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Albanian Workers Rebel Over Financial Fraud; Capitalist ‘market reforms’ ruin living standards

By Argiris Malapanis, Militant, Vol.61 no.6, 10 February 1997

In the biggest challenge yet to the pro-capitalist regime of President Sali Berisha, tens of thousands of workers and others have been protesting, setting roadblocks, and clashing with the police in Albania since January 15. The demonstrations spread nationwide, swelled, and became more explosive the last weekend of January, as working people took control of some cities out of the hands of the authorities.

Protesters are demanding their money back from failed "pyramid schemes." Managers of these fraudulent investment funds lured hundreds of thousands to deposit their savings by promising to double people's money in two to three months. Operators of some of these schemes, which were promoted on state television, began declaring bankruptcy in early January, igniting the social explosion. Workers who have taken to the streets are demanding the government cover their losses.

"I invested $30,000 I saved working in Germany and I have lost it all," said Agem Mucaj, an unemployed construction worker, standing at a barricade in the town of Rrogozhine. "Why did the government allow these schemes to go on collecting money?"

About 500,000 Albanians out of a population of 3.2 million have put money in these funds. In addition to immigrant workers depositing their savings, others sold land, homes, or livestock to invest in the so-called pyramids, which offered interest rates of 50 to 300 percent.

In a way, these get-rich-quick scams are a rather crude reminder of the current financial bubble building up in the stock markets on Wall Street: they are based on the illusion that new investments will keep pouring in endlessly, that money will generate more money without the medium of production. While the financing of the funds is secretive, the basic premise is that contributors are paid handsomely from the deposits of later investors. When new deposits slow down, they quickly become insolvent.

Albanians put their money in these schemes en masse, searching for income higher than the average wages of $60-80 per month, in a largely agricultural and underdeveloped country - the poorest in Europe. Tens of thousands are now incensed that the government, which urged them to invest, appears to be shielding some of these would-be capitalists.

"Albania entered the market economy no more than four years ago, coming from a strong centralized economy," declared Tritan Shehu, foreign minister and chairman of the ruling Democratic Party. "I guess it is normal for Albania to have problems that are normal for Western economies. The government has never undertaken to manage its citizens' portfolios."

Anti-government revolt spreads

About 35,000 people gathered in Skanderberg Square at the center of Tirana, the country's capital January 26, in the largest protest to date. "The government are thieves, we want our money back," many shouted. Riot police attacked the rally but had to retreat initially, after being pelted with rocks. The cops later returned in force with water cannons and assault dogs, dispersing the crowd. Witnesses said the police badly beat protesters who attempted to reach parliament to present their demands, including a call for Berisha's resignation.

The revolt spread throughout this workers state the same day. In some cities police stood aside as protesters blocked roads, severing transport links between the north and the south and with neighboring Greece and Yugoslavia. In Rrogozhine, which was paralyzed by a mile of makeshift blockades, one police officer said orders had been received from the interior ministry not to break up demonstrations by force.

The government lost control of some large cities, like Lushnje in central Albania, home of the founders of two failed pyramid schemes. The courthouse and the offices of the Bureau of Investigation were reportedly burned there January 24. The headquarters of the Democratic Party were also ransacked.

On January 25, Tritan Shehu, who is also deputy prime minister, was chased by angry demonstrators in Lushnje. Shehu had to lock himself in the changing rooms of the town soccer stadium with his bodyguards and 10 riot policemen. A government helicopter sent to rescue him was left hovering over the soccer field as protesters prevented it from landing.

In Patos, demonstrators attacked the headquarters of Albpetrol, the state-owned oil company. In the southern port of Vlora, base of the failed Gjalica scheme, the municipal building and police station was set ablaze, while four policemen were hurt in clashes January 26. In Korca, near the border with Greece, the headquarters of the governing party was also torched.

As protests raged, the Albanian parliament gave the president special powers on January 26 to deploy the army to guard roads and government buildings.

Regime has trouble defusing protests

The protests spread rapidly despite hasty actions by the regime to defuse them. On January 23, the Albanian parliament passed a law banning "pyramid schemes." The legislation includes minimum sentences of 20 years for starting up such enterprises and confiscation of assets. The government also froze 25.5 billion leks ($232 million) deposited by owners of the Xhaferrie and Populli funds in state-owned banks and arrested 60 of their officials, including top managers. But many protesters are demanding these swindlers be released so they can pay out at least some of the debts.

On January 28 Prime Minister Aleksander Meksi reiterated earlier official pledges that the government would begin paying back investors on February 5. Meksi stated, however, that authorities can only guarantee up to 70 percent of the principal. And he indicated it may take months before the money is returned, heightening fears that deposits will be quickly eaten up by inflation, which jumped to 18 percent in December, up from 6 percent a year earlier.

Even to meet these promises, the government will probably have to print more money, accelerating inflationary trends. State-owned banks are already burdened by many bad debts. Nine leading companies and foundations taking deposits at exorbitant interest rates have their funds in state banks. And some of the few privately owned companies with productive investments in agriculture and industry, such as VEFA Holdings and the Kamberi group, have been financing their activities through pyramid schemes. Officials of some of these companies were prominent supporters and financial contributors to the Democratic Party in last year's controversial elections. While some of these foundations have now collapsed, the government has declared continued backing for companies like VEFA, which has re-applied for a banking license that was denied earlier by the central bank.

To avert financial collapse and weather the storm, the Berisha administration, which has strong backing from Washington, has requested new loans from the International Monetary Fund. An IMF delegation is expected in Tirana soon. An article in the January 29 Financial Times of London quoted an anonymous official of an imperialist financial institution saying, "It is important to - find ways of minimizing the economic and political costs."

The government also launched a propaganda offensive. After threatening a counter-demonstration in front of the opposition Socialist Party (SP) headquarters, Berisha's Democratic Party held a pro-government rally in central Tirana on January 28. Only 3,000 people showed up, a much smaller crowd than previous pro-Berisha mobilizations.

"The future of Albania is not based on pyramid schemes, which will not exist anymore," Berisha told the rally in his first public appearance since the crisis began. "But there will be in Albania a great freedom of initiative."

The president and his entourage accused SP leaders of fomenting the unrest. "Stop the red terror!" their supporters shouted.

"These were terrorist acts that tried to distort the image of Albania, and to block support from Europe and the world," stated foreign minister Shehu. "But those who try to set fires in Albania will themselves be consumed by fire."

The night before the pro-government rally, SP leader Ndrek Legisi was badly beaten in the head. Prime Minister Mkesi told reporters he did not know who carried out the attack, but added that Legisi has been among the most active anti-Democratic Party politicians. The Socialist Party, which has backed the protests, is calling on Berisha to resign.

Roots of economic crisis

The SP is the former Communist Party, or Albanian Workers Party, which ruled the country until the opening of the 1990s. The former Stalinist regime, headed by Enver Hoxha until his death in 1985, shattered under pressure of mass mobilizations for democratic rights and better economic and social conditions. These included large student protests and strikes by half of the country's 700,000 wage workers. The change in the ruling guard was part of similar developments in other workers states in the region.

Between 1989 and 1991, Stalinist regimes and governing parties crumbled across Eastern Europe and the Soviet Union, often in the face of popular protests. These regimes had been weakened by years of economic and political crisis. The Stalinist bureaucratic and anti-working-class methods of planning and management had proved incapable of raising labor productivity. The resulting crisis was worsened by the accelerating economic stagnation of capitalism since the mid-1970s.

The Democratic Party was formed and recognized as a legal opposition group in December 1990, and held its first rally at the University of Tirana. It was founded by pro- capitalist professors, intellectuals, disgruntled government officials, students, and others.

The SP and Democratic Party represent competing interests among the petty-bourgeois ruling caste and aspiring bourgeois layers in Albania. Both parties joined in a brief coalition cabinet in 1991. This bureaucratic caste, in power since the degeneration of the Albanian revolution in the late 1940s, is interested only in safeguarding its own privileges, diverting workers from acting in their own class interests, and continuing the fruitless attempt - at different tempos - to be welcomed as equal partners in the world capitalist system.

After Hoxha's death his successor, Ramiz Alia, began opening Albania's economy to capitalist investment. Alia's regime won the first bourgeois-type parliamentary ballot in March 1991. The Albanian Workers Party was subsequently renamed the Socialist Party, as hundreds of thousands of workers struck demanding wage raises and improved working conditions. But after dozens were killed in anti-government food riots in December 1991, the Stalinist regime was forced to call new elections, which swept the Democratic Party to power in March 1992.

While the SP adopted a social democratic posture, the Democratic Party favored a more rapid integration into the world capitalist market and espoused right-wing views. Ever since it came to power, Berisha's group has been trying to purge its Socialist Party rivals from the state bureaucracy. SP leader Fatos Nano, who was Albania's premier in 1991, is serving a 12-year sentence on charges of embezzling Italian aid funds.

Washington backs Berisha regime

Washington has backed the Berisha administration with economic and military aid since 1992. In exchange, the Albanian government has provided a military base for U.S. reconnaissance activities over neighboring Yugoslavia. It has also discouraged Albanians in the Kosovo region of Serbia from pressing demands for autonomy.

All opposition groups, including the SP and the Human Rights Union, which is backed mainly by the ethnic Greek minority in southern Albania, alleged widespread fraud and organized protests demanding new elections after the last parliamentary ballot in May 1996. Berisha responded with a brutal police crackdown, beating and jailing many opposition leaders. Washington and other imperialist powers refrained from raising even mild criticism. The Berisha administration managed to hold onto power, claiming a landslide victory.

During its five years in office, the Berisha regime has implemented austerity measures such as cutting social services, sold off some state-owned companies to foreign investors, and has relied on loans from the IMF to finance imports. Albania has been touted by the big-business media as one of the success stories of "market reform" in Eastern Europe. But Berisha's pro-capitalist policies have plunged the Albanian workers state, already backward economically, into a deeper social crisis by making it more vulnerable to the ups and downs of the business cycle in a period of world depression.

Today, some 300,000 people are unemployed. The official jobless rate is 10 percent. Despite an initial upswing in the rate of growth of the gross domestic product (GDP) in the mid-1990s, and the curbing of inflation from 237 percent in 1992 to 6 percent in 1995, working people face economic ruin. Ninety percent of industry has been shut down and most in the country's majority rural population live barely above the level of poverty. About 500,000 retirees struggle with average pensions of $30 per month. Hundreds of thousands of workers and peasants have immigrated to Greece, Italy, and Germany in search of better jobs. Their remittances to relatives back home account for nearly half the country's GDP.

The recent collapse of the pyramid schemes - which was proceeded by similar phenomena throughout Eastern Europe and the former USSR, such as the failure of the $1 billion MMM investment fund in Russia in 1994 - may unleash new waves of immigration.

Farm worker Xhyser Lamani is one such example. He worked for six years as an undocumented immigrant on farms in the Greek island of Crete. During that time he saved $24,000, which he invested in three of the failed schemes. "I wanted to build a house in Tirana and make a proper life for my family, but now there's nothing else to do but go back to Greece," he told the Financial Times. "This is worse than a disaster."

The challenges facing working people in Albania today can best be appreciated, however, by taking a look at the road workers and peasants have traveled in the last half century - primarily at the revolution that abolished capitalist social relations in this Balkan country in the mid-1940s and its subsequent degeneration.

Revolution by workers and peasants

Albania won formal independence in 1912, after 450 years of feudal rule under the Ottoman empire. It became a monarchy in 1928 under King Ahmed Zogu. Prior to World War II, the country was essentially a semicolony of Italy.

The vast majority of the population were peasants. Illiteracy was rampant. Apart from some handicraft in the towns, the industrial work force was tiny. In 1938, only 300 light industrial plants existed in the entire country, and wage workers numbered 15,000. Many of these workers were employed mining bitumen, chrome, and copper, as well as in oil extraction, owned primarily by Italian capitalists. Rome was the dominant capitalist power, absorbing two-thirds of Albania's exports and providing half of its imports. Italian imperialist domination began in 1925, with the signing of an agreement for the exploitation of Albania's natural resources. Rome relegated backward Albania to a mere exporter of raw materials, assuring its underdevelopment. In addition, the Italian government and Italian firms provided loans for imports and capital investments, perpetuating the country's debt slavery.

In April 1939, at the outbreak of World War II, the fascist government of Benito Mussolini, sent 100,000 troops and 400 aircraft to occupy Albania. King Zogu fled to neighboring Greece, and Mussolini offered the Albanian crown to the Italian monarch, Victor Emanuel III. The German army under Adolph Hitler took over from the Italian forces in 1941, after the Italian army suffered humiliating defeats by troops of the capitalist regime in Greece.

Resistance to the occupation developed among workers and peasants in a similar fashion as in Yugoslavia. A guerrilla movement flourished, which was heavily influenced by the Yugoslav partisans. The armed struggle against the German occupation led to the victory of the popular forces in 1944, when Albanian partisan brigades defeated 20,000 German troops after a 19-day battle and liberated the capital.

The revolutionary resistance movement was led by the Albanian Communist Party, formed in 1941 out of three groups - the Seutari, Koritza, and the Youth group -which claimed adherence to communism but were in constant conflict with one another. Many of its leaders had been trained in Moscow's school of Stalinism already, and its Central Committee was riven by factionalism through the 1940s. Delegates from the Yugoslav Communist Party played an active role in the fusion.

Following the defeat of the occupying forces, the new government nationalized the vast bulk of productive property. All the German- and Italian-owned enterprises were confiscated, along with those belonging to local capitalists that collaborated with the Nazis. A radical land reform in 1945-46 redistributed nearly half the arable land to landless peasants. Rationing provided a more equitable distribution of initially scarce food resources. Foreign trade came under state hands and planning was instituted.

The resulting workers state began developing close links with its Yugoslav neighbor, including common price and currency systems and joint economic planning. Joint Yugoslav-Albanian corporations were organized in transportation, mining, foreign trade and banking. Albania was one of the strongest candidates for the Balkan federation, proposed by the Yugoslav CP as an alternative to the Warsaw Pact at the time.

Rapid degeneration of workers state

In 1948, a fierce struggle that had been developing between Moscow and Belgrade broke out into the open. Moscow criticized policies of the Yugoslav government of Josip Broz Tito and dredged up conflicts from the Yugoslav civil war and before. The Yugoslav leadership condemned Moscow's plunder of the so-called buffer zone of Eastern Europe. That year, the regime of Joseph Stalin in the USSR imposed an economic blockade on Yugoslavia, leading to the formal break of the Yugoslav CP from Moscow.

Stalin worked to foment divisions within the Albanian CP. During the Soviet break with Belgrade, the faction headed by one of the Albanian CP's central leaders, Enver Hoxha, promoted by Moscow, gained control through bloody purges. The fight centered on matters related to the national question: whether Kosovo would be returned to Albania as had been the formal position of the Yugoslav CP, and Albania's status in the proposed Balkan federation. The party's organizational secretary, Koci Xoxe, who was supported by the Yugoslav CP, was executed by Hoxha's group in 1949 at the urging of Moscow. Many others followed. By 1953 only three members of the original Albanian CP Central Committee were still members. Hoxha's regime cut off ties with Yugoslavia and allied itself totally with Moscow.

During this period, a bureaucratic caste headed by Enver Hoxha crystallized, leading to the rapid degeneration of the initial gains of the revolution and closing of any democratic space for the working class. Hoxha maintained the alliance with Moscow until Stalin's death in 1955. Fearing a working-class uprising like the one that developed in the Hungarian workers state in 1956 - after new Soviet premier Nikita Kruschev acknowledged some of Stalin's crimes while crushing the Hungarian rebellion with Soviet troops - Hoxha broke away from Moscow and realigned his government with the Stalinist regime of Mao Zedong in China. In the subsequent decades, Hoxha ruled with an iron grip, keeping Albanian workers and peasants isolated from the rest of the working class in the region and from world politics.

Isolation of working class is broken

This isolation was broken at the dawn of the 1990s, as popular protests led to the shattering of the Stalinist murder machine that Hoxha meticulously put together. Any political continuity with the revolutionary traditions of the workers and peasants in the 1940s had been decisively broken, which explains why a pro-capitalist opposition initially gained such a wide hearing.

At the same time, Albanian workers and peasants became part of the class struggle in the region, through the massive immigration and travel back and forth that was now permitted. The current mobilizations against the would-be capitalists of the Democratic Party, as well as the uprising against the Stalinist regime of Alia in 1991, show that workers and peasants in Albania can eventually find their way back to building a leadership worthy of their accomplishments in the 1940s.

That's what worries capitalist investors today, as the Berisha regime is shaken by protests. As an article in the January 29 Financial Times put it, "There is no easy solution to this. There is going to be a lot of disruption in Albania, however the problem is approached."

In related developments in the neighboring workers states, the Stalinist regime of Slobodan Milosevic has refused to make any more concessions to 10 weeks of daily protests by tens of thousands, demanding reinstatement of municipal election results Belgrade annulled earlier. At the end of January, a Yugoslav court overturned a ruling by the state electoral commission conceding victory to the Zajedno opposition coalition in Belgrade. Other courts have also ruled that the governing Socialist Party won in eight of the 14 cities where Zajedno claims it won majorities in the November 17 ballot.

In Bulgaria, the ruling Socialist Party is pressing ahead to form a new government. The SP parliamentary majority is not heeding calls by the opposition Union of Democratic Forces for new elections, despite weeks of strikes and demonstrations fueled by runaway inflation and declining wages.

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