How the West Failed Bosnia

How the West Failed Bosnia

The Dayton Accords and privatization have kept Bosnia and Herzegovina in a tragic limbo.


Tuzla, Bosnia—Just minutes after the polls closed on October 2, a German diplomat named Christian Schmidt changed the election laws of Bosnia and Herzegovina. He did so unilaterally and without public input, as he is empowered to do as the high representative for Bosnia and Herzegovina. The vote had been going smoothly; international election monitors reported that it was peaceful and lawful. Then Schmidt’s decision suddenly pushed the country into crisis.

For more than a year, Schmidt had been suggesting that he would rewrite the election rules to “promote the functionality” of the Federation of Bosnia and Herzegovina, one of the two constituencies that make up the country, along with the Republika Srpska. But he walked back those promises after protests of more than 7,000 people in Sarajevo over the summer. His decision to impose these laws was a surprise, and it has shaken the country’s already fragile faith in democracy.

This kind of intervention has been a feature of life in Bosnia and Herzegovina (referred to hereafter as Bosnia for simplicity) since the Bosnian War ended in 1995. Decades of international managerial involvement and billions of dollars in aid have created a unique case study of the effects of interventionist foreign policy and neoliberal economics. The result is that the country’s peace remains tenuous, and its politics are as deadlocked as ever.

The political scientist Jasmin Mujanović has called Bosnia’s political system “the most decentralized and complex constitutional regime in the world,” with a “Byzantine government apparatus staffed according to a rigid ethno-sectarian key.” This is a consequence of the Dayton accords, which ended the war by granting ethnically cleansed territory to those who had cleansed it and by proclaiming that Bosnia would be, as many Bosnian politicians have put it since, “one country of three nations.” The segregation encoded by the accords touches nearly every aspect of Bosnian life—not just politics but schools and other public services. In some ways, the peace agreement was extremely successful: It immediately ended a three-year conflict that left an estimated 100,000 dead and 2 million displaced, and there has been little interethnic violence since. But it didn’t spare the country from postwar economic stagnation and political chaos.

The Dayton-erected government structure is dizzying. In a country of just over 3 million inhabitants, there are two federal entities, the Republika Srpska and the Federation of Bosnia and Herzegovina; some 14 levels of governance; more than 100 political parties; 13 prime ministers, more than 180 ministers, and more than 700 members of parliament; 10 districts known as cantons, plus one autonomous district; and three coruling presidents, each of whom represents a constituent ethnicity: Serb, Croat, or Bosniak. All the other identities, including Roma, Jews, and anyone else who does not fit neatly into one of the three ethnic identities, are excluded from the presidency. With each election cycle, politics is increasingly entrenched along ethno-nationalist lines. All of this is presided over by a suite of international agencies, one of which is the Office of the High Representative, led by Schmidt, a former German agriculture minister. His UN-appointed role is to enforce the Dayton accords, and his sweeping powers allow him to change the Constitution, fire elected officials, and, as Bosnians have just learned, alter election laws before the votes are even counted.

Bosnia’s Constitutional Court and the European Court of Human Rights (whose rulings, according to Dayton’s preamble, override the agreement itself) have judged the accords to be discriminatory in eight separate cases. Dayton’s defenders often argue that although the agreement isn’t perfect, it is the only thing keeping the country from relapsing into ethnic violence. But Dayton was meant to be temporary: It froze the conflict but didn’t solve it.

Taken separately, the 21 changes Schmidt made to the election laws and the Constitution may appear inconsequential and highly technical. But critics say the combined effect undermines Bosnian democracy. The reforms were intended to address a controversial Constitutional Court ruling. In 2016, Božo Ljubić, a former leader of the Croat ultranationalist HDŽ 1990 party, sued the Bosnian government on the grounds that Croats were unequally represented in the tripartite government. Croats make up about 15 percent of the country’s population, while Bosniaks comprise 50 percent and Serbs 30 percent. Ljubić argued that, based on the principle of equality enshrined in Dayton, Croats should be afforded an equal third of governing power.

By changing the election laws to benefit Ljubić’s party rather than working toward a government guided by ethnically agnostic democratic principles, critics say, Schmidt reinforced the current malfunctioning system. (Schmidt has dismissed the other seven human rights cases as “outside the jurisdiction of the High Representative.”)

When Dayton was signed, the task of building a lasting peace was left to the humanitarian sector, while privatization and “shock therapy” were supposed to remake the Bosnian economy in America’s capitalist image and usher in an era of prosperity. Instead, the agreement, along with the implementation of neoliberal economic policies, left Bosnia in political limbo and trapped it in poverty, allowing politicians to exploit Bosnian desperation by promoting fear and ethnic division.

The international plan to cure Bosnia’s ills turned out to be a slow-acting poison.

In the days before the general election, the faces of dozens of political candidates could be seen on every billboard and wall in Tuzla, a city of 110,000 in the northeastern part of the country. The night before the vote, my glamorous but crumbling Yugoslav-era hotel was teeming with election monitors from the Organization for Security and Co-operation in Europe. As the receptionist enjoyed a cigarette outside, he told me that there were between 30 and 40 election monitors staying there. I asked him whether this kind of international involvement made any difference. He shrugged. “Every election, the same parties go to the villages, give the villagers 50 marks”—the equivalent of roughly $27—“and tell them to go vote for them,” he said. (The average hourly wage in Bosnia is around six marks, but many people earn far less.) “For 50 marks, people will do anything.”

Such stories of corruption, along with resignation about the ineffectiveness of international actors, are common. I have been reporting on and traveling to the region since 2016, and during that time I have heard little optimism about the future of the country. Bosnia’s young people are leaving en masse. Half of people age 18 to 29 already say they want to emigrate, and 10 percent of the country’s GDP comes from remittances each year. Meanwhile, politicians like the Serbian leader Milorad Dodik and members of HDŽ respond to the chronic unemployment by stoking ethnic hatred with increasingly inflammatory statements and territorial threats.

Although Tuzla is Bosnia’s third-largest city, you can walk its entire downtown in less than 15 minutes. As with most Bosnian cities and towns, many buildings and sidewalks are pockmarked with bullet holes from the war, and there is a monument to a massacre in the city center. Like most Bosnian cities before ethnic cleansing, Tuzla was diverse. It was the heart of Bosnia’s industrial economy, drawing workers from all backgrounds.

After World War II, when Yugoslavia was transitioning from a largely agrarian economy, President Josip Broz Tito chose Tuzla as the country’s manufacturing center because of its salt deposits (the name of the city comes from the Turkish word for “salt mine”), which were mined for industrial use.

A 1997 paper from the European Commission and the World Bank found that “only a small portion of the overall industrial capacity [had] been damaged” by the war. Yet according to an EastWest Institute report from that same year, foreign experts prescribed a “complete overhaul” of the economy through privatization.

In 2004, the US Agency for International Development (USAID) blamed Bosnia’s economic problems on the “slow pace of privatization, obstacles to the free flow of capital, a bloated public sector, [and] a lack of direct foreign investment.” The Bosnian government auctioned off any remaining state-owned businesses—part of the economic shock therapy that the US imposed across much of the post-Soviet bloc. In 2014, the AP reported that “more than 80 percent of privatizations have failed” as tycoons bought the companies, sold them off for parts, and then filed for bankruptcy. Some estimates are even worse: Quartz reported in 2015 that in the Republika Srpska, only 10 of the 1,200 privatized companies survived.

To maximize profits, businesses owners would often file for bankruptcy instead of investing in the industry or factory. Bankruptcy in Bosnia is a lengthy legal process that can take years or even decades to resolve. Some factories stayed in production amid these proceedings while their workers were left unpaid.

In the center of Tuzla, there’s a small building with the alternating red and yellow stripes popular in the Austro-Hungarian period and a placard above the door with a hammer-and-sickle symbol. This is the office of the trade union Syndikat Solidarnosti (Solidarity Syndicate), and on Wednesdays and Fridays its leaders gather there to catch up, organize, and drink rakija, the local fruit brandy.

Enes Tanović, the vice president of the union, told me that because he was technically employed at one of the bankrupt factories, he was ineligible to receive assistance from the NGOs and charities that gave direct aid. To survive, Tanović did odd jobs and manual labor for as little as five euros a day.

Others he knew turned to high-interest microloans to help them build subsistence farms so they could feed their children. Some were able to pay back their loans, while others lost everything.

In February 2014, employees from several major companies peacefully demonstrated in Tuzla, accusing local authorities of ignoring the exploitation of workers following the privatization of state firms and demanding compensation for unpaid wages and stolen pensions. After a confrontation with the police, 600 protesters torched the offices of the city government, housed in the former headquarters of Sodaso, a salt production company that was once Tuzla’s largest employer. (Sodaso supplied more than 80 percent of the table salt consumed in Yugoslavia. In 1998, the company employed some 2,500 people; by 2013, that number had dwindled to 422.) The building still stands in the center of Tuzla, its burned windows open and blackened.

Many workers have since received some of their back pay from the postwar period, but the workers at the Solidarity Syndicate say there are at least 2,000 cases of unpaid wages in Tuzla alone. They know of at least 20 suicides that they blame on the lack of jobs.

And yet the United States has continued to tout the success of its interventions in Bosnia. The USAID says it directed more than $1.7 billion to Bosnia’s recovery efforts from 1996 to 2017. It boasts that it created more than 18,000 jobs this way, claiming that “no other single program had such a profound impact on economic recovery after the war.”

Bojan Šošić, 42, a psychologist and member of the think tank Krug 99 (Circle 99), wore a suit to our meeting and spoke carefully and softly. We met in the café of the Hotel Mellain, Tuzla’s tallest building. He is a signatory of a letter criticizing Schmidt’s changes to the election laws. “We have a saying that is actually more like a curse: ‘May you have and then not,’ meaning may you experience the contrasts of living with abundance and then poverty,” he said.

Before the war, he told me, Bosnia was not only Yugoslavia’s industrial heartland but also its cultural mecca. It was the center of Yugoslav counterculture and music, and its capital, Sarajevo, was a cosmopolitan home not only to Bosniaks, Croats, and Serbs but also to people from a wide range of other backgrounds. Yugoslavia was a relatively wealthy and powerful nation on the world stage as the leader of the Non-Aligned Movement, positioning itself as a broker between East and West. Šošić pointed out that Bosnia “used to produce parts for Rolls-Royce airplane engines and helicopters. We had an electrical engineering system akin to General Electric or Siemens or Philips for the Third World.”

But after war broke out in 1992, politicians-cum-genocidaires began promoting the fantasy that the land should belong to a single ethno-state. The Dayton accords eventually codified those fantasies into constitutional law. Bosnia’s Yugoslavian period, in which Bosnia was diverse and economically prosperous, came to be seen by the West as a historical fluke. Instead of envisioning a modern, multiethnic Bosnia, the international community chose to treat the country as a backward, agrarian nation haunted by tribal divisions.

In the immediate aftermath of the war in 1996, Bosnian leaders wanted to emulate the post–World War II reconstruction effort in northern Italy, which had targeted specific industries for investment, most significantly steel manufacturing. The resulting “economic miracle” produced many of Italy’s most famous brands, including Vespa, Lamborghini, and Alfa Romeo. A network of highways was constructed, and in just two decades, a largely agricultural Italy was transformed into a dynamic industrial nation.

Bosnian economists asked Western leaders for this kind of program. But the Western charities and institutions that were involved in Bosnia became enamored with a pastoral vision of self-sustainability. “Western donations were obsessed with this word, ‘sustainability,’” Šošić said, “and that was through small and medium enterprises,” or SMEs. The international community proposed that SMEs would become the backbone of the economy. These were generally self-sustaining farms, clothing distributors, and small businesses; they were not, by definition, the industries that had powered Bosnia’s prosperity before the war.

To illustrate his point, Šošić told a story about global investment in SMEs after the war. The World Bank reasoned that farmers would need livestock supplies, so it shipped 600 Holstein cows from Germany. The classic black-and-white dairy cow had been bred in the Netherlands to produce nearly twice the amount of milk of the average cow. Their short legs and fat bellies were anatomically perfect for the flat fields of the Netherlands, but in the steep mountains of Bosnia, they began to starve from the lack of grass. They would climb higher and higher until they fell, snapping their necks or breaking their legs. “So these sustainable dairy cows ended up in farmers’ smokehouses—turned to sausage by the end of the year,” Šošić said.

Despite past failures, projects like this continued. As recently as three years ago, the European Union Force organized a shipment of 33 Holstein cows to the town of Kalinovik.

Milford Bateman, a British banking consultant and former professor of economics at Juraj Dobrila University of Pula in Croatia, told me that the focus on SMEs and “microenterprises”—businesses with one or two members, such as street vendors or seamstresses—was part of a broader neoliberal aid strategy. After the war, microfinance organizations were the main vehicles through which small businesses received funding. They boomed alongside NGOs as part of the Local Initiative Project headed by the World Bank. At first, they operated as nonprofits, but eventually many became for-profit companies. According to Bateman, “commercialized microfinance was considered the most politically appropriate—i.e., market-driven—way of helping the poor finance their own solution to poverty and underdevelopment.”

By 2008, Bosnia was the second-largest user of microfinance in the world, behind Bangladesh, where the concept began. Typically, Western investment provided money at interest rates of 7 or 8 percent to Bosnian microcredit institutions, which in turn would provide loans to Bosnia’s poor at rates of 30 or 40 percent. It generated profits for the companies while putting impoverished communities in debt. “In that sense, it’s a bit like the subprime crisis on Wall Street,” Bateman said. “You can’t stop it. As long as the music’s playing, you get up and dance.”

By 2008, there were nearly 400,000 microloans active in Bosnia, totaling around $770 million. But with that year’s global financial crash, thousands of Bosnians lost everything after they were unable to make payments on their loans. Some microfinance lenders were hit with default rates as high as 80 percent. Because of a law designed to discourage corrupt lending, borrowers who defaulted on their loans were required to publicly declare their destitution in court, a humiliating process for many.

Despite this history, microfinance institutions continue to be major lenders in Bosnia, a fact that speaks to the lack of options many Bosnians face.

Although many of the nations of the former Yugoslavia share the same language, you will rarely hear the word ubleha outside of Bosnia. In its crudest sense, it means “charming lies” or “selling snake oil,” but it also refers to promises and plans that are never meant to be realized. Western intervention and promises of democracy are now seen as ubleha. The Dayton accords and the program of privatization, and the political and economic problems they caused, emerged from the view that Bosnia needed to be saved by the West, but the promises the West made were never going to be fulfilled.

According to Dayton’s own architect, the late Richard Holbrooke, the agreement was “brokered by an impatient American administration determined more to end the war…than to establish the basis for a viable and sustainable state.” Former president Bill Clinton, reflecting on the accords in 2019, admitted they “obviously set up the possibility of paralysis.”

Schmidt’s abrupt revision of the election laws has only further damaged Bosnians’ already faltering trust in the West. When the news came out, the US Embassy in Sarajevo immediately released a statement praising the high representative’s decision “to bolster the stability and functionality of Bosnia and Herzegovina through amendments to the Federation of Bosnia and Herzegovina’s Constitution and the BiH Election Law.”

Like Dayton itself, the Office of the High Representative was envisaged as a temporary measure. In 2008, the Peace Implementation Council—a conglomerate of 55 countries and agencies that oversees and implements the accords—extended the mandate of the office indefinitely until a long list of “key priorities for transition” were met. In 2003, Gerald Knaus of the think tank European Stability Initiative compared Bosnia’s relationship with Europe to that of India with Britain during colonial rule, with the position of the high representative akin to that of an imperial viceroy.

Darko Brkan, the president of Zašto Ne? (Why Not?), an NGO dedicated to promoting governmental transparency and building civic activism, told me prior to the election that he believed there was little chance that Schmidt’s reforms would be passed. “If the changes to the election law were to happen, I would consider leaving Bosnia for good,” he told me. In a follow-up e-mail after the election, Brkan said he was deeply disturbed by the high representative’s actions. “I never believed that anyone ever, especially coming from democratic countries, could do what the high representative did. The possibility of that happening was so unbelievable to me that I still cannot make anything of it,” he wrote. “As far as I know, there has not been a single democracy ever in the world where the elections rules were changed after the votes have been cast…. So, by my seeing this precedent happen in my country, I think that my whole faith in democracy has shattered to the bone.”

The sudden changes to the election laws “set a precedent for anyone in this country and the region that no one really believes in democracy other than it being a tool when they need it for their own benefits, and that it is OK to poke a giant hole in it if it serves a cause,” he wrote. Brkan said he will continue to fight for democracy and the rights of citizens as he has done for decades, but he and his family have left Bosnia, as he said he would. They are currently in Montenegro, where his son is newly enrolled in kindergarten.

Azra Zornić, a plaintiff in one of the five cases where the European Court of Human Rights ruled against the Bosnian government, has criticized the potential election law amendments. In 2014, the European Court of Human Rights ruled in her favor that the Dayton agreement was discriminatory. But the rulings in her case and in others like hers have yet to be implemented. In an open letter to US Secretary of State Antony Blinken, Zornić, who is also a member of Krug 99, recounted her experiences of discrimination since the war. Born and raised in Sarajevo, she is Bosnian with a Muslim last name, though she did not practice any religion as a youth in socialist Yugoslavia. She met her husband, a Serb, on the streets of Sarajevo, and they fell in love. At the time, interethnic marriage was unremarkable, if not common.

And, like all the people who were trapped in Sarajevo during the war, she depended on charity. She was living in Dobrinja, an area near the airport that was heavily shelled. An internationally funded Muslim charity, Merhamet, distributed coffee. When it was her turn to get some, the NGO turned her away—because she was married to a Serb. Merhamet is still in operation, with offices in Sarajevo and Stockholm, and still caters exclusively to a single ethnic subsection of the Bosnian population.

Zornić sees this discrimination as linked to the governing framework imposed on Bosnia, promoted by diplomats and implemented by NGOs who act as agents of the international community. “Dayton put a straitjacket on us. We are still seeking a way to get out of it. Our governmental structure is based on ethno-nationalism,” she said. “At the time, it was useful to stop the war to sign this peace accord, but nearly 30 years later it is completely dysfunctional.”

Šošić told me, “You solve segregation through desegregation, right? That’s how it was done in the States.”

He admitted somewhat darkly that he wonders whether it is even moral to keep fighting what seems like the inevitable collapse of Bosnian society, whether trying to build a functioning civil society is itself ubleha.

“Is it moral to perpetuate the illusion that a good life is possible here? Would it be better to leave things alone and let them fail fast on their own?” Šošić asked me. “Are we just wasting time?”

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