The preferred groups

The original Law on the Transformation of Ownership was amended six times in the Croatian Parliament from 1991-1995. These changes generally had two directions. The first was to limit the power of insiders (after the outbreak of the management scandal), hoping that this would attract outside investors; it was mostly expected that rich people from the Croatian Diaspora would like to invest.16 _{Investors from Western countries who were considered influential in}

their countries were also welcomed, since it was expected that they might help the legitimation of the regime of a newly independent country. The Government was also oriented to creating further individual shareholders. The amendments enabled the distribution of shares to people who had suffered in the war – to war veterans, to the families of victims and to former political prisoners.

Such moves were always supported by a moral justification. Employees were given the opportunity to buy shares since “they created those assets”. Former political prisoners emphasised that they didn’t have the chance to work in companies “while they fought for freedom”; therefore they demanded their share. The inclusion of the victims of the war among those who were supposed to benefit from privatisation was justified by the principle that the redistribution of national wealth should not leave anybody to starve. I would like to recall that the moral arguments that were raised in Croatia were similar to the arguments about initial appropriation that were discussed in chapter

15 _{I would like to say that the theory of the continuity of the elite counted on its skill and experience}

inherited from socialism and pragmatism in transition. The proponents of the theory of the replacement of the elite believed that in new times people who are not burdened by socialistic habits have a higher chance of success. It seems clear from Kristofic’s analysis why neither one of these theories fits Croatia.

16 _{Sime Prtenjaca, the head of the County of Dalmatia, concluded about the interest of the Diaspora}

in investing in Croatian companies: “Our people who earned money abroad … don’t want to bother with a number of individual shareholders. This is a golden rule for them. They want to have total control over invested money.” (Privatisation No. 17, May 1996, my translation).

II. The suspicion, which was advanced in chapter II, as to whether it is possible at all to find an uncontroversial moral justification of initial appropriation, here was strengthened by the fact that these moral justifications conflicted: the arguments of former political prisoners, employees and others were in fact persuasive, but it wasn’t possible to fulfil all of them. However, it doesn’t imply that the moral assessment of the process of privatisation was inappropriate. The economic aspect of this problem should be emphasised: If privatisation should not leave anybody to starve, is a distribution of resources, more specifically, shares the best method to implement this principle? This problem will be additionally commented on below, but here I would like to recall the position of Croatian economists, which was mentioned in chapter V. In the already quoted Conception and Strategy the Croatian economists proposed that the transformation of the property regime should respect the principles of social justice. It was assumed that the method of the distribution of assets, or giving a big discount, would enable “the poorest people to collect money for a normal life”. The distribution of shares and their subsequent sale would be an “easy solution of social problems” (CSEDRC 1992, p. 27).17 _{This confirms that Croatian economists provided}

a theoretical argument for the distribution of assets to chosen social groups.

It was noted that the distribution of shares was also politically motivated. Kasapovic (2001) concludes that Croatian authorities formed their client groups: they included war veterans and invalids, war victims and their families, former political prisoners during socialism (some among whom were imprisoned after being accused of being ordinary criminals, so it was not always clear whether they were really victims of the undemocratic regime), former emigrants, especially those who declared that they left the country because of political and not economic reasons. The state budget financed their organizations (associations, societies) and in the process of privatization they received a preferred status. Legal possibilities for intervention in corporate matters were also used in order to give an advantage to people close to the leading party or to party members. It is possible to think that the described pattern of the distribution of shares as a method of privatisation was reasonable and morally justifiable while others can claim that it was clientism. Later on it will be demonstrated that neither the political nor the social goal of the distribution of shares was possible to fulfil without an organised capital market – which didn’t exist.

17 _{The document has been quoted already a number of times, and for a good reason. It was}

created by the leading Croatian economists, coordinated by Borislav Skegro, who later became vice-president of the Government responsible for the economy. Skegro (2007) declared that while being vice-president of the Government he followed The Conception and Strategy as an informal program of Croatian economic transition.