The city of Sarajevo represents a unique case within the Independent State of Croatia. None of the state's other major cities had such a wealth of ethnic and religious diversity as Sarajevo, where Croats, Serbs, Muslims, and Jews had coexisted for centuries. These groups often lived in their own neighborhoods and occupied their own specific economic niches, but their relationships were generally harmonious prior to the establishment of the Ustasha state. However, not even a city with such a long-standing history of relative tolerance was immune to the terror of the Ustasha regime. When it took control of Sarajevo in April 1941, peaceful ethnic relations in the city were shattered, as neighbors were turned against one another by the racist ideology of the regime; the Jews and Serbs of Sarajevo were especially victimized.

The Ustasha regime's crimes against the Jews are notorious. The Jasenovac death camp has become the symbol of the horrors committed against them. However, the Ustasha regime first persecuted the Jews in the social and economic sphere before deporting them to concentration camps, where the majority met their deaths. The city of Sarajevo, where there had been little in the way of anti- Semitism prior to 1941, is an ideal location not only for the study of the state and local structures and processes for the nationalization and expropriation of Jewish property but also for an analysis of the capability of the local authorities to intervene in this process in the name of preserving local economic stability. Through studying the types of properties nationalized and expropriated, the handling of Jewish financial assets, the placement of Jewish firms under Croatian commissioners (povjerenici), and the procedure for the sale of expropriated Jewish property, it is possible to create a model for the nationalization of Jewish property in Sarajevo as well as to understand its economic impact on the city and the Ustasha regime's plan for the economic “regeneration” of the state. In the city of Sarajevo, while many properties were confiscated by the Croatian state, the local nationalization directorate as well as the city's authorities tried to mitigate the damage this process caused to the local economy through extralegal actions aimed at maintaining economic stability in the city.

“Revolutionary times demand revolutionary methods,” Aleksandar Seitz wrote in Put do hrvatskog sozializma (The road to Croatian socialism). In the Ustasha state, he reminded his readers, it was not enough to seek “social justice” or to think “socially”: the new worker in the Ustasha state had to be socialist too in thinking and actions. Seitz stressed that Croatian socialism was distinguished from both “Anglo-American and Jewish” capitalism and “scientific” Marxism, having been formulated specifically for the economic and social requirements of the national community; as such, it was an expression of the “national soul.” What this meant in practice, he explained, was social solidarity and reciprocity: everyone who did his or her duty to society would receive benefits from it in return. An attitude of duty, discipline, and order, meanwhile, would be forged through the construction of the “ethical person of work,” a figure embodied not just in the factory worker but also the peasant, office worker, intellectual, and soldier. The construction of a socialist state would, Seitz envisaged, lead to the withering away of all class divisions and social barriers; no longer would economic and social life be characterized by conflicts between workers and bosses; instead, society would be divided between the dutiful and disciplined new national class of worker and those anational “social parasites” who idled, cheated, and lived offthe toil of the national community. Furthermore, in the new socialist society the Ustasha state was bringing into being, private property would no longer belong exclusively to the individual; instead, the principles of Croatian socialism dictated that private property would be classified as a public good for which the private owner was responsible to the people, state, and, ultimately, the national community. As such, should owners not dispense their duties properly, their property and assets could be taken away from them. In short, the demands of the individual had to be harmonized with those of the “national community [narodna zajednica].” If Croatian socialism envisaged a revolution in social and economic relations, it also assumed a transformation in collective ideology, embodied in the concept of the national community.

During the celebrations to mark the first anniversary of the Ustasha state's founding in Osijek in April 1942, Vilko Rieger, the head of the State Information and Propaganda Office (Državni izvještajni i promičbeni ured—DIPU) gave a speech in which he linked the fate of the Croat people and the survival of the nation to the leadership of the Poglavnik:

By deifying the Poglavnik and presenting him to the Croat people as an omnipotent leader given to the nation by God, he was not merely attempting to argue for unquestioning obedience on the part of ordinary citizens as well as Ustasha activists toward the supreme leader but also illustrating how the Ustasha movement sought to legitimate its rule through the use of sacralized imagery and the identification of its ideology as a new religion.

Despite the frequent use the movement made of religious symbolism and sacralized imagery, when relating Ustasha ideology to religion, historians and scholars of the Ustasha regime in socialist Yugoslavia predominantly focused on the relationship between the Ustasha regime and the Catholic Church in Croatia. While some of this was rooted in legitimate historical inquiry, much of this historiographical approach was also motivated by the state's anticlerical orthodoxies and the desire to provide evidence of the church and state's mutually close relationship and common struggle against both the Partisan resistance movement and the new Yugoslavia. In fact, the relations of the church hierarchy and the Ustasha authorities were characterized by a combination of ambivalence, suspicion, and, eventually, hostility.

The Croatian Revolutionary Organization (Ustaša—hrvatska revolucionarna organizacija—UHRO), as the Ustasha movement was originally known, was created sometime in late 1929 or early 1930 from among radical student clubs and militant youth activists within the nationalist Croatian Party of Right (Hrvatska stranka prava). The UHRO was formed jointly under the leadership of Gustav Perčec, a Zagreb journalist, and Ante Pavelić, a lawyer and parliamentary deputy for the Croatian Party of Right. The ostensible catalyst for the founding of the organization was the fatal shooting in June 1928 in the Yugoslav parliament of Stjepan Radić, the leader of the Croatian Peasant Party (Hrvatska seljačka stranka—HSS), the largest and most popular political party in Croatia, and the subsequent establishment of a royal dictatorship under King Aleksandar, which created a centralized synthetic Yugoslav state. However, while Pavelić, Perčec, and other leaders of the embryonic Ustasha movement would later claim that Radić's assassination, which provoked violent student protests on the streets of Zagreb, represented a turning point, convincing them that an independent Croatian state could be achieved only through violence, in the late 1920s the Croatian Party of Right had already created a number of paramilitary student and youth groups that in their underground newspapers and journals boasted of their preparations for a “final confrontation” and violent insurrection against Belgrade. The UHRO was not the first insurrectionary anti-Yugoslav movement to be formed in Croatia. Immediately following the establishment of the new Yugoslav state in December 1918, embittered emigres, led by Ivica Frank and Captain Josip Metzger, had formed a paramilitary organization, the Croatian Legion, in Graz, Austria. Claiming thousands of young and able members, they vowed on their return to exact a terrible revenge on the Serbs and fry them in “boiling oil.” Nevertheless, the UHRO was certainly the most significant.

After the founding of the UHRO and the formal decision to struggle for the “liberation” of Croatia through violence, Pavelić and his followers fled abroad where they established training camps in sympathetic “revisionist” states such as Fascist Italy and Hungary.

Surrounded by the Kupa, Korana, Mrežnica, and Dobra rivers, the city of Karlovac was, in times of peace, widely recognized as a place of leisure and sports. Its picturesque parks, dating from the Habsburg period, and beach-lined riverbanks provided natives and visitors alike with ample opportunities for a variety of pleasurable activities. Karlovac's beautiful physical geography, however, did not always lend itself to a positive portrayal of the city. Ante Kovačić, the famous nineteenth-century writer, referenced Karlovac's proximity to so many rivers, and the humid, swamp-like environment created by such a geographical position, in his unfinished condemnation of Karlovac and its inhabitants, Međ Žabarima (Among the frog people). So outraged were Karlovac's elites at Kovačić's portrayal of them as frog-like, duplicitous, and cowardly that Kovačić never completed the volume. In times of war, Karlovac's rivers and the star-shaped fortress located in the town's center helped protect the town from invaders.

The advent of the Second World War, however, placed Karlovac's citizens in a situation where the lines between the invaders and the invaded—the aggressors and victims—became blurred beyond any recognition. As an Ustasha stronghold surrounded by an overwhelmingly Serbian Orthodox–inhabited countryside, Karlovac served as a center from which the Ustasha state launched many murderous raids against the area's Serbian Orthodox community. Nonetheless, it also suffered ample devastation and many casualties as rebel guerillas from surrounding areas sought to wrest the city from Ustasha hands. Though a historical analysis can neither confirm nor disprove Kovačić's one-dimensional caricature of Karlovac's citizens, it can offer important insights into how the ordinary inhabitants of this picturesque town and its surrounding areas responded to a set of extraordinary circumstances brought about by the Nazi invasion of Yugoslavia and the establishment of the Ustasha-led Independent State of Croatia (Nezavisna Država Hrvatska—NDH), circumstances so extreme they could hardly be compared to anything the city had ever experienced before. Exploring the manner in which the Ustasha movement ruled and how Karlovac's citizens adjusted to Ustasha rule in and around Karlovac can lead us to conclusions relevant far beyond Karlovac's city limits.

“Don't ever forget that through You and by You as a new generation the state idea must be secured, the idea of freedom and independence of the Croat people for all times. Never again can traitors, hirelings and slaves be born from your generation, but only strong, highbred and decisive carriers, representatives and warriors of a liberated and strong Croat nation.” It was with these words that Ivan Oršanić, the leader of the Ustasha Youth organization, said goodbye to his young followers when he was reassigned to his new position. Through his words it is possible to discern the guiding role assigned to members of the Ustasha Youth: to be a future ruling elite of the Ustasha state. The question of youth within regimes that aspired to total social and political control has often represented a key project in campaigns aimed at ideological, social, and cultural transformation through the refashioning of citizens. In both Fascist Italy and Nazi Germany, an emergent uncompromised and “unsullied” ruling cadre aimed to create a new ideologically committed and unquestioning generation, both loyal citizens and future leaders. Even more so in smaller authoritarian states established during the 1930s and 1940s in Southeast Europe, it was deemed crucial to mold the young into true believers and future leaders, an embryonic “elite” whose purpose and mission would be to safeguard the existing state, order, and its ideas. In the case of the Ustasha movement, the aim was to create a new generation of fanatical, belligerent, politically conscious Croats—that is, young Ustashas.

This chapter explores the various ways in which the generation of Ustasha leaders who came to power in 1941, considering themselves the warriors of the struggle in the 1930s for a liberated independent Croatian homeland, embarked on a project to create a new generation of followers and believers, of Ustashas. This new generation was taught to be proud of the older generation's sacrifices and ruthlessly to defend their achievements, in particular, the successful national liberation struggle.

In June 1941, an official of the German legation in Belgrade received the following eyewitness report from a colleague. In a cover note, his colleague explained that the report exposed the “inquisitorial methods of torture that Croatian Serbs are exposed to and the methods that the Croatian Ustashas use for the final destruction of the Serbs.” Quoting the report “verbatim,” he continued: