Volume 7 Number 1

Winter 1998

When pyramids collapse

A Conversation with Fatos Lubonja
This interview was conducted for the EECR by Irena Grudzinska Gross.

EECR: I would like to start with the pyramid investment schemes that precipitated the collapse of the Albanian state. It seems that nowhere in eastern and southern Europe did the pyramid schemes attain such destructive significance. I heard that more than $2 billion were involved, more than the government’s annual budget. Could you tell us more about these schemes and why they were so popular?
Fatos Lubonja: Yes, the pyramid schemes were a direct reason for the crisis. On May 26, 1996, we had elections, and the elections were manipulated. People tried to demonstrate; they were angry. But Berisha was still able to survive and maintain his power. He even had some support outside Albania, despite criticism from the US and other governments. During that time Albanians were generally passive. Their anger was ignited after they discovered that their money was lost in the pyramids. These were more than mere investment pyramids. They were also mixed up with money laundering, and the state was clearly involved. They began in 1993 as nothing really special, just small enterprises buying some properties and collecting some money. The owners were simple people, nobody knew them. Vebi Alimuci, the president of the largest pyramid scheme, was a low-ranking army officer. There were rumors that if you put money into his fund, you could get 8 percent per month, sometimes 10, sometimes 7. Thus the pyramids began to flourish, one after the other. The state didn’t stop them; nobody knows why. It is unclear if the government was involved right from the outset. But if not the state, then politicians were certainly right there. There was widespread speculation that these were not simple pyramids, that the government or politicians were involved in money laundering. Some say that the Italian Mafia has been involved as well. The largest investment scheme, VEFA, had its own shops and supermarkets in Italy. It had buildings in Bucharest and in Budapest, and ships, and two or three helicopters. It bought numerous private factories in Albania at very high prices, far in excess of their real value. At first, the people were suspicious, but with time were seduced. Some were able to buy apartments, others could buy something more. After all, the pyramids lasted for five years! In economic terms, these pyramids replaced the old socialist system. People didn’t build or invest. Instead they put their money in the pyramids and expected the state to take care of and defend these schemes. It was a complicity between the people and the state. People invested their money, so they didn’t want journalists snooping around to expose the truth. They wanted to live with their dreams of money coming, money coming, while they relaxed in cafés. I have met with those who were trying to build new firms. They said, “It’s a big problem. We cannot find good workers.” The good workers, they put $1,000, let’s say, into the pyramid funds and they could get $70 or $80 a month, which was much more than any salary they could earn. And everyone stayed in the coffee shops. You see why I say it was a kind of mutation of the communist system.
EECR: What happened when the pyramid schemes collapsed?
FL: After the first one collapsed, the others toppled, one after the other. People didn’t want to accept it; they even took to the streets. At that moment, the opposition was very weak, completely dwarfed by the one-party system. This is another reason why I call this transitional time in Albania the last mutation of communism. Politically speaking, we still had a one-party state, the party of Sali Berisha. The opposition parties existed but they had no bearing on our political life. Berisha had a parliamentary majority and could do whatever he wanted. The opposition had only a few newspapers that died one after the other and had no impact on the decision-making process. But when people lost their money and started to demonstrate, the opposition began to organize, realizing that it was time to act.
EECR: Who were the main political opposition forces?
FL: The main opposition party, the Socialist Party, was the largest, but there were also the Social Democrats, who were in a coalition with Berisha before the elections, and there was the Democratic Alliance, liberal democrats who created their own party after they split with the Democratic Party. There were also right-wing parties who were against Berisha for several reasons, especially because of the problems related to restituting property. All of them had something in common—they were out of the political game. They all lacked the fundamental rights and freedoms necessary for political action. They had no access to television, for example. It was then that we created the Forum for Democracy, which was a coalition of all these parties from the left to the right, except for Berisha’s party and some small satellite parties linked with Berisha. I was one of three leaders of the Forum at that time. I did not belong to any party, but as an ex-political prisoner, together with two other ex-political prisoners, the three of us represented a coalition at the roundtable talks. Our main objective was to create a government of experts. To prepare new and fair elections, we needed a government that would clarify the status of the investment schemes, because the people were increasingly angry and frustrated. And somehow we thought that we could fill the gap between the party in power and the people. This was back in January 1997.
EECR: How did Berisha react?
FL: Of course, Berisha rejected the idea of a government of experts. We were strongly attacked in his press and on television. We were also arrested during demonstrations. He opted to use force. In Tirana he could do it somehow, he could suppress demonstrations because he had numerous supporters, especially those from the north of the country. But he failed in the south. So he sent police troops there to suppress the demonstrations. In the beginning they were successful, but then people started to fight back. After all, they had lost their money. It seems that in the south people were involved in trafficking in arms and people. They were smuggling emigrants and drugs between Vlora and Italy. Vlora is the main port in southern Albania and things heated up there. People responded to the police and drove them out of town. At this moment, we in the opposition tried to have some debate, some dialogue, with Berisha. We tried to keep him calm, but instead he asked Parliament to declare a state of emergency. That meant that troops, the army, could be sent to the south. And the army went there at the beginning of March, but it was not the army he had in mind. It was a weak and unmotivated army. It was not an army, let’s say, created by a social class to preserve their interests. People were drafted, not paid, and many deserted. At the same time, the opposition remained unknown among the people. So, in the south, people went to the arms depots and took weapons. They armed themselves. The opposition could not direct or control the popular insurrection. It is even unclear what this was. Was it a democratic revolution, a latent democratic revolution, or economic rebellion? Perhaps it was a mixture of all these elements.
EECR: But was this rebellion spontaneously organized? Where was its leadership?
FL: Interestingly, the movement was initially modeled on the Serbian example. People started to demonstrate peacefully, as in Belgrade. They were even imitating the Belgrade demonstrators’ symbolic behavior, including giving the three-finger sign. And the students went on a hunger strike. But gradually they became more aggressive, although still waiting for Berisha to do something. They were asking for the same things we were asking for: a government of experts and new elections. This was the beginning, the peaceful part. But when Berisha reacted with violence, they also responded with violence, and the state of emergency was announced. It was at that moment that people went to the depots and the prisons were opened. The opposition movement in Tirana became extremely isolated, under continuous threat of persecution. It was terror. Everyone feared for his life.
EECR: Was this when the roundtable negotiations began?
FL: Yes, Berisha and the opposition were gathered for roundtable talks, perhaps at the suggestion of the Italians and the intervention of the Italian ambassador. Italy was very interested in preserving calm in Albania. They were afraid of the destabilization of the country, of the refugees and massive immigration. They thought that Berisha was important for the stabilization of the country. During the roundtable talks a
government of experts was created, a coalition government with the Socialists and some other parties. It was called the National Reconciliation Government. It was March 9. This was the worst possible outcome. Sharing responsibility with the others, Berisha ordered the arms depots in Tirana and in the north of the country opened, to create the impression that it was a north-south conflict and to influence the outside world through that conflict, so that it would intervene on his behalf. People went to the depots without thinking, took weapons, everything they could get their hands on, and they started to kill each other. In Tirana two hundred were killed by stray bullets.
EECR: Could you describe a bit more about what was happening at that time outside of Tirana?
FL: I was in Vlora before the arms depots were pilfered, during the demonstrations. During the hunger strike, the parents of students were in front of the university all night long, trying to prevent the secret service from coming to take students away. After the weapons were taken—after the chaos and the banditry were unleashed—the social fabric was totally destroyed. And when I was in Vlora in late March, you saw fewer Vlora residents in the streets because the bandits had gotten the upper hand. They robbed and kidnapped people for money and took control of everything. The people in Vlora started to leave or went into hiding. At noon, there was no one in the streets. This was really very strange. The complete collapse of state order was obvious. Even a dictatorship is somehow better than what happened at that time. I was in Skhodra as well, and the situation there was the same. In Tirana there was less tension. Tirana’s streets were empty at 8 p.m. because of the declared state of emergency. And, it was a very frightening situation. But in the center of Tirana you could still take the risk of going out to do something. This disintegration of society happened, in my opinion, because the sense of community is so weak. After all, Albania comes from a primitive, a very primitive, society. Before the Second World War we had a kingdom for a very short time, and the king started to build a state for the first time in our history, and an administration, a centralized administration. But still these so-called baraktars, tribes, especially in the north, were very important. The king couldn’t control them so he gave them privileges just to keep the country united. The communists centralized everything; they organized a society through their own ideology. After the collapse of communism, people fell back into tribal organization. They could defend only their own house, their own garden, but they couldn’t defend common institutions, banks and so forth. The bandits robbed the banks; they even destroyed universities. They robbed and looted, but also they simply destroyed property because it did not belong to them. Everything was built up by the state, which had never been theirs.
EECR: Were there people who wanted to take power in these cities? Was there any sign of self-organization or that the state existed?
FL: People were unable to defend their streets, their districts, from these bands. All the power of the state was in Tirana. And there was the state of emergency. But in all the other towns no one respected Tirana’s authority because there were no police. Only in Tirana was there a real state of emergency, but even there it was not respected, mainly by Berisha people, who, after 8 p.m., could move about and terrorize and shoot people. It was a time when in Tirana you could hear gunfire all night long. The police were totally paralyzed, and there was no political power anymore. We had the National Reconciliation Government, but it was just a government created by two political forces who wanted to eliminate each other. And the police couldn’t obey just one of them. This lasted for three months. We survived because there was no ethnic conflict or regional conflict. This north-south conflict was completely artificial. It was manufactured by Berisha and without much success. And we had foreign military intervention at that time. When anarchy became obvious, the coalition government and then Parliament asked foreign troops to come to Albania. We had foreign troops from eight countries. Their role was limited because they couldn’t be involved in internal politics, they couldn’t shoot Albanians. Their main function was to defend the borders so that Albanians did not flee to Italy. That was their main task. It is strange how the fate of Albania was linked with the fate of the struggle for power in Italy. And everything went against Albania. I met at that time Beniamino Andreatta, the Italian minister of defense, and I told him we didn’t need these troops. We needed a different kind of support because the problem was clearly political. If we had political stability we could police ourselves and suppress the chaos and the banditry. The bandits were the greatest threat at that time, and they existed because of the power vacuum. I told him that all we needed was more pressure so that Berisha would step down. Then we could have a kind of political stability. Because that was the problem: Berisha was on one side; the opposition on the other. That conflict created a power vacuum. At that moment, the Americans were much more for pressuring Berisha to leave the country than the Italians. But even for the Americans, he was a factor of stability. It is amazing to see that in the final hour they began to understand who Berisha was, and yet they still did not change their policy. The Americans considered stability the first priority, then the economy, and democracy last. They supported Berisha until May 26. But not anymore after that. Yet for three months we had Berisha on one side and the opposition on the other, and troops in between and a power vacuum. This, for a full three months. More than 2,000, some say 5,000, Albanians were killed during this time.
EECR: What made the Albanian situation so special, so different from what was going on in other countries that were abandoning communism?
FL: After the collapse of communism the other Balkan countries assumed the kind of nationalistic identities that maintained them as societies of sorts. For many reasons, that did not happen in Albania. First, we have no strong historical memory. We had five centuries under Turkish occupation, and at that time, we had a Turkish identity, not an Albanian identity, except for our language. We as Albanians didn’t have a real history during these five centuries. Our history was linked to the Turkish Empire. This is one of the reasons I could say that our nationalism started very late. And the second reason why the Albanians don’t have strong nationalistic feelings is that under Enver Hoxha the communist regime attacked our national sentiments with a vengeance. Although he himself used nationalism, of course. He changed Albania into a prison through the idea of a great country resisting the West and East. And I should also add weak religious feelings among the Albanians, which is another factor why we fell back into a primitive social form. Traditionally, the society was organized into clans, families, tribes. And our Christian law—the so-called “Canon of Lek Dukagjini”—was called by one of the popes the least Christian law in the world. It was firmly linked to the blood feud. And Albanians could defend only their own house, their own family, their own tribe, and they didn’t care about others. They were not able to pull themselves together to defend their own library, their own bridges, their own city against the bandits.
EECR: You have termed this latest crisis of 1997 “the second collapse” of the Albanian state.
FL: The first collapse occurred in 1991, so it was actually the second collapse of the communist state. That state never served Albanians. It’s not created by them. It’s always been a tyrant and a tutor, like an authoritarian father, and they hated it. At the same time they needed it. During the communist time, the authorities were always saying that we are the only state where people do not pay taxes. The state took care of all, of children, of schools, of everything. And at the moment of strongest conflict they killed it, they killed the father. Now is perhaps the first time when they have to think about this experience and start to create their own state, a state as their own servant.
EECR: But “the killing of the father,” that is, the collapse of the communist state in 1991, was very peaceful. Now maybe we are beginning to see, in fact, that this was a seven-year revolution. And the true depth of the conflict and change came about only in 1997, and it was very violent. Wouldn’t you say that in 1991, it was more of a transfer of power, because Berisha himself was a former communist and a lot of his top deputies were from these communist classes. Now, because of the money, because of the pyramid schemes, Albanians really revolted?
FL: That’s true, but I have to stress one difference here. In 1991 the collapse of communism happened in all of Eastern Europe. The communists gave up power. They were forced to give up that power because of economic and political pressures from their own populations and from the outside. In Albania, the second generation of Albanian communists were more prepared for a transformation than were the persecuted. We didn’t have dissidents. We didn’t have a dissident movement. Probably, they could have managed the transition better than Berisha’s people, that is, the first-generation communists. Berisha was a communist with an authoritarian mentality. He wanted to create his own party to replace the Communist Party and eliminate the other parties. This inclination toward a mono-party system is an Albanian tradition; it happened in the 1920s in Albania, during WWII, and then during Berisha’s time. On three occasions we have had, for a short time, a multiparty system. And then the strongest one eliminated the others and remained the only political power. You have all the privilege for yourself and for your supporters. The communists were forced to allow a pluralistic system, and they couldn’t remain in power. They were kicked out. And then Berisha did what they were unable to do: he created a strong party, which eliminated the other parties and remained the only one. In this sense, it was a continuation of the authoritarian system. His revolution, the “democratic revolution,” was not like the French Revolution of the bourgeoisie. We didn’t have an economic class that, after being developed enough, wanted to have political power, that needed to have its own party. On the contrary, we had a party that had to create an economic class. So they started to create the new rich. Politics became the most successful business. That’s why Berisha’s people were so determined to remain in power. That’s why they were so intolerant. And they failed. They failed because they were so corrupt. The pyramid schemes were just a part of that corruption.
EECR: The pyramid schemes were perhaps also an expression of a more general lack of experience in dealing with money. After all, during communism, money was not a real measurement of value. Under Hoxha money was of secondary importance, wasn’t it?
FL: In Hoxha’s times, the higher you were in the party, the less property you owned. My father was a member of the Central Committee. He couldn’t own his own villa, it belonged to the state, but he owned our furniture. For a member of the Politburo, you did not have your own villa, and even the furniture was not yours. It belonged to the state. All the privileges you had were linked to the power you had in the party-state. And when you lost your power, you lost everything. People in the cities did not own the apartments they lived in, but in the villages they could have their own house. When Hoxha eliminated one of his Politburo members, Mehmet Shehu, he didn’t have any furniture. All he owned was books. This is not a communist tradition in Albania. This is linked with the Turkish tradition. During the Turkish time, the so-called spahi, could have land and power, but could not inherit it. It was linked with the privilege that came from Istanbul. If they lost favor there, they lost their property. It makes you want to maintain power. The difference between common people and politicians is small, very small.
EECR: How was this state crisis resolved?
FL: For three months, we had eight armies in Albania. And then the elections were arranged. People were truly fed up with the situation, with the chaos, the anarchy. And they voted against Berisha—more than 70 percent! That’s how stability was attained. If he had gotten 40 or 45 percent of the vote, then he would have remained. But he lost the 19 seats in Tirana; he lost all of them. He lost more than 80 percent of the seats because we used a majoritarian system. We had some trouble with the king, because a referendum posing a choice between a monarchy or a republic was mixed with the elections. The king claimed that he won. But it became very clear that people wanted stability. And the outside world wanted stability. And we got stability.
EECR: Yet, I understand that the influence of the West was not all that positive.
FL: I can say first that the West had a very short time horizon in looking at the Albanian situation. The West was thinking stability, but couldn’t foresee that there is no stability without democracy. Berisha, for instance, was supported by the Americans. He respected neither human rights nor the rules of democracy, yet they recognized his authority. Of course, they could not control him, this dictator, that was easy to foresee. As for the Italians, they intervened to stop the exodus of Albanians, the big exodus that could create a political crisis on Italian soil. But meanwhile, for five years there was a steady exodus, day after day. No thought was given to Albania’s development, to the incentives that would make people want to stay. In 1993 there were no Albanian prostitutes in Italy. In 1996, they constituted already one-third of the “force.” And the Italians did not care about that. They started to care when 11,000 Albanians fled from Vlora on ships. Now that was spectacular and created a crisis.
EECR: How would you describe today’s situation in Albania?
FL: Now there is political stability; it is more normal. The government is supported both by the outside world and Albanians. The second half of 1997 was much, much better, calmer than the first half. But many problems remain. We have to start again from scratch. Our infrastructure is worse than it was back in 1991, especially the roads. The corruption in the country was such that in the last years only 10 or 15 kilometers of highway were built. And the roads are much worse because they have been destroyed by cars, and the traffic is much more dense now. It is politics without inspiration. You cannot inspire people to build up something because politicians will use their power for their own profit. There is nothing to make people stay in the country, to participate and build the community. Nowadays, you cannot find unifying ideas to inspire the people. But maybe individuals could inspire Albanians. One of our ideas is to bring back Albanians from exile. During these five years many people went abroad. We want them to return and help in building something. We need these people, we need inspiration to live together, to build up a normal country, not to destroy. Perhaps we could establish the rule of law, similar to what Americans did with their Constitution. Our main objective, though, is to transform our tribal society into a civil one.

Mitchell Orenstein is a Post-Doctoral Fellow of the Watson Institute for International Studies, Brown University.
Fatos Lubonja was born in 1951. He finished his university studies in physics in 1974. In the same year, he was sentenced to seven years’ imprisonment for “agitation and propaganda” after police found his diaries, which contained criticisms of Enver Hoxha. In 1979, while still in prison, he was accused of creating a counterrevolutionary organization along with nine other prisoners and was sentenced to a further sixteen years. Released in 1991, he became involved in human-rights issues and went on to found the quarterly journal Perpjekja (Endeavor) in 1994. In January 1997, he cofounded the Forum for Democracy, which assembled eight opposition political parties, calling for a peaceful dialogue in Albania’s increasingly polarized political climate.

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