10 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 44 | 2026 The Yugoslav legacy: Socialism and veze When Croatia was part of the SFRY, under the League of Communists of Yugoslavia, political power was deliberately centralized, and the one-party system lacked competitive electoral accountability. The party operated as the only organization with state power and subordinated the judiciary as a tool to execute its ideological needs (Ramet, 2006). Unlike Soviet-style central planning elsewhere, SFRY introduced “workers’ self-management” of stateowned enterprises, an institutional arrangement that allowed limited market elements and decentralized authority over production and distribution. However, this model paradoxically strengthened local patronage networks rather than democratic institutions (Grdešić, 2008). In this environment, the concept of veze became the primary modus operandi in Croatia’s society. Veze refers to the informal connections that emerged under Yugoslav socialism and was reinforced in the 1990s cronyism era, where jobs and access to health care, housing, and favorable legal outcomes depended on personal relationships with those in power in place of formal procedures (Walton, 2024). Informal networks became more effective than formal procedures. The judiciary was seen not as an independent body but as an extension of the party. Citizens learned that the state labyrinth could only be navigated using a patron, not a lawyer (Mastilica & Kušec, 2005). The reliance on veze fostered a conviction that seeking justice was futile, because none existed. The cultural reliance on connections survived the fall of socialism in the 1990s and became a way to distort democracy. That endurance helps explain why contemporary Croatians assume corruption pervades the system, even when their day-to-day encounters do not confirm it. The Homeland War and the culture of impunity The transition in 1991 to Croatian independence did not reset this dynamic; conversely, it intensified it. During the Homeland War (1991–1995), the Croatian Democratic Union ruled, and once again centralized control to manage potential state-directed threats. Although centralization was justified on the grounds of national security, the continued concentration of power had serious long-term institutional consequences. During the war, the boundary between actions to defend the nation and to expand political control blurred. Actions that would typically be subject to judicial review, such as misuse of public resources or preferential treatment, were either not brought before the courts or were handled by a judiciary operating under intense political pressure, with abuses justified as essential wartime measures (Subotić, 2005). This avoidance of lawsuits established a culture of impunity: Political and military elites operated with near-total protection from legal consequences, shielded by the emergency context of the war and the Croatian Democratic Union’s dominance. The judiciary was, moreover, already weakened by a difficult-to-navigate state-building process, a protracted conflict, and its (inherited) lack of independence. Subordination to political interests reinforced the public perception that legal accountability applied to ordinary citizens and not those in power (Grdešić, 2008). Politicized privatization and relationship-based capitalism The factor most damaging to public trust arose from the 1990s economic transition. The privatization of state-owned enterprises was grossly mismanaged. Rather than through transparent public auctions, valuable state assets were sold significantly below market prices to tycoons or individuals with political party connections (Bičanić & Franičević, 2003). Relationship-based crony capitalism confirmed the public’s fear that the new democracy was already rigged. The judiciary’s failure to prosecute evident cases of asset stripping and embezzlement sent a clear signal that economic crimes by elites would be tolerated. Surveys from the late 1990s indicate that this period crushed the faith in democracy for many citizens, creating enduring cynicism (Bičanić & Franičević, 2003). Even after Croatia joined the EU in 2013, a widespread belief persisted that reforms had been more of a checklist than a genuine cultural and institutional shift. To gain accession, Croatia had to reform its judicial system, focusing on accountability and impartiality by insulating judges and prosecutors from political interference. Judges, in turn, had to demonstrate competence and build track records of corruption case convictions. Croatia satisfied the EU’s extensive set of requirements and joined in 2013 (European Commission, 2011). Yet citizens remain unconvinced; though the letter of the law changed to satisfy the EU, they see the patronage system lingering and courts protecting the powerful instead of serving the public. Only 28% of the general population and companies in Croatia perceive the independence of courts and judges as “fairly or very good” (European Commission, 2025a). The gap between formal compliance and lived experi-
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