Towards the October 25 elections and beyond

Branko Milanović is an economist specialised in development and inequality. His latest book, The Great Global Transformation: National Market Liberalism in a Multipolar World , was published November 2025.

Cross-posed from Branko Milanović’s blog Global Inequality and More 3.0

Axiom 1. So long as Europe is at the state of undeclared or declared war with Russia, Serbia will be seen as a Russian satellite or a potential Trojan horse .

Discussion. This perception, held by the European elites (although not evenly: more openly so in Northern Europe, the Netherlands, Germany and Poland, and especially in England), is based largely on an accurate reading of history. It exaggerates somewhat the political closeness between the two nations since there were also the times of disagreement (the San Stefano peace agreement, the last years of the 19 th century with Serbia’s pro-Austrian policy, Stalin’s cut off of relations in 194 , but these were all episodes limited in time. More importantly, unlike the Western powers that attacked Serbia three times in the past 110 years (and occupied Belgrade, with real foreign army and real foreign government, punctuated by public hangings, for almost 10 percent of the past century), there was never a war between Serbia and Russia, nor Russian occupation.

Conclusion. No amount of concessions that Serbia might make to please Europe in regard to its Russia policy will affect Axiom 1. Consequently, there is no point in changing the Russia policy because it would not be to Serbia’s economic advantage and will not provide any benefit in terms of perception in Europe.

Axion 2. European Union will never accept Serbia as a member.

Discussion. That follows already from Axiom 1. Ratification of such putative membership will certainly fail in the Netherlands, Sweden, Finland, France, Germany, all Baltic counties, Poland and Croatia. Even one country is sufficient to derail the membership. In the case of Serbia, there are at least 10 to 12 who would do that. In addition, membership requires recognition of Kosovo’s independence. By the arguments of self-determination Kosovo has the right to independence: 95% of its population (if not more) want to be independent. The problem is that about the same percentage of the population in Serbia is against accepting Kosovo’s independence, it is explicitly ruled out by the Constitution (thus requiring a change in the Constitution for which a referendum is needed), and any government that would recognize Kosovo’s independence would be overthrown by force.

Conclusion. Serbia cannot recognize Kosovo’s independence.

Axiom 3. Serbia is deeply entangled with Europe.

Discussion. About two-thirds of Serbia’s trade is with the European Union; about one-half of direct foreign investments come from the European Union; about 1 million Serbian citizens live in the EU; hundreds of thousands travel annually for business, tourism, or to visit relatives. Family links with Greece, Hungary, Germany, France, Italy, the Czech republic, and obviously so with Croatia and Slovenia, are strong. They go back a century or two and in some cases more. Culturally, Serbia is entirely integrated into Europe and all intellectual and cultural advances come from there. In addition, the candidate status of the country provides some (modest) funds, estimated to about 0.3% of Serbia’s GDP. More importantly, there are intangibles that the EU provides: accepting its ecological, industrial, cultural, and judicial standards is absolutely crucial for a modern country. Serbia has a lot to learn in these four areas, and any collaboration with the EU in these (and possibly a couple of other areas), is necessary. But the EU-Serbia current relations resemble a labyrinth where no-one knows where they are, and nobody knows where is the exit. It is time to get out of the labyrinth.

Implication. Serbia must aim to maintain good economic and cultural relations with Europe, and even to deepen them. But it should do so in a context where membership is explicitly no longer the objective: it is ruled out. This needs to be clearly stated and agreed: (i) an official agreement between the two sides that EU membership is no longer sought, and (ii) that cooperation in the areas mentioned before should continue. EU has sufficient number of flexible arrangements (consider the latest one, mulled over, with Canada) that such a special arrangement can also be “invented”.

Conclusion. The association talks with the European Union should be ended.

Axiom 4. America has no interest in South-Eastern Europe.

Discussion. The United States is in process of major realignment of its foreign policy. This should not be confused with Trump’s presidency, because such a realignment started already under Obama and his pivot to Asia. The Balkans are geo-politically and geo-economically of almost zero importance to the United States. This however is not a novelty because the US had similar lack of interest for the region until 1945. During the Cold War, however, the situation changed because the US wanted to prevent communist victory in the civil war in Greece, to buttress Yugoslavia as a bulwark against the Soviet-type Communism, and deployed atomic weapons in Turkey. But after the end of the Cold War and with the rise of China, the only country in the area that is of relevance to the US is Turkey.

Implication. Good relations with the United States are desirable and useful but they do not mean much. Serbia’s geo-political situation is more akin to the one from the 19 th century where the country was at the crossroad of influence of European powers. The similarity with the 19 th century, has, however, to be modified in light of much greater integration of the world and the rise of Asia, as the axioms 6 and 7 argue.

Axiom 5. There will be no new industrialization in Setbia,

Discussion. The worldwide industrial activity has moved to the countries with young and hard-working labor force. This will happen more and more. They will produce all the manufactured goods the world needs. Currently, China produces 30 percent of the world manufacturing output. In the future, most may be produced in Africa. What is sure is that it will not be produced in the old European countries with declining populations. Similarly. when it comes to new technologies Serbia has no obvious advantage either. According to the latest Pisa scores in mathematics, Serbia with 1,327 points is doing well but is significantly below South European countries like Spain (1,432), Nordics (Estonia 1,547, Poland 1,477) and Asia (Japan, 1,599; South Korea, 1,570)

Implication. The idea that Serbia can use domestic private investments and domestic labor to produce internationally competitive manufactured goods or heavy-content information technology is a phantasy. Serbia shares with poor countries the lack of know-how but on top of that it has an old population that is ill-equipped to participate in the new technological revolution: the average age of Serbia’s population is 45; the average age in Nigeria is 18. Who is more likely to have the technological savviness?

Conclusion. Serbia’ s growth will, like in its pre-Communist past, depend crucially on its ability to attract foreign investments.

Axiom 6. The world is big and changing.

Discussion. The European Union, however important for small Bakan nations, is a declining economic and intellectual power. If we take the current 27 members and add the United Kingdom, the share of these 28 counties in the global GDP was 27 percent in 1980 and is 15 percent today. With the continued economic and political rise of Asia, and in particular China, India, Indonesia and Vietnam, Europe’s share will further diminish. Intellectually too, while Europe remains a very important part of the world, it lags in practically all new technologies, including artificial intelligence, and the cultural production from the rest of the world (the United States, Latin America, South Korea, Turkey, and Japan) is increasingly popular, thus sidelining European.

Implication. Small countries have to find their particular niche in a globalized world and to use the advantages of their position. Small countries in Europe have done this through the ages. The current wealth of Luxembourg and Lichtenstein depends a lot on providing tax havens and playing the games that are on the border, or even on the other side, of legitimacy and legality. The same is true—for centuries—for Switzerland. In the former Yugoslavia, Montenegro has successfully played a similar role.

Serbia thus needs to look further afield. In doing so, it must focus on rich Arab countries that are open to all kinds of deals, and on China that is keen to have at least several footholds in Europe. This means that investments from these countries, exchange of business contacts, and in the case of China, many more cultural and people-to-people contacts, are needed. India, not the least because of the long-standing ties of friendship going back to the non-aligned movement, is important both in the investment area (particularly in new technologies) and in student training. India has a further advantage that, at the higher educational level, it is almost entirely English-speaking and English is clearly the language of global communication whose knowledge is indispensable.

Conclusion. Of all the former Yugoslav republics, only Serbia can continue with a version of Tito’s non-alignment. This is not only the right policy—but it is the only feasible policy (short of policies that lead to disasters).

Axiom 7. China is becoming a great power.

Discussion. The fact that China is economically the big power (the largest economy in the world in purchasing power terms and the second largest if GDP is measured at market exchange rates) is incontestable. The speed of its technological advance took everybody –perhaps even the Chinese—by surprise. Consequently, small countries have to pay special attention to China. Further, China has another advantage in the eyes of small countries: indifference to the type of their political system. Thus, small countries do not have to fear that China will try to politically determine the type of government in places where its companies do business (other than in purely economic sense when needed to extract the best possible deal). This is in sharp contrast with the European Union that largely believes that its world-historic role is to interfere in domestic affairs of other countries, as well in contrast to the United States (that has interfered in hundreds of cases, most recently against Venezuela, Palestine, and Iran) and in contrast to the Soviet Uhion and Russia (with the latter currently waging a war against Ukraine).

Implication. Focusing on cooperation with China must be a part of a sensible foreign policy.

Conclusion. The cooperation may extend further than economics.

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