1“We can no longer live like this” were the words of Mikhail Gorbachev in March 1985, which clearly indicated that the end of the then socialist social order was approaching.¹¹ For many decades, Slovenia lived within the framework of a phenomenon known to economists as the Gulliver effect. This is a phenomenon when a smaller, weaker state and its economy adapt to the standards of a larger and stronger state, which can be a neighbouring state or even an economic community. According to the economist Neven Borak, Slovenia knows two such ‘Gullivers': Austria-Hungary and later Yugoslavia.¹² Given the situation in which the socialist countries found themselves at the end of the 1980s, including Slovenia within Yugoslavia, changes were inevitable. The beginning of the transition was symbolically heralded by the fall of the Berlin Wall,¹³ and the political milestone in each state were the first democratic elections, marking the transition from a one-party political system to a democratic multi-party system and radical institutional changes.¹⁴ When we talk about the economic transition, we have in mind the transition from a closed centrally planned (in the Slovenian case planned market economy) to an open social market economy.¹⁵ The concept of transition is similarly explained by Veliki slovar tujk (The Great Dictionary of Foreign Words), where it is defined as an act, process or stage in changing one state, form of activity to another as well as a transitional state and a period of transition from the socialist to the liberal democratic system.¹⁶

2How to transition into a market economy system as quickly and successfully as possible was the question and mission of all post-socialist states. A successful market economy was also the objective of Slovenia, which was far from being easily achievable. On the one hand, the states in transition were able to follow the example of certain world markets, where market economy had already been introduced and could simply “import” it. In doing so, they mainly followed the principles of the so-called Washington Consensus. The latter was introduced in 1989 by John Williamson, an economist at the Institute of International Economy in Washington. As Noam Chomsky wrote, the neolib- eral¹⁷ Washington Consensus represented “a series of market-oriented principles developed by the United States (USA) government and international financial institutions.” The basic rules of the consensus were to liberalize trade and finance, to allow the market to set the prices, to curb inflation (macroeconomic stability), austerity measures and privatization. One of the principles was also that the state should not interfere in the economy. Chomsky believes that “the chief architects of the neoliberal Washington Consensus were the owners of the private economy, especially the huge corporations that control a great part of the international economy and have the means to control policy-making as well as the structuring of opinions and views”, and in this system, the United States played the main role. The historian Gerald Haines described the events as follows: “After the Second World War, the United States took on a role of ensuring the prosperity of the global capitalist system out of selfishness.”¹⁸ Giovanni Arrighi, one of the greatest experts in world-systems analysis and historical sociology, also discussed the role of the United States in the 20^th century and capitalism in general in his book, claiming that in the history of modernity, there are patterns of cyclical movements. After the Genoese, Dutch and British cycles, the 20^th century was marked by the American cycle. As we know, the American hegemonic centre went into crisis in 2008 as a result of the bursting of the real estate and financial bubble and caused the global economic crisis. One of Arrighi's theses is that a new hegemon could soon emerge in the field of Asian economies, especially the Chinese economy was booming at a time when virtually the entire world was feeling the effects of the global crisis. Of course, “China's growing economic weight in the global political economy does not in itself guarantee the emergence of a society with a world market centred in East Asia”.¹⁹ What will happen and in which direction capitalism will go will certainly become clear in time. Returning to the Washington Consensus, it is a fact that the latter contained principles which the transition countries tried to follow, but local conditions were also a highly important factor. Each state was in a specific situation and therefore it was simply not possible to import a market economy by merely following the example of developed countries. The reason was plain - a great deal of the knowledge that individual states needed was simply not written down anywhere. Each state thus resorted to specific measures and relied on its own experience, while institutional changes had to be adapted to local conditions in order to make the transition as successful as possible.

3The first democratic elections, which marked the formal beginning of transition, took place in Slovenia in April 1990. However, even before that - at the end of the 1980s - important events occurred, which heralded later social changes. These included the 57^th issue of Nova Revija (New Magazine), the May Declaration, the Litostroj workers' strike, the Writers' Constitution, the popular uprising in opposition to the Trial against the Four and the amendments to the Slovenian constitution in September 1989. If the first democratic elections marked the beginning of transition, this extremely demanding and complex process ended at a formal level with the accession of Slovenia to the European Union (EU). In the time of the above-mentioned frameworks of transition, the following crucial processes took place: democratization of society (right to free political expression and association), transformation of socially-owned property and gaining independence. In the economic field, the most vital processes were macroeconomic stabilization, the already mentioned transformation of socially-owned property or privatization and the restructuring of the economy. Certain changes in the economic field were brought about by the adopted legislation as early as the end of the 1980s. What we have in mind is primarily the federal Enterprises Act, which, among other things, triggered the beginning of the establishment of private companies and the privatization of existing companies. Several other laws were adopted that affected economic changes, but it should be emphasized that the actual process of tearing the Slovenian economy away from the Yugoslav one began with the appointment of the Demos government in May 1990.²⁰

4Transition is an extremely complex process, which was a logical consequence given the state of socialist economies. We could say that socialism lost the battle against itself. Namely, socialist economies were relatively inefficient compared to capitalist countries.²¹ As in other socialist states, the economic image in Slovenia deteriorated year by year, especially in the 1980s. Economic growth was declining, labour and capital productivity was low, technical progress was small, the standard of living was dropping and the gap between the socialist and capitalist economies was widening every year. In the late 1980s and early 1990s, a break with the old social order thus occurred, and many states were liberated from communism. During this time, several countries disappeared from the map and new ones were born: Estonia, Latvia, Lithuania, Belarus, Ukraine, Moldova, Slovakia, the Czech Republic and, in the area of Yugoslavia: Slovenia, Croatia, Bosnia and Herzegovina, Serbia and Montenegro and Macedonia.²²

5During the initial transition period, all Central and Eastern European states experienced major upheavals and a drop in production.²³ In the early 1990s, economists believed that democratic governments in transition states should draw up a reform agenda as soon as possible, covering all key areas simultaneously, namely macroeconomic stabilization, liberalization of foreign and internal trade, and privatization. The sudden collapse of socialism required a quick answer to the question of how to carry out the transition to a capitalist system without major social upheavals. There were no solutions or answers that would ensure success. The transition from a socialist to a capitalist economy thus began without a clear picture of the actual economic situation, without the framework of a new economic system and with no appropriate economic and social solutions to the problems that would arise during the transition period. The new, often inexperienced governments with romantic expectations were aided by international financial institutions and advisers who in fact knew very little about the states they were advising. In addition, like many local politicians, numerous foreign experts were to a great extent ideologically blinded and politically motivated as well. Their main objective was the final abolition of socialism and the existing institutions, instead of gradually creating an appropriate economic system for each state and increasing economic prosperity for the entire society not just for a part of it. A question for every transition government was whether to implement reforms with the so-called shock therapy or to opt for the gradualist approach. As will be presented in more detail below, Slovenian politics decided for the gradualist approach, i.e. the policy of gradualism and pragmatism, thus avoiding political upheavals and possible crises. As far as gradualism and pragmatism are concerned, after Slovenia's independence, they “became even more gradual and pragmatic than the gradualists themselves suggested”, the economist Jože Mencinger wrote.²⁴

6With the plebiscite, the declaration of independence, the Ten-Day War and international recognition, Slovenia gained independence in 1990-1992.²⁵ Due to the specific position of Slovenia at the beginning of transition, the latter began and took place differently than in other former socialist economies. Quite a few experts believed that the optimal strategy would be a gradual and slow implementation of changes or a gradualist approach.²⁶ The economic policy, which served the governments of Janez Drnovšek in directing Slovenia's economic development, was also called gradualism. It yielded good results, but according to some, it had run its course at the turn of the millennium. The economist Mićo Mrkaić, who was striving for a new model of economic policy, shared this opinion. He was no longer in favour of the cautious gradualness characteristic of Drnovšek's handling of the unknowns of transition, but was advocating radical cuts that would enable the Slovenian economy to grow rapidly. Among other things, he was also advocating for the state to withdraw from the economy as soon as possible.²⁷ The economist Rado Pezdir also believes that numerous consequences of the gradualist approach to transition can be observed in Slovenia. According to him, they include the constant reduction of competitiveness, poor cooperation between the economy and science, the lowest level of economic freedom in the region, extensive administrative burdens of the economy, market distortions, the dominant role of monopolistic state-owned companies and constant state interference in the market mechanism. In one of his discussions, Pezdir claims that “if economic policymakers do not abandon the gradualist economic policy, serious consequences should be expected for the future economic growth and catching up with more developed EU countries”.²⁸ Pezdir even describes Slovenia as a transition ‘loser', and everything that economic and social planners advised and did during the period of transition as wrong and based on degenerative scientific programmes and failed experiments. According to him, gradualism “was not a policy based on Slovene peculiarities, but a political regulation based on the ideology of totalitarianism”.²⁹ Pezdir also believes that the economic and political picture of Slovenia's transition would be significantly different if it were not for “ideological blindness about socialism, about corporatism, as this would mean the disintegration of all networks, a strong rule of law and the exclusion of interest groups from the political and economic market”. In his opinion, Slovenia never saw “capitalism based on the philosophy of classical liberalism”.³⁰ However, as do many other older economists, the economist Jože Mencinger disagrees with the so-called young economists. He wrote in one of his articles that a strong argument against gradualism is precisely the “ranking of countries according to the amount of ‘economic freedom' and competitiveness, in which Slovenia performs rather poorly”. According to him, the awe of these rankings and sadness about the downward movements are superfluous. It must be taken into account that rankings are carried out by the institutions³¹ whose classifications only show whether and how economic systems fit into the neoliberal ideological frameworks and whether the systems are or are not friendly to entrepreneurship, especially foreign. The rankings, according to Mencinger, show neither the general economic performance nor the performance of economies in the world market. The former is shown by economic growth, the unemployment rate, inflation and the evenness of income distribution, while the latter by the current account deficit. According to these indicators, Slovenia ranks at the very top compared to other transition economies. Mencinger believes that precisely because of gradualism, Slovenia “was achieving the highest and most even economic growth among the new EU members, without major imbalances and social upheavals”.³² He also pointed out the following: “Gradualism is the foundation of development of any normal developed country. Revolutionary system changes are rare; they occur once or twice a century and cause a great deal of ‘collateral' damage. I believe that in our country, only the then Council of the Bank of Slovenia consciously decided for gradualism in economic form in 1991; the most telling expression of this was the introduction of a managed floating exchange rate and the efforts to prevent a real appreciation of the Slovenian tolar. Slovenia was able to afford gradualism due to self-government and socially-owned property, which enabled decentralized decision-making, and the level of development it had achieved before transition. I am again actively participating in various economic conferences abroad; most economists from the East and the West are admirers of Slovenian economic policy during and after independence.”³³ In the second half of 2008, when the global economic crisis was already on the horizon, triggered by the US mortgage crisis, the economist Franjo Štiblar wrote that it was important for the population, companies and the entire Slovenian state to prepare for it as best as possible. He emphasized that the “guide” and “sui generis” of the solution must be gradualism. He therefore pointed out the characteristics that contributed to the successful development of independent Slovenia or as Štiblar wrote, “the best among the transition countries”.³⁴

7Slovenia opted for a pragmatic and gradual systemic transformation instead of shock therapy, as advised by some international institutions and individual experts. Precisely gradualness enabled both a smoother economic transition as well as moderation instead of radicalism in personnel interventions in the economy, although there was no shortage of attempts at sharp cuts. Already in designing the concept of privatization of the economy, some politicians in the right-wing parties demanded the first phase to be a general nationalization of socially-owned companies, which would also allow for a massive change of management, but the more clear thinking part of the politics opted for more productive options. Tone Krašovec, a long-time general secretary of the Management Association, wrote: “The very complexity of transition in a newly independent country ‘replaced' about a third of management in Slovenian socially-owned companies in the first years, which continued during the privatization process. Nevertheless, under the auspices of the Slovenian People's Party (Slovenska ljudska stranka), an alternative economic programme for an independent Slovenia emerged in 1994, which required a break with the ‘continuity' in the leading positions in the economy and a great managerial purge. Comparisons with a number of other transition countries show that, with a more radical systemic, institutional and personnel transformation, they suffered more damage than Slovenia.”³⁵ The economist and Minister of Economic Relations and Development in the period 1993-1995, Davorin Kračun, also wrote in his discussion in 2005 that the process of Slovenian transition had more elements of gradualism than shock therapy. As another characteristic, he pointed out the fact that Slovenia allowed relatively high inflation compared to what was acceptable in other states that were on their way to the EU. From today's point of view, according to Kračun, gradualism and allowing inflation were appropriate. Political conditions, such as the break-up of Yugoslavia and the wars, required caution and were a sufficient argument to avoid unnecessary shocks. In any case, avoiding political turmoil and rejecting foreign advice was economically beneficial. It should be noted, however, that certain cases nevertheless deviated from the gradualist characteristics and that rapid changes were unavoidable. What we have in mind is the monetary reform and import liberalization. According to Kračun, tolerance for inflation is to be understood in the context of the gradualist concept as well as other reasons. Until the end of the 1990s, some processes were valued more than inflation. These were economic growth, the reduction of unemployment and the maintenance of export competitiveness, while inflation could be kept at moderate levels with an acceptable macroeconomic balance. Only immediately before Slovenia's accession to the EU and ERM II (Exchange Rate Mechanism), the reduction of inflation had to be put in the first place of the economic policy goals. Such an attitude towards inflation was also possible due to the fact that Slovenia had been experiencing economic growth since the transition from the recession in 1993.³⁶ Slovenia opposed the transition formula of the World Bank and the International Monetary Fund. Instead of a big bang of rapid change, it advocated gradual reforms and contrary to fast opening-up of the economy to foreign capital, Slovenia preferred to focus on its own development resources. One of the more important factors was political stability, which other transition states did not have. In Slovenia, we witnessed a ten-year dominance of the leading party and a charismatic Prime Minister. “In Slovenia, transition was carried out by the old political and business elites”, the economist Bogomir Kovač claims.³⁷ The historian Božo Repe also believes that the transition from a one-party to a multi-party system in Slovenia was carried out in a sufficiently cultural and correct manner and that it deserves a positive historical assessment.³⁸ It is impossible to say that all decisions of the state were correct and optimal, but this is also understandable. Processes such as transition do not frequently occur and there are no instructions on how to ensure flawless and optimal results. The fact that Slovenia was among the first to go through a period of transformational depression compared to other transition economies is a testament to itself. As will be apparent in continuation, Slovenian transition was not merely a story of success. Today, Slovenia's society is a society with certain weaknesses and issues, which is nothing special compared to other societies in the world. It is true for Slovenia, as well as for several other countries from the former socialist bloc, that there were no clear ideas on how to ensure the transition to capitalism without major social upheavals. There were also no plans for its future economic system, nor precise predictions for solving the problems in individual areas. “There was a great deal of improvisation, but also a lot of ingenuity. Fortunately, we had considerable knowledge of local experts who did not fall prey to some very liberal, in a way fundamentalist advice by foreign experts and various international institutions. On the other hand, there was a lot of romantic expectations and illusions, especially at the top of some new parties on the political scene, such as about the automatic miracle-making of capitalist institutions or the liberating financial assistance by Slovenian emigrants. There was no lack of ideological blindness that everything from the socialist times was bad, including the ‘red directors' in the Slovenian economy, who should be replaced one by one, while there were also numerous sober-minded politicians who believed that everyone should contribute to Slovenia's independence and its least painful transition with the knowledge and experience they have” Krašovec believes. In his opinion, Slovenia had capable people in the majority of important areas, competent to judge and ‘dose' the transitional moves according to real possibilities, with the necessary gradualness instead of destructive shock therapy. Many companies were also run by skilled businessmen, tried in agile adaptation to numerous reform changes in the socialist state, who knew how to take appropriate action in the new difficult conditions after Slovenia's independence at the beginning of the transition crisis.³⁹ Slovenian transition was also successful in the eyes of numerous foreign experts. Richard J. Walters, chosen by the European Bank for Reconstruction and Development (EBRD) as a director of the Slovenian Special Restructuring Program (SSRP), said the following in the spring of 1996 about Slovenia and the Slovenian economy: “I can say that Slovenia is very poorly recognizable in the developed western part of the world. This is most likely due to its small size, as people in the West only talk about Poland, Hungary or the Czech Republic, while Slovenia is rarely mentioned. On the other hand, it is, of course, very interesting, especially if we look at its economic indicators and compare them with figures in other Central and Eastern European countries. All important economic indicators speak in favour of considerable economic power and finally, this is evidenced by the opportunities that Slovenians have to make profit; the standard is also much higher than in some other Central and Eastern European countries, even in certain countries of the European Union.”⁴⁰

8According to the opinion of several economists, road construction, among other things, generated economic growth during and after transition. Let us recall the period after 2005, when Slovenia recorded high economic growth mainly due to the rapid growth of building industry on the one hand and mortgage loans as its consequence on the other. The economist Franček Drenovec has an interesting perspective on the transition period. The main thesis of his discussion of 2005 is that economic development after 1991 is only a continuation and completion of the old cycle and in his opinion “after 1991, nothing special has so far occurred in the economy in the framework of transition”. “The state of the economy is downright idyllic compared to the catastrophic state of affairs in the areas covered by various state branches and activities - the legal system, the police, higher education, healthcare, etc. - which are for the most part directly under the control of politicians and precisely because they are under the control of politicians”, Drenovec wrote. According to him, Slovenia differs from other transition countries in its good state of the economy and its own national business sector, a significant part of which is closely integrated in the modern technological and business structures. The weakness of Slovenia and other transition countries or the thing that is missing is “a mature and selfconfident political elite, firmly embedded in the life of local society, capable of a good assessment of its problems and potentials and possessing a high level of necessary capacity for action”.⁴¹

9It is obvious that opinions regarding the gradualist approach and the Slovenian transition differ. One of the key bearers of Slovenia's process of gaining independence, France Bučar, emphasized in his book Slovenci in prihodnost (Slovenians and the Future) that the problem is that “we need the state and that in today's predictable conditions there can be no democracy nor free citizens without the state, much less a healthy economy”. This is “the exact opposite of what neoliberalism preaches”, Bučar added.⁴² His thesis was also confirmed by the financial and economic crisis that came to the fore in 2008 and affected the entire world. The latter showed that everything cannot be left to the functioning of the market and that sometimes state intervention is required. Even in the cradle of neoliberalism, the United States, in late 2008, the former President George W. Bush approved financial aid to the automotive industry against the will of Congress. At the end of his term, in late 2004, the then Prime Minister Anton Rop said: “The transition in Slovenia is concluded. I believe that all chances exist that the next government will be successful, efficient and that it will take steps forward”. In Rop's opinion, it was no longer “so extremely important” who would lead the government.⁴³ After 2004 and the positive growth, the economic and financial turmoil was first caused by the global crisis and most recently by Covid-19. In the latter case, it is clear how important it is to have quality public healthcare, public care and services in general.