When nothing makes sense, the maniac is king

'WHY have the most beautiful things become the saddest?' asked Maja. We were standing on the summit of the Kalemegdan, the old Turkish fortress at Belgrade built above the confluence of the River Sava and the Danube.

Below us, the huge water-landscape was empty. On the rivers, which used to be lively with steam tugs hauling strings of barges, nothing moved. Beside us the marble column supporting Ivan Mestrovic's statue of a hero was daubed with red graffiti. The 'Roman Well', where Belgraders throw money for a wish, was boarded up. Through the planks could be seen a litter of worthless dinar banknotes, which last week bought a coffee and this week would not buy a matchstick.

Earlier, we had been sitting with Maja's husband at a pavement cafe, drifting through one of those animated, useless arguments about whether the Milosevic regime was fascist or authoritarian or totalitarian. What do you call a government that has mobilised gutter nationalism, armed it, decorated it with religion and paranormal superstition and yet - almost contemptuously - allows a small number of journalists and intellectuals to criticise and mock it? Then we walked down Knez Mihail street towards the Kalemegdan, past stalls selling Chetnik kitsch: Serb royalist badges, skull-and-crossbones flags ('Liberty or Death'), car stickers inscribed 'Thank God I am a Serb'.

The sanctions are tight and harsh on the city. There is little traffic, because there is almost no petrol. The air is pure, because all over Serbia factories are silent, their gates chained up. That night, when I went to a small restaurant and ate fried veal, I became aware that families at the other tables were glancing sideways at me: at meat on my plate. They were having pretend-suppers: wine, bread, little plates of salad, the odd bowl of vegetable soup. For my meal - soup, a piece of meat with potato, a glass of wine - I paid 275 million dinars. Less than pounds 4 worth of German marks for me: for them, perhaps several months' pay.

Technically, the rump 'Yugoslavia' is at peace. Even if the air strikes begin, they will happen in Bosnia; nobody is going to bomb Belgrade. But in every other way Serbia is a country in wartime. People talk about what it was like 'before the war'.

Above all, there is wartime isolation: economic, political and mental in a country locked up with the ceaseless, shameless lying of Belgrade television. On television, it is always 'the Muslims' who are launching attacks (with fanatical Islamic ruthlessness) on peace-loving Bosnian Serbs, who shell and starve themselves to make the world hate Serbs, who are holding the population of Sarajevo as unwilling hostages, who have plenty to eat but whine about their sufferings while proud Serbs keep silent and ask foreigners for no favours.

On her regular slot on prime- time television, the clairvoyant Milja Vujanovic declares that if you put Croatia, Germany, Austria and Italy together they form the outline of a woman - a scarlet woman, the Whore of Babylon herself, for the secret religion of the leaders of the West is Satanism. Cyrus Vance is the lightly disguised demon Sirius; 'Owen' is close to a Serbian word for he-goat.

Earlier this year, the painter Milic was applauded when he told the Bosnian Serb 'parliament' at Pale that he would use his occult powers to raise a swarm of Serbian vampires against Nato aircraft. Then he recounted his vision: North America would be sundered by an earthquake, whose tidal wave would drown the world except for Serbia. Then the Serbs, born on a distant star from which they had descended to Atlantis, would repopulate the earth and open communications with intelligent extra-terrestrial life on other planets in the language of the cosmos . . . Serbian.

Too many people half-believe this sort of stuff. Even those who laugh at it recognise a distorted reflection of their own anger and frustration. Most Serbs seem to share the conviction that, even if the Milosevic regime is a clique of unscrupulous gangsters, yet Serbia is being wickedly and deliberately defamed by the outside world - above all by Germany, next to Turkey the ancestral enemy.

Why does the world pretend that a Bosnian 'nation' exists, or that Serbian minorities abandoned to Croatian-Catholic or Bosnian-Muslim governments do not have a right of self-determination? The obvious retort - that Serbs had nothing to fear from a multi-ethnic Bosnian government with powerful entrenched rights for all its communities - falls on deaf ears. The truth - that the Serbs are the victims not of German aggression or Islamic jihad but of a gigantic manipulation by a Serbian regime using expansionist war to stay in power - is accepted by only an intelligent but impotent minority.

Cars approaching Belgrade from Bosnia are searched for weapons. The authorities want to keep the war at arm's length. It is not long since a Bosnian Chetnik, arrested for drunkenness in Belgrade, used gun and grenade to kill and wound the staff of a police station. Even more recently, a famous actor was assaulted by a gang of thugs for 'unpatriotic' views; he opened fire on them, and is facing murder charges. Violence and the fear of violence keep up the tension, which helps the government to maintain its grip. But its most powerful ally, paradoxically, is hyperinflation.

The currency loses 20 per cent of its value every day. The mark was being bought on street corners for 20 million dinars two weeks ago, and a new 50 million note was issued. By the following Saturday, the price was 33 million dinars, and a banknote for 100 million appeared. Last Friday, the 500 million note hit the streets. Incredibly, cheques and credit cards are still in use; there is a cash shortage because the clapped- out printing machinery cannot keep up with demand. In Belgrade, many families are surviving purely on the time-lag between bills paid at one rate and debited to their accounts at another.

After recent hyperinflations in other countries - Argentina in the early 1980s, or Poland in 1989-90 - we know something about what happens when money goes mad. Economies never quite collapse. The poor, especially those on pensions, suffer horribly; the rich find ways to get by. But people do not rebel. Instead, they fall into a concussed passivity. Yesterday and tomorrow vanish; only today counts.

Rationality itself stops. When two and two may come to 22 billion, then there is no certainty that opening an umbrella will keep the rain off. Politics itself assumes that a given action will produce a given result. But when you stop associating cause and effect, political leaders can do or say almost anything they like. You are driven towards a crude choice: to believe in the leadership with blind faith, or to believe in nothing whatever except that the world is a madhouse.

This is why hyperinflation - crazy, uncontrollable, soaring hyperinflation - can be the dictator's friend. While it lasts, the autocrat can rely on the paralysis and the credulity of the masses. When nothing makes sense, the maniac is king. Naturally, there are problems. (The classic one, which may come to threaten even Slobodan Milosevic, is officers' pay, for soldiers know that one cause never loses its effect: the gun).

But for the moment sanctions - the root cause of the inflation raging in Serbia and Bosnian Serbia - are not undermining Milosevic. They make it harder for him to wage war. But they are helping to keep him in power.

(Photograph omitted)