Croatia’s seaside socialism and crony capitalism

My first visit to Dubrovnik was as a black-marketeer.

Hitch-hiking through the then Yugoslavia in the summer of 1985, my brother and I, fervent evangelists for capitalism, were trying to practise what we preached. A long lift took us from Graz in Austria to the Dubrovnik bus station, but we initially found few takers for the foil-wrapped bricks we had brought from Vienna: Yugoslavs in those days bought their coffee in beans. Then my brother, showing his characteristic business acumen, slit open one of the packages, unleashing an enticing aroma and banishing suspicion. We quickly sold the lot.

This month I was there again, for what at first sight seemed like a meeting of the Balkan Bodyguards' Association. The hotel was full of muscular, alert-looking men in loosely-cut suits, gruffly discussing engine sizes, muzzle velocities, and radio frequencies in a hotchpotch of local languages. But behind the biceps, I glimpsed some politicians, including Nursultan Nazarbayev (Kazakhstan), Mikheil Saakashvili (Georgia), Dan Fried (America's brainbox regional fixer) and top representatives of most of the countries of the neighbourhood.

The conference was Croatia's attempt to show that it is a constructive regional player, friends with its neighbours and worthy of speedy entry to the EU and NATO. To some extent it worked: anything that gets the enlargement train on the rails and moving is welcome.

But there were some curious features. One was a complete absence of any critical local voices. Croatia has a bunch of independent-minded NGOs and institutes. None came, though there were plenty of independent outsiders from farther afield. Equally, there were no opposition politicians from the region-though plenty from elsewhere, such as Carl Bildt, the former Swedish conservative prime minister. Some might wonder if the Croatian authorities are nervous of something.

I tried to find out why. "Don't blame the diplomats: they know it's stupid. It's the foreign ministry protocol department" said one well-informed outsider. "They just make sure that any invitations to undesirable people get lost".

It is hard to avoid the impression of Croatian control-freakery. The authorities have just been criticised by the International Federation of Journalists for appointing a number of political cronies to the board of HINA, the main news agency (and that in itself is odd: why does the state have anything to do with the media anyway?). Some journalists say that advertising from state-owned industries is used to reward friendly media outlets and withdrawn from critical ones. One local think-tank compares Ivo Sanader, the Croatian prime minister, to Vladimir Putin of Russia.

That may be too harsh. But there is an interesting analogy. Just as the top-heavy and incompetent Russian state survives thanks to the rents (unearned income) from the country's oil and gas wealth, Croatia's stodgy economy lives off the rents of tourism. The country scores very poorly on indexes of economic freedom: labour laws are restrictive, taxes high, foreign investment puny.

Yet the combination of climate and coastline is so compelling that only gunfire will keep tourists away (which it did, during the war).

Now Croatia has plenty of visitors again, and they are well-fed, well-sunned and well-refreshed. But even in Dubrovnik's top hotels and restaurants you do not feel, to put it mildly, that you are the customer of a world-class tourism industry where intense competition is driving standards ever-upwards.

Yugoslavia was in theory a communist dictatorship, but it did not feel like one. Now in theory, Croatia is a normal capitalist democracy. But it does not quite feel like one. Even the glitziest conferences cannot fix that.

• Edward Lucas is central and eastern Europe correspondent for The Economist.

My first visit to Dubrovnik was as a black-marketeer.