Yugoslav Market Socialism: From heyday to collapse

Yugoslav Market Socialism: From heyday to collapse

By Michael Karadjis

Introduction – Titoism versus Stalinism

Following the Yugoslav revolution of 1941-45, the government of Josip Broz Tito carried through a very rapid nationalisation of all private capital, a forced Stalin-style collectivisation of the peasantry, and set up a classic Stalin-style bureaucratic apparatus with a highly repressive police regime.

Ironically, this was far more rapid than anything Stalin was doing in the rest of East Europe occupied by the Red Army, where coalition governments between Communist parties and other liberal parties were the norm. Moreover, Stalin opposed the Yugoslav revolution’s socialist rapidity – Yugoslavia had been divided 50-50 between Russian and British interests between Stalin and Churchill at Yalta and Potsdam, and such rapid socialisation left little for ‘British interests’. Even worse, Tito was supporting the revolution in Greece, which had been handed 100 percent to the British sphere.

Tensions exploded into open conflict in 1948, and from then on Yugoslavia made a number of political and economic changes which fall roughly into the NEP/perestroika/Doi Moi category being discussed, though with several highly unique features.

The changes combined a greater use of market mechanisms by state enterprises, and allowing a small-scale private sector, on the one hand, with increasing the control by workers over their own enterprises – the celebrated system of “workers’ self-management” – on the other.

The two aspects are related to the two opposite pressures on the regime following the break with Stalin. On one side, the revolutionary origins of the regime compared to others in Eastern Europe was reflected in the ceding of some power to its working class via self-management. On the other, whatever the initial reasons for conflict with Stalin, the break could only mean total isolation if Tito had not turned to the West. The subsequent economic alignment was reflected in greater use of the market.

Main stages of Titoism

In the first decade and a half, more emphasis was on the pro-working class element of the reform, the self-management, while market mechanisms played only a small role and the central state maintained a significant planning role. During this period, Yugoslavia experienced one of the fastest growth rates in the world, and by the late 1960’s a chronically poor agricultural country with 75 percent illiteracy had been transformed into a highly industrialised, urbanised and literate society. Some 6 million have left their villages to find work in the cities and towns, and life expectancy rose from around 50 to 70 by the 1970’s.

In the second phase, from 1965 to 1974, the market side of the reform became paramount, and this is the height of the famous “market socialism”. Growth continued, but with very marked negatives – Yugoslavia recorded the highest unemployment in eastern or western Europe, and social and class inequality grew to undreamt of heights for a socialist country.

Following 1974, the regime attempted to gain a measure of control over the market, by further enhancing the system of self-management. Yet this was accompanied by an extreme decentralisation of power to republics, municipalities and enterprises, which made any central plan impossible, while easy access to western credit facilitated financial irresponsibility and led to a crushing debt.

The last period was the 1980’s, when the International Monetary Fund (IMF) and World Bank were called in to deal with this debt. Their prescriptions, forced through by a largely unrepresentative federal bureaucracy, demolished whatever aspects of socialism remained.

The final point of this process was the rise of Slobodan Milosevic, backed by the western financial institutions, who pushed through a program in 1988 ending the socialist period, while his promotion of a virulently anti-Titoist Serbian nationalism also squashed the official working class ‘Brotherhood and Unity’ ideology of the Communist period. Such a disastrous end was in league with the end of other such experiments, like the Soviet NEP squashed by Stalinism, and perestroika by Yeltsinism.

The Problem

From the point of view of analysing how socialist regimes could have performed better and what went wrong in most cases, Yugoslavia is a special case. In most cases, Marxists who have been critical of bureaucratic socialist regimes accept some ‘market mechanisms’ and modest private sectors as correctives to ultra-bureaucratic planning, due to the ‘immaturity for socialism’ in terms of economic development of most states that begun implementing it. Yet the combination of bureaucratic rule and the market also has a negative side, in terms of the corrupting of socialist elements by the market and the lack of real social control over the market’s negative consequences, as elements of the bureaucracy become semi-legal participants in it. Meanwhile, the supposedly positive side of the market, allowing competition to create better prices and better quality goods for the consumer, is hampered as bureaucratic and crony participants in the market monopolise it.

Therefore, Marxist critics from Leon Trotsky and Nikolai Bukharin in the 1920’s to Ernest Mandel in the 1980’s have stressed the missing element to be ‘proletarian democracy’, that is, the ability of the ‘revolutionary’ workers to make democratic decisions about the society they are theoretically running, in accordance with classic Marxist-Leninist prescriptions (1). If they can run the enterprises and the state, instead of a privileged bureaucracy, then, the theory goes, they will be able to check bureaucracy, collectively offer ‘social’ alternatives to blind market domination, and expose corrupt bureaucratic participation in the private economy.

The problem is that Yugoslavia seemed to hold out precisely this promise. The regime, while far from democratic, was more tolerant of opposition than others in the East; above all, the system of workers’ self-management appeared to many to be this fabled ‘proletarian democracy’. Why was this system ultimately unable to play the role expected of it?

No ‘Self-Management’ at the top

In reality, there was less ‘proletarian democracy’ than is often thought, and whatever was happening at lower levels of society, the central bureaucracy was left relatively untouched.

Firstly, while it is true that Yugoslavia was relatively politically liberal, it remained strongly controlled by the Party bureaucracy and a powerful military/police establishment which could be rather effective at suppressing opposition. The relative liberalism in the 1950’s and 1960’s (following extreme repression in the late 1940’s, and excepting the iron heel imposed on Kosovo), coincided with continual economic expansion and a continual rise in living standards. When opposition got louder in the late 1960’s following the impact of the market on living standards, the regime cracked down in 1971-72, jailing or expelling from the Party thousands of people. This ultimate ability to crack down needs to be borne in mind when considering how much real power resided with the self-managing workers.

Secondly, the bureaucratic elite was as privileged as any in the East, and this must be taken into account when discussing its determination to maintain its grip on power and the effects of this on other aspects of the system. The elite had found different methods of preserving its power, methods that allowed some popular frustration to be channeled rather than bottled up and ready to explode as in neighbouring countries. A few examples should suffice.

In the late 1940’s, average Yugoslav people were pretty hungry, due to the level of destruction in WWII. Yet the following examples from that time show the extraordinary level of privilege enjoyed by the bureaucrats even in these dark conditions.

A banquet given by Tito was described by a Swiss paper (Er und Sie, February 29, 1949): “In a great hall 300 generals waited, covered from head to foot with gold and silver braid and decorations. With them were women in gorgeous evening gowns. The waiters were in snow-white, gold-trimmed dress–coats. You felt you were in a Hollywood fairyland. The tables groaned under the weight of huge gold and silver dishes laden with food. Eighty different kinds of hors d’oeuvres were served. There was an abundance of Tokay, Bordeaux, Frascati and, of course, champagne” (2).

Another correspondent wrote that “in city hotels I felt ashamed to eat magnificent meals of goose and duck, caviare or filleted salmon, chicken or veal, when I remembered the ‘diet’ of men, women and the few miraculously surviving children in the forgotten villages of distraught Bosnia” (3).

Another wrote from Belgrade that “here, as in Moscow during the war, I am shocked that leaders who boast so much of the dictatorship of the proletariat, should enjoy privileges that are relatively far greater than those enjoyed by any privileged class in Britain” (4).

Thirdly and most fundamentally, ‘self-management’ was restricted to the enterprises and lower levels of authority. This meant that on the one hand workers could make democratic decisions only about local issues and this hence increased an attitude of parochial enterprise self-interest, and on the other, while the central state was unrestricted by democratic control in the arena of political repression, it had no real authority to carry out any necessary level of socialist central planning, the complete reverse problem compared to the rest of the East.

As one author states, “A socialist democratisation would have extended workers’ self-management to central political decision making”. She continues with a historical anecdote, showing that this had been discussed and rejected: “Already in 1947, another Slovenian and a close collaborator of Kardelj, Boris Kidric, warned that the ‘bureaucratic centralism’ which the new system was meant to combat risked emerging within each of the various Yugoslav republics, ‘with the same or even in greater measure, with the same or worse effects’. Kidric recommended giving self-management a vertical dimension, by electing workers from the various republics to make global economic decisions in the best interests of all. Without this, he predicted, decentralised workers’ self-management along the lines of the republics would ‘inevitably lead back into state capitalism – in fact, several state capitalisms, particularistic towards the whole, bureaucratic-centralist towards workers’ collectives’ ” (5).

According to Janos Kornai, these kinds of developments also occurred in Hungary, though there was no ethnic dimension to it. In the framework of the incompatibility of political rule by the bureaucracy, central planning and market mechanisms, the bureaucracy became ‘polycentric’, transforming itself into a network of bureaucracies, each group becoming more independent but preserving its privileges (6).

Hence two aspects which would seem essential for a socialist society – democratic participation or control by the working class, and economic planning to ensure the social surplus is disposed of primarily to promote overall social goals – were here in conflict, one was stronger or weaker in inverse proportion to the other. The right of workers to control their enterprises, and aspects of policy and that part of the surplus most relevant to local concerns, became confused with greater and greater political and economic independence of the enterprises in all matters. Hence giving more independence to the enterprises was seen as giving more rights to the workers who ran them. In reality, what this did reduce was the ability of these workers to control social policy at any level above the local, while throwing them as collective owners ‘independently’ into the savage world of the free market.

By contrast, the higher up the bureaucratic pyramid, the less control from below. Thus, apart from enterprises, workers also had a degree of control over communes, very little over republics, and none at all over the central government. Their complete independence from the central government made central planning for the common good impossible.

Period 1: 1950-65

It is significant from this point of view that the first period of ‘self-management’, before full-blown ‘market socialism’, was its most successful.

Self-management in 1950 handed enterprises over to workers’ collectives, who elected their own managers, and which were originally given control over how their small portion of enterprise profits were to be spent, for example, on a sports club or a child-care center (7). The bulk of the profit still belonged to the state and was disposed of by the Central Investment Fund. Thus a balance existed between worker-run enterprises and the central state.

Gradually, these workers’ collectives with each enterprise were given rights to more or less independently purchase their own raw materials, decide on the variety, output and prices of their products and market them, determine their own wage scale, and to buy, sell and lease fixed assets. Market mechanisms determined many of these decisions, but as they did not control all their social surplus, and as the state still maintained considerable control over prices and other operations of the market, it cannot be said that the market was dominant.

In 1953, legislation was passed which allowed ‘citizens groups’ to found enterprises and hire labour, and for private individuals to purchase assets from state economic organisations to do business but not employ labour. Hence this was equivalent to the Gorbachev regulations in the late 1980’s allowing non-agricultural cooperatives, and self-employment, without rights of individuals to hire labour.

It was during this period that the highest growth rates were achieved. Between 1948 and 1977 industrial growth averaged just under an impressive 10 percent, while between 1956 and 1960, it reached 13 percent (8).

It would be too easy to assert that the relative success of this period demonstrates that maintenance of central planning, a limited use of market mechanisms, and self-management without extreme decentralisation, was the ideal mix. While the record may indicate this, it is impossible to know what may have occurred if the abrupt changes in the mid-1960’s had not occurred. In addition, the reforms in the direction of greater decentralisation and control by the market were the result of growing strains on the system by the 1960’s. The devolving of greater power to ‘below’ – to the market, to enterprises and to republican bureaucracies – seems to have been the bureaucracy’s response to its unwillingness to allow any control from ‘below’ over its power, in the context that it was unable to provide answers itself.

Agricultural de-collectivisation

The other important aspect of this period was agricultural de-collectivisation. In 1951, the agricultural collectives began to be disbanded, decreasing from 6,900 in 1950 to 1,200 at the end of 1953, and 147 in 1960. Edvard Kardelj claimed that “collectivisation is the same as expropriation” (9). Peasants were given the right to buy, sell and rent land and employ labour, and free trade replaced planned purchase of agricultural produce.

These moves ended the premature and forced collectivisation carried out in the late 1940’s. However, there was a negative spin-off: it resulted in serious rural inequality. By 1959, poor peasant households with less than 5 hectares of land each (70 percent of peasants), owned 43 percent of privately owned land, while rich households with more than 8 hectares (13 percent of household), owned 33 percent (10). Likewise, of the 308,000 peasant households in Vojvodina province, 55 percent had no draught animals in 1962. Households with less than 2 hectares of land (40 percent of households), owned only 4.4 percent of ploughs, while rich households owned more than 1300 tractors and a great deal of farm machinery and ploughs (11).

Nevertheless, the reason the regime paid little attention to the issue of rural equality may have been the very rapid industrialisation going on. Unlike in poorer socialist countries, this massive expansion of industry was able to easily permanently absorb the poor or landless peasants in better paying positions in towns and cities with a wide range of social benefits.

Indeed, as the rapid collectivisation was not considered to be ‘true socialisation’, Yugoslav leaders claimed their new policy was successful in socialist terms, because the ‘socialist sector’ in agriculture – state farms and the state-promoted ‘general agricultural cooperatives’ – had grown from 6 percent after the collectives were disbanded to 15 percent of the economy of rural areas by the end of the 1950’s. However, these ‘general agricultural cooperatives’ were mainly marketing cooperatives. This in itself may be a step towards ‘socialist’ relations in the countryside, but they were clearly having little impact on equalising ownership of land. Given the sharp differentiation between rich and poor peasants, the likelihood was that many of these cooperatives became vehicles of kulak development (12), as the debates in the USSR in the 1920’s pointed to.

Period 2: 1965-74 – ‘High market socialism’

This is the classic period of market socialism, but since some market reforms and decentralisation had occurred before this date, and continued after this date, the development of the main reforms along these lines will be discussed here, even if some began earlier.

The central 1965 reform was the dismantling of the Central Investment Fund, with funds distributed to republics and ‘self-managing’ enterprises, and the elimination of most central controls over the workings of the market. This was allegedly to allow greater effectiveness of the self-management bodies at the factory level. Enterprises were now ‘free’ to compete with each other on the open market, and were given maximum control over how to use their social surplus. Enterprises allowed to set their own prices, following which the retail price index rarely dropped below 10 percent.

In addition, there were a number of reforms further expanding the rights of the private sector. In 1963, constitutional changes recognised the role of an element of private capitalism, and gave private individuals the right to hire labour, but only to a maximum of five workers. According to the Statistical Pocketbook of Yugoslavia in 1963, there were 115,000 privately owned craft establishments in Yugoslavia.

The state monopoly of foreign trade was abandoned and specialist trading companies set up. Already in 1953, the ‘Act on Foreign Trade Activities’ had permitted enterprises to conduct foreign trade independently, and in 1961 restrictions on imports were relaxed, as were restrictions on the supply of foreign exchange needed for unrestricted import.

This extension of the market had had three results: “Planning became ineffective, the weight of workers in society declined relative to ‘management specialists’ and unemployment rose. The logic of the market and ‘loyalty to enterprise’ was to eliminate self-management, to give managers the right to fire workers, to give them a stake in the company” and so on (13).

Regarding unemployment, even though in theory workers could not be laid off to boost productivity, competition between enterprises and determination of income according to the market led workers to accept lay-offs as ‘inevitable’. They generally chose to begin by laying off married women whose husbands are working (14). By the mid-1970’s, Yugoslavia recorded the highest unemployment in eastern or western Europe, plus 800,000 emigrants working as ‘guest-workers’ in Europe, accounting for 10 percent of the working population. Counting these “emigrants, the officially unemployed and those looking for work, up to 20 percent of the all Yugoslav labour force is calculated to be out of work” (15). A massive migration also took place from the poorer to the richer republics, as the economic divide between regions greatly widened under decentralised market socialism. For example, 14 percent of the total population of Montenegro and 12 percent in Bosnia worked outside its borders (16). Those who had a richer republic to go to went – Serbs from Kosovo, Montenegro and Bosnia to Serbia and Vojvodina, Croats from Bosnia to Croatia – leaving Albanians in Kosovo and Muslims in Bosnia stuck in the poorer regions.

Next, the wild market competition greatly increased the power of ‘experts’ and managers, who wanted bigger rewards for enhancing the market share of their enterprise, over the power of self-managing workers – their collective decisions to extend workers’ benefits, prevent speed-ups or protect themselves against unemployment became less relevant. “Sectors that gained included managers of export-import companies who enjoyed a meteoric rise, as well as managers of banks and financial institutions” (17).

There is some evidence that the material privileges of managers were already evident before the extension of market reforms of the 1960’s, reflecting both the impact of even moderate market mechanisms and the bureaucratic domination of enterprise management by the League of Communists (LCY) despite self-management. So, in 1958 it was reported that “in some enterprises, the bonuses of the managers and higher staff are forty times those of the workers. In some enterprises, the total amount of the bonus which a group of leaders received is equal to the wage fund of the entire collective (18).”

The increasing power and privileges of the enterprise bureaucracy and the decreasing relevance of workers’ collective decisions led to a drastic drop in workers’ participation in the workers’ councils, which in turn led to further weakening of their power in the enterprise.

Thus membership of the workers councils declined from 156,300 in 1960 to 135,204 in 1970. The percentage of workers in these councils declined from 76 percent in 1960 to 67 percent in 1970 – but looking at production workers alone, in 1970 they were only 55 percent. “But this is misleading because it counts those who are workers by trade, although they may not be working at their trade. Thus the statistic also includes an unknown proportion of former workers who have become full-time officials.” At the 1957 Congress of Workers Councils, 61 percent of delegates were workers; at the second Congress in 1972, “the large majority of delegates were fulltime staff members and highly skilled workers” (19).

The dissatisfaction of workers with this situation was expressed via a dramatic strike wave. The largest number of strikes took place 1965-72, but there was a slight temporary downturn in 1966-67, “when the central investment fund was dismantled and distributed to the enterprises, which used these funds to increase wages. But this capital was very quickly used up, increasing the enterprises’ dependence on the banks” (20). From 1964 to 1968, 77,597 strikers participated in 869 strikes (21).

The onset of full-scale ‘market socialism’ also led to a sharp increase in social differentiation. In a number of articles in the journal Vidik, Croatian sociologist Boris Vuskovic concluded:

“A large accumulation of private wealth has been generated by speculation and trade in real estate, and especially in building land. At the level both of financial institutions and productive units of the economy, alienated centres of power enforce a brutal exploitation on the direct producers ... The main danger lies in a private appropriation of social property and of the results of labour within the domain of public ownership itself. This reintroduces relations and a mentality of a capitalist type into the very core of our social existence.”

Thus Vuskovic notes both open private accumulation in the usually suspect areas like construction, the power of banks over enterprises which was enhanced by the market reform, and the growth of ‘private appropriation of social property’, referring to the power of enterprise managers, the capitalist ‘mentality’ of break-neck competition, and no doubt the diversion of social assets to private accounts. The inequality had become very sharp:

“When earnings and privileges generated outside normal working hours are taken into account, then the spread of personal incomes in Yugoslavia today approaches 1 to 20 – really drastic degree of inequality for a non-capitalist society” (22).

Aside from the growth of private and ‘techno-bureaucratic’ capital, there were also marked differences among workers. According to Nica Jovanov, a high Yugoslav official of the Central Council of the Yugoslav Trade Union Confederation, the wage spread between factory workers and certain bank workers reached 1 to 15 and sometimes 1 to 25 (23), reflecting the rising power of financial capital during this period.

Vuskovic continues with the effect of this inequality in political power:

“The total displacement of workers by leading cadres and specialists in all federal and republican representative bodies is a clear expression of a previous techno-bureaucratic usurpation of the surplus created by labour. The result is to ensure that accumulated social differences and inequalities will be reproduced.”

In other words, the consolidation of the power of a ‘techno-bureaucratic’ class within the enterprises was the basis for the displacement of workers’ representation at higher levels – though as noted above, they never had much representation at higher levels anyway. In 1971, workers made up 55 percent in workers councils, 32 percent of management committees, only 13 percent of municipal assembles, and a mere 1 percent of both republican assembles and the federal assembly (24).

As noted above, this loss of power by workers at the central level was compensated for by giving more independence to the enterprises they (tentatively) managed. Thus under market socialism, decentralisation of power to the enterprises reached extreme levels, compared to the more modest 1950-65 period. The result was that much of the social product became in a certain sense ‘privatised’, as Mandel describes such processes, even if it is in the form of ‘group ownership’ rather than individual ownership. Of course, in all such attempts at ‘perestroika’, there is some devolution of responsibility to enterprises, as extreme central planning is also distorting. However, there is a rather significant question of ‘how much?’

To the extent that overall social conditions did not worsen dramatically and growth continued, it largely relied on easy access to western loans – by the central apparatus, the regional and local apparatuses, and the individual enterprises, all of which could directly borrow abroad for their own projects and trade in foreign currencies without reference to the central government. The West was willing to provide this leeway with credit and direct aid because Yugoslavia was seen as a buffer to the Soviet bloc, and even as an unofficial member of NATO (25). Local banks also extended large scale credit, and in this period, financial capital came to dominate the decisions of enterprises, based on a purely commercial logic which defied social planning.

The easy western credit fueled Yugoslavia’s very high rate of growth – not only during market socialism, but also the very high growth rate of the 1950’s cannot be seen in isolation from this. This allowed Yugoslavia to industrialise without driving down wages as happened in the USSR under Stalin. So it was able to maintain a very high level of investment (40 percent of GDP) with steadily increasing wages, two things that often do not go together (26).

This easy western credit, plus earnings from tourism and remittances from workers working abroad, allowed Yugoslavia to cover another problem created by market socialism – the chronic trade deficit. The ratio of exports to imports rarely exceeded 70 percent, and at times was as low as 50 percent (27). This was a result of the excessive liberalisation of the foreign trade regime in the 1950’s.

The private sector under Titoism

Part of the market socialist polity was a far greater toleration of a small private sector than elsewhere in the East, though only in certain sectors and not touching the ‘commanding heights’ of the economy. As such NEP’s, the private sector is seen as a supplementary engine of growth and distribution, working where the state sector did not need to or was weak.

Yet there were also many of the same problems associated with private sectors as in other such situations, for example, the actual size of enterprises and wealth of enterprise owners was in many cases much larger than reported.

For example, even earlier than the 1963 law, there were a small number of establishments illegally employing many more than five workers, some even employing 500-600 workers (28). According to the newspaper Svet, “the net income of some private handicraftsmen reaches one million dinars per month” (29). According to Vecernje Novosti in 1961, “last year 116 owners of private enterprises each received an income of more than 10 million dinars”, some receiving 70 million dinars, equivalent to $US 100,000 (30).

The daily Politika explained how this is done: “It is difficult to ascertain how wide the net of these private entrepreneurs spreads and how many workers they have. According to the law, they are entitled to keep five workers who are supposed to help them in their work. But to those who know the ins and outs of the matter, these five persons are actually contractors who in turn have their own ‘subcontractors’. As a rule, these contractors no longer engage in labour but only give orders, make plans and conclude contracts, traveling by car from one enterprise to another” (31).

According to Jure Biblic, president of the Croatian assembly in the 1970’s, “the number of billionaires in Yugoslavia has grown in recent years,” especially from property rentals. Full-scale private rental chains existed by putting apartments in the names of different family members. Yet only 5 percent of the non-rural workforce (250,000 people) worked in the official private sector. According to Tito in 1978, those in the private sector were hiding their real incomes and not paying tax corresponding to their income (32).

These problems were caused by excessive bureaucratic regulations and the unrealistically small size of officially allowed enterprises within the allowed sectors, which only the ‘better-connected’ could get through easily. This facilitated the tendency for these better off owners to have privileged links to Party or state bureaucrats at various levels, and the ability of bureaucrats and mangers at various levels to divert assets from state to private enterprises.

Mandel claims that Soviet perestroika’s limited opening to the private sector legalised the already powerful black market (33). Because it had been operating so long, and because of the powerful nexus between its mafia runners and elements of the bureaucracy, it was able to rapidly undermine perestroika and quickly seize state assets under Yeltsin.

In Yugoslavia’s case, the much earlier legalisation of private enterprise may be expected to have headed off this black market development, but the excessive regulations and unrealistic restrictions on size meant there was still much illegality about its actual operations, as noted above. Therefore, the gradual legalisation of larger enterprises in the 1960’s probably also legalised this element of the black market, which had likewise already established a nexus with the local and enterprise bureaucracy. What’s more, in Yugoslavia’s case the excessive decentralisation of the bureaucracy created an atmosphere where such connections would have been enhanced.

There was also a role for foreign capital, but strictly in joint ventures, though this was not large. In the 1970’s, a total of 170 joint ventures came into being, with foreign capital supplying only one-fifth of their capital, a total of $350 million in the whole period (34).

Period 3: 1974-80 – Extending decentralised self-management

The fissures created by market socialism, the rising urbanisation and level of education, and the influence of international events such as the western anti-war movement, the Paris 1968 upsurge and the Prague Spring, together led to a political challenge to Tito from both the left, from liberals, from national movements in Kosovo and Croatia, and from the right (including one wing of the Croatian national movement). Students on Belgrade University launched the ‘Red University’ campaign for university autonomy, and denounced the ‘Red bourgeoisie’ who they accused of seizing power. The upsurge in Kosovo led to the founding of the Pristina University, the first Albanian language university in that most impoverished province.

In 1971-72, Tito led a political crackdown on all wings of opposition, including large-scale Party purges, especially in Serbia and Croatia. Officially targeting the more rightist manifestations of nationalism within both republics, the purge nevertheless covered the whole gambit of political opinion and demolished the chances of a new generation of younger Party leaders to take the helm. Thee weight of the army in the LYC and state apparatus increased, and unions were brought back into line

This crackdown was accompanied by an attempt to tame to extremes of the market, yet the way this was done was curious. Rather than attempting to re-introduce a measure of central planning, new reforms in 1974-76 devolved even further powers to the republics, municipalities and enterprises, hence worsening one of the key problems. The central government essentially became irrelevant.

The 1974 constitution made the republics virtually independent, ironically ceding the kind of powers that the more nationalist elements had demanded before the crack-down. This fact demonstrates that Tito had been more afraid of the democratic power of that movement than its marginal more nationalist wings; as long as the power of the bureaucracy was assured, a new bureaucratic decentralisation could be carried out to keep the local bureaucracy happy.

The 1976 Law on Associated Labour likewise gave even more power to the enterprises. However, this was accompanied by greatly expanding the official power of workers’ self-management within both the enterprises themselves and also over a larger section of wider local social policy. This expansion of their role was the key way in which workers were supposed to impose new ‘social controls’ on the operations of the market – workers were to be a counterweight to technocrats. And its fate is therefore of considerable interest, because social control over the market ‘from below’ might seem precisely a more efficient and democratic method than centralised bureaucratic control ‘from above’.

However, combining this move with further decentralisation was a double edged sword for the ‘self-managing’ workers, as it did nothing to increase their control over the centre, and hence did nothing to enhance even a measure of central planning – neither bureaucratic nor democratic, neither tight nor mild, neither ‘administrative’ nor ‘indicative’. Croatian writer Branka Magas describes this succintly:

“Power was nominally devolved, on the one hand, to workers’ councils (self-management), and, on the other, to the constituent republics. The result was something of a vacuum at the centre. The key political role continued in reality to be played by the Party.” So could the Party, being allegedly a party of the working class, provide that missing element of central cohesion, bring together the needs of the workers from different parts of the country, at least setting some overall planning guidelines? According to Magas, it was no longer primarily a working class party: “the League of Communists is predominantly one of the technical and administrative intelligentsia: officials, professional people and highly skilled workers. The manual working class accounts for only about a third of its membership, with peasants making up another 7-8 percent.” Far from lending any central cohesion, Magas claims that “now the essential locus of its (the Party’s) power became the regional centres, with their extensive economic autonomy.”

“Although the period since 1974 has seen a revival of economic planning ‘in the context of self-management’, the absence of effective institutions at the federal level can only hamper planned direction of the economy.” Analysing some of the deep structural problems that require federal solutions, she asks: “Would the new Yugoslav leaders have sufficient political authority to persuade Yugoslav workers and peasants of the new scale of priorities?” (35).

Economic autarky

Some of the deep structural problems were accentuated by further republican decentralisation. For example, the over-development of processing industries but underdevelopment of the extractive industries and agriculture that feed them was notorious in Yugoslavia. While this was part-driven by the traditional Stalinist preference for heavy industry, the promotion of new consumer industries in the 1960’s did not address the problem either.

If it is assumed that ‘market socialism’ may fix the problem by only allowing firms that could compete on the market to survive, the actual course of events was different. This was partly due the wide exposure of Yugoslav firms to the world market in the heady boom days of the 1960’s – republics and enterprises assumed those days would never end. It was also facilitated by easy international credit, which could cover the growing trade deficit as Yugoslavia had to import the raw materials to run its industries.

Of course, this was the reverse situation to most Third World countries which have to export cheap raw materials and import expensive manufactured goods – in Yugoslavia by contrast manufactured goods made up 75 percent of exports by 1975 (36). But the easy credit and decentralisation enabled everyone to import at a far greater quantity than would have been possible under some kind of overall plan, whether raw materials, consumer goods or manufactured goods in competition with those of fellow Yugoslav republics.

The problem was that once the international recession hit in 1974-75, much of this Weimar mentality came crashing down. Protection levels on manufactured goods shot up in the West, squeezing out Yugoslavia’s inferior products; sources of income such as tourist dollars and especially remittances began drying up – 200,000 guest workers were thrown out of work in western Europe, and another 60-80,000 per year began returning to Yugoslavia.

According to Magas, the roots of the problem “are to be found in the great imbalance created over the past two decades between an extractive industry which has been systematically neglected (along with other infrastructural investments like agriculture, transport, energy and health) and a bloated processing industry, mostly financed by foreign loans, dependent on imported raw materials, primary industrial goods and machine spares – all of which have to be purchased in hard Western currency” (37).

What is more, the resources to develop these undeveloped extractive industries were plentiful in Yugoslavia, especially in the poorer southern republics. Republican decentralisation accentuated this problem as each region developed its own range of industries, creating an enormous epidemic of wasteful duplication:

Yugoslavia “was exporting high quality machinery, but resources where the country enjoyed a natural advantage were left underdeveloped. Thus the historically poorer southern republics did not develop their plentiful raw material resources. Rather, each republic was granted the full rage of basic industries, such as steelworks, on its own soil. According to Andrej Marinc, former member of LCY presidency, ‘We have built refineries and lagged behind in the production of oil and other energy sources; we erected rolling mills and neglected the production of metals’ ” (38).

While this may have seemed very democratic and indeed even a form of affirmative action for the poorer republics, the marked imbalance did not help them. Many of the projects were huge ill-conceived mistakes and resulted in debt-creating monsters that never produced a profit, including “prestige projects and political factories” (39).

What is less often mentioned, however, was the responsibility of western investors themselves for these disastrous decisions, which ultimately had to be paid for by Yugoslavia. The US financing of the FENI fero-nickel plant in Macedonia misjudged the world market, helping lead to a disaster. Dow Chemicals joint construction of the INA petro-chemical refinery in Croatia was another disaster that had to be abandoned at substantial loss in 1982 (40). While “inefficient bureaucrats” are correctly blamed, the equal inefficiency of foreign capitalist firms usually escape blame. Indeed, in the 1970s, western governments and the International Monetary Fund actually advocated the very economic decentralisation they later attacked, believing it would lead to the “free market.”

Moreover, if even the poor provinces could export manufactured goods during the boom, after the 1974 recession it was precisely the more costly industries of the south which lost foreign markets first, while more efficient northern industries survived. More development of their extractive industries would have reduced some costs. Then the international rise in prices of manufactured goods in the 1980’s, and drop in prices of primary products, further accentuated this already wide gap between the republics. By 1980, Slovenia had a GDP per capita seven times as high as Kosovo.

Perhaps even worse, the illusions continued after the onset on world recession in 1974 precisely due to further decentralisation of the right to obtain credit combined with the West continuing to lavish credit on Yugoslavia even when other means of covering the various economic imbalances were drying up. Between 1974 and 1978, industry grew 33 percent, employment grew 4.5 percent per year and purchasing power increased 25 percent (41).

As each republic, municipality and enterprise could obtain western credit and deal in foreign currency, the crisis could be ignored, and republican and provincial bureaucracies continued even with the most ruinous autarchic industries. Moreover, in order to reduce the power that financial capital had gained over enterprises during ‘high’ market socialism, the post-1974 system introduced a new unique institution.

The central bank of Yugoslavia was broken into a number of central banks and republic banks. Debts of enterprises accumulated before 1974 were annulled, and local banks were transformed into a financial servicer of the local enterprises that funded them. Opposite to the post-1965 situation when banks pursuit of immediate profit from enterprise debt drove them, now interest rates became very low (since the enterprises seeking loans were those that funded them and decided the bank’s policies). Rates were so low that when taking inflation in to account, they were negative (42).

‘Those who need to control inflation – the central authorities – lack the instruments to carry this out, while those who directly drive inflation – local enterprises and the regional banks partially funded by them – have little incentive to restrain credit and make investment efficient (43). This led to calls (eg by Bakaric, the regime’s principal Croatian leader) for “all banks to be nationalised.” However, they were not private, but ‘social property’ stimulating economic anarchy and “group forms of property” (44).

While we saw above that republican governments had no more working class participation than the federal government, nevertheless, given that they were ‘closer’ to the people, and that no economy really runs on a local or enterprise level, the enterprise and local bureaucracies gradually coalesced around the republican bureaucracies. This was also economically logical, given the abandonment of any economic role for the centre in 1965 and even more in 1974. Moreover, any attempt by the centre to restrain republican leaders was seen by leaders and often workers further down at the enterprise and locality level as strengthening the same central power which wanted also to restrain the independence of the institutions they did have some control of. The real economic power of the republics thus became a base for rising nationalism, not only in the ‘outlying’ republics but also in the central Serbian republic.

Ironically, this increasing irrelevance did not result in a reduction in the size of the federal bureaucracy - on the contrary, employment in the federal administration was growing at 16 per cent annually, in contrast to 2.5 to 4.5 per cent for the country as a whole, in the early 1980s (45).

Expanded self-management

Yet what of the expanded rights to self-management after 1976?

In the 1976 Law on Associated Labour, Rank and File Organisations of Associated Labour were given full rights to manage the entire social surplus. However, the scope was now extended well beyond the enterprise, with these self-management bodies in enterprises, localities, communes and republics disposing of this social surplus through the ‘system of delegations’ and ‘communities of interest’.

The ‘system of delegations’ was supposed to provide for direct representation of elected workers’ delegates in the formulation of budgets worked out by cities, autonomous provinces and republics, though not on the federal level. ‘Communities of interest’ brought together workers and consumers of services, and were empowered with control of the portion of social surplus that went to collective consumption (education, health, daycare etc).

Thus, while still based on the market, overall social control over the market was supposed to flow from a long process of discussion taking into account local development plans, while leaving a very large degree of autonomy to the republics, municipalities and enterprises.

The LCY was supposed to be what held it all together, setting overall priorities and targets. Planners decisions were to be the product of a long process of balancing out many conflicting interests expressed by individual plans of each Rank and File Organisation of Associated Labour, each commune, each republic, and less directly, up to the federal level (46).

Compared to the maintenance of a largely bureaucratic central regime in 1950-65, despite compromises, and the almost complete ascendancy of the market in 1965-74, this new system looked a lot like the promised ‘dictatorship of the proletariat’ for real.

As this system only began to be implemented in the second half of the 1970’s, and then after 1980 the debt crisis brought in the International Monetary Fund and World Bank to virtually control the country’s economic direction, the real experiment was actually quite short-lived. As such, its failure could conveniently be blamed on not having enough time. The gigantic debt it inherited and then had to be paid for, and much of the other damage already done, might mean it is unfair to slam this system as unsuccessful. However, there were a number of key problems not addressed while others were made worse.

Firstly, as Nica Jovanov, a high Yugoslav official of the Central Council of the Yugoslav Trade Union Confederation, pointed out, this institutional strengthening of the workers’ councils occurred after the social weight of workers within them had fallen to an all-time low. “In a relatively brief period the number of workers in the workers councils has fallen to 55 percent, while the technocrats attained decisive influence within them. A paradoxical situation has arisen: the workers councils began to strengthen their position as institutions at a time when their social composition (and their influence as well) was no longer working class” (47).

Secondly, according to Magas, “The working class can at present find only a muted voice in the maze of institutional and constitutional structures that regulate political life” (48), and according to Verla, “The basis for making decisions is presented ‘in the form of a heap of unreadable documents (because of their language and volume)” (49).

Undoubtedly, both the complexity of the structures and the volume of the documents would make working class participation difficult in any context, yet this leads to a fundamental problem: it is the complexity that theoretically allows for maximum democratic input from below, and the number of documents is also aimed at providing maximum information to those making decisions.

Thus time would always be a problem for average workers, and therefore ‘experts’ of various sorts would always have the upper hand, at least unless working hours could be drastically reduced with new technology, as in the socialist ideal.

The problem was that not only were working hours not being reduced, but the opposite was occurring: the free market was forcing workers to work longer: “In practice, the workers don’t have time to participate in this since they work more than 40 hours a week, and often supplement their legal job with under the table work due to their low basic pay. Because these workers lack the time to consider other alternatives, it is clear they cannot really participate in determining overall objectives.” This means that in practice, “the workers have no knowledge beyond their individual, ‘tangible’ experience, of anything beyond the conditions of work and individual and collective income over the short and medium range” (50).

Thirdly, despite alleged social control over market excesses, inequalities continued to grow. This was no doubt based partly on the displacement of workers from real control and the great rise in inequality in the earlier period as shown above, but also to the intensification of decentralisation in the new system. The decentralised method of determining income meant that the highest incomes accrued in sectors having a privileged position within the market. In theory, each was paid ‘according to their work’ but in reality, they were paid ‘according the value of their work in the marketplace’ (51).

And it was this further sharpening of decentralisation in the 1974-76 reforms that were the main problem with the new extension of theoretical workers’ control, exacerbating many of the problems noted above, including a fiscal irresponsibility at every level. While the new system had the advantage of extending self-management beyond the enterprise to give it a level of control over social policy, this control was still exercised at a local level, while the fundamental problem of lack of democratic control over the central state, and its lack of authority to carry out any central economic planning, was only intensified.

It should however be emphasised that while these were the weaknesses of the system, there were aspects of it viewed very positively by Yugoslav workers. For example, ‘Self-Management Workers Control Committees, much more controlled by workers than the actual workers councils were, were ad hoc bodies set up by workers to inspect any aspect of management at any time. An inquiry in 1976 showed how important workers considered them to be. However, these control committees were not empowered to make decisions regarding the irregularities they uncovered, merely to report to higher bodies.

According to Verla, “The growing gap between the acknowledged rights of the workers and their real power has been pointed out. But that does not mean that these rights are simply formal rights. The impressive effectiveness of strikes, or workers’ control actions, reflect social relations where the rights of self-management have a very real weight. The managers of an enterprise are approved by the workers, and can be removed. Self-management is an ‘ideological reality’. That is, it has been largely reduced to a paper right as a result of all the mechanisms described; but the workers would rebel if it were eliminated (52).

The question of strikes
Regarding the question of strikes noted above by Verla, their prevalence, on the one hand, would indicate that self-management was unable to satisfy working class aspirations within the system. Strikes developed outside the political structures and self-management bodies, the Party and unions, and often strikers and those who strikes were directed against belonged to the same party branch, same union or same self-management body; while in 44 percent of strikes, unions supported the strikers’ demands, they disapproved of strike action, and only in 11 percent of cases did unions support both (53). On the other hand, their ‘effectiveness’ would indicate the level of power that workers still possessed within this system, both socially and ideologically.

There were debates on the issue of legalising strikes at time of the 1976 law, but Jovanov claimed the leadership was divided on and so the law simply did not mention them, therefore they were neither legal nor illegal. Magas claims that the 1976 law “gave them (the unions) a greater independence from party and state, and demanded more action from them on behalf of their members’ material interests. Yet their true basic function is still to seek out and diffuse conflicts at their base, before they develop into full-scale strikes” (54).

However, this did not seem to be very effective, because strikes were still very common. On the one hand, Magas claims “they normally end in victory for the workers.” In fact, according to a survey, 58 percent of strikers were totally satisfied with the results of strikes, 23 percent were satisfied, and 17 percent partially satisfied – a total of 98 percent! (55) On the other, they also end in “replacement of the party, trade-union and factory officials who had allowed the strike to happen in the first place” (56). Jovanov also claims the organisers of strikes were often punished or thrown out of their jobs or out of the party (57).

Of 869 strikes in 1964-68, the largest number were in metallurgical, wood, and textile industries. These sectors were at the bottom of the chart of personal income. There were no strikes in banks, import-export companies, government offices or similar institutions, because the “general social conditions of the employees are far better than that of workers in industry.” The total income of a textile worker was one quarter that of an employee of an import-export company.

However, there were also strikes by teachers and medical workers, due to “the moderate value placed on their labour and the generally bad social conditions of teachers. These factors seriously threaten the high ethical and professional standards of teachers and medical employees” (58).

Workers had the most impact and influence in matters that raised their own level of consumption. The cause of strikes was often the division of the plant’s income between he wage pool and productive investments, “with the directors wanting to increase investment at the expense of wages, and the workers taking the opposite view.” Jovanov also noted that undemocratic practices undermining self-management were often to blame, criticising the practice of “the factory manager, the party secretary, and the union leader making decisions behind closed doors and then compelling the workers to vote for them.” It was incorrect, he stressed, to speak of workers striking ‘against themselves’, as trhese disputes point to dysfunctions in self-management and real social conflicts (59).

On the other hand, Jovanov, claims one problem was “insufficient political organisation of the working class on the level of overall society.” This leads to “appearance of short-term, partial interests” that may be “in contradiction to the class interests and historic mission of the working class as a whole. Consequently, the weak class consciousness of one segment of the working class is one of the negative factors that causes strikes” (60).

This claim is very much in agreement with the overall analysis above. It is also notable that someone as openly sympathetic to strikers as Jovanov could still see some strikes as contradicting working class interests “as a whole”. For example, in a situation where there was no (official) “exploiting class”, do strikes by better-off Slovene workers for better pay contradict socialist goals such as raising the overall social surplus which could help development in the poor regions? Of course, as he otherwise asserts, there were real social conflicts, there had clearly developed an unofficial exploiting class, most of the social surplus was decentralised anyway, no-one was confident where the rest was going, and even that supposedly going to development in the south was often ending up in wasteful bureaucratic projects while these regions became poorer. Small wonder this might lead to “weak class consciousness.”

Finally, in answer to the question about the causes of strikes outside the enterprise, 90 percent of strikers answered the position of the workplace in the economic system and unfavourable market conditions (61). Thus the strengthening of self-management locally was unable to eliminate such differentiation brought about by the market.

Period 4: 1980-88 – Control of state taken by IMF and World Bank

By Tito’s death in 1980, Yugoslavia had accumulated over 20 billion dollars in foreign debt. The International Monetary Fund and World Bank were brought in to restructure the Yugoslav economy to force through repayment of the debt. The program included general economic liberalisation, privatisation, bankruptcy laws, severe restrictions on wages, elimination of price controls and demands for the end of workers’ self-management to give greater powers to enterprise managers to act without consulting workers collectives. The program as a whole was a program for the elimination of socialism in Yugoslavia, but while its effects very drastic, the entire program could not be put into place in one go.

The federal state became an instrument of the IMF and World Bank in driving this austerity program. However, given that the federal state had for some time performed no economic role, this new role was perceived by republics, enterprises and workers as one of merely acting as a tool for these foreign interests. This was exacerbated by the facts seen above regarding the pyramid of power – the most democratic organs were at the bottom and the least democratic at the top. It was thus the least democratic organ that was being used by international creditors to impose an unpopular program. This gave the federal state little authority to carry this program out, or even a more limited program which was no doubt necessary to end the fiscal irresponsibility.

This meant that key to the IMF/WB program was a new political and economic re-centralisation of power to better suck out the debt and force through the economic liberalisation program, to overcome republican barriers to an unrestricted Yugoslav-wide market for the flow of western investments and goods, and to remove the republican veto on federal economic decisions dictated by the IMF (62). This was also the view of western governments. The US Congress assessed that “some strengthening of federal powers” would be necessary and that “unless there is a reduction in those geographic barriers (ie republican borders), economic reform in Yugoslavia will have to wait. Such an eventuality could be catastrophic” (63). This re-centralisation attacked both the privileges of the republics and republican barriers to the free market, and the system of self-management.

To service the debt under the IMF programs, imports were cut, which resulted in great industrial stagnation due to industry’s dependence on imports – between 30 to 60 percent of industrial capacity became unutilised. Industrial losses doubled each year between 1981-83 (64), mainly in basic industry, which had been set up as large processing plants without an equivalent extractive industry. The underdeveloped republics and provinces in the south suffered particularly from this. This thus drove the whole economy even further into crisis, and industrial growth crashed to zero in 1987-88 and then -10.6 per cent in 1990 (65).

Servicing this debt took up 20 per cent of annual exports. The diversion of production to exports to pay the debt led to soaring inflation (running at 200 percent and by 1989 reaching 100 percent per month) (66) and a huge reduction in living standards. Workers had lost 50 per cent of their buying power by the mid-1980s, including through direct wage cuts ordered by the IMF (67), and unemployment hovered around 20 per cent.


While it has been noted that the central regime was the least democratic element, there was also another aspect which hastened the end of Yugoslavia as a state. Yugoslavia was a federation of theoretically equal nations; any tampering with this, by removing republican ‘privileges’, was likely to upset the delicate ethnic-constitutional balance which Tito had presided over. Furthermore, members of the Serb ethnic group dominated federal structures. For example, Serbs, around 40 per cent of the population, made up 78.9 percent of personnel in the federal administration (68), and about 70 percent of the military officialdom of the Yugoslav Peoples Army (JNA) (69). By contrast, Albanians, with 8 percent of the population, were only 1 percent of officers. This meant that recentralisation was perceived as increasing Serb domination of Yugoslavia, and struck at the very basis of the federation.


As Branka Magas put it: “The grip which the IMF now exercises over the country’s economy needed a fulcrum and found it in the increased power of the federal state, not only over the republican and provincial centres, but also over the main levers of the economy. As the government in Belgrade becomes the main arbiter of who is going to prosper and who go under, national intolerance has once again been placed on the country’s agenda” (70).


Resistance to the program was thus two-pronged – republican bureaucracies fought to maintain their privileges, and workers fought to maintain their rights under self-management, and to oppose the offensive against their wages and conditions. While the republican fight tended towards nationalism in the different republics, the working class fight tended towards unity as it grew larger. Thus in 1987 there were 1700 strikes involving workers from all over Yugoslavia, in a great number of cases involving cross-ethnic strikes.

The identification of the state with the interests of foreign creditors carrying through an anti-socialist program led to the collapse of working class membership of the LCY. The Belgrade party branch lost 4,389 members in 1986, most of whom were workers. “The rate at which workers are leaving the Party trebled over the last year” (written in December 1987) (71).

As the ethnic balance thus started becoming unstuck, the central bureaucracy developed another role apart from serving its foreign creditors – gendarme. The Yugoslav Peoples Army (JNA) was eating up two thirds of the federal budget (72). The legendary privileges of the military high command were already a source of popular annoyance - while the average income in 1991 was $400, the average army officer received $2300 monthly, an apartment, medical insurance, early retirement and a pension ten times the average – and many were well above ‘average’ (73). Opposition to diversion of republican funds to the JNA was accentuated by its crackdown in Kosovo from 1981 onwards; this was seen as acting only on behalf of the republic of Serbia. The economic crisis was already leading to calls by more nationalist elements in Croatia and Slovenia to slim down their contributions to the fund for the south, which delivered funds from richer to poorer republics, but this was not acted upon; yet giving money to help the Kosovo economy is one thing, but giving it to help Serb troops police the Albanians another. In 1989 Croatia and Slovenia withdrew their forces from the federal occupation of Kosovo (74).


Into this picture came Slobodan Milosevic, who seized control of the Serbian wing of LYC in 1987 riding a wave of Serbian nationalism. If nationalism among other nationalities tended towards fragmentation, Serbian nationalism emphasised recentralisation under its own control. This is one reason he was originally viewed very positively by western leaders and the IMF. Moreover, the economic reforms he drove through were also backed by the IMF and can be seen as the final nail in the socialist coffin.

Milosevic gathered around himself the cream of the liberal economic intelligentsia in May 1988, in the “Commission of the Presidency of the Republic of Serbia: The Commission for Questions of Economic Reform”, usually known as the ‘Milosevic Commission’.

Its economic reforms opened the Yugoslav economy to 100 percent foreign ownership rights (Milosevic called on Yugoslavs to abandon their “unfounded, irrational and primitive fear of exploitation by foreign capital”); private property was given full constitutional equality with public property and banks were deregulated; enterprises were allowed to collapse and create unemployment; and “workers' self-management” was downgraded and eventually abolished, workers being encouraged to become shareholders, while enterprise managers were given still greater flexibility to act without restraint by the workers. Workers’ councils were to be replaced by ‘social boards’ controlled by enterprise owners and creditors. Milosevic exhorted these enterprises to “function on economic principles, strive to create profits and constantly struggle for their share and place in the market”. The Financial Operations Act allowed for the closing of “bankrupt” enterprises - in 1989, 248 firms were steered into bankruptcy or liquidated, with 89,400 workers laid off. The first stock exchanges in Eastern Europe were set up in 1988 in Serbia and Slovenia (75).


These changes combined with the official promotion of the nationalism of the central nation helped destroy socialist Yugoslavia. The great multi-ethnic strike wave of 1987-88 which briefly looked like posing a federation-wide alternative ‘from below’, was scupered by the mobilisation of Serbs around nationalist slogans against the ‘enemy’ nations in an ‘anti-bureaucratic revolution’. These nationalist mobilisations overthrew the local Comunist parties in the republic of Montenegro and the autonomous province of Vojvodina, bringing them more directly under the control of the new Serbian regime. In early 1989, federal troops occupied Kosovo, abolished its autonomous status, killed 24 striking miners and sacked 13,000 workers at the Trepca mines – the entire Albanian part of the workforce. Formerly having a 'high level' autonomy, representing the fact that Kosovar Albanians were the third largest national grouping Yugoslavia, Kosova was now reduced to a mere province of Serbia. This represented a complete smashing of the Yugoslav constitution. Yet while abolishing Kosovar and Vojvodina autonomy, and taking Montenegro under control, these two former autonomous provinces and the Montenegrin republic still had federal representation, in an obvious contradiction. The reason for this was that it meant that the Milosevic regime now controlled four of the eight federal seats (the other four being the republics of Slovenia, Croatia, Bosnia and Macedonia).

In January 1990, the LCY collapsed at its last Congress, the different republican parts of it renaming themselves ‘Socialist’ or ‘Social-Democratic’. Two months later, Croatian elections brought to power a Croat nationalist mirror image of Milosevic in the form of Franco Tudjman. Each new republic enacted its own privatisation legislation over the next two years. The Serbian regime began, via control of the JNA, illegally arming Serb militias among the Serb minorities in Croatia and Bosnia, in order to annex them into an expanded 'Greater Serbia; its right to intervene into other republics to allegedly 'protect' Serbs living there was written into the new Serbian constitution in 1990. In response to this, and to the crushing of Kosova, in late 1990, Slovenia and Croatia announced they would hold referendums in 6 months time if the federation was not reorganised into a confederation, to release themselves from the increasing central and Serbian control of the now defunct federation. In addition, the Kosovar Albanians held a referendum in late 1990 calling for an independent state, passed by over 99 percent of voters.

In March 1991, the self-styled 'Serbian Republic of Krajina', the part of Croatia being taken over by Serbian militias, declared independence from Croatia, and began to ethnically cleanse the Croat population living there. In June 1991, on the eve of the Slovene and Croatian referendums, US Secretary of State George Baker arrived in Belgrade and voiced support to the maintenance of the unity of Yugoslavia "at all cost," and claimed any independence declarations by the two republics would be "illegal and illegitimate." The same month, independence won out overwhelmingly in both referendums; Croatia and Slovenia declared independence from Yugoslavia. A half-hearted attempt by the federal government and army to rein in Slovenia was aborted, as Milosevic - now in effect the real power in Yugoslavia despite only being head of the Serb republic - had no interest in Slovenia, as it contained no Serbs. By contrast, Serbia and the now completely Serb-run JNA launched a massive attack on Croatia over the next six months, devastating the country, destroying 40 percent of Croatian industry, killing 10,000 people, expelling hundreds of thousands of Croats from one third of Croatia which was annexed as a 'Serb Republic'. At the end of the year, UN forces moved in to separate the Serb and Croat forces, essentially entrenching the division of Croatia. In this context of this complete destruction of Yugoslavia, the European Union and Russia finally recognised Slovenia and Croatia in January 1991, as guns were silenced. The US, however, continued to insist that it recognised "only one government on the territory of Yugoslavia", ie, Belgrade.


Conclusion

The main problem with Titoism’s bold combination of dominant socialist property, market mechanisms and workers’ self-management was the extent of political and economic decentralisation that these other aspects were blended with, as well its combination with an unrepresentative central bureaucracy which continued to grow despite its facilitation of decentralisation and hence its abdication of a real economic role.


Before summarising this main problem, it is worth briefly looking at positives and negatives of the other three aspects.


The domination of socialist property forms contained many of the same positives and negatives that can be seen in other state-socialist countries. Positives included a very rapid rate of growth from being a poor agricultural country to becoming a modern industrialised, urban and educated society, high levels of literacy, drastic reductions of health problems and great rises in health indicators, a general commitment to social equality in the early days, and a relatively high social and ideological position of workers within the set-up. Its negatives included the usual low levels of efficiency and declining quality of industrial output together with the usual ‘soft budget constraints’ on enterprises.


The market mechanisms worked to reduce these negatives of central planning, and in period one, their modest application combined with socialist property and workers self-management to allow a degree of dynamism in the economy lacking in other East European states. The decision to extend this mechanism greatly after 1965 was aimed at reducing these soft budget constraints and improving efficiency and competitiveness, and as the economy continued to grow dynamically, it may well have had these effects. On the negative side, the freer market after 1965 also produced many of the usual problems, including inflation, reasonably large-scale unemployment and very marked social inequalities at a level normally considered unacceptable for a socialist society.


In combination with these market mechanisms was the toleration of a small but significant private sector. As in most other cases, private ownership was restricted to certain sectors, and not allowed in the areas the state considered to be strategic. This aspect is aimed at helping the private sector help the economy in areas where it may do better and do not threaten overall socialist control, which also then allows the state to concentrate resources on the areas it considers more central. However, also as in most other cases, the actual bureaucratic procedures and restrictions on size (ie even after the 1963 reform, only 5 employees were allowed) were unrealistic and hence encouraged much illegal private activity with its corrupting influence both on bureaucrats and on the enterpreneurs themselves. It seems an important distinction needs to be made between clearly restricting the areas the private sector should operate, together with necessary social restrictions (eg labour, environmental, health standards), and unrealistic restrictions on size and volumes of red tape.


The aspect of workers self-management was the new element, to complement but also tame market mechanisms within the overall loosening of central bureaucratic state control of the economy. If workers run their own enterprises and make their own decisions they have a better feel for the real needs of the enterprise and feel less alienated from decisions made either by bureaucrats or capitalist owners. They may be able to democratically stop corrupt activities of managers who they can control and elect, and they may make decisions based on the social needs of workers and their localities rather than only the more limited commercial decisions of purely market driven enterprises. This was undoubtedly part of the dynamism of the Yugoslav model, and it also increased the generally high social and ideological position of ordinary workers already evident in many socialist states, perhaps making it more real. The fact that strikes were nearly always successful and therefore workers did not allow the ravages of the world market and bureaucratic mis-planning to have too much of an effect on their standard of living is evidence of this. The very multi-ethnic nature of the last great wave of working class struggle in 1987-88 was evidence of the potential of this class in Yugoslavia.


However, its negatives included the fact that the very ‘inefficiency’ often occurring in state enterprises can even be intensified where workers have complete control, as, looking at it from a narrow point of view, they may be even less interested than managers in making themselves work harder or faster or produce better products, let alone sack themselves. If that contradicts the idea that workers’ control makes them less alienated from their enterprises, this would probably depend on other factors as well, including the degree of market mechanisms, the degree of budget constraints, the degree of real control they have, the degree to which they can see other social results of their labour (eg better local schools for their children), and the degree to which they see their work as part of a greater socialist whole. So here we need to look at the intertwining of factors.


In this paper it appears that the most successful period overall was the initial 1950-65 period when market mechanisms were relatively modest and a degree of central planning remained. This means that market mechanisms imposed a degree of market discipline on the self-managing workers without becoming the dominant factor. However, once market mechanisms became dominant after 1965, while they may well have imposed greater market discipline and budget constraints on the enterprises, they also revealed an inherent clash between what workers considered to be their rights and what the market created, leading to a new alienation. ‘Market discipline’ in the final analysis means unemployment; but the reality is that this can occur even when you do work harder due to the fact that some succeed and some do not in an open market. The rule of the market thus strengthened the position of market-oriented managers vis a vis workers in the enterprises, self-management began to lose meaning, and hence the proportion of production workers in the workers councils and management boards declined drastically, leading to still further weakening of self-management. The price rises induced by the market also had the effect of forcing workers to work longer hours and in second jobs, further reducing their time to really put into running management – a chronic weakness in all such experiments.


In effect, the decentralised enterprises were becoming units where a decentralised bureaucratic elite was forming, and in the market period this elite was also transferring its wealth to its growing private concerns. This all led to extreme social inequality, a situation still less conducive to the idea that workers needed to work harder to become more efficient to enrich others.


While the economy kept expanding in this situation, this may have had much to do with the boom in the world capitalist economy at the time. Whether this more open market situation would have dealt better with the post-1975 international recession than the new system did is impossible to know, as this was also when the system was adjusted. While it may be argued that it would have dealt better with the financial irresponsibility of enterprises through harder budget constraints, it also needs to be remembered that the discussion is not about whether capitalism or socialism are more efficient systems, but how NEP-style socialist systems perform. The situation even before 1974, of having the highest unemployment in Europe, about 10 percent of the working population working abroad, and social inequalities of a very severe nature, indicate that the question of capitalism or socialism was then being posed.


As such, while market mechanisms and a private sector are important parts of the mix, they can hardly be considered decisive to the success of a country with a socialist orientation. So aside from the market and the budget constraints, what of the other factors influencing the outcome of self-management listed above – “the degree of real control they have, the degree to which they can see other social results of their labour, and the degree to which they see their work as part of a greater socialist whole”?


The degree of real control of their enterprises had eroded, as noted, but the new system after 1974 theoretically expanded the other two factors. In particular, the extension of self-management bodies beyond the enterprise to social control at the local level was very significant, and given more time, may have been more effective. In fact, this aspect may have been a healthy addition to the mix from the 1950’s, enabling workers to directly see the results of their work in better local schools, health services etc. the degree of real control was also theoretically extended to higher levels in communes and even republics, though as pointed out, this occurred at precisely the time that the actual role of workers within self-management bodies had already reached an all-time low.


But it is when we speak of the degree of real control at a federal level, and related, the degree to which they see their work as part of a greater socialist whole, that the real problem of decentralisation – extended still deeper by the 1974-76 reforms – becomes clear. By limiting the scope of self-management to the enterprise level until 1976 and then only extending it to the local level, the parochial side of workers’ control was accentuated, as it was only at the local level that a real effect could be seen. Conversely, the lack of any democratic control from below, of ‘self-management’ at the federal level, helped preserve a very privileged bureaucracy at the centre even as its economic role was being reduced to nil. This lack of any central role in planning could not but lead to economic fragmentation and fragmentation of working class consciousness. Meanwhile, this was combined with a new banking system that did the total reverse of the post-1965 period – if the latter led to a situation where purely commercial rather than social decisions became paramount, the new system whereby enterprises controlled banks, combined with the continuing largesse of western banks, fuelled the financial irresponsibility of each enterprise, commune and republic which had now completely decentralised rights to operate independently on the world market and in the international banking system.


Ultimately, when the central government had no choice but to begin reining the republics, communes and enterprises in, when forced to confront the debt crisis, it had no authority to do so, as it was itself the least accountable organ. This was only intensified by the fact that it was now acting under the control of international financial institutions, and then also by the perception that its other role consisted mainly of paying for a huge military machine whose role in Kosovo was mainly the concern only of the dominant republic. This could only lead to collapse of the federation at the same time that the federal government’s prescriptions, under western financial tutelage, carried out a program that could only be described as frankly anti-socialist.





REFERENCES


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(2) Quoted in The Origins of the International Socialists, (Ed.) Richard Kuper, Pluto Press, article by Tony Cliff, ‘On the Class nature of the Peoples Democracies’, Pluto Press, 1971, p 53
(3) ibid, p 53, quoting The Contemporary Review, February 1946
(4) Ibid, p 53, quoting Vernon Bartlett, ‘Tito has special luxury shops for friends, workers are barred’, News Chronicle, April 26, 1949
(5) Johnstone, D, Fools’ Crusade, Pluto Press, London, 2002, quoting Vera Vratusa-Zunjic, ‘The intrinsic connection between endogenous and exogenous factors in social disintegration: A sketch of the Yugoslav case’, Dialogue, Paris, June 1997, p 23
(6) Mandel, E, Beyond Perestroika: The Future of Gorbachev’s USSR, Verso, 1991, p235
(7) Dick Nichols, ‘The disintegration of the Yugoslav economy’, Direct Action, November 15, 1998
(8) Ibid.
(9) Edvard Kardelj, Opening Address, 9th Plenum, 4th Federal Committee of the Socialist Alliance of the Working People of Yugoslavia, May 5, 1959, quoted in Is Yugoslavia a Socialist Country, Foreign Languages Press, Peking, 1963
(10)Komar, S, ‘Some problems concerning the countryside and the peasant households’, Socializam, No. 5, 1962, quoted in Is Yugoslavia a Socialist Country, op cit
(11)Index, No. 2, 1962, quoted in Is Yugoslavia a Socialist Country, op cit.
(12)Is Yugoslavia a Socialist Country? Op cit
(13)Catherine Verla, ‘Workers self-management in Yugoslavia today’, Intercontinental Press, May 19, 1980
(14)Ibid.
(15)Dick Nichols, op cit
(16)Magas, B, The Destruction of Yugoslavia, Verso, London, 1993, p 83
(17)Ibid.
(18)Letter to the Central committee of the LCY to its organisations and leaderships at all levels, February 17, 1958, quoted in Is Yugoslavia a Socialist Country, op cit.
(19)Catherine Verla, ‘How policies of Yugoslav bureaucracy spur strikes’, Intercontinental Press, May 19, 1980
(20)ibid.
(21)Nica Jovanov, ‘Extracts from study of Yugoslav strikes’, Intercontinental Press, May 19, 1980
(22)Boris Vuskovic, New Left Review, No. 95.
(23)Catherine Verla, ‘Mounting Economic Difficulties in Yugoslavia’, Intercontinental Press, March 12, 1979
(24)Catherine Verla, ‘How policies of Yugoslav bureaucracy spur strikes’, op cit.
(25)Anton Bebler, “US Strategy and Yugoslavia’s Security,” Yugoslav and American Views on the 1990s, Simic, Richey and Stojcevic Eds, Institute of International Politics and Economics, Belgrade, 1990
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(27)Ibid.
(28)Todorovic, M, ‘The Class Struggle on Two Fronts,’ Nasha Stvarnist, March 1954, quoted in Is Yugoslavia a Socialist Country, op cit.
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(31)Politika, December 7, 1961, quoted in Is Yugoslavia a Socialist Country, op cit.
(32)Catherine Verla, ‘Mounting Economic Difficulties in Yugoslavia’, op cit.
(33)Ernest Mandel, Perestroika: The Future of Gorbachev’s USSR, Verso, 1991, p 27
(34)Catherine Verla, ‘Mounting Economic Difficulties in Yugoslavia’, op cit.
(35)Magas, B, op cit, p 80-82
(36)Nichols, op cit.
(37)Magas, op cit, p 95.
(38)Nichols, op cit.
(39)Hashi, “The Disintegration of Yugoslavia,” in Capital and Class, no. 48, Autumn 1992, p57
(40)Lampe, J, Yugoslavia as History, Cambridge University Press, 1996, p 314
(41)Catherine Verla, ‘Mounting Economic Difficulties in Yugoslavia’, op cit.
(42)Catherine Verla, ‘Workers Self-Management in Yugoslavia Today’, op cit.
(43)Dick Nichols, op cit.
(44)Catherine Verla, ‘Mounting Economic Difficulties in Yugoslavia’, op cit.
(45)Woodward, S, Socialist Unemployment, Princeton University Press, Princeton, 1995, p356, quoting Zagreb daily Vjesnik, September 8, 1982.
(46)Catherine Verla, ‘Mounting Economic Difficulties in Yugoslavia’, op cit.
(47)ibid, quoting Vjesnik, September 2, 1978
(48)Magas, B, op cit, p 82
(49)Catherine Verla, ‘Workers self-management in Yugoslavia today’, op cit.
(50)Catherine Verla, ‘Mounting Economic Difficulties in Yugoslavia’, Intercontinental Press, op cit.
(51)Ibid.
(52)Catherine Verla, ‘Workers self-management in Yugoslavia today’, op cit.
(53)Nica Jovanov, op cit.
(54)Magas, B, op cit, p 82
(55)Nica Jovanov, op cit.
(56)Ibid.
(57)Catherine Verla, ‘Mounting Economic Difficulties in Yugoslavia’, op cit.
(58)Nica Jovanov, op cit.
(59)Catherine Verla, ‘Mounting Economic Difficulties in Yugoslavia’, op cit.
(60)Catherine Verla, ‘How policies of Yugoslav bureaucracy spur strikes’, op cit.
(61)Jovanov, op cit.
(62)Woodward, S, Balkan Tragedy, The Brookings Institution, Washington, 1995, p 59
(63)US House of Representatives, Committee on Small Business, Economic Restructuring in Eastern Europe: American Interests, 101st Congress, First Session, September 1989, p12
(64)Magas, B, op cit, p 95
(65)World Bank, Industrial Restructuring Study: Overview, Issues and Strategy for Restructuring, Washington, June 1991, p10, 14.
(66)Michael Barratt Brown, ‘How the Debt Broke Up Yugoslavia’, in The Spokesman, Ed. Bertrand Russell, London, 1993, p 110-111
(67)Magas, op cit, p 98
(68)Ekonomska Politika, Belgrade, January 27, 1969
(69)Vreme, Belgrade, July 15, 1991
(70)Magas, op cit, p 97
(71)ibid, p 114
(72)Gow, J, Legitimacy and the Military, Pinter Publishers, London, 1992, p105
(73)Anderson, J, The Price of Balkan Pride, in The Washington Post, December 29, 1991
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(76)Magas, op cit, p 79