slovenia and Croatia raised
the specter of Serbian domination, by sheer
numbers if in no way, over the Bosnian
Moslems, Macedonians, Albanians, and
other ethnic groups. Thus arose the move-

ments for an independent Bosnia, Macedonia, and even Sandzak and Vojvodina. Similar perceived Croatian hegemony led to a
movement for autonomy in Istria.6
At various times since the creation of
Czechoslovakia, the 'Slovak Question'
emerged among the leading domestic issues:
in 1939 before the creation of Independent
Slovakia, in 1963 during the Slovak Spring,
in 1968 preceding the Soviet invasion, and in
1989 after the velvet revolution. In the aftermath of both unification in 1919, as well as
federation in 1969, Slovaks were appeased
with various measures ensuring their 'separateness' within the context of a state.
In both countries, agitation for breakup
spiraled out of control very rapidly. Indeed,
polls taken one year prior to the breakup
indicated clearly the unpopularity of
secession. In Slovenia, a poll conducted by
Delo in early 1990 showed that 52% of the
population was in favor of a confederative
association with Yugoslavia, 28% was for
total secession, and 8% was for the continuation of the pre-breakup relations.7 In Slovakia, a poll in late 1990 indicated that only
16% of the population favored secession.8
Other polls consistently showed that most
Czechs favored a federation, while most
Slovaks favored a confederation.9 Despite
these poll results, the question of secession
was put to the public in the form of referenda in Yugoslavia, giving some measure
of legitimacy to the breakup.10 Slovenia,
Croatia, Kosovo, Krajina and BosniaHerzegovina held referenda, although in the
latter four they were boycotted by significant portions of the population.'1 In Czechoslovakia, no referendum on the breakup
took place. Indeed, it was opposed by the
leading parties, which had the legislative
power to block it, despite demands by opposition parties.

Thus, an anticlimactic divorce happened

to the Czechs and the Slovaks malgre eux.
In Yugoslavia, the breakup was extremely
violent, producing some two million refugees, over 100,000 killed, and evidence
of gang rape, impaling, dismemberment
and forced circumcision. These horrors
occur against a background of sanctions,
political repression, property devastation,

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The Breakups of Yugoslavia and Czechoslovakia

and nationalist frenzy in which the overriding principle seems to be 'cleanse or be

cleansed'.12
3. The Phases of the Secessionist Process
There are three phases through which
the secessionist process evolves, roughly
corresponding to the before, during and
after: re-evaluation, redefinition and reequilibration.'3 While the emphasis in this
study is on economic factors, since they
seem strongly to influence all phases of the
secessionist process, this does not negate
the importance of non-economic considerations, such as nationalism, religion and ethnicity.
3.1 Re-evaluation
This phase, measured in months or decades,
refers to the period of time during which the
seeds of secession are planted and anticenter sentiment percolates. At some point
in this phase, demands are formulated by a
segment of the population. These greatly
vary in scope and tenacity. Indeed, they
may simply be demands for increased favoritism by the center towards a region or a
targeted segment of the population,14 or
they may be demands for a dramatic change
in the participation of a region in the central
and state affairs, or the demands may be
such that nothing short of severance of
pre-existing economic and political ties with
the center is acceptable. The latter demand
is referred to by Leslie as the 'we want
out' demand (Leslie, 1989, p. 47), while
Bremmer modified Hirshman's concept and
calls it the 'exit option' (Bremmer, 1991;
Hirshman, 1970).
What are the economic factors that lead a
region to reappraise the costs and benefits of
membership in the union?15 The critical
consideration is the perception of economic
injustice. Within region/center economic relations, several issues have consistently
emerged as imperative in the assessment of
economic justice. These are (a) the share of
central budget and capital investment allocated to the regions, (b) the proportion of
input in the form of taxes that the region
contributes to the center, (c) the degree of

177

autonomy in decision-making pertaining to

economic issues, (d) central bias favoring a
sector that is under-represented in the
region in question, such as pricing policies
biased against agriculture and in favor of
industry, and (e) the share of foreign
exchange and external funding. Perceptions
of economic exploitation may be experienced by regions that are more or less developed relative to the nation, as is evident in
Yugoslavia (Slovenia as well as Macedonia),
Czechoslovakia (Czech lands as well as
Slovakia), Italy (Lombardy as well as the
Mezzogiorno), India (Punjab as well as
Kashmir), and in the former USSR (Lithuania as well as Turkmenia). The highincome, subnational regions enumerated
above have recently experienced a tax
revolt, reflecting a saturation with what they
perceive to be unfair drainage of their
resources, while the less developed regions
are lobbying for increased spread effects of
national development, as well as a change
in the redistributive policy. Perceptions
of economic injustice influence the reevaluation of the relative costs and benefits
of belonging to a national union, and, when
costs outweigh benefits, economic factors
are then mingled with ethnic, religious or
cultural factors, to form a set of demands
that take the form of 'we want out'.
What did the populations of former
Yugoslav republics want prior to their
secession from Yugoslavia in 1991? Culturally, they wanted to assert their independence, despite the linguistic and cultural
accommodations guaranteed by the federal
constitution. Economically, the argument
differed according to the relative level of
development within the union. Slovenes and
Croats did not want to share their wealth.
Slovenia, whose population amounted to
8.4% of the total, produced 16.8% of the
national domestic product,'6 and desired to
decrease its contribution to federal coffers
and thus to end what it perceived as support
of the less developed regions of the country.
Such a sentiment was shared by Croatia.
This sentiment translated into, first, the
desire to withdraw their participation in the
Federal Fund.'7 Second, they wanted to decrease their contribution to federal expendi-

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178

Milica Z. Bookman

tures such as the military, in terms of both

equipment and personnel. Third, they
wanted to decrease their contribution to
the support of the federal administration.
Fourth, they proclaimed to desire a shift to a
market economy at a faster pace than in the
remainder of Yugoslavia, and they perceived central policies as preventing that
process. Politically, Croatia and Slovenia
favored the introduction of a multi-party
system, direct elections and the overthrow
of communist rule. Although other republics were also moving in this general political
direction, their slowness became unacceptable to Slovenia, implying the necessity for
an alteration in the federal rules pertaining
to republic rights to follow independent
paths at independent paces. In addition,
they sought to break with the perceived
Serbian hegemony.
The economic arguments for leaving
Yugoslavia were different for the less developed regions of Macedonia and BosniaHerzegovina. They stood to lose federal
subsidies, access to markets, and benefits
of scale economies. Nevertheless, they
believed they received an insufficient share
of capital investment, enjoyed insufficient
autonomy in decision-making over their
resources or in their representation at the
center, were subject to biases in pricing policies and allocation of foreign exchange regulation, and received a small share foreign
investment, aid and other forms of foreign
intervention (Ramet, 1992).
Slovaks perceive themselves to be sufficiently different from Czechs that one of
their demands is for their culture, as embodied in their history, religious fervor and
language, to come to the forefront. In addition to cultural autonomy, the Slovaks are
very aware of economic factors in their
quest for sovereignty. They perceive themselves to be less developed than the Czech
lands, and for this they blame their union.
Indeed, despite infusions of capital during
the communist rule and higher growth rates,
Slovakia's economy lagged behind that of
the Czech lands (Capek & Sazama, 1993).
The key economic issue fueling secessionist aspirations has been capital investment.
Slovakia, although acknowledging the

investment and inflow of funds that it

enjoyed in the postwar period (as well as
during the First Republic and the AustroHungarian Empire) has the following complaints pertaining to that investment. First,
investment did not contribute to long-term
economic growth, since it was limited to the
raw material sector. Indeed, the division of
labor that emerged within the state indicated a bias towards the location of final
production in the Czech lands, contributing
to out-migration into Moravia and Bohemia. The second claim pertaining to the
nature of the investment is that the technology adopted in Slovakia (as well as the
Czech lands) was so detrimental to the environment that its human and material costs
are presently unbearable to the Slovak
economy. Third, investment also supported
the military industry, which became obsolete when President Havel imposed a ban on
exports of military goods. Fourth, some
have argued that there was not sufficient
help forthcoming from Prague. Although
the strength of this perception varied with
changing leadership, Leff shows that since
the creation of the republic in 1919 it has
always been an issue (1988, p. 281). This
feeling was reinforced after the implementation of the economic reform of 1991, when
evidence emerged pertaining to a discrepancy between the two regions with respect
to joint ventures and privatization which, it
was claimed, were the result of a deliberate
policy of bending to Czech economic
interests (Sharap et al., 1992, pp. 16, 18).
While the majority of initial complaints
about the federation came from the Slovak
side, the Czechs have come to believe that
they too will benefit from a divorce. There
will be a cessation of federal outflow from
Prague, which is more than it received from
Bratislava: according to Dean, Slovakia
contributed approximately 25% of the
national income, less than proportional to
its population of 31% (Dean, 1973, p. 22).
Moreover, they will not have to deal with
some of the policies of the Slovak government that they oppose, such as government
attitudes towards the press, ethnic minorities and the Gabcikovo hydroelectric
dam project.

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The Breakups of Yugoslavia and Czechoslovakia

179

3.2 Redefinition
ness. This was clearly pointed out by
The period of redefinition is the period Estonia, which agreed to pay to the Soviet
during which a region is in the process of Union the same percentage of debt that it
breaking its existing ties with the center, and received from the Soviet reserves of gold
is formulating new ties to its former union as and currency. Negotiations among the
well as to the international economy. These Yugoslav and Czechoslovak republics have
include a settlement pertaining to the div- taken both of these principles into account,
ision of the national and international debts, albeit inconsistently. In the former, the divthe division of federal or central budget, isions of hard currency holdings has been
foreign currency holdings and other finan- linked to the sharing of the foreign debt.
cial holdings and property. The obligations Prewar Yugoslavia's hard currency reserves
of each side must be calculated with respect are estimated to be between USD 4 and
to issues like social security and armed USD7 billion. Yet, Slovenia is demanding
forces. While these ties are being severed, one-third of that, not on the basis of poputhe new economy must introduce a new cur- lation or territory, but rather on a subjective
rency, a new monetary policy, new tax and estimation of its contribution to the econlegal systems, and a new army. In the inter- omy. The division of federal assets has de
national sphere, trade agreements, joint facto occurred on the principle of territory,
ventures and investments must be renego- given the war and the hostile relations that
tiated.
preclude a negotiated split. One of the six
The nature of the negotiations, as well as committees of the Geneva Peace Conferits outcome, will largely depend upon agree- ence is addressing the question of the
ment pertaining to the breakup. If there is a division of federal assets and liabilities.
general acceptance of the idea that the The international community did assign the
region should secede, then negotiations following responsibilities with respect to the
about the division of assets, although turbu- share of foreign debt: the IMF quota of 918.3
lent and controversial, can proceed in an million SDRs is divided such that 335.4 goes
atmosphere of peace. So far, this is the to the new Yugoslavia, 261.6 to Croatia,
experience of the former Soviet Union 121.2 to Bosnia-Herzegovina, 150.4 to Sloand Czechoslovakia. If war precedes the venia and 49.6 to Macedonia. The USD 217
distribution of assets, as in Bangladesh and million debt to the IMF will be split among
presently in Yugoslavia, then negotiations them in the same proportion.18
are more difficult to conduct since there
The agreement between the Czechs and
is basic disagreement on the issue of the Slovaks also invokes both the territory
secession.
and the population principles. The proposal
In the division of federal property, as well under discussion in mid-1993, supported by
as assets and liabilities, various principles the Czechs, suggests that federal assets
have been discussed, including the terri- should be divided according to territory,
torial, the population and the contribution while all other assets should be distributed
principles. In the first, division takes place by population (2:1 ratio, since the Czech
in accordance with location of assets, population is twice the size of the Slovak
namely, what is located in any region at the population). This has raised some oppotime of the breakup remains there. In other sition from the Slovaks: with respect to
words, 'finders, keepers'. The population certain assets, such as army installations,
principle entails the division of assets in they stand to lose, since 80% of military
accordance with population size. The contri- assets are located on Czech territory. The
bution principle entails division in accord- proposal has also raised opposition from the
ance with the magnitude of the contribution Czech side on the grounds that the Czech
to the union. Given that all regions try to regions have consistently produced more
maximize their assets and to minimize their than twice as much as the Slovaks, and thus
responsibilities, a consistent application of should be entitled to more than twice as
principles must be applied to ensure fair- much. Other disputes loom, such as the div-

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180

Milica Z. Bookman

ision of the 'golden treasure', some seven

tons of gold collected during the Independent Slovak state (1939-45). Slovakia
demands the return of this entire sum, while
the Czech government insists that it is federal property and should be divided. No
consensus was reached on the division of
assets, even on 29 October 1992, when the
Czech Prime Minister Vaclav Klaus and Slovak Prime Minister Vladimir Meciar signed
sixteen comprehensive agreements defining
interstate relations after breakup. The economic components of these agreements
include the creation of a customs union, as
well as a treaty on monetary arrangements,
social security and intra-regional employment.19 With respect to a division of the
foreign debt of Czechoslovakia, decisions
were made by the IMF: the Czech Republic
will be assigned 69.61% of assets, liabilities
and quotas, whole Slovakia will get 30.39%.
The USD 1.54 billion debt will be split along
the same proportions.20
While extrication from the union is ongoing, the setting up of new economies must
also take place. As in the case of divorce,
monetary questions are the first to demand
attention after the euphoria of 'freedom'
wears off. The creation of a new monetary
system first entails a new currency, a central
bank and independent monetary policy. The
cutting of monetary ties to the union has the
effect of shielding a new state from the
monetary oscillations of the union, such as
inflation, interest rate changes and undesirable monetary policy (it clearly shielded Slovenia from the hyperinflation that raged in
other parts of former Yugoslavia, reaching
35,000% annually). There is much variation
between the monetary policies of independent states in the 1990s. In the former Soviet
Union, some regions chose to remain in the
rouble zone (such as Khazakstan), while
others chose a new currency (such as
Ukraine). Within Yugoslavia, Slovenia,
Macedonia, Croatia introduced new currencies, while there are three currencies
presently in use in Bosnia-Herzegovina. The
monetary split of the Czechs and Slovaks
took place in February 1993, and was followed by measures designed to stimulate
trade, increase foreign currency earnings

and pave the road to currency convertability.

The setting up of new economies entails
the establishment of links with the international economy and the former union. All
successor states with the exception of the
new Yugoslavia and Macedonia experienced a smooth transition into the world
bodies. Both the Czech Republic and Slovakia were easily admitted into the UN in
January 1993, and soon thereafter became
members of the European Bank for Reconstruction and Development. The new
Yugoslavia did not inherit the old Yugoslavia's seat at the UN, as Russia did, but
rather is presently retained in a semipermanent status. Macedonia's international recognition has been problematic
due to Greece's objection to the use of the
name Macedonia: it has become a UN
member under the name Former Yugoslav
Republic of Macedonia, while, in the EC,
only Germany and Denmark have granted
recognition as of mid-1993. The remaining
Yugoslav republics were admitted to the
UN, IMF and other international bodies in
1992.
3.3 Re-equilibration
A study of the 'aftermath' of successful
secession must address itself to questions
pertaining to the economic life of the region
as an independent economic entity. Various
economic conditions, as well as arrangements made in the 'during' period, are relevant in determining the economic future of
the region, in other words, its viability.21
For the purposes of this study, the economic
viability of a region is defined as its ability to
sustain economic growth at or above the
pre-independence levels, in the short-run
aftermath of secession.22
The successor states of Yugoslavia and
Czechoslovakia will not all have the same
resource advantages, the same international
support and the same ability to manage their
economies independently. Their viability is
dependent on factors such as the level of
economic development, trade dependency
on the former union, net flows of resources
across regional boundaries and the degree
of regional decentralization. These variables

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The Breakups of Yugoslavia and Czechoslovakia

in turn encompass other characteristics. For

example, the level of economic development tends to be positively related to the
degree of industrialization, business mindedness, level of education and nature of the
infrastructure. Trade dependency has implications pertaining to the hard-currency
earning capacity of industrial, agricultural
or raw materials output of the region. Also,
the degree of national price deviation from
international prices is important in determining the facility with which a region can
integrate itself into the global economy.
Clearly, a region accustomed to subsidies
will undergo a costly adjustment following
independence (indeed, it has been estimated that Slovakia will pay double for the
purchase of various raw materials in the absence of central subsidies). Moreover, homogeneity of the population is important for
the economy in the aftermath of secession
insofar as it may minimize disruption within
the labor force. Ethnic rivalries may translate into significant disruption of economic
activity, as occurred when the rights of the
Gagauz in Moldova were threatened by presecessionist activity, as well as those of
Russians in Latvia and Estonia.
A crucial determinant of viability, namely
the method by which secession was
achieved, has an effect on the economy. If
independence is achieved through peaceful
means, then the new region is not encumbered with reconstruction costs, as it might
be when the economy is devastated by outbursts of violence in response to secessionist
demands. Clearly, an assessment of the
viability of the former Yugoslav states is
affected by the ongoing civil war, with the
exception of Slovenia. The regions immediately affected by the fighting experienced a
precipitous drop in productive economic
activity as a result of disrupted markets and
delivery systems, which altered demand,
increased military production, displaced
labor from the labor forces into combat,
diverted public finance into the war effort
and away from social and economic projects
and broke down financial and banking
systems. It is estimated that in Croatia some
200,000 men were withdrawn into the military (not counting the irregular volunteers),

181

90% of the state budget was allocated to war

purposes (in the last trimester of 1991) and a
special heavy tax was introduced to fund the
war.23 The effect in the new Yugoslavia
involved measures largely aimed at financing the war effort, such as a freezing of
individual and enterprise foreign currency
holdings, the ongoing printing of money,
the raising of farmer procurement prices to
stimulate agricultural supply and the rationing of necessities.
There are also indirect war-related
sources of economic setbacks in the former
Yugoslav republics. First, these republics
depended heavily on Yugoslav markets, despite evidence of some market fragmentation (Bookman, 1990). The war has
severed those ties, and the republics are
scrambling to break into new markets and
forge new economic relationships. Second,
most former Yugoslav republics have been
swamped by the influx of refugees. With
respect to registered refugees, it is estimated
that Macedonia has accepted 60,000,
Croatia 515,000 and Yugoslavia has taken
463,000.24 While all the host economies
have been stretched to the limit by providing for these refugees, there is significant
variation in the international help that the
regions are receiving to help cope.25 Third,
Croatia relied heavily on tourist revenue
(contributing over USD 2 billion in 1989),26
which has been obliterated as a result of the
war. Fourth, the war in both Croatia and the
new Yugoslavia is resulting in a large
number of out-migrants, many of whom are
highly educated and skilled (estimated at
100,000-150,000 professionals in 1992 in
Serbia).27 This brain drain is motivated partially by draft avoidance and partially by
political repression (mostly in Croatia) and
economic hardship (mostly in Serbia), and
this loss in human capital will have an
adverse effect on reconstruction efforts.
Fifth, the imposition of UN sanctions on the
new Yugoslavia in May 1992, for the third
time since the turn of the century,28 intensified the war-related economic crisis. While
it is difficult to assess how much of the economic hardship is due to sanctions, the
estimated loss to the economy is USD 18
billion.29 The economic effects may be

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182

Milica Z. Bookman

Table I. Growth, Unemployment and Inflation in Former Yugoslavia

State
Bosnia-Herzegovina
Croatia
Macedonia
Slovenia
New Yugoslavia

Growtha

Unemployment

Inflation

NA

NA

3.4% (1988)
-30% (1991)
-18% (Jan 1992)d

267,000f

86% monthly
(April 1992)
40% monthly
(Dec. 1992/
70% per month
(May 1992)b
92.7% (1992)
300% (1991)h
235% (1991)'
102% monthly
(May 1992)"

-0.2%
-11.0%
_0.5%
-15%

(1988)
(1991)
(1989)
(1991)

20%d
12-13%h
2m/19% (1991)

Sources: a Political Risk Services, IBC USA Publications, East Europe and the Republics, July 1992; b RFEIRL
Research Report, 15 January 1992, p. 34. For lack of better data, inflation for Bosnia-Herzegovina is derived from
inflation in the entire dinar zone, of which it was a part at the time; c RFEIRL Research Bulletin, vol. 10, no. 1. 5
January 1993, p. 1; d RFEIRL Research Report, vol. 1, no. 25, 19 June 1992, p. 37; e PlanEcon Report, vol. 8, no.
14-15, 14 April 1992, p. 2; f RFEIRL Research Report, vol. 2 no. 3, 15 January 1993, p. 3; g Transition, vol. 3 no.
7, July 1992, p. 17; h Data released by the Slovenian Embassy in Washington (February 1993), from the Ministry
for Economic Relations and Development.

divided into the loss associated with imports

(gasoline, technology, repair and servicing,
manufactured goods, raw materials, medicines, etc.), loss associated with exports,
and loss associated with diplomatic ostracism (closing of embassies and consulates,
severing of participation in cultural and
political associations and sports events).
Most affected are the labor-intensive industries such as health, textiles and trade. The
most immediate effect of the sanctions was
identified in the decrease in oil imports,
since Serbia produces only 20% of its petroleum needs. The response to the sanctions
has taken place at both the government and
the private level, and, in both cases, sanctions were not respected and adjustments
were made, even after the enforcements
were imposed by the Security Council in
November 1992. The government adjustments included in the 'survival strategy' are
the stockpiling of necessities (prior to the
actual imposition) and the development of
alternative sources of supply (such as the
routes through Serbian areas of Croatia and
Bosnia-Herzegovina not subject to sanctions). On the private level, sanctions gave
rise to (semi-legal) private initiative conspicuously absent from the period of market
socialism. This was evident in the rapid development of a lucrative smuggling industry.
Such adjustments to sanctions have pro-

duced an abundance of imported goods,

foods and gasoline, albeit at exceedingly
high prices unattainable to the average consumer.
While all former Yugoslav republics are
affected by the disruption of economic
activity due to sanctions, the loss is most
evident in Macedonia, whose government
claims (overestimates?) a cost of USD 1.3
billion in 199230 and 1.8 billion in 1993. Its
low levels of industrial development,
coupled with its traditional role as a land
route from east to west, north and south,
topped with its strong pre-sanction trade ties
to Serbia and Montenegro, make respecting
sanctions an unbearable burden. Its economy has become oriented towards smuggling, it has become a buffer zone where
sanction-busting goods become 'cleansed'
and because of its lack of international recognition, it is restricted in its ability to apply
for foreign loans to offset its crisis.
Thus, the creation of a war economy, the
economic effects of sanctions and the concomitant disruption of trade activity among
the former Yugoslav republics has created
an economic crisis in the region, such that
viability in the short run takes on a new
urgency. Indeed, GDP dropped precipitously, while unemployment took on extreme proportions and inflation flared, as
shown in Table I. Moreover, economic

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The Breakups of Yugoslavia and Czechoslovakia

decline is noted in other macro-economic

indicators (such as indebtedness and the
bulging underground economy) as well as
micro-economic indicators (such as insufficient capital accumulation, failing consumer goods market and price distortions).
Within Yugoslavia, the viability of Slovenia is presently the highest. This is due
not only to the fact that it is not directly
affected by the war, but also that its economy has been vertically integrated for
decades, and it has well developed ties to
the international economy. These benefits
outweigh the costs associated with the loss
of markets, especially those in Serbia. In the
aftermath of the war, Croatia is likely to
recuperate relatively easily if it is able to
revive its lucrative tourist industry. An important consideration is the ultimate status
of the highly productive agricultural lands of
eastern Slavonia, over which the SerboCroat war of 1991 was fought, and the
coastal, tourist-oriented Istra: both regions
demand control over their resources.
Serbia is rich in resources, contributing to
its viability, but the effects of sanctions may
pose a long-term obstacle to recovery. In
addition, it is ulclear just how much of a
drain Kosovo will be on the Serbian economy, since the region saps resources while
producing little other than political trouble.
While Bosnia-Herzegovina as a unitary state
is viable on economic grounds, it is unlikely
to survive as a political entity. Macedonia is
not likely to thrive economically without
major infusions of capital from external
sources. As a member of the Yugoslav federation, it was a net recipient of resources.
The loss of these resources, coupled with
the loss associated with Yugoslav markets,
may prove too cumbersome for the economy to bear.
The viability of the Czech Republic is not
questioned. Its current economic performance is not debilitating: inflation was 9%
and unemployment 4O/%in the fall of 1992,
coupled with a trade surplus and a decrease
in the precipitous drop in industrial production (which was 20% in 1991).31 Its viability
is enhanced only by the cessation of capital
flows to Slovakia, which has persistently
drained more than it has contributed.

183

Rather, it is Slovakia that must struggle with

viability questions: with the breakup, it will
lose between USD700 million and USD 1
billion in annual support from the federation.32 To offset this loss, the Slovak economy will receive a boost from a change in
policy pertaining to arms sales: while President Havel imposed a ban on arms exports,
severely hurting the Slovak economy,
Premier Meciar lifted it immediately upon
independence. Moreover, Slovakia might
benefit from the creation of the Visegrad
Free-trade Zone, created on 1 March 1993
(with Hungary, Poland and the Czech
Republic), which opens up markets with 64
million consumers.
4. Differing Conditions in Yugoslavia and
Czechoslovakia
While there are numerous similarities in the
conditions of the two states under study,
one crucial difference helps explain the
divergent breakups. First, both countries
have similar historical roots, insofar as they
were both born out of the ruins of disintegrating empires, the Habsburg and
Ottoman, In both cases, there were some
dissenting voices to the union, but the
unionists prevailed, making the unions
voluntary. Second, the political nature of
the unions was similar. They were both federations, with administrative boundaries
largely based on ethnicity. The constituent
republics enjoyed a wide measure of
regional decentralization, which in Yugoslavia was greatly expanded under the
guidelines of the 1974 Constitution. Third,
both were communist states. However,
while Czechoslovakia was closely aligned
with the Soviet Union, Yugoslavia was a
proponent of non-alignment; while the
former had a centrally planned economy,
the latter enjoyed a system of market socialism characterized by enterprise selfmanagement. Fourth, both had regional
disparities that accentuated economic grievances, since they called for regional policies
that were perceived as unfair by both the
more and the less developed republics.
However, Czechoslovakia and Yugoslavia differed significantly with respect to

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184

Milica Z. Bookman

degree of ethnic heterogeneity. The Czech

Republic and Slovakia are both quite ethnically compact, with 94% and 86% of the
populations being of the titular nationality.33 There are not significant numbers of
Czechs living in Slovakia and vice versa (1%
and 3%/ of the respective populations), and
there is no such nationality as 'Czechoslovak'.34 By contrast, in Yugoslavia there is an
ethnic mosaic in all regions except Slovenia.
There are some six principal nations and ten
minor nationalities.35 The largest are the

Table II. Principal Nationalities in the Successor States

of Yugoslavia and Czechoslovakia (in Percent)

Serbs (37%/), followed by the Croats (200/o),

Croatia

Muslim Slavs (9%) and Slovenians (8%).

There is significant inter-marriage and intermixed residence, especially in BosniaHerzegovina. In addition, Tito created a
Yugoslav nationality that in most censuses
represented a reasonable choice for some
10% of the population. Since the late 1980s,
these ethnic groups have become mobilized
and political divisions are taking place along
ethnic lines. The situation is further intensified by the fact that ethnic and sub-ethnic
groups,36 with the exception of Gypsies, all
have territorial pretensions.
Such an ethnic mixture was bound to
explode when secession found some groups
on the wrong side of the border. With xenophobic nationalist leaders prodding populations, the process of majorities becoming
minorities and minorities become majorities
was bound to be destabilizing. Moreover,
memories of inter-ethnic relations during
the civil war 1941-45, as well as World War
I, were readily revived, adding impetus to
inter-ethnic carnage.
Czechoslovakia shares neither the intermixture of ethnic groups, nor the concomitant territorial ambitions. Slovakia contains
a significant Hungarian population (11%)
whose rights are not clearly protected by the
new Slovak constitution of September 1992.
Yet, despite indications of irridentist aspirations on the part of the Antall government
in Hungary, Hungarians in Slovakia was not
an issue in the breakup with the Czech
lands. A similar internal ethnoterritorial
issue is currently contributing to a constitutional crisis in the Czech Republic: opposition parties are demanding the creation of
a federation in which Moravia and Silesia

State

Principal Nationalities

Czech Republic

Slovakia

Czechs (81)
Moravians (13)
Slovaks (3)
[

Slovenes (91)

Sloveniaslovema

(2.9)
~~~Croats

1
[

New Yugoslavia

Croats (75)
Serbs (12)
Serbs (63)
Albanians (13.5)
Montenegrians (5.5)
Slavic Muslims (39)
Serbs (32)
Croats (18)

Bosnia-Herzegovina

Macedonia

Slovaks (86)
Hungarians (11)
Czechs (1)

~~~~~~JMacedonia
teoins
{l
eoi[

(67
Albanians (20)

Sources: former Czechoslovakia: The Prague Post, 30

December 1992-5 January 1993; former Yugoslavia:
Savezni Zavod Za Statistiku, Statisticki Godisnjak
Jugoslavije, 1990, Belgrade.

are to receive the status of 'autonomous

lands'. This has met with rejection from the
government, for fear of promoting secessionist tendencies. However, it has no
consequence on the divorce with Slovakia.
This ethnic-administrative boundary distinction between Yugoslavia and Czechoslovakia is an important non-economic
factor contributing to the differences in the
two divorces. However, there are numerous
others, including: (1) with the end of the
Cold War the raison d'etre of Yugoslavia
suffered more damage than that of Czechoslovakia, (2) the preceding economic crisis
had been greater in Yugoslavia, (3) the
great powers intervened in the Yugoslav
breakup (premature recognition, sanctions,
etc.) in a way that was not deemed necessary in Czechslovakia, and thereby seemed
to have contributed to a prolonged conflict,
(4) Czechslovakia had a more democratic
political culture in its recent history, enabling it to establish democratic institutions
and practices more readily Yugoslavia, and
(5) the Czechs and Slovaks have not gone to

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The Breakups of Yugoslavia and Czechoslovakia

war against each other, while the nations of

Yugoslavia have a history of inter-ethnic
violence. Indeed, the Serbs and Croats have
fought each other three times in this century.

5. Implications for Peaceful Secessions

The differing ethnic conditions affected all
three phases of the secessionist process in
Yugoslavia and Czechoslovakia. Since ethnicity is usually related to regional boundaries, economic injustice has become transformed into ethnic injustice, which is vented
by political parties in an era of multi-party
power during the period of re-evaluation.
Indeed, as Pomerantz said, 'nationalities
have turned into political parties', an experience frequently shared by African states.37
This inter-ethnic struggle continues in the
redefinition phase, and, if war breaks out, in
re-equilibration times also.
While Yugoslavia had some conditions
that would have suggested an easier
breakup (such as extensive regional decentralization, greater western orientation, and
less central planning), its complicated ethnic
picture precluded such an outcome. When
regional issues are associated with ethnic
groups, and when those ethnic groups are
politicized and have territorial pretensions,
then a messy breakup is inevitable. Thus,
while economic factors may be crucial in all
phases of the breakup, non-economic factors are crucial in determining the nature of
the breakup. This leads to the conclusion
that, in order to maximize the changes of
peaceful breakups, population, minority
and ethnoterritorial issues must be
addressed ex ante. The west was wrong to
have recognized the Yugoslav republics
before minority rights were adequately
addressed. The EC should have been
heeded when it said that Croatia and
Bosnia-Herzegovina had not addressed
their internal matters sufficiently to warrant
recognition. Extra caution on the part of the
western governments might have prevented
the bloodshed that followed, and may have
contributed to making the Yugoslav divorce
more like the Czech and Slovak divorce.

185

NOTES
1. Belgium from The Netherlands (1830), Norway
from Sweden (1905), Ireland from Britain (1919)
and Bangladesh from Pakistan (1971).
2. It is debatable whether it is legitimate to call the
breakup of Yugoslavia and Czechoslovakia
secession, or whether unravelling is a more appropriate term. This question is discussed in Bookman
(1993).
3. This, in effect, becomes the Third Yugoslavia. The
name was retained to reflect the multi-ethnic
nature of the union. Indeed, the term Serbia alone
would deny the Montenegrian ethnicity. Given that
the word Montenegro in Serbo-Croatian translates
into Black Mountain, jokes abounded in 1992
about the appropriateness of combining the names
to form 'Black Serbia'.
4. Crucial among these grievances was the drawing of
republic boundaries according to which large
numbers of Serbs were left out of Serbia, while
Serbia had two autonomous republics carved out of
it.
5. During World War II, Hitler set up a puppet
government under the Ustashas which was responsible for the extermination of large numbers of
Serbs, Jews and gypsies in Croat-held territories of
Croatia and Bosnia-Hercegovina.
6. In the Croatian elections of February 1993, the
Istrian Democratic Diet of Istra won 72% of the
vote. Its chief goal is to achieve the status of an
autonomous region within Croatia (La Repubblica,
16 February 1993).
7. The remainder had no opinion (Interviju 30 March
1990).
8. The New York Times, 16 December 1990.
9. Radio Free Europe/Radio Liberty (FEIRL)
Research Report, vol. 2, no. 1, 1 January 1993, p.
84.
10. The experience of Yugoslavia does raise the
question of who participates in a referendum:
namely, is it limited to the regional population, or
does the entire population partake. International
experience is mixed: while all of France participated in the referendum for the independence of
New Caledonia, the question is as yet unresolved in
the upcoming referendum on the status of Western
Sahara.
11. In Croatia, Bosnia-Hercegovina, and Kosovo, the
Serbs did not partake, while in Krajina, the Croats
did not partake (amounting to approximately 12%,
34%, 10(%and 30(%of the regional populations).
12. This phrase was first introduced by The Economist,
6 February 1993, p. 53.
13. The phases discussed here are described in detail in
Bookman (1993).
14. This difference is exemplified by Slovenia, where
the region is identified by its ethnic component,
and Lombardy (Italy), where demands for autonomy are not based in ethnicity.
15. Economic concerns thrive even in cases in which
other concerns, such as culture, politics, religion
and language, dominate secessionist aspirations.
For example, the civil war in Northern Ireland,

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186

Milica Z. Bookman

althoughpredominantlyreligiousin nature,is also

influencedby the economic advantagesthat Protestantshave and Catholicsdo not share. Linguistic
issues seem to dominate the Catalan efforts at
increased autonomy; however, the economic
strengthof the regionis not forgottenor negatedby
the leadersof the nationalistmovement.
16. Calculatedfrom SavezniZavod za Statistiku,Sta-

29. Channel1 BelgradeTV, 18 January1993.

30. RFEIRL Research Report. vol. 2, no. 3, 15 January

1993,p. 34.
31. In Slovakia,inflationwas 10%and unemployment
reached 13% duringthis time (RFEIRLResearch
Report,vol. 2, no. 1, 1 January1993,p. 88).
32. The New York Times, 12 February 1993.

33. Recently, the Moravianpopulationis listed as a

separate ethnic group, amountingto 13% of the
total population.However,this groupdiffersfrom
412, Table201-10.
17. The full name is the Federal Fund for Financing
the Czechs only with respect to historicalexperience.
FasterDevelopmentof EconomicallyUnderdeveloped Republicsand AutonomousProvinces.The 34. The Prague Post, 30 December 1992-5 January
1993.
withdrawalof Slovenia from the FederalFund in
mid-1990was viewed as the strongest attack on 35. Within Yugoslavia, nations are those peoples
whosenationalhomebase is one of the republicsof
Yugoslav unity since the inter-regional crisis
began.
Yugoslavia,while nationalitiesare those that have
18. Transition,vol. 3, no. 11, December1992-January
homes elsewhere,such as the Albaniansand Hun1993,pp. 12-13.
garians.
19. The non-economic aspects of the agreement 36. One example of these is the Movementfor the
Autonomy of Dubrovnik,raisingthe question of
include treaties on border regulations, legal
mattersconcerningpersonaldocuments,car regiswhether the 'Dubrovcani'are distinct from the
trationand weaponsregistration;a bordertreaty;
Croatiansin otherthanhistory.
the establishmentof a common approachto resi- 37. GrigorijPomerants,quotedin Zaslavsky(1992),p.
107.
dency requirementsfor third country nationals;
visa requirements,joint use of archivesbelonging
to the federalministryof internalaffairs;cooperation in communications,healthcare servicesand
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MILICA Z. BOOKMAN, b. 1953, PhD in Economics (Temple University, 1983); Associate Professor, St Joseph's University (1983-); most recent books: The Economics of Secession (St Martin's,
1993) and Economic Decline and Nationalism in the Balkans (forthcoming St Martin's, 1994).

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All use subject to JSTOR Terms and Conditions