Global financial crisis and related country-level financial sector disasters: The case of microfinance in Croatia

The economic policy regime that has dominated global economic policy making since the late 1970s is often termed the Wall Street-neoliberal policy regime (also called the ‘ Washington consensus’ ). This policy regime was the preferred choice of the US government, the World Bank and IMF, and Wall Street’ s (now deceased) high-profile investment banks (see Gowan, 1999 ; Stiglitz, 2002 ; Elliot and Atkinson, 2008). One reason for this preference, we are now coming to realize with greater clarity, was that it was a policy regime overwhelmingly meant to primarily benefit the richest developed countries and their key institutions and individuals, especially in the USA, far more than it was meant to benefit the poor countries actually expected to adopt it (see also Oyelaran-Oyeyinka and Rasiah, 2009). Of course, many local economists in these countries, as well as many high-profile international economists with experience of developing countries (see for example, Taylor, 1994 ; Amsden et al, 1994 ; MacEwan, 1999), were not unaware that such a policy regime had effectively destroyed many developing countries in the past. But such realists/sceptics had little effective power to stop the policy juggernaut coming from the powerful western countries. From 1995 onwards Croatia was pretty much a full and willing participant in the Wall Street-neoliberal global policy experiment, notwithstanding some hedging and backtracking on the part of those previously fully enamoured (for example, see Šonje and Vujčić, 2003). The full impact of this policy regime choice has yet to be felt in Croatia. However, there are few optimistic portents that suggest that Croatia will avoid a serious economic downturn. This paper looks at one policy area where the flawed Wall Street-neoliberal policy regime played itself out in Croatia. As elsewhere in South East Europe (Bateman, 2003), after 1995 the Croatian government was strongly recommended to offer its full support for the concept of microfinance