TAKING TO THE STREETS TO UNDERSTAND CROATIA’S ECONOMY

At parties, when people hear that I’m an American with an economic and business background, I’m often asked what I think of Croatia and the economy here.

Instead, I talk about traffic.

In the two years or so since I moved to Zagreb with my Croat wife and two sons, I’ve spent a lot of time driving around the city. In many ways, I’ve gotten to know Croats by the way they drive. It amazes me and perplexes me.

First, there’s the Zagreb Parking Place. At any time, day or night, a driver can simply switch on the car’s emergency flashers and create a parking place in the middle of a road. It seems, from observation, that as long as the car’s not on tram tracks, the parking space is good. I’ve never seen a spider going after one of these cars, even if it’s creating a jam by blocking a major thoroughfare during rush hour. An amazing invention, the Zagreb Parking Place, and if it could be packaged, marketed to other countries and sold, tourism would have a rival as the country’s chief source of foreign currency.

Next, there’s the Croat Cue Jump. Often, in turning lanes, traffic is backed up for one or two cycles of the traffic light, especially during morning or evening rush hour. But there are clever drivers out there who realize these cues don’t apply to them. Instead, they stay in the through lane until they get to the traffic light, then cut in front of the cue, usually blocking a zebra crossing or even edging into the intersection. It’s a clever maneuver and shows which drivers are smarter than the dozen or more waiting in the cue. And, as bonus, those drivers get wherever they are going a few minutes sooner.

I’ve travelled a bit and driven in a dozen or more countries. And while bad drivers are everywhere, these two maneuvers in particular seem more prevalent in Croatia. (One random observation is that the less developed a country is, the more likely it is that motorcyclists will assume road rules don’t apply to them.) But it’s not the bad drivers that exemplify Croatia’s challenges to me. It’s everyone else.

Other than myself, I’ve never noticed anyone getting frustrated or angry with this behavior. Dozens and dozens of people who are also eager to get on with their lives just watch as others cut in front of the cue or block lanes. There is not a toot to be heard or a rude gesture to be seen. Lawbreakers inconveniencing and even endangering those abiding the law are greeted with indifference and resignation, and perhaps a bit of chagrin: Look at those clever people beating the system and getting ahead while I sit here waiting for the light to change.

Every day on the streets of Zagreb, you get another lesson that those who cheat can get ahead. Laws are irrelevant, in this school, and you can get ahead by ignoring them because no one is likely to rat you out. And that mentality is contagious. After two years, I find myself deploying the Zagreb Parking Place when there’s no legitimate space free in front of my favorite bakery. I’m no fool, and, after all, I’ll only be gone for a few minutes … unless the bakery is crowded … or I have trouble choosing between a chocolate croissant and a meat burek.

The Zagreb Parking Space and Croat Cue Jump are small things compared to the problems facing Croatia. But the mentality is pervasive and colors attitudes toward laws in general. Income taxes are avoided. Houses are built or improved without permits. Businesses underreport revenues. Degrees are taken for plagiarized work. High- and low-ranking officials skim cash wherever possible. It doesn’t end, and those who try to play it straight are made to feel fools for not taking while the taking’s good.

Politically, it creates a government of whatever party that lacks credibility and authority. How, for example, can a government enact a property tax, when everyone is absolutely positive their neighbors are somehow paying less? Economically, among other effects, it contributes to a fiscal crisis. And such a mentality dampens foreign investment by creating unnecessary uncertainty and is a likely factor in low productivity. I suspect, although I have yet to look for numbers, that the national budget could be quickly balanced if taxes and fees already on the books would be efficiently and fairly collected. With greater certainty, foreign investors would stop approaching the country with clinched teeth.

This brings me back to the question of Croatia and its economy. Croatia is a wonderful country, swarming with passionate and talented people, rich in natural beauty, and aching with potential. That potential is being held back by something that I can’t quite put my finger on, but is exemplified by the resignation and chagrin shown for the Zagreb Parking Place, the Croat Cue Jump, and other cheats that leave law-abiding motorists feeling like second-class fools.

Transparency is a prerequisite to a functioning economy and government. If people are unclear about the rules or whether they should be followed, they will always suspect someone else is getting a better bargain. When the rules are clear and everyone has faith that everyone else is essentially playing the same game, individuals can craft strategies, take risks, tolerate appropriate taxes, and sacrifice short-term gains for longer-term benefits.

In writing about Croatia and its economy, I don’t pretend to offer answers. I see this country, much as a foreign investor might, as a deeply interested foreigner, not as an expert on its nuances. I look at its problems and challenges, not as years or decades or centuries of build-up animosities and political gamesmanship, but as puzzles that may have solutions. This is the mythical world of economics, in which rational players make rational decisions. It’s not the real world, but it should at least help inform the discussions around the challenges Croatia faces as it works to build a prosperous economy for all.

(Originally published in Croatian in 21. Stoljece, Dec. 1, 2012.)