Searching for Adam Smith in Serbia

Serbia was a strong and powerful medieval state in the mid-14th century. The death of its Emperor Dusan in 1355 and the inability of his successor Uros to preserve the empire led to it being divided into smaller areas, ruled by local feudal masters. The Serbian state was highly centralized prior to Emperor Dusan’s death, and the tension between his son and local feudal rulers decentralized political power. In the eyes of many contemporary Serbian historians, this made Serbia easy prey for attacks by the Ottoman Empire. If the country had not been feudal and had been more decentralized, this might not have occurred, or its loss of independence would not have lasted as long. 

Feudalism characterized the Serbian state in those days, as with other countries in Europe. Following its loss of independence in the 15th century, it regained independence in the 19th century with the Berlin Congress in 1878. As a newly established state, Serbia wanted to develop its society and politics in the manner of modern European countries, including its economics. However, both internal and external events led to its economic policy shifting as various political parties traded power. The implementation of economic policy was therefore inconsistent. Although there was a liberal party on the political scene, its name was misleading, as its economic policy was socialist than capitalist. However, the ideas of classical liberalism lived on among the Serbian people and again became influential.

The first head of the newly established Central bank in Belgrade, Kosta Cukic, advocated for privately-run economy, instead of one where the state would have the primary role. Other important figures, like Cedomir Mijatovic, were adherents of the subjective theory of value, first demonstrated by Adam Smith in the Wealth of Nations. Mijatovic served as Minister of Finance between 1873 and 1887. Writer Vladimir Jovanovic was influenced by John Locke and John Stuart Mill; he advocated mightily for emancipation from the Ottoman Empire, individual liberty, and liberal education in Serbia. 

Despite the efforts of such liberal Serbs, economic policy in those days still relied heavily on state management of the economy. This led to higher disparities in income among Serbs than in other European countries, as Serbia’s lack of reliance on the free market led to distortions in the economy. This situation continued after the First World War in the newly established Kingdom of Serbs, Croats and Slovenians, later the Kingdom of Yugoslavia. Those disparities grew even larger during the Socialist Federal Republic of Yugoslavia. 

The need for economic freedom became even more evident by the early 20th century, as the divide between the lives of ordinary men and women and wealthy industrialists grew. The latter were able to acquire great wealth in their partnership with the state, while the former were offered only meager social assistance from the state. There was no legal framework in place to enable the private sector to run efficiently. Despite the advocacy for economic liberalism by many, state control endured. 

Adam Smith favored private enterprise, knowing that individual actors and not the state promote  economic growth and social justice. It was markets, consisting of people who, although unintentionally, care for each other, that needed to be freed, not the government guiding the economy. This idea was proclaimed formally in Serbia, but never tested in real time. Something that would look like capitalism would be held off until 1989 with the reforms of then Yugoslavian prime minister Ante Markovic. A Communist, his reforms unintentionally promoted a higher degree of freedom than ever before. He too, guided by the “invisible hand,” promoted an end which was not part of his design, only for his work to be shattered by the dissolution of Yugoslavia in 1991.