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Were Bosnia’s ‘good ol’ days’ really that good?

· Bosnia,economic growth,Economic History
Like many around the world, Bosnians often reminisce about the "good old days." But in Bosnia, there might be something to it.                               
Originally on Brookings' Future Development blog
Many people in Bosnia who are old enough to remember will tell you that things were better in the past. Indeed, if you ask people in much of former Yugoslavia, many will agree.

The view that the past was somehow better is not so unusual in many parts of the world. If you ask my grandmother—of Welsh and Irish stock, and going strong in her mid-90s—she will sometimes tell you the same. And if you ask my mother—of English and Yiddish stock, and in her mid-60s—she will also tell you the same.

But two things differentiate Bosnians from my mother and grandmother. First, Bosnians have a more specific idea about what “the past” means; they mean, before the collapse of Yugoslavia. Second, by at least one objective measure, Bosnians are right—the past was better.

In 2012, the average Bosnian had an income of a little shy of $4,900, around the same as Albania, Macedonia, or Tunisia, but less than the average Bosnian income in 1989, which was over $6,100 (in 2012 prices). That is a fall of around 20 percent. A recent study found that, of all former Yugoslav republics, only Slovenia was significantly richer than in 1989, and most have seen significant declines. This stands in contrast to typically slower growing developed economies like France, Germany, and the United Kingdom, where average incomes rose by around 75 percent between 1989 and 2012.

Branko Milanovic calls Bosnia one of the “absolute failures” of Eastern European transitional countries that is “not likely to reach its 1990 income any time soon.” He notes that at current growth rates it might take two generations to go back to the income levels the country had at the fall of communism.

Has Bosnia really seen no progress?
Yet, as I travel around Bosnia, not everything seems so bad. Bosnians seem to live better than before. Life expectancy was 72 years in 1985, but was over 76 years by 2013. Lifetime maternal mortality risk fell from 3.5 in 10,000 in 1990 to 1 in 10,000 today. The proportion of children immunized against measles increased from around half in 1992 to over 90 percent today. Pollution levels are lower despite recent protests. Today, sulphur dioxide levels in Sarajevo occasionally reach 10 times the World Health Organization limits; that is high, but much lower than the 75 times the limit seen during the 1970s.
And Bosnians have access to more of the “things” that make life a little better. Communication technology is ubiquitous. In 2013, 90 percent of the adult population had cellphones and over one-third of these had mobile internet. Nearly half of all households had broadband. Wherever you look, consumption choices are vast compared to options available in Yugoslavia. Cars are more comfortable and efficient. And, while fairly short, Bosnians now have highways to drive their cars on. With so many things improved, what do Bosnia’s low GDP figures capture?
So where did all that growth go?
Put another way, when Bosnians say things were better in the past, what do they mean by “things”?
Bosnian workers’ productivity is not to blame for the poor GDP performance. The average worker in Bosnia produced around EUR 1,100 of gross value added (GVA) per month in 2013. There is much less than Western Europe (where the average worker generates over EUR 5,000 of GVA), but Bosnian workers are already as productive as those in Romania or Bulgaria. Yet too few people work. For every 100 Bosnians, just 27 have a job. Around half of those appear to be employed in the (inefficient) public sector, and many of the rest work tilling their own gardens to produce food to eat at home. That leaves too few highly productive workers to shoulder the burden for the rest of the population. With an aging population, the situation risks getting worse.

Yet, much of Bosnians’ “Yugo-nostalgia” does not come from the loss of GDP. A non-scientific survey of friends and colleagues revealed a few other examples, including:

  • A sense of comradeship. This seems to stem more from social factors than an increase in inequality. Indeed, inequality has barely shifted since Yugoslav times. Latest World Bank estimates put the Gini coefficient at 33.4 in 2011. I was unable to find a Yugoslav period estimate for Bosnia but the Gini coefficient stood at 28.6 in Croatia in 1988 and for non-farmers in Yugoslavia in the early 1980s in the range of 30 to 32. If Bosnia was similar, wealth today is being created by fewer (employed) people but it is being shared almost as equally as before, possibly triggering feelings of resentment that reduce any sense of comradeship.
  • The Yugoslav passport and pride in Yugoslavia’s international status. Yugoslav passport holders enjoyed visa-free travel to both Western and Eastern countries during the cold war, a right that, if sitcoms of the day reflect people’s experiences, was used sufficiently to be missed. Today, even with visa-free access to the Schengen zone, many Bosnians miss their Yugoslav passports. Bosnians also miss being a comparatively wealthy Eastern European country. For example, during the 1980s poorer Poles could be seen on vacation in Yugoslavia and were regarded by some with sympathy or derision. Today, the average Pole is 2.5 times richer than the average Bosnian.
Where to from here?
Bosnians’ feelings of Yugo-nostalgia seem partially, but not completely, justified. As we noted, many things—such as life expectancy, education, pollution, and access to consumer goods—have improved. In addition, inequality has barely increased, crime is low, and Bosnians can travel visa-free to most European countries. Yet, the country has not caught up with its pre-war output and a small group of people generates wealth that supports many. Like much of former-Yugoslavia, Bosnia has fallen behind Eastern European countries. Today, improving Bosnians’ quality of life will require generating more productive jobs. But with the worst business climate in former-Yugoslavia and a leviathan state that controls half of GDP (even ignoring pervasive state-owned enterprises) it won’t be easy. Only by (re)vitalizing the private sector and giving it space to grow and generate jobs can Bosnia hope to let go of its past and impart its citizens with optimism for the future, rather than nostalgia for the past.
Originally on Brookings' Future Development blog
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