Yugoslavia's 10 Year Journey From Prosperity to Poverty

KRAGUJEVAC, Yugoslavia – Milan Sretenovic should be happy to have work in this shabby one-factory town where a steady job is only a memory for most. Instead, he rages at Slobodan Milosevic, NATO and everything else that conspired to turn Yugoslavia's showcase enterprise into a basket case.

Standing in the cavernous hall where thousands of blue-smocked colleagues once turned out "Yugo" cars, Sretenovic speaks of the frustration of millions of Yugoslavs who have seen lives of modest comfort ruined by war, corruption, economic mismanagement and international isolation.

"What Slobo's policies didn't destroy, NATO aggression did," says Sretenovic. He blames the former Yugoslav president for the demise of the Zastava car factory and the West for bombing the plant last year in its air campaign against Yugoslavia.

"Now, it's up to the outside world to help us," he says. "Our place is here, in the factory, not on the streets, selling cigarettes. Our goal is to be able to live on our salaries again."

Ten years ago, the average Zastava worker took home the equivalent of about $500 a month, easily twice that of colleagues in neighboring countries. With the decline of the Yugoslav dinar, the standard monthly wage equals about $50 for the approximately 15,000 workers still putting in half shifts. The other half of the work force was laid off four years ago.

In many ways, what happened to Zastava over the past decade is emblematic of Serbia, the larger of the two remaining Yugoslav republics.

Only half of the work force in Serbia is employed. State-run enterprises still operating run on half-steam, producing outmoded products for a poverty-stricken domestic market. Capital and assets were often drained by the Milosevic loyalists who managed them.

About 200,000 people consume 20 percent of the gross domestic product in a country of 10 million.

As the top echelons live well, mass poverty has grown. Layoffs of hundreds of thousands over the past 10 years have created a legion of beggars scouring trash bins and street peddlers, selling cigarettes, bootleg compact disks, used crankcase oil in plastic bottles — anything to survive in a society where the poverty line is at around $30 a month.

In Kragujevac's McDonald's restaurant, opened in more prosperous times, only a few tables were occupied by locals able to afford a meal selling at the equivalent of nearly $4. As a group of visitors left one table, two Gypsy kids moved in, wolfing down the remains.

With the traditionally harsh Balkan winter around the corner, a European Union decision Monday to lift economic sanctions and pour hundreds of millions of dollars into Serbia comes not a moment too soon.

"We have dramatic information about the state of our power supply system and communication, as well as of the entire economy," said top opposition leader Zoran Djindjic. He said a "swift financial injection" was needed to get Serbia through the coming winter.

It wasn't always like this.

Like Yugoslavia, Zastava was riding high back in the 1980s. From its 19th century beginnings as an arms manufacturer, it branched out into car and truck manufacturing by the 1950s, growing into the country's largest enterprise.

Its boxy Yugo hit American markets in the 1980s, selling for only $4,000. Poor quality doomed it after only three years but it remained the only car manufactured in a communist country to crack into the American market.

Sales boomed elsewhere from Eastern Europe to Africa.

Then came the Yugoslav wars, fomented by Milosevic as he exploited Serb nationalism. Slovenia, Croatia and Bosnia split away in bloody wars. Macedonia went peacefully.

With the breakup of Yugoslavia, Zastava lost more than 60 percent of its domestic market. Its widespread production net was truncated. Dashboards manufactured in Croatia, for instance, no longer found their way to the assembly line in Kragujevac, 85 miles south of Belgrade.

Starting in 1992, international sanctions on trade, financial transactions, travel and energy were slapped on Yugoslavia. Smuggling blossomed — and became a new state enterprise.

"Everything was forbidden and everything was done, nonetheless," says Stanijan Stankovic, Zastava's deputy manager. "We always managed to bring in tin from Austria, throughout the sanctions. Chemicals for paints always were brought in from Germany and Italy. We received tools from America and Japan. It was a matter of survival."

Other Zastava employees said Russian middlemen played a key role in smuggling raw materials in and finished products out.

By last year, Zastava managers were running only one production line. Some operations — such as the painting plant — continued only because it was cheaper than to restart once they were shut down. Most production went toward replacing worn out Yugo parts of cars already running in Serbia.

Stankovic says NATO bombing caused more than $1 billion in physical damage and lost sales.

Auditors from the camp of new Yugoslav President Vojislav Kostunica are trying to find out whether local, Milosevic-appointed managers raided company coffers or sold raw materials on the black market.

"Fact is, many workers took what they could to sell on the streets," says Dragan Markovic, a former Zastava worker who now peddles track suits, socks and underwear from a stall near a weed-infested Kragujevac parking lot.

"If you're hungry, you steal," he says. "It's better than the bosses who had it all, and stole nonetheless."