The Fordist Structure of Croatian Industry Needs to Change

On the day this column was written, there were 355,043 unemployed citizens in Croatia. Trends indicate that unemployment may continue to rise in the second half of the year.

The economic authorities are undoubtedly responsible for this situation. Economic policy over the past twenty years has not favored the creation of new jobs. The dispute over responsibility for the current state between the two main groups of elected politicians is completely meaningless: there is a shared responsibility for the loss of many jobs.

Complex Solutions Indeed, the creators of economic policy have failed to accurately diagnose the situation, which is why they could not, probably did not know how, to shape a policy that would encourage new employment. In this respect, union leaders are right: high unemployment indeed requires a change in the direction of government policy because the previous one has not stopped the dramatic decline in employment. However, unions, just like the political elite, cannot even imagine how deep the problems are and how complex the solutions are.
Today’s Croatian economic structure was created more than fifty years ago. The politicians of that time embraced Fordism (named after American industrialist Henry Ford) and the industrial paradigm of mass production that employed many low-skilled workers. Thus, hundreds of thousands of workers in large industrial companies such as Borovo, Končar, Prvomajska, or Varteks produced simple products. Many companies of Croatian Fordism disappeared during the transition. Croatian governments, however, artificially kept some of them alive with taxpayers’ money. Shipbuilding is just one example. The list of ‘Fordist’ companies that are completely uncompetitive in the globalized market is long, which, thanks to loans from state banks, renewed industrial capacities based on completely wrong business models.
Unfortunately, what Croatian workers who are now unemployed once knew how to produce, and many of whom participated in May Day union protests, no one wants to buy anymore. Ideas about how these companies could be helped by devaluing the national currency or additional supply of cheap money are complete nonsense. The latest developments in the Slovenian economy, which experienced accelerated devaluation before adopting the euro, show that monetary policy cannot help companies that have not restructured.

Restructuring Fordism Fordism fell into a deep crisis in the 1980s, and since then, companies in developed countries have been constantly restructuring in search of new products that meet the needs of modern consumers. Investments in research and development of new technologies, products, and methods of managing markets and business potentials are increasing and becoming crucial for increasing productivity. Market consolidation has occurred in most traditional industrial sectors as a result. Most of the remaining Croatian industrial companies operate in such sectors, and survival is linked to huge investments. After entering the EU, domestic industrial companies based on outdated models will be under additional pressure, so a continuation of job losses is very likely.
In our public discourse, there are often comments that Croatia’s economy needs to be reindustrialized. The example of the revitalized automotive industry in Serbia is mentioned. Italian Fiat and the local government invested one billion euros in the ‘ruins’ of the former car factory in Kragujevac, but due to a high level of automation and robotization, they only employed 2,500 workers.
The Croatian government talks about investments in public infrastructure and the energy sector of enormous value as a solution. If these investments are carried out as the government plans, they could have a slight impact on the labor market. A completely new approach to economic policy is needed that will encourage private investments in modern industrial sectors that will employ retrained and further educated workers, as we see, for example, in the Vienna region, the German state of Saxony, or the city of Rome. Local authorities there, with ample support from EU regional policy, have accelerated the transition from the era of Fordism to the era of post-Fordism and the creative economy. Croatia indeed needs a new economic policy that would create modern jobs as our European neighbors do, but we can be sure that this would not be welcomed by industrial unions or a large part of the political public burdened with ideas from the past.