12/13/2012 05:46 pm ET Updated Feb 12, 2013

Reconnecting the Balkans

When I was traveling in East-Central Europe in 1990, I had only a handful of contacts outside of Poland, where I had lived the year before. I usually arrived in some capital city and started calling the few numbers I had. Then I relied on those people to connect me to their friends, their colleagues, and sometimes their political adversaries as well.

So it was that I was exiting a café in Ljubljana, the charming capital of Slovenia, after a meeting with political scientist Mitja Zagar. We happened on a group of party representatives drinking coffee on the terrace. Mitja made introductions for me and I quickly arranged interviews with two of the people there. One of them, Vojko Volk, was serving at the time as a consultant for the Socialist Party. He had previously worked on human rights issues.

When I prepared to return to Slovenia 22 years later, I discovered that Vojko Volk had become a diplomat and was now posted in Zagreb as the Slovenian ambassador. One of the great pleasures of this current project is to see where people have gone and what they have done in the intervening years. Because many of the people that I met in 1990 spoke English quite well and were engaged politically, it is no surprise that many of them became diplomats. On this trip alone, in addition to Vojko Volk, I spoke with the Bulgarian ambassador in Slovenia and the former Croatian ambassador to Egypt, both of whom I interviewed in 1990 before their leap into diplomacy.

In this interview, Vojko Volk talked about the challenges that Slovenia currently faces, particularly in the economic realm. On this issue in particular, he has had some second thoughts over the years.

"I was suspicious that the so-called Slovenian model of transition would not in the end be the best," Volk told me. "Our model was not to sell the silver, not to sell the companies that were basically owned by the state. All the other countries did the opposite: Hungarians, Czechs, they sold their companies, they sold everything. We didn't do that. And it went well for us for 15 years. It was swell even after we entered European Union. From 2004 to 2008, we had an average growth of more than 4 percent every year, and sometimes more than 5 percent. We achieved, can you imagine, 92 percent of the GDP average inside the European Union! It was the record for ex-communist states. Then it turned out, in the last four years after the Lehman Brothers collapse, that state ownership is not good when it comes to banks."

As in 1990, our conversation returned in the end to the potential of regional cooperation. Twenty-two years ago, we discussed the viability of an Adriatic Alliance. This was before, of course, the collapse of Yugoslavia and the ensuing wars. Now, Volk champions a slightly different proposal: Reconnecting the Balkans.

"There is no success in the Balkans without reconnecting, reconnecting everything except politics," he concludes. "We should reconnect everything in former Yugoslavia: energy, roads, railways, sports, culture, economy, market."

The interview

One of the issues we focused on 22 years ago was this gap between rich and poor that had emerged in Slovenia. Do you think that for the most part the economic benefits achieved during the years of economic growth were distributed relatively equally throughout society?

In the first years, yes. And in the time of growth, the social welfare state was treated fairly enough: the health care system, the school system. All the social reimbursements were really high, so it's difficult to complain about that. Of course, in the time of crisis, huge differences began to appear, because the welfare state in Slovenia was completely dependent on the economy. We don't have access to the transition funds, so the welfare state depends on the budget. If the budget goes down, so does social welfare. It's suffering now, and it might suffer even more.

There's a book recently published in the United States about the Slovenian model. It didn't really talk much about the issue of privatizing the best...

The issue of not privatizing.

Yes. It talked more about the pace of economic reform and it argued that the Slovenian model was quite different from what happened in Poland, for instance. It held it up Slovenia as a useful model, not necessarily for this region any longer but perhaps for other countries in the world thinking about economic reform.

And I agree. Because in capitalism there are just two models. There's the model where a national economy is highly competitive because it has low taxes and a poor welfare state. And there's the model with extremely high taxes and an extremely strong welfare state, which of course is the Scandinavian model.

I recently wrote an article about the Scandinavian model of the welfare state. I wrote that there is no economist in the world who can explain why, among the top ten competitive economies in the world, you can find all five Scandinavian states and three Asian states and Switzerland and Malaysia and Singapore. These are five states with extremely high taxes and five states with extremely low taxes. There are some mysteries in economics, too.

We are average. In Slovenia, our tax rate is 40 percent. When I get my wage, 40 percent goes to the state and 60 percent goes for me.

To read the rest of the interview, click here.