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Serbia is on the way to become a functioning democracy, Montenegro is a free country, a crisis in Macedonia spun off by the aftermath of the war was resolved diplomatically. So to employ Colman's rule, intervention didn't create a bigger mess than was there before. If there would have been a less painful way, I don't know.
Of course, this argument can fall apart if you look at the larger consequences of the war, which were that the Republican party of the USA drew all the wrong lessons from it and that it may have fueled a resurgent nationalism in Russia. But both of these relations are rather tenuous.
In Kosovo, US-led NATO involvement may not initially have created a bigger mess than was there before, but it did involve the subsequent purging from most of Kosovo of all ethnic Serbs. And, having no central authority to speak of and essentially being run by organized crime, Kosovo is essentially now the entrepot through which heroin, sex slaves and illegal immigrants from SW Asia and SE Balkans transit. Not an ideal situation.
As for Serbia, the fact of the matter is that the NATO intervention did not drive Milosovic from power. Rather, violent Serbian protests in response to widespread election irregularities over a year later did. This election result arguably would have happened either way, given the state of the Serb economy and its painful (by contemporary European standards of the time) diplomatic isolation. The 96/97 environment was almost assuredly a thing of the past by 1999, given the deteriorating situation in Serbia even prior to the bombing campaign. In any event, arguing that intervention put Serbia on a path to western Democracy is discutable, given it has arguably not improved much since.
Also of note is the banditism in Serbia which, although not as acute in Albanian Kosovo, is still pretty bad (as evidenced by, among other things, the assassination of Zoran Đinđić by Serbian organized crime).
I'm not so sure you can say that the intervention made the situation better. In fact, I think it can be argued that it made things worse.
Unless, of course, if you are an Albanian Kosovar, and in particular if you are engaged in organized crime there.
The Hun is always either at your throat or at your feet.
Contrary to war apologia spread by Clinton, Wesley Clark et al, Miloević was actually temporarily strenghtened during the war. This was natural, it happened so before and after elsewhere, but the advocates of air war never learn: people will pull together when bombs are falling. So Milo could actually step up his hunt for oppositionaries, some of whom had to go in hiding, and even lost popularity for doing so.
Furthermore, the West did have a role in Miloević's overthrow, but not via the war: it was the concerted effort to get the opposition to organise itself and unite (this went along two main routes, financial and material support in the form of sister city help to local governments under opposition control, and organising conferences -- the most important here in Budapest -- to get the different factions to cooperate).
And the long-term consequences for Serbia proper (they never consider the long-term consequences) were even worse than you describe. That chief propagandist of 'liberal' interventionism, Thomas "Let war give a chance!" Friedman, infamously wrote: "Every week you ravage Kosovo is another decade we will set your country back by pulverizing you. You want 1950? We can do 1950. You want 1389? We can do 1389 too." 'They' did 1950. Sane people realise that the country doesn't consist of Miloević, and realise that throwing a country back decades means poverty and resentment lasting for decades. Especially if once pro-Western forces get into government, and start reforms (including neoliberal "reforms"), yet the West won't send the promised financial aid, resentment will turn into hate and into support of demagogues of various dangerous kinds. This is exactly what happened. The air war killed any possibility of a genuine development towards Western-style democracy.
One whose delusions are out of fashion.
What you want to know, of course, is what course of action would have been best, which would require plotting various scenarios, which is a lot of work and largely untestable. But the bigger mess rule ignores the hypotheticals that a situation is on the brink of spiralling beyond control and, on the opposite, that a better solution is clearly available.
All ethnic Serbs are not yet out of Kosovo, though the majority fled.
Though an aerial bombardment has an effect of rallying the people around the leader, losing a war does not have the same effect. Kosovo was the heart of Milosevic's nationalist politics. Posing as the protector of the Serbian minority there is what brought him to power, and failing at this will have had an impact on the elections. The credit for deposing Milosevic goes to the Serb people, but the Kosovo war will have played a role in it.
The Serbian economy recovered to its pre-war level in 2002 or 2003 and has since grown by 7% in 2004 and 5.9% in 2005.
The lawlessness and banditism in Kosovo was already there before the war began. In addition there was a guerilla war, which was threatening to spill over into Macedonia.
In total, I don't think it is arguable that the overall situation now is not better now than before the NATO intervention. What parts of the overall improvement were caused by the intervention can be argued about, as well as whether the intervention was worth it and whether the situation could not still deteriorate.
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