JOURNAL OF COMPARATIVE POLITICS     36 
 
 
 
 
 
 
THE PROCESSES OF ECONOMIC 
CONSOLIDATION IN COUNTRIES OF FORMER 
YUGOSLAVIA 
 
 
Simona KUKOVIČ and Miro HAČEK
1
  
………………………………………………………………………………… 
    
Before we can even discuss democratic consolidation, at least 
three minimal conditions must be fulfilled. Besides, those 
consolidated democracies should also fulfil several other 
conditions
2
 that have not attracted such attention of scientific 
analyses, as have the three minimum conditions, among which 
Linz and Stepan specifically stress the importance of economic 
consolidation.
3
 This article analyses the processes of 
democratic consolidation in the former Yugoslav republics. It is 
clearly evident from various democratic consolidation 
measurements that most former Yugoslav republics have not 
yet reached the level of consolidated democracies; authors test 
the thesis that one of the reasons for that is also the 
unsuccessful economic consolidation. 
 
Key words: democracy, economy, consolidation, former 
Yugoslavia, Slovenia. 
 
 
1 DEMOCRATIC CONSOLIDATION IN COUNTRIES OF FORMER 
YUGOSLAVIA 
 
Before we can even discuss democratic consolidation, at least three minimal 
conditions must be fulfilled. The first is the existence of a state because 
otherwise there can be no free elections or human rights. The second 
condition is that no democracy can be consolidated before the process of 
democratic transition has ended. A necessary but not also a sufficient 
prerequisite to finish the democratic transition is free, general and 
democratic elections. In many cases of free, general and democratic 
elections it became obvious that governments de facto lacked real decision-
making power, which in spite of the institute of democratic elections 
                                                 
1
 Simona Kukovič is research assistant at the Faculty of Social Sciences, University of Ljubljana. Miro 
Haček is associate professor at the Faculty of Social Sciences, University of Ljubljana. 
2
 Linz and Stepan speak of five additional conditions for achieving a consolidated democracy, as follows: 
economic consolidation, the rule of law, the existence of an organised civil society, an efficient state 
bureaucracy and a relative autonomy of political society. See Juan Linz and Alfred Stepan, “Toward 
Consolidated Democracy,” Journal of Democracy, 7, 2 (1996), 14–18. 
3
 Linz and Stepan also use the term economic society when speaking of consolidating the economic 
sphere. See Juan Linz and Alfred Stepan, “Toward Consolidated Democracy,” Journal of Democracy, 7, 
2 (1996), 15–16. 

JOURNAL OF COMPARATIVE POLITICS     37 
 
 
remained in the hands of the former rulers or other powers. The third 
condition of democratic consolidation is therefore the necessity of 
democratic rule. If democratically elected authorities violate the constitution, 
restrict human rights, interfere with the work of other independent authorities 
and do not govern within the limits of the rule of law, then we cannot talk of a 
democratic regime. It may be concluded that only democracies can be 
consolidated democracies.
4
 If we are to talk about a consolidated 
democracy, then we must also fulfil other conditions than those mentioned 
above. Linz and Stepan list five more interlinked prerequisites: economic 
consolidation, the rule of law, the existence of an organised civil society, an 
efficient state bureaucracy and the relative autonomy of political society.
5
 
 
We can measure the success of democratic transition and democratic 
consolidation through various indexes. The most frequently used index is the 
Human Development Index (HDI), which is composed of various economical, 
social, demographic and other indicators. The precision and ability to 
determine any country’s stage of development of the HDI is much greater 
than any other composite index or statistical indicator. The Human 
Development Index marks some of the fundamental achievements in a 
certain society, such as the average length of life, dissemination of 
knowledge, economic development and certain life standards. The Human 
Development Index is a more profound indicator than for example revenue 
per capita, because the latter is only one of the many means of human 
development but not also its final result.  
 
Table 1 shows values of the HDI index in four different time periods, from 
1995 to 2012. Besides the actual value of the index, it also gives two kinds of 
information. The first one regards the stage of development a specific 
country has achieved, whereas the second one shows the country’s position 
in the world ranking. The results mentioned are entirely congruent with 
frequently published economic indicators – Slovenia scored best among the 
former socialist countries in all time periods between 1995 and 2012. In the 
last available period, 2012, Slovenia actually overtook three old EU Member 
States – Portugal, Greece and Italy – and nearly caught up with Austria. 
Between 1995 and 2012 all former socialist countries advanced in their world 
rankings, but their progress is very diverse; Slovenia for instance gained 16 
places, Latvia even 48, but on the other hand, the FYR Macedonia only 
gained two places. The fastest advancing former socialist countries are Baltic 
States, which all gained between 38 and 48 places. It is also visible that all 
Central and Eastern European countries lowered their score from 2005 to 
2012 due to the impact of world economic crisis. 
 
 
 
 
 
 
 
 
 
 
                                                 
4
 See Juan Linz and Alfred Stepan, “Toward Consolidated Democracy,” Journal of Democracy, 7, 2 
(1996), 16. 
5
 Ibid. 

JOURNAL OF COMPARATIVE POLITICS     38 
 
 
TABLE 1: HUMAN DEVELOPMENT INDEX (HDI)* IN FORMER SOCIALIST 
COUNTRIES IN 1995–2012 
 
* The Human Development Index is measured on a 0 to 1 interval, where 1 represents a fully 
developed country and 0 represents a completely undeveloped country. 
** Countries are divided into three groups: high human development (marked HD), medium 
human development (MD) and low human development (LD). In 2010 there was also a fourth 
group added, very high human development (VHD), for the most developed countries in the 
world. Next to this mark we placed information about the individual countries’ places in the 
world ranking. 
*** Ranking among listed former socialist countries. 
Source: Human Development Report; available at http://hdr.undp.org/en/reports/global/hdr 
2013/ (25 June 2013). 
 
Very similar to the Human Development Index is the Democracy Index, 
measured annually by an organisation called Freedom House and presented 
in a special report – Nations in Transit. The Democracy Index is composed of 
seven indicators. It includes evaluations of election systems, civil society, 
free media, democratic government (national and local levels), independence 
of the judiciary, and the spread of corruption. Every indicator is measured on 
a scale from 1 to 7, where 1 represents the highest level of the democratic 
process and 7 represents the lowest level. Nations in Transit encompasses 
all former socialist countries including the successor states to the Soviet 
Union. These countries are divided into five groups. The highest group 
includes countries with the best ratings in the Democracy Index, i.e. 
consolidated democracies. In the 2006 Report
6
 countries assigned to this 
group were Slovenia, Estonia, Slovakia, Hungary, Latvia, Poland, Lithuania, 
Czech Republic and Bulgaria, and in 2012 all previously stated except 
Bulgaria. 
 
If we compare reports of 2006 and 2012, the most noticeable characteristics 
are the regression of several counties in the regions in terms of their 
democratic consolidation, most noticeably of Bulgaria and Albania in terms of 
reassignment to lower groups, and regression in the grades of several other 
countries, most noticeably in Hungary, Slovakia, but also in Slovenia. There 
are also few cases of progress (Estonia, Czech Republic), but the 
differences between 2006 and 2012 grades are insignificant. We can also 
notice that all other former Yugoslav republics are listed in the second group 
of countries, among semi-consolidated democracies, making only small 
progress between 2006 and 2012. Almost all those countries received 
especially concerning low scores in the fields of independent media, spread 
of corruption and judicial framework and independence.  
 
 
 
                                                 
6
 See Freedom House, available at http://www.freedomhouse.org (25 June 2013). 

JOURNAL OF COMPARATIVE POLITICS     39 
 
 
TABLE 2: DEMOCRACY INDEX 2006 AND 2012 
 
Source: Freedom House, Nations in Transit; available at http://www.freedomhouse.org (25 
June 2013). 
 
 
2 THE NOTION OF ECONOMIC CONSOLIDATION 
 
The process of consolidation within the economic sphere of society is only 
one of the conditions leading to the consolidated democracy. Even the most 
economically consolidated and successful society would be but a pale 
reflection of democracy if it lacked the institutes of civil society or the rule of 
law. Linz and Stepan
7
 claim that a consolidated modern democracy requires 
a set of socio-political norms, institutions and arrangements in the sphere of 
economy – they term this set “economic society” – which is situated between 
the state and the market. Namely, democracy can be consolidated neither in 
the context of planned economy nor under the circumstances of a pure 
market economy. 
 
We can ask ourselves why a completely free market cannot coexist with a 
modern consolidated democracy. In recent years, all sound studies of 
modern policies have empirically confirmed the existence of important 
degrees of state interventions into the market and state ownership in all 
                                                 
7
 Ibid., 21. 

JOURNAL OF COMPARATIVE POLITICS     40 
 
 
consolidated democracies.
8
 Theoretically speaking, there are at least three 
arguments in support of such empirical findings and their validity. The first 
one stresses that, in spite of neoliberalistic claims of market’s self-
sufficiency, pure market economies cannot exist without a certain degree of 
state regulation. Namely, the market requires legislative enforcement of 
contracts and obligations, protection of investments and money, regulatory 
standards and protection of private as well as public property. Because of all 
this, the state has to undertake certain actions in the market.
9
 The second 
argument is the fact that even the most developed markets requires certain 
corrections by the state if the market is to yield optimum performance.
10
 The 
last and the most important reason, which supports the market intervention 
and state ownership in consolidated democracy, is the public character of 
government priorities and policies. If a democracy fails to implement policies 
whose direct result is the production of public goods in the domains of 
education, healthcare and transportation or the creation of social security 
network intended to alleviate social inequalities, then democracy as such 
cannot exist. Therefore, were a democracy to be born in a pure market 
economy it would, already by its own operation, transform such an economic 
system from a pure market economy into a mixed-type economy or a 
consolidated economic sphere, i.e., something Linz and Stepan
11
 call 
“economic society”. 
 
First and foremost, the consolidation of democracy requires the 
institutionalisation of a politically regulated market. This, in turn, demands 
“economic society”, which, however, can only operate efficiently under the 
conditions of efficient state mechanisms, intended for monitoring 
developments in the market. A frequent objective of states that underwent a 
transition into a new political and economic system in the late 1980s or early 
1990s has been the project of privatisation of once socially owned business 
enterprises. Even such a goal, whose primary aim is to reduce the share of 
public property, is much easier to achieve if state mechanisms are efficient 
and strong enough. Economic deterioration, which is caused by the inability 
of state to exercise its regulatory functions, significantly contributes towards 
the problem of economic reform and democratisation.
12
  
 
A modern consolidated democracy can be conceived of as a notion, which 
comprises five mutually, interlinked arenas,
13
 whereby each of them has to 
adhere to its own organisational principle. Democracy is more than a form of 
rule – it is a system of mutual interaction.
14
 None of these arenas can work 
                                                 
8
 See, e.g., John R. Freeman, Democracies and Market: The Politics of Mixed Economies (Ithaca, New 
York, Cornell University Press, 1989).  
9
 See Juan Linz and Alfred Stepan, “Toward Consolidated Democracy,” Journal of Democracy, 7, 2 
(1996), 18–24. 
10
 Peter Murrell, “Can Neoclassical Economics Underpin the Reform of Centrally Planned Economies?” 
Journal of Economic Perspectives, 5, 4 (1991), 59–76. 
11
 See Juan Linz and Alfred Stepan, “Toward Consolidated Democracy,” Journal of Democracy, 7, 2 
(1996), 18. 
12
 In post-communist Europe, the Czech Republic, Hungary and Slovenia have been on the way (or have 
already achieved this stage) towards an institutionalised economic society. This, however, cannot be 
said of Russia and Ukraine where the power and the capability of state to operate in the market still 
remain negligible. The consequences of inexistence of economic society are evident everywhere – let 
us only look at the case of Russia, whose population is 15 times that of Hungary and which has 
incomparably greater raw material reserves (especially crude oil and ores), yet in 1993, it only received 
3.6 billion U.S. dollars worth of foreign investments, whereas in that same period, 9 billion dollars were 
invested into Hungary. See Richard Rose and Christian Haeffer, New Democracies Barometer III: 
Learning from What is Happening. Series Studies of Public Policy, 230 (Glasgow: University of 
Strathclyd, 1994), 32–33. 
13
 This pertains to a developed civil society, the rule of law, institutionalised economic society, an efficient 
and modern state bureaucracy and, last but not least, a relatively autonomous political society. See 
Juan Linz and Alfred Stepan, “Toward Consolidated Democracy,” Journal of Democracy, 7, 2 (1996), 
17. 
14
 Adam Przeworski et al, “What makes democracies endure?,” Journal of Democracy, 7, 1 (1996), 39. 

JOURNAL OF COMPARATIVE POLITICS     41 
 
 
properly without the support of other arenas. Hence, e.g., civil society cannot 
exist without the rule of law that would guarantee the citizens’ rights and 
freedoms. Furthermore, each of these interlinked arenas exercises a certain 
amount of influence over others. Therefore, the arena, which is of greatest 
importance to our contribution, also significantly affects others and we dare 
say that one cannot even speak of a modern consolidated democracy 
without economic consolidation.  
 
 
3 ECONOMIC INDICATORS AND THE PROCESS OF DEMOCRATIC 
CONSOLIDATION IN COUNTRIES OF FORMER YUGOSLAVIA 
 
Let us ask which factors influence a certain country at a given moment so 
that it will achieve and maintain the status of a consolidated democracy. This 
question is answered by Adam Przeworski, Michael Alvarez, Jose Antonio 
Cheibub and Fernando Limongi
15
 in a very large-scale project, which was 
presented for the first time in 1995 at a conference, entitled “Consolidating 
Third Wave Democracies” in Taiwan and published the following year in the 
Journal of Democracy magazine. The abovementioned researchers claim 
that these factors are democracy, state-owned assets, economic growth with 
moderate inflation rates, reduction of inequalities, a favourable international 
atmosphere and, last but not least, parliamentarian institutions. Their entire 
research project is based on data acquired in 135 countries during the period 
of 1950–1994.
16
 In this period, they identify 224 different governments, of 
these 101 cases of democratic rule and 123 various cases of undemocratic 
rule, which are not of such importance to our contribution. During the time of 
their research, 50 cases of transition in the direction of democracy and 40 
cases of transition in the opposite direction were recorded.  
 
In certain intellectual and political science circles (especially in the USA) a 
claim has been surfacing ever since the 1950s that democracy is a cyclical 
phenomenon. In this context, two statements have been made, which directly 
refer to economic consolidation. The first one says that various forms of 
undemocratic rules are more suited to achieving economic development in 
poorer countries; and the second one maintains that, the moment a once 
poor country achieves a certain degree of development, the rule of 
democracy obtains.
17
 However, both the research project of the previously 
mentioned team of researchers and the results of our analysis indicate that 
these two theses do not withstand critical judgement. In their project, the 
research team thus claim that there is no basis for a greater probability of 
achieving higher economic growth rates under undemocratic forms of rule.
18
 
56 states with various forms of undemocratic regimes had less than 1,000 
U.S. dollars of Gross Domestic Product (GDP) per capita at the beginning of 
research.
19
 By the project’s conclusion, only 18 of the countries had 
                                                 
15
 Ibid., 39–55. 
16
 The year in which an individual state achieved independence or, alternatively, the year in which certain 
data was first available is considered as the year in which data gathering began. 
17
 See Adam Przeworski et al, “What makes democracies endure?,” Journal of Democracy, 7, 1 (1996), 
40. 
18
 For more on relationships between economic growth ant the form of political rule see John F. Halliwell, 
“Empirical Linkages Between Democracy and Economic Growth,” British Journal of Political Science, 24 
(1993), 225–248. 
19
 Gross Domestic Product (the GDP) is the most frequently mentioned and applied economic indicator, 
which shows the developmental phase of a certain state. Comparative analyses most often apply the 
GDP per capita, expressed in market prices (current prices according to the current exchange rate) or 
the GDP per capita, expressed in purchasing power parity. In former socialist states, it is especially 
problematic to monitor the private sector, primarily as regards informal economic activities, which is 
therefore to a greater extent done on the basis of more or less accurate estimates provided either by 
central statistical offices of individual states or by international organisations. The latter is especially 

JOURNAL OF COMPARATIVE POLITICS     42 
 
 
managed to pass the threshold of 1,000 U.S. dollars of GDP per capita, only 
6 managed to exceed the limit of 2,000 U.S. dollars of GDP per capita and 
only 3 had crossed the 3,000 U.S. dollars line. The other 29 countries even 
experienced economic setback during that same period. 
 
As regards the data on GDP per capita during the period of 1991–2011 
(Table 3) gathered in countries that were established in the territory of former 
Yugoslavia, it is evident that, in 1995, only Bosnia and Herzegovina was part 
of the group of states with less than 1,000 U.S. dollars of GDP per capita; 
during the period of 1991–1999, the group of states that had between 1,000 
and 2,000 U.S. dollars of GDP per capita included (in addition to Bosnia and 
Herzegovina) Serbia, Montenegro and the FYR Macedonia. Among all six 
countries that were created in the ex-Yugoslav area, two groups of states 
can be clearly defined according to one of the key economic indicators –GDP 
per capita. 
 
In the first group of countries, comprising Serbia, Montenegro, the FYR 
Macedonia and Bosnia and Herzegovina, the influence of political and 
economic change, which occurred during the transition into a democratic 
system at the end of the 1980s and the beginning of the 1990s, is reflected in 
the reduction of GDP per capita during the 1991–1999 period, by over 68 per 
cent on average. Another important characteristic of this group of states is a 
fairly high rate of growth in GDP per capita between 1999 and 2011, namely 
387 per cent in Serbia and 369 in Bosnia and Herzegovina, respectively. On 
the basis of these data we may conclude that, in the analysed period, the 
GDP per capita at first decreased quite a lot due to an exceptionally difficult 
phase in democratic transition and then, as the actual preconditions for the 
beginning of the process of democratic consolidation were met, it rose 
sharply, thereby in 2011 greatly exceeding the 1991 values. This fact is one 
of the significant indicators of a distinctive two-stage character of processes 
of democratic transition and consolidation in the states belonging to this 
group. 
 
In the second group of countries, including only Slovenia and Croatia from 
the territory of ex-Yugoslavia, the influence of political and economic change 
that occurred in the late 1980s and the early 1990s during the transition into 
a democratic system did not manifest itself in a long-term decrease in the 
GDP per capita. The value of GDP per capita as a primary indicator of a 
country’s economic success
20
 was steadily increasing in Slovenia and 
Croatia (if the period from 1991 to 2011 is considered). Thus, between 1991 
and 2011, the GDP per capita in Croatia increased by 73 per cent despite 
the war that took place during this period; during the same period, GDP in 
Slovenia increased by 64 per cent, but the outset value of Slovenian GDP 
per capita in 1991 was 133 per cent that of Croatia.  
 
So, what is the position of Slovenia in the group of states of the ex-Yugoslav 
area, especially if we compare it to the most successful former socialist 
states in Central and Eastern Europe as well as with certain European Union 
Member States? As the Table 3 shows, Slovenian GDP per capita, 
expressed in current prices was much higher in all three analysed time 
periods, both in comparison with the most successful Central and Eastern 
European states and with the states created in the territory of Former 
                                                                                                                                                                  
characteristic of states that were established in the territory of the former Soviet Union, therefore data 
from this geographical region tend to be somewhat less reliable. 
20
 See Thomas Nowotny, Economic Transition, Democratic Consolidation and the Integration of Central 
Eastern European Countries into European Structures. NATO Economic Colloquium 1997. Available at 
htpp://www.nato.int/docu/colloq/1997/97-4-2.html (25 June 2013). 

JOURNAL OF COMPARATIVE POLITICS     43 
 
 
Yugoslavia. On the other hand, in all the analysed time periods, Slovenian 
GDP per capita was much lower, primarily relative to Austria and Italy, 
whereas in 2011, Slovenian GDP per capita almost reached that of Greece. 
A significant advantage of Slovenian GDP, which had been equal to at least 
two times the GDP of former socialist states in 1991, somewhat decreased in 
2011, as the closest pursuer – Czech Republic – was only 4,102 U.S. dollars 
short of Slovenian GDP per capita, or, in other words – the Czech Republic 
had only achieved 41 per cent of Slovenian GDP per capita in 1991, whereas 
in 2011, the respective figure was already 83 per cent.
21
 
 
TABLE 3: GDP PER CAPITA AT CURRENT PRICES (IN U.S. DOLLARS) IN 
DIFFERENT TIME PERIODS 
 
Source: United Nations Statistic Division; available at http://data.un.org/Data.aspx?d=SNAA 
MA&f=grID%3a101%3bcurrID%3aUSD%3bpcFlag%3a1 (28 June 2013). 
 
The team of researchers
22
 further claims that it is the economic development, 
which importantly affects the percentage of probability of survival of a 
democratic rule. Democracies that are severely underdeveloped in economic 
terms and have a GDP per capita of less than 1,000 dollars have thus a 12 
per cent probability of being overthrown in the next twelve months. This 
percentage decreases to 6 per cent for democracies with a GDP per capita 
between 1,000 and 2,000 U.S. dollars,
23
 to 3 per cent for democracies with a 
GDP per capita ranging from 2,000 to 4,000 U.S. dollars and to one per cent 
for democracies having a GDP per capita in the 4,000 to 6,000 U.S. dollars 
range.
24
 Considering these observations and if we once again take a look at 
our data on states created in the territory of the former Yugoslavia (Table 3) 
we can infer that, from the aspect of economic underdevelopment, political 
systems in Bosnia and Herzegovina and in the FYR Macedonia are the most 
compromised, as their economies had just below 5,000 U.S. dollars of GDP 
per capita in 2011, which does not take into account the effects of global 
economic crisis that were manifested in 2012 and 2013. Hereby, it needs to 
be stressed that the level of economic development is but one of many 
factors influencing the survival or demise of a democracy and that the 
abovementioned percentages of probability are by no means to be 
                                                 
21
 Also, the distance to the closest pursuer within the group of former Yugoslav republics, i.e., to Croatia, 
decreased between 191 and 2011. In 1991, Croatia achieved only 43 per cent of Slovenian GDP per 
capita, whereas in 2011, it was at 58 per cent. 
22
 The research project undertaken by Adam Przeworski, Michael Alvarez, Jose Antonio Cheibub and 
Fernando Limongi, which has already been mentioned several times. See Adam Przeworski et al, “What 
makes democracies endure?,” Journal of Democracy, 7, 1 (1996), 39–55.  
23
 This, in other words, means that the expected lifespan of a democracy under such conditions is 17 
years. 
24
 See Adam Przeworski et al, “What makes democracies endure?,” Journal of Democracy, 7, 1 (1996), 
39–55. 

JOURNAL OF COMPARATIVE POLITICS     44 
 
 
considered as absolute. Democracies in states with a GDP per capita 
exceeding 6,000 U.S. dollars are invincible according to the level of 
economic development. Never has it happened so far that a democratic 
system would fall in a state whose GDP per capita has been higher than 
6,055 U.S. dollars,
25
 so in this respect, Slovenian, Croatian and Montenegrin 
democracies are perfectly safe. Thus, proceeding from the data provided by 
foreign researchers and those of our own research project, we can conclude 
that the degree of economic development is an important (but, of course, far 
from being the only one) factor that influences the survival and consolidation 
of democracy. Or, if we summarize Martin Lipset, “the more a state is 
developed in economic terms, the greater is the probability of its democratic 
rule’s survival”.
26
 The question why democracies tend to be more stable in 
economically more developed countries has been attracting extensive 
debates. One of the reasons also mentioned by Martin Lipset
27
 stresses the 
fact that the intensity of distributive conflicts tends to be lesser in countries, 
which have achieved a higher degree of economic development.  
 
One of the key economic indicators contributing towards democratic 
consolidation is the economic growth accompanied by a moderate inflation 
rate. The research team
28
 state that, contrary to Martin Lipset’s
29
 and Mancur 
Olson’s
30
 arguments,
31
 rapid economic growth
32
 does not contribute towards 
the destabilisation of democracy. According to them, only the opposite can 
be true: democratic rule has a greater probability of consolidation and 
survival if annual GDP
33
 growth is about five per cent or higher. The team of 
researchers further establish that negative economic growth rates are one of 
the most important reasons for destabilisation. 
 
With respect to these findings, a methodological error has to be emphasised, 
which frequently occurs in scientific literature: authors often neglect the 
starting and the finishing positions of countries – i.e., their situations at the 
beginning and the end of a research period, respectively. It is by no means 
possible to equate the degree of economic growth in Slovenia, which had 
had a stable economic growth all the way between 1991 and 2009 when 
negative impacts of global economic crisis hit it, with a state in which the 
process of democratic transition has barely begun for whatever reason. 
Thus, Slovenia’s 5.3 per cent and Bosnia and Herzegovina’s 9.6 per cent of 
annual GDP growth in 1999 can by no means be interpreted as a sign of 
Bosnia and Herzegovina been twice as successful as Slovenia, because 
such a piece of data also requires at least the consideration of data on 
growth rates for the preceding years and the data on absolute values of GDP 
per capita in the same year, respectively. In the selected case, a rate of 5.3 
per cent of annual GDP growth in Slovenia equalled just over 400 U.S. 
dollars per capita, whereas a rate of 9.6 per cent of annual GDP equalled 
                                                 
25
 Argentinean rate of GDP per capita in 1976 (in 1995 international dollars). 
26
 Lipset, Martin. “Some Social Requisites of Democracy: Economic Development and Political 
Legitimacy.” American Political Science Review, 53, 1 (1959): 69.  
27
 See Martin Lipset, Political Man: The Social Bases of Politics (Baltimore: John Hopkins University 
Press, 1981), 27–63. 
28
 See Adam Przeworski et al, “What makes democracies endure?,” Journal of Democracy, 7, 1 (1996), 
39–55. 
29
 See Martin Lipset, Political Man: The Social Bases of Politics (Baltimore: John Hopkins University 
Press, 1981). 
30
 See Mancur Olson, The economics of the wartime shortage (Durham: Duke University Press, 1963). 
31
 In their works, these two authors warn of a greater probability that a democratic rule may become 
destabilised under circumstances of rapid economic growth (they define it as an annual GDP growth 
rate exceeding 5 per cent). 
32
 Rapid economic growth is also defined as exceeding a 5 per cent annual rate of increase in GDP by the 
group of authors whose research we refer to. 
33
 Average annual GDP growth rate is an important indicator of economic trends within a national 
economy and tells us by how much per cent the GDP of a certain state increases in an observed year. 

JOURNAL OF COMPARATIVE POLITICS     45 
 
 
“only” slightly less than 100 U.S. dollars per capita. During the period 
between the acquisition of independence and the year 2008, only Slovenia 
was experiencing permanent and positive economic growth among all the 
countries in the territory of former Yugoslavia, whereas other states were 
experiencing more or less intensive rises and falls, which became more 
distinct especially during the 2008–2011 period, which witnessed the 
negative effects of global economic crisis in all six states that are successors 
to the former Yugoslavia. 
 
TABLE 4: GDP GROWTH (ANNUAL)
34
 IN FORMER YUGOSLAV REPUBLICS 
IN DIFFERENT TIME PERIODS (PER CENT) 
 
Source: World Bank, available at http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/c 
ountries (30 June 2013). For Bosnia and Herzegovina, Monte Negro and Croatia in 1993, see 
World Macroeconomic Research, available at http://kushnirs.org/macroeconomics/gdp/gdp_b 
osnia_herzegovina.html #t1 (27 June 2013). 
 
States that were established in the territory of former Yugoslavia can be 
distributed into two groups according to the levels of GDP per capita growth 
(Table 3). Between 1987 and 1990, when they were still federate republics of 
the former Yugoslavia, all of them had negative annual GDP growth rates,
35
 
which was a direct consequence of exacerbated crisis in the then Yugoslavia 
plus the beginning of the end of the socialist system and the onset of 
democratic transition. In all the states (except Slovenia), this negative impact 
was even enhanced in the second measurement period (1990–1993). 
Slovenia was the only state from the area of former Yugoslavia that had 
positive annual GDP growth rates already in 1993, whereas in other states, 
this effect was visible only after 1996 and even later in some countries. The 
decade between 1990 and 2000 was also characterised by gross oscillations 
in economic growth rates; so in case of Montenegro, the GDP decreased by 
incredible 45 per cent in 1993 relative to the year before, whereas in 1995, 
the GDP increased by equally astounding 40 per cent over the preceding 
year.
36
 The data in Table 4 allows us to confirm without any reservation the 
interdependence of both economic indicators – the GDP per capita and 
annual rates of GDP growth. Slovenia, being the only state with a relatively 
high GDP
37
 per capita, had also been achieving stable positive annual GDP 
per capita growth rates up until the period of global economic crisis, which 
had only further increased the gap between Slovenia and other ex-Yugoslav 
countries.  
 
                                                 
34
 Annual percentage growth rate of GDP at market prices based on constant local currency. Aggregates 
are based on constant 2,000 U.S. dollars. GDP is the sum of gross value added by all resident 
producers in the economy plus any product taxes and minus any subsidies not included in the value of 
the products. It is calculated without making deductions for depreciation of fabricated assets or for 
depletion and degradation of natural resources. 
35
 See Miro Haček, Razvojni indikatorji držav na območju bivše Jugoslavije (Development indicators of 
former Yugoslav Republics). Ljubljana: Research Team of the Centre for Political Science Research, 
Institute of Social Sciences, 2000a. 
36
 See World Macroeconomic Research, available at http://kushnirs.org/macroeconomics/gdp/gdp_monte 
negro.html (27 June 2013). 
37
 Of course in relation to other states in the territory of former Yugoslavia and also to other Central and 
Eastern European states. 

JOURNAL OF COMPARATIVE POLITICS     46 
 
 
Surprisingly, the research team
38
 find out that a moderate inflation rate has a 
greater contribution towards democratic consolidation than a very low rate of 
inflation.
39
 It is necessary to mention here that these finding supports the 
hypothesis of Albert Hirschman made in 1981, which also claimed that “a 
moderate inflation rate strengthens a democracy’s stability”.
40
 
 
Data in Table 5 allow us to conclude that a majority of states from the 
territory of former Yugoslavia, with the exception of Serbia and Montenegro, 
had managed to curb inflation by 1999. In some of the states, inflation even 
decreased by over a hundred times over the 1993–2011 period. In Slovenia, 
inflation rate decreased by over 20 times during that same period, falling 
from 32.9 per cent in 1993 to 1.8 per cent in 2011. Characteristic of the 
analysed group of states were also extraordinarily high 1990–1996 inflation 
rates, which was undoubtedly affected by general political and economic 
conditions in each of the studied countries. If our findings are compared to 
those of the research team, a conclusion can be made that none of the post 
socialist states from the former Yugoslav area has exceeded a 30-per-cent 
annual inflation rate since 2002, a limit that the foreign research team’s 
research project defines as the threshold at which inflation may contribute 
towards the destabilisation of a democracy.
41
 
 
TABLE 5: INFLATION IN FORMER YUGOSLAV REPUBLICS IN DIFFERENT 
TIME PERIODS (CUSTOMER PRICE INDEX; ANNUAL; PER CENT)
42
 
 
Source: World Bank, available at http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG/countrie 
s?page=3 (30 June 2013). 
 
The next economic indicator that can importantly influence the 
(de)stabilisation and the process of democratic consolidation is the 
unemployment rate,
43
 which, however, poses the biggest problems for 
comparative analysis due to methodological reasons. Namely, in centrally 
planned economies, unemployment rate was not among the officially 
recorded statistics. All post socialist European countries now do have 
employment offices, which provide information on the numbers of officially 
registered employment seekers, but we have found out that the official data 
on unemployment rates published by either national statistical bureaus or 
employment offices is unrealistic, which is especially the case with most of 
the countries in the territory of former Yugoslavia. The reason for grossly 
                                                 
38
 See Adam Przeworski et al, “What makes democracies endure?,” Journal of Democracy, 7, 1 (1996), 
39–55. 
39
 According to the claims made by them, even higher degrees of democratic consolidation can be 
expected in states experiencing annual inflation rates between 6 and 30 per cent than in those with 
annual inflation rates below 6 per cent. 
40
 Albert Hirschman, The Social and Political Matrix of Inflation: Elaboration’s on the Latin America (New 
York: Cambridge University Press, 1981), 177–202. 
41
 See Adam Przeworski et al, “What makes democracies endure?,” Journal of Democracy, 7, 1 (1996), 
42. 
42
 Inflation measured by the consumer price index reflects the annual percentage change in the cost to the 
average consumer of acquiring a basket of goods and services that may be fixed or changed at 
specified intervals, e.g., on a yearly basis. 
43
 The team of researchers merely mention unemployment rate as one of the factors that influence the 
(de)stabilisation and the process of democratic consolidation. See Adam Przeworski et al, “What makes 
democracies endure?,” Journal of Democracy, 7, 1 (1996), 35–45. 

JOURNAL OF COMPARATIVE POLITICS     47 
 
 
underestimated rates of actual unemployment is in part also the shortage of 
reasons (motivations) for registration. Namely, in these states, there are 
much higher unemployment rates than those official statistics record, as the 
latter only account for registered and active job seekers. Certainly, this 
problem is present in developed market economies as well, yet its scale is 
not as large as in states undergoing transition. In a range of transition 
economies, there is also the so-called grey employment market, unrecorded 
by official statistics, yet offering occasional employment to a multitude of 
officially unemployed people. Data presented in the Table 6 is official data of 
World Bank, collected through the application of the same methodology in all 
the states included, which on the one hand enables comparability, yet on the 
other hand, precisely due to methodology’s strictness, results in a lot of 
missing data for individual time periods.  
 
In comparison with some other former socialist states, Slovenian 
unemployment rate was somewhat high
44
 throughout the entire analysed 
period; on the other hand, we can see that Slovenia is the only state 
belonging to the group of countries created in the area of former Yugoslavia 
that has had its unemployment rates constantly below 15 per cent for the last 
twenty years, as well as it is the only state that had been witnessing slowly 
decreasing unemployment rates after 1993, of course, with the exception of 
the most recent period marked by global economic crisis whose effects have 
been exceptionally evident through this indicator. In the remaining ex-
Yugoslav states, it is still impossible to trace any explicitly positive 
employment trends, with some of the states still experiencing unemployment 
rates close to 30 per cent, even exceeding this figure. Probably, high 
unemployment rates have become a mainstay of these states’ economic 
development and will only slowly decrease. Hereby, it is interesting to stress 
that unemployment has been one of the most salient issues in the European 
Union as well, becoming all the more visible in the recent years because of 
negative effects of global economic crisis. Therefore, unemployment rate is 
one of those indicators exhibiting the lowest or even inexistent differences 
between post socialist states and European Union Member States. In the 
European Union, even higher unemployment rates can be found in certain, 
especially southern EU Member States (Greece, Spain, Portugal, France 
and Italy) than are some of the values in the Table 6, whereas 
unemployment rates are somewhat lower in western and northern EU 
Member States.  
 
TABLE 6: UNEMPLOYMENT IN FORMER YUGOSLAV REPUBLICS IN 
DIFFERENT TIME PERIODS (PER CENT OF TOTAL LABOUR FORCE)
45
 
 
 
 
                                                 
44
 On the one hand because of lax criteria of registering unemployment and on the other (according to the 
International Monetary Fund) due to too generous social benefits for those registered as unemployed. 
See International Monetary Fund, available at http://www.imf.org/January 2001 (28 June 2013). See 
also Miro Haček, “Proces ekonomske konsolidacije v državah Srednje in Vzhodne Evrope (Process of 
Economic Consolidation in CEE),” in Demokratični prehodi I. (Democratic Transition I.), eds. Danica 
Fink Hafner and Miro Haček (Ljubljana: Faculty of Social Sciences, 2000b), 59–77. 
45
 Unemployment refers to the share of the labour force that is without work but available and seeking 
employment. 

JOURNAL OF COMPARATIVE POLITICS     48 
 
 
 
Source: World Bank, available at http://data.worldbank.org/indicator/SL.UEM.TOTL.ZS/coun 
tries (30 June 2013). 
 
One of the most important economic indicators, which also describes the 
(un)successfulness of a national economy, are certainly the external debt 
stocks of a state. External debt stocks include the sum of principal debt 
returns repayable in foreign currency, goods or services plus interests owed 
to international financial institutions or other sovereign states. Table 7 shows 
external debt stocks as a percentage of GDP, which gives quite a realistic 
depiction of certain state’s indebtedness and its ability to repay the borrowed 
funds. 
 
The first finding evident from the data is the growth of real debt in all the 
countries created in the territory of the former Yugoslavia, with the only 
exceptions of Slovenia, the FYR Macedonia and Bosnia and Herzegovina, 
whose debts decreased somewhat in the period of 2005–2008, only to 
increase substantially in the following period of 2008–2011. In all the states 
established in the ex-Yugoslav area, real debt increased during the 1999–
2011 period, with Croatia leading (119.1 per cent increase), followed by 
Slovenia (94.1 per cent increase) and Macedonia (57.4 per cent increase), 
whereas Serbia was the last (15.4 per cent increase). Slovenia and 
Montenegro are also the only two of all the former Yugoslav countries whose 
external debt stocks were less than one half of their GDP in 2001, 
respectively. 
 
TABLE 7: EXTERNAL DEBT STOCKS (PER CENT OF GDP/GNI
46
) IN 
DIFFERENT TIME PERIODS 
 
Sources: Statistical office of the Republic of Slovenia, available at 
http://www.stat.si/indikatorji.asp?id=28&zacobd=1-1995 (30 June 2013); World Bank, 
http://data.worldbank.org/indicator/DT.DOD.DECT.CD (30 June 2013); World Bank, 
http://data.worldbank.org/indicator/DT.DOD.DECT.GN.ZS (30 June 2013); Osnovne 
informacije o Hrvatskoj, available at http://www.hnb.hr/statistika/h_ekonomski_indikatori.pdf 
(27 June 2013); Ekonomski indikatori, http://www.hnb.hr/ statistika/h-ekonomski_indikatori.htm 
(25 June 2013). 
 
 
3 CONCLUSIONS 
 
The findings provided by our short research study perfectly match those of 
the research team,
47
 which emphasise the importance of economic factors in 
democratic consolidation. Hence, we corroborate the claims made by Martin 
                                                 
46
 Total external debt stocks to gross national income. Total external debt is debt owed to non-residents 
repayable in foreign currency, goods, or services. Total external debt is the sum of public, publicly 
guaranteed, and private nonguaranteed long-term debt, use of the IMF credit, and short-term debt. 
Short-term debt includes all debt having an original maturity of one year or less and interest in arrears 
on long-term debt. GNI (formerly the GNP) is the sum of value added by all resident producers plus any 
product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income 
(compensation of employees and property income) from abroad. 
47
 See Adam Przeworski et al, “What makes democracies endure?,” Journal of Democracy, 7, 1 (1996), 
49. 

JOURNAL OF COMPARATIVE POLITICS     49 
 
 
Lipset
48
 stating that a democratic rule has better chances at consolidating in 
economically more successful states. Of course, this is by no means to say 
that other factors, such as the setting up of democratic institutions, the rule of 
law, the guaranteeing of human rights and fundamental freedoms are not of 
key importance to democratic consolidation. Our statement refers solely to 
the fact that a democratic rule has a greater possibility of consolidation in an 
economically more successful state. It is true, though, that economic 
consolidation cannot be achieved without prior or at least parallel political 
consolidation. Democracy may even be consolidated in poor countries, yet 
these are faced with a need to accelerate economic development, reduce 
inequalities, manage inflation, not to mention the existence of democratic 
institutions, the guaranteeing of human rights, the rule of law, etc. The 
research team correctly establishes that poverty and economic stagnation 
are the major obstacles in the way towards democratic consolidation.  
 
The second finding refers to the situation of economic (democratic) 
consolidation of the states created in the territory of the foreign common 
state of Yugoslavia. A democracy becomes consolidated when the rate of 
risk
49
 decreases in proportion to its age.
50
 Dahl further claims that the 
probability of attaining democratic consolidation is greater when democracies 
“operate” successfully during a given time span in political, social, economic 
and other terms. On the basis of our research project and other similar ones, 
we can confirm this claim at least from the economic aspect. Democratic rule 
has a greater chance of survival and consolidation in economically more 
successful states.
51
 After several years of economic progress, the risk rates 
diminish enough to allow us to speak of economic democracy. Hereby, the 
level of GDP a state achieves is not that much important for democratic 
consolidation as are stability, straightness and sufficient speed of economic 
development.  
 
Considering all this, it seems justified to claim that the only two states from 
among the ex-Yugoslav countries that can be counted – though with certain 
reservations mentioned above – as belonging to the group of not only 
politically but also economically consolidated democracies are Slovenia and 
Croatia, whereas the remaining four countries in the territory of former 
Yugoslavia – Macedonia, Montenegro, Bosnia and Herzegovina and Serbia 
– have a long and difficult path still ahead of them. Namely, the secret to the 
resilience of a democracy is hidden in economic development – not only, as 
some theories claimed back in the 1960s,
52
 in various forms of undemocratic 
rule, but in a democracy built upon democratic institutions, respect for human 
rights and fundamental freedoms plus the rule of law. 
 
 
 
 
                                                 
48
 See Martin Lipset, Political Man: The Social Bases of Politics (Baltimore: John Hopkins University 
Press, 1981). 
49
 The rate of risk stands for the probability that a democratic rule will transform into some other form of 
rule, but with undemocratic properties. This rate is higher for states that have only recently become 
democratic systems, for states that can be defined as economically underdeveloped, yet with existing 
and operational democratic institutions, etc. See Adam Przeworski et al, “What makes democracies 
endure?,” Journal of Democracy, 7, 1 (1996), 35–52. 
50
 Robert A. Dahl, Transition to Democracy. Address delivered to the symposium on “Voices of 
Democracy”, University of Dayton, Centre for International Studies, March 1990, available at 
http://www.freedomhouse.com (28 June 2013), 16–17. 
51
 See Adam Przeworski et al, “What makes democracies endure?,” Journal of Democracy, 7, 1 (1996), 
50. 
52
 Martin Lipset, “Some Social Requisites of Democracy: Economic Development and Political 
Legitimacy,” American Political Science Review, 53, 1 (1959), 69–105.  

JOURNAL OF COMPARATIVE POLITICS     50 
 
 
 
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JOURNAL OF COMPARATIVE POLITICS     91 
 
 
 
 
 
 
THE PROCESSES OF ECONOMIC CONSOLIDATION IN COUNTRIES 
OF FORMER YUGOSLAVIA 
 
PROCESI EKONOMSKE KONSOLIDACIJE V DRŽAVAH NEKDANJE 
JUGOSLAVIJE 
 
Simona KUKOVIČ in Miro HAČEK 
………………………………………………………………………………… 
 
Preden sploh lahko razpravljamo o demokratični konsolidaciji, 
morajo biti izpolnjeni vsaj trije temeljni minimalni pogoji. Poleg 
tega morajo konsolidirane demokracije izpolnjevati še nekaj 
dodatnih pogojev, ki nikoli niso pritegnili veliko pozornosti v 
znanstvenih analizah; med njimi Linz in Stepan še posebej 
poudarjata pomen ekonomske konsolidacije. Pričujoči prispevek 
analizira procese demokratične konsolidacije v nekdanjih 
jugoslovanskih republikah. Avtorja na podlagi več indikatorjev 
ugotavljata, da večina nekdanjih jugoslovanskih republik (še) ni 
dosegla ravni konsolidiranih demokracij; avtorja testirata tezo, 
da je eden od temeljnih razlogov za to tudi neuspeli proces 
ekonomske konsolidacije. 
 
Ključne besede: demokracija, ekonomija, konsolidacija, 
nekdanja Jugoslavija, Slovenija.