Capitalism and socialism, as two major economic systems, have shaped the past century to a great extent. After many wars and political games, it seems that the battle between the two systems has come to an end. Capitalism proved to be the stronger system and, as a result, globalization became the most descriptive attribute of the world economy in the current century. Most of the socialist countries decided, or were forced, to start a painful process of transition, which would enable them to become capitalist countries in the future. The countries in transition have had to deal with numerous problems such as political and economic pressure from other countries, corruption at all levels of political and judicial power, and (un)armed resistance by certain fractions of population. The purpose of this thesis is to shed light on what Bosnia and Herzegovina and other countries have had to go through in order to adopt capitalism. The focus will be the ongoing process of transition in Bosnia. Bosnia is an excellent example of a country in transition. It used to be a part of a monarchy (Kingdom of Serbs, Croats and Slavs, later Kingdom of Yugoslavia) and a republic in a socialist country (Socialist Federal Republic of Yugoslavia). Bosnia and Herzegovina finally became an independent country in 1990s. During the monarchy, Bosnia was primarily an agricultural region, rich with natural resources that had not been used. It remained underdeveloped and one of the poorest republics in Tito’s socialist Yugoslavia. As an independent country, Bosnia is currently struggling both politically and economically. It is considered a representative democracy, making its way to capitalism. The population of Bosnia is mainly comprised of three different ethnic groups: Serbs, Bosniaks (Muslims), and Croats. Although very similar, these groups have distinct histories, cultures, and religions (Serbs are predominantly Orthodox Christians, Bosniaks are Muslims, and Croats are predominantly Catholics). Ethnic differences have played a significant role in the development of Bosnia throughout the 20th and into the 21st century. Unfortunately, those differences proved to be an obstacle to progress for the citizens of Bosnia. Although an independent country, Bosnia has been divided into two separate entities since the civil war in the nineties. Different feelings of nationality and different political agendas have raised many issues that the country is still struggling with. Bosnian diversity and certain individuals’ personal goals resulted in a very painful process of transition to democracy and free market economy. This transition is a process that affects almost all spheres of society. It is very difficult to analyze economic transition in Bosnia without considering other factors such as culture and politics. This thesis hopes to give a broader picture of the transition in Bosnia and the underlying factors that facilitate transition or slow it down. Although many of these factors could be studied separately, their short introduction will provide a better understanding of the economic transition in Bosnia. For this reason, this text will be divided into three major parts. The first part gives a historical background, which in addition to Islamization of Bosnia, includes the main political and economic events in the country from the end of World War I until present day. Major political events include the creation of Kingdom of Yugoslavia, SFR Yugoslavia, and Bosnia as an independent country. Some of the events that are also considered include Constitutional changes in 1963 and 1974, and the war-ending Dayton Agreement of 1995. Economic changes closely reflect political changes. In addition to these changes, special attention is given to self-management, a managing system of former Yugoslavia, which will be discussed in detail. The second part addresses privatization, the key...
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