Socialist Unemployment - The Political Economy of Yugoslavia, 1945-1990

ISBN 0-b51,-0e551-?

Socialist Unemployment THE POLITICAL ECONOMY OF YUGOSLAVIA, 1945-1990

Susan L. Woodward

PRINCETON UNIVERSITY PRESS PRINCETON, NEW JERSEY

Copyright © 1995 by Princeton University Press Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press, Chichester, West Sussex All Rights Reserved Library

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Woodward, Susan L., 1944Socialist unemployment : the political economy of Yugoslavia, 1945-1990 / Susan L. Woodward. p. cm. Includes bibliographical references and index. ISBN 0-691-08645-1 (alk. paper) 1. Unemployment—Yugoslavia. 2. Full employment policiesYugoslavia. 3. Yugoslavia—Economic conditions—1945-1992. 4. Socialism—Yugoslavia. I. Title. HD5811.6.A6W66 1995 331.13'79497—dc20

94-46153 CIP

This book has been composed in Caledonia Princeton University Press books are printed on acid-free paper and meet the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources Printed in the United States of America 1

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To Peter Vincent Woodward In Memoriam

Child o f u n e m p l o y e d man: " W h y don't w e have h e a t ? " M o t h e r : " B e c a u s e t h e r e is no c o a l . " C h i l d : " W h y is t h e r e no coal?" M o t h e r : " B e c a u s e your father is out of work. " Child: " W h y is my father out of work?" M o t h e r : " B e c a u s e t h e r e is too m u c h c o a l . " — D r . D i e t e r Steifel, Austria, 1931 O n e gets the impression that as a society we are q u i t e inert w h e n it c o m e s to solving the p r o b l e m of u n e m p l o y m e n t . We have difficulty a c c e p t i n g facts if they do not conform to our conceptions or plans. A progressive, and particularly a socialist society, cannot wait "optimistically" for so important and delicate a p r o b l e m to be resolved spontaneously and cannot e x p e c t its m e m b e r s not to be exposed to great social and e c o n o m i c risk as a result. Security of e m p l o y m e n t is o n e of the significant contributions of socialism, highly valued and popular, particularly in the ranks of the working classes of capitalist countries, s o m e t h i n g that we ought not allow ourselves to question. We are aware of the fact that it is difficult to harmonize e c o n o m i c n e c e s s i t y and political opportunity, but we should not allow those difficulties to d e m o b i l i z e us. — T r i p o Mulina, Yugoslavia, 1968

CONTENTS

List of Figures and Tables Preface

xi xiii

CHAPTER 1

Introduction: The Paradox of Socialist Unemployment

3

CHAPTER 2 The Making of a Strategy for Change

31

CHAPTER 3 Creating a State for Socialist Development

64

CHAPTER 4 Military Self-Reliance, Foreign Trade, and the Origins of Self-Management

98

CHAPTER 5 A Republic of Producers

164

CHAPTER 6 Unemployment

191

CHAPTER 7 The Faustian Bargain

222

CHAPTER 8 Slovenia and Foča

260

CHAPTER 9 Divisions of Labor

310

CHAPTER 10 Breakdown

345

EPILOGUE

371

Appendix: Statistical Data

375

Bibliography

393

Index

427

FIGURES AND TABLES

FIGURES Figure 1-1. Map of Former Yugoslavia

2

Figure 6-1. Employment Growth, 1962-1975

192

Figure 6-2. Unemployment, 1952-1988

193

Figure 6-3. Rate of Unemployment, 1959-1988

193

Figure 6-4. Unemployment: Gross and Net Rates

199

Figure 6-5. Job Seekers and Yugoslavs Working Temporarily Abroad

200

Figure 6-6. Length of Time Waiting to Be Employed

202

Figure 6-7. Length of Time Waiting to Be Employed (proportions)

202

Figure 6-8. Women among the Registered Unemployed

203

Figure 6-9. Unemployment Rates by Republic: The North

204

Figure 6-10. Unemployment Rates by Republic: The South

204

Figure 6-11. Economically Active Population by Republic

205

Figure 6-12. Unemployment by Age Category

206

Figure 6-13. Unemployment by Age Category (proportions)

206

Figure 6-14. Women, New Entrants, and the Educated

207

Figure 6-15. Women, New Entrants, and the Educated (proportions)

208

Figure 6-16. Youth Unemployment Rates: The North

209

Figure 6-17. Youth Unemployment Rates: The South

209

Figure 8-1. Employment in the Social Sector by Republic

292

Figure 9-1. Rate of Unemployment: Kosovo, Slovenia, and Bosnia-Herzegovina

340

Figure 9-2. Rate of Youth Unemployment: Kosovo, Slovenia, and Bosnia-Herzegovina

340

Figure 9-3. Rate of Employment: Kosovo, Slovenia, and Bosnia-Herzegovina

341

xii

LIST OF FIGURES AND TABLES TABLES

Table 1-1.

International Comparison of the Sectoral Distribution of Employment

25

Table 1-2.

Level of Employment in Socialist and Market 27 Capitalist Countries, 1974

Table 6-1.

Rate of Employment by Republic or Province 205

PREFACE

BETWEEN THE Great Depression of the 1880s and the Great Depression of the 1930s, the political systems of modern states were created. Inseparable from that development was unemployment. Mass political parties, governmental activism in the economy, systems of public welfare—all were a response to the phenomenon of mass, industrial unemployment and the efforts by working-class organizations to protect against it. By the 1980s, the solutions that had b e e n in use had failed. U n e m p l o y m e n t began to take on serious proportions even in the wealthiest, most technologically advanced nations of the world. Countries celebrated as models of full e m p l o y m e n t — S w e d e n , Austria, even J a p a n — w e r e dismantling the systems of political decision making in the economy that had managed their success. At the same time, the socialist alternative, which had once inspired political action and a r e m e d y against unemployment, was also under attack. The global defeat of both Keynesian and Marxian programs had its crowning glory in the political revolutions in central and eastern E u r o p e in 1 9 8 9 - 9 0 and their open declaration that the "natural price" for liberal democracy and the prosperity of market economies was large-scale unemployment. In eastern G e r m a n y , the seat of social d e m o c r a c y — w h e r e the Yugoslav socialist story b e g i n s — t h a t unemployment was conservatively estimated at 50 p e r c e n t on the first anniversary of German reunification. Guided by the older v e r i t y — t h a t unemployment was the great, unresolved affliction of capitalism, and socialism was a movement to make it unnecessary—I began this book with what s e e m e d an obvious paradox: a socialist country with high and unremittingly rising unemployment. In the early 1980s, when my research began, socialist Yugoslavia had the highest rate of registered unemployment in Europe. T h e country was acclaimed for its maverick approach to socialism—for defying the ideological blocs of the cold war, helping to organize the nonalignment movement, and creating a domestic order of economic democracy and decentralized, market socialism. But those few who noticed its unemployment—part of the paradox was the great silence toward this unemployment in the Yugoslav public as well as in scholarship on the country—identified the cause as the system of "workers' control." According to this theory, e c o n o m i c democracy gave workers the right to manage their firms, and they chose to maximize their incomes at the expense of new investment. Yugoslavs had made the syndicalist dilemma into an organizing principle of society.

xiv

PREFACE

Before the alternative explanation in this book could appear, the country died. To explain the paroxysm of killing and territorial war that followed, a new e x c e p t i o n a l i s m — o f ancient ethnic hatreds and a Balkan culture of blood r e v e n g e — r e p l a c e d the fame of Yugoslavia's "third way." Yugoslav socialism was ascribed a role in the tragedy for failing to allow political democracy and for repressing national identities and the historical aspirations of the country's peoples for national self-determination. But for the most part, its experiment was assigned to the overnight oblivion of the rest of European socialism. T h e branch of scholarship claiming that Yugoslav politics was always about the national question and ethnic conflict s e e m e d vindicated. In fact, neither the disintegration of Yugoslavia nor the character of its wars can be understood apart from the political-economic and social system created by the Yugoslav League of Communists or the effect of rising unemployment on that system. T h e leaders' approach to employment was a core e l e m e n t of the system. T h e dynamic of governmental policy alternated between two models, which I have labeled (after contrasting wartime administrations in 1 9 4 1 - 4 5 ) "Slovenia" and " F o č a . " T h e first model r e p r e s e n t e d the approach to economic growth—and the economic and political institutions to implement that a p p r o a c h — o f the dominant ideology of liberal, or reform, communism. T h e second model represented the policies and institutions periodically required by the strategic considerations of national defense and of a foreign-trade strategy in contractual markets, or in market conditions where revenues depended on supply increases instead of price competition. A central e l e m e n t in both approaches was the country's foreign economic and strategic relations and its domestic adjustment to international conditions. In the breakup of Yugoslavia, an extreme version of this dynamic played out with the initial, almost surgical secession of Slovenia (to pursue the Slovene model independently in central Europe) and the prolonged, bloody agony of Bosnia-Herzegovina (where the F o č a model had its earliest and most developed expression). T h e ability of Slovenia to exit was inseparable from the political consequences of the republic's nearly forty years of full employment. T h e characteristics of the war in BosniaHerzegovina were, likewise, inseparable from the political c o n s e q u e n c e s of nearly 25 percent unemployment in the 1980s, at the start of another liberalizing, "efficiency-oriented" economic reform for international adj u s t m e n t . Both were the product, as was the broader path of disintegration, of a political system based on the liberal, or reform-communist, model of socialism and on the leaders' system of social protection against u n e m p l o y m e n t — a system that structured the labor force into highproductivity and subsistence sectors of the economy, with corresponding differences in property rights and political participation: one socialist (or public), the other independent (or private).

PREFACE

XV

The understandable focus on the collapse of Yugoslavia and the human tragedy of its wars diverts attention, unfortunately, from the resemblance between its strategy and the one eventually followed in other socialist states. If not a prelude to war, the economic reform of socialist societies for the purposes of global economic integration and economic recovery in a period of worldwide stagflation and then recession has left in its wake a type of social organization and attitudes—described in this b o o k — a b o u t social status, economic rights, and welfare that will shape the path of postcommunist regimes. T h e dismissal of a century of human experience in the case of the Soviet Union and nearly fifty years in the case of E u ropean socialist states also cannot erase the problems socialism arose to solve or its more generally shared dilemma of the declining relevance of the responses to agrarian and industrial unemployment in the 1920s and 1930s to conditions in the 1990s and beyond. Structural unemployment among urban youth, both unskilled and university-educated, and within the administrative and service sectors poses a different problem for economic policy. Nationalism is only a negative manifestation of the political problem it poses; it remains uncertain who will organize the unemployed (and those threatened with unemployment in these conditions) and therefore what economic ideologies and political systems will result. At the very time the Yugoslav socialist system was disintegrating, its key elements were the rage in Western theory: decentralization, rising labor productivity as the route to higher employment, the political and economic incentives of property rights, and social alternatives to budgetary expenditures on welfare. T h e underlying tension of the Austrian paradox in the epigraph to this b o o k — t h e aggregate paradox of Keynes's ideological revolution, the dilemmas of secondary uncertainty and market failure, the relation b e t w e e n individual and social interests, the role of government—was the source of Yugoslavia's most highly contested and unsolved political, as well as ideological, predicament. Like the former Yugoslav state, I have accumulated a very heavy burden of debts in the course of writing this book that can never be fully repaid. Beginning with those who helped financially, I acknowledge with particular gratitude the International Research and Exchanges Hoard, for enabling my research sojourn at the Zagreb Institute of Economics (Ekonomski Institut) during 1982; the American Council of Learned Societies and Williams College, for making possible a research leave at the Russian Research C e n t e r at Harvard University in 1 9 8 1 - 8 2 , when I began to think about the project; Yale University, for a social science faculty research grant and a glorious leave in California in 1987, where I was able to do the archival work and write undisturbed in the true ivory tower of the Hoover Institution and its supporting fellowship from the U . S . D e partment of State's discretionary grant program under the S o v i e t -

xvi

PREFACE

E a s t e r n E u r o p e a n Research and Training Act of 1983 ( P . L . 98-164), Title V I I I , 97 Stat. 1047-50; and, finally, the National Fellows program of the Hoover Institution, for the sanctuary in 1 9 8 9 - 9 0 that gave me the additional quiet n e e d e d to c o m p l e t e the manuscript. E v e n then, without the supportive work environment of the Brookings Institution, the editing necessary to turn a book on a topic I considered of burning i n t e r e s t — i n the face of troubles far more serious—into a work of history might never have been completed. Raghbendra Jha first suggested the topic and reignited an earlier interest in economic developm e n t discovered under the remarkable professional nurturance of Robert T. Holt. No one who studied Yugoslavia escaped its spell of hospitality and endless complexity; no one can escape the painful sense of loss over its tragic death. Among my many hosts, I note especially Olga Supek, Silva Mežnarić, Branko Horvat, Josip Županov, Zagorka Golubović, Radmila Nakarada, the librarians at the Zagreb Institute of Economics, Nikola Uzunov, Boro Škegro, Tripo Mulina, and the late Kiril Miljovski. My gratitude also goes to the many, many experts—economists, sociologists, planners, historians, labor-bureau officials, and retired party officials— who gave freely of their time and knowledge to make this book possible. Daniel T u r n e r produced the charts and graphs for the book, and Milj e n k o Horvat provided informed research assistance. Judith Shapiro, Louka Katseli, Gerry Arsenis, Deborah Milenkovitch, and Shirley Gedeon c o m b i n e d unquestioning friendship with invaluable support on economic issues; Elizabeth Brett, Sara and Nick Ohly, Pat Tracy, Martha Lampland, Gail Kligman, and, above all, Vann Woodward and Don and B e t t y Lampland sustained me.

Socialist Unemployment

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C hapter 1 INTRODUCTION: THE PARADOX OF SOCIALIST U N EM PLO Y M EN T

U n e m p l o y m e n t plays a pivotal role in the Marxist analysis of capitalism. At the symbolic level, unemployment exposed the myths of capitalism— its claims of economic growth and prosperity and of individual equality and justice through free markets and political rights. Labor organizers needed few arguments to convince workers who found their very survival dependent on employers’ decisions to hire and fire that their vulnerability to unemployment reflected a constitutional inequality. The legal equality of citizenship could readily appear superficial to workers who saw privi­ leges granted to profit makers while they themselves faced a trade-off between lower wages and unemployment. And despite the promise of continuous prosperity, economic growth was cyclical, and labor-shedding business downturns and periodic economic crises with mass unemploy­ ment were said to be necessary. At the analytical level, the irrationality of capitalist decision making was most easily demonstrated by citing unemployment— the waste of periodically idle human energy, plant, and equipment that seemed to be necessary to the dynamic equilibrium of free-market economies. At the political level, the threat of unemploy­ ment demonstrated that capitalism was not just a system of organizing the production and exchange of goods but a system of power, in which the fear of unemployment provided the essential discipline to keep labor in its place: to keep workers continually increasing their effort and output despite the limits on their share o f realized profits and to keep them polit­ ically malleable even when their economic interests lay in radical change. Among all the objectives of Marxist political movements, which sought political power in order to create an economic and social alternative to the evils of capitalist society, the end of unemployment was therefore a mini­ mal condition— a sine qua non — of socialist society. This was so axiom­ atic that the achievement of full employment seemed unremarkable in countries governed by Marxist political parties. Few questioned the critics of socialist economies in their central focus on full employment and its guarantee of jo b security as the primary explanation for the decline of these economies in the 1980s (the fact that capitalist countries were expe­ riencing a sharp rise in unemployment at the same time was not taken into account). It made sense that leaders of working-class parties would

4

CHAPTER 1

attempt to go even further than full employment, to design a world that would recognize human labor as central to individual identity and social interaction, the calculation of value in the economy, and human welfare and creativity. For all the euphoria over the collapse of the Berlin Wall in the former German Democratic Republic, the palpable sense of loss there over the disappearance of work-centered community in the year that fol­ lowed reflected what socialists considered fundamental: that “work is how one makes sense of one’s life, makes sense of one’s place in nature. ”1 Socialist Yugoslavia was an exception to this world of full employment. The leadership of the Communist party acknowledged officially in 1950 that unemployment could exist under socialism, and the number of people registered as unemployed and as seeking work became ever larger as the years went by. In 1952, the newly reopened employment bureaus recorded a rate of unemployment at least two points above the 5 percent then considered the normal rate 2 in Western Europe; in 1985, when the number of Yugoslavs looking for work went above one million, the rate surpassed 15 percent, ranging from 1.5 percent in Slovenia to more than 30 percent in Kosovo and Macedonia.3 Yet the Yugoslav leadership, more explicitly than in any other socialist state, had designed its society around the concept of community through labor, in which the core unit of social, economic, and political organization was the socialist workplace (called an organization o f associated labor). The meaning of unemployment thus extended beyond the loss of potential wealth for society and the loss of income and identity for the unemployed that we associate with capitalist countries.4 To be unemployed was to be excluded from full membership in society— a loss of full citizenship rights, a second-class status, a disenfranchisement. The only theoretical attempt to explain Yugoslav unemployment— an analysis proposed in 1958 but accepted without question even in the late 1980s— identified the culprit as that organization of work and its concept of community. According to this theory, the country’s system of decision making in labor-managed firms (called “worker self-management”) gave employed workers too much power over the share of net profit going to 1 John Berger, cited in Mar/orali, “Living and Writing the Peasant Life,’' 50, 2 This is the rate at which neoclassical economists consider market economies to be at full employment. It represents frictional unemployment caused by the job-seareh process, usu­ ally 4 or 5 percent. 1 Mendnger, “Privredna reforma i nezaposlenost”; Statistički g odišnjak Ju goslavije, 1990, Yugoslav newspapers ;md journals paid some attention to the symbolism of the one million mark 1 See Sen, E m ploy m en t, T ech n olog y , a n d D evelopm en t, on the three aspects of employ­ ment (production of some output or service; remuneration for work done; and reputation— a social status and identity associated with that work) and their measurement (4-5).

INTRODUCTION

5

wages.5 For the large number of scholars who studied and advocates who praised this experiment in economic democracy, unemployment was sim­ ply the price of allowing workers genuine participation in the life of their workplaces, analogous to the price paid by the unemployed under capital­ ism for society’s economic prosperity.0 For critics from the socialist camp (particularly economic reformers who wanted to introduce market social­ ism without accepting that the Yugoslav troubles were its result), as well as ones from the capitalist or anticommunist camp, it was obvious that the problem of Yugoslav socialism was its system of “workers’ control. ’ When high inflation also became a persistent problem, the analysis seemed dou­ bly correct: if there were no worker participation, there would be no unemployment. The denouement to Yugoslav socialism appears to be explained by this analysis. By legislative fiat, as the central plank in a program of radical economic reform, the government of prime minister Ante Markovic in 1989 declared an end overnight to worker self-management on the grounds that it prevented the rational allocation of labor and the incen­ tives necessary to higher productivity. No escape was possible from a decade of economic crisis, the argument went, unless unemployment b e ­ came a threat to workers, managers were free to hire and fire, and poten­ tial foreign investors were assured of full private-property rights. But this economic paradox— that more unemployment is necessary to reduce unemployment— appears to ignore the more fundamental role of unem­ ployment in socialist theory and practice. The purpose of social ownership was not to provide jo b security but to reorganize economic activity and social relations fundamentally in order to make unemployment economically unnecessary and to deprive it of its political role. In that reorganization, job security was intended to be a direct incentive to effort and rising productivity of the kind attributed to systems with private ownership, while full employment was a political choice (if the literature on actual socialist countries is correct) on which the party’s political legitimacy came to rest. Even analyses of unemploy­ ment in actual capitalist societies had shifted focus from the allocative and incentive roles of unemployment and a market-driven wage to the politi­ cal and societal factors. The primary finding of the vast literature on coun­ 5 Ward, “The Firm in Illyria." Although most of the widespread theoretical and political writings on the system oi self­ management were positive and considered the price of unemployment (if they gave it con­ sideration) worth paying, there were some who placed both the unemployment and the system of labor management and syndicalism into a broader revisionist critique, arguing that the leadership had simply restored capitalism; see, for example, Carlo, “Capitalist Restora­ tion and Social Crisis in Yugoslavia.”

6

CHAPTER 1

tries that have achieved full or nearly full employment since World War II, in comparison with those where unemployment and labor-shedding recessions govern the economy, is that there is an explicit political com­ mitment by the governing party to the goal of full employment.7 The Keynesian revolution in the advanced industrial democracies after the Great Depression of the 1930s was an ideological revolution: a recognition that a market economy required macroeconomic management by govern­ mental policies if it was to eliminate nonfrictional unemployment. The question in both market and planned economies was not whether the economy alone could prevent unemployment or what policies to adopt, but whether there was the political will and the political institutions nec­ essary to implement those policies.8 In both cases, the commitment came from labor-oriented parties that emerged to fight the consequences for labor of business-oriented, orthodox economic policy. T iik P a r a d o x The Yugoslav exception to the rule of full employment in socialist states thus presents a political paradox— not as an economic problem but as a political fact. How could a ruling Communist party, claiming to represent the interests of labor and the theoretical analysis of Marx, ignore the polit­ ical consequences of persistent and rising unemployment for almost forty years? The commonplace view of Communist party rule as a system of political repression, organized to give the party a monopoly on political power without its having to be accountable to a voting public or respond to political pressure from society, hardly explains how a system of rule can last forty years without attending to its legitimacy, if full employment was indeed the basis of that legitimacy. It does not explain why the party leadership did not at least experience a crisis of ideology or identity. On the contrary, it would suggest that the party had sufficient political power to implement its commitment to full employment. Equally paradoxical was the great silence about Yugoslav unemploy­ ment in general. Most portraits of the Yugoslav system simply ignored its existence. From the common citizen to policymakers and politicians, an­ alysts, critics, and protesters, a great public indifference to unemploy­ ment seemed to prevail. This book represents an attempt to resolve this political paradox. What it proposes is that the models that have been used to analyze socialist 7 Therbom, Win/ Som e Peoples A re M ore U nem ployed than O thers, provides a good summary, lie emphasizes that this political commitment must he present before the onset of economic crises induced by international conditions, such as that experienced by most coun­ tries in the late 1970s and the 1980s. H Sec, Ibi example, Weir and Skocpol, “State Structures. ”

INTRODUCTION

7

societies are tied to a particular understanding of market economies and competitive politics that has little relation to the ordering principles of socialist states and societies. In the dominant model, people organized according to their economic interests. Those interests are defined above all by the institution of private property and its fundamental division b e­ tween capital and labor, which defines individuals’ political identities. Economic interests motivate people to enter public life, seeking to per­ suade others, organize collectively, and influence government to take courses of action that will further those interests.9 Public policy is a result of such organized pressure, in which the competition among groups and the relative success of their demands depend on the balance of economic and organizational resources among them. Individuals may choose to or­ ganize on moral rather than economic grounds; but where there is a con­ flict between economic interest and ethical impulse, the model assumes that the former will win out. Whatever the short-term outcome of this competitive struggle to control government office, moreover, the long­ term stability of a political system depends on its legitimacy. Policies and their outcomes must convince citizens that their government is acting in their interest, or is at least subject to being influenced accordingly. But it is short-term competition, not long-term legitimacy, that produces this accountability. The prevailing model of modern political life, in other words, imitates an ideological (theoretical) model of a market economy. Expectations about the political role of unemployment have also been based on this model. Market economies, according to the model, are based on the fundamental conflict between profits and wages— in the aggregate, between price inflation and unemployment (the Phillips curve). In human terms, the conflict is between employers and workers: employers present workers with the choice between wage restraint and dismissal when profits are threatened. Because the political organization of interests reflects this “trade-off,” so, too, do public policies. The dis­ tinction between governments that promote full employment and those that do not, scholars have found, is in the class basis of its ruling party. Proemployment governments tend to represent laboring constituents; political parties oriented to business interests are, as a rule, more con­ cerned with price stability.10 The difference between governing conserva­ tive and labor parties (when the particularities of national histories are removed by aggregate statistical analysis) is thus defined by their voters’ economic interests on the issue of unemployment.

9 Hirschman, T he Passions a n d the Interests, analyzes the origins of this model in W est­ ern thought during the seventeenth century. 10 Kirschen, E con om ic Policy in O ur Time, first identified this correlation; see also Hibbs, “Political Parties and Macroeconomic Policy,” for econometric evidence.

8

CHAPTER 1

The paradox of unemployment in a socialist country thus arises from the historical fact that it was only when political parties representing the interests of labor won control over governments that explicit policies to promote employment and reverse the causes of unemployment were ac­ tually carried out. Wartime or business-oriented governments might achieve full employment, but only as a side effect rather than as a goal that could be politically sustained. Socialist and social democratic coun­ tries, on the other hand, explicitly aimed at full employment. The very idea of unemployment, as something publicly recognized and distinct from the condition of poverty, vagabondage, and homelessness with which it was bound once public responsibility for poor relief began in the seventeenth century, began with the political pressure for govern­ ment action in the second half of the nineteenth century from industrial unions, social movements, and political parties representing the inter­ ests of w orkers.11 One of the best-organized, most conspicuous interest groups in modern societies— industrial workers, and wage earners more broadly— organized first in the early stages of industrialization into social­ action leagues and craft unions in order to control access to employment, bargain more effectively for job rights, and provide mutual insurance dur­ ing periods of unemployment. The appearance of mass unemployment in industrial societies after the 1880s increasingly pushed workers directly into the political arena because it became clear that atomized skirmishes with individual employers and local control over access to employment were insufficient. The problem of unemployment was not only economic but political as well. Workers’ wages and jobs depended on their capacity to bargain in the labor market, and that bargaining power depended on the level of employment; economic position and political strength rose and fell to­ gether. Unemployment thus had a dual face. As long as there was unem­ ployment, workers attempts as individuals or unions to improve their economic position were threatened by the right of employers to fire workers and dispose of their capital as they wished. Political organization to counteract that threat with an equal threat to withhold labor and dis­ rupt production was always vulnerable to defection from members who could not risk being replaced by an unemployed worker willing to work for less. As long as workers’ organizations could not promise their mem­ bers protection against this competition, they found it difficult to exact the discipline that successful protest requires. This meant that workers’ economic interests were inevitably bound

11 See, for example, Garraty, Unemployment in History; Hallam, “Economic Visions and Political Strategies”; and Tilly, Tilly, and Tilly, T he R ebellious Century But see also Keyssar, Out o f W ork, for sources of variation in the social context of work

INTRODUCTION

9

with the interests of the unemployed in escaping unemployment. Workers might choose to unite in craft or professional unions in order to raise incomes and protect jobs by policing artificial scarcities within sec­ tors of the labor market, at the cost of unemployment for other workers; but the shortsightedness of this “trade-union consciousness” would be re­ vealed when the anarchy of capitalist decision making produced another downturn in the business cycle (or even an economic crisis) and their rising wage share became the focus of cuts they did not have the power to fight. Only if they could unify and sustain such organization could they hope to overcome the trade-off through collective bargaining, political rights, and governmental policy. Studies of the consequences of mass unemployment during the depres­ sion of the 1930s by social psychologists in Austria and Poland revealed another aspect of the link between the fate of individual workers and that of all wage earners, this time from the point of view of the unemployed. The researchers discovered that the psychological effects of unemploy­ ment made organization by the unemployed in their own behalf a rare event. Their time occupied by the struggle for survival and their efforts increasingly discouraged and diverted to the search for explanations of their own inadequacy, unemployed persons tended to become apathetic and to personalize the cause of their plight, responses that worked against collective action for change.12 The link between their economic interest and the political organization to translate that interest into effective de­ mand had to be made by people who had jobs and who understood that their long-term self-interest lay in common cause with all who live by their labor. Conversely, later studies suggest, where political organiza­ tion in behalf of the unemployed comes from people motivated not by their own economic interest but by moral conviction or sympathy, their organizations do not have the staying power and cohesion necessary to be effective.13 Labor-oriented governments, in successfully promoting full employ­ ment, built on this recognition of the link between economic and political interests, between what happens to individual workers and to workers collectively, and between workers’ position in the labor market and their political power. In addition to making an explicit political commitment to aim at full employment, parties representing the economic interests of laboring and small-property constituencies were able to reverse the slide 12 Jahoda, Lazarsfeld, and Zeisel, M arienthal, 2 2 -2 5 ; Jahoda, Em ploym ent an d Unem­ ployment Later explanations o f political organization, led by Olson in The L og ic o f C ollec­ tive Action, reverted to the economic school. 13 Schlozman and Verba, Inju ry to Insult; but see Rivers, “Micro-Economics and Macro­ Politics,” for ways that a solidarity of interests on unemployment may emerge among people of different economic interests without explicit political organization.

10

CHAPTER 1

into ever-greater unemployment and in many cases to achieve full em ­ ployment because of their attitude toward the role of the state. Govern­ mental policy was viewed as a positive instrument to counterbalance the cycles of market activity or to make up for market failures, and labororiented governments had the political capacity to implement such eco­ nomic policies at both the macroeconomic and microeconomic levels. In­ deed, the literature on advanced industrial economies, independent of a political motivation of economic interest, identifies success in minimizing unemployment with the political capacity to employ an active, counter­ cyclical policy of demand management and an active labor-market policy that permits flexible adjustment in wages and labor mobility without the economic and psychological costs of unemployment.14 T h e political factors necessary to this capacity, according to the litera­ ture, are a broad consensus on the need for a macrosystems approach to the econom y;15 a set of economic institutions appropriate to countercycli­ cal demand management and effective exchangc-rate policy;16 and cen­ tralized institutions of bargaining between organized labor and capital that enable labor to negotiate trade-offs between wage restraint and some socialization of the risk of unemployment (through social welfare and ac­ tive labor-market assists).17 Labor-oriented governments tend to be most successful because they are more likely to be not only politically commit­ ted to macroeconomic regulation, but also tied to strong, peak unions that have won the right to represent labor in centralized collective bargaining and that have the power over their membership to guarantee labor’s disci­ pline in implementing agreements, including wage restraint (a system often referred to as corporatism). In the language of this school of explana­ tion, the pow er resources with which wage earners translate their inter­ ests into effective aggregate demand are critical.18 The best demonstration of this argument seemed to be the socialist states of the Soviet mold. Instead of counteracting market forces with governmental policy, working-class political parties used their organiza­ tional power to create, through social ownership and economic planning, a permanent capacity to achieve full employment. Indeed, full employ­ ment was portrayed by supporters as one of the primary achievements of 1,1 See especially Scharpf, “Economic and Institutional Constraints of Full-Employment Strategies.” 15 Lehmbrueh, “Liberal Corporatism and Party Government.” lB Weir and Skocpol, “State Structures.” 17 See Katzenstein, C o rp oratism a n d C h an g e; Cameron, “Social Democracy”; and Esping-Andersen, Politics against M arkets. ls The literature on European social democracies is rich with these findings. See Korpi and Shalev, “Strikes, Power, and Politics”; Korpi, T he D em ocratic Class Struggle, Scharpf, “Economic and Institutional Constraints”; Cameron, "Social Democracy”; and Katzenstein, C o rp o ra tism a n d Change.

11

INTRODUCTION

socialism. Even critics saw it as the basis of socialism’s political legit­ imacy. A functional equivalent of the electoral mechanism was said to exist in a social contract between government and people, in which citi­ zens were guaranteed jo b and income security in exchange for their politi­ cal support. Internal critics who saw this as state paternalism nonetheless agreed that the state defined and provided for citizens’ economic interests in exchange for limits on their political expression of demands.19 Thus, according to the history of working-class organizations in capital­ ist societies and the experience of socialist states, unemployment should never have reached the proportions it did in socialist Yugoslavia. Gov­ erned throughout its forty-five-year history by a Marxist party, the League of Communists of Yugoslavia, the country should have had the political will to achieve full employment. Because the ruling party also created institutions within each workplace and locality where workers’ representatives decided jointly with management on all business and em ­ ployment matters, it should have had the political capacity as well. Un­ employment should have led to declining legitimacy and a rejection of the pact on political passivity. The country should have experienced waves of organized protest as the party’s own working-class constituency de­ manded a change in policy. Nothing of the sort happened.

E m ploym ent

and t h e

Po l it ic a l M o d e l

of

S o c ia l is t S t a t e s

The industrial model with its trade-union trade-off between wages and jobs came to dominate the understanding and study of political behavior in socialist states as well in the late 1970s, after the totalitarian model was discredited. The dynamic of socialist societies was defined by the absence of restraint that was provided in capitalist market economies by the eco­ nomic interests and political power of private capital— restraint on the “investment hunger” of firms and on the “paternalism” of governments, which aimed at jo b security but led to a shortage economy;20 and the restraint imposed by the threat of unemployment to keep workers’ de­ mands in check. The full employment that provided these systems’ re­ puted legitimacy was illusory, according to internal critics. A vast “hidden unemployment” or “overfull employment”21 concealed a “gross underuti­ lization of labor”22 that both limited the potential for economic growth and repressed living standards. The only difference between socialist states of 19 Pravda, "East-West Interdependence and the Social Compact in Eastern Europe”; Hauslohner, “Gorbachev's Social Contract.” 20 Kornai, The E con om ics o f S hortage. 21 Granick, J o b Rights in the Soviet Union, 1 22 Adam, Employment Policies in th e Soviet Union a n d Eastern E u ro p e, xiii.

12

CHAPTER 1

the Soviet model and Yugoslavia was that unemployment in the latter was open not hidden. The open-unemployment variant was due to the consequences of worker self-management, according to Benjamin Ward’s model to explain Yugoslav unemployment— which he appropriately labeled not market so­ cialism but market syndicalism. Ward argued that because workers in labor-managed firms in Yugoslavia had the power to choose between new investment and individual incomes, they would limit the hiring of addi­ tional workers among whom net profit would have to be distributed. The conflict of interest between individual workers’ wages and other workers’ jobs was greater, in W ard’s model, under social ownership than under capitalism because workers’ power over labor-market questions had no contraints.23 In Hungary and Poland, unemployment took the form instead of de­ clining standards of living and eventually economic crisis, but the expla­ nation was the same. According to Charles Sabel and David Stark, full employment gave Hungarian workers substantial shop-floor bargaining power. Because the objective function of managers was to fulfill output targets on time, they conceded to workers’ demands for higher wages in order to prevent them from leaving for higher wages elsewhere. To meet their expanding wage bill, managers then bargained with higher authori­ ties for exceptions and subsidies. W hether they obtained subventions on plan targets, supplies from industrial ministries, or money advances from banks for the wage bill, the result was to reduce the resources available for new investment and eventually, when government authorities tackled the consequences for growth rates, to produce investment cycles that looked very much like their capitalist counterparts.24 Alex Pravda and George Feiwel argue that the Polish case of declining growth and hidden unemployment resulted from the political power of workers in a socialist state rather than the economic power of workers in firms operating under full employment. Because the legitimacy of a Communist party govern­ ment depended on the active support of workers, workers who organized to demand higher wages or lower consumer prices trapped political au­ thorities into an affirmative response. These wage or price concessions created inflation, to which authorities also had to respond; the result in Poland was a political cycle of strike waves and bargaining between gov­ ernm ent and workers over incomes policy (wages and prices) that led to 23 See chapter 6 for a fuller discussion of Ward’s model. 24 Sabel and Stark, “Politics, Planning, and Shop-floor Power.” Other studies of the Hun­ garian labor market insist that workers’ bargaining power and managers’ strategies varied substantially, depending on workers’ skill levels; but this refinement fits better with the argument that will be developed in this book. See Kertesi and S/.irackzi, “The Institutional System, Labour Market, and Segmentation in Hungary.”

INTRODUCTION

13

“premature consumerism.” Resources were diverted from investment to workers’ consumption, lowering the economy’s potential for long-term growth and creating a new round of goods shortages, price inflation, and successful demands for higher wages.25 Thus, according to these theses, the economic crisis of socialist coun­ tries and their political collapse by the end of the 1980s— beginning in Poland and Hungary and spreading throughout the region— were the re­ sult of workers’ interest in higher wages and their bargaining power. In some cases the pressure was political, exerted through wage strikes and demonstrations that threatened the core of the governments’ legitimacy; in other cases it was economic, as workers took advantage of tight labor markets to bargain with managers in their firms and the managers in turn bargained with economic authorities. The normative conclusion was in­ creasingly being drawn: that nothing short o f political revolution would make possible real economic reform. The property rights of workers to a job, its compensations, and its status were seen as traditional (in the sense of outmoded).26 For a modern, effective economy, these rights had to be replaced by mechanisms for more efficient allocation of resources: market wages, the disciplinary threat of unemployment, and a renegotiation of the social contract to replace governments’ labor constituency with entre­ preneurs. Privatization, market economies, and parliamentary govern­ ments with limits on their authority to respond economically to workers’ demands were the only way out of the soft budget constraints27 and short­ ages due to excess demand that had brought these countries to economic crisis. Even those who still held to socialist values argued that any peaceful, parliamentary transition to socialism was a utopian dream that would nec­ essarily be interrupted by economic crisis because the election of a social­ ist government would remove existing restraints on popular expectations. Demands for improved standards of living would rise faster than the ca­ pacity of the economy to produce results, leaving the government with a choice between economic crisis or abandoning both its wage-earning con­ stituency and democracy for repression. Such new governments would be 25 Pravda, “Poland 1980”; Feiwel, “Causes and Consequences of Disguised Industrial Unemployment in a Socialist Economy.” 2r>Although Walder’s argument in Com m unist N eo-Traditionalism was based on China, East European social scientists received it enthusiastically as a portrait of their regimes as well. 27 The term soft budget constraints in regard to socialist economies was introduced by the Hungarian economist Jin os Kornai in T he E con om ics o f S hortage. Although he argued that bailouts of large firms in capitalist countries also represented such "softness,” and that in socialist countries cooperatives and private sector firms did have to operate by “hard budget constraints,” the term came close to becoming an explanation for most of the economic and social ills of late socialism

14

CHAPTER 1

too politically fragile to manage the trade-off between investment and consumption in the face of populist demands and would collapse.28 The idea that socialist states had not created full employment but only a perverse, upside-down version of capitalist societies— where workers’ ex­ cess power placed limits on growth, job security pushed the cost onto wages, and states were too weak to resist workers’ pressure— was politi­ cally very persuasive. It fit well with the prevailing model of politics based on economic interests and their political organization. It did not challenge the prevailing orthodoxy of conservative reaction in the 1980s, which explained the global stagflation of the 1970s as a result of tradeunion power and rising wage shares that had to be reversed. And it was a satisfactory replacement for the totalitarian model, demonstrating not only that there was political life in socialist states but also that, contrary to the argument that states were too strong, they were in reality too weak. This idea also provided an answer to the question of legitimacy in the political paradox of socialist unemployment, which the revolutionary events of 1 9 8 9 - 9 0 in Eastern Europe had appeared to question. The mas­ sive exodus from the German Democratic Republic (GDR) in the east, as citizens left secure jobs and incomes for the Federal Republic of Germany in the west, where unemployment was high and publicized, clearly seemed to belie the model’s assumptions that workers’ interests lie with full employment and that in socialist states they had been willing to trade political passivity and grant legitimacy in exchange for that full employ­ ment. The political revolutions in the East began where full employment reigned— in Hungary, Poland, Czechoslovakia, the G D R , and Romania. In Yugoslavia, democratization and the fatal attack on the constitutional position of the Communist party occurred in Slovenia, which enjoyed full employment, instead of in Serbia, Macedonia, or Bosnia-Herzegovina, where even officially recorded unemployment captured a quarter of the potential labor force or more. These events had also revived the total­ itarian model, with its assumption of a hierarchy of values in socicty ac­ cording to which people universally prefer freedom above economic security— even though its adherents did not explain why the desire for freedom lay dormant for most of the postwar period or why it was capable of radical action only in 1989. For most scholars, however, the model of economic interest, political demand, and the economic trade-offs of mar­ ket economies fit these events better. An economic crisis resulting from too much worker power had motivated this upsurge out of political apathy or passivity. The difficulty with this argument in the case of Yugoslavia was its fairy­ 28 Przeworski, Capitalism an d Social D em ocracy , 4 3 -4 6 ; idem, D em ocracy an d the M ar­ ket, chap. 4

15

INTRODUCTION

tale relation to the facts. Workers’ wages declined as rapidly as unemploy­ ment rose during the stagflation of the 1970s and the economic crisis of the 1980s. Workers’ self-management had been introduced in 1950 ex­ actly at an early-revolutionary point of political fragility in order to obtain wage restraint. It was scarcely a system of worker control, even though it may have in some aspects created a labor aristocracy among those em ­ ployed in labor-managed firms.29 Ward’s elegantly persuasive model was never intended to be a description of Yugoslavia and could not be verified there empirically.30 As in the case of the Eastern bloc countries, the ap­ plication of ideological assumptions based on capitalist market economies to critique a socialist system suggests a political purpose more than a trustworthy analysis. Moreover, Ward’s model of labor-managed firms said nothing about government policy; and it lacked an analysis of political dynamics, which would have been necessary to explain the reality and the political paradox of open socialist unemployment.31 T he Key Ro

le o f

E

c o n o m ic

Id eo lo g y

in

S h a p in g

S o c ia l is t St a t e s

The assumption guiding this book on Yugoslav socialism is that the eco­ nomic crisis of the 1980s and the revolutionary end to Marxist states in Europe were not sufficient to explain away the political paradox of unem­ ployment in a socialist country. The explanation of that paradox offered here leads to a different accounting for the economic crisis and politi­ cal revolutions. In providing an answer, this study has more in common with another political model of socialist states— the model of Leninist regimes— and its basis in ideology, an explanatory variable out of favor for market economies.32 But the concept of Leninist regimes used here re­ 29 This is the implication of E strins study Self-M anagem ent: E con om ic T heory an d Yugoslav Practice 30 See Smith, “Does Employment Matter to the Labour-Managed Firm?” Ward himself cautioned against seeing his model of the firm in “Illyria” as an analysis of the Yugoslav system, although he did come to believe that the Yugoslav system would tend to have more unemployment than an equivalent capitalist country (personal communication, fall 1989). 31 Comisso, W orkers* C on trol u n d er Plan an d M arket, provides one possible political dynamic for a society composed of labor-managed firms— an alternation between pressures for greater autonomy and demands for governmental regulation, or between what she calls “market” and ‘plan ” But this does not explain the choice of economic policies relating to unemployment or the absence of political pressures to address unemployment. 32 The concept of Leninist regimes was an offshoot of the totalitarian school, developed primarily by Jowitt in R evolutionary B rea kth rou g h s an d N ational D evelopm en t (and more explicitly in “An Organizational Approach to the Study o f Political Culture in Marxist­ Leninist Systems” and “Inclusion and Mobilization in European Leninist Regimes”) on the basis of Selznick, The O rganizational W eap on ; and Schurmann, Ideolog y an d O rganization in Communist China.

16

CHAPTER 1

fers only to a subset of socialist states known as regimes of the reformcommunist persuasion. And while that concept gives priority to a revolu­ tionary party’s organizational principles and democratic centralism, the concept in this book begins with economic ideology. The political system and politics of Yugoslav society did mirror its econ­ omy, in the way seen in capitalist market economies. But the ideology behind that economy was different, as was the society it shaped. The primary characteristic of socialist societies is that they originate with a political project, the project of a political elite. That project begins in the same way as did the model of liberal market economies— with an eco­ nomic analysis of existing society, the political organization of economic interests, and policy choices that reflect the organizational and economic resources of a party’s potential constituents and allies. But at the point at which we encounter the ideology— when the leadership achieved power and attempted to create a new society— it was a platform and an explicit strategy for change. W hen studies of Communist regimes emphasize ideology, they tend to mean by M arxism-Leninism an attitude toward political power or a politi­ cal structure— usually an unresponsive dogmatism or an organizational rigidity, as implied in the concepts of Leninism, totalitarianism, and dem­ ocratic centralism. Ideology is here used instead as in capitalist regimes, to mean a set of economic ideas and the social and political relations ap­ propriate to them. Those ideas defined goals, but also ways of thinking and perception. The ideology was built around a conception of economic growth and the social organization of labor— of employment in produc­ tion and administration— that it implied. To understand the political re­ sponses to socialist unemployment, by both policymakers and those threatened by unemployment, one must begin with that ideology. The central focus on economic growth served two purposes for Commu­ nist parties in power— one socialist, the other nationalist. The first goal was to increase capital so as to overcome the burden of underdevelopment, in ways that avoided the costs— including mass unemployment— that the capitalist way entailed for people who labor in factory, farm, or office. The second was to end the cycles of foreign economic and political dependence to which second-class status in the international arena had condemned these countries. The failure of previous governments to industrialize and to secure national independence was portrayed as a form of betrayal— as a consequence of antipopular and antilabor policies. According to the leader of the Yugoslav Communist party, only a prolabor party would put the interests of the Yugoslav peoples above foreign interests. They based their legitimacy as a ruling party on their commitment to the individual benefits of this economic growth— rising standards of living, secure subsistence, and national pride.

INTRODUCTION

17

Industrialization and political independence of the state did not come easily. In contrast to the Marxist focus on the dynamics of capitalism and the subsequent stages of evolution toward socialism, Communist parties came to power in agrarian societies at early stages of capitalist and indus­ trial development in countries outside the economic and political core of the global system. No fact was of greater consequence for Marxist revolu­ tionary strategy and policy than these political origins because the parties’ goals (particularly as defined by the influential German Social D em o­ cratic party in the late nineteenth century) had presumed the most ad­ vanced stages of capitalism, “bourgeois” political development, and internationalism. The states they created became developmentalist states instead. Paradoxically, these parties representing labor found that their most pressing problem was the shortage of capital— of machines, financial capital (domestic savings and access to global capital markets), and the human skills and mentality appropriate to industrial and technologically advanced society. Because they came to power through war in areas for­ merly ruled by the Russian, Habsburg, and Ottoman empires (and later by the British, French, and Americans) where the national question was still not settled, and because they faced a hostile international environ­ ment, internationalism was not the political result of the globalization of capital but a defensive response against its consequence for nations on the economic periphery. The issues of national identity, vulnerability, and territorial defense loomed far larger. Marxist parties were not alone in their developmentalism, however. They shared it with all “latecomers” to the process of industrialization and nation-state formation.33 The model of economic development based on the English experience of the seventeenth century occurred nowhere else, despite initial steps in Italy, the Netherlands, and India. Even in England, the spontaneous emergence of merchants and manufacturers depended on particular international conditions, and they succeeded in their mutual competition to influence state policy in their favor, as Joyce Appleby argues, only after they discovered an economic theory— an ideology— that was appropriate to those interests.34 The process of interstate competition that gave developmentalism its force was aided by the rise of economics as a profession and economists as a power in the nineteenth century, and by the mid-twentieth century no leaders of any state or aspiring state could ignore the temptation to use rational designs to enhance both power and authority. Theorists of social­ ist states in Europe claim W e b e r’s fourth type of authority legitimation, Levy. M odernization: IM tecomers an d Survivors; Gerschenkron, E con om ic B a c k ­ wardness in Historical P erspective; Kitching, D evelopm en t an d U nderdevelopm ent in His­ torical Perspective; Bereiul and Ranki, T he E u ropean P eriphery an d Industrialization, M Appleby, E conom ic Thought an d Ideology in Seventeenth-C entury England,

18

CHAPTER 1

Wertrationalitcit, as their particularity.35 But it was common to many states after the mid-nineteenth century, as the perception of their “back­ wardness” in relation to “more-developed” societies led states to use eco­ nomic ideas and reasoned, ex ante designs in the service of a project to catch up with the rich and powerful.36 Socialist states, beginning with the Bolshevik Bevolution in 1917, only perfected and expanded this idea of directed change to fully societal projects on the lines of grand strategy, copying from the military tactics that the revolutionary parties had chosen. In contrast with the neoclassical economic model (and its Keynesian variant) that informs the prevailing political model of modern societies, this developmentalist project in Marxist-Leninist states was based in clas­ sical thought and its emphasis on structural change. The object of eco­ nomic activity was to produce goods that would satisfy the needs of consumers (the use value of final goods), but this required above all an increase in society’s productive capacity. Unemployment was not a theo­ retical problem for Marxists any more than it was for other classical theo­ rists, but it was a political problem. A properly functioning economy would have no unemployment; it would be self-regulating and would need no external adjustments. But unemployment could occur if there was insufficient capital to employ labor productively. The capacity to em ­ ploy society’s members was dependent on increases in productive capac­ ity and was therefore hostage to who made investment decisions and by what criteria. For liberal theorists, the rightful decision-makers were pro­ ducers as property owners. Producers were also at the center of socialist theory, but investment decisions could not be left to private prerogatives and the motive of private gain alone, or to the secondary uncertainty resulting from autonomous decision making in a market economy that often made it unprofitable to invest in the infrastructure, producers’ goods, and even raw materials that were necessary to expanding produc­ tive capacity (industrialization).37 The crucial concept in this Marxian societywide project for capital for­ mation and sustainable growth was productive labor. According to the classical notion (whether physiocratic or cameralist, Marxian or Ricar­ dian), growth occurred only through increases in real value— net, or su r­ plus, value accumulated from production where the yield from human labor exceeded that which was necessary to reproduce both that labor and :ir> See Feher, Heller, and Markus, D ictatorship o v e r N eeds 3(i For a good example in a country that later adopted socialism for the same reason, see Janos, T h e Politics o f B ackw ard n ess in H istorical Perspective: H ungary, 1825-1945. 37 T, C. Koopmans coined the phrase “secondary uncertainty”; see Dobb s exposition in W e lfa re E con om ics a n d the E con om ics o f Socialism , 121-52.

INTRODUCTION

19

all other, unproductive uses of human labor in society.38 Value added in production was not only a monetary category of revenue above costs of production, but necessarily a real category: the wages of those whose la­ bor created value represented wage goods (goods that workers would con­ sume in the course of producing other goods, the level of which was based on a conception of subsistence that was set culturally and in social interac­ tion). The subsistence fu n d for society defined the limit to economic growth. It depended not only on how many were consuming that fund in relation to how many were creating it (the calculation of this ratio incorpo­ rated both Malthusian considerations of population growth in which eco­ nomic growth encouraged birthrates to rise, and classical analyses of class structure in which there were unproductive parasites such as landlords, lawyers, clergy, and aristocrats’ servants living off the product of others), but also on the productivity of the industries producing those basic con­ sumption goods and on the price of the goods. There were two ways to increase growth. One was to encourage bring­ ing as much of society’s resources as possible into productive use and to reduce to a minimum the drain of resources into unproductive endeavors. In the colorful language of the physiocrats, for example, merchants’ profits were “leeches sucking off” agricultural and industrial producers. All but essential administrators, preferably chosen by examination for professional skill, were “sterile”; bureaucrats only rarely contributed to the increase of productive output.39 Naturally, the way a society orga­ nized its activities, including the offices and activities of the state, could be more or less wasteful. The second way to increase growth was to “cap­ italize” labor itself— by increasing individuals’ capacity to raise their mar­ ginal output through use of machinery, application of science, new production techniques, organizational rationalizations, and education (“human capital”). Labor’s reward should include incentives to higher productivity and capitalization; people would thus be defined in terms of their relative productivity— for example, according to skill, experience, output, or managerial abilities. The goal of increasing the net output of society meant that rights to ownership and to the organization of economic activity should be handed to producers. By reuniting the functions of labor, commerce, manufactur­ ing, and finance into a single association of workers, they would save on costs while work incentives would rise. A rational economic plan to coor­ dinate the activities of individual associations and avoid the problems of secondary uncertainty would guide producers’ economic decisions. The 3S J Roemer, F re e to L ose, is a particularly lucid presentation of this guiding concept. 39 Appleby, E con om ic T hou ght a n d Id eolog y in Seventeen th-C en tu ry E ngland, 107, 134; Dobb, T heories o f Value a n d D istribution since A dam Smith, 41.

20

CHAPTER 1

crises of capitalism had taught that the separate role of money— the sep­ aration of production from finance, and autonomous decision making co­ ordinated only by the price mechanism— could independently depreciate the value added by labor, whether through falling real wages, unemploy­ ment, or state debt and financial crises that prolonged resolution of the problem.40 It was in society’s interest to ensure a balance between the goods necessary to production (both producers’ goods and wage goods) and the goods that represented an increase in its standard of living, and to prevent an autonomous role for money and finance. From this economic ideology there also followed a view of the state and political relations. As a political organization in capitalist societies, Marx­ ist parties argued, government took the guise of a neutral intermediary in the conflict between forces separated by the institution of private owner­ ship; but its actions were not those of a disinterested arbiter, and so it actually served to mask the real structure of power in society. As an eco­ nomic organization, it also imposed an additional layer of exploitation (rents and taxes) on labor’s surplus, wasting resources on the coercive instruments necessary to maintain the power of both employers and rulers. Social ownership, on the other hand, would eliminate the need for such an organization. It could therefore eliminate the coercive power ol taxation and police and the wastefulness of unproductive consumption by bureaucracies. The state would become less and less necessary. Eco­ nomic and social functions could be reintegrated into associations of workers (producers), and although this would not eliminate all disagree­ ments or conflicts of interest, they would no longer reflect an unbreachable divide between capital and labor. There remained disputes among socialist parties and schools of thought— as there were among schools of classical economists— over, for example, what constituted value in a monetized society and therefore over how to price labor.41 A policy of industrialization and a system of differentiated economic incentives would create differences in a socialist society according to workers’ individual “capital” or the economic branch in which they worked. Disagreements over the optimal scale of produc­ tion, particularly in agriculture, and over the pace of development and its political implications— for consumption standards and investment prefer­ ences and for which groups would benefit more from the resulting policy choices— remained unresolved in the socialist legacy and laid the basis for 10 Rucciardi, “Rereading Marx on the Role of Money and Finance in Economic Develop­ ment, ’ is a rare example of attention to the crucial role of money and the causes of financial crisis in Marx’s political as well as economic analysis and also in later Marxian theorizing. 11 See Dobb, T h eories o f Value an d D istribution, 112-20; and Milenkovitch, Plan and M arket in Yugoslav E con om ic Thought, 21—31, '14-50, 2 30-49

INTRODUCTION

21

factional disputes.42 Even the Soviet model, despite its image as a dog­ matic blueprint of development and organization forcibly imposed on other societies, contained within it alternative paths and choices on devel­ opment strategy and its associated policies and organization that reflected these disputes. This was most obvious in the Soviet debates on strategy of the 1920s,43 although the debates revived after World War II and every decade thereafter in competing schools of policy and their political factions. But a major assumption of socialist theory was that no economic con­ flicts in a society with social ownership would be inevitably unreconcilable in the way that private ownership of property created truly antagonistic relations between classes. Individuals were supposed to be guided by their economic interests— the Smithian assumption was no­ where rejected— but social ownership removed the artificial obstacles to their natural cooperativeness. Conflict between individuals incomes or jobs and their common interest in economic growth was only a matter of time horizons, and it could be handled by education and the feedback of real growth. The institutions for regulating conflict could presume cooperation. The societies created on the basis of Marxist ideology were organized on principles different from those of market economies with private owner­ ship. Their politics, therefore, did not follow the market logic. The political correlate of the dynamic concept of the trade-off between capital and labor, investment and employment, was not a contest between parties and orga­ nized interests representing private owners of capital on the one hand and people who labor on the other. It was instead a range of policies for eco­ nomic growth and its distribution, proposed by economists and govern­ ment ministries; these policies benefited certain groups, firms, sectors, and regions but did not result from pressure by them. The swings por­ trayed in most analyses of socialist policy between utopia and develop­ ment, vision and reality, “red” and “expert, ”44 were alternations between 12 For a good introduction to the agricultural debates, see Mitrany, Marx against the Peasant, 7-23; see also Cox, Peasants, Class, an d C apitalism On the debates over pace, A. Erlich, The Soviet Industrialization D e b a t e , remains extremely useful; see also Lewin, Political U ndercurrents in Soviet E con om ic D ebates; Dobb, Soviet E con om ic D evelopm en t since 1917; and V. Cligorov, G ledišta i sp orovi o industrijalizaciji u socijalizm u Kitehing, Development an d U n derd ev elop m en t, is particularly helpful in showing the tensions among the Ricardian socialist, Listian nationalist, and Marxian strands within the socialist movement. *3 A. Erlich, The Soviet Industrialization D eb a te; Lewin, Political U ndercurrents; and Dobb, Soviet E con om ic D evelopm en t since 1917, are still particularly useful sources. H Lowenthal, “Development vs. Utopia in Communist Policy,’ is the classic work of this very large genre (most analyses being based on the Chinese case).

22

CHAPTER 1

particular approaches to economic growth and their corresponding party factions. To implement a shift in approach required organizational and regulatory reform, not only of production and exchange hut also of the state. Political authorities attempted to capture savings and control alloca­ tion not for the purpose of dominance alone45 (although such motives may be found in any system), hut also for the purpose of executing a particular economic theory. The precondition, however, was to obtain and protect political independence over domestic economic decisions; to do so re­ quired protecting above all national sovereignty, then the system of social ownership of capital, and within that system jurisdictional distinctions in public authority over economic assets. Policy alternations occurred pri­ marily, it turned out, in response to changing international conditions that affected capital accumulation, the capacity to trade, and national security. The antimilitarism of liberal economists, from the physiocrats on through Marx, left them ill-equipped to conceptualize war readiness as a part of a functioning economy.46 The part of their conceptual tradition that could do so— the mercantilist and cameralist legacy— included a vi­ sion of the state, however, that the Yugoslav party leaders rejected. Find­ ing a modus vivendi in the cold-war international order to suit their precondition of independent choice in economic strategy, they devised a peculiar international balancing act among the three camps of that inter­ national order. But the adjustments required to maintain the country’s balance of foreign payments and those required for defense were often in conflict; similarly, the leaders’ ideological preferences for economic strat­ egy and political organization often clashed with the requirements of na­ tional sovereignty and defense. The result was a domestic contradiction that had already emerged during World War I I — between what I will call the “Slovene model” of the ruling strategy and the “Foca conditions” (see chapter 2) that made the strategy possible. That contradiction defined the country’s political dynamic as it altered economic policy in response to changing international conditions. The methods that replaced the market in allocating factors of produc­ tion varied among socialist societies, and so, therefore, did political orga­ nization. In the Yugoslav case of the class of reform-communist states, policies were debated in elected assemblies of citizen-producers repre­ senting autonomous organizations of “associated labor” and among fac­ tions of the single political party (as tended to be true in hegemonic 15 Verdery, N ational Ideology u n der Socialism, has a very useful summary of these "modes of control” (74-87). 4fi Even Alexander Erlich’s otherwise highly respected analysis of the Soviet debates on development strategy in the 1920s ignores the central role that defense and the army played in these debates and subsequent policy— with the result of crucial misinterpretations, ac­ cording to Mark von Hagen (personal communication).

23

INTRODUCTION

parties of the same historical period, such as the Liberal Democrats of Japan and the Christian Democrats of Italy). In place of the competitive mechanisms and decision rules of electoral and pressure-group politics, the political system was based on consensual or proportional mechanisms for defining rules by which money, goods, and people would be allocated or redistributed among economic interests. Instead of a choice between wages and jobs, there was a more or less continuous (but not frictionless) adjustment of the methods of employing labor aimed at improving the conditions for increasing both wages and jobs; the reorganization of soci­ ety to use labor more productively and rules defining labor incentives that aimed to increase productivity would together increase aggregate eco­ nomic growth. Because all individuals were defined by their labor (and their capacity to create capital, usually measured by their individual contribution to productivity), the way that employment was organized defined the struc­ ture of society and the main lines of political life and conflict. The mecha­ nisms of what Claus Offe calls a second logic alongside that of capital— a countervailing political force that people vulnerable to unemployment can wield against those who have power over economic decisions, whether through labor’s organization against capital or popular opposition against the state— did not exist in Yugoslavia.47 Instead, individuals sought to prevent their own unemployment by increasing their personal capital and individual access to employment and by resisting a demotion in their regulated social status. Employers (firms and governments) in turn competed to retain as much autonomy as possible over their assets while increasing their access to additional funds. There were as a result three very separate spheres of political action within the country, as de­ fined by the leaders’ original political-economic strategy: property owners’ strategies toward capital assets, individuals’ strategies regarding employment and status, and the mass of people left outside this public sector of political activity, including the unemployed. Only the first influ­ enced policy, but the actions of all three shaped the evolution of Yugoslavia and its similarities with and differences from other socialist states.

Pl a c in g

the

Yu g o sla v C a

se

: S in g u l a r H is t o r ie s

and

Common

R e f o r m St r a t e g ie s

In their comparative project on the size and incidence of unemployment and the response to it in Western Europe, North America, and Australia during the Great Depression, Barry Eichengreen and T. J. Hatton find no 47 Offe, “Two Logics o f Collective Action.

24

CHAPTER 1

common pattern across countries, except that world depression is indeed reflected in large-scale domestic unemployment. Both before and after the Depression, countries varied substantially in the rate of unemploy­ ment, in the economic and social groups that were unemployed, and in the social consequences of unemployment. “Only in the early 1930s is a common pattern evident,” write Eichengreen and Hatton.4H For the crisis decade of 1 9 7 3 -8 4 , similarly, Goran Therborn finds no general pattern for rates and incidence of unemployment in countries of the Organization for Economic Cooperation and Development (O E C D )— only countryspecific, historically defined profiles.49 This case study of unemployment in socialist Yugoslavia from 1945 to 1990 is based on this finding that countries have their own specific pro­ files, particularly in patterns of work, employment, and unemployment. It is also intended as a theoretical case study, however, with its assump­ tion that these profiles are based on variables that are common across countries. The variable of developmental ideology, discussed above, places Yugoslavia in the universe of other socialist states; they had much in common because they shared the same legacy of developmentalist thought, the socialist debates in nineteenth-century Europe, and (for states outside the USSR) experiences with Soviet policy. Thus, despite the attention paid to Yugoslavia’s system of “workers’ control” and “mar­ ket socialism” as different from state-socialist systems of the Soviet type in Eastern Europe, the similarities in employment structure between Yugoslavia and those countries (with the exception of women’s participa­ tion in the labor force— related, as will be seen, to the issue of unemploy­ ment) point to a fundamental commonality. Their differences arose from adapting this common legacy to the local imperatives of political struggle. The socialist parties’ search for allies out­ side the industrial working class (in agriculture and sections of the urban middle class) as they formed a social movement for revolution and identi­ fied a domestic enemy, in conjunction with Comintern policy regarding political alliances, defined the social basis of each party when it came to power. Differences also arose from the international conditions under which the party competed for power and from the country’s geopolitical and global economic positions. The effect of these differences in the com­ position of the party’s political constituency and in international position was substantial variation— within a common ideology— in governmental policy, just as among market economics. It is this variation in governmenm Eicliengreon and Hatton, In terw ar U nemployment iti International Perspective, p. 51, 19 Therborn, W hy Som e Peoples A re M ore U nem ployed than O thers Boltho finds the same variation in European countries’ experience with inflation (The E urop ean Economy). Seharpf uses this variation for his analysis of unemployment in "Economic and Institutional Contraints,”

T

able

1-1

In te rn a tio n a l C o m parison o f th e S e cto ra l D istrib u tio n o f E m p lo y m e n t (p ercen tag es)

M a n ufactu ring & Mining (1) '

Construction i? T reimportation (2)

Trade, Catering, Banking ir Insurance (3)

Other Services (4)

(1) + (2)

(3) + (4)

Yugoslavia

4 2 .6

1 9 .8

1 7 .7

1 9.9

6 2 .4

3 7 .6

B ulgaria

4 4 .8

2 0 .8

1 1 .0

2 3 .4

6 5 .6

3 4 .4

C zech oslo vak ia

4 4 .1

1 9.4

1 2 .7

2 3 .7

6 3 .5

3 6 .4

E a s t G erm a n y

4 7 .1

1 6 .4

11 .5

2 5 .0

6 3 .5

3 6 .5

H u ngary

4 3 .2

2 0 .4

1 2 .2

2 3 .9

6 3 .6

3 6 .1

P oland

4 3 .2

2 1 .8

1 2.2

2 2 .8

6 5 .0

3 5 .0

5 0 .4

2 1 .1

8 .8

19.8

7 1 .5

2 8 .6

4 5 .5

2 0 .0

1 1.4

2 3 .1

6 5 .5

3 4 .5

Austria

3 5 .0

1 7 .0

2 3 .7

2 4 .3

5 2 .0

4 8 .0

B elg iu m

2 7 .9

1 5 .6

2 6 .4

3 0 .1

4 3 .5

5 6 .5

D enm ark

2 4 .0

1 6 .7

2 2 .3

3 7 ,2

4 0 .7

5 9 .5

R om ania A verag e

(■c ontinued)

Table 1-1

Manufacturing &- Mining (1)

Construction ir Transportation (2)

F in lan d

3 1 .0

1 6 .3

F ran ee

2 9 .3

16.4

(Continued) Trade, Catering, Banking 6Insurance (3)

Other Services (4)

(1) + (2)

2 2 .8

3 0 .0

4 7 .3

5 2 .8

2 5 .6

2 8 .2

4 5 .7

5 3 .8

(3) + (4)

G re a t B ritain

3 2 .1

1 3 .5

2 4 .6

2 9 .8

4 5 .6

5 4 .4

Irelan d

2 9 .2

1 8 .4

2 4 .4

2 8 .0

4 7 .6

5 2 .4 4 9 .5

Italy

3 2 .4

1 8 .2

2 4 .7

2 4 .8

5 0 .6

N eth erla n d s

2 3 .7

1 7 .9

2 7 .4

3 1 .0

4 1 .6

5 8 .4

Norway

2 4 .0

18.1

2 5 .0

3 2 .9

4 2 .1

5 7 .9

Portugal

3 7 .2

1 8 .4

1 9 .0

2 5 .1

5 5 .6

4 4 .1

Spain

3 3 .7

1 8 .5

2 9 .6

1 9 .2

5 2 .2

4 8 .8

Sw ed en

2 6 .3

1 4 .2

2 1 .1

3 8 .4

4 0 .5

5 9 .5

Sw itzerland

3 5 .7

1 3 .3

2 9 .8

2 1 .2

4 9 .0

5 1 .0

W e s t G e rm a n y

3 9 .6

1 4.3

2 1 .6

2 4 .7

5 3 .9

4 6 .3

3 0 .7

1 6 .5

2 4 .5

2 8 .3

4 7 .2

5 2 .8

A verag e

S ou rce: International Labor Organization, Y e a rb o o k o f L a b o r Statistics (1981), cited in Mencinger, T h e Yugoslav E con om y, 20.

27

INTRODUCTION T a b l e 1 -2

Level of Employment in Socialist and Market Capitalist Countries, 1974 (percentages) M a r k e t C a p it a l i s t Socialist C o u n trie s

P ercen ta g e

C o u n trie s

P ercen ta g e

Yugoslavia

2 1 .0

Austria

4 0 .1

Bulgaria

3 9 .3

B elg iu m

3 8 .8

Hungary

4 8 .5 4 2 .7

F ra n c e

4 0 .3

East Germany

W e s t G erm a n y

4 1 .4

Poland

5 1 .6

U n ited K ingdom

4 4 .3

Romania

4 7 .9

Japan

4 7 .4

USSR

4 5 .7

U n ited States

4 0 .6

Czechoslovakia

5 0 .1

Sw ed en

4 8 .6

Source: Daviđović, “Nezaposlenost i društvena nejednakost u Jugoslaviji," 4

tal policy, within different social and international contexts, that produces country-specific histories. Among countries ruled by political parties whose social base among wage earners and alliances with small-property owners lead to a sustained commitment to full employment, the governmental policies that matter in achieving full employment, according to the literature on advanced industrial societies, are national strategies for international trade and ad­ justment. The fact that mass unemployment occurs during global depres­ sions and that unemployment tends to rise about the same time in many countries because they participate in a global economy (for example, both Yugoslavia and the developed capitalist economies had increasing diffi­ culty with employment in the global crisis after the late 1970s, just as countries showed a common pattern in the early 1930s) has led to an appreciation of the role of national policy in promoting economic growth and employment at home when recessions occur in primary trading part­ ners or in reserve-currency countries. As James Alt demonstrates econometrically, so significant a portion of domestic unemployment in open economies can result from a contraction in the external environment that the influence of any macroeconomic policy on the level of domestic unem­ ployment cannot be assessed without first measuring those external influ­ ences.50 The regulation school takes such empirical findings to a theoretical level, by arguing that strategies for capital accumulation and their accompanying patterns of employment are international regimes.51 50 Alt, “Political Parties, World Demand, and Unemployment.” 51 For example, this school characterizes the period after 1973 as one of “global overac­ cumulation of capital in relation to the supply elasticity of both labour-power and primary products” (Itoh, “The World Economic Crisis”). See also Noel, “Accumulation, Regulation, and Social Change.”

28

CHAPTER 1

A country’s niche in the international economy matters critically in this regard, and for a small state dependent on trade for some necessities of industrial growth— such as japan, Sweden, Switzerland, or Austria— the primary issue, according to the scholarship on full employment, is its political capacity to formulate, agree upon, mobilize support for, and im­ plement a strategy of adjustment to the international economy— to changes in demand for the country’s exports and in its relative terms of foreign trade— in ways other than by adjusting levels of unemployment.52 The key element of Yugoslav exceptionalism was not the country’s sys­ tem of worker self-management or its multinational state, but its interna­ tional position— its attempt to retain socialism at home and a vigilant national independence while being open to the world economy, which required constant adjustments in the use of labor and organization of em­ ployment.53 It was partly in order to make those adjustments at the level of workers’ wages and benefits that workers’ councils were introduced. Yugoslavia’s trajectory differed from that of other socialist countries above all in its earlier move to the economic and political reforms associated with global market integration and export orientation— to what the Hun­ garians called the “new economic mechanism” and to what R. W. Davies called the “new orthodoxy” in the USSR in 1985, the policies of reform communism that most characterize Leninism.54 Introduced in Hungary after 1 9 5 9 -6 1 , intermittently in Poland, in Czechoslovakia after 1963, and in the Soviet Union most recently and explicitly under Mikhail Gor­ bachov in 1985, the program had its most sustained experience in Yugoslavia. This book is a study of the attempts to maintain and imple­ ment that reform program under changing international conditions. W hile the primary difficulty for employment lay with the effect of open­ ness on the country’s institutions of economic management— the central regulation of financial indicators based on the closed accounting system of Soviet monetary planning (though with origins in German cameralism)— Yugoslav experience suggests that, in analyses of countries that have suc­ cessful national strategies toward external markets, their international po­ sition should receive as much attention as is currently paid to their political institutions for economic management. In contrast to Yugo­ slavia’s position of national independence outside both the Eastern and W estern blocs, the full-employment countries not only were advanced industrial democracies but were fully incorporated into Western trading 52 Alt, “Political Parties, World Demand, and Unemployment"; Katzenstein, C o rp o r a ­ tism a n d C h an ge; Therborn, W hy Som e P eople A re M ore U nem ployed than O thers; Cam­ eron, "Social Democracy”; Eichengreen and Hatton, In terw ar Unemployment 53 William Zimmerman also sees the domestic-international linkage as critical to the un­ derstanding of socialist Yugoslavia, but his argument differs from the one presented here; see O pen B ord ers, N onalignm ent, an d the Political Evolution o f Yugoslavia 51 Davies, “Soviet History in the Gorbachev Revolution."

INTRODUCTION

29

alliances, and they had made a choice for neutrality within Western secu­ rity alliances and for conventional territorial defense. In attempting to explain the political paradox of unemployment in so­ cialist Yugoslavia, this study came upon a social organization and political dynamic entirely different from that common in most views of the coun­ try. It was as if the question of unemployment had unlocked doors to the Yugoslav system in the same pivotal way that Marx ascribed to it in the analysis of capitalism. That process of discovery began with an exami­ nation of the early choices on political and economic strategy made by the Yugoslav Communist party leadership in the course of revolution and early state-building. These choices are the subject of the next two chapters. The leaders decision for political and economic independence from Moscow, although not their choice alone, made the party’s pro­ cess of consolidation particularly intertwined with international condi­ tions. That process, prolonged until 1949—52, and the founding period are described in extensive detail in chapter 4 because they were critical to the system that emerged and because the argument presented here dif­ fers substantially from previous scholarship. Chapter 5 then summarizes the principles of the political system that were put in place in 1952 and that governed the periodic adjustments in subsequent constitutional reforms. As a result of the choices made in that founding period, the Yugoslavs moved ahead of the other socialist states on a path they all eventually took. Incorporating openness into their economic strategy and treating foreign aid, imported machinery, advanced technology, cheaper wage goods, and eventually foreign investment as critical supplements to do­ mestic resources, they accepted Western food and military assistance, asserted national sovereignty outside of secure cold-war alliances with an independent defense, and moved to integrate into international markets by opening their borders to labor migration, participating in Western cap­ ital markets, and joining global trade and financial institutions— the G e n ­ eral Agreement on Tariffs and Trade, the International Monetary Fund, and the World Bank (they also had association agreements with the E u ­ ropean Community and the Council for Mutual Economic Assistance). This openness in turn required domestic economic and political reforms. Governmental policy toward employment and unemployment, discussed in chapters 7 and 8 (after the characteristics and meaning of unemploy­ ment in socialist Yugoslavia are presented in chapter 6), was driven by the need to respond to changes in the country s international environment in the areas of both trade and defense. The result was an increasing ineffec­ tiveness of the institutions of macroeconomic regulation essential to the leaders’ strategy for employment growth, and a growing disjuncture b e ­ tween the labor policy adopted for international adjustment and the char­ acteristics of the labor supply at home.

30

CHAPTER 1

The political consequences of the policies of adjusting labor and em ­ ployment to international conditions are discussed in chapters 9 and 10: why there was public silence on the subject of unemployment; why no collective action to change economic policy could he mounted; and how unemployment nonetheless had political effects by corroding the princi­ ples underlying the political system and leading to a rebellion against it by people who were threatened not by capitalist unemployment but by so­ cialist unemployment— a loss of social status and political rights over eco­ nomic assets. As in European social democracies, the most vexing employment problem in the 1980s was not with industrial workers but with civil servants, white-collar administrators and staff, and the social services55— in the language of Yugoslav socialist ideology, “unproductive” people on “guaranteed salaries” from “budgetary employment.” Property owners in the socialist sector fought to retain their rights— either individ­ ual rights to their social status with its political rights and economic b en e­ fits, or the collective rights to control economic resources belonging to governments and enterprises. But unlike in market economies, their eco­ nomic interests, under rapidly changing international conditions, were expressed not in political organization and demands for policy change but in the arena of, and the methods of, the system of employment: redis­ tribution of labor (of individual incomes and people among jobs and prop­ erty sectors) and autonomy over capital. The result was a competition over both citizenship rights and governments’ jurisdiction over money and finance; those struggles led, by way of constitutional contest and its competing visions of the state, to the country’s dissolution. v' See Tarschys, "Curbing Public Expenditure, on the "scissors crisis in publie finance ill O E C D countries since the mid-1970s. See also Esping-Audersen, Politics against M ar­ k e ts, on the significance lor policy change of the political alliance forged by the Swedish Social Democrats with white-collar unions after the late 19(i0s and these unions' “wildcat” opposition when the process of European integration began to displace civil-service jobs abroad (tile significance of the housing problem, also critical in the Yugoslav case, is dis­ cussed as well)

Chapte r 2 THE MAKING OF A STRATEGY FOR CHANG E

p o l i t i c a l and economic system in socialist Yugoslavia was the prod­ uct of a strategy in motion, in the process o f becoming. Its institutions never stablized in the sense that most analytical approaches to politics and policy— whether the pressure-group, competitive-party, bureaucratic, or rational-actor approach— take for granted, treating institutions as given conditions in no need of examination. To understand the country’s social order and explain the policies adopted, therefore, one must be more aware of the assumptions and mentality of the leaders who guided policies and institutional reform in response to environmental pressure— assumptions that remained constant (if not fully visible) throughout the period of their rule, as I will argue in the course of this book. The leaders’ strategy for change had much in common with those of other Marxist­ Leninist parties in Europe, which in turn borrowed much from, or were in reaction to, the policies and institutions of developmentalist govern­ ments in Europe in the nineteenth century. But strategies were also shaped by the process of acquiring power, and therefore each was particu­ lar to its own locale— the political questions it had to face, the potential constituencies and political allies within the society, and the level and character of economic development. In contrast to the view that Marxist­ Leninist political parties are dogmatic, obsessed with “totalitarian” con­ trol and obedience to the dictates of the center of some hierarchy of power, their strategies were— like the ideology of any other political party— a set of “beliefs or ideas materialized in action, often in political conflict.”1 They were not fixed beforehand, but shaped by the time and conditions in which they were formed. The strategy that the Yugoslav Communist leadership pursued after World War II was a composite of political choices made between 1928 and 1949. Like the approach to unemployment that began to crumble and change in the 1980s in advanced industrial states, such as Sweden, the United States, or France, the Yugoslav system had its origins in the 1930s.2 In making these political choices, the Yugoslav leaders confronted

The

1 Verdery, National Id eolog y u n d er Socialism , 9, 2 The Swedish corporatist system formed by the Social Democratic party between 1932 and 1938 was dismantled during the 1980s, a process completed with the moves for acces­ sion to the European Community, On the alliances of the New Deal and its Employment

32

CHAPTER 2

two tactical problems. The first was how to construct a single program for 1 a country of such heterogeneity, where political parties, unions, and po­ tential constituencies differed substantially across regions, where pro­ found differences of industrial and capitalist development exacerbated the dilemma about how to apply Marxist theory to largely agrarian and pre­ bourgeois conditions,3 and where the country itself was engaged in great quarrels over how to integrate its preunification territories and socio­ political orders. This chapter will argue that the early shift of ideological dominance to political forces from the more economically and organiza­ tionally developed areas of the country, reinforced by the Marxist predi­ lection to favor that which was most progressive or most advanced, was decisive in defining such a program. The second tactical problem was the fact that the political struggle, to a far greater extent than electoral dy­ namics in developed economies, played out simultaneously on two fronts: within an international power structure and requirements for interna­ tional recognition, and within a domestic contest. Equally decisive for ultimate choices was the fact that moments of decision were most often determined by international events, from the founding of the party in 1919 to the end of that formative period, when after 1949 the statebuilding process began to stabilize— because, as its architect Edvard Kardelj told the third party plenum on D ecem ber 29, 1949, the “most important battle of socialism now, ” that of national independence through W estern recognition, had been won.4 The resulting program for transformation did not eliminate the tensions and differences between alternatives and factions. That thorn was still felt by Marshal Tito near the end of his life in 1980; Ivo Banac cites the leader’s reminiscences: “The struggle we began more than fifty years ago for the resolution of party affairs was very hard, since factionalism was deeply rooted, and it went on a long time, practically from the founding of the KPJ [Communist Party of Yugoslavia].”5 Some elements within the package of tactical and strategic choices were mutually contradictory, while substantive differences tended to be submerged in arguments about the appropriate pace of change or hidden in name-calling against political enemies. Act, enacted in 1946, see Hicharcl Bartel’s 1992 interview of James Tobin in “The Economic Pendulum/’ For Franee, see Piore’s review of the Salais group study, in “Historical Perspec­ tives and the Interpretation of Unemployment 3 See Hoston, Marxism an d the Crisis o f D evelopm en t in P rew ar Ja p a n , as a good exam­ ple of how central this problem was to the formation of strategy and tac tics within Marxist parties in the twentieth century* 4 Petranovic, Koncar, and Kaclonjic, S edn ice Cen traln og kom iteta KJ}J (1948—1952), 474, r> W ith Stalin again st Tito, 45. Shoup emphasizes this factionalism as well in his careful study, C om m unism a n d the Yugoslav N ational Q uestion, especially 13-59.

THE MAKING O F A STRATEGY FOR CHANGE

33

In contrast to the tendency in the literature on Yugoslavia to character­ ize conflict in terms of political power only, this analysis attempts to re­ store attention to what it considers those conflicts to have been about— at base, about a search for the optimal development of material life and the corresponding organization of social life, then about control over eco­ nomic resources, and only in that context about the political instruments necessary to those goals. For example, the literature interprets both ac­ tual conflicts over domestic economic policy and contests by which strat­ egy was formulated and redefined as fights among leaders for personal power (elite conflict);6 among ethnic groups for dominance or autonomy (national conflict);7 or among layers in the party and state hierarchy for the location of power (conflict between center and republics, statism and pluralism, plan and market, conservatives and liberals).8 But none of these classifications can explain its political construction of the problem of unemployment. Turning points considered politically decisive turn out to be far more ambiguous if one focuses on political-economic strategy. For example, the argument that 1940 is critical because the party was then fully “bolshevized,” meaning that Tito succeeded in consolidating his leadership and imposing iron discipline,9 looks different in light of the material in this chapter. The year 1948, universally recognized as decisive because Tito secured independence for his leadership and his country in a contest with Stalin in the famous quarrel that established the principle of “national communisms” (the ability of countries governed by Communist parties to follow their own path independently of Moscow),10 seems far less important than 1946, 1947, and 1949, according to the material in chapters 3 and 4. For some, the interlude of the world war in 1 9 4 1 -4 5 is 6 See especially Burg, C onflict a n d C ohesion in Socialist Yugoslavia Rusinow, The Yugoslav Experiment, is far more nuanced, though he does weave his story around the contest between liberals and conservatives. 7 Most studies of postwar Yugoslav politics pay obligatory obeisance to the national ques­ tion as the underlying character of the state. The most undiluted version is in Banac, The National Question in Yugoslavia; see also Ramet, N ationalism a n d F ederalism in Yugoslavia; and Cohen and Warwick, Political C oh esion in a F ragile Mosaic. 8 Comisso, Workers' C on trol u n d er Plan an d M arket; Burg, C onflict a n d Cohesion; Milenkovitch, Plan an d M arket in Yugoslav E con om ic T hought (in her discussion of eco­ nomic thought, not political factions); Rusinow, The Yugoslav E xperim ent 9 Banac, With Stalin against Tito, 78. 10 See especially Campbell, T ito’s S ep arate R oad; Radonjić, Su kob KPJ s K om in form om i društveni razvoj Jugoslavije, 1948-1950, 108ff.; Ulam, Titoism an d the C om in form ; Clissold, Yugoslavia an d the Soviet Union, 1939-1973 , 4 2 -4 3 ; Auty, “Yugoslavia and the Cominform and Banac, "Yugoslav Cominformist Organizations ” A. Ross Johnson s study The Transformation o f C om m unist Id eolog y is also based on the concept of ideology as being shaped and reshaped in the process of critical political conflicts, but his choice oi timing and critical event— before and after the Cominform resolution of June 28, 1948— creates a pic­ ture of a process very different from what I think occurred.

34

CHAPTER 2

decisive because of the leadership’s decision to organize a peasant, “all­ national” following with the battle cry of national liberation from foreign oppressors11 and because of the leaders’ troubled relationship with Stalin, which provided the resources for their independence— a popular follow­ ing at home and the doubt necessary to disobedience. But this interlude was far more important in defining the army’s postwar role and the leaders’ political tactics abroad than in granting the party legitimacy at home. In fact, the underlying theme in the entire literature on Yugoslavia of national independence and difference from the Soviet bloc distracts from all these countries similarities in economic strategy and in the influ­ ence of their international position (in relation to Moscow as well as the W est and the third world) on policy choices and political reform. To get away from these characterizations of what will still be familiar pieces (though told from a different perspective), I propose a different labeling shorthand for, on the one hand, the dominant package of the leaders’ chosen design for a state and a social order and, on the other hand, the tensions that remained unresolved in the conditions in which the leaders operated and the disagreements among them. In keeping with the territorial organization of economic and political power that was so critical to the postwar state and the influence of its wartime origins, I will call these two tendencies (after the Partisans’ wartime rules of order) the Slo­ vene and Foca models. W e begin with the choices made before the war.

Id e n t it y

and

O

r g a n iza t io n a l

Bo u n d a r ie s

The most fundamental decisions for a party and its strategy are those about identity: Who are we? W here do we draw our boundaries terri­ torially and socially? With whom will we ally? How do we view our role in history? It was critical that these questions were posed for the Yugoslav Communist party in the interwar period when the national question drove political conflicts and the language of conflicts even when they were about other matters. The new Yugoslav state joined territories and peoples with separate identities and social orders, and their commitment to the common state and some common identity varied.12 In addition, 11 C, Johnson, P easant N ationalism an d C om m unist P ow er. 12 Because the government was identified with the Serbian monarchy and its seat in Belgrade, and because the country was multinational, it was common to fight government policy in terms of national assertion and charges of national discrimination. Since histories of that period tend to focus on the national question, it is difficult for scholars even fifty years later to see a different story, and the wars of 1991 and 1992 will reinforce this difficulty. See, for example, Banac, T he N ational Q uestion; and Cohen and Warwick, Political Cohesion, In N ation al Id eolog y u n d er Socialism (especially pt, 2), Verdery argues that in socialist Ro­ mania, this preoccupation of the intellectuals came, over time, to capture the discourse and ideology of the Communist party.

THE MAKING OF A STRATEGY FOR CHANGE

35

those party leaders who tried to maintain the Marxist position that na­ tional consciousness and nation-states were secondary to and even diver­ ted from the class struggle came under the most criticism from the Comintern, which focused on the national question as a resource for revolution— such as when its tactics demanded the right to self­ determination of peoples and the anticolonial struggle of “oppressed na­ tions” to break up empires in the cause of “workers’ and peasants’ states.”13 The fact was that the Yugoslav party, from its founding in April 1919, was also an alliance of preunification socialist parties and left-wing cultural clubs that had different political legacies (the German social dem ­ ocratic and Austromarxist influences in Slovenia, for example, were very different from the Chernyshevskian Marxism ofSvetozar Markovic’s party in Serbia) and different national consciousnesses. Although Paul Shoup and Walker Connor argue that the party’s eventual success lay in its very ambiguity on the national question,14 the issue was decisive in the choice of constitutional program for the new state and in the consequences of the choice of party leaders, in contrast with the equally compelling but less influential events of the agricultural crisis of the 1920s, the Great D epres­ sion of the 1930s, or the king’s suspension of the democratic constitution in 1929. Moreover, in the extensive literature on the party’s frequent shifts, quarrels, and attempts to avoid the question, the usual distinction drawn between internationalists (who saw national identities as a useful weapon in the service of revolution) and committed nationalists tells us little about how nationalism was defined, recognized, and authorized in the Yugoslav space .15 For example, internationalists could follow Lenin or Stalin, and nationalists could believe, with the Austromarxist Karl R en­ ner, in a “democratic nationalities federal state” recognizing that cultural identities were as fundamental as economic ones for social organization;16 or with the German social democrats of the 1875 (Gotha) program that nation-states were the natural organizational unit for an economy; or with 13 Connor, The N ational Q uestion in M arxist-Leninist T heory a n d Strategy, 1 3 7 -4 2 and chap, 3; Carr, T he B olshevik Revolution, vol. 1, note B, “The Bolshevik Doctrine of Self­ Determination,” 410-28. 14 Shoup, C om m unism a n d th e Yugoslav N ational Q uestion, in the contrast he draws (in the conclusion) between the relation o f Communist rule and the national question in the period of state formation and the relation that had evolved by the 1960s; Connor, T he N a­ tional Question, 168. 15 Connor’s statement that Tito was an internationalist, calling frequently on patriotism but always subordinating national goals to that of the revolution (The N ational Q uestion, xiv), is disputable at many points in the leader's long career. 16 Culick, Austria f r o m H ab sb u rg to H itler 2:1369. Convinced of the Austrian influence on debates in the northwest of Yugoslavia, despite my critics, I was particularly grateful to Benjamin Ward for suggesting this work and the relevance of the Second and a Half International.

36

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the Slovene Edvard Kardelj and many Croat Communists that the prole­ tarian struggle was first of all a national struggle and the best way to achieve national aspirations.17 The first major choice came with the rout of the right faction from the party leadership (the faction was outvoted in 1924 and purged by the Comintern in 1928) in lavor of a revolutionary approach that was against working within the state as then constituted. The shift in party leadership from Serbian to non-Serbian (especially Croat and Slovene) dominance was particularly decisive, because it forever after confirmed federalism for both party and government, as well as a strongly anticentralist concept of the state (often tinged with opposition to Great Serbianism or Serbs in general). For example, despite the Comintern’s shift to united-front tac­ tics after 1935 and the party’s attempt to build that front on a Yugoslav identity for all sections of the party and for its revolutionary objectives, the party followed through on its commitment in 1934 to national self­ determination: when the Slovenes applied for their own section in the Comintern, the Yugoslav party gave full organizational autonomy to the Communist party of Slovenia (in 1937) and then to the Croat party (in 1938). The federal units of the constitution adopted provisionally in 1943 were to be defined nationally, but the concept of national identity that emerged and its meaning for political tactics were also a result of the influence on party thinking of the intellectual milieu in Croatia and Slovenia in the 1920s and 1930s. As Silva Meznaric recounts it, intellectuals from these former Ilabsburg territories felt themselves trapped, in limbo in both national and class terms: they were in a backward state that was using mercantilist policies to protect the less competitive and less developed Serbian bourgeoisie and thereby preventing the full domestic develop­ ment of capitalist forces; and in European space, their reality of pettybourgeois peripherally and international “nonposition” due to the stunted development of an indigenous bourgeoisie separated them from the world of great nation-states and the advance of global capitalism.18 The proletarian revolution would be simultaneously a national revolution— against the exploitative tax and foreign-trade policies of the Serbian state and carsija , 19 against its increasing dependence on foreign connections 17 Basoin, “Socialism as National Liberation,” provides a useful analysis of Kardelj s writ­ ings and pronouncements on the national question. 18 Meznaric, “A Neo-Marxist Approach to the Sociology of Nationalism: A Quest for The­ ory” (published in Praxis In tern ation al as “A Neo-Marxist Approach to the Sociology of Nationalism, Doomed Nations, and Doomed Schemes”). 19 Political slang for the links among merchants, bureaucrats, and state-protected indus­ tries centered in Belgrade.

THE MAKING OF A STRATEGY FOR CHANGE

37

and capital to maintain that power at home, and against the political chains of absolutism that prevented those in the former Habsburg territo­ ries from completing their process of nation-building and the democratic, republican revolution that would make the bourgeois stage of develop­ ment possible. But these intellectuals tended to define the problem of revolution largely as one of consciousness and political action. Steeped in the tradition of Hegelian “positioning,” they were aware that both Marx and Engels categorically dismissed the Slavic nations as “relics of peoples,” “nonhistoric nations” that would disappear with the march of capitalism, “barbarians” incapable of civilization and without the right of self-determination that was due the great, historic nations.20 In the intellectuals’ interwar debates, as Meznarič records them, many be­ came obsessed with asking, “Who are we in Europe?” What role could a working-class party of Slavs in a land of “vagabonds, travelling salesmen, smugglers” play within this historical process, to escape their pettybourgeois peripherally? Both their explanation for this economic and po­ litical reality and the source of their emancipation were to be found in the sphere of consciousness and cultural identity, with the “ideology of small­ ness,” deference to the major “historic” nations and the latter’s cultural hegemony in Europe, and a sense of community characterized by a sklavenmoral (slave culture) in subordination to this external herrenmoral (master culture). Cultural backwardness maintained and perpetuated their economic backwardness and global nonposition because it hindered any internal sources of innovation, whether economic or cultural, thus making them forever vulnerable to great-power designs on their territory. Economic weakness in turn brought political impotence and subjection and led to cultural insignificance, which then returned full circle to eco­ nomic exploitation.21 For these activist intellectuals, the historic mission of the Communist party was to take on the creative, revolutionary role played elsewhere by the bourgeoisie: to overthrow the Serbian monarchy, build a republic, emancipate the mass of the population from their petty-bourgeois mental­ ity of inferiority by making them conscious of their collective power to alter their fate with their own hands, and bring “national equality to Serbs, Croats, Slovenes, Macedonians, Montenegrins.”22 This substitute 20 Meznarič, "A Neo-Marxist Approach," 11-12; see also Connor, The N ational Q uestion; and Slioup, Communism a n d the Yugoslav N ational Question. 21 Meznarič, “A Neo-Marxist Approach,” 9 The terms of reference are shared through­ out the region; ior a slightly different approach, see Janos, The Politics o f B ackw ardn ess in Historical Perspective: H ungary, 1825-1945 22 Josip Broz Tito, at the fifth party conference, October 19-23, 1940, cited in Connor, The National Question, 147.

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bourgeoisie would begin the process of economic emancipation with cul­ tural and political emancipation. The fight for national independence by all the Yugoslav peoples against imperial powers, foreign capital, and their domestic agents and collaborators would achieve self-determination for the working people as national communities. The concept of a nation in this critique was first of all a historical one, implying a set of class stages and a view of progress for peoples (nations) that were defined by the historical and territorial characteristics of states. Nations were also economic units and communities o f common culture and language — the mix so common to the German sphere of reflection, developmental thought, and critique to which Marx, Engels, Herder, List, and Hegel all contributed.23 Whatever the permutations of the idea of self-determination in the shifting Soviet, Comintern, and Yugoslav po­ sitions (autonomy, self-rule, the right to secession, full sovereignty), it always meant self-government of territorial units that had historical con­ sciousness as nations— “free cultural and economic development” of an “administrative character. ”24 From this perspective, however, the nations within multinational Yugoslavia were not at the same stage of development. This was a prob­ lem tactically; as late as 1940, delegates to the fifth party conference in Zagreb could not themselves fully agree on what level of national forma­ tion had been achieved by each.25 Capitalist development was very un­ evenly spread over the Yugoslav territories— from Slovenia, where commercial agriculture, public education and roads, and light manufac­ turing had begun to develop with the mid-eighteenth-century Theresian reforms in the Habsburg empire, to Bosnia and Macedonia, where Ottoman-type feudal relations on the land still marked political as well as economic and social life in the 1930s. Smallholding dominated agricul­ ture, with the exception of the large estates of the plains of Vojvodina and 23 The attempt (as in Szporluk, Communism an d Nationalism ) to counterpose commu­ nism and nationalism, especially in the sense of Marxism and Listianism, as polar opposites does not work for central Europe. In the Yugoslav debates and perceptions in the interwar period, the two were opposite sides, perhaps, but of the same coin. Hroch, “How Much Does Nation Formation Depend on Nationalism? and Kitching, Develojnncnt an d Under­ d ev elop m en t in H istorical P erspective, demonstrate the interaction and frequent interde­ pendence o( the two ideologies. 21 Tito, discussing the character of the new Yugoslav federation in B o rb a , May 22, 1945, citcd in Shoup, Comm unism a n d the Yugoslav National Question, 116n. 25 In the notes on the debate that remain, Milovan Djilas appears to have taken a mediat­ ing role, arguing that "the Croatian national question still exists.” Tito replied that "the Croatian question is solved as a bourgeois question. But it is not completely solved even for the bourgeoisie (who are fighting in treacherous ways). There exists a clique with great Croatian oppressive tendencies (Damjanović, Bosić, and La/.arević, Peta zemaljska kon­ fer en c ija KPJ, 214 ).

THE MAKING O F A STRATEGY FOR CHANGE

39

Macedonia, but these were held by absentee foreign owners or the churches (especially Roman Catholic and Muslim). Each region had been governed until 1918 by a different regime (or by a mixture, as in BosniaHerzegovina, which had a layer of Austro-Hungarian on top of Ottoman institutions after 1878), and the differences persisted because nearly all efforts by the Belgrade government to integrate the country— in financial institutions, roads and communications, educational policy, and industrial investment— had foundered on interminable political conflicts, local ob­ struction, or heavy-handed imposition of state policies in response.2fi Peoples in the south, such as in what would become the republics of Bosnia and Macedonia, were in many (but not all) instances still mired in precapitalist relations with respect to religion, colonial oppression, and the nation embodied in the feudal power of a landholding class. Kardelj’s insistence that the basis for national divisions on the historical map of Europe lay with communication and language27 made it possible to grant at least the Bosnians recognition as a nation, a matter subject to dispute throughout the interwar (and even postwar) period. Tito, intervening in the rancorous debate at the last party conference before the war (in Octo­ ber 1940) regarding the national status of Muslims and the basis of nation­ hood for the ethnically mixed population of Bosnia, insisted that “Bosnia is a single unit because of centuries of communal life, regardless of reli­ gious beliefs.”28 But the national position of the Macedonians was a source of continuing dispute, revealing clearly that the Croats’ and Slovenes’ view guiding their policies toward national identity reflected only one of many class realities, with direct political consequences. The Macedonian party section’s perspective in 1940 was not a nation­ ally defined territory in relation to European power (as it was to be de­ fined in the federal structure after the war), but of class divisions within the Macedonian territory along national lines, divisions created by the colonizing policies of the Serbian state. According to Metodija Šator Sarlo, the secretary of the temporary regional committee formed for M ac­ edonia in February 1940,29 the national question of Macedonia was pri­ marily a question of land, and this was an issue of class exploitation, despite the party leadership’s position that it was not. It divided the party section between Macedonians and Serbs— not only the Serbian “gen­ erals, gendarmes, and spies,” but all colonists who were “given the best 26 I am grateful to István Csillag for emphasizing (in relation to debates in the 1970s about the level of economic integration among the Yugoslav republics) the failure o f the interwar royal government to integrate not only physical infrastructure but also the financial institu­ tions necessary for a unified market. 27 Meznarič, “A Neo-Marxist Approach.” 28 Damjanovič, Bosić, and Lazarevič, Peta zem aljska kon feren cija, 214. 29 Shoup, Com m unism a n d th e Yugoslav N ational Q uestion, 5 2 -5 3 .

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land,” all of it taken from Macedonian peasants and their common pas­ tures and forests. In Sarlo’s view, the Croat position (and thus that of the party program) was “sectarian, Trotskyist”— telling the Macedonians that they would resolve their national question only after the proletarian world revolution and taking Lenin’s position on the solidarity of all nationalities— whereas the Macedonians had to proceed immediately with developing their national consciousness, through culture and lan­ guage, and emancipating their land from Serb rule.30 “W e can’t go to the Macedonian peasant and tell him that colonists are the brothers of the Macedonian peasant, Sarlo insisted. “Whoever knows the psychology of the Macedonian peasant knows that he is fighting for blood revenge against the colonists.”31 The same argument applied to the Albanians in Kosovo-Metohija, where the colonists were “the pillar of hegemony [Great Serbianism],” where “feudal remnants” were still large, and where the “struggle for national rights of the Arnauti [Albanians]” was just beginning.32

The provisional government of 1943 created a federal republic of “na­ tions” that represented historical communities, territorially defined, with extensive economic and cultural administrative autonomy; it thus autho­ rized the dominance of the “progressive” sections of the party from the more-developed northwest. The importance to them of retaining each nation’s individuality at each stage of their common struggle even pre­ vented the use of “Yugoslav” labels. The war, for example, was an “all­ national liberation struggle” under the slogan of “brotherhood and unity. ” The Macedonian section of the party coidd be a united, “nationalrevolutionary” front “cooperating with liberal bourgeois groups” because of their role in questions of culture and language; the working class would lead the struggle for this cultural self-determination, but it was not to take land from colonists— “only from those who oppress the Macedonian na­ tion.”33 This rejection of the Macedonian (and Albanian) national concept led Sarlo to take the Macedonian section to the Bulgarian party, where Georgi Dimitrov continued to hold Stalin’s view; likewise, the Albanians from Kosovo-Metohija joined the Italians, who were also more limber in their use of the colonial argument. Moreover, it was only after the war, at the fifth party congress in July 1948, that the four “communities”— Bosnia, Macedonia, Montenegro, and Serbia— gained the full status of separate party organizations (“national committees”) to conform with the nationally defined territories of the new federal state. 30 31 32 33

Damjanovic, Bosie, and Lazarevic, Peta zcm aljska kon feren cija, 210-11. Ibid., 210. Ibid., 213. Djilas, at the fifth party conference, ibid., 212.

THE MAKING OF A STRATEGY FOR CHANGE D iv is io n s

w it h in

Un

it y

: T

he

Labor Q

41

u e st io n

The political victory of the Communist party after World War II is usually attributed to its redefinition of the national question as peasant patriotism against foreign invaders and to its insistence on an all-Yugoslav program, operating in all areas of the country. The party was the sole Yugoslav organization that appealed to the peoples’ common interest in a better life and in putting behind them the conflicts of the interwar period with the resulting wartime horrors. But the party’s actual approach to the national question— recognizing the differences in national development by allow­ ing economic, cultural, and political autonomy, and recognizing all the nations’ right to self-determination with their voluntary (at least in theory) union in a common state after 1 9 4 3 -4 5 (what Connor calls “retroactive self-determination’’ on the Leninist reasoning)34— was the source of ex­ traordinary difficulty. A working-class party committed to economic de­ velopment and social revolution would necessarily have to have a single plan for all areas, while operating politically in the different contexts of each of the national territories. The differences in national consciousness across these territories paled in comparison to their differences in socio­ economic conditions and level of organizational development, and were in part a result of them. The party’s Marxist focus on what was most economically advanced and politically progressive— “the organization of the most advanced elements of the proletariat” as “the greatest productive force in society”35— did give a direction that would likely have prevailed even without the choice of leaders in 1928 and especially after 1937, with Josip Broz and his circle. The overwhelming portion of the organized working class and the strong­ est industrial unions with the longest tradition were in Slovenia and Croatia. The Slovene proposal for a constitution in the bitter conflict of 1919-21, although rejected, contained a replica of the social legislation of the Weimar constitution, including the Bismarckian social-insurance pro­ grams and the workers’ councils favored by the German Social D em o­ cratic party.36 The 1921 constitution and the 1922 Law on Workers’ Social Insurance did incorporate for those workers who belonged to registered unions the benefits that Slovene and Croat workers had won under the 34 The N ational Q uestion, 161. 35 Rankovic, "Referat o sindikalnom pitanju/’ 4 9 -5 0 . 36 Beard and Rad in write: “Betraying perhaps the influence of the new German constitu­ tion, the Slovenian project declares that the age o f the military and police state is over and that the time has come for the social state. Some industries are to be placed in the hands of an economic council representing employees, employers, and consumers. In certain se­ lected industries, the workers are to be empowered by legislation to take part in administra­ tion and to share in the profits” (The B alkan Pivot, 4 9 -5 0 ; see also 55-56).

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Habsburgs (guaranteeing health care and material assistance for illness, injury, old age, and death, for insured workers and their dependents).37 Zagreb workers gained notoriety for their militancy during the interwar period, which the government repressed quite severely on occasion. There were important pockets of radical workers elsewhere, such as those employed in the munitions factories ot Kragujevac (Serbia), the to­ bacco workers in Macedonia, the printers in Montenegro, and the mem­ bers of the famous soccer club of Split, but the real strength of the party outside of Slovenia and Croatia was not in industry. In Belgrade, for ex­ ample, its strength was in the state sector and services (postal workers and unionized white-collar employees in banking, insurance, commerce, and construction). As late as 1940, at the fifth party conference, a delegate from Serbia noted that their party cadres “still undervalue the unions” and had “not posed the question of unemployment, or the starvation it threatened, as sharply as they ought.”38 Even after a particularly success­ ful period of organizing workers and militant protest, in 1936-40, the report on the trade-union question at the 1940 conference admitted that the party remained weak among “miners, monopoly-sector workers, transport workers, and the industrial proletariat."39 While organized workers had the right to assistance during unemployment, and the gov­ ernment contributed public funds to that aid after 1937,40 the approach to unemployment in Belgrade at the time consisted of police roundups of beggars to do what amounted to forced labor, in conditions closer to me­ dieval than modern. Most cities became depots for abandoned children of unemployed and uninsured families, who lived by begging or in appren­ ticeship to master workmen under near slavery conditions.41 The sense of degradation and powerlessness among apprentices from peasant homes pervades the memoirs and interviews of one of their kind who was to become the leader of the Yugoslav Communist party— Josip Broz.

37 Sce Has, "DruStveno-ekonomski osvrt na problem zaposlenosti,' 135-36; and Parmalee. “Medicine under Yugoslav Self-Managing Socialism,'' 3 8 -42. 3S Damjanović, Bosić, and Lazarević, Pela zem aljska kon feren cija, 206. Vl Ranković. “Referai o sindikalnom pitanju, ’ 51. 1,1 In 1927 the workers’ chambers, responsible for unemployment insurance, wer obliged to be “self-managing’ (i e., financially autonomous); but during the second wave ol intcrwar unemployment after 1936 (in the first wave, in 1930-34, every fifth insured worker was thrown out of work, and the real incomes of those who kept their jolis dropped 20 percent), that compensation was so paltry that the government granted public funds. The number of registered unemployed grew from 139,382 in 1928 to 1,069,443 in 1940 (M. Radovanović, “Različita shvatanja uzroka i oblika nezaposlenosti,” 47; Dukanac, Indeksi kon ju n kturn og razvoja Jugoslavije, 1919—1941, 2 7-2 8; Has, “Društvcno-ekonomski osvrt,’ 134-36; Ranković, “Referat o sindikalnom pitanju ’; Vuković, “Uticaj svetske privredne krize, ” 213-15), 11 Kalembcr, “Siromaštvo i pitanje besposličenja.’’ 440-44

THE MAKING OF A STRATEGY FOR CHANGE

43

The rural population had declined only to 74 percent by the end of the interwar period, and this figure rose as one traveled south; in Macedonia, it was 90 percent.42 It is true that this agricultural sea included areas of large landed estates with agricultural laborers, numbering 400,000 in the Vojvodina plain, for example. The cyclical industries of mining, construc­ tion, brickmaking, and timber continued to depend on the ancient tradi­ tion of seasonal migration by unskilled peasants called polutani,43 who left their land temporarily to seek cash-paying industrial jobs; these com­ posed more than half the industrial labor force (in 1 9 2 9 -3 4 , only 46.5 percent of industrial workers were in full-time positions, and only half of those were insured). As the delegate from Dalmatia reported at the 1940 party conference, the land question was “as important as the union one. ”44 The Macedonians’ conflict with the party’s definition of the na­ tional question, which Sarlo and others found impossible to separate from the agrarian question, arose from their view, with Stalin, that the op­ pressed, colonized peasants were the revolutionary force. But organiza­ tion among agricultural workers and small farmers was greatest, too, in Croatia and Slovenia, where the cooperative tradition was well-developed and peasant parties were strong. To simplify this complexity, the party leaders used three political ideol­ ogies. The first was a national one. In Croatia, such an ideology was hard to avoid because the Communists’ main competitor, the Croat Peasant party (CPP), based its successful appeal on Croat nationalism and identi­ fying the Croat rural population as the true “people” (narod). The Slovene Peoples’ party was also nationalist and clerical, in the Austrian Christian Social tradition. But the largest of the Serbian parties, the Radicals, al­ though originally a peasant party, had long since become a party of the Belgrade royal establishment and local notables; and the other major Ser­ bian parties operated outside Serbia proper, in Croatia or Vojvodina. For others, Lenin’s analysis of rural class differentiation, between rich farmers and poor or middle peasants, served better. Confused over the Macedonian focus on colonial (Serbian) usurpation of the peasant’s right to their land, one Montenegrin delegate at the party conference asked, “Are there peasants, poor ones, who are colonists?” Another criticized the state in Montenegro because the monies being spent to drain Lake Scu­ tari would benefit the bourgeoisie, while the state paid no attention to the poor peasant and how he lived. The Serbian delegate used the Russian 12 Kostić, Seljaci-indtistriski radnici; Metodija Šator Sarlo, in Damjanovič, Bosić, and Lazarevič, Peta zem aljska kon feren cija, 210, for Macedonia. The agricultural population in 1931, the year of the last prewar census, was 76.5 percent (Tomasevich, Peasants, Politics, and Economic C han ge in Yugoslavia, 303). 43 The word connotes something second-rate or mixed-breed. 11 Damjanovič, Bosić, and Lazarevič, Peta zem aljska kon feren cija, 212-13,

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metaphor in his focus on the marketing cooperatives that enabled the kulak to hold a village in his fist by controlling the supply and marketing of grain and by retaining the entire profit from the rise in grain prices. Discussing Vojvodina, party members concentrated on the burden of the land tax and the dominance of rich farmers and other bourgeois elements in the credit and flood-control cooperatives. Delegates from Dalmatia also singled out the dominance of wealthy farmers over rural cooperatives, particularly where Communists faced legal obstacles to competing openly or to infiltrating the powerful village cooperatives (Gospodarska Sloga) and cultural organizations (Seljačka Sloga) of the C P P .45 The third ideology was actually a combination of two others and was meant to address the difficult task of forming alliances under these cir­ cumstances. It included the Leninist idea of a vanguard party, represent­ ing the most advanced elements of the working class at its core; and revisionism, with its idea of the solidarity of a popular front of exploited forces across poor and middle strata. Even the Slovene and Croat workers were divided among unions organized, in the manner of French ones, along religious, ethnonational, and ideological lines. Slovene workers tended to side firmly with the social democrats or the clericals (and Kar­ delj admitted at the 1940 party conference that the Slovene party had done little to prevent German-speaking workers from joining the German union and from there siding with Hitler). In Croatia, Catholic unions and the union affiliated with the CPP were strong. W here peasant parties had organized cooperatives, in the north, the Communists’ attempt to create “peasant chambers” on the model of workers’ chambers was unsuccessful. There were divisions between organized and unorganized workers (pri­ marily women and youth, who faced legal prohibitions on organizing and who filled the classic niche of Marx’s industrial reserve army as low-cost competitors because of their lower skills and the traditional attitudes of employers); between unemployed urban workers and the rising number of peasants kicked off the land by the agrarian crisis after the mid-1920s but blocked from their usual escape route by the anti-immigrant walls around the richer countries after 1923;46 and between Communists and 15 Ibid. 46 The fall in world farm prices in the second half of the 1920s was followed by declining domestic demand during the 1930s because urban wages also tell; growing poverty, indebt­ edness to moneylenders (who were often also local politicians), increasing liquidation of peasant smallholdings, and even widespread malnutrition bordering on starvation hit all areas of the country (see Tomasevich, P easants, Politics, a n d E con om ic C h an ge, pt, 2, but particularly chaps. 19, 20, and 27 [especially pp. 667-80]). A searing portrait of those condi­ tions in Croatia— and an explanation of why many who were exposed to them became politi­ cally radicalized— can be had from an ethonographic diary of the young Rudolf Bićan ić, an influential economist in post-World War II Croatia who before the war was an activist in the C PP, which he kept during a tour of the countryside to get in touch with “the people" after

THE MAKING O F A STRATEGY FOR CHANGE

45

former a||ies in the United Unions о f Yugoslavia (U jedinjenje Sin­ dikata Jugoslavije), who benefited by collaborating with the corporatist гееиле after 1937 (in the view o f the C om m unists, betraving the S n g class by accepting laws against the strike and by cooperating with hour

/Z s T lT

' ™ e s e ,divis; ons P revented any real action for workers' nghts and demanded political unity as its precondition

71.e common denom inator o f these political ideologies was that workers should be united organized on branch principles instead of by trade and profession into com prehensive unions with sections for youth and women, and unified at local, regional, and countryw ide seats into one working class: one union p er factory, one party for the country. And b e­ cause the united-front strategy am ong progressive, opposition parties had failed the party would shift (as the C om intern signaled in 1939, to a StratT fr° m be,OW> ° rRanizinK th<‘ »"o rgan ized against political leaders and creating a solidarity o f protest with wage workers among the mass of the population, independent o f p a r t y - p e a s a n t s and villagers, small producers, and the liberal, petty bourgeoisie.** But on wlwt programmatic basis would that unity and “mass line” arise''1 The report on the trade-union question at the fifth party con feren ce m W itten by t h e militant Zagreb branch of the United Unions or^nfra-

tion of Croatia and Slavonia (although it was handed to the Serbian party b ^ s released.from jail forpolitical activity; an English version of his K ako živi n a ro d (Н о,о e People Lwe) was pubhshed posthumously by his widow, Sonia Bićanić, and anthropolo­ g y Joel Halpern. Peasant indebtedness so threatened the social order that the king granted a moratorium on rural debt in 1932. Hgranteci with Unt| i'932’ thC РаГ‘У f0llOWed ,He Com in,erns “sectarian" line against cooperation

mm

ТэтT l ,C PartiflS “"и и™0П8' Tht' bril-f , " terl,,lle r f W e gave way S 1937-38 to increasing conflict between the Communists and the Social Democrats over laree D.rt a re T Veme" ‘ Т " * 0* Wi' h ' Ы' C P '’ ‘’VCr Cr0;" W "*M tu en cv -ta Urge part a result of the corporatist policies of the Stojadinovii government, which sought to КО.Пthe upper hand ... 1 9 37 -3 8 by separati,,« the Communists from any possible legal cover all es. The government banned the United Unions onjanizaHon where C o m m u n M W .om emfluence; created business and government unions in which legal status for collecГ arK; " " 7 R“ «» o t h e r workers’ rights was obligatory and in which Social Democrats chose to collaborate; and took over the workers' chambers, offices for social insurance and workers inspectors in factories. In August 1939, the royal g o v e r n m e n t gave in,ernal administra,ion e *ceP‘ 'hat of the military, foreign affairs and H?°n0my m Z nd joint finances, and gave control over local administration to the C P P - w h i c h also re’ qu.red .nembersh.p in either the clerical organizations or the CPP c o o p e r a tiv e s « ;^ , podarska Moga) to participate in local government. « The Communist party of Croatia resisted this shift, however, aud ignored party disci Т . Г Л Г п Г . Г ' n " “ * lbUUX Wi' h ' he C P P ' S" PPHr,m« ,be '> ««” party list against Ifflfv ? t 1 Г " “ 1’ 15 in eleCti0ns in December 1938, supporting the August 939 Cvetkov.c-Macek Agreement (S porazu m ) for Croatian autonomy, requiring the cite-

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46

CHAPTKR2

activist Aleksandar Ranković to read), and it was a classic Marxist analysis of the crises of capitalist accumulation. The Great Depression was one of underproduction, the depression alter 1936 one of overproduction; and both crises gave rise to monopoly capital— the increasing merger of in­ dustrialists, financial capital, and the state to counteract the fall in profits by increasing surplus value, not only by intensification of production at the workplace and allowing rising unemployment despite underutilized capacity, but also by raising prices through cartels in markets for food and other necessities. The responsibility for unemployment, inflation, milita­ rism, and the corporatist decrees that reduced workers’ political rights, however, lay with the state. The enemy, said the report, was fascism, whereby the state guaranteed the power of an expansionist capitalist class— the "great bourgeoisie” of Serbia and Great Serbianism and for some, like Tito, also that of Croatia and Great Croatianism— with police repression and corporatist exclusion, with military expenditures from the state budget to revive production through rearmament, and with mercan­ tilist exploitation of the entire population, especially the poor. Protective import duties, state monopolies on basic goods, and other indirect taxes (representing 6 5.6 percent of all tax receipts in the 1930s)49 shifted part of the burden of achieving profits and capital accumulation to the backs of consumers. The cost of living for all working and poor people rose sub­ stantially as a result of rising taxes, government debt, and monopoly prices for matches, salt, tobacco, and protected manufactures.50 Feeding into the international conjuncture of fascism only made it worse. Inten­ sified international competition in trade had led to wildly fluctuating ex­ change rates and a more frequent resort to bilateral, tied trade on clearing agreements in which poorer states like Yugoslavia were reduced to pro­ ducing stocks for war, such as food and textiles for imperialist powers.51 Instead of improving the terms of trade for formers or agricultural nations, however, the cartels that sprang up to organize this trade and to speculate further captured the profits, so that in the boom year of 1937, price ratios between Yugoslav farmers and industry were the same as in 1932— the depth of the depression— and 70 percent of farm households remained in terrible poverty.52 Despite greater demand for skilled labor in defenseMitrany, Marx against the P easan t, 103. The figures for Bulgaria and Romania were similar, at 64.0 and 72,5 percent (ibid.). 50 Ranković, “Referat o sindikalnom pitanju,” 9 3 -9 5 , 51 Yugoslav treaties with Italy and Germany, and Iheir political outcome in the secret non agression pact that Prince Regent Paul signed with Hitler only months alter the fifth party conference (a pact to which Yugoslav air force officers responded with a coup in April 1941, provoking Hitler to bomb Belgrade and bring the war to the Balkans), fit Hirschman’s classic analysis of economic power in N ational P ow er a n d the Structure o f Foreign Trade, 52 Ranković, “Referat o sindikalnom pitanju,” 79.

THE MAKING OF A STRATEGY FG1Î CHANGE related b ra n ch es o f i n d u s t r y a n d

47

r i s i n g w a g e s as a r e s u l t o f w o r k e r s

greater militancy (including a guaranteed minimum wage for unionized workers), rising inflation sent real wages plummeting. The royal government had failed to develop the dom estic econom y for the benefit of its citizens, and the result was a dependent position in the world economy. I lie report con dem ned the govern m en t for seeking to evade this failure by foreign borrowing that m ade this depen d en ce worse and by inviting foreign capital into dom estic production with special pro­ tections that exacerbated poverty and unem ploym ent at hom e. Selling off Jugoslav mines, factories, and even state monopolies ov er basic com m od ­ ities (tobacco, matches, salt) to F re n c h , British, Swedish. C zech , and German capitalists in o rd er to line the pockets of Belgrade bureaucrats and merchants was as hostile an act to the Yugoslav people as the export of food to pay for imports, the protections for a weak Serbian bourgeoisie that could not com pete abroad, and the collusion am ong the national lxmrgeoisies to protect their power over workers. This criticism re v erb er­ ated with a h is to ry o f e x p e r i e n c e a n d p o p u l i s t p o li t ic s in H a b s b u r g t e r r i t o ­ ries since th e m i d - n i n e t e e n t h c e n t u r y — w h e r e f ir s t a la n d m a r k e t a n d then c o m m e r c ia liz a t io n of a g r i c u l t u r e , u n d e r c o n d i t i o n s o f g l o b a l m a r k e t s far agricultural p r o d u c e , had f o r c e d i n d e b t e d s m a l l h o l d e r s to s e ll t o f o r ­ eigners sim ila rly d i s p o s s e s s e d in r i c h e r c o u n t r i e s b u t a b l e t o a ffo rd la n d in

poorer countries.83 Foreign com panies also subjected wage earners in ag­ riculture and industry to foreign com petition by recruiting skilled labor from more-developed cou ntries (nationally distinct layers of labor by skill were particularly noticeable in the mines, but th e foreign com ponent was also high in urban labor forces in northern cities, such as Ljubljana, in the late nineteenth century)54 while local artisans w ere forced to wander the world in j o u r n e y m e n ’s b a n d s o r e m i g r a t e p e r m a n e n t l y in s e a r c h o f work.

Despite the union report's radical critique of capitalism, the party was not ready to write a political program for social revolution. At the party conference, Rankovic om itted the rep o rt’s concluding attack on capitalism and its assessment that the developing conflict betw een proletariat and capitalist class obliged the party to "link the struggle for wages with the struggle against capitalist methods o f production, for a socialist o rd e r.”55 Although T i t o a d m i t t e d in h is r e p o r t t o t h e c o n f e r e n c e t h a t it w as “g r e a t e r social re v o lu tio n t h a t w e p l a n ,

h e m a d e it q u i t e e x p l i c i t t h a t t h e i r c u r r e n t

task was to f o r g e s o l i d a r i t y b e t w e e n people,

th e p arty and th e

“m a s s o f t h e

m o b i l i z e t h e m f o r p o li t ic a l a c t i o n , a n d f ig h t a g a i n s t f a s c i s m a n d

,J H Bieanic, “Aural na kriza oil 1873-1895." Slam- Saksida, analysis of (he Ljubljana census of 1880, personal communication, J975. " Rankovic, Hofcrat o siiulikalnom pitauju,” 94.

48

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war.56 The trade-union report proposed that action on unemployment be linked to the struggle of employed workers (including their demands for equal pay for equal work), the right to work, and the right of unemployed workers to unemployment compensation, rent forgiveness, soup kitchens, food staples, and shelters.57 But even this was too radical for some; Kar­ delj insisted on the Comintern view at the time— that union activists within factories should remain narrowly focused on economic issues and union rights. Warning that this tactic underestimated the strength and treachery of the Social Democrats, Rankovic had the support of the Mon­ tenegrin section and of Sreten Zujovic (also a Serb, then active in Mace­ donia) in arguing that the only way to link the wage struggle with the struggle for peace, for workers’ rights, and for the civil and democratic freedoms of which the people were deprived under the “total, open dic­ tatorship of the bourgeoisie” and its corporative regime was for the party to take charge of all unions, labor inspectors, and workers chambers; plan and coordinate all its activities; organize unions and youth societies; cre­ ate correspondence and reading groups and newspapers in all shops and factories; and train union cadres.58 The cautionary position won. Greater engagement in the workers’ struggle did not ensue. The party focused its political campaign on the monarchy and on the fascist state— the “leader of reaction not only in Yugoslavia but in the entire Balkans”— and the foreign exploitation it had invited.59 The “mass line” of a popular front from below defined the party’s social and economic program. The common denominators of such an alliance of peasants, workers, and liberal middle strata, an alliance far larger than any minimum winning electoral coalition, were the “struggle against the high cost of living," as Kardelj argued was most appropriate in Slovenia,60 and the struggle for national self-determination. The Yugoslav Communists' revolutionary commitment on political tactics and apparent subservience to the Comintern can therefore be deceptive, for the pro­ gram combined elements that were much closer to the revisionism of the Austromarxists— such as constitutional recognition of the nationality is­ sue, the alliance with peasant and middle groups, and commitment to the 5,i Tito, in Damjanovic, Hosier, and La/are vie, Pet a zem aljska konfe.rencija 57 Little had changed in the proposals since 1932. See Has, “Drustveno-ekonomski osvrt,” 136-39; and “L et’s Organize the Struggle of the Unemployed,” 263 r>HRankovic, “Referat o sindikalnoin pitanju.” 9 3 -9 8 . 59 Ibid., 51 As the trade-union report chose to view it, the government was nearly the last in Europe to recognize the Soviet Union— doing so only in 1940— and the first to assault the political, union, and cultural organizations of the working class after World War I (the report was referring to the government s ban on the party’s electoral participation in 1921 and, with the royal dictatorship in January 1929, its suspension of all civil liberties and workers’ organizations). (SO Damjanovic, Bosic, and Lazarevic, Vela zem aljska kon feren cija, 210-14

THE MAKING OF A STRATEGY FOR CHANGE

49

smallholders’ right to land ownership.61 The links between early Marxism and the Ricardian socialists, or between Leninists and the radical agrar­ ians, would become far clearer in the program once the state stabilized internationally after 1950. The lineage is most obvious in the writings of Kardelj, the alliance of the Slovene National Liberation Front, and the program of the CPP (especially in the proposals for postwar reconstruc­ tion that were written during the war by many of its activists).62 And until that postwar order began to unfold after 1946, until the conflicts on the pace of change revived (see chapter 4), one might also have seen this alliance in the one link Tito was able to forge for the party in Serbia (as early as June 1941)— the “joint struggle” against the occupiers, for Soviet power, against English agents and the old order, against incitement to national hatred through joint committees of the “worker-peasant alli­ ance,” with Dragoljub Jovanović and the agrarian-socialist offshoot he formed from the left wing of the Serbian Agrarian party.63 One might even have read this alliance in the views of Ranković (despite his disagree­ ments with Kardelj) regarding party successes before the war. Noting with pleasure in his report on the trade-union struggle the many instances in which villagers had come on their own initiative to support striking workers with food and even participate in their mass demonstrations, Ranković urged party cadres to take advantage of this sympathy by orga­ nizing mass organizations as a ring of support around the unified union movement and by teaching both unionized workers and unorganized women and youth about their mutual interest in problems of unemploy­ ment and the wage struggle.64

M

il it a r y

O

r ig in s o f t h e

Sta te

Hitler’s decision to invade Yugoslavia in April 1941 redefined rather dra­ matically the party’s methods of domestic political competition. Moving within months from the political vise of fascist retrenchment and corporatist exclusion to the armed struggle to which it was committed in principle but which it had expected as part of a social revolution far in the future (a struggle delayed by the Comintern’s imposed respect for the Hitler-Stalin 61 Gulick, Austria f r o m H ab sb u rg to H itler, vol. 2, especially 1366-82. 62 See Mirković, Ju g oslav P ostw ar Reconstruction P apers 63 Banac, With Stalin against Tito, 6; see also Jovanović, “Političke uspomene.” Mitrany labeled Jovanović a "romantic populist” (Marx against th e Peasant, 113; see also 125—131, 2.5 0 ).

M The earliest attempts to “ensnare the peasant” (Friedrich Engels, cited in Mitrany, Marx against the Peasant, 22) for the socialist movement in the 1890s led to the first o f the great debates over reformism and to the first use of the term revisionism , decades before the split over revolutionary strategy vs. evolutionary parliamentarism.

50

CHAPTER 2

pact), the party set out to organize an armed uprising of popular/national liberation. The war turned its political weaknesses in elections into a com­ parative advantage over other forces: its early rejection of political reform­ ism in favor of revolution against a state that could not protect its people from war; the imposed clandestinity and reliance on underground, con­ spiratorial organization so necessary in guerrilla warfare against foreign occupiers; the experience of leaders still alive in 1940 with Stalin's purges, the Spanish civil war, or the ideological training of long prison sentences in Sremska Mitrovica; the intense personal bonding and loyalty these experiences bred; and early choice of a federal party composed of territorial units with substantial operational autonomy so well suited, it turned out, to resistance war. Thus the effect of the war was to reinforce many of the political choices made before it— choices about social alli­ ances and identities, political organization and leadership tactics, and even the choice of caution on an economic and social program and the disagreements over tactics and pace among peoples facing different conditions. The Communists’ ideological understanding of the war as fascismclass warfare played out at the international level— gave them the con­ fidence to mobilize broad support and non-ethnonational bases for interpreting the civil war within Yugoslavia. At the: same time, the choice for a popular front “from below” against external foes, based on the soli­ darity of the oppressed (workers, peasants, national minorities) was a de­ fault position (like that in 19.37-40) because they failed, except in Slovenia, to persuade other parties to join their antifascist front. Tito tried more than once in 1941 to negotiate an alliance with Dra/.a Mihailovic and the Chetnik forces (the reconstituted Serbian royal army, internationally recognized as the fighting force of the London government-in-exile until 1944); his efforts included two trips of personal diplomacy to Mihailovics camp and offers to play a subordinate role if necessary. The very real disappointment at this failure was repeated in Croatia, where Tito re­ tained the hope throughout the war that he might yet persuade Vladkc Macek, leader of the CPP, to cooperate in the Croatian Liberation Front (ZAVNOII).65 The failure of the June 1941 uprising in Uzice, Serbia, the ease with which the Germans could retaliate in urban areas, the tendency of the urban population to passivity until late in the war (refusing to “leave for the forests,” as the decision to join the Partisan army was called), and the collaboration of the Croatian Ustashe and the Independent State of

05 Interview with Vlatko Velebit (Tito’s emissary during the. war to numerous Allied posts, as well as to Subasic s government in London during the winter of 1944), New Haven, Conn., November 12, 1987,

THE MAKING OF A STRATEGY FOR CHANGE

51

Croatia with the Axis all necessitated support from the mass of the popula­ tion in the countryside. As in the past, the organizational requirements of the contest— in this case war— were politically critical. The leaders’ preference to subordinate internal disputes to the unity necessary for political action needed no theory of democratic centralism to justify it, given the very dangerous requirements of physical survival and military operations and the priority of military victory. But the party was also transformed by war. As a van­ guard, it became a supreme military headquarters, and its leader became Marshal. Party cadres became officers in mobile fighting units, or military commissars in local and regional “national liberation front” governments or in soldiers’ brigades. The unions in their role were replaced as the “most active elements of the working class” by the proletarian peoples’ liberation brigades— the elite, mobile troops that bore the brunt of direct military encounters. The army became the “school for the working masses,” just as the unions had been “schools for socialism.” The core of the postwar governing party was no longer the trade-union movement or the interwar equivalent of old Bolsheviks (the “Spaniards”); it was now the “Club of ’41”— the “first fighters” (prvoborci ) to join the Partisan move­ ment. Throughout the later decades of socialist rule, appeals to civic vir­ tue in political campaigns were modeled on the “best sons of the nation (or people)” (najbolji sinovi naroda ), a large number of whom gave their lives for the honor; those who survived the war, organized into the influ­ ential veterans’ association S U B N O R ,66 felt themselves the legitimate guardians of the revolution and of contemporary political virtue. Of all the elements of prewar political strategy, the true victor of the war was federalism, for this was the principle on which the party con­ structed wartime administration— the other half of the political instru­ ment to wage war and gain power. As in 1934, the Slovenes took the initiative that secured the principle. On April 27, 1941 (two months b e­ fore Germany’s attack on the Soviet Union), they founded the first of the many regional liberation councils that would govern in liberated territory. The Slovene National Liberation Front was a true united front, linking the leaderships of political parties and other groupings in an antifascist coalition: the Christian Socialist wing of the Slovene Peoples’ party, the Communists, Sokol clubs, and several cultural associations of left-wing intellectuals. By February 27, 1943, the secret Dolomite Agreement (de­ clared publicly on May 1) gave to the Communist party the hegemony within this coalition that it had long considered essential to its revolution­ 66 Savez Udruženja Boraca Narodnog Oslobodilačkog Rata (League of Associations of Sol­ diers in the National Liberation War)

52

Cl I APTlili 2

ary strategy. At the same time, Slovenia never integrated its partisan corps into the army structure.'" Following on the Slovene example, and the lessons of the losses at Užice, the party leadership sent members of the central committee out to organize uprisings and similar regional liberation fronts in their home territories. By November 1942, the party leadership had gathered delegates from these fronts to meet in the first of annual assemblies (the first two in liberated territory in Bosnia) that would become the provisional government, the Antifascist Council lor the National Liber­ ation of Yugoslavia (AVNOJ ).m By its second session, AVNOJ had declared a federal republic as the principle of the postwar state. The primary characteristic of these territorial subdivisions was their autonomy and the decentralization of power to each regional headquar­ ters. Each unit was responsible for waging the war on its territory, for fielding the territorially circumscribed and recruited Partisan brigades, and for founding local governments— people’s liberation committees— as territory was liberated. Gathering local progressives and allied supporters into assemblies of delegates sympathetic to the Partisans' liberation struggle, these governments at all three levels— local, territorial, and central— were managed in the parliamentary interim by an elected exec­ utive board of party cadres. In most eases, the effective unit ol govern­ ment was the local committee; it was the vital link between party leadership, army, and popular support— “all we had, had to come from the people,” Kardelj often said.®0 This lifeline required organizing Parti­ san units, feeding and clothing soldiers, giving aid to the wounded and to refugees, running messages and material, disabling the enemy, propagan­ dizing for the antifascist alliance, keeping schools open, and ensuring sur­ vival of the civilian population. W hether one sees in these committees the socialist model of the “commune ’ of Paris 1871 and Lenin’s State and R evolution , the “municipal socialism” of Austiomarxist slogan, or the Balkan and South Slav tradition of local self-government, they were unde­ niably the practical base of a new state, a base on which both Kardelj and Ranković would draw after the war. The task of war also meant that executive power at the center fused party and military functions; the Supreme Headquarters was both central military command and politbureau of the Communist Party of Yugoslavia (CPY). This executive created and controlled its own mobile brigades (to Stalin’s dismay, called proletarian brigades from the moment of their founding in D ecem ber 1941), which moved with the action and engaged (i? Gow, leg itim a c y a n d the Military, 37. The Slovene partisan corps was, however, sub­ ordinated to— without being incorporated into— tlie fourth army (of four) in May 1945. The Slovenes and Macedonians did not attend, however, Nešović, P rivredna politika i ek on om ske m em u toku oslobo d ila čke b o r b e naroda Ju­ goslavije, 29.

THE MAKING OK A STRATEGY FOR CHANGE

53

the. enemy strategically. These parallel armies— the proletarian brigades of the center and the territorial armies of the regions— actually acknowl­ edged and reinforced the basic administrative autonomy of the territorial councils. Although there remained challengers to Tito’s leadership of the party both during and after the war, his joint role as supreme military com­ mander and party secretary, the dictates of military as well as party hier­ archy, and the profound emotional power and symbolism of the war hero clearly made alternative choices nearly impossible. Tito held his leader­ ship position, confirmed in 1940, until his death in 1980. Ilis personal style of rule can be traced directly to the needs of guerrilla warfare and its principles of military organization; he saw insubordination as both per­ sonal affront and vital danger to effective operations, and he approached factional conflicts as a matter of personal disloyalty requiring a change in leadership and installation of persons who could be trusted. Habits of political calculation that many later attributed to the political culture of Tito’s native region— the political “cleverness” (lukavost; literally, “foxi­ ness”) of the peasantry of the Zagrebacke Zagorje lying between Croatia and Slovenia— were necessary to survival in guerrilla war, where pre­ emptive action against the external foe and, when necessary, temporary retreat were a source of strength under conditions of weakness. Although differences oi opinion and theoretical interpretation were not always obvi­ ated by personal loyalty and Tito’s inclination to restore discipline and political harmony by co-opting into the leadership younger followers of a challenger, many of these skills remained too useful to abandon in post­ war circumstances. This was particularly the case in international relations, where Tito’s wily behavior can be seen in wartime relations with Stalin (and thus with the international workers’ movement)— as opposed to the usual inter­ pretation that the party leadership was practicing self-restraint of its revo­ lutionary goals in deference to Stalin s fears that ‘premature’ party radicalism would spoil his relations with Britain— and also in his Novem­ ber 1943 independent declaration of a new state and his demand for inter­ national recognition of the sovereignty of Yugoslavia as a republic, in order to preempt the Allied leaders as they met at Teheran. Tito had learned with growing astonishment and anger that Stalin continued to support the London government-in-exile despite accumulating evidence that its forces in the field, the Chetniks, were collaborating outright with the Germans, and then learned (erroneously) that the Allies were prepar­ ing a landing in Yugoslavia to reinstate the king and the émigré govern­ ment waiting in Cairo. Tito devoted much effort to obtaining Allied recognition of the Partisans as the primary fighting force in Yugoslav terri­ tory and especially to securing arms and supplies; this, too, required self-

54

CHAPTER 2

assertive cleverness. Only in July 1943, after two long years of British missions to the Partisans and mutual negotiations, did Tito’s forces begin to receive Churchill’s material recognition of their contribution to the Allied cause, and the British delayed shifting political support from the London government-in-exile to the Partisans until the next year. Soviet aid never materialized. The decisions taken at the second session o( AVNOJ on November 29, 1943— to found a republic and refuse recogni­ tion to the king and to any international agreements made thereafter by the government-in-exile— were made in consideration of external events. Perhaps the participants had in mind the fate of the first Yugoslav state, when parties to the Corfu Declaration in 1917 also felt forced by diplo­ matic negotiations to act before they had reached mutual concord. But by 1943, Tito and his circle were intent on taking the initiative and present­ ing a fa it accompli of domestic resolve against Stalin’s pleas for silence on these matters. They informed Stalin of the AVNOJ gathering less than twenty-four hours in advance through his Comintern emissary, who had only just arrived at Partisan headquarters. As Kardelj later reported, their shock the next October when they learned of the Stalin-Churchill talks about Eastern and W estern spheres of influence in postwar Eastern Eu­ rope and the Balkans— the “percentage deal” that would split Yugoslavia fifty-fifty— as well as of British maneuvers to reinstate the king, similarly led Tito to sign forthwith the accord with the head of the government-inexile, Ivan Šubašić, for a provisional coalition government that they had been negotiating for nearly five months. The timing of the formation of a new government, announced in March 1945, was likewise a peremptory strategy in the face of the Allies’ meeting at Yalta and their renewed ef­ forts to shape the Yugoslav state and Balkan relations by forcing interna­ tional recognition of AVNOJ on terms agreed to in the Tito-Subašić accord of November 1, 1944 (for example, a coalition cabinet that in­ cluded prewar politicians and review and ratification of the provisional government’s legislation by a constituent assembly).70 The wartime symbiosis between party and army, political and national fortunes thus strengthened the leaders’ tendency to analyze political struggles in international terms and to define the national question in terms of unity in a joint cause and against external threat. The dynamic of political decisions followed these two imperatives. The timing of the polit­ ical stages of the revolution in the course of the war came to be set in large part by Tito’s reading of external events and the international “correlation of forces, ” a pattern that continued in domestic policy after the war. Posi­ 70 Kljaković, “The Legacy o f the Anti-Fascist Council ”; Petranović, Politička i ekonomska osnova n aro d n e vlasti u Ju g oslaviji za vrem e ob n ov e, 207. See also Clissold, Yugoslavia and the Soviet U nion, 33-40-

THE MAKING O F A STRATEGY FOR CHANGE

55

tioning within the domestic political arena depended on prior positioning in the international arena. External military threats only reinforced the Yugoslav Communists’ view that capital, both domestic and foreign, would choose divide et impera when it could, thus necessitating political unity for the strength to resist.

S l o v e n ia

and

F

oca

Many issues on which there was internal party disagreement also resur­ faced in the course of war, however, especially the meaning of national autonomy and self-determination; the pace of social revolution; and the consequences of social and economic heterogeneity for a uniform, societywide program. Because the war brought the first application of the Communists’ strategy to real conditions and the first stages of governance itself, these disagreements and differences under the umbrella of general political and organizational principles already foreshadowed the contra­ dictions in economic policy and outcome that are essential to understand­ ing the political paradox of Yugoslavia’s postwar unemployment. Despite the guiding principle that an appearance of domestic con­ sensus was essential to international leverage, the continuing dispute over the meaning of national autonomy and national rights led to inter­ minable conflicts between the central party and its national sections. The 1941 founding document of the Slovene National Liberation Front, in spite of the party line of a united front, declared “the right of self­ determination, including the right of secession and uniting with other people!”71 To recapture the rebel Macedonians after their section de­ fected to the Bulgarian side, Tito sent an entirely new leadership team to rally dissident elements and organize a separate front under the fiery leadership of Svetozar Vukmanovic-Tempo. In Croatia, too, Tito met the party’s disloyalty over the 1938 elections with a sweep of its top leader­ ship; but this turned out to be insufficient, and relations with the Croatian party took more of his attention than relations with any other area.72 The problem was that the alliance between the CPY and the more­ progressive elements of the C P P — not those associated with Macek— in ZAVNOH was dominated by the CPP, while the Croat Communists ar­ gued that they could win its following away from Macek’s “collaboration­ ist” leadership and inherit its popular and national mantle. To do so, they ignored central orders and accepted a wartime platform written by C PP activists that emphasized Croat national feelings; it included catechism in schools, the goal of democratic revolution (the “bourgeois” task), and an 71 Connor, The N ational Q u estion , 156. 72 See Irvine, State Building a n d Nationalism.

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economic program scarcely distinguishable from the (liberal) republican­ ism and radical populism of Stjepan Radio’s C PP during the 1920s. In­ stead of developing a separate Communist party organization and cadre, they helped to revive C PP organizations and newspapers and set up gov­ ernmental offices (such as courts and a telegraph agency) of a "free Croatia.”73 This waywardness was the cause of endless trips to the Croat camp by Tito’s emissary, Edvard Kardelj, in order to discipline Andrija Hebrang, its leader after the end of 1942. It even became a source of trouble with the Slovene National Liberation Front, which found the Croat platform so appealing that it chose to publish it— earning Kardelj’s public fury. Yet Tito sought time and again to accommodate the Croatian front so as to retain Croatia for the Communist cause, even to the extent of playing down the early dominance of Serbs in Partisan units in areas where the genocidal Ustasha policies had pushed Serbs to organize resis­ tance and seek Partisan protection (in mixed areas of Dalmatia, Kordun, and Lika). The Communists therefore made a ''chauvinist” calculation in their political equation in Croatia, where conflicts were between nation­ alities within a federal unit— a course they had explicitly rejected in the Macedonian case. The contrast between the “nationalism” for which the central party took the Croat leadership to task and that in Slovenia is instructive. The Slovene party, too, pursued a united-front strategy that downplayed class-based appeals and emphasized populist, liberal, and Slovene cul­ tural elements; it was scarcely different from the idea of Croatia as a single "Croat” unit, irrespective of ethnonational identities within its territory, and a Croat national program for them all. The Slovene program was also a maximizing strategy, in large part a reaction to the loss of popular sup­ port the Communists suffered as a result of a class-based program of polit­ ical differentiation in the villages during the spring of 1941. But the party’s success in forging an early wartime alliance without losing its orga­ nizational integrity enabled it to use Slovene nationalism rather than be­ come subordinate to it; and when it sensed popular support was moving toward the Christian Socials in 194.3, it was able to maneuver a secret agreement for its hegemony within the front.74 In dealing with the question of property during the war, which was part of the question of the pace of revolution, the party also reinforced a du­ ality similar to that of the revisionist compromise of 1940. Early radical-, ization in the countryside had tried to push the national revolution to a social revolution— partly spontaneously, partly as a result of party policy— and there were expropriations, violent confrontations over sei­ zures of land, and “class warfare” between rich and poor peasants soon 73 Banac, W ith Stalin against Tito, 95-96. 7'‘ Kostunica and Cavoski, Party Pluralism o r Monism, 52 -54.

THE MAKING OF A STRATEGY FOR CHANGE

57

after the declaration of popular uprising in 1941 in Slovenia and in the winter of 1941-42 in Montenegro. Because these events appeared to be the cause of a dramatic shift of popular support to the camps of competing parties, the leadership reinforced its commitment not to touch the ques­ tion of property in the countryside, disavowing local radicals as “left ex­ cesses” and “left errors.” With respect to industry, finance, and large landholdings, on the other hand, the “advanced core” of Marxist thinking received a boost from the war. The expropriation of exploiting classes could there be equated (as many desired) with the national revolution, with returning to the people its national patrim ony of what German and Russian Marxists called the “commanding heights” of the economy, ex­ ploited by foreign economic interests and protected by the royal govern­ ment as “gendarme . ” The right of just revenge against a defeated enemy of king, collaborators, and occupiers legitimized its nationalization. The provisional government’s first act, in fact, was to lay claim in November 1943 to areas contested between Slovenia and Italy— the Slovene littoral and islands as well as Istria— and settle scores with the World War I Allies, who had awarded them to Italy (a point of particular interest to Kardelj, whose treatises defending the Slovene character of Trieste and the surrounding countryside were written in the 1930s). The declaration of a republic, of national independence from the king, was in fact a decla­ ration against all remaining feudal property, including the large estates of the Hungarian, German, and Catholic-church landlords of the northern plains of Vojvodina and Slavonia. In October 1944, within days of the Tito-Subasic agreement, the gov­ ernment began its nationalization of domestic property by transferring all property owned by enemy combatants to public ownership. Three weeks later, at the third session of AVNOJ, on November 21, 1944, the core of the postwar socialized-property sector was established by expropriating the property of the German state, of war criminals, and of obvious collab­ orators. This was all the easier because the Axis occupiers had themselves expropriated the core of Yugoslav mining and industry to support their war effort. For example, Germans owned the lead and zinc mines at Trepca (formerly British), the Allatini chrome mine (formerly British), the Bor copper mine (formerly French), the Zenica steel plant, the Bata leather works (formerly Czech), and many textile and cotton mills— a to­ tal of 55 percent of Yugoslav industry.73 In August 1945, an agrarian re­ 75 Warriner, Revolution in E astern E u r o p e , 19-20. See the series o f reports prepared by Tomasevich for the U S War Department on German holdings (“German Economic Pene­ tration and Exploitation of Southeastern Europe, ” “German Penetration of Corporate Hold­ ings in Serbia,” and “German Penetration of Corporate Holdings in Croatia”); Petranovic, Politicka i ekon om ska osnova n aro d n e vlasti, pt. 3, chap 1; and Kaser and Radice, The Economic History o f E astern E u rop e, 1919-1975, chap. 20.

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form in turn legalized the wartime expropriations— property taken into local control in order to wage the war, and the landed estates and capital­ ist farms of the enemy and collaborators that were nationalized by fiat in November 1944. Into this national “land fund’’ also went all landholdings in excess of one hundred hectares that had been owned by banks, indus­ trial enterprises, monasteries, charitable trusts, and churches. The third tension between a central, uniform policy and the variety of conditions the party leadership faced was a result of the self-sufficiency granted territorial authorities to execute daily administrative tasks. In these experiences of actual governing was the germ of later conflict over economic institutions and policies. Limited to regions where liberation fronts were established and where the Partisans managed to liberate terri­ tory over a sustained period, these experiences produced two fundamen­ tally different models of administration according to the political tasks and economic conditions each faced, one in Slovenia, and the other in the two southern territories of Bosnia-IIerzegovina and Montenegro with the Bay of Kotor. Immediately upon forming its council of national liberation in April 1941, the Slovene front formulated a set of governing principles. It was aided in putting these principles into administrative practice and creating stable rule more than a year and a half before the end of the war by the success of the popular-front coalition for the Slovene Communists, the small numbers under arms,76 the relatively early cessation of hostilities on Slovene territory (one part was incorporated into the German Reich so that industry continued and little destruction occurred, while in the part under the front’s control the Italians had capitulated by September 8, 1943), and an effective governmental apparatus from two hundred years of local self-government as a result of the eighteenth-century Theresian reforms. Government in what I will call the Slovene model was based on “people’s power” expressed through local assemblies of voters. They elec­ ted an executive body, the people’s liberation committee, from delegates of political activists within the liberation front and created a fund, a trea­ surer, and principles of taxation. The front insisted on civilian control of all economic matters, by local councils independent of military com­ manders; and it distributed circulars throughout the war to propagandize for maximum local and popular initiative. Essential to its concept of politi7fS According to Gow, the Partisan movement “was never as strong in Slovenia— throughout 1941, the total o f individuals engaged in Partisan detachments in Slovenia did not exceed 700 or 800”; at the. time of Italian capitulation, there were probably four to five thousand (but eight thousand in the collaborationist White Guard), and the figure remained low in relation to other to other areas until the end of the war. (Legitim acy an d the Military, 35).

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ca] self-government and local initiative was the principle o f regional e c o ­ nomic self-sufficiency and thus autonomy in econom ic policy. T h e party’s actions since 1934 remained consistent on this principle. The social element o f Slovene econom ic policies lay in the character of the committee’s fund. B eginning in O c to b e r 1941 with a “p e o p le ’s tax” and a "Freedom B ond ,” the front chose to finance the war effort and social assistance in a way that would also effect a more egalitarian distribution o f wealth in the population. It replaced the host o f prewar taxes with a sin­ gle, progressive tax on incomes and gave citizens the option of voluntary contributions to the war effort by purchasing shares in the bond. People could also contribute their labor. To bring all arable land under cultiva­ tion and maximize production, the com m ittees organized the free civilian population (mainly youth and women) into volunteer collective-labor teams to aid peasant producers. By April 1942, the front had instructed economic commissions and local com m ittees to assume m anagem ent o f all land that was abandoned or that belonged to enem ies or estate owners accused of collaborating with the enem y , and then to lease this land gratis to those willing to work it. In N ov em be r it declared this property to b e under public ownership, while reiterating the inviolability o f private property once communal needs were met. T h e skeleton of an apparatus for economic planning appeared in May 1942. A C entral E co n o m ic C o m ­ mission was to set policies for essential production and distribution. An Administrative Commission was to collect reliable econom ic data about supply stores, economic needs, and potential sources o f provisions; trans­ late these data into basic production plans; and supervise the im p le m e n ­ tation of sowing plans. Athough interrupted by hostilities, this econom ic apparatus was able to operate again by August 1943. For social as well as e conom ic reasons, the architects o f this econom y placed particular importance on keeping inflation in check and on finan­ cial stability, accomplished primarily by regulating upper limits on agri­ cultural prices. W ith the end of hostilities in S e p te m b e r 1943, the people’s liberation com m ittee moved rapidly to order the monetary sys­ tem. Between S e p te m b e r and March o f 1944, the c om m ittee blocked all bank accounts to prevent hoarding, issued a new Partisan currency, and created a bank with all the functions of central finance— issuance and regulation of the money supply, provision o f savings deposits and lending operations, crediting of producers who were willing to work for the army and the home front, and regulation o f foreign exchange for busin esses. By the end of June 1944, the Slovene Partisan money and its bank, the D e ­ narni Zavod, had b ec o m e the cu rrency and central bank, respectively, o f postwar Yugoslavia. As the standard for the rapid conversion o f all other wartime currencies, the Slovene cu rre n cy ’s own stability made possible the early and successful stabilization o f the dinar that was to b e an impor-

GHAITKH 2

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tant mark o f early Yugoslav socialist policy (in contrast to, for example, the infamous inflation of 1 9 4 5 - 4 6 in neighboring Hungary). T h e Slovene principles w ere the basis for the governing rules adopted by central party headquarters for application in all liberated territories— areas that w ere almost entirely in the south, w here Partisan engagements w ere con cen tra ted for most of the war. These' principles were elaborated by Mosa Pijade, the party’s ideological patriarch at the time, into the F oca Regulations o f F ebru a ry 1942, named for the leadership’s base in eastern Bosnia after their humiliating long march out o f Serbia the previous fall. W h a t I call the; F oca model employed the same basic political principles as the Slovene model, but in the very different conditions and experience o f Bosnia-Her/.egovina, M ontenegro and the Bay of Kotor, and the Sandzak. T h e contrast is striking. In these impoverished, supply-deficit, and heavily em b a ttle d regions, w h ere the constant threat of starvation among the rising nu m bers o f landless, poor, orphans, and refugees competed with the dem ands of an army for food, supplies, and sanctuary, liberation councils confronted highly uncertain conditions and shortages, with few effective instrum ents. T h e pressure to increase agricultural production while preventing speculation and inflation from depriving the poorest of access to food d em anded a particularly effective political and administra­ tive apparatus, yet the councils had to work with local administrations or cooperatives that w ere weak even before the war and that were fre­ quently disrupted by battles during the war. In most cases, there was little to do but fall back on the sim plest methods: above all, that each household should provide for itself from its own land. But even family self-sufficiency required redistribution. Thus a moratorium on rents was declared, and an agrarian reform distributed “surplus’’ land belonging to the chu rch, m onasteries, and charitable trusts to the landless and landpoor, on the principle of “land to the tiller.” Local com m ittees were told to d efine this surplus and set local landholding maximums. Rich peasants could keep their land on the condition that they provide land for refugees and donate tools to the poor. At the same tim e, central headquarters ord ered the p e o p le ’s com m ittees not to tamper with the “question of own­ e r s h ip .”77 As in Slovenia and Croatia, private property o f land was guaran­ teed ; but sharecropping as a form o f exploitation was also prohibited, and the p e o p le ’s co m m ittee s requisitioned peasants’ produce to build up stores for the army. T h e s e collections were based on the same simple, progressive principle as the incom e tax in Slovenia, but they were neces­ sarily a tax in kind, based on local surveys o f available supplies and esti­ mates o f survival m inimums for each household. Citizens were handed 77 Nesovic, P rivredna politika, 129.

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receipts certifying that they had fulfilled their tax obligations and said to be redeemable with their local g overnm ent after the war. As in Slovenia, citizens were encouraged to volunteer donations above their quota. Conditions did not allow these authorities to effect econom ic policy through price regulation, as the Slovene front could. Efforts to set prices so as to control distribution and limit inflation only led farm ers to w ith­ draw their produce from peasant markets and to complain so loudly that on January 15, 1943, the all-national provisional gov ernm ent ordered that the principle of free markets should b e protected and that com m ittees should find political rather than econ om ic rem edies to the problem o f price inflation. Persuasion rather than a money price had to govern in shortage conditions. In M ontenegro, com m ittees established c o m m is­ sions of three persons— two delegates from the army and one from the people's committee— to supervise peasant markets, rem inding farmers of their “patriotic duty” to keep prices low. I f that did not work, they would flood the market with money to effect a rapid local devaluation. In lib er­ ated areas of Serbia and Bosnia, com m ittees also organized merchants into associations for the d irect purchase and collection o f produce at freely negotiated prices. Some efforts w ere made to organize marketing c o o p e r­ atives among peasants them selves in the hope o f stimulating production and achieving a marketed surplus without speculation, but the base for such efforts was far less developed than in the highly cooperativized polit­ ical traditions of Slovenia and Croatia (as the party had discovered in the 1930s). As in Slovenia, the co m m ittee s also attem pted to increase produc­ tion with public labor, organizing collective-labor teams to cultivate the land of families who could not do so them selves b ecau se o f the war. In contrast to the north, the countryside in the predominantly Partisan­ held territories faced overw helm ing dem ands arising from the war itself, a local economy that even in good times was far closer to subsistence, and less-developed public institutions for econom ic cooperation and administration— all exacerbated by enem y occupation o f the towns. C o m ­ mittees understandably fell back on a natural econom y, adjusted policies and demands to specific local circum stances, and interwove civilian and military needs and personnel in the basic tasks o f governing. W ith fewer instruments, they had to accomplish more in their com m on “struggle for national defense and liberation, such as actually im plem enting an agrar­ ian reform, rationing food, and creating supply depots. D istributive egali­ tarianism and cooperation might have b e e n natural to this setting, b u t the ambitions of rational planning, monetary stability, popular assem blies, and civilian control belonged to another w orld.78 ™ It would be unwise to think ol the situation in the southern th eater o f war and its Foca principles in terms o f the system o f war comm unism in 1 9 1 9 -2 3 , for the comm unist elem en t

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C o n c l u s io n

In Scandinavian social dem ocracy — the classic case of necessary political c o m m itm e n t to full e m p lo y m e n t— electoral victories and governmental coalitions under e conom ic circum stances of mass unem ploym ent (the G re a t D epression) w ere the conditions that led to the definition o f a new approach to u n em plo y m en t by governmental p olicies.79 T h e conditions that defined most e le m e n ts o f the Yugoslav Com m unist party’s strategy for e co n o m ic and social transformation w ere different. T h e Yugoslav royal g ov ern m e n t had declared the party illegal in 1921 and prohibited elec­ toral participation by its various front organizations. As a result, party m e m b ersh ip declined, and leaders went into exile or underground con­ spiracy. A m inuscule party o f 6 ,6 0 0 m e m b ers with an affiliated youth wing of 1 7 ,8 0 0 at the last party conference (in O c to b er 1940) before war i n te r v e n e d ,80 it had little opportunity to test its strategy against a voting public or to refine it in repeated electoral contests. In contrast, the Aus­ trian Social D em ocra ts, who also cam e to power after W orld W ar II com­ m itted to full em p loy m ent, w ere largely trade unionists who won sizeable electoral space b ecau se o f their postwar purge of Fascists, policy of neu­ trality, and close ties to the United S ta te s .81 W hile the Austrian Social D em o cra ts had won the contest against the Com m unist party by the 1920s and their formative political experiences w ere the struggle against mass u n em p lo y m en t in the 1930s (for which they were jailed) and the s u b seq u e n t civil war, the Yugoslav Com m u nist party was still engaged in the conflict with the Social D em ocrats in 1 9 3 7 - 4 0 (with the state being a significant interm ediary in the corporatist exclusions after 1937 and in the outright ban on the U nited Unions organization in 1940, when the Com­ munists w ere making advances with labor militancy). M oreover, in con­ trast to Austria, the p e rc e n t o f the Yugoslav population classified as was based in conditions, not ideology. But th ere are parallels in the debate o ver ideology and exp ed ien ce in the Soviet case as well; see Malle, The Econom ic Organization o f War Co7nmunism, introduction. 79 T ilton, “A Sw edish Road to Socialism .” Esping-Andersen, Politics against Markets, is especially good on th e im portance o f the particular m oment, and therefore dom estic and international conditions, o f a political decision in the Social D em o crats’ cho ice oi issues, policy, and social support. S e e also Hall, G ov erning the Econom y, on this subject for En­ gland and France. so Banac, With Stalin against Tito, 5* Avakumović lists 6 ,4 5 5 as the n um ber o f party m em b ers (History o f the Com munist Party o f Yugoslavia 1:185). T h e youth wing was called th e League o f C om m unist Youth o f Yugoslavia (Save/. Kom unističke Om ladine Jugoslavije, generally referred to by its acronym, SK O J). S1 Attention is drawn to the Austrian contrast not only because it is another example oi social dem ocratic success at full em ploym ent, but also because many Yugoslav economists insisted through m uch o f th e country’s socialist period that if only governmental economic policy w ere co rrect, it “could b e Austria.”

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industrial workers was low— only 11 p e rce n t as late as 19 3 9 — and the unionized working class, designated as those covered by social insurance, was less than 5 p e r c e n t.82 The party’s victory cam e instead through armed struggle and mass m o­ bilization in an antifascist war o f national liberation. It confirmed the Communists’ choice for federalism (based on national identities histori­ cally and territorially defined and on substantial operational autonomy), their choice for revolution against the state and foreign capital, and their inclination to read power in international as well as dom estic term s and to put great stock in a strong military defense. It was also profoundly reveal­ ing, in a way that would reoccur, o f the conditions (international as well as domestic) necessary to support their preferred S lovene model o f political and economic institutions— rational planning, econom ic m anagem ent through regulation o f m oney and prices, civilian rule in local parliaments combined with the party’s ideological (but not administrative) hegem ony in a coalition of political forces, and regional self-sufficiency. In the years following the C o m m u n ists’ entry into Belgrade as liberators in O cto b er 1944, industrial un em ploym ent was a social question (a question o f pov­ erty and survival) far m ore than an econom ic one amid the tasks o f post­ war reconstruction and demobilization. Ind eed , wartim e destruction left the country in 1945 even less industrialized and m ore rural than when it entered the war. T h e defining m om ents for the C P Y on its road to power were instead the revolutionary strategies o f the C o m in tern (particularly with respect to the national question) in the 1920s and 1930s; fascism; world war; and, as we will see in the next two chapters, the cold-war division of the postwar world. 82 Dukanac, Indeksi konjunkturnog razvoja Jugoslavije, 27.

Ch ap ter 3 CREATING A STATE FOR SOCIALIST D E V E L O PM E N T

socialist period in Yugoslavia is universally identified with the Sov iet model and is called, in the Yugoslav literature, its “administrative p e rio d ,’ on the argum ent that Stalinist policies and a planned econ­ om y operated. According to this consensus, the period ended around 1 9 5 0 - 5 2 , with the introduction o f w orkers’ councils in industry, the aban­ d on m e n t o f agricultural collectivization, and the rechristening o f the C o m m u n ist party as the L eague of C om m unists to signify its abdication from d irect administration for the conscious force of volunteer activists. F u r th e rm o r e , the view is that these changes that produced the Yugoslav “e x ce p tio n ” w ere introduced in response to popular dissatisfaction and

T he early

the lead e rs’ need to find dom estic bases of political support and legit­ imacy o n ce they had b e e n abandoned by Moscow and the Cominform, with its famous expulsion letter of Ju n e 28, 1 9 4 8 .1 This ch a p ter and the next will challenge such a view on three grounds that are essential to understanding the Yugoslav system under C o m m u­ nist party ride that did e m erg e. First, new stales and socioeconomic or­ ders do not e m e rg e fully formed, like the: phoenix, especially out of the ashes o f war. T h e y have to b e created, and this applies especially to the far g reater authority and administrative capacity necessary lor a planned e con om y or the centralized, authoritarian character implied by most dis­ cussions o f an “administrative p eriod .” T h e Yugoslav leadership never had that capacity. S econd , this view does not conform to the facts on the ground. Political power in O c to b e r 1944, when the Partisans e n tered Belgrade, came largely from the barrel of a gun, was distributed among many authorities, and was territorially incom plete. Military campaigns with devastating losses (including m ore than thirty thousand on the Srem front)2 continued into the spring o f 1945, and the borders of the state were not fully settled 1 O n th e Com inform conflict, see Clissold, Yugoslavia a n d the Soviet Union, 19 3 9 - 1 9 7 3 ; Ulam , Tito ism a n d the C om inform ; Djilas, Conversations with Stalin; V. D edijer, T h e Hat­ tie Stalin Lost; and Banac, With Stalin against Tito. F o r this characterization o f the period, any work on postwar Yugoslavia will suffice. 2 V. D e d ije r, Novi prilozi za hiografiju Josipa Hroza Tita 3 :143.

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until 1954. International recognition o f the new state and leadership (and thus both national in d e p e n d en ce and dom estic authority) was not secure until the end of 1949, b eing contested repeatedly during this period by both West and East. T h e party’s attem pts to introduce a five-year plan for rapid industrialization and the apparatus necessary to it began only during 1947, after a period o f reconstruction; the plan was not patterned after a Stalinist model, but rather based in the Len inism o f the New E co n o m ic Policy— a choice confirmed in April 1946, not 1952; and it was never consolidated because o f continual difficulties obtaining foreign assistance and because of growing fears o f war (in late 1947) and the resulting policy change. The period saw a set o f changing policies and priorities in the construction o f the state, when difficult international conditions and quar­ rels within the top leadership over fundamental questions o f strategy were most influential. Third, this view makes assumptions about the political dynamic o f such a state that are faulty— for example, that it was largely principles o f party hierarchy and personal ob e d ien ce that w ere at stake in the Tito-Stalin conflict, or that when leaders introduced new policies that see m e d more friendly to the population, they did so in response to popular dem and, in order to gain more political support. Instead, the political dynamic o f the period was driven by the international difficulties o f the leaders’ attem pt to combine political radicalism and social caution— difficulties in both East and West, at the level o f national security and foreign trade and aid. It was the goal o f national, not party, ind ep end en ce that consum ed this initial period o f state-building, whereas relations b etw een party and pop­ ulation were defined by the lead ers’ attem pt to obtain desired econom ic outcomes within the constraints o f an inhospitable foreign environm ent and by their conceptions o f the proper strategy (econom ic theory, state form, and social relations) for transformation. As we will see in the next chapter, this throws a different light on their policy o f “workers’ control” and policies toward agriculture. Yet revision o f Yugoslav historiography is not the primary purpose o f these two chapters. It is instead to d em onstrate that the institutions o f the Yugoslav system (such as workers’ councils) and the focus o f political c o n ­ flicts (such as c e n te r-re p u b lic or national conflict) w ere defined originally by the leaders’ strategy for industrialization without capitalist un em ploy­ ment, that those institutions changed frequently in order to keep that strategy on track in the face o f changing international conditions, and that the oppositions usually postulated in the literatu re— such as b etw ee n ad­ ministrative and self-managing systems, plan and market, c e n te r and republics— do not distinguish b etw ee n systems and policies. A broad conception o f policies toward labor does make that distinction, for the

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state (in its new sense) rem ained a master em ployer that periodically reor­ ganized tlie society in adjusting to problem s of capital, although with means that w ere n either directive nor market. T h e lead ers’ “ideas actualized in action”3 yielded, in the first years after the war, the institutional pieces of the two levels of power critical to em­ ploym ent: in laying an organizational framework to im plem ent their econom ic-grow th strategy, the leaders created a state, while a new sys­ tem for em ploying and rem u nerating labor e m erg ed from a struggle on several fronts to replace the market wage and collective bargaining of capitalism. In both aspects, there w ere difficulties at the highest levels b eca u se of a major political quarrel over the source of capital for the in­ dustrialization drive and over its foreign implications, and because of un ex p ected difficulties in foreign relations. This chapter ends with the first phase of that process of institutionalization, toward the end of 1947, when T ito perceiv ed the foreign disputes and environm ent as so threaten­ ing that lit' chose to shift to a policy of military self-reliance. Chapter 4 exam ines the second phase, b etw een N ov em ber 1947 and 1951, when the leadership pursued a wholesale, though temporary, adju stm ent of this original structure of state and society to m eet the new demands of produc­ tion and foreign trade— with a dizzying kaleidoscope of legislation, am en d m en ts, temporary transfers of authority and power over capital and labor, and changes in industrial relations and agricultural policy.

A R a t io n a l St a t e

T h e primary problem for the Yugoslav leaders after 1944 was how to in­ dustrialize rapidly, to reverse both the very low capital capacity that lim­ ited any real rise in living standards, and the country’s vulnerability to the gre a te r econ om ic and national strength of industrialized powers. Promis­ ing a life different than that under the prewar kingdom yet facing the extraordinary dem ands of postwar reconstruction, the leaders found that their need for capital was greatest when they had the least to spare and when their political position was most fragile. T h e conflict was not one of relative shares for investment/profits and consumption/wages, but o f how to effect structural change that would increase the capacity to emplov the labor surplus in agriculture without creating financial crises that would devalue industrial labor, through falling wages or outright unemployment. In the leaders conception of e conom ic growth, society’s capacity to employ was limited by the size o f the subsistence fund. This limit varied according to the n u m b e r of people consuming more than they produced, w h e th e r b ecau se they w ere unem ployed, their productivity was low, they 3 V&rderv, National Ideology u n d e r Socialism, 9,

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performed tasks that w ere necessary to growth but did not yield a c o n ­ sumable output (such as producing capital goods and raw materials or laying infrastructure and constructing new plant), or they w ere paid for work that produced no usable output or service at all. T h e r e w ere also political limits due to the composition o f the leaders political alliance of smallholders, wage earners, and salary earners because the growth of the three groups’ jobs and incomes w ere potentially in mutual conflict— even assuming that social standards o f consumption could b e kept modest for a while. A rural-urban conflict related to the price o f food could arise b e ­ tween the level of farmers incom es— and thus the relative threat o f their proletarianization— on the one hand, and the level o f workers consu m p ­ tion standards— and thus their cost o f production and the threat o f their unemployment— on the other. A conflict b etw ee n production workers and administrative personnel and another b etw ee n generations might pit the wages and jobs for industrial workers against the net value (profit) redistributed to create new jo b s for peasants and to em ploy middle strata. With the high level o f agricultural “surplus” (this surplus, called “agri­ cultural overpopulation’’ in the interwar period, was m easured by the proportion of the rural population that made no marginal contribution to productive output on the farm and was thus de facto unem ployed), o v er­ coming these economic and political limits required m ore than marginal adjustments. In the period b etw ee n 1921 and 1938, only one-twelfth of the natural population growth (then at 1 .5 pe rce n t a year) had b e e n a b ­ sorbed by industrial em p loy m ent (for a total o f 1 8 0 ,0 0 0 new jobs). The agricultural labor surplus during that period was estim ated at 60 p ercent. The number of persons recorded as actively seeking nonagricultural e m ­ ployment grew, in proportion to the n u m ber o f insured industrial workers, from 9 .6 p ercent in 1922 to 2 6 pe rce n t in 1931, and to m ore than 80 percent by 1 9 3 8 .4 T h e “peasant q u e s tio n ,’’ in K a rd e lj’s statem ent o f the leadership’s policy, was “not to b e resolved primarily in agriculture but in industrialization of the country, with the transfer o f a large part o f the labor force from the village into industrial production and other econom ic activities.”5 But not at the cost of real growth; that would oidy force cuts in 4 Macura, Stanovništvo kao činilac p riv red n o g razvoja Jugoslavije, 3 8 - 3 9 . 5 Cited in Puljiz. Eksadus poljoprtvrednika. 6. T om asevich writes fur the interw ar p e­ riod “A realization o f basic significance, whiclt liecam e clear during; the 1930 s to most Yugoslav economists and to som e politicians and adm inistrators, was that the problem o f agricultural overpopulation was th e cen tral econ om ic issue o f th e country and that il had farreaching political and social significance and ram ifications. . . . S in ce mass «m igration was impostihlc. the only avenue o f approach to a p erm anen t solution . . . was through industri­ alization . . Fu rth erm ore, th e re was an almost unanimous opinion in support ol planned industrialization and. generally, for a planned econom y in which the leading c riteria would I*, ilie needs and th e Interests o f the large mass o f th e peasant population" (Peasants. Poli­ tics, and Economic C ha nge in Yugoslavia, 3 3 8 -4 0 ) .

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consum ption and em p loy m ent later. In the language o f the leadership, the structural change to crea te new em ploy m ent capacity could not ig­ nore the “law o f v a lu e ,” the necessity o f maintaining the “equilibrium conditions o f reproduction. ”6 T h e lea d e rs’ solution was to restru cture all o f society for the optimal use of econ om ic resources. At its c e n te r would he socially owned assets in manufacturing and finance (the “com m anding heights" o f Marxist dis­ course), which would use existing capacity to the fullest, the most modern, technology available, and rational calculation o f production technique ariîl work incentives to increase productivity. Invoking Trotsky, Boris Kidric (who had moved from heading the Slovene National Liberation Front to; controlling the chief federal econom ic portfolios) maintained that the plan1, would b e the “b rain” o f the econom y, gathering accurate economic data from producers and providing them with scientific information about ag­ gregate trends and possibilities in return. Expansion of the public sector would occu r w here production could b enefit from the industrial organiza­ tion of labor and mechanization, such as with large landholdings in graini production, mines, and large-scale manufacturing; and where services, such as wholesale trade, could benefit from econom ies o f scale and the red uction o f transfer costs by handing administration and distribution toi producéi s them selves within an industrial branch. Society itself would be reorganized to reduce waste and nonproductive bureaucracy, creating a lean public administration— in L e n in ’s words, a “parsimonious” statew h ere the rate o f capital accumulation in society would rise in proportion! as administrative (rezijski) costs declined. T h e instructions and incentives to im p lem e n t public decisions including investment, would be commun« cated through centrally set financial indicators (cash advances, prices, cred it, wage rates), not a bureaucracy, and the entire public sector would. b e cov ered by uniform accounts for the economy. Alongside this capital sector, the assets of the rest of society would be red istribu ted more equally so as to raise average consumption and guar­ a n tee all households the means necessary for subsistence. From this “in­ dividual" sector, persons would move gradually into industry as growth in the public se cto r— through ever-higher productivity— created economic dem and for new em ploym ent. It was very important that this process also b e rational, so that there would b e no fall in consumption standards al­ ready attained and no threat to growth. It was b e tte r to keep down the dem and for food for the urban and industrial population by limiting the pace of agrarian exodus than to employ extensive methods of capital accuh I'or the context o f (lie same debate in the Soviet Union and on the Leninism ofw Yugoslav leadership, see Sulela, ‘ Ideology as a M eans o f Eco n o m ic D eb a te," 200.

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69

mulation that would delay proportionate d ecreases in the consumption fund and threaten m acroeconom ic stability. Moreover, to avoid the bureaucratic costs o f centralization and a ccom ­ modate the vast cultural and e con om ic differences across republics that the territorial self-governm ent o f the federal system presum ed, op era­ tional management would b e as d ecentralized as possible. B eca u se social ownership of assets in the public sector made governm ents the “founders” of enterprises, with final rights to dispose, regulate, and tax firms in their jurisdiction, there n e ed e d to b e a functional division o f labor to distin­ guish among levels o f governm ent. Following L e n in ’s approach to the national question (although its basis in the th ree d epartm ents o f the M arx­ ian scheme of reproduction also had strong H absburg roots, most recently evident in the ju risdictions granted Croatia by the Cv etk ovic-M acek Agreement of 1939), this division gave the federal gov ernm ent ju risd ic­ tion over defense, foreign relations, the monetary instrum ents necessary to maintain a unified m arket for the country, and investm ent in dev elop­ mental projects o f c o n s e q u e n c e to the growth o f the econom y as a whole, such as the long-gestating and huge capital investm ent for produ cers’ goods such as iron and steel and m ajor infrastructure. T h e federal govern­ ment did not own any o f these assets, how ever, and as soon as federal projects were up and running, they w ere to b e handed to the republics for management. F e d e ra l revenue would com e from customs duties and the turnover tax, but any share in the tax on e nterprise incom e would have to be granted by republics. Republican governm ents would have ju ris ­ diction over D ep a rtm e n t II activities— production supplies, processing industries, manufacturing, agriculture, labor, and capital projects o f a re ­ gional character. T o the local g overnm ents went D e p a rtm e n t I I I — the sphere of household consumption, com prising both public and private activity, such as small con su m er goods, services and trades, local roads, elementary schools, and retail shops. T h e conc ept o f “socially necessary consumption” assumed that expectations and needs would vary and, given the great variety o f circum stance and custom in Yugoslavia at the time, that matters o f daily life w ere best resolved close to hom e. This principle of subsidiarity might b e abrogated under special circum stances (such as the em erg enc y need for a national food policy im m ediately after the war, which prescribed sowing plans and compulsory purchase quotas for both state farms and private farmers), but never abandoned entirely. Putting this program into practice, the leadership began with the trans­ fer of property to the public sector and the redistribution o f wealth for “social” (welfare) purposes. T h e process occurred in stages, from N ov em ­ ber 1945 to April 1948. It began with the provisional g ov ern m e n t’s legal­ ization of the nationalization o f e n em y property discussed in chapter 2,

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which yielded 55 p e rce n t of large industry and 6 p e rc e n t o f arable land; a n other 2 7 p e rc e n t o f the industrial stock— property owned by foreigners or citizens who had fled the country— was placed under state man­ agem ent. M ost o f the transport sector and manufacturing o f household necessities (m atches, salt, tobacco, fuel oil) w ere already under state mo­ nopoly.7 Justifying this transfer largely as an assertion of national sover­ eignty, the leadership had wide popular support, and talk in the assembly and in public life appeared almost euphoric over kicking out foreigners and escaping national d e p e n d e n c y .8 In the private sector, agrarian and currency reforms reduced substan­ tial previous inequalities, although their purpose was not equalization but social transformation— reducing opportunities for exploitation or dispos­ session of th e tools and land necessary for rural and artisanal households to subsist in d e p e n d en t of the state. D istribution o f land to poor and land­ less peasants who would actually work it added two hectares each of the holdings o f 3 1 6 ,4 3 5 rural households, with special privileges to veterans of the Partisan army. Courts set up to hear claims requ ired applicants to “show their horny hands as p ro of” o f eligibility.9 T h e agrarian-reform leg­ islation o f August 1945 prohibited hired and tenant labor and set limits o f 2 0 to 35 hectares on private landholdings (depending on land use). T h e goal o f cu rre n cy reform — to preven t inflation and reduce money wealth— was assisted politically by the need to convert occupation curren­ cies into the dinar, although in this case the assem bly’s nationalizing fer­ vor infected national relations at hom e. Croat leaders (especially Andrija Hebrang) o b je c te d to the term s of exchange given the Croat currency, reflecting the C ro a ts’ historical mem ory o f b eing cheated as form er Habs­ burg citizens by the S e rb monarchy after W orld W a r I — a memory that had b e e n revived in public deb ate over the negotiations for Croat auton­ om y in 1 9 3 9 .10 M oreover, the cu rrency and banking reform revealed most clearly the influence that the Slovene exp erien ce during the war would have on the new econom y. By this cu rrency conversion and then revaluation, the obligatory reporting o f money holdings, blocked bank accounts, confiscation of fortunes above certain limits through a highly progressive tax, expropriation o f war profits into a national fund for recon­ 7 K aser and Radice, The Economic History o f Easter n E urope, 1919-1975 2:6 5 -6 7 ; Zeković, “Razvoj i karakteristike privrednog sistema F N R J ”; and Hondius, The Yugoslav

C o m m u n it y o f Nations H S e e the discussion in the federal council ot the provisional assembly (Narodna Skupština F N R J, Drugo re dovn o zasedanje [4th session, D e c e m b e r 5, 1946], 9 7 -1 1 2 ). 9 D o reen W arriner, the agrarian economist on the UNRRA mission to Yugoslavia, in

Revolution in Eastern E u ro pe, 138. 10 Hebrang, at the fourth session o f the provisional assembly, February 3, 1945, in Anti­ fašističko V eće Narodnog O slobodjenja Jugoslavije (AVNOJ), Z akonodavni rad, 106.

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struction, and a fixed exchange rate with gold and the U .S . dollar, the new authorities reduced the m oney supply tenfold, gained substantial revenues for the reconstruction budget, and p revented serious inflation such as that in neighboring Hungary and Romania. But it was not until the spring o f 1948 that wholesale trading firms and the property of many urban trade and service establishm ents w ere nation­ alized. According to a m ore populist than Marxist analysis by Kidrič, in a 1946 speech to the national assembly, com m ercial profit was the most “primitive form o f exploitation”; its drain on national accumulation through state wholesale-trading firms was proportionately g reater the lower the level of industrial d ev elopm en t and organic composition o f capi­ tal (as in Yugoslavia at the ti m e ).11 National wealth and individual c o n ­ sumption would rise to g eth er only if growth occurred in real te rm s— by producers who lowered production costs and raised productivity, not by commerce, speculation, and d e b t that produced money profits and had the potential to dilute incentives and destabilize the econom y. Although Kidrič attacked the limits that com m ercial profit, o th er forms o f specula­ tion, and the stimulus to a profiteering spirit placed on true surplus value, his audience was likely to associate such profit with the “le e c h e s ” of Adam Smith and the long tradition o f viewing this idea o f exploitation as the merchants’ and bankers’ “profit upon alienation” against small producers. One of the first acts o f the provisional governm ent, at the end o f 1944, was to unify all prewar w orkers’ and em p lo y e es’ unions into the United Unions of Yugoslavia, with divisions according to industrial branch. E ach factory and firm would have a single union and eventually party office. In April 1945, legislation also set countrywide minimum wage rates for each industrial branch, equalized wage rates for m en and w omen, and autho­ rized employers to grant wage increases in response to price rises. T e c h ­ nical normatives for wages in priority b ranches w ere worked out throughout 1 9 4 5 - 4 7 . A uniform accounting system and unification o f the principles of econom ic calculation w ere essential, H ebran g told the provi­ sional assembly in F e b ru a ry 1945 in his maiden speech as com m issar of industry to introduce this legislation (retroactive to January 1); they were necessary “so as to organize econom ic activity rationally and to oversee economically all our state and private firms. T h e situation we have in h e r­ ited is neither contem porary nor rational, but a sign instead o f our e c o ­ nomic backwardness, which will brake m o vem en t in the direction of increased production. ”12 T h e prewar multitude o f decentralized, separate welfare funds, each with different sources o f revenu e and different provi11 Kidrič, “O brazloženje osnovnog zakona o državnim privrednim preduzećim a” (July 1946), 10 12 Hebrang, in AV N O J, Zakonodavni ra d , 3 7 - 3 8 .

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sions (such as the funds lor social insurance (luring unem ploym ent, old age, illness, and incapacitation), was also to he unified and centralized. As m inister ol social policy Anton Kržišnik e xp la in ed ,13 it would he far more econom ically rational” to increase the nu m ber of m em b ers and thus lower the amount o f their individual contributions, reducing the neces­ sary size of the reserve fund as well as offices and staff 1-Iebrang also told the provisional assembly in F ebru ary 1945 that strict limits on g o v ernm ent expenditures (which would fall over time as the state w ithered away ) and obligatory balancing of governm ent budgets w ere essential to a people s g overnm ent that would “no longer permit theft Irom the people or the state by means ol fraudulent accounts" or earnings gained through “exaggerated exploitation of the labor force, speculation, state subventions, and high protective tariffs at the expense o f the consum ing m asse s.”1' At the same time, all financial accounts— from the g o v ernm ent bud g et to public funds for social insurance or ed u ca tion — w ere sectioned by republic, with the aim o f budgetary auton­ omy and self-financing. E xpenditures w ere to be made w here revenues w e re collected ; w h ere th ere w ere com m on funds, the principle was the right to draw on those funds in proportion to the amount contributed. The spirit of this econom ic federalism was captured in the assembly's discus­ sion of social-insurance funds in Ju ly 1945, when Kržišnik explained that “if we are a com m unal house, our stomachs are not com m unal”— and th en, hastening to allay the fears of poorer regions, that this “did not exclude the possibility of offering fraternal aid” to federal units in less fortunate c ir c u m s t a n c e s .15 T h e organizational apparatus for the econom ic plan and the law on state e n te rp rises went to the national assembly in Ju n e and July 1 9 4 6 .16 Firms w ere operationally autonomous, but because of the great shortage of tech­ nical experts (such as engineers and accountants) for critical advice on production te ch n iq u e and technical im provem ents, the middle adminis­ trative level b etw ee n the enterprises and their respective ministries (these branch administrative offices w ere called direkcija, or director­ ates), along with expediters specializing in locating the cheapest source of supplies, b e c a m e in practice more important and was the basis for the “ Kržišnik, ibid., 2 0 5 - 9 . M Hebrang, ibid., 38. ls Kržišnik, ibid., 212. lfl T h e principles of ownership and internal organization o f enterprises and th e apparatus for planning and im plem enting investment choices w ere set out in two fundamental laws: th e Law on the G en eral E co n o m ic Plan and S la te Organs for Planning, sent to the assembly on Ju n e 4, 1946; and the Law on State E co n o m ic En terprises, sent on July 2 4. T h e Law on Cooperatives, defining the private sector and its relations with the public, sector, was sent on Ju ly 27.

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cooperation among firms in the same industrial branch that would replace market allocation and co m p e titio n .17 Most important to the lead ers’ c o n ­ cept of planning, however, was the system of cash accounts by which the production plan (also subdivided by republic) would b e made operational. Following the Soviet system of khozraschet, in which budgetary units were autonomous and obliged to balance their budgets quarterly, the fi­ nance ministry and its banks (and especially its staff accountants) w ere to ensure that the circulation o f m oney was tied to increases in real wealth by allotting cash directly for the need s o f p ro d u ctio n .18 T h e branch m inis­ tries and the planning commission w ere subordinate to territorial author­ ity; and the economy was governed not by the plan but by policy decisions of the E con o m ic Council, which coordinated both federal policy and the policies and cooperation of the republican g o v e r n m e n ts .19 But the nexus of the entire system was the local governm ents (still the people’s committees of wartim e administration)— above all w h ere e m ­ ployment and consumption w ere c o n c e rn e d .20 Although the organiza­ tional changes would seem to have b een creating a highly centralized “administrative ’ system and planned econom y, the localities were actu­ ally at the center. T h e five-year plan was an aggregate o f local plans, and it could not be composed until enterprises had formulated their production plans and localities their social plans; delays in preparing the plan for 1947 led to frequent admonitions against local commissars o f the republican ministries. Local taxation and investm ent in local industries would d e t e r ­ mine whether the population’s standard o f living rose or fell and w h eth er the market links with the peasantry brought food to the towns or col­

17 These direkcije were th e equivalent o f Soviet glavki. S e e C arr and Davies, F o u n d a ­ tions of a Planned Econom y, vol. 1, pt

1 : 3 5 1 -8 4

lKSee Davies, The D evelopm ent o f the Soviet B udgetary System, 7 0 - 8 4 , 297fF.; D o bb , Souief Economic D evelopm ent since 1917, chap, 15; Lavigne, “T h e Creation o f M oney by the State Bank of the U S S R ”; and G ed eo n , “Yugoslav M onetary T heory and Its Implication for Self-Management,

on the influence o f the real-bills doctrine on Soviet (and Yugoslav)

monetary theory, m The Yugoslav leaders’ Leninism was reflected in their p referen ce for giving priority to the territorial principle o f organization above the sectoral. Lenin was an expert on regional policy, and one can see this in the regionalization program o f July 1923 (see Carr, Socialism in One Country, 1 9 2 4 - 1 9 2 6 2 : 2 7 3 - 3 0 3 ) and in Khrushchev’s Leninist revival (“econom ic reform'”) in the sovnarkhozy (see Nove, A n Econ om ic History o f the U. S S R . , 3 3 5 - 3 7 , 3 5 2 ­ 61), According to Hamilton, the basis o f the Yugoslav five-year plan was th e comparative advantage of each republic, with supplem ental state investm ent in capital industries in stra­ tegically secure, m ineral-rich areas in th e south and interior (Yugoslavia: Patterns o f E c o ­ nomic Activity). 20 The writer Miroslav Krleza, a longtim e critic and sympathizer o f the C P Y and a Tito confidant, said, when asked by Milovan Djilas what he thought o f the new regim e, “It’s really awkward being su b ject to a district c o m m ittee” (D jilas, Rise a n d Fall, 52).

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lapsed for lack o f local goods that farmers wanted to buy. T h e careful mobilization o f the true agricultural labor surplus without exceeding the capacity for intensive em p loy m ent in industry and without inordinate so­ cial upheaval d ep en d e d on the e conom ic and political calculations of local g overnm ents. B ecau se of the leaders’ strategy for gradual incorporation of peasants and the private sector into the modern public sector, it was also at the local level that econom ic coordination b etw ee n the two sectors and their separate principles o f socialist and capitalist accumulation would take place. W ith ou t proper local accounting, the lead ers’ method of achieving m acroeconom ic stability would fail; th ere was thus, throughout the fall o f 1946 (and for two more years), an urgency to the work of the finance m inistry— the loyal, skilled accountants who would guarantee this was H e b ra n g ’s “p e o p le ’s g ov ern m e n t”— to teach local officials how to k e ep e co n o m ic records and use profit-and-loss accounting to supervise their econom ies. Political stability d ep end ed on local authorities as well. It was at the local level that the majority o f the population in the private sector had political representation; the lead ers’ conc ept o f democracy, as we saw in the wartim e Slovene model, was local participation of citizens in eco­ nom ic tasks and the assem blies o f popular government. T h e fulfillment of their long-term goal of social transformation would begin with coopera­ tives at th e village level and voters’ assem blies in which political partici­ pation in e co n o m ic decisions was to b e the vehicle for educating peasants and artisans away from a subsistence mentality (which set limits on effort on ce basic need s w ere satisfied) toward an industrial mentality of everincreasing social wealth and a long time horizon. And it was at the local level that opponents to specific policies or to the revolution itself (as were many clerics, wealthy peasants, and party organizers from prewar agrar­ ian parties) could do damage and had to b e engaged. A measure of the im portance o f these local jurisdictions is the sheer volume and frequency of legislated local reorganization in these years.

Q

uarrels over

D

evelopm ent

Str a te g y

T h e institutional apparatus of this new econom y and administration, at least on paper, borrowed heavily from Soviet experien ce, both of the 1920s and the 1930s. B u t the principles of growth and the combination of political radicalism with social and econom ic gradualism, as we saw also in the interwar period and the war, were decidedly L eninist rather than Stalinist. Political revolution, national ind epend en ce, and an assertive posture to define borders and alliances in the region w ere com bined with an e con om ic policy that recalls the New E co n o m ic Policy o f the 1920s—

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through which, in Bukharin's familiar phrase, the “commanding heights [would] gradually absorb the backward econom ic units ’2* and through which the incentives o f market production would lead small producers, especially in agriculture, to increase yields and marketed produce or ser­ vices and to cooperate with or join the modern, lean public sector at their own pace. As in the Soviet debates on industrialization o f the 1920s, this combination left unresolved th e source o f rapid capital accumulation. The targets of the five-year plan scheduled to begin in January 1947 made this contradiction in strategy apparent. Despite the derision in foreign circles that met Milovan Djilas s boast that Yugoslavia would catch up with E n ­ gland in industrial production within ten years, and despite the charge o f megalomaniacal expectations for immediate increases in capacity and output, the plan's objective o f quenching the country's “thirst for eco­ nomic and political independence," as Tito told the national assembly in April 1947. was deadly serious.22 The quarrel came early, at the politbureau m eeting o f April 1946: would the initial organizational rationalizations, concentration o f scarce resources, and even "released initiative” o f the agrarian reform and people s government” be sufficient for the rapid leap in new invest­ ment.-'-1 I he opposition s case began with agriculture: on top of the d e­ mands of reconstruction and lowered productivity in farms and factories (compared to that achieved by 1939), farmers were likely to consume a greater proportion of their produce for some time, and the equalization o f purchasing power among urban consumers would raise their aggregate consumption as well. H ebrang confided to Doreen W arriner. the English agricultural economist on the UNRRA (United Nations R elief and Recon­ struction Administration) mission to Yugoslavia, that the policy could not work economically without more-rapid increases in agricultural produc­ tivity and therefore without rapid collectivization o f the land.24 Trade control would not be sufficient to gain access to farmers’ surplus and to prevent an inflationary spiral when industrial output would also be de­ layed In capital investments. The opposition argued that this reliance on the law of value" and nominal control over the public sector without more-basic changes in the sphere o f production or a slower-growth path was, simply put. state capitalism, with all its known consequences.25 The 21

Cited in A. Erlich, T h e Soviet Industrialization D ebate

10

“ Tito “Speech on the F iv e-Y ear P la n ,” pam. collection. Yale Univers.lv I,ihnirv See the discussion m V. D ed ijer, Novi prilozi 3:292. T h e partial m inutes that remain of the politbureau meetings are printed in this work. 24 Warriner, Revolution in Eastern E u ro p e , 142. "’ The policy meant com bining control over finance and investment in the domestic economy with openness to foreign aid and trade with capitalist countries.

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lea d ers’ policv of ‘'socialism in one cou n try ,” especially, was “foolhardy.”26 T h e ir econ om ic federalism placed limits on the state’s capacity to capture th e surplus and to maintain a stable cu rren cy — which particularly con­ ce rn e d S re te n Žujović, as minister o f finance. Not only did the federal division o f the bud get defy the fundamental accounting principle of bud­ getary unity, he argued, but it also left in the republics’ control resources that the c e n te r need ed for new investm ent, and it did not define final authority over the inevitable conflicts that would arise betw een the re­ publics and the c e n te r over access to capital (and, it turned out, to labor as well). S in c e the budgetary resources would com e largely from a tax on pu blic-secto r firms, the fact that the most-profitable and best-established firms w ere un der republican jurisdiction and concentrated largely in the m o re-d evelop ed areas left unclear w here the revenues for federal respon­ sibility for d efense and d ev elopm en t would be found.27 T h e leaders responses are notable as much for the political weapons they used to d eflect criticism as for the econom ic solutions they proposed. Kidrič (as proponent o f their m acroeconom ic policy) took the political of­ fensive: th e th e o ry ’ that the state and its companion, the cooperative sector o f the econom y, w ere in essence capitalist, with the same laws and forms, was “an opportunistic, ultimately reactionary theory, which denies the revolutionary political, social, and econom ic changes in the new Yugoslavia. . . . [Its proponents] forget that . . . the state sector of our econ om y is the result of the fact that we have a people's power, and not a pow er o f exploiting classes.”21* This political control was the crucial differ­ en ce. T h e operation o f the “law of value” was not ju st characteristic of capitalism, he continued, for that law would hold until distribution could occu r according to need. T h e real issue was w h eth er the accumulation that resulted from it rem ained in the hands o f capitalists to serve “private goals, and not social o n e s ” or was under the control of a p e o p le ’s power.29 T h e dual strategy was a m atter o f concern, Kidrie did admit (indeed, he worried publicly), b ecause of the problem s for m acroeconom ic manage­ m e n t that would arise from the coexistence in one system o f two logics of accum ulation, one socialist and one capitalist, and the “stubborn perse­ v erance and resourcefulness of the la tte r.30 But in his view, the problem 2,1 Srete n Žujović, in V D edijer, Novi prilozi 3 : 3 8 3 - 8 5 . Four and a half years later, Žujović adm itted that he, at least, had found the discussion on state capitalism “confusing” and had b e e n forced into silence by “D jilas’s insults.” S e e his confession, in the form of a public le tte r dem anded by th e party leadership, printed in B o rb a , N o vem ber 2 5, 1950, 1. 27 T h e d e b a te is apparent in the m inutes o f the politbureau m eeting (V. D ed ijer, Novi prilozi 3 :2 9 2 - 9 3 ) . 2H Kidrie, “O nekim principijelnim pitanjim a naše priv red e,” 46 29 Ibid. 30 Kidrič, “O brazloženje osnovnog zakona,

9.

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77

of agriculture lay not in production but in exchange, and in the ability of the state to capture its resources and to secure advantage to the principles of accumulation in the socialized sector. H e saw the most worrisome o b ­ stacle as the “monopoly position” of rural traders over agricultural m ar­ kets and its inflationary potential, which could destabilize the operation o f the “law of value. ” Attempting to shame opponents for “un derestim ating” the dom estic ca­ pacity to undertake the plan, Kidrič also attacked their pessimism about the liberating potential o f this new p e o p le ’s power: When we listen to th e so-called e x p e rt “a r g u m e n t s ” o f those sages w h o u n ­ dervalue the c reative p o w e r o f o u r w orking m asses, w e a re r e m i n d e d of similar “military e x p e r t s , ” w h o in 1941 d e m o n s tr a t e d “professionally" that partisan [guerrilla] warfare in Yugoslavia was not possible a n d th a t a re g u la r army could not be c r e a te d from a p a rtisa n arm y. U n d e r th e l e a d e rs h ip of o u r Party and C o m ra d e Tito, o u r national m asses v e ry quickly d e s t r o y e d both the theory and th e p ra c tic e o f s uch p r o p h e c i e s . 31

The economic solution to this initial demand on both investm ent and consumption was to gain supplem ents to the capacity o f the public sector, from two sources: unpaid, voluntary labor from the population, and f o r ­ eign aid. In order to keep the monetary demand for goods limited when new investment in capital e q u ip m en t and infrastructure would delay the production of consum er goods but demand new workers and greater ef­ fort, the leaders would follow the Soviet example o f “socialist c o m p eti­ tion” in the capital sector and would prolong the wartime system of Partisan brigades outside it. E m ploy ed workers would be rewarded for surpassing labor norms and cutting costs with status, honor, and non­ monetary privileges. “S hock w o rk ers,” who saved on materials or e x ­ ceeded piecework rates; “innovators” who suggested organizational or technical improvements in the labor process; and inventors in the ranks of workers would be given titles, badges o f honor, new suits o f clothing, or vacations in the new workers’ resorts, and their names and pictures would be prominently displayed in one o f the many broadsheets that poured forth to publicize the industrialization drive. Extraordinary but short­ term demands for labor for the initial push to industrialize would b e m et by mobilizing “all available hands” o f the rest o f the population into “vol­ unteer brigades” (what critics called a “bare-hands” approach to industri­ alization). Housewives, youth, dem obilized soldiers, even prisoners of 31

Kidrič, “O nekim principijelnim pitan jim a,’’ 49. Kiro Gligorov, the party’s appointee to

he deputy under Zujovic at th e finance ministry, used similar argum ents against Žujović, including an attack on "cam eralistics,” in “Neki problem i u vezi sa izvršenjem opšte držav­ nog budžeta za 1947 god .”

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war would provide free labor for construction; the leaders would thus avoid an extensive labor mobilization that would underm ine their longrun strategy for intensive labor use within the capital sector and worsen short-run pressures on monetary stability. In this period, each republic and locality had its projects, from schools and hospitals to roads and bridges, steel mills and machine factories. Salaried olfice workers w ere required to devote part of their worktime (and manual labor) to local projects. Towns organized "shock weeks throughout 1946 and 1947 to reconstruct villages in war-torn regions. The federal g o v ern m e n t’s projects, in line with its jurisdiction over capital d ev elop m en t, included the “Brotherhood and Unity” motor highway be­ tw een B elg rad e and Zagreb, the “youth rail line” b etw ee n Banovici and Brcko in Bosnia, the expansion o f the mine at Banoviei-Zivinice (Bosnia), and the hy d roelectric power plants at Zirovnica (Macedonia), Maribor (Slovenia), and Dravograd (Slovenia). At the same time, socialist competi­ tion and labor brigades were organized to move political organizations and values in the direction the leaders sought. Of the brigades, for exam­ ple, the most prestigious w ere the federal projects that selected youth from all regions on a com petitive basis and that were organized by the Leag u e of C o m m u nist Youth of Yugoslavia (Savez Komunisticke O m lad ine Jugoslavije, or S K O J), whose radical proclivities were har­ nessed for many tasks of social transformation. In the pro jects’ focus on the younger generation as the “h e ro e s ” of a new beginning, political loy­ alties to a new Yugoslavia and technical skills to increase society’s produc­ tivity would b e built as well as roads, with a mixture of political education, training in industrial skills and discipline, and cultivation of “brother­ hood" among the nations and “all-national’ bonds through patriotic and populist rituals in field camps far from home. T h e new role o f the unions began with the task of organizing socialist com petition in factories and at construction sites, while the Popular Front (Narodni F ro nt, the mass political organization tied to the party) was charged with mobilizing popular acts of solidarity and patriotism and or­ ganizing the local labor brigades. T h e importance o f the local community was most apparent in the lead ers’ hope of encouraging local initiative by private citizens and volunteers in contributing to the reconstruction effort and in improving living standards. O ne o f the purposes of the democratic assem blies that existed alongside the executive people's com m ittees was to turn patriotism and dem ocracy into motivations for “voluntary contri­ b u tions” to bond issues and financing for specific local econom ic and cul­ tural projects. In the tax reform of D e c e m b e r 27, 1947, when the leadership faced the reality of budget deficits in the first phase of the fiveyear plan, certain towns and worker settlem ents w ere given the authority to introduce local excise taxes to balance their budgets.

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The search for foreign aid, on the other hand, was clearly an admission that the great leap in capital requ irem ents o f the industrialization plan could not be accomplished at hom e by the lead ers’ strategy. F o reig n aid was critical to that strategy and, like the war, defined much o f the tra je c ­ tory of the Communists’ first decade o f power. T h e idea was to obtain both cheaper wage goods and m ore-advanced technology on foreign m ar­ kets, preferably by purchasing them on credit against future trade or by receiving outright assistance. Not fully self-sufficient in any case, the country also needed to im port some raw materials, such as coking coal for steel production and cotton for textiles and clothing; and food aid was needed to help tide it over through the gradual reconstruction and trans­ formation of agriculture. Also critical, however, was military aid— from strategic raw materials to weapons and hardware— so that the plan to develop defensive strength did not conflict too much with civilian needs. The literature on the transition to socialism tends to downplay, even ignore, the international aspects o f that transition, but the role o f foreign trade and aid was central in the debates on industrialization strategy in the Soviet Union during the 1920s. All participants shared M arx’s as­ sumption (written to V era Zasulich) that the dem ands o f industrial take-off on the population could b e “relaxed” with foreign capital, but they dis­ agreed on the particular role o f foreign trade. Should they follow an export-led path and, in view o f their com parative advantage at the time, invest substantially in agriculture and labor-intensive primary products for export, which would impose a slower and potentially d ep en d e n cerenewing path of industrialization? O r should they seek assistance from friendly powers to sustain an im port surplus while they built up capital­ intensive, infrastructural, and producers’ goods industries, which would enable them to move sooner onto a higher-growth path and d evelop a comparative advantage in processed and manufactured goods? As por­ trayed, however, these debates tended to ignore the im portance o f d e ­ fense and, in particular in the 1920s, the political pressure from the army, from soldiers b eing dem obilized, and from military industries that they not he overlooked e n tire ly .32 T h e Yugoslav leaders could not b u t b e aware of these Soviet debates, o f the deep meaning o f the opposition’s charge that they w ere pursuing “socialism in one c o u n try ,” and o f the consequences of the revolution’s failure to spread to the W e st in 1 9 1 9 - 2 0 for Yugoslav hopes o f friendly assistance and for su b seq u ent dom estic policy.33 32 Mark von Hagen, personal com m unication on the basis o f his research. T h e se issues of national defense and the military are strikingly absent from th e discussions about eeonom icdevelopment strategy in th e 1920s (including the otherw ise splendid study by Alexander Erlich, The Soviet Industrialization D ebate). 33 Such assistance from W estern powers was L e n in ’s major hope in 1919; although the

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T hu s, the inner Yugoslav leadership— Tito, Kardelj, Kidric, Djilas, and o th ers — at the time based its strategy and its assumption o f foreign aid in part on the conviction that the international correlation o f forces had changed fundamentally after W orld W a r II. First there was the Soviet Union, truly a friendly power as another socialist state that would aid them materially. B ut it had not aided them during the war, and its ability to assist others after the war— given its own serious task o f domestic re con stru ction — was likely to b e severely limited; so it was important that the Partisans had also b ee n part of the Allied fight against Germany. Al­ though their efforts to secu re Allied military and econom ic support during the war had b e e n a painful, uphill battle, by m id -1944 they had nonethe­ less b e e n recognized by Britain and the United States as the primary ally in the Balkans deserving o f aid. This very fact also seem ed to prove that an era of peaceful coexistence b etw ee n socialist and capitalist countries had replaced international class antagonism and the threat o f capitalist e n c ir c le m e n t.34 B ecau se the real threat o f war after the defeat of fascism, in th e Yugoslav lead ers’ view, cam e from the gap b etw een rich and poor nations, they began to broadcast widely on the necessity of redistribution o f wealth through foreign aid as the primary weapon for peace. And in their own neighborhood, the defeat of G erm any and the rise o f progres­ sive g overnm ents in E astern E u ro p e offered the hope (motivating Tito’s wildly successful tour o f its capitals in F ebru a ry and M arch 1946) that “Slavic solidarity” would also bring opportunities for favorable trade ag reem en ts and aid. T h e s e assumptions w ere wrong. O n th e one hand, the Soviet leadership made no change in the policy it had pursued since 1940 toward the Yugoslav party. Yugoslav radicalism th reate n e d Stalin’s desire to protect the Soviet Union’s alliance with Brit­ ain and the United States, whereas the goals of its own territorial secu rity— the containm ent o f G erm any, reconstruction at hom e, and sta­ ble, mixed governm ents (“p e o p le ’s d em ocracies ”) on its b ord er— took pri­ ority over socialist internationalism in the region. T h e Yugoslavs’ discussions o f a Balkan alliance,35 active involvement in Albania36 and co n se q u en ces o f its disappointm ent w ere well known, they were not sufficient to dissuade

others from later holding the same hope. 31 S e e Hahn, Postwar Soviet Politics, on the em ergen ce o f the same view in the USSll a the tim e and Andrey Zhdanov’s special role in it. 3fi O n th e long history o f this idea and on the dispute over inclusion (at Stalin's urging) of Bulgaria, see C onnor, T h e National Question in Marxist-Leninist Th eo ry a n d Strategy, 130­ 4 2. Kardelj appears to have b e e n the most open opponent, arguing that they should not integrate with p o o re r states, such as Bulgaria and also Albania (see V. D ed ijer, Novi prilozi 3 :302). 36

C P Y em issaries helped organize the Albanian Com m unist party and its partisan resis

tance during th e war, T ies d eepen ed after the war, witli discussions about integrated eco­ nom ic plans and armies, jo in t econom ic ventures, a Yugoslav military base at Korye, and,

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support for the D em ocratic Army o f G r e e c e in the brewing civil w ar,37 and claims on lands occupied by South Slavs (especially those b ord ering Slovenia in Italy and Austria)38 won them Stalin’s fury rather than aid. Soviet technical and military advisers did arrive in the fall o f 1944, and official recognition on April 15, 1945, brought promises o f econ om ic and military assistance; th ere w ere discussions o f jo in t ventures that sum m er, a treaty of friendship, mutual aid, and postwar cooperation on April 11, 1946, and promises that Ju n e to provide weapons, munitions, and aid to defense industries. B u t as late as F e b ru a ry 1947, little aid had arrived, and only two agreem ents— on shared control over D a n u b e River traffic and Yugoslav civil aviation— had b ee n conclu ded, on term s Yugoslavs found extremely unfavorable but agreed to “b ecau se they hoped for other investment.”39 On the other hand, the British and the Americans also continued their wartime policy of using aid as a weapon o f political influence. F o r exam ­ ple, in the negotiations over Allied Military Liaison Aid, they sought to influence the composition o f the postwar gov ernm ent in favor o f the king and the London governm ent-in-exile. T h e y provided no aid for a year after the aid agreem ent was signed April 3, 1944, while they negotiated a power-sharing arrangem ent b etw ee n Tito and the form er prim e minister Subasic; quarreled over the bill;40 and w ere deadlocked over the Yugoslavs requests for the return o f their gold reserves ($47 million) d e­ posited by the royal gov ernm ent in the F e d e ra l R e serv e Bank o f New York and over their D a n u b e F l e e t o f two hundred river craft, which had been sequestered by Allied forces. In the year preceding the contentious politbureau m eeting o f 1946, the Yugoslavs’ repeated requests for aid and trade with the United States e n co u n te red a policy aiming “to underm ine the new regime with e con om ic collap se.”41 F o r exam ple, their recjuest in June 1945, for a $ 30 0 million cred it from the U .S . E xp o rt-Im p o rt Bank was repeatedly tabled as the United States nursed hopes o f assisting the when the U SSR refused to assist Yugoslav plans to explore for oil in Vojvodina, access to Albania’s petroleum reserves. 37 Yugoslavia eventually provided training bases, sanctuary for refugees, and supplies o f food, medicine, and weapons. 38 Slovene national claim s (which Kardelj felt intensely) on T rieste, parts o f Istria and the Slovene littoral, the Julian M arch, and Austrian Carinthia led eventually to the T rieste crisis, It began in early 1945, as Yugoslavia sent four arm ed divisions (8 0 0 ,0 0 0 soldiers) to Zone A to preem pt th e decisions b ein g made at Yalta (see Mugoša, “Odnosi Jugoslavije i SAD-a izmedju 1945 i 1949/’ chap. 1; and Clissold, Yugoslavia a n d the Soviet Union), 39 Kidrič, quoted in V. D e d ije r, Novi prilozi 3:322- O n th e quarrels over jo in t ventures and Soviet aid, see V. D e d ije r, T h e Battle Stalin Lost, 7 3 - 9 5 , 102; Kidrič, “O brazloženje osnovnog zakona, ” 13; and Clissold, Yugoslavia a n d the Soviet U nion, 230. 40 Mugoša, “Odnosi Jugoslavije i S A D -a ,” 44. 41 Ibid,

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retu rn o f prew ar Serbian parties (the D em ocrats and the Radicals) to power, then o f obtaining higher com pensation for Am ericans’ property that had b e e n nationalized and cessation of support for the Greek guerrillas. Relations with E u ro p e w ere no more successful, b ecau se o f the compe­ tition on both sides o f the e m erg ing continental divide for capital and raw materials to repair war damage and b ecause the destruction of German industry and eastern E u ro p ea n agriculture laid waste to E u r o p e ’s primary prew ar sources o f capital goods, food, and fu el.42 Trade agreem ents with Poland and Czechoslovakia foundered on serious conflicts o f national in­ terest. T h e s e cou n trie s’ reservations about Yugoslavia’s plan, the likeli­ hood that it could make good on its com m itm ents o f agricultural goods, ores, and tim b er, and the fact that they would b e creating a competitor in foreign m arkets for processed goods and m achinery w ere matched on the Yugoslav side with indignation that Slavic solidarity did not lead to more d ev elo p m en t assistance that would enable it to obtain machinery and pur­ sue its d ev elop m en t strategy o f replacing exports o f low-value-added pri­ mary goods with higher-value-added exports.43 Like Stalin, the Poles and C ze ch s worried that Yugoslav foreign policy would antagonize the West and en d an g er their greater success at trade and credit relations.44 Although Yugoslavia was a founding m e m b e r o f the U nited Nations and th e International M onetary F un d (IM F ), the new g o v ernm ent’s disputes over th e dinar-dollar exchange rate caused negotiations for I M F credits (and th e re fo re access to W orld B ank loans as well) to break down in M arch 1945, and m ounting tensions over T ries te made Yugoslavia the sole UN m e m b e r to b e refused the L e n d -L e a s e aid it sought in order to repair transportation networks and obtain military hardware. T h e deci­ sions on war reparations at the Paris Peace C o nference in N ovem berD e c e m b e r 1945 that pro tected G erm any from heavy war indemnities at the cost of Yugoslav (and other) claims w ere considered so damaging that T ito sought persistently after January 4, 1946, to secure an invitation to 42

Hogan, T h e M arshall Plan; Milward, T h e R econstruction o f W estern E u ro p e , 1945­

51. J3 1 am grateful to C a m ! Lilly for this discovery, from h er exhaustive reading o f the newspaper B o r ha at the tim e, that th e Yugoslav leadership tried to use arguments about “Slavic unity” against Polish and Czechoslovak objections. 44

Czechoslovak president Edvard B e n e s reportedly told prem ier Klein en t Gottwald in

M arch 1946 that “Yugoslav unpredictability [threatens] to drag us into conflict with the West as well

B u t you don’t know th em , they have always created disturbances with th e West.

T h e y ’ll pull us into this. T h e y are such a people that o n e does not know what they will do. A peo p le that surprises” (V. D e d ije r, Novi prilozi 3:223). It did not help that Americans had taken early to referring to T ito as a “Soviet agent” and to Yugoslavia as Stalin’s “most loyal sa tellite.”

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Washington to press his case personally for an American loan.45 Although also subject to frequent delays and U .S . objections, U N R R A assistance (finally agreed to on April 15, 1945) b ecam e the critical (and nearly the only) source of external support for reconstruction. In the two years b e ­ tween June 30, 1945, and Ju n e 30 , 1947, the mission distributed approx­ imately $415 million in food and grains (70 p e rce n t o f the total assistance) in addition to clothing, textiles, medical e q u ip m en t and medicines, agri­ cultural machinery and livestock, industrial plant and tools to resum e pro­ duction in mines, sawmills, a steel mill, and a large quantity o f trucks, jeeps, locomotives, and wagons, while earnings from the gov ernm ent sale of UNRRA goods w ere the main source o f financing for the F un d for Reconstruction of W a r-D a m a g ed R eg ion s.46 The 1946 politbureau m eetin g at which the dispute over d ev elopm en t strategy erupted had b een called to mark the shift from reconstruction and the “social” (basic welfare) question to the institutional preparation for the industrialization plan; it took place five days, in fact, after the signing of the Soviet-Yugoslav treaty of friendship, mutual aid, and post­ war cooperation. T h e con se q u e n ces o f the m ee tin g w ere decisive. Hebrang was replaced as chair o f the E co n o m ic Council and m inister of industry by Kidric, and then rem oved from the politbureau. T h e fact that he was kept on as head of the planning commission was, as many argue, due to his intellectual strengths and stature within the party (which were considerable); but a stronger reason was probably that many agreed with him and could have used his expulsion to coalesce into a more formal opposition. T h e com petition o f eith er H ebran g or Zujovic for leadership of the party, which many saw as possible, and the challenge o f th eir e c o ­ nomic ideas to the policies o f the Slovene model had one more stage to go through before their final purge in May 1948; but their marginalization on the choice of strategy began h e r e . 47 45

In place o f llie $11 billion Yugoslavia asked of Germ any, it received $ 3 5 .8 million; in

place of $1.3 billion Irom Italy, it got $ 1 25 million; and in place o f $ 1 .2 8 billion from H u n ­ gary, it was granted $70 million. None o f these amounts bad been received by April 1946, however, and the Yugoslavs renounced Bulgarian reparations of $25 million as part o f their treaty of friendship, signed in August 1947 (see Mugosa, “Odnosi Jugoslav! je i S A D -a ,’’ chap.

2 ). 4B Ibid., chap. 1. On the continual quarrels with the United States— including the frus­ tration of UNRRA s director, Fiorello La Cuardia, with what he saw as unjustified in ter­ ference with humanitarian aid to the Yugoslavs— see ibid.; and W arriner, Revolution in Eastern Europe F o r a balanced, overall view, see L a m p e’s introductory chapter in Lam pe, Prickett, and Adamovic, Yugoslav-Am erican Econom ic Relations since W orld W ar II. 47

On the debate, see V. D ed ijer, Novi prilozi 3 : 2 9 2 - 9 3 . T h e view that both H ebrang

and Zujovic, and especially Hebrang, might be competition for T ito and that they might be political leaders with a separate constituency in their own right came up frequently in the course of the author’s interviews in 1982 with people who bad been present.

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he

N

ew

Sy st e m

of

Labor

W ith ou t foreign assistance, econom ic growth would depend on maximal use of internal reserves, especially increased labor productivity in facto­ ries and on farms and the ability o f the g overnm ent to keep a lid 011 wages in relation to the supply and price of basic consumption goods (such as food). D esp ite K idric’s attack on H ebrang in the debate 011 state capital­ ism, H ebrang, too, assumed that the political revolution alone would take them a long way toward releasing capital reserves. As he told the provi­ sional assem bly in 1945, “the new relations toward work will awaken in every Yugoslav worker a sense for rationalization. ”4lS But the unions, whose role would necessarily change, and particularly skilled workers, who had substantial bargaining power because of their new importance to the industrialization strategy and their very short supply, continued in­ stead to fight for higher wages, until the introduction of workers councils in 1950 finally eliminated their market power. Political liberation alone was not sufficient. W h ile the introduction of econom ic planning centered 011 redefining property rights and teaching the system of economic ac­ counting, there would be no results without reorganization o f productive activity and incentives in industry and agriculture. T ito made this clear in his version of the leadership’s concept of eco­ nom ic growth during a contentious two-hour m eeting with a delegation from the L ea g u e of Railroad and Transport W orkers and Em ployees in January 1946. As the union journal Glas reported, the league was protest­ ing the firing of two hundred drivers from the state transport firm and tlie g o v ern m e n t’s limits on union demands for higher wages. T ito ’s response was that higher wages were no longer the correct route to an improved standard of living; instead, it was e ver-g reater productivity 011 the one hand and b e tt e r and ch e ap e r food from increased yields and marketed produce o f farmers cooperatives on the other. T he drivers lost their jobs, b e explained, b ecau se o f their “b u r e a u c r a t i s m t h e y were not taking proper care o f their cars, had even destroyed precious UN R R A trucks, and w ere trafficking with smugglers. But more to the point, he insisted, it was not good policy to centralize several thousand trucks; it was b etter to hand them over to those who would be economically responsible for their use and u p k e e p — namely, the republics and enterprises. T h e federal gov­ e r n m e n t’s only task related to transport should be to guarantee the free transport o f colonists (in the settle m e n t of Vojvodina during 1 9 4 6 - 4 7 ) and o f food to starving re g io n s.49 T h e first step in the lead ers’ project to replace the “wage struggle” with 48 H ebrang, in A V N O J, Zakomxlavni r a d , 37. 19 Glas, January 4, 1946, 1.

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a socialist concept of workers interests was the reorganization o f factory management in the new public sector. Early in 1945, in his role as c o m ­ missar of industry and presid ent of the E con o m ic Council, H ebran g had created an open parliamentary confrontation over workers’ “right to su­ pervise production, a right outlined in the proposed law on w orkers’ commissars [povcrenici).m D efen d in g the factory m anager’s authority against union proposals that the e le cte d w orkers’ commissars share in d e ­ cisions on the organization of production, he tu rned the parliamentary vote around despite the opinion in favor o f the unions on second reading of the legislative commission chaired by Moša Pijade. T h e problem was not the idea of worker participation itself , which “they surely would later” introduce, but the union s “avant-gardism .” “Looking reality in the e y e , ” given the low level of w orkers’ expertise at the time and the fact that most factories were being managed by their former owners, H ebran g called the proposals impractical and sure to antagonize those managers “before they were ready, which would interfere with im plem entation of their plans.51 By the time the law' 011 state e con om ic enterprises was proposed, in Ju ly 1946, Kidrič had presen ted a co m p ro m is e .52 T h e Soviet principle o f edinoclialie (one-man m anagem ent), giving the director final authority (which Kidrič compared to the military system of unified com mand, avoiding reference to the Soviet example), would prevail within the e n ­ terprise as long as the director worked closely and consulted frequently with all groups concerned with production (the union, associations o f pro­ duction workers, organs o f state m anagem ent, and the professionaltechnical advisory council [stručni savjet]). At the same time, the unions were to he represented on the professional council and told to organize production conferences periodically so that the workers could b e directed toward discussion about ways to improve production organization and away from the functions they had b een usurping in 1945 and 1946, “such as interfering in the business of the enterprise, replacing managers, forc­ ing salary increases, and improving work conditions beyond justified measures.”53 The next step was to reform the unions. T h e main vehicle by which labor had attempted to control and raise its price in the Yugoslav lands since the 1880s was union control over em ploym ent. By the late 1930s, this consisted of two parallel systems. Organized workers had lost control 50 Savezno V eće Narodne Skupštine F N R J, Stenografske b e leske, July 1945, 4 5 8 - 7 8 On the early system, see also A Ross Johnson, Th e Transform ation o f Communist Ideology, 159(1' ’ 51 Helming, in AV N O J, Zakonodavni r a d , 4 6 7 - 6 8 52 Kidrič, "Obrazloženje osnovnog zakona,” 53 Pet rano vic, Politička i ekonomska osnova na ro d n e via s ti za vrem e obnove, 81

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over the e m p lo y m e n t bureaus to local governm ents, but the unions were increasingly militant— using the strike especially— as the demand for skilled labor rose with rearm am ent. U n der the corporalist regim e, the unions shared trilateral responsibility with local governm ents and the w o rk e rs’ ch a m b e rs (the corporatist, sem ipublic institutions o f Austrian, G e rm a n , and Italian tradition) for em ploy m ent and collective bargaining over contracts. Social insurance was regulated by the state and funded by both e m p lo y e rs’ and e m p lo y e es ’ contributions, but only workers on p e rm an e n t, legal contracts w ere eligible. N onetheless, skilled workers could often do b e tt e r by bargaining for p erm anent contracts directly with em ployers, who tried to evade the insurance regulations by circumvent­ ing the labor exchanges when hiring. Unskilled workers, unorganized and without such leverage, w ere forced to com p ete “on the street” by the conditions o f surplus. In the first two years after the war, the provi­ sional g ov ern m e n t continued this system — expanding the network of e m p lo y m e n t-se rv ice bureaus from thirty-five to sixty-five because of ris­ ing urban u n em p lo y m en t— and filled the em ploym ent bureaus with its own people, chosen by the Commissariat for Social Policy in consultation with the U n ited Unions organization. T h e bureaus remained self­ financing and self-managing, as they had b ee n before the war. As regis­ tries o f un em ployed and generally unskilled persons, they mainly filled re q u e sts from local g overnm ents and the Popular F ro n t organization for labor for public works— to repair property, stand guard over reconstruc­ tion p ro jects, or assist in harvests and repairs on the state agricultural e s t a te s .54 T h e prew ar system was abolished on April 23, 1946, in the first phase of organizational rationalizations in preparation for the industrialization plan, by giving the unions authority over the em ploy m ent bureaus and title to th e ir property. “Union mediation o f labor” aimed to eliminate the “bureaucratic, passive, receiving-win dow” approach o f local officials, who— unlike union officials— d ep end ed on g overnm ent budgets for their salary.55 As the wage was no longer the means to regulate employment but a d irect incentiv e to increase productivity, however, the unions’ role in collective bargaining over wages and em ploy m ent contracts (now called “e co n o m is m ”) would b e replaced by legislated wage differentials and out­ put norms, em p loy m e n t criteria, and work-safety and social-policy regu­ lations. T h e unions’ task was now the “struggle for increased productivity and d ev elo p m en t o f new relations toward work, organization of competi­ tions, self-sacrificial solutions to material difficulties, and the technical, 5'1 Radmilović, “Karakter službe posredovanja rada i pitanje n je n e reorganizacije,” 11-12. 55 Ibid.

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ideological, and political instruction o f w ork ers.”56 F o r that reason, the network of the new U nited Unions organization was expanded to every state enterprise, and these plant-based unions were joined into associations— one for each industrial b ra n c h — called union leagues (savezi sindikata). To safeguard workers’ interests on questions outside the technical scope of production decisions, such as work safety and social policy, all workers and staff within a firm would e le ct workers’ representatives (also an Austro-German inheritance) to re p re sen t these interests in workplace d e ­ cision making, participating jo intly with m anagem ent, unions, and gov­ ernment authorities.57 Reorienting the unions and o th er w orkers’ organizations to the work­ place and replacing m arket wages with pay calculated as a d irect incentive to productivity would not elim inate the upward pressure on wages from employers’ competition for workers with industrial and technical skills; the shortage of such workers was the greater problem for m a croeconom ic stability and monetary control. Nor did legal specification o f the union’s new role put a stop to th e ir attem pts to bargain for wage gains for their members, so that in m id -N ov em b e r 1946, the m inister o f labor, Vicko Krstulović, called the executiv e board o f the United Unions organization into plenary session in order to read it the riot act. Adding his voice, Kidrič, the econom ic m inister, even warned obliquely o f dire c o n s e ­ quences if they did not accep t the authority o f the legislated wage norms and desist their continued militance over wage bargaining. In D e c e m b e r , federal authorities organized a policy conference to discuss the problem o f “labor,” but its main th e m e was the “organizational difficulties” with the unions.58 At the conference, th ree views com peted . Many urged greater regula­ tion of the labor market. T h e majority wanted to make the unions respon­ sible for employment, requ iring all workers and em ployers to contract under union auspices and recruiting the social-insurance bureaus to po­ lice the employment and wage regulations by threatening the withdrawal of benefits. T h e leadership re je cte d both views in favor o f retaining the current “initiative” o f em ployers and managers in solving their own labor problems. The leaders wanted sim ultaneously to red uce unions’ bargain­ ing room over wages and to hold managers responsible for production despite managers’ attem pts to shift the b lam e to unions when production lagged and to get the central g o v ernm ent to assign or m obilize labor polit­ 56 Has, 'D ruštveno-ekonomski osvrt na problem zaposlenosti,'' 140 57 Ibid.; Krstulović, “Stalno podizanje proizvodnosti rada poboljšava radne i životne uslove radničke klase.” 58 V. Begović, “P roblem o b e z b je d je n ja radne snage i stručnih kadrova u petogodišnjem planu,” 2 2 -3 0 ; Radmilović, “Karakter službe posredovanja rada.”

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ically when they had difficulty attracting skilled industrial and profes­ sional workers. O nly days after the conference, on D e c e m b e r 13, a new office o f labor inspectors was created to relieve the unions o f th eir over­ sight role on labor contracts and work safety and to replace the labor com m issars (the organs o f revolutionary authority in the local people’s co m m ittee s, many o f whom w ere still soldiers in the liberation army) with civil servants responsible to the b ranch ministry within their republic. T h e protection of w orkers’ interests fell solely to the worker inspectors in the firm, whom workers e le cte d annually. T h e next step in replacing wage bargaining with direct productivity incentives at the firm was to reduce the labor mobility that made wage com p etition possible and p revented application o f technical normatives for wages and labor use. T h e population would thus b e settled physically, into jo b s and b e tw e e n the two sectors o f the econom y. In January 1947, peasants eligible to settle in the northern plains w ere given only two more m onths to accep t the offer or lose the right o f resettlem ent. 59 T h e se were largely agricultural laborers from “passive regions60 in Bosnia, Her­ zegovina, southern Croatia, and M ontenegro who had also b e e n Partisan soldiers; they had until then b ee n encouraged to move to the state farms in V ojvodina— w h ere their labor was need ed and their patriotism and military e x p e rien ce important for the defense o f the plain.61 Vojvodinian authorities, worried about social stability, began to rail against the explo­ sion of “wild marriages” (common-law unions) among colonists,62 cam­ paigned for legalization of such cohabitations, and required new settlers to arrive with their families or stay away. In March, workers in the public 59

V- P etrović, Razvitak p riv re d n o g sistema F N R J posm atran kroz pravn e propise,

vol. 2. 00

T h e phrase pasivni krajevi (passive regions), according to Tomasevich, referred to

“areas greatly deficient in food production as well as in oth er earning opportunities and th erefore d epending for livelihood, to a large extent, on outside earnings” (Peasants, Poli­ tics, a n d E con om ic C h a n g e , 265). T h e se w ere the areas o f th e karst, especially those near the Adriatic coast, from th e G u lf o f T rieste to Ljubljana, th en southeast to Kolašin and down the M orača and B o jana rivers (largely what are now M onetenegro, Herzegovina, Dalmatia, and southw estern Croatia). 61 O f about 1 9 0 ,0 0 0 families (with about 5 0 0 ,0 0 0 m em bers) o f agricultural laborers (land­ less peasants) before the war, 7 0 ,7 0 1 families received on e to two h ectares o f land in agrarian reform ; most o f the rest w ent to the agricultural estates, although som e w ent to industry or o th e r bran ches o f th e public-sector economy. T h e y b ecam e th e core (72 percent) o f socialsecto r agricultural lahor (Privreda FN R J ti p eriodu 1 9 4 7 - 1 9 5 6 , 1 6 4 -6 5 ) . This resettlement was to b ec o m e the source o f political problem s later (especially in th e 1980s and in the civil war that began in 1991) as Serb s reassessed the purpose o f the loss o f life on the Srem front in 1945 and as n o n-Serb s charged that the royal governm ent had used agrarian reform in the interwar period to settle Vojvodina and Slavonia with Serbs. 62 K ostic-M arojević, P rom ena d ru štv en e sredine i pro m en e u porodici, 6 5 n. 129, citing research by V. D ju rić.

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sector were issued labor books (radne knjižice, the livrets of F r e n c h tradi­ tion without which one could not get a new jo b )63 so that evidence about their wage and e m p loy m e n t could be im proved and so that legislated wage norms and e m p loy m e n t rights could b e im plem ented . E xecutiv es o f district or town p e o p le ’s co m m ittee s, or their labor commissions, w ere told to issue these books and record the w orker’s occupation, training, and length of em ploy m ent; the books also contained a space for recording prizes, honors, inventions, and selection as a shock worker. This settling process was particularly important in the countryside, where employers under pressure to cut costs but with authority to hire and fire would be inclined to p e rpetu ate the existence o f an “industrial reserve army.” T h e idea behind the sector o f “individual” property had been to guarantee sub sistence to villagers who worked their own land or produced related services through smallholding rights. T h e r e was a strong element o f radical republican and populist tradition in this view— that the concentration o f assets on land and the resulting inequalities were unjust, destroyed com munal solidarity, and produced unem ploy­ ment, and that the initiative o f private ownership and profit in con su m e rs’ markets, with the freed energies and civic virtue o f those free to exploit their own labor rather than forced to sell it to others, would lead to ratio­ nal use and increasing yields. T h e s e populist, or agrarian socialist, e le ­ ments of the S lovene model prevailed despite limits on significant productivity gains due to parcelized landholdings, the shortage o f agri­ cultural machinery and working stock, and the prohibitively high capital costs of industrial inputs (such as fertilizers, advanced seeds, and trac­ tors). There is also strong evidence that in the minds o f policymakers responsible for the econom y and for agriculture, who w ere o v er­ whelmingly drawn from Slovenia and C roatia— such as Boris Kidrič, E d ­ vard Kardelj, and Vladim ir Bakarić— these smallholders w ere not the impoverished sub sistence peasantry o f the passive regions in the south and southwest (where soil was essentially unarable) but the successful middle-size, com m ercially oriented farm ers o f their northern regions who had emerged with the abolition o f serfdom by the 1880s. T h e s e farmers had led in the adoption o f new agricultural techniques, in contrast to the large landowners in Vojvodina, Bosnia, and M acedonia who had found cheap labor an easier route to profits than modernization; and they d om i­ nated the cooperative m o v e m e n t.6“1 Cooperation was the key to this secto r— to protecting the individual holdings o f producers while pooling assets such as m achinery and exper63 V Petrović, Razvitak p riv re d n o g sistema FN R J 2 : 5 0 - 6 5 , 64 On these farmers, s e e R Bićanić, “Agrarna kriza od 1 8 7 3 -1 8 9 5 / ’ Bakarić and his ad­ viser Slavko Kom ar w ere particularly influential in defining agricultural policy in this period,

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tise, and to the marketing links that could increase production for the m arket and provide an organizational link for direct contracts with the public sector firms, increasing their supplies and tying the private sector to the public sector s econom ic dynamic. T h e agrarian reform o f August 1945 created the necessary legal machinery by permitting and regulating th e voluntary formation oi peasant cooperatives along the lines of Lenin’s stages of cooperativization; but in line with Kautsky, technical possi­ bilities w ere to d eterm in e the pace o f cooperativization in production. L a b o r cooperatives called seljačke radne zadruge (peasant labor coopera­ tives), like the Soviet kolkhoz , w ere encouraged in areas of food-grain and export-crop production (primarily in the large estates o f the northern plains o f Vojv odina and partly in Slavonia— and not, it tu rned out, in the plains of M aced onia).1’5 But authorities responded with benign neglect to the many labor cooperatives that dem obilized Partisans and poor peasants set up (some say out of ideological fervor; others say the purpose was to pool scarce im plem ents or avoid compulsory deliveries and state taxation) in regions that could not support such collective labor economically. The month before the decisive politbureau m eeting of April 1946, in fact, con­ tracts for m e m b ersh ip in existing labor cooperatives w ere reduced from ten to th r e e y ears.06 E lse w h e re , general farm ers cooperatives (opće zem­

ljoradničke zadruge) w ere formed on the basis o f prewar marketing and co n s u m e r cooperatives and L e n in ’s cooperative plan of J 9 2 1 . T h e primary purpose of cooperatives, in Kardelj s vision, was in fact far less e co n o m ic than social and transformative. A cooperative would eoextend with a village and b eco m e the basis o f its social and public life as well as its e con om ic exchange. Although cooperation would begin with mar­ keting, as was the tradition of the cooperatives in Slovenia, Croatia, and S e rb ia that would be taken over politically (“from below"), these coopera­ tives would b e territorially confined to a village or district, w here mutual exchang e would grow into m ore-extensive cooperation naturally and transform villages into full socialist com munities. At the same time, given Kidric s B ukharinite insistence that the primary problem in agriculture was not producers but traders, marketing cooperatives were the right vehicle for governm ental policy. At first, when e xtrem e shortages of food prolonged wartim e methods, policies included the requisitioning (otkup) of a portion of a farm er's wheat, corn, pigs, and wool at government-set prices, and delegation ol plainclothes policem en and party cadres to stroll farm ers’ free markets and cajole peasants into “patriotic prices (tactics of the F oča model). W ith more normal conditions, essential produce such as So m e would say th ese cooperatives were forced; hut see the debate at the third plenum o f the C P Y central c o m m ittee in D e c e m b e r 1949 betw een Jovan Veseli nov and party leaders {discussed in chap ter 4). № Tom asevieh, “Collectivization o f Agriculture in Yugoslavia.’’

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grains and meat continued to b e purchased at gov ernm ent prices as part of a national food policy, and cooperativ es’ stores w ere given monopoly over the sale of industrial goods to the villages so that the gov ernm ent could influence form ers’ incentives to increase yields and m arket agri­ cultural produce while leaving them free to make production decisions. This capacity to regulate the overall term s o f trade b etw ee n agriculture and industry, village and factory, private and public sectors was a crucial element of m acroeconom ic equilibrium b etw ee n wage funds and wage goods. Equally important at the tim e, by transferring control over coo pera­ tives from private traders to local authorities (who w ere e le cte d by coo p­ erative members), the g o v ernm ent was preparing to protect state firms from competition for labor with the private sector for the time when the state firms were ready to em ploy new workers from the villages. Also, local authorities could m ore rationally regulate the pace o f that m o vem ent from agriculture to industry and from private to public sector by keeping data on the local labor supply and using means o f re c ru itm en t that did not require outlays o f cash. Localization o f cooperatives and limits on the econom ic power o f pri­ vate traders together had a political c o n se q u e n ce that drew v e h e m e n t opposition from fo rm er peasant-party allies in th e assem bly— above all the Communists’ main front partner in Serbia, D ragoljub Jovanovič. Ac­ cording to Kardelj, these autonomous socialist com m unities in the vil­ lages would b e integrated vertically through obligatory m e m b ersh ip in district business leagues (poslovni savezi),67 by being rep re sen ted in local assemblies and then indirectly up the governm ental hierarchy, and through contracts with pu blic-sector firms. This would b e a d irect blow, in Jovanović’s view, to cooperation as a social m o vem ent (which he c o n ­ trasted to the united-union m o vem ent for industrial workers) and to its economic potential through functional specialization and horizontal links among cooperatives over a wider territory than that o f the district, op era t­ ing in an all-Yugoslav market. In the parliamentary deb ate on the law on the cooperatives that took place on Ju ly 9, 1946, noncom m unist village notables, such as the priest and clericalist don Ante Salacan, charged that the law destroyed the “autonom y” of the peasantry (evoking catcalls of 87 Poslovni savezi, or business leagues, w ere organizations o f agricultural producers along the same lines as th e industrial-branch producers’ associations (p riv re d n e kom ore) that orga­ nized wholesale trade and supply contracts for their m em bers. Kidrič stated th eir purpose: "To strengthen general cooperatives, their jo in t provisioning and their ever-closer links with the state economy. . . . [They] will represent th e greatest guarantee that th e coops will perform the tasks assigned to them today to benefit th e working masses in the village and the city and to raise the national product” (“Obrazloženje nacrta osnovnog zakona o zadrugam a,” 7-9).

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“Reactionary!” from the floor). W hile Jovanovič supported the cooperatives— “not the C z e c h kind but the Sov iet”— he insisted that without a political party to give voice to the peasantry, their separate interests would have no d efen d e r and they would remain subordinate to the public sector and industrial w o rk ers.68 T h e e co n o m ic co n se q u e n ces o f localization also created a political prob­ lem , in this case with industrial ministries. Although the idea o f two sec­ tors, one public and one private, was to concentrate scare resources and attention on the public sector— com pensating the individual sector with freed om and smallholding rights during the wait for public-sector jobs— K a rd e lj’s vision began with the construction of cooperative centers in al­ m ost eve ry village in the country. As with the volunteer brigades, the villagers, in building the physical infrastructure for communal activity with th e ir own hands, would develop symbolic and practical commitment to their cooperative. In spite o f the savings on wage costs, the diversion of b ud getary funds and construction materials to these c enters was loudly criticized by people from the ministry o f mining and manufacturing whose requ ests for such resources to build housing at the mines had been ignored. Particularly vocal against the village cooperatives, whose aim was to settle labor in the villages, w ere mine directors already having great difficulty finding labor in the aftermath o f war and agrarian reform and b eca u se o f inadequate housing.69 Until the postwar nationalizations, the mines had b ee n largely foreignowned, and m anag em ent imported skilled workers and technical staff, es­ pecially from G erm any. As a rule, the mines w ere also undermechanized, b ec a u se the supply o f cheap, unskilled labor from the surrounding impov­ 6S

Narodna Skupština F N R J, Prvo redovno zasedanje, 4 1 6 - 2 4 . Jovanovič consistently

held this position from his first negotiations with T ito during th e war; see his “Političke u sp o m e n e .’’ H e was already in the parliamentary opposition after th e fall o f 1945; and, as with H eb rang , his position spelled the en d o f his c a reer— though he was not arrested until the fall o f 1947. 69

M u le c and Glišič, “P roblem radne snage u metalurgiji i rudarstvu.” Opposition to the

construction o f th ese cooperative c en ters also cam e from traditional authorities in the village— dem onstrating that Jovanovič rep resented only one stream o f opinion against gov­ ern m en ta l policy toward the countryside, as Kardelj’s parliamentary speech on the 1948 bud get (on April 25, 1948) suggests: “I know o f th e example o f on e village which recently finished the construction o f its cooperative cen ter. T h e village was, as they say, inclined toward reaction. Actually, a few wealthy owners succeed ed in exerting influence on the mass o f the peasants with small and medium-sized holdings. W h en the initiative for the building o f a cooperatve c e n te r cam e from the P eo p le’s Front, strong organized resistance was of­ fered . T h e well-known rumors about com m on kitchens and com m on beds began to fly. One part o f th e peasants with small and m edium-sized holdings, however, set to work, and when the first results w e re seen, a tu rn-about took place in th e village. T h e whole village set to work” (cited by Wolff, T h e Balkans in O u r Tim e, 327), By th e end o f 1947, four thousand cooperative cen ters w ere under construction, according to Kardelj (ibid.. 3 2 6 - 2 7 ) .

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erished countryside s ee m e d almost inexhaustible— particularly when the long-distance seasonal migrants supplem ented day laborers from nearby villages. German wartim e occupation simply added coercion by c o n ­ scripting labor. Nationalization o f the mines and the agrarian reform thus interrupted the m in e s’ traditional labor supply. Peasants now preferred to remain at home on their small plots rather than e n te r mines with their horrendous conditions, w hereas much o f the agricultural “surplus” popu­ lation had b een moved as colonists to state farms in Vojvodina or Slavonia. The little housing available at the mines consisted o f drafty, primitive barracks without sufficient supplies o f blankets and other necessities. F a r from the urban trade network, m ine settlem en ts had difficulty getting food, clothing, and industrial goods, which w ere in short supply. E v e n if government policy had b ee n am enab le, raising wages to attract more skilled labor made little sen se if th ere was nothing to buy. F o r most workers, the alternative to these living conditions was com m uting from home, which m eant an exhausting addition to the workday of, on average, four to six hours on foot (bicycle tires w ere nonexistent and train fares were too high for an ordinary worker)— a circum stance that was unlikely to raise workers’ productivity or leave tim e for training. M oreover, workers who com m u ted w e re m ore likely to remain at hom e during sow­ ing and harvest seasons. Tu rnover, a b senteeism , and other behavior c o n ­ trary to industrial discipline followed; and because forem en and supervisers also cam e from the villages, such behavior was usually in­ dulged. To com pen sate, one could hire m ore workers (if they could be found) or pay skilled workers extra for overtim e, but both solutions raised rather than lowered costs o f production and intensified conflicts among workers over wage differentials and with budgetary authorities charged with enforcing profit-and-loss a ccou n ts.70 M ine managers made do with prisoners of war— G e rm an and Italian workers still interned in the mines— to relieve their shortages. Prisoners accounted for a majority o f the workforce at the Sartia m ine (near S m ed erevo), for example, and a third at the cop per m ine at Bor. In 1945, the gov ernm ent attem pted to lure back Yugoslav “m iners and o ther workers” who had migrated abroad before the war by approving the international convention on pension rights for migrant workers, but this step apparently m et union resistance. The “inhospitable” union offices at the mines was the o th er cause o f Kidric’s sharp rebu ke at the U nited Unions plenum in N ov em be r 1946. Thus opposition to the policy on cooperatives and agriculture, and to the g overnm ent’s refusal to assume responsibility for recruiting labor where shortages interfered with essential tasks, cam e from the ministry o f mining and from m in e managers with an im m ediate practical problem 70 On the situation in the mines, see M n lec and Clisic, "P ro b lem radne snage ’

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co n c ern in g labor and the resources necessary to attract it from the vil­ lages. F o r these officials and party cadres, the policy did nothing to facili­ tate th e move toward socialism— it was a waste, if the ultimate aim was socialization o f agriculture; and it diverted scarce resources away from the socialized sector and its im m ediate needs o f fuel and exports for the in­ dustrialization plan. Similar opposition arose to the assignm ent o f final authority over labor to the republics, because of the great regional inequalities in the location o f skilled and professional labor. Since govern­ m e n t policy was relying on the im m ediate returns o f increased productiv­ ity in existing plants, industries favored with publicly allocated resources w e re located largely in the m o re-developed regions of the country where industrialization had occu rred much earlier, especially Slovenia and Croatia. Speak ers in one public forum after another derided the “old” and the “backw ard” in their society to support this reversal o f the policy of the prew ar gov ernm ent; they identified that policy with a “logic o f economic growth [b ased on] the m ore backward sectors and regions o f the econ­ o m y ," in the words of the Croatian-based Encyclopedia o f Y ugoslavia,71 that punished the m o re-developed regions with heavier taxation and eco­ nom ic discrimination from Belgrade to pay for it. Difficulties finding labor to fulfill new tasks necessary to the plan, therefore, led to quarrels over priorities in investm ent and economic strategy am ong federal ministers, the party leadership, and some “na­ tional c o m m it te e s ” (the republican party organizations) and republican gov ernm ents. F a cto ries in the m o re-developed north had advantages that th e ir gov ernm ents sought to protect, while the mines, new construction sites, and forests essential to exports tended to b e located in the poorer interior (especially within Bosnia, Croatia, and Serbia). T h e policy of ad­ ministrative rationalization for b e tt e r utilization of scarce technical skills ca m e in conflict with professionals who did not want to move and possibly lose status and cultural identity as well as comfort. Slovene authorities in particular ca m e into fre q u e n t conflict with those responsible for federal tasks, such as raising export revenues to restore the balance of payments and new construction for d efense and capital developm ent, b ecause Slo­ venia had proportionately the greatest n u m b e r o f skilled workers and pro­ fessionals as well as the greatest resources to b e able to retain them with h ig her pay. T h e central authorities’ ongoing frustration in attracting doc­ tors, teachers, and engineers to poorer regions and priority projects in isolated areas, even with higher salaries and material benefits, led to fre­ q u e n t calls on th e floor o f the assembly throughout 1945 to require obliga­ tory service in these regions. Yet the party leadership strongly resisted these calls in o rd er to pro tect republican authority over labor against the 71 C ited in Bo m b elles, Econ om ic D evelopm ent o f Com m unist Yugoslavia.

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central government and to institute monetary incentives and normalized governmental rules as instrum ents of labor allocation.

W h a t P r ic e F o r e ig n A id ?

To be able to maintain their strategy against dom estic opposition o f all kinds, the Yugoslav leaders counted on foreign assistance. By the fall o f 1946, they faced severe balance-of-payments deficits, and U N R R A aid was drawing to a close. At the United Unions plenum in N ov em ber, K id ­ rič warned, “I t ’s an old truth that what one purchases in foreign countries one must first earn in blood at h o m e .”72 Although the political and legal steps in preparation for the five-year plan w ere on course, it was late by nearly four months, appearing on April 26, 1947, rather than at the first of the year. The delay was blam ed on obstruction from the federal planning commission, chaired by H ebrang; but politicians’ public sp eeches reveal a preoccupation instead with difficulties in foreign trade. In early 1947, Yugoslavia felt the first serious pinch o f the e m erg ing U .S. policy o f co n ­ tainment in E u ro p e, against com m unism and its spread to G r e e c e and Turkey. On January 25, even before the appearance of the Trum an D o c ­ trine (March 15) and the Marshall Plan (July)— the “two halves o f the walnut” of U .S. policy73— P resid ent Trum an removed Yugoslavia from the UN’s list o f those most in need o f American food aid after UN R R A closed, where it had jo in e d Austria, Italy, Hungary, G r e e c e , and Poland and had been slated to receive $ 6 8 .2 million o f the total o f $ 3 5 0 million. Accusing Yugoslavia o f giving grain free to Romania and Albania and of allowing higher bread rations than in F ra n c e , Czechoslovakia, Poland, or Switzerland, Trum an prohibited the sale o f any food before May or Ju n e (the prohibition was extended indefinitely in April). At that point, the export-control regim e o f the Cocom Accords went into effect to prevent the sale of any d efense-related (“dual-use”) goods to countries governed by Communist parties, with Yugoslavia at the top o f the list (the ban affected cotton desperately n eed ed for textiles and shoes, and several pending contracts with Am erican eng ineerin g firms).74 W ith conflicts over Soviet assistance as well, the leaders had no choice but to shift to trade; they negotiated sev en tee n bilateral ag reem ents (including all cou n ­ tries of the future E a stern bloc and Sweden) b etw een May and August 1947 . 72 KklriČ, “Govor na P etom plenum u centralnog odbora je d in stvenili sindikata Ju g ­ oslavije” (Belgrade, N o vem b er 11, 1947). 73 Hogan, T h e M arshall Plan. 74 Mugoša, “Odnosi Jugoslavije i S A D -a .” On C ocom , see Adi er-Karl s so n, W estern E c o ­ nomic W arfare F o r a balanced overview o f th ese conflicts, see the article by L am pe in Lampe, Prickett, and Adamovic, Yugoslav-Am erican Econ om ic Relations.

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T h e political and e conom ic contradictions o f their strategy, as the oppo­ sition saw it, would now be exacerbated by the demands of export produc­ tion. Extraction o f primary com m odities for export was labor-intensive and located primarily in the poorer regions, far from the developed and urban ce n te rs o f s e ttle m e n t and modern industry. In his speech inau­ gurating the first five-year plan in April 1947, Tito alluded to the diffi­ culties at the same tim e that he renewed a com m itm e n t to the leaders’ chosen strategy. Against their goal of “econom ic and political indepen­ d e n c e , ’’ th e re w ere many critics, lie said: critics of rapid industrialization, o f priority for heavy industry, of a “planned agriculture. ” Som e feared the plan would destroy artisanal trades, others that Yugoslavs would become d ep e n d e n t on Am erican and English capital. B u t the issue was quite the reverse, T ito insisted. I f they did not create their own dom estic industry, they would return to the d ep en d e n c e on capitalist countries they had e x p e rien ced un der the old regim e and to all the “heartless exploitation’ and “ruthless pillage’’ that had meant. B ecau se of “various difficulties in obtaining the necessary m a ch in e ry ,’’ however, the plan would re­ quire “fulfilling all our obligations towards foreign cou n trie s.” As long as trade credits and loans w ere not forthcoming, they had no choice but to produce the coal, tim b er, livestock, and ores they had com mitted in foreign-trade ag reem ents to pay for the needed imports. Fulfilling these obligations would d ep end on the “greatest efforts” to improve and multi­ ply the skills of the industrial workforce, for the “main source of greater accumulation and the c h ie f means o f raising the material and cultural standard o f living o f the working people is increased productivity of la­ b o r . ’ T h e key to plan fulfillment lay in mechanization, rationalization, pay according to work, and socialist com petition. Public-sector (wage) em­ ploym ent over the five-year planned period was projected to grow from 6 1 0 , 0 0 0 to 1 ,3 8 0 ,0 0 0 , an increase equivalent only to the natural increase in the working-age population over the p e riod .75 But, ju s t as during the war, the institutions of the Slovene model con­ flicted with the dem ands facing the areas o f the F oca model. T h e leaders’ strategy for real e con om ic growth and for the political support of a wide popular alliance continued to b e based on capital-intensive manufacturing using skilled labor; limitation o f the expansion of the “wage fund” (both in term s of the m oney supply and in the real term s of food production) by restricting new em p loy m ent; cuts in the costs of administration (the “non­ pro d u ce rs”); and various incentives to individual effort to increase pro­ ductivity, all supp lem ented by foreign aid and imports of capital and wage goods the country was not yet ready to produce. T h e ir first adjustment in this strategy after the January blow was to conced e, in Febru ary, the need 75 Tito, “S p e ech on the F iv e-Y ear Plan," 8, 10, 17, 19, 33

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for temporary control over foreign exchange; all holders o f foreign curren­ cies were required to deposit them with the National Bank until the mat­ ter of foreign reserves was settled. Although Tito had spoken throughout 1946 on the need to end the volunteer brigades, unemployed workers and army units were now sent into the forests to cut tim ber and to the state farms to help in the harvest, while war prisoners still in the country who had lesser skills w ere impressed into work on the roads. In Jun e the gov­ ernment came to the aid of the mine directors, despite KidriC’s concern for macroeconomic stability, and granted a 20 percent raise in m iners’ wages and somewhat smaller raises for workers in defense industries.76 But by the end of 1947, the leaders could not maintain this program. H eir fear of war and the increased tensions with the U .S. and Soviet leaderships led to a shift toward strategic self-reliance, a reversal of demo­ bilization, and a breakdown in their policy toward labor, which was not restored until W estern aid began to flow after August 1949. The next chapter will show how they adjusted to international conditions with their policy toward industrial and agricultural labor, and how that policy led in tfie end to the final stage of localizing labor and to the workers’ councils that had appeared premature in 1945. 76 V. Petrovič,

Razvitak privrednog sistema FNRJ, vol. 3.

Ch ap ter 4 MILITARY SELF-RELIANCE, FOREIGN TRADE, A N D THE ORIGINS OF SELF-M ANAGEM ENT

b e tw e e n dom estic programs o f econom ic recovery with rapid expansion through imports, programs motivated in most cases by the hop e o f avoiding the mass un em ploym en t that followed World War I, and a shortfall o f finance with rising trade deficits confronted most of Eu­ rope during 1 9 4 7 .1 Although the Marshall Plan (initiated in July) is now viewed as having b ee n the solution to that conflict in W e stern Europe, the political co n se q u e n ces in Fi ance, Belgium , and Italy o f a return to orthodoxy had already occurred in May. Com m unist parties and orga­ nized labor chose to leave the postwar antifascist coalitions in order to

T h e c o n f l ic t

side with w o rk ers’ strike demands against the austerity policies o f demand re strictio n— thus ending, C harles M a icr argues, any possibility for the radical change in labor’s role in econom ic m anagem ent that had seemed possible only months before. It was in Britain that the choice was made after Ju ly; but there, too, Marshall Plan financing had the effect o f restor­ ing both the prewar strength o f financial authorities and the Labour party’s com prom ise, which was to help enforce stabilization so as to retain control over its voting co n stitu en c y .2 T h e sam e problem faced the Yugoslav leaders. B u t the failure o f foreign relations to normalize and the e m erg in g cold war dashed their hopes of peaceful c oexistence, while their socialist goals made the political calcula­ tions o f a policy response m ore complex. T h e ir econom ic strategy de­ p e n d ed on imports, b u t b ecause so little aid was forthcoming from either E a s t or W e st, their trade deficits and foiling reserves gave them no choice but to increase exports and reduce domestic demand. Yet their political revolution and the cou ntry ’s econom ic conditions did not allow the option o f reversing course on the goal o f rapid industrialization. Both elem ents of the lead ers’ political strategy posed a dilem m a for policy: the military basis o f national in d e p e n d en c e requ ired them to increase stockpiles and 1 M il ward, T h e R econstruction o f W estern E u ro p e , 1 9 4 5 -5 1 2 M aier, “T h e Tw o P ost-W ar E r a s ,” especially 346, On the consequen ces for British poli­ tics, see Hall, G o v ern in g the Econom y; on the "quid pro quo” for Marshall Plan aid, see W exler, T h e M arshall Plan Revisited; Mil ward, The Reconstruction o f W estern E u ro p e ; and Ilo g a n , T h e M arshall Plan A reinterpretation o f the reasons for the Marshall Plan s success is found in E ic h en g ree n and Uzan, “T h e Marshall Plan ”

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production o f strategic supplies and to build up defense industries and armaments at hom e at the same time that exports had to increase; and the promise of gradual im provem en ts in living standards for the population on which they based their claim to power and their alliance o f peasants, workers, and middle strata would make it e xtrem ely difficult to reduce domestic consumption even before power had b e e n consolidated. The dilemma was most im m ediate in the dem ands on labor policy. I n ­ creased production for foreign trade and defensive security would d e ­ mand increased e m p lo y m e n t— particularly in mines, forests, heavy industry, and construction, w h ere labor shortages w ere already a serious problem— and that increased em p loy m e n t would imply an expansion of the aggregate wage bill, not a contraction. This expansion in absolute numbers and in the proportion o f workers consum ing what others pro­ duced was in conflict with the chosen d ev elopm en t strategy o f rising labor productivity and declining relative consumption without inordinate e c o ­ nomic, social, and political instability. The new state and the C o m m u n ist party’s political power w ere consoli­ dated in this period. T h e ir shape e m e rg ed from the lea d ers’ a ttem p t to create an institutional and political capacity to im p lem e n t their strategy for change while adju sting to international conditions they did not expect— not a collapse o f foreign dem and for d om estic products and r e ­ sulting unem ploym ent, b u t inadequate finance for import needs and p o­ litical barriers to trade that forced them to m obilize new labor when they did not want to pay e ith e r the econ om ic or the political costs. As in the war, the Slovene model confronted F o č a conditions. This process is fol­ lowed in great detail in this ch a p ter b ecause it was so critical to the system that emerged and b ecau se the conventional accounts that this chapter revises have such a hold in both scholarship and general opinion. The leadership confronted this d ilem m a from Ju ly 1947, when U N R R A aid ended and A m erican hostility intensified, to the fall o f 1950, when the promise of Am erican aid began to relax the austerities o f production for export and d efense and to assure national sovereignty despite the e m ­ bargo and propaganda war from the East. In contrast to the standard p ic­ ture of a “b rea k ” in d om estic policy after the Cominform resolution of June 28, 1948, the period saw five distinct shifts in policy as the leaders adjusted to changes in international conditions with alterations in their policy toward labor: (1) Ju ly to O c to b e r 1947, when increasing difficulties with the W e s t revived leadership quarrels over the strategy; (2) N o v em ­ ber 1947 to April 1948, when Tito shifted in vestm en t policy dramatically in anticipation o f war; (3) May to D e c e m b e r 1948, when political power was consolidated during a crisis in food and fuel and the drive for military self-reliance; (4) D e c e m b e r 1948 to August 1949, when the labor m o bili­ zation to increase production for exports and defense and to cut imports

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took on the cha ra cter of a military campaign; and (5) August 1949 to June 1952, when W e ste rn aid, trade, and recognition allowed labor rationaliza­ tion and a return to the countryside, despite rising military budgets; the rulers then consolidated the “new strategic and tactical o rd er” of their original strategy. In each case, the leadership, trying to increase supplies while keeping a lid on dem and, revised not only policies but also the institutional capacities to im p lem ent them. In contrast to the dominant focus o f the literature on Yugoslavia in this period, the Tito-Stalin quarrel was only a part of the broader international positioning that was taking place in E u ro p e at the time. Its interpretation as a battle for ideological conformity within international communism also hides what is critical in this period: the creation o f a state and a set of institutional and policy habits, or tend encies, in responding to particular international conditions. This chapter will argue that Yugoslavia’s radicalization in agriculture b etw ee n S e p te m b e r 1948 and August 1949 was not an a ttem p t to prove itself sufficiently Stalinist to regain favor, as is usually said, b u t a short-lived mobilization o f labor and agricultural production that sought to avoid the Stalinist path; and that both the reversal of that policy and the introduction o f workers’ councils in 1950 w ere not an at­ te m p t to gain d om estic political legitimacy in the face of international isolation, but a return to the lead ers’ preferred focus on manufacturing and e n g in e e rin g firms with use o f e conom ic incentives to raise labor pro­ ductivity, and on m acroeconom ic stabilization by cutting employment in­ stead o f wages, by decentralizing administration, and by sending many workers back to the countryside, under the pressure o f trade reorienta­ tion to the W est. By treating the policies o f 1950 as a turn away from internationalist o b e d ien ce to a “d em ocratic” response to popular demand, the literature has ignored the real dom estic conflicts as well as the re­ markable similarity to the stages o f Soviet policy change from 1921 to 1933. In that light, W e ste rn aid in 1949 (not the “Cominform break” in 1948) appears even m ore decisive, in contrast to the effect o f rearmament in E u ro p e after f 9 3 6 - 3 7 on Soviet policy, b ecause it supported a return to the strategy the Yugoslav leadership had chosen in 1946. T h e confusion stems largely from the leaders’ behavior in foreign rela­ tions. F o r exam ple, they seem ed to go out o f their way to antagonize both the United States and the U S S B in asserting their sovereignty in the re­ gion, while they continu ed throughout the period to seek aid and trade on both sides. D e s p ite shooting down two American airplanes in 1946, giv­ ing aid to G re e k rebels (the D em o cratic Army of G re e c e), and pressing claims to Trieste/Zone A, they relentlessly pursued their requests for a W orld Bank loan, U .S . E xp o rt-Im p ort Bank credits, and the return of th e ir gold reserves. Q uarrels sim m ered with Stalin over their inter­ fe re n ce in Albania, the term s o f Yugoslav-Bulgarian federation, defense d octrine, the b ehavior o f Soviet military officers in Yugoslavia, and de­

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fense ties with R om an ia.3 B u t in July 1947 a tw elve-m onth bilateral trade agreement, and then Soviet credits and technical advisers for defense industries4— followed in early August by T ito ’s press con feren ce angrily denouncing the United States for obstructing Yugoslavia’s d evelopm ent plan and trade negotiations with B ritain— seem to support (though so m e ­ what after the fact) the U .S . argum ent that Tito was “Stalin’s p u p p e t.” At the end of June, the Yugoslavs sent a note o f serious interest in the E u ­ ropean Recovery Program (Marshall Plan), only to r e je c t m e m b ersh ip 011 July 9.5 At the first m ee tin g o f the new Com m u nist Information Bureau, 011 September 2 2 - 2 7 , 1 9 4 7 ,6 the Yugoslav leaders derided the F re n ch and Italian Communists for their “petty -b ou rg eois” concession to a parlia­ mentary line, arguing that they had squandered the great resources of their wartime resistance and that as “parties which wait to ju m p into power," they were im potent to oppose the Am erican in terferen ce that kicked them out of power and onto the road o f isolated opposition. T h e Yugoslavs also attacked Wfadyslaw Gom ulka for his moderate “Polish road. 7 At the same time, the Polish minister o f the econom y, Hilary Mine, attacked the Yugoslavs’ e conom ic program as some vain hope o f a third road that would necessarily lead them back by the econom ic route to capitalism, and he argued that their unwillingness to accep t the ag re e ­ ment among Eastern European Com m unists the previous F e b ru ary to hasten the pace of agricultural collectivization put them in the same camp as Gomufka.* T he explanation for such apparently contradictory behavior lies on the ground, in the strategy the leaders had chosen earlier. 3

There is a large literature

011

the Yugoslav-Soviet eonilicl. It is still worth beginning

with V, Dedijer, The Battle Stalin Lost; anti Djilas, Conversations with Stalin. Se e also Clissokl, Yugoslavia a n d the Soviet Union, 1939-1973 1 The USSR com m itted itself to exchange “eotton, paper, cellulose, oil products, coal and coke, ferrous arid non-ferrous metals, automobiles, tractors and other eq uipm ent, agri­ cultural fertilizers, etc.

tor Yugoslav “lead, zinc and pyrite concentrates, copper, tobacco,

heinp, plywood and agricultural goods, ' beginning retroactively on Ju n e 1. T h e defense pact granted Jugoslavia long-term credits o[ $1.35 million for eq uipm en t for the mining, metal, nil, chemical, and tim b er industries (d is s o ld , Yugoslavia a n d the Soviet Union, 43, 167). ’ The United States was opposed to including Yugoslavia at the Paris negotiations, but an olfical invitation came on July 4 after British and F ren ch ambassadors met with Yugoslav leaders at the Slovene resort of Bled to urge their participation, fl Ihe Yugoslavs claim ed to have initiated the idea, and the Com inlorm offices were to be located in Belgrade; but many argue that the S e p tem b er m eeting was called precisely to exert control over the Yugoslav party V Dedijer, Novi prilozi za bit/grafiju Josipa Broza Tita 3 :2 7 6 h Warriner, Revolution in Eastern E uro pe, 4 3 - 4 6 , She cites Mine's April 1947 speech to the central com m ittee o f the Polish United W orkers party, published in the Cominform journal For a Lasting Peace, fo r a P eoples Democracy (August 1, 194<S) On the Cominform meeting, see V D ed ijer, Novi prilozi 3 : 2 7 1 - 7 9 . Many m isinterpret the Yugoslav's position at these meetings because of their alliance with Zhdanov, but their position has b een clari­ fied by W erner Hahn's definitive account ol Zhdanov s moderate position at the time (Post­

war Soviet Politics ).

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ctober

1947: R a t i o n a l i z a t i o n

W ith in two months of the inauguration o f the five-year industrialization plan, the problem of labor had b eco m e political. T h e local labor short­ ages, rapid labor turnover, and stubborn wage pressure w ere serious problem s un der the conditions o f a trade deficit, limits on essential im­ ports o f m achinery and food, and high production targets in order to fulfill the plan and increase exports. According to the planning commission s Ju ly 10 c o n feren ce , called the very day after the rejection of the Marshall Plan invitation to attend the Paris negotiations, th ere was rising political d iscontent. Although production targets had been formulated and sent down, no one, from the ministries to the factory managers, had given a thought to labor supplies,9 according to conference participants. Most b elieved that the source o f the problem was the still-dominant “capitalist m en ta lity ’ among managers and officials, which simply assumed that an inexhaustible reserve of willing workers among the unemployed and the agricultural surplus population would spontaneously yield itself up upon dem and. But according to the com m issioner of the plan, Andrija H ebran g , this view ignored the conseq u ences o f the agricultural policy. T h e issue rem ained what he had argued at the politbureau meeting in April 1946: the e co n o m ic intensification and rationalizations since late 1946 would be insufficient to com pen sate for their m oderate policy to­ ward the countryside. In contrast to technically more advanced countries, he continu ed , w h ere high levels o f mechanization and little use of labor power made agriculture highly productive, Yugoslavia had to substitute labor for non existent machines. Unlike collectivized agriculture in the U S S R , the agrarian reform had so parcelized holdings (there were now som e two million farms) that they n eith er released what would in a mod­ ern e con om y be surplus labor nor produced enough to feed those already outside th e rural sector. T h e shortage o f skilled and professional labor— and, even worse, its uneven distribution in relation to econom ic needs— m eant that such labor could not com pensate for the absence o f machinery in industry in raising productivity. T h e party leaders, however, continued to view the cause of labor turn­ over, wage pressure, and food shortages as a m atter o f inadequate work incentives and state access to supplies, and wanted to pursue growth from existing capacity— which in their view was still underutilized. T he princi­ ple of their system was to be “to each according to his w o rk ,” accompanied by g reater vigor in settling the labor force and, to relieve political discon­ tent in the; m eantim e, improved distribution o f scarce consum er goods 9 V. Begović, “P roblem o b ez b je d jen ja radne snage i stručnih kadrova u petogodišnjem planu,” 18—32.

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and elimination of speculators. As Tito told the youth brigade assem bled in Sarajevo on N o v em b e r 16, 1947, to ce le b r a te their com pletion o f the Šamac-Sarajevo rail line, their example to the country on “how to work” was the spirit o f a new Yugoslavia. “H e who will not work has no right to use the results o f a n o th er’s labor, to b enefit from the efforts o f you who have contributed for th e good o f our com munity. ”10 The pace of work on elaborating the technical normatives for wage cal­ culation and then legislating wage norms b ec a m e feverish during the fall.11 At the annual m e e tin g o f the union hierarchy in N ov em be r 1947 (the fifth plenum), the federal L abo r M inister, Vicko Krstulović repeated his warning of the previous N ov em be r to unions and managers to cease plant-level wage bargaining and obey the legislated rules. E ch o in g the theme of politicians’ sp eeches throughout the fall, he soberly insisted that planned, centrally regulated wage scales w ere essential to the production plan.12 Federal regulations also used e con om ic incentives to increase the supply of professionals and to get them to move: stipends for university education, graduated according to fields o f social priority; honorariums for professionals willing to teach in night schools; and pay supplem ents for the costs of travel for professionals and administrators to jo b sites away from home. E n te rp rises and artisans’ workshops willing to take on the training of more apprentices than their legal obligation (since 1946) o f one for every three skilled workers they em ployed w ere also offered a sub­ sidy.13 A collective incentiv e encouraged “all workers and em ployees o f the enterprise” to participate in raising productivity and “realizing profits” by reducing the cost-prices o f production: enterprises that earned more than their planned re v e n u e by cutting costs had the right to retain a por­ tion of that revenue for a “m anagers’ fund,” which would “raise the social and cultural level o f workers and e m p loy ees” by building new apart­ ments, canteens, libraries, or clubs (and, not incidentally, also cut these expenditures from public b u d g ets).14 Reducing labor turnover also requ ired m ore rational direction. Thus the planning com mission instructed district p e o p le ’s com m ittees to sur­ vey and record the true labor surplus in the towns and villages o f their territory. At the N o v em b e r union plenum , Krstulović com plained about 1(1 Tito, "Govor na svečanosti prilikom puštanja u saobraćaj omladinske pruge SamacSarajevo,” 160, 11 V. Petrović, Razvitak p riv re d n o g sistema FN R J posinatran kroz pra v n e propise, vol 3 12 Krstulović, “Stalno podizanje proizvodnosti rada poboljšava radne i životne uslove radničke klase.” 13 This was an obligation that factory managers had nonetheless ignored; th ey saw such training as a “nonproductive” cost that only reduced their profit margins. 14 Bjeladinovic, ‘O privrednim preduzećinia,” 373.

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the “irrationalities” o f countrywide searches for lahor. Serbian companies w ere seek ing workers in the Croat regions o f Dalm atia, Lika, and Medju m u r je while Croatian com panies w ere recruiting in Vojvodina and Ser­ bia proper. W h at was the sense of identical construction firms’ crossing republican borders to recruit new labor when they could find it nearby? P reju d ice against the em ploy m ent o f women from both factory managers and union bureaus, he also argued, was a major obstacle to the obvious solution to local labor shortages— a solution that would at the same time k e ep down public expenditures for housing, child allowances, and trans­ portation (it was rare at the time for a woman not to m arry ).15 The many skilled em igrants who had retu rned to Yugoslavia in sympathy with the new political reg im e w ere still th reatened , as he had complained the year b efore, b eca u se local p e o p le ’s com m ittees were not helping them to settle, To red u ce labor turnover at industrial sites (particularly because of vil­ lagers who w ent hom e frequently to get supplies), to strengthen produc­ tion incentives by linking access to supplies directly to productive labor, and to attract new labor, the ministry o f trade and provisions began using coupons to ration necessities for wage and salary earners and their fami­ lies, a system called guaranteed provisions (obezbedjeno snabdevanje). R e d e e m a b le in state stores at factories or in the new public trade network for food and o th er necessities, these coupons would also reduce the por­ tion of wages paid in cash without cutting workers’ consumption. The system would thus red uce the strain on e n te rp rises’ cash reserves, enable the National B ank to cut the supply o f money it had to keep in circulation in ord e r to im p lem e n t plan directives, and undercut the prohibited but p e rsiste n t wage bargaining b etw ee n unions and m a n a g e rs .16 Similarly, a series o f exp erim ents in the middle o f 1947 moved more supply functions to the enterprise. F irm s under federal and republican jurisdiction that em p loy ed m ore than two hundred workers were required to organize in­ plant stores and canteens to supply their own workers, staff, and their families, while all factory administrators w ere told to order supplies of both rationed and nonrationed necessities, including food and clothing, d irectly from th e ir republican ministries of trade and provisions according to the n u m b e r o f em ployees each month. Such an enterprise-based sys­ tem o f local stores could further cut cost-prices of production by cutting th e costs o f distribution, could possibly save fuel and scarce rolling stock, and certainly gave the gov ernm ent a weapon against managers who ig­ 15 T h e strident insistence o f labor officials on increasing the em ploym ent o f women sug­ gests co ncern not only about ideological com m itm en t and labor shortages, but also about depletion o f the male labor force due to defense mobilization. T h e y were up against power­ ful cultural prejudices, how ever, even from party m em bers who opposed their wives’ taking jo b s. S e e Naljeva, “Neka pitanja partiskog rada medju ženam a,” 16 V ujošević, * 0 nedostacim a službe radničkog snabdijevanja”; Lompar, “() novom sis­ temu trgo vin e.’’

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nored wage norms and hoarded labor by forcing such managers to keep employment records and standardized accounts of wages and costs. F i ­ nally, rather than rely totally on the peasants for food and raw materials, state enterprises and public institutions would grow their own. I f they cultivated “workers’ gardens on land adjacent to their buildings or c r e ­ ated their own farms by leasing land owned by local people's com m ittees, they could b ecom e self-sufficient in vegetables, potatoes, pigs, and poul­ try and would be im m u ne from market shortages. All manner of public persons, from factories to hospitals to farm ers’ marketing cooperatives, were encouraged to create these “community farms” (zadružne ekonomije) and to release em ployees part-tim e to work collectively on the land alongside the “devotion o f all interested persons — that is, volunteers who were otherwise u n o c c u p ie d .17 The effect of the system o f guaranteed provisions was, of course, to bias the direction of supplies toward workers in priority industries and in the socialized sector in general. Representatives for these industries would have said, however, that this bias would only redress the disadvantages their workers faced in com peting for necessities on the market. In the drive for increased productivity in the public sector, after all, it was only their incomes that w ere limited, and those priority-sector firms tended to be far from the existing trade network (the offices of worker provisions in the cities and towns or the general farm ers’ cooperatives in the villages). Workers received wages at the end of a work cycle but had to pay for necessities in advance, while the sales period was so short that they lost days from production simply in driving from one local office to another in search of clothing. D esp ite legislated higher rations for miners, one offi­ cial from the Ministry o f Social Policy com plained in January 1948 that many miners had not received clothing for five months, others had yet to receive any blankets, and th e re was very little in the way o f bed linen, shoes, and clothing. Sandals for lum berjacks had b ee n delivered in place of the promised boots, and on agricultural esta tes— the “young model farms that ought to crea te a new life in the village”— farm workers were often left with only chaff after grain had b een exported to towns and for­ eign markets. If they got any flour or grain at all, it was less than their regulated allowance, and they frequently had to pay higher prices for food on the state farm than they would have paid in private farmers markets. The farm canteens w ere poorly supplied, and rations of sugar, coffee, soap, and oil arrived a month later than scheduled, if at all. S u m m e r clothing arrived in winter, w inter clothing in s u m m e r .18 The immediate solution to shortages of food, raw materials, and e x ­ ports, of course, still d ep end ed on farm production in the private? sector. 17 Bjeladinovic, " ( ) privrednim p redu zećim a,” 373. lfi Vujošt'vić, “O nedostacim a,

14

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T h e g o v ernm ent pe rm itte d prices to rise in the markets where farmers sold their surplus after m e e tin g their quotas for compulsory deliveries (otkup). This freedom was accom panied, how ever, by harsh penalties against those involved in trading activities— “speculators”— to prevent th e s e w ealthier and middle-size farmers from hoarding supplies, spec­ ulating with farm prices, and bidding up the price o f rural labor. T h e rural poor in food-deficit regions received the right to guaranteed provisions, even if the household owned some land. T h e official explanation of this privilege was political— it was a ju s t reward to those who had sacrificed so m uch to feed Partisan soldiers during the war— but it also sought to keep these peasants on the land to prevent proletarianization, undefended territory, and wage com petition from private employers. R hetoric was thick with L en inist slogans about the poor and middle peasants who la­ bored on their smallholdings them selves (and with Kidric’s favorite, the “blight o f speculation”). T h e line b eing drawn com es out clearly in a story recorded by Vladimir D e d i je r o f a lunch conversation at T ito ’s palatial office, B eli Dvor. Tito liked to consult a particular peasant from a village near Bjelovar, Croatia, on th e “n eed s and mood o f the p e o p le .” B ut after B u jn a h ’s tales of state injustices and mistakes toward the peasantry, Tito reminds him that as a “middle p e a sa n t,’’ he must put the “general in te rest” before his personal views, and that all will b e well in the new Yugoslavia for those who work. On the shortage o f boots, T ito explains that “we must first equip our army . . . I have already taken steps to obtain leather and soles abroad . . . and if th e re a re n ’t sufficient raw materials from abroad, in a year or two we’ll have leath er from our own cattle and w e ’ll begin to set aside boots for our peasants, to o .” As for the rumors that the state will take land from the peasants, these are lies, “b ecause who the devil would we give it to?” And they both agree that land lying idle is also wrong and that taking land from th ose who will not work it is justified. T h e low farm prices and guaranteed provisions are to pre v e n t speculators from buying up cheap produce and making a profit when others go without: “L e t those who want more than their rations pay m ore, [but] c e m e n t, bricks, pipe, and o ther peasant needs will gradually b e allowed on the free market. And w e ’ll import textiles from Poland and Czechoslovakia. I ’ve told people traveling there to buy iron and banding for wagons. B ut they dem anded corn, and we’ll have to give them some c o r n .”19 G o v ern m e n ta l capacity to im p lem ent these policies rem ained focused on the self-sufficiency o f localities, which w ere urged to open new indus­ tries that would g e nerate revenues to free up republican federal budgets for new in v e stm e n t and that would produce local goods to attract farmers’ 19 V* D eclijer, Novi prilozi 3 :2 4 2 -43,

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produce to the market; to improve local parsimony, especially by consol­ idating firms w h erever feasible in order to cut their needs for administra­ tive staff and to save on plant and equ ip m ent; and to adopt econom ic accounting (officials from the ministry of finance put ever m ore time into teaching it during the fall o f 1 9 4 7 — often in words taken directly from Soviet speeches of the m id -]9 2 0 s — through seminars for district officials in the techniques o f accounting, econom ic supervision of enterprises, and budgetary discipline). As with the d eb ate on supplies, the idea that the severe shortage of skilled labor and loyal agents would recom m en d e c o n ­ omies of scale through concentration and centralized allocation was re ­ jected in favor of local knowledge and binding people to land, employer, and locality, as the Tu dor Statutes did in similar troubles. The political campaign aimed at “nonproducers” who might take advan­ tage of the market opening in the countryside. On S e p te m b e r 26, 1947, at the second congress o f the Popular Front, the Com m u nist leadership withdrew its support from the Croat Peasant party; in early O ctob er, the CPP leader Josip Cazi and the S e rb left agrarian D ragoljub Jovanovic went to trial. D uring the fall, Kardelj began a reform o f the local p e o p le ’s committees. From the freq uent allusions to “re a c tio n a rie s ’ and those “who sit in cafes and criticize rather than w o rk ,” one can infer a campaign against prewar village political organizations and those who would oppose the new differentiation, including the shift in D e c e m b e r away from the flat tax (which the ministry of finance continued to defend) to a steeply progressive incom e tax on private farmers.

N ovem ber

1 9 4 7 - A p r i l 1948: P r e p a r i n g k o r W a r

The problems with foreign trade w ere soon com plicated by the growing conflict with the Soviet leadership over policy in the Balkans and military doctrine and authority .20 R e je c tin g “fantasies” designed to “crea te insecu ­ rity in the nation” as a “very refined way to dem obilize our p e o p le ,” Tito 211 For example, th ere w ere quarrels over Yugoslav intervention in Albania, which hv the end of 19-17 so infuriated Stalin— b ecause he believed it would give the Americans occasion lor an attack— that he sum m oned Djilas, whom he thought he could influence, to Moscow; it also led to the suicide in N o vem b er o f Albanian politburo m e m b e r Nako Spirit, allegedly as a protest against the stationing ol a Yugoslav air force unit there and proposals to unify their armies. O th er points o f conflict included the N ovem ber 27 m utual-defense treaty with Bulgaria, apparently intended to obstruct Stalin’s plans for their federation; T ito ’s discus­ sions with G heorghe G h eo rg h iu -D ej on D e c e m b e r 1 6 - 2 0 regarding Yugoslav-Romanian joint military doctrine (in follow-up talks in January with Svetozar Vukmanovic-Tem po, the Romanians called the Yugoslav moth1! “closer to Romania than to the l TS S R ” because thev liotli had only "just em erged from revolution’’ [V. D edijer, Novi ]>rilozi 3:2251); the escala­ tion in February of the G r eek civil war, in response to which the UN established a special investigatory commission on the Balkans; and the Tripartite A greem ent o f March 20 an-

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criticized those "e n e m ie s in our country who now take advantage of the international situation to crea te a psychosis as if tomorrow will bring war, . . . saying: A m erica is the strongest country in the world; it will change our situation back to the old ways, . . . bringing international reaction with an enorm ous military and atomic b o m b s .” Tito told the youth bri­ gade in Sarajevo on N ov em be r 16 that “today’s working world in capitalist cou ntries is intelligent enough not to want to go to war for alien interests.” N onetheless, lie added, “L e t no one think that the people o f Yugoslavia in their efforts, in their difficulties in constructing the country, in working to im prove the living standard, are not at the same time taking care of their own s ec u rity .”21 By M arch, he had sum m oned in secret the first meeting since 1940 o f the surviving m e m b ers o f the party’s central com mittee to announce that the refusal of the U S S R to deliver promised military hard­ ware and to negotiate indispensable trade left them with no other choice than to c onstruct their army, air force, navy, and defense industries with dom estic resources a lo n e .22 “W e must orient ourselves alone, with our own forces, and for this “we will have to sacrifice m u c h .”23 This change m eant that alongside exporting to reduce the trade deficit, they would shift investm ents and production to the needs of self-reliance: capital goods, transport, import substitutes, and strategic raw materials, including food and fuel. This shift, in turn, required temporary but funda­ mental read justm en ts in federal econom ic jurisdictions and far greater e m p lo y m e n t o f labor. T h e federal portion o f the general state budget was already dangerously in deficit b ecau se revenues, defined by its sphere o f jurisdiction over foreign affairs and the all-Yugoslav market, had fallen drastically with the exhaustion o f war profits and U N R R A goods sales and with the effect of the austerity program and production delays on turnover-tax receipts. O rd erin g the strategic stockpiling o f grain and the mandatory adoption of guaranteed provisions and workplace stores in D e c e m b e r 1947 ,24 Tito began to make the governm ental adju stments necessary to gain for the nouncing the intention to hand Trieste/Zone A to Italy, with which Stalin concurred de­ spite Yugoslav claims

Although T ito ’s speeches during the tail ol 1947 expressed concern

over the growing threat of global war and the clanger of tensions within the UN, in his speech marking Yugoslav Army Day (D e c e m b e r 22). he acknowledged the conflicts with Soviet military officers over lines o f authority. 21 Tito, “Govor na svečanosti," 1 6 3 -6 4 , 22 T h e Soviet Union had stopped deliveries Iroin their July 1947 trade treaty and post­ poned negotiations over its renewal until D e c e m b e r 1948. On March 18, it withdrew its military and civilian advisers and the promises ol weapons made to kardelj in early February. 23 V D ed ijer, Novi prilozi 3 :308. 21 In an attem pt to slop the m anagers’ practice of bypassing the state trading network for m ore-beneficial barters with other firms, it was decided that enterprises close to trade net­

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federal government the capital and labor that the new investm ent policy required. A governmental d ec ree (uredba) on D e c e m b e r 2 7 made a statu­ tory exception for 194S and 1949 to the rules governing transfers o f ow n­ ership and dispersal of assets within the public sector. On January 8, the assembly was informed that the Ministry o f Industry would be subdivided into three ministries— heavy industry and mining com ing under federal jurisdiction alone and only light industry remaining a shared federalrepublican competence— and the Ministry o f Agriculture and Forestry into two, although they would continue under shared federal-republican jurisdiction. Tito assumed the dual authority ol minister of defense and prime minister, adding to his growing personal power. In January 1948, the recommendations of the labor conference held the previous Ju ly ap­ peared on the agenda ol the politbureau; it was decided to transfer final authority over labor in plan execution from factory managers to the state, although the federal m inister o f labor was still obliged to respect repu bli­ can jurisdiction over labor by working in full consultation with republican labor ministries. In sum m oning Jakov Blazevié to Belgrade on D e c e m b e r 29, 1947, to take over at the Ministry o f T ra d e and Provisions, Tito e x ­ plained that the world situation “wasn’t rosy — there could even b e war and other "unpleasantness''— and thus they could not afford to crea te a united front of “e m b itte re d ” peasants against them when they might have to depend on their fighting loyalty.2"’ As a loyal m e m b e r o f the Croatian leadership, m em ber o f the central co m m ittee o f the party since 1940, prosecuting attorney in the trial o f Archbishop Stepinae, and organizer of the "uprising in Lika (for which he was punished by Ile b ra n g , the Croat party leader at the time), Blazevié was selected, Tito explained, because the problem of supplies had b eco m e “a significant political issu e.” T h ey needed a new policy toward the village.26 Kidric announced the increase in expenditures of 4 5 .2 p e rc e n t— “in capitalist terms, difficult to com prehen d — in his annual speech on the budget in April. Although conspicuously silent on the increase in defense expenditures of 35 p ercent, he did explain that capital construction would grow 73 percent, industrial production 61 p ercent, and the output o f coal, steel, and cement faster than the overall plan rate; and th ere would b e an entire range of products never before produced at hom e, such as asphalt, light- and heavv-grade benzin, petrolcoke, charcoal b riq uettes, cylinder oil, transformers, ship engines, asbestos products, electrodes, drills, and their “rich but un derutilized” d om estic raw materials. Although “one of

works now had to get ministerial permission to c rea te farms and stores, and rules on trade between firms were clarified, 25 From Blazevic’s diary, printed in V. D ed ijer, Novi prilozi 3 : 2 2 9 - 3 4 , 26 Ibid., 3:230.

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th e most basic, central planned tasks of the cou ntry” for 1948 was growth in exports, he insisted that th ere would b e “no trade-off b etw een living standards and growth in foreign tra d e .” Sounding no less than ever like the Trotsky o f the Sov iets’ twelfth party congress o f O c to b er 1923 or the Bukharin o f 1 9 2 4 - 2 5 , however, he promised that the increase in accu­ mulation would com e not from inflationary finance, lowered consump­ tion, or exploitation o f the peasantry, but from “production itself”— by utilizing th e vast reserves still hidden within existing capacity, by elim­ inating waste, and by further lowering costs o f production. In the first public state m e n t o f the leadership’s policy toward labor, Kidrič told the national assembly: “It is well known how capitalists solve the question of a reserve army o f proletarians. T h ey solved it by means of pauperization and proletarianization o f the village, by means of terrible economic and o th e r pressure on the working peasant, above all on the poor and poorest, W e cannot and will not take such a path to mobilizing the new labor power necessary for our industrialization.”27 T h e primary focus o f labor policy was still public sector firms, but the problem o f productivity was now blam ed on managers and government officials who cavalierly ignored regulations (in his own speech to the as­ sem bly the next day, Kardelj cited a long list from the year-end reports of inspectors on the State Control Commission, o f which he was head), W h e n told to gather data on the labor supply, for example, too many officials (Kidrič complained) only retorted that sufficient numbers of qual­ ified personnel to draw up accurate labor plans would not be available for five m ore years, let alone months. E co n o m ic establishm ents “and even e n tire rep u blics” responded to the shortages with “pseudoplanning” for more than seven times the labor they actually needed, “savage” competi­ tion among firms, hoarding and even kidnapping o f labor, and the uncon­ scionable ov erpaym ent o f certain categories of workers at the expense of others, resulting in mounting chaos in their wage policy. Ministry stall w e re so lax in their inspections that managers w ere essentially free to hoard. F acto ry directors used the labor shortage as an excuse for failing to d eliver planned output, and then tried to blackmail leaders who wanted the plan fulfilled into leaving them free to recruit their own labor and use o v ertim e pay as need ed . Union offices continued their unfriendliness to new workers (in the mines they wanted overtim e work instead) and their g eneral disregard for o th er causes of labor turnover, absenteeism (on av­ erage 2 3 - 2 7 p e rc e n t in the first five months of 1948), and general lack of discipline, all o f which increased the nu m ber of workers need ed to meet assigned production targets. Many district people's com m ittees refused to recru it new workers and w ere protected by their republican govern­ 27 Kidrič, “Govor ria pretresu opštedržavnog budžeta za 1948 godinu," 239.

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ments, while others contributed directly to the serious political tensions in the countryside by filling their labor quotas mechanically, without s e n ­ sitivity to individual prefe re n ce s for place and type of e m p lo y m e n t ,2H Within factories, th ere would be a move to three shifts and continued emphasis on human capital as a substitute for m achines. R esearch and development, the training of technicians and skilled labor, the authority of engineers, consultation b etw ee n “work collectives’ and scientists to improve production tech n iqu e and work organization, and monetary re ­ wards for shock workers and inventors w ere all critical to higher produc­ tivity and finding hidden reserves, but the state woidd no longer leave this to firms. On May 17, 1948, it announced a host o f new federal offices for scientific research and d evelopm en t, such as one for developing a do­ mestic raw-material base and an institute for electric energy, and federal schools for technical training, such as a secondary forestry school for the karst (to reforest this barren area along the Adriatic coast). Kidrič did not mention the decision to spend substantial resources on the rush to atomic (later nuclear) power and w eapo nry .29 The leaders would also introduce e nterprise plans “of Soviet p ra c tic e ,” legally obliging factory directors to rationalize their use of labor, tie pro­ duction possibilities to financial means, and plan future needs for skilled labor and technicians so that appropriate training occurred on time. In January, social-insurance bureaus had received instructions to gather data on employment levels, the wage fund, and work hours, a move aimed at enforcing drafting o f e nterprise labor plans more promptly and m ore in line with actual needs o f production. Republican and federal ministries would then com bine these plans with surveys by district labor offices to formulate a countrywide plan for labor, including quotas for the te m p o ­ rary mobilization o f unskilled labor into volunteer brigades for increased export production in the mines, forests, and agriculture and for capital construction projects. On May 29, 1948, a federal bureau o f statistics was created under the office o f the state president, and during the month of June census takers w ent into the field to gather the data on labor supply that it had b een so difficult to get factory managers and the p e o p le ’s c o m ­ mittees to gather. S o m e professionals would b e transferred temporarily to Belgrade, “regardless o f w h ere they otherwise have their p erm anent e m ­ ployment and sp here o f a ctivity ,”30 and the federal minister o f labor would assign skilled labor to federal priorities w here there was continued difficulty in getting people to move. Kardelj was particularly impatient with professionals who wanted to keep their com fortable life in the city, 2S Ibid., 253 2y See S. D ed ijer, “T ito ’s B o m b ;" :1<1 Kidrič, “Govor na pretresu opš loci r/a v nog budžeta za 1948 god inu ,” 250.

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given the tasks at hand: “T hose who do not want to understand that it is th eir duty to work and to give of them selves w h erever they are needed for building up our country are good-for-nothing sons of the people and goodfo r-nothing citizens of this country. Such people must understand that the com m unity will behave the same way toward t h e m . ”31 As for workers’ living standards, they would not fall, but it would be “pure demagogy” if th e leaders pushed for a rise in living standards at this point. T h e “only healthy, solid guarantee o f raising the living standard” was to continue the drive to raise labor productivity. A new wage system, officially inaugu­ rated on May 2 9 and scheduled to b e im p lem ented by July, would replace the disparate wage norms devised the previous year for priority branches with a coordinated system of centrally set average wage norms based on progressive piece rates and bonuses for above-norm ou tp u t.32 T h e political problem , how ever, was how to mobilize the “tens and tens o f thousands o f new forest, construction, and industrial workers who must b e re cru ite d from the village,” without following e ith er the capitalist path o f “a reserve army o f proletarians” or the Stalinist path that nearly de­ stroyed agricultural production. In his explanation to Blažević when he began work in January o f the n eed for a new policy toward the village, Tito did not m ention that agricultural production had not yet recovered its prewar level and that the incentive of higher prices in farm ers’-surplus m arkets during the fall of 1947 had made it increasingly difficult to en­ force the com pulsory-delivery quotas on which the system of guaranteed provisions d epended. Arrests o f formers who resisted the required sales to th e g o v ernm ent had risen alarmingly. At the same time, party radicals com plained that the policy b enefited richer farm ers over middle and poor peasants and favored the countryside in general over urban residents and industrial workers. B u t for Tito, it was the tax policy toward the village “im posed by the Ministry of F in a n c e ” (headed by S reten Žujović) that was fueling political “oppositionists” and rural d iscon ten t.33 M oreover, the p ro blem with the kulaks was in their role as employers. W ith higher prices for their produce, rich farmers could afford to offer higher wages and b e tt e r food to poor peasants than could the factories and mines of the public sector. This was already the case in all regions— except Macedo­ n ia.34 In their mutual com petition with the state over labor, the kulaks also had a cultural advantage: “opposition e le m e n ts ” in the villages were successfully frightening peasants with rumors that if they e n te red factory 31 Kardelj, quoted in Arsov, “M obilizacija nove radne snage za izvršenje privredcnog plana,” 8. T h e unwillingness o f doctors, engineers, and oth er technicians to move out of capital cities such as Belgrade into the newly industrializing areas was the subject of news­ paper cartoons as well as leaders derision from 1945 on. 32 S e e V. Petrovu:, Razvitak p riv red n o g sistema FN R J, vol. 3. 33 T ito, in V. D ed ijer, Novi prilozi 3 : 2 2 9 - 3 4 . 31 Lazar Koliševski, the representative from Macedonia, at the second plenum of the

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gates, they would return to find their land taken from them and their families transported.35 However harsh the m easures to requisition produce and control trade were becoming because o f the need for supplies, the leadership did not want to "hit the kulaks frontally”36 but to find new, indirect ways to squeeze them economically. T h e aim was to undercut their market power— their ability to monopolize rural trade and labor m arkets— without eliminating them as individual producers. Thus on F e b ru a ry 11 the government unveiled a new policy o f farm-produetion incentives to replace the free markets, and it forbade trade in agricultural produce ou t­ side the official trade netw ork .37 According to this policy— called trade by linked, or interdepend en t, prices (vezane cene)— peasants in eith er the private or cooperative sector who sold their surplus above the eompulsory-delivery quota to an agent in the state trading network would receive, in addition to cash, coupons with which they could purchase industrial goods un der gov ernm ent monopoly at prices 16 p e rce n t lower than in retail markets. G u aranteed provisions would be given only to p ro­ tect the livelihoods o f the poorest and the efficacy o f production in c en ­ tives to workers. T ito ’s instructions to Blazevic, on January 15, 1948, were to aid most the regions of greatest suffering during the war and to distin­ guish among poor, middle, and kulak peasantry in both taxation and re q ­ uisitioning.38 As Kidric explained in April, the solution to the problem of agricultural production still lay with industry: they would be “disregard­ ing internal econom ic links if they did not first improve peasants’ living conditions and produce the industrial inputs necessary for higher agri­ cultural yields. “Naturally, ’ Kidric added, the provision cards, favorable fiscal measures, and o th er econom ic aid to protect the living standards of the working peasant” would be withdrawn from those who take such assistance in place o f working; and “o f course the speculator’s standard will fell!"39 CPY central com m ittee, January 2 8 - 3 0 , 1949, in Petranović, Končar, and Radonjič, Sednice centralnog komiteta KPJ ( 1 9 4 8 - 1 9 5 2 j, 63. r i15 ;Arsov, “M obilizacija nove radne sn age,” 10 -

36 Kardelj, in his report on the “policy o f the C P Y toward the village” (see also the refer­ ence in that report to Kidrič s position at a conference of th e governm ent s Eco n o m ic CounG ’il on June 5, 1948), and T ito, at the second plen inn of the C P Y central c o m m ittee, in Petranović, Končar, and Radonjič, S edn ice, 23, 70. 'h This Uredba o prodaji poljoprivrednih proizvoda vezanoj sa pravom na kupovinu

odredjenih industrijskih proizvoda po nižim jedinstvenim cenam a (Regulation on th e sale o f agricultural products in exchange for th e right to purchase certain industrial products at lower, unified prices) was valid until April 1950, when it was replaced by the U red ba o trgovini po vezanim cenam a (Regulation on trade by linked prices) and a version o f the USSR s 1921 tax in kind and 1923 forward contracts, S e e Petrovič, Razvitak priv red n o g sistema FN R J, vol. 3; and Lom par, “( ) novom sistemu trgovine,” 11, - 38 V. D edijer, Novi prilozi 3:233* 39 Kidrič, “Govor na pretresu opštedržavnog budžeta za 1948 godinu,” 240.

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T h e class struggle in “their way” in the new Yugoslavia was not that of Stalinist collectivization; it took place in co m m e rce, and it was a “struggle against speculators” that was sim ultaneously a struggle against “adminis­ trativ e” m easures. O n the one hand, the state and cooperative trade net­ work had to elim inate the side trading, private m iddlem en, and speculative practices that w ere feeding inflation. Anyone engaged in re­ selling goods without license would be prosecuted. Capitalist elements and “rem nants of the form er ruling class” would be deprived o f their eco­ nom ic power. O n the o ther hand, local officials had too often resorted to administrative measures in collecting and distributing goods when they should have b e e n using financial m easures— controlled prices— to in­ fluence allocation. Thus on April 2, a second dom estic nationalization in urban areas— the “road to liquidating the urban bourgeoisie”— transferred to social ownership (either state or cooperative) the remainder of retail trade and all enterprises o f local jurisdiction: smaller industrial and construction firms, all printers and warehouses, 5 0 0 hotels, 30 san­ atoriums and hospitals, 100 cinem as, and 5 3 0 dairies. O vernight, 3,100 private shops and establishm ents closed down. Legislation also prohib­ ited trade in fixed assets, most importantly the private sale o f land of any a m o u n t— “even if the holding was below the so-called minimum. ” Pri­ vate purchase o f agricultural m achinery was prohibited to “capitalist e le m e n ts .”40 T h e state would also e n te r the world of village labor for the first time. Anyone who wished to employ village labor— w h eth er privately, for per­ m a n en t industrial jo b s , or in volu nteer labor brigades— would now be requ ired to go through local offices o f the labor ministry (established in every district p e o p le ’s co m m ittee in S e p te m b e r 1948). T h e se offices would also cond u ct surveys o f labor power in the district to improve identification o f the true surplus— labor that could move permanently to th e wage sector without threatening (largely private) agricultural produ ction— and th e re b y reduce the problem s of labor turnover in indus­ try when re cru itm en t occu rred to fill the higher quotas set for industrial em p lo y m e n t in 1948. At the same time, Kardelj did begin in April to refer to the need for a “fundam ental b rea k ” in agriculture (using Stalin’s 1928 phrase) because, as Kidrič put it, “the social process taking place in our country . . . must be conceived as a unified whole. I f that process, if the construction of socialism, w ere not to move with the tem po that conditions and the stage o f d ev elo p m en t dem and, th en e conom ic success would also fall be­ h in d .”41 T h e socialization o f agriculture had to lay the groundwork for the

10 Balog. "U re d b e vlade F N R J u 1948 godini," 97. T h e regulations excluded the purchase o f buildings for use as housing by workers, em ployees, civil servants, artisans, or working peasants in the towns H Kidrič, "G ovor na pretresu opštedržavnog budžeta za 1948 godinu. ’ 2.55.

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agricultural m a c h in e ry b e in g p ro d u c e d by e n c o u r a g in g th e form ation o f more cooperatives “of th e n ew t y p e ” ( p e a s a n t labor c o o p e ra tiv e s )42 with their industrial p rin cip le s — land c o n c e n tra t io n ,

e c o n o m i c a c co u n tin g ,

pay according to o u tp u t, m o re efficient organization o f work, and socialist competition. In fact, p ro d u ctio n coo p e ra tiv e s would be fo rm ed only where crops n e e d e d for d efen se stockpiles, e x p o rt, and im p ort su b stitu ­ tion, such as grains and c o tto n , could b e grow n (in the V ojvodina plain b ut not necessarily in th e M ac e d o n ia n plains, for e x a m p le ; or, in th e c a se of livestock, on o th erw is e u narab le land in Bosnia). M o r e o v e r , as Vladim ir Bakarić admitted la ter, th e p rim ary reason was not agricultural d eliveries, but to release m o r e labor “n aturally” for in du stry and for v o lu n te e r brigades.43 This middle path on a g r icu ltu r e has b e e n confusing to m o st analysts, particularly b e cau se its im p le m e n ta tio n in th e following y e a r did lead to local excesses in th e rush to fill labor quotas. A lread y in K idric s d efen se against critics, o n e can see the political difficulty o f e v e n defining this course when political lines had b een drawn historically in o th e r ways. Thus, on April 12, b eh in d closed doors, to critics on th e left within th e central c o m m ittee, K idric used class-based a rg u m e n ts : “a superficial o b ­ server might think th at th e system of linked trad e is a con cessio n to c a p ­ italist elem en ts”; on th e c o n tra ry , “linked trad e as such limits kulaks in getting rich’ and, with u p c o m in g m e a s u re s against sp ecu lato rs and “c a p ­ italist elem en ts” in th e village, would stre n g th e n th e p o o r and m id d le peasants. The im p o rtan t points w e r e that m o re than 9 0 p e r c e n t o f in du s­ try was in state hands, th at w h olesale tra d e had b een liquidated, and that all of private retail tra d e w ould soon follow (as it s e e m s to have d o n e by the end of M a y ).44 H o w e v e r , in p ublic d e b a te b efore the national a s s e m ­ bly ten days later, K idric sought to re a s s u r e those “e l e m e n t s ” and to do what he could to k eep th e p op u lar-fro n t alliance to g e th e r . T h e policy of linked trade would, he a g r e e d , r e d u c e fa r m e r s ’ cash r e v e n u e , b ut it would also im p ro ve th e te rm s o f tra d e b e tw e e n industrial and agricultural products in their favor. A c o m p aris o n with a v e r a g e p ric e ratios in th e last years before the w ar w ou ld show that f a n n e r s ’ p u rch asin g p o w e r was now greater by 12 p e r c e n t , and to the e x te n t that th e te rm s o f trad e w e r e still to agriculture s d isad van tage, th e gap r e p r e s e n te d an en tire ly n ew reality. Before the war, he exp lain ed , the high cost o f industrial goods was d u e to the exploitation o f foreign capitalists, w h o b ou gh t Y u goslavia’s raw m a t e ­ rials for m uch less than t h e ir w orth and th en sold Y ugoslav c o n s u m e r s finished goods from th ose sam e raw m aterials at m u c h h ig h er p r ic e s — which they had no c h o i c e b u t to pay b e ca u se th ose fo reig ners refused to 42 Seljačke radn e zadruge. 43 Bakarić, in discussion at t h e third p le n u m o f t h e C P Y c e n tra l c o m m i t t e e , D e c e m b e r 29-30, 1949, in P e tr a n o v ić , K o n c ar, a n d R adonjić, Sednice, 4 1 5 ,

m Kidric, in V, D c d ije r , Novi prilozi 3 : 3 7 5 - 7 6 .

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p r o d u c e th e goods in Yugoslavia. N ow , that gain would stay at home to d e v e lo p th e e c o n o m y . B e c a u s e th e policy would also m ake possible lower food p ric e s, u rb an res id en ts would benefit and th e en d o f rationing would r e d u c e “ad m in istra tiv e b u r e a u c r a t i s m .” T o c o m p e n s a te , th e policy would also c u t th e tax on “w orkin g p e a sa n ts ’ i n c o m e s ” m o re than 4 0 p e r c e n t over th e 1 9 4 7 ra te , and it w ou ld allow free sale at th e h igh er official p rice of any surplus afte r th e p o s t-h a r v e s t collections for g u a ra n te e d provisions and lin ked t r a d e . 45 T h e a p p ro a c h to th e p ro b le m o f foreign trad e was similar. T h e primary c o n c e r n was th e w aste o f fo reign e x c h a n g e b e c a u s e o f th e poverty of c a d r e s in fo re ig n -tra d e organizations and th e in ad eq u ate commercial n e t w o r k — r e f le c te d in, for e x a m p le , th e “lousy” s y stem o f billing; foreign b u y e rs w e r e g e ttin g goods free b e c a u s e Yugoslavs view ed bills o f lading as m e r e fo rm alities. T h e “m o st im p o r ta n t econ om ic-organ ization al task,’’ K ard elj a r g u e d in his April 2 5 - 2 6 s p e e c h on g o v e r n m e n ta l reform and the e c o n o m y , was to p ut “o u r socialist c o m m e r c e . . . on its fe e t”; producers t h e m s e lv e s n e e d e d to b e c o m e “socialist t r a d e r s , ” atte n tiv e to the com­ m e r cia l side o f th e ir w ork and th e skills n eces sary to it. In ven tories were piling up in industrial w a re h o u s e s and deliveries o f goods w e r e “lagging te rrib ly b e h in d p r o d u c tio n ” b e c a u s e p u b lic-s e cto r m an a gers attended only to p ro d u ctio n . E m p l o y e e s in the trad e n etw ork w ho still thought with a “capitalist m e n ta lity ” should b e rep laced by socialist c ad res; those w h o co u ld show initiative in m ovin g goods; k eep b e t t e r re c o r d s and follow th e d icta te s o f profit-and-loss acco u n tin g ; and, u n d e r the p re s su re of the “w id e particip ation o f th e m a s s e s ,” fight b u r e a u c r a ti s m .46 M ost important was foreign tra d e , and Kardelj called on e v e r y p erson and en terp rise in th e c o u n t r y to assist: I t is t h e u l t i m a t e in n a r r o w - m i n d e d n e s s w h e n s o m e e c o n o m i c in s ti t u t i o n s refu se

to

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staff to

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tra d e .

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old

Y u g o s la v ia h a d m o r e n u m e r o u s a n d q u a lifie d f o r e i g n - t r a d e c a d r e s th a n we h a v e w ith f e w e r task s a n d le ss re s p o n s ib ility th a n h a s o u r fo re ig n tr a d e . O ur e c o n o m i c i n s t i t u t i o n s m u s t e n d a t o n c e t h e i r h a r m f u l p r a c t i c e o f h o l d i n g o n to c a d r e s w h o a r e n c c e s s a r y f o r f o r e i g n t r a d e , f o r i f n o t , t h e y w ill c a u s e g re a t d a m a g e t o t h e m s e l v e s a n d to t h e i r c o u n t r y . ' 17

T h e effect o f t h e Ja n u a ry decisions was a s e v e re food and fuel crisis that lasted t h r o u g h o u t M a rc h an d April. 48 T h e first signs of in creased hardship w e r e visible w ithin days o f th e M a rc h 1 p olitb ureau m ee tin g , when Tito 15 K id rič , “G o v o r n a p r e t r e s u o p š t e d r ž a v n o g b u d ž e t a za 1948 g o d i n u , " 244. 4(i K a rd e lj, “T h e S t r u g g l e for t h e F u lf illm e n t o f th e F ir s t F iv e Year P l a n , ” 15, 22, 27

17 Ib id , 48 B la žev ic m e n t i o n e d t h e crisis f r e q u e n t l y in d is c u s s io n at t h e s e c o n d p l e n u m of the C P Y c e n t r a l c o m m i t t e e (in P e tr a n o v ié , K o nčar, a n d R ad o njič , S e d n i œ , 144)

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MILITARY S E L F - R E L I A N C E

forces 011 th eir own (no sopstvene snage) in o r d e r to s e c u r e th e approval o f rep u b lic lead ers for

announced the policy of building d efen se

the shift in in v e s tm e n t, c u ts in im p orts at the e x p e n s e o f light in du stry (and therefore e n te r p r i s e s u n d e r rep u blican jurisdiction), and tasks that this policy would r e q u ir e o f the republics. Staple foods d isap p eared from local markets as stockpiling and m ilitary use i n c r e a s e d 49 and exp o rts rose (by the end of th e y ear, exp o rts of co rn and w h e a t alone had in creased tenfold over the 1 9 4 7 figures).30 C u ts in civil-aviation flights, freight movements, and au to m o b ile traffic refle cte d th e decision to c o n s e r v e p e ­ troleum fuels and in cr e a se th e e x p o rt of coal. 51 I 11 M a rc h , w hole villages in Slovenia re b elled against local officials o v e r th e c h a n g e d quotas o f ra ­ tion cards allocated u n d e r th e n e w policy of linked trade. T en sio n s b e ­ tween the Slovene an d federal g o v e r n m e n ts o v e r w ho was to b lam e rose to such heights that Kardelj an d Kidrič had to in te rv e n e p e rs o n a lly .52 Rules forbidding th e traditional E a s t e r slau g h ter o f sacrificial animals so as to conserve livestock for ex p o rt and food for w o r k e r s ’ tables led to direct confrontations with c h u r c h e s in cou ntless villages. T h e political backlash over the April 2 nationalization left such scars th at for tw elve to eighteen m onths th e re a fte r , th e lead ership raised its s p e c te r w h e n e v e r radicals argued for faster and m o re d ire c t socialization. Even before th e first C o m in fo r m resolution, then, th e policy on agri­ culture had b egu n to c h a n g e in o r d e r to gain labor for p rod u ctio n that leaders con sid ered n e ce s sa r y to national s o v ereig n ty ; th e d ecisive politi­ cal purge of th e opposition to c o m e had b e e n d efined; and out o f the reorganization to i m p le m e n t th e plan and th eir p articu lar strateg y toward labor there e m e r g e d a n e w state, th e vision o f w hich was fully c o n c e p ­ tualized in K ard elj’s April 2 5 s p e e c h . The role of state p o w e r d u rin g th e “socialist tran sitio n ” (that is, w hen state power would still h av e a role) was to be the “integral c o o r d in a t o r ’ of society. C easing to b e an i n s tru m e n t for fiscal exploitation and c o erc io n “above’ society, it w ould b e c o m e (in E n g e l s ’s fam ous p hrase) th e a d m in is­ trator of things, not o f m e n . A rep u b lic o f s o c io e c o n o m ic c o m m u n itie s based on p rod u ction an d c o n su m p tio n , it would b e held to g e t h e r by a set of central rules and offices o f tec h n ical supervision, b u t would e n c o u r a g e as much d e ce n tra liz e d e x e c u tio n , a u to n o m o u s m a n a g e m e n t, and d e m o ­

49 U,S. A m bassado r C a v e n d is h C a n n o n ’s t e le g ra m to th e U .S . s e c r e t a r y of sta te , F e b r u ­ ary 4, 1949; h e also w r o t e th at “in April L948 se c u r ity z o n e s r e q u irin g sp ecial and u n o b ta in ­ able permit for all d ip lo m ats w e r e g re a tly e x p a n d e d ” ( Foreign

Relations o f the United States,

1949 5:862).

The Balkans in O ur Time, 3 3 3 - 3 5 , 51 Foreign Relations o f the United States, 1948 4 : 1 0 6 7 ; m in u te s meeting of M arch 1, 1 9 4 8 , in V . D e d ije r , Novi priloži 3 : 3 0 3 - 8 . 52 Blaževic diary, in V* D e d ij e r , Novi priloži 3 : 2 3 4 - 3 5 . 50 Wolff,

o f th e c e n tra l c o m m i t t e e

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c r a ti c p articip ation in firms an d localities as possible. T h e bureaucratic s ta te would b e re p la c e d with th e efficiency o f a te c h n o c ra tic d em ocracy. W h i l e d e ce n tra liz a tio n to e n c o u r a g e local initiative could result not in efficien cy b u t in a s y s te m ic inefficiency of horizontal deals and collusion a m o n g factory m a n a g e r s , factories and farms, o r local c o m m itt e e s that c i r c u m v e n t e d tech n ically efficient rules w h en it was in th eir particular in t e re s t, this cou ld not b e resolv ed by a b u r e a u c r a ti c ap paratus th at alien­ a te d w orkin g p eo p le and d iv e rte d surplus value to pay u n n eces s ary ad­ m in istrativ e salaries. T h e an sw ers to the e c o n o m i c w aste an d political p o w e r o f “b u r e a u c r a t is m ” w e re a lean state (of federal and rep u blican ad­ m in istration s); financially au to n o m o u s c o m m u n e s (the n am e given to the u nit o f local adm in istratio n); and “p e o p l e ’s p o w e r ”— supervision o f central p rin cip les on issues afiecting living standards (welfare, clothing, housing, h ealth an d safety m e a s u re s , food, labor p rod u ctivity) by assem blies of m ass p articip ation in factories, c o o p e ra tiv e s, and c o m m u n e s . 53 This re­ q u ir e d tu rn in g th e state into a staff of ru le-m ak ing e x p e rts , decentralizing n e c e s s a r y ad m in istratio n to th e locality, and p erfec tin g th e vertical chain o f c o m m a n d b e t w e e n the tw o — th e financial plan that would enforce the p r o d u c tio n plan, th e rules and laws form ulated by scientific institutes and e n g i n e e r s in th e m inisterial d i re c to ra te s to assist in p rod u ctio n technique an d d e v e l o p m e n t o f re s o u rc e s , and th e in sp ectors o f th e ce n tra l control c o m m iss io n to o v e r s e e quality and safety standards. T h e e c o n o m ic basis o f this vision o f th e state re c e iv e d a very practical i m p e tu s in th e spring ol 1 9 4 8 . Fin an cial and e c o n o m i c in d e p e n d e n ce of localities w as n e c e s s a r y to reliev e th e grow ing b u d g e ta r y b u rd en s on re­ p ub lican g o v e r n m e n t s that res u lted from the re d ire c tio n o f resou rces to d e fe n s e , capital in v e s t m e n t, and the foreign m ark et. Subsidies to local g o v e r n m e n ts would b e c u t, and d istrict and urb an p e o p le ’s com mittees w ou ld h ave to take g r e a t e r initiative than th ey had in 1 9 4 7 in developing t h e ir “local e c o n o m i e s ” and relying on local materials. L ocal assumption o f th e tasks o f e c o n o m i c d e v e l o p m e n t and social c h a n g e would p erm it the c e n tr a l g o v e r n m e n t to c o n c e n t r a t e on plan priorities. “C o n trol from be­ low” w ou ld re p la c e paid officials with d e m o c r a t ic voluntarism so that the s h o rta g e o f c a d r e s an d b u d g e t deficits cou ld b e reliev ed . P op ular initia­ tive in e x p a n d in g national w ealth was a free c o m m o d ity , and it engaged citizen s in th e n ew o rd e r. M ass p articip ation was also a p ow erful political in stru m e n t of class stru ggle. In th e m o st critical task ah ead , th e rational r e c r u i t m e n t of new 53

A.

B oss J o h n so n a r g u e s in T he T ran sform ation o f Comm unist Ideolog y that the

Y u g o slav le a d e r s d e v e lo p e d t h e i r c r itiq u e o f b u re a u c r a c y o u t o f th e ir re a sse ss m e n t of Stalin­ ism d u rin g 1 9 4 9 ; in fact, th e y had m a d e this critiq u e a n d activ ely p r o m o t e d it from the b e g in n in g o f th e ir r u le, particu larly in 1 9 4 7 and 1 9 4 8 (se e , for e x a m p le , K idrič, “O nekim p r in cip ijeln im pitan jim a naše p r i v r e d e ”).

119

Ml L 1 T AR Y S E L F - R l i I J A N O K

labor, political c a re was essen tial; so it was h an d ed to th e mass political organizations— the C o m m u n is t youth organization (S K O J), the Antifas­ cist Women s F r o n t, th e district p a rty c o m m i t t e e , and th e U n ited Unions branch. And the localization of' g o v e r n m e n ta l tasks was essential to the leaders con cep t o f national d efen se, just as th e ir m ilitary s tra teg y o f te r r i ­ torial defense had d e v e l o p e d d u rin g the war. A lthough th e effect o f the governmental reform was not to re d u c e b ut to in crease the n u m b e r of state offices and officials, th e se w e r e p rim arily at the d istrict level, not the center; ami although e c o n o m i c policy was surely set in the m o st c e n t r a l ­ ized and even s e c r e tiv e forums, th e political stru ggle gave m o re effective authority to local administrators.

co m m iss ariats

and

political

organizations

than

to

Perhaps just as im p o rta n t to th e evolution o f Kardelj's design for the state was a rep etition o f th e tac tic of w a rtim e and th e April 1 9 4 6 politInireau meeting: using p atriotism to c o v e r up sub stan tive d isp utes o v e r policy and justify a political p u rg e. At th e p lenary session of th e cen tral committee that p r e c e d e d Kardelj s April 1 9 4 8 s p e e c h , held in th e library ol the former King A l e x a n d e r ’s p alace in B elg rad e on April 12 and 13, the fwenty-lbur m e m b e r s w e r e p r e s e n te d with Stalin’s le tte r o f M arc h 2 7 and the draft of a Yugoslav reply, and then given a c h o i c e — b e tw e e n “the policy of the C P Y

and

Stalin and his th eses.

T h e internal d e b a t e was no

longer over d o m e s tic policy; it was an issue o f national loyalties. As Tito said in conclusion:

C o m r a d e s , r e m e m b e r that it is not a m a tte r h e r e of

any theoretical discussion. . . . W e m u st not allow o u rselves to b e forced into a discussion of such things. C o m r a d e s , the point h e re , first and fo re­ most, is the relations b e t w e e n o n e state and a n o t h e r . ”54 This time voicing d is a g r e e m e n t, Žujović called both th e p re c ip ita te r e ­ ply and the le a d e rs h ip ’s c h o se n policy o f socialism in on e co u n tr y a “fatal mistake,

b e cau se “w e ’ve isolated o u rselv es from the b ro a d e r p e r s p e c tiv e

under the b urden o f p o w e r . ”55 B u t T i t o ’s an sw er was “You, C rni [Ž u ­ jović s

mnn tie gtierre], have taken for y o u rself the right to love th e U S S R

more than m e. ,(> By M ay 5,

w hen Tito an n o u n c e d th e rem oval of

Hebrang and Žujović to th e national assem bly, a th oro ug h p u rg e had b e ­ gun of the m in istry of finance (u n d e r Žujović) and of the m in istry o f h eavy industry and the p lann ing c o m m ission (both u n d e r H e b ra n g , w h ose view was also solicited after the m e e tin g ) A rre s te d four days later, th e se tw o o f the most p ro m in e n t p r e w a r C o m m u n is ts and c o n ce iv a b le ca n d id ates for party leadership w e r e c h a r g e d by a p arty tribunal with betrayal. As Tito had instructed his c o lleagu es on April 12,

W e m u st do e v e r y th in g to

11 V. D cd ijer, Novi prilozi 3 : 3 3 8 . Sue also V n k in a n o v ić-T rin p o , Revolucija koja teče 2:71-72. 1,5 V. Declijer, Novi prilozi 3 :3 7 0 . * Ibkl , 3 8 2 .

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p r e v e n t p e o p le w h o w ant to d e str o y th e unity of o u r P a rty from doing s o . ”57 In April alon e, an “esp io n ag e trial” of tw e n ty -s e v e n p rew ar, non­ c o m m u n is t leftists in L ju b lja n a r e m o v e d m an y o f th e rem ain in g mem bers of th e p o p u la r front from high g o v e r n m e n ta l positions. M ost

interna­

tio n alists,” such as th e “S pan iard s” (Spanish civil w ar v eteran s), and a la rg e n u m b e r o f p a rty in tellectu als s u c c u m b e d to exile, trial and prison, o r suicide. T w o w aves o f p e rs o n n e l c h a n g e in fed eral ministries, in the sp rin g and again in A ug ust, p laced loyalists in th e m ajo rity— above all in th e m in istries o f labor, m in in g, and foreign affairs. In K id r ič ’s April b u d g e t s p e e c h , w h e r e the shift in i n v e s tm e n t strategy was a p p a r e n t, h e criticized skeptics c h a r g e s as

e n e m y sland er

and op­

p o n e n ts as " e x p e r ts e d u c a t e d in foreign technical schools, u n d e r th e influ­ e n c e of m o n o p o listic ‘th e o r ie s ’ of foreign financial capital

who were

p re j u d ic e d against d o m e s ti c p rod u ctio n o f raw m aterials and investment in m e ta llu rg y and m e ta l-p ro c e s s in g industries. At the s a m e tim e, those w h o d isa g re e d with th e h u g e in cr e a se in capital in v e s tm e n t w e re no bet­ t e r th an w a r t im e traitors, for “w itho u t the d e v e l o p m e n t of basic branches o f o u r h e a v y in d u stry, mining, electrification, etc. . . , ou r co u n tr y would fall d e e p e r and d e e p e r into e c o n o m ic d e p e n d e n c e on foreigners, and it w ould p r e v e n t th e con stru c tio n of socialism in the F P R Y [Federative P e o p l e ’s R e p u b lic o f Y u g o sla v ia ].” T h e population would m ake th e neces­ sary sacrifices ou t o f p atriotism , h e insisted: D e a r p e o p le 's d e le g a te s , w e can c o m p a r e th e stru g g le for T it o ’s Five-Year Plan w ith t h e N ational L ib e r a tio n stru g g le in m an y ways. N a m ely, in the c u r r e n t s tru g g le for t h e Five -Y e ar Plan, h u g e efforts a re also n e e d e d , sacri­ fices are n e e d e d , b e c a u s e w i t h o u t effort and w ith o u t sacrifice t h e r e are no g r e a t victories, j u s t as w i t h o u t th e m t h e r e w o u ld h a v e b e e n n o n e in the N ational L ib e ra tio n struggle. A nd in this stru g g le as well t h e r e a ppea r, just as t h e r e a p p e a r e d in t h e N ational L ib e ra tio n struggle, w a v e re rs, capitula­ tors, e n e m i e s , w h o s p re a d d is b e lie f in success, disbelief in th e p o w e rs of our l a n d a n d o u r w o rk in g nation. A nd ju s t as th e e x p e r ie n c e of the National L ib e r a tio n s tru g g le clearly s h o w e d th at such p e o p le w e r e in fact working against th e i n d e p e n d e n c e a n d fre e d o m of o u r land, th e e x p e r ie n c e of the s tru g g le for o u r F iv e -Y e ar Plan a n d its success also d e m o n s tr a t e s , a n d will d e m o n s t r a t e , th a t p e o p le w h o s p re a d d o u b t in o u r e co n o m ic p o w e rs arc in fact e n e m i e s o f th e a ll-a ro u n d s tr e n g th e n i n g o f o u r fa the rland , a n d are at the sa m e tim e e n e m i e s of th e c o n stru c tio n of socialism in o u r c o u n tr y . 58 57 Ib id . A c c o r d in g to D e d i j e r , t h e conflic t a r o u s e d ‘'e x c ite m e n t''; b u t th e c h a r g é d affaires at t h e U .S . E m b a s s y s e n t w o r d to W a s h i n g t o n o f s u r p r is in g a p a t h y o n M a y D a v a nd on Tito s b i r t h d a y (M a y 2 5 ) — in s trik in g c o n t r a s t to t h e p r e v i o u s y e a r ’s c e l e b r a ti o n s . H e also reported sig ns d u r i n g M a y o f a " d r o p in t h e r e g im e 's c o n f id e n c e a n d o p tim i s m " (F o r e ig n Relations of t h e U n i t e d S ta te s , 19 48 4 : 1 0 7 0 —72) K id rič , “G o v o r n a p r e t r e s u o p š t e d r / a v n o g b u d ž e t a za 1 9 4 8 g o d in u ,

245.

MILITARY S E L F - R E L I A N C E

121

Despite even T ito’s in sisten ce in 1 9 4 6 th at th e v o l u n te e r labor brigad es should end, these p o p u lar “c o n trib u tio n s ” to th e extra o rd in a r y b u t shortrun demands for capital c o n s tr u c tio n and federal p ro jects w ou ld co n tin u e. Similarly, the extra o rd in a ry b u d g e t e x p e n d itu r e s would b e c o v e r e d in pait by a

national bond for th e five-year plan for d e v e lo p m e n t o f th e

national econom y o f th e F P R Y , ” w hich would, like the b on d for national liberation of Jan u ary 1 9 4 3 (w hich u nfortu n ately would m a tu re in 1948), offer the population a n o th e r o p p o rtu n ity to p articip ate in th e d efen se o f the country s i n d e p e n d e n c e .

May- D

ecem bkh

194 8 : T

he

Po l it ic s

of

M il it a r y Se l f -R e l ia n c e

The leaders had n e v e r given up on efforts to obtain trad e and assistance, unblock their gold r e s e r v e s , and r e v e r s e a tou rist ban with th e U n ite d States; Tito even d e le g a te d Srdja Priea in early Ja n u a ry 1 9 4 8 to re n e w requests in W ashin gto n with an explanation o f th e ir difficulties with the USSR, fhe con cessions th e y m a d e in F e b r u a r y on c o m p e n sa tio n for American property claim s in h op es o f r e o p e n in g n egotiations b o re fruit by May, when they c o n c e d e d (“p r e c ip it a te ly ,” th e A m e ric a n s th ou gh t) to much of the U .S . position in o r d e r to g e t an a g r e e m e n t oil J u n e l l . 59 In June, they' re p e a te d th eir

in te re s t in e x p an d in g W e s t e r n tra d e

in c o n ­

versations with U .S . and o th e r W e s t e r n diplom ats, and s everal tim es d u r ­

ing July Tito raised the idea o f their participating in the Marshall Plan «ifter all. By October, they had reduced the How o f supplies to aid the rebels in the Greek civil war— a sore point with Stalin and the primary complaint of the United States since late 1946— but probably because o f the burden on their own economy. The United States began a tentative leassessment in light of th e se c o n cessio n s, sensing an extra o rd in a ry p r o ­ paganda o pportunity th at was e m e r g in g w ith th e C om inforin resolution of June 28. After Ju ly 6, the State D e p a r t m e n t and the National S ecu rity Council edged from a policy d e sig n e d to u n d e r m i n e th e C o m m u n is t r e ­ gime through e c o n o m ic h ardship to o n e o f “watchful w a itin g .”60 T o r e ­ place the oil deliveries that Albania, H u n g a ry , and R o m an ia c a n c e le d in

July (the first manifestations of the trade slowdown from the East, which were followed by Czechoslovakia’s refusal to send more coking coal and machinery until the Yugoslavs upheld their part o f the trade agree­ ment),'’' the United States now gave Yugoslavia permission to purchase 1.1 The J u g osla v s h e ld u p t h e sig n in g u ntil Ju ly 19, h o w e v e r , so t h a t it w o u ld c o in c id e with the o p e n in g o f t h e fifth p a r t y c o n g r e s s tw o d a y s la te r. T h e c o n c e s s io n s in c l u d e d p a y ­ ment ol $18 million for v a rio u s c la im s o u t o f t h e *57 millio n in d i s p u t e , a n d 4 7 m illio n d in a rs lor tlieir obligations on L e n d - L e a s e good s. 60 Mugosa, " O d n o s i J u g o sla v ije i S A D -a i z m e d ju 1945 i 1 9 4 9 .” 1.1 Very little- e lse o c c u r r e d at this p o in t, d e s p i t e t h e s t a n d a r d v ie w th a t t h e r e w as an

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oil from th e Allied occu p ation au thorities in T ries te. In S eptem ber, a te a m from th e I M F an d th e W o r ld Bank arrived in B e lg r a d e to reopen n egotiatio n s on con ditions for cred its and loans, and the U .S . State De­ p a r t m e n t allow ed two A m e ric a n c o m p a n ie s to sub m it preliminary re­ q u e s ts for e x p o rt licen ses to sell Yugoslavia m a c h in e r y forbidden by the s tra te g ic e m b a r g o in e x c h a n g e for m inerals and o r e s . 1’2 In his negotiations with t h e U .S . a m b a s sa d o r C av en d ish C a n n o n , Kardelj confided their dire n e e d o f tires, fuel, and tru ck an d tra c t o r parts to reliev e transportation b o ttle n e ck s. T h a t re q u e s t was re je c t e d in D e c e m b e r , but in O cto b er the W o r l d Ban k did in clu d e Yugoslavia along with Austria, Poland, Czecho­ slovakia, an d F in la n d in its offer of a loan for tim b e r e q u i p m e n t because of t h e b a n k ’s special in te re st in e n co u r a g in g tim b e r exp orts from the East to W e s t e r n E u r o p e . T h e su ccess o f U .S .- Y u g o s la v n egotiations o v e r the gold r e s e r v e s e n c o u r a g e d W e s t e r n E u r o p e a n g o v e r n m e n ts to e n t e r trade ne­ gotiations to gain similar le v e r a g e in th eir own claim s against Yugoslavia. B e t w e e n April and D e c e m b e r 1 9 4 8 , th e p e rio d in which the Soviet trade t r e a ty had b e e n p o s tp o n ed , Yugoslavia c o n clu d e d bilateral treaties with B ritain , A rg en tin a, Italy, B e lg iu m , the N e th e rla n d s , S w ed en , Switzer­ land, T u rk e y , and F r a n c e , a m o n g o t h e r s . 63 T h e sup ply of p rim a r y c o m m o d itie s for ex p o rt and capital construction thus c o n tin u e d to d o m in a te th e h o m e front, w h e r e Kidrič and Kardelj p r o c e e d e d w ith additio nal institutional a d ju stm en ts to im p ro v e incentives an d e n fo r c e b o th real and ac c o u n tin g balances. O n J u n e 5, th e day of the n e w b o n d su b scrip tion , th e E c o n o m i c C o un cil held a c o n fe re n c e of all p e rs o n s involved with agricu ltural policy to discuss th e results of the sp rin g sow ing and th e p ro s p e c ts for th e co m p u lso ry deliveries in the fall. A p p a re n t ly resistin g s tro n g p re s su re s for a d ir e c t confrontation with rich fa r m e rs , K idrič in stead c o n c e d e d to m u c h h igh er quotas, by changing the c r i t e r i a u se d in 1 9 4 7 - 4 8 : instead o f b eing based on th e size of a farmer’s c u ltiv a te d land surface, th e q u o ta would b e a steep ly prog ressiv e propor­ tion o f th e actual h a rv e s t (up to 8 5 p e r c e n t) d ep e n d in g on th e size of the holding, afte r d e d u c tio n s w e r e m a d e for hou seh old c on su m p tion , animal feed , s e e d , an d forage. S tate farms had to sell th eir en tire yield: labor im m e d i a t e b lo ck ad e from th e E a s t . T h e tr a d e blo ck ade c a m e into effect only during 1949; it w as m o r e o r less c o m p l e t e by th e e n d o f J u n e , e x c e p t for th e o n e -e ig h th o f previous trade c o n t r a c t s th a t had b e e n n eg o tia te d w ith th e U S S R in D e c e m b e r 1 9 4 8 (Ib id .; and

Relations o f the United States, 1949,

Foreign

vol. 5).

62 T h e m a c h i n e ry in clu d ed a ste e l-b lo o m in g mill w o rth $ 3 million, fifteen oil drills, five m ob ile m a c h i n e -r e p a ir sh op s, B a n b u ry m ix e rs for a tire plan t, a n d se v era l thousand tractor tir e s ; t h e m in e ra ls and o re s in clu d e d c o p p e r and lead w o rth $ 6 million for the steel mill alo n e ( s e e , a m o n g o th e r s , M u g o ša , “O d n osi Jug oslavije i S A D - a ”; and Clissold,

Yugoslavia

and the Soviet Union). 63 M u g o ša , “O d n osi Ju g oslavije i S A D - a ”;

Foreign Relations o f the United States, 19495:

8 5 4 - 5 5 (cab les fro m D e c e m b e r 2 3 - 2 4 , 1 948).

MILITARY S E L F - R E L I A N C E

123

cooperatives, b e t w e e n 10 and 5 0 p e r c e n t ; g en eral fa r m e r s ’ c o o p e ra tiv e s, between 2 0 an d 2 8 p e r c e n t ; and p easan ts with less than two h e c ta r e s , none. F a r m e r s willing to c o n c lu d e forw ard c o n tra c ts (kontrahiranje)m with the state w e r e p ro m is e d p rices 2 5 p e r c e n t h ig h e r than th e official price for both c o m p u ls o ry d e liv eries and free surpluses. T h e National Bank was in stru c te d to shift c red its for th e c o o p e ra tiv e s e c to r from the 1947 emphasis on w orkin g capital to one e n c o u r a g in g in v e s tm e n t. L o c al reforms also a im ed at c a p tu rin g savings, from th e p rivate s e c to r in local savings associations e s tab lis h e d to a d m in iste r th e national bon d, an d from public-sector e n te rp ris e s in th e es ta b lis h m e n t o f N ational Bank b ran ch es in every district to a d m in iste r th e s ystem of cash p lann ing65 (legislated on August 14). Insistence on local and s ettled so u rc es of labor,

prob ab ly o f ev e n

greater c on cern b e c a u s e o f th e d ecision to d e v e lo p the territorial militias, remained policy. W r i tin g in the J u n e issue o f

Narodna D ržava, th e j o u r ­

nal for g o v e r n m e n t officials in e c o n o m ic adm in istratio n, th e n ew m in ister oflabor, L ju b čo A rsov, u rg e d p a rticu lar c a re “to avoid as m u ch as possible large transfers o f w orkin g p e o p le from on e region o f th e c o u n tr y to a n ­ other.

As he exp lained , “It is also n e ce s sa r y to k eep in m in d that p e o p le

are separated from t h e ir e n v ir o n m e n t with difficulty and that they wish in one way or a n o t h e r to k eep in the c losest c o n ta c t w ith t h e ir own region. ”6(i He then re ite r a te d his p r e d e c e s s o r ’s stress on e m p lo y m e n t of w o m e n , arguing that th e reasons for th eir low p rop ortion in the e m p lo y e d labor force in 1 9 4 7 (only 1 8 . 8 p e r c e n t , th ou gh th e figure varied g reatly a m o n g sectors and regions) had to be a c k n o w led g ed ; w o m e n ’s “relativ e b a ck ­ wardness d ue to th eir s u b o rd in ate position and ed u cation h isto rically ,’’ the absence o f cafeterias and d a y -c a re c e n t e r s , and d iscrim ination by some factory d ire c to rs w h o o b je c te d to the rules equalizing w o m e n ’s pay rates with those of m e n . 67 Nonetheless,

th e c o n c e r n

o v e r food and fuel took on e m e r g e n c y

proportions in early Ju n e ; th e resp o n se on the g rou nd , as u n d e r the supply-strained, e m b a ttl e d conditio ns o f F o č a in th e w ar, was military campaigns, political p re s su re s , an d ev e n physical c o e rc io n to e x tr a c t all available internal supplies. W i th coal re s e rv e s dow n to several days sup-

1,1

See V P e tro v ić , R a z v i t a k p r i v r e d n o g sistem a F N R J 4:14.3-4 4 T h e s y s te m o f f o r w a rd

contracts was also p atterned ¡liter th e Soviet system , which was introduced (at first on a voluntary basis and th en , in 1933, by d ecree) b etw een individual peasant farms and the colleetive-farm m o vem en t then developin g, in ord er to secu re supplies. "C red it facilities .»id supply o f m anufactured goods w ere coupled with a guarantee o f certain m inim um Slip plies of grain" (D oh b. Soviet Economic Development since 1917. 224, see also 285). ® Kaseno planiranje; s e e D obb. Soviet Economic “ Arsov, ’M o biliz ac ija n o v e r a d n e s n a g e , ” 6. 67 Ib id .. 4.

Development since 1917, 3 8 5 - 4 0 2 .

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ply, K idrič left B e lg r a d e for a p ro g res s o f th e m in es in th e interior (by c o a l-c o n s u m in g train!),

p erh ap s con sciou sly im itatin g Stalin’s “Urals-

S iberian m e t h o d , ”68 to see w h at his p erson al to u c h could do to get sup­ plies m o vin g. At th e e n d o f J u n e , T ito m o v e d his tou gh troubleshooter s in c e 1 9 4 2 , S v e to z a r V u k m a n o v ič-T e m p o , from th e standing arm y he had h e l p e d build after th e w ar to th e fed eral M inistry of M in ing and Power. D e s p it e V u k m a n o v ic - T e m p o ’s p e n c h a n t for blunt, shocking rhetoric, his m e m o ir s for th e s e m o n th s a re prob ab ly not h yp erb ole: W e b e g a n w ith “r o b b i n g ’ th e m in e s a n d forests: w c d u g u p th e rich e st veins of o re , c u t d o w n e n ti r e c o m p le x e s of forest. . . . All those p ro d u c ts that were in d e m a n d on fore ign m a r k e ts a n d for w h ic h w c h a d s c c u re d foreign ex­ c h a n g e in o r d e r to p u r c h a s e ra w a n d i n te r m e d i a te m ate ria ls for th e needs of in d u str ia l p ro d u c ti o n a n d s u p p ly in g th e p o p u latio n . T o do this, it was neces­ sary to s e c u re sufficient labor o r m ec h a n iz atio n . W e did not h a v e the foreign e x c h a n g e for th e s e c o n d , w h ic h left us w ith th e single o p tio n of mobilizing labor. W e d id n o t w aver: all u n e m p l o y e d in th e t o w n s — those w h o had no p r o o f th at t h e y w e r e e m p l o y e d in so m e socially useful w o r k — w e re mo­ bilized a n d s e n t to w o rk in th e m in e s. P e a sa nts also h a d to w ork in the mines a n d at c o n s tr u c tio n sites w h e n th e y w e r e n o t o c c u p ie d in agricultural labor. L a b o r offices w e r e c r e a te d in th e c o m m u n e s 69 for m obilization. T h e mobiliza­ tion was forced; those w ho fled from w o rk w e re p u n i s h e d w ith prison sen­ te n c e s lasting u p to two m o n th s . In this universal m obilization o f people, the c o u n tr y incre asin g ly took on th e c h a r a c t e r of o n e g re a t c o n stru c tio n site. . . . B ut it was not that m agnifice nt effort of th e e n ti r e p o p u la tio n that charac­ t e r i z e d th e p e r i o d d ire c tly after libe ra tion, w h e n th e e n ti r e p opulation vol­ u n ta rily set to w ork so th at th e c o u n try w ould e m e r g e as soon as possible from th e ru in s of t h e four-y ea r-lo n g war. . . . In ste a d , t h e r e w e r e elements o f co erc io n . W o r k in g in th e m in e s w e r e m in e rs a n d “u n e m p l o y e d ” citizens a n d in so m e places e v e n p r is o n e r s w ho h a d b e e n s e n t e n c e d to hard labor b e c a u s e of c rim in a l a c tiv ity .70 This mobilization was in effect by July, w hen th e first revision of the plan for lab or i n c r e a s e d th e q u o ta th at p e o p l e ’s c o m m i tte e s had to supply from th e villages

fou rfo ld. K id ric’s April op tim ism in urging full utiliza­

tion o f c a p a c ity was no lo n g er justified by A ugust, as th e com b in ed pres­ s u r e on p ro d u ctio n an d the sh o rtage of r e p l a c e m e n t parts began to take t h e i r toll on plant and e q u ip m e n t and thus on ou tp u t in mining, timber, an d p u b lic a g r i c u l t u r e . 71 B e c a u s e th e h arv es t looked prom ising and the 68 S e e N o v e , Am

Economic History o f the USSR , 153. opština, a p r e w a r

69 V u k m a n o v ič -T e m p o uses th e w o rd

Se rb ia n t e r m for local govern­

m e n ts , alth o u g h th e y w e r e not c r e a t e d as su ch in th e socialist p e rio d until 19 5 5 .

Revolucija koja teče 2 : 1 0 2 - 3 . Foreign Relations o f the United States, 1948

70 V u k m a n o v ic -T e m p o , 71 I b i d .;

4 :1 1 0 7 .

MILITARY SKLF-RKLIANCF.

125

bread ration had b e e n officially raised, the fact that food s ho rtages c o n tin ­ ued “thoroughly a la rm e d th e p op ulace. 72 A mid s e v e r e s ho rtages o f m eat and fats in c o n s u m e r m ark ets, m o r e o v e r , th e g o v e r n m e n t req u isition ed hogs for export in early S e p t e m b e r . At the S e p t e m b e r 2 0 m e e t in g o f the Economic C ouncil, as re p o rts from th e h arvest and p u rch asin g boards flowed in, Kidric finally c o n c e d e d to th ose who saw th e kulak as th e source of the p ro b lem . U n leash in g a cam p aign o f political slogans against the rich kulak, village m a g n a te , re m n a n ts of “c l e r i c a lis m ,” s peculato rs, “saboteurs,” and agen ts o f foreign es pio nag e, the leaders no lon ger at­ tempted to stop ru m o rs that collectivization was i m m i n e n t .73 A lthough the party policy since Ju ly to “limit capitalist e le m e n ts in th e village in their exploitative activ ities” was n o n co m m ittal on m e th o d s , p arty zealots now pressured peasants into labor c o o p e ra tiv e s. By N o v e m b e r , w ork was b eing reorganized at state farms along b rigad e principles cop ied from both Soviet and wartime e x p e r i e n c e s , including a n e w title of socialist c o m p e tit io n — "fighters for high y i e ld s ,” b e c a u s e p rod u ctiv ity had b e e n singularly d isap ­ pointing and th re a te n e d th ese fa r m s ’ role in ex p o rt p ro d u c ti o n .74 The reaction is not surprising. M an y m id d le peasan ts a p p a re n tly slack­ ened their h arvest efforts, calcu lating that th ey would soon lose t h e ir land anyway, w hereas ric h e r peasants used th eir lin ked -trad e c ou p o n s not for industrial goods, but as c u r r e n c y to obtain the labor services o f p o o r p e a s ­ ants. Mothers in cities w h o could not obtain c ou p o n s for g u a ra n te e d p r o ­ visions because th ey w e r e not e m p lo y e d tu rn ed to “sp ec u la tio n ” (illegal trade) in o rd er to feed th eir ch ild ren (for w h ich , Tito la m e n te d in Ja n u a ry 1949, "we lock th em up and send th e m to labor c a m p s, and d o n ’t p ay any attention at all to w h at will b e c o m e o f th eir ch ild ren ”) . 75 F a c t o r y m a n ­ agers pressed by s h o rtag es and u n d e r obligation to p rov ide g u a ra n te e d provisions for th eir w orkers ign ored th e rules and bargain ed d ire c tly with farmers and their c o o p e ra tiv e s: r u b b e r boots in e x c h a n g e for p oultry, te x ­ tiles for lard and m e a t, pigs hair and e l e c tr i c m o tors for fuel wood, shoes for textiles. B a r t e r b e tw e e n factories (even factories in different r e p u b ­ lics), between factories and district p e o p l e ’s c o m m it te e s , b e tw e e n the di­ rectorates of industrial m inistries, rep u blican g o v e r n m e n t s , trad e-u nio n branches, and all the way up to th e level of ministries c r e a te d an en tire system of u n regu lated c o m m e r c e in kind. A “c o m m e r c ia l a p p a r a tu s ,” in Kidric s o xy m o ron , was e m e r g i n g in d e p e n d e n t of state c on trol, and it kept for d o m e s tic c o n su m p tio n goods alread y c o m m i tte d for e x p o rt in 72

Cable: to W ash in g to n from U . S . E m b a s s y in I k d g ra d f, Au gu st 2 2 , 1 9 4 8 , in

Relations o f the United States, 1948

Balearic, “G radu n a ro d n o g frontu na s e l u . ’’

Foreign Relations o f the United States, 1948

4:1054-1118.

14 Petranovic, K o n c a r, and Kadonjic, Sedniee , 6 9 6 n. 5 0 , 75 Ibid

261.

Foreign

4 :1 1 0 6 .

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tra d e a g r e e m e n t s . By O c to b e r , trains w e re stop p ed for lack of fuel, and a sh o rta g e of tires and parts sidelined trucks and tractors. C o n t r a r y to th e shift in Ja n u a ry to state (lederal) control o v e r trade and lab or plans, th e M ay p olitb ureau m eetin gs began a d riv e to p rep are the p a rty to b e th e p rim a ry in s tru m e n t of d irectio n, using an active, militant c o r e of w o rk ers (like the p roletarian brigades d u rin g the war) against offi­ cials, m a n a g e r s, professionals, and o t h e r stalf in both public and private s e cto rs in th e “battle to c o m p l e te the plan

G o v e r n m e n t officials, many

of t h e m h old overs from the p re w a r g o v e r n m e n t, and factory managers, e n g i n e e r s , and o th e r professionals in the e c o n o m y w hose interests con­ flicted with th e le a d e r s ’ policy or w h ose skills lay not with political cam­ paign ing but with tech n ical calculations and m anagerialism could no lo n g er be tru sted . T h e p arty was to con solidate its p o w er as a governing political p arty and o c c u p y th e offices of th e stale in the c o n te x t of emer­ g e n c y m o bilizatio n — to in crease capital c o n stru c tio n for military self­ relian ce and

to e x t ra c t

from d o m e s tic con su m p tion

all the supplies

n e e d e d for fo reig n -trad e c o n tra c ts m ad e w ithou t cred it. O n M ay 9, Tito began p rep aration s within the surviving central com­ m i t t e e for a p arty c o n g re s s , although th e final decision was not taken until M ay 2 2 and th e public a n n o u n c e m e n t was d elayed until T it o ’s official b irth d a y on M ay 2 5 . 70 This c o n g res s signaled the official e n d to the period ol th e p op u lar-fro n t coalition and its am b iv a le n c e about the full role of the C o m m u n i s t p arty, d u rin g which p arty m e m b e r s had b een instructed to k e e p th eir m e m b e r s h ip s e c r e t, radical action was led m o re often by the youth wing (S K O J), and activists, b e c a u s e th ey still re p re s e n te d the p a r t y -a s - a r m v — the m ilitary eom m isars of the w artim e proletarian bri­ gad es and the c o m m iss ariats of th e local p e o p le ’s c o m m itte e s during r e c o n s t r u c t i o n — were1 (by th e e n d of 1946) b ein g d em ob ilized and re­ p laced by civilians. But the rising p op ular d iscon ten t, the political deli­ c a c y of ad m in iste rin g a fourfold in crease in labor for th e n ew policy of “d e fe n se with o u r own re s o u rc e s , would

side

with

Stalin

m ade

and the co m in g p u rge of those who

loyal

party

c ad res

essential

again as

o p e ra tiv e s. T h e political s p ac e b e tw e e n M ay 2 5 and July 2 1 , w hen th e fifth con­ gress c o n v e n e d in B elg rad e, was filled with a host of p re c o n g re s s rituals an d p arty m e e tin g s to e le c t d eleg ates . Organizationally, th e congress m a d e two m ajo r c h an ges: grantin g full status as national com m ittees to w hat had so far b een only provincial party organizations in BosniaI Ie rz e g o v in a , M ac ed o n ia, and M o n te n e g ro ; and initiating a membership d riv e d e sig n ed to shift the party's social base to th e n ew working class.77 7
7f Lju jić , “ P r i m a n j e u partiji i p o b o ljš a v a n je s o cij aln o g s a s ta v a .” H o w e v e r . I>jujić, reports, m a n y p a r t y o r g a n iz a tio n s in fa c to rie s w e r e n o t i m p l e m e n t i n g t h e n e w p a r ty line, aimed at

127

MILITARY S E L F - R E L I A N C E

In fact, the m a s s -e n ro llm e n t cam p aign that followed was a roll call on national loyalty. T h e c riterio n for n e w and old m e m b e r s alike was their answer to a single q u estion , asked of each , standing alone in front of the others and w ithou t discussion: w e r e th ey for Stalin or T ito ? 78 T h o se who sided with Stalin (known since then as th e

ibeovci, o r C o m in fo rm

sympathizers)— in s o m e cases e n tire p arty c o m m i tte e s ,

especially in

Montenegro— w e re exp e lle d , and m an y w e re a rr e ste d . B u t this p u rg e, which lasted from A u g u st 1 9 4 8 to the e n d of 1 9 5 0 , was also a civil war. Alongside the a rrest o f a s e c r e t Bolshevik p arty faction in th e B e lg r a d e Faculty of E co n o m ic s in late 1 948, th e pub licized b o r d e r e s ca p e s o f m an y army generals (not all successful), and th e large p r o p o r tio n — which was not publicized— of soldiers and air force officers in th e resu ltin g political emigration (estim ated at 3 , 5 0 0 ) , the d isp ro p o rtio n ate p u rg e o f S erb s and Montenegrins o v e r C r o a ts and S loven es, as vvell as th e cou ntless private scores that w ere settled in th e uph eaval, reflected th e national and r e ­ gional dimensions o f a partisan stru ggle that was c o n c e n t r a t e d in th e in te ­ rior borderlands and th e s o u t h w e s t.79 T h e industrial w orking class still predominated in C r o a tia and Slovenia, w h e r e in du stry was m o r e d e v e l ­ oped and war d a m a g e less s e v e r e — although it was soon to b e join ed by the new workers e m p lo y e d in B o s n ia -H e rz e g o v in a as in v e s tm e n t in h eavy industry was c o n c e n t r a te d th e re in 1 9 4 8 and 1 9 4 9 for reasons o f strategic safety and the location o f m in eral reso u rces. Because the p a rty ’s p rim a ry task was to im p l e m e n t th e e c o n o m ic pol­ icy, however, its activity would m ir ro r th e e c o n o m y 's dualism (and the party s political s trateg y of 1940). In th e public s e cto r, it would a p p e a r as the organized van gu ard of a unified industrial working class in te g ra te d into production units. In th e p riv ate s e c to r and in th e g o v e r n m e n t that joined the two secto rs, it would be a parallel force, mobilizing solidarity and overseeing officials in the g o v e r n m e n t and th e mass political o rg an i­ zations such as the P o p u lar F r o n t. As early as A ugust, th e ruling c a m e that the m in ister of foreign affairs had to he a m e m b e r of the p arty p olitb ureau, and th re e senio r p arty leaders w ere m ad e v ic e -p re s id e n ts in the g o v e r n m e n t — K ardelj, A lek­ sandar Ranković, and Blagoje N ešković. L a b o r r e c r u i tm e n t was a m a tte r ol the greatest political sensitivity, req u irin g e x p e rts in agitation and p r o ­ paganda to p e rs u a d e p otential w ork ers of th e c on trib ution th ey would be making to the c o u n t r y ’s d e v e lo p m e n t and i n d e p e n d e n c e ; at th e sam e time, it could not be p e r m itt e d to h arm e c o n o m ic grow th by in creasin g reducing tlu* p ro p o r t i o n ol p e a s a n ts a n d i m p r o v i n g tile p a r t y ’s social c o m p o s i tio n by e n ro llmg more p r o d u c tio n w o rk e rs . 7H My in fo rm a n t is B o risla v S k e g ro , w h o s e f a t h e r e x p e r i e n c e d th is in Bosnia, 7lJ Discussions o f t h e i b e o v c i , i n c lu d in g d a t a o n w h o t h e y w e r e , a r e in B an ae, W i t h Sta lin against Tito; a n d P e tr a n o v ic , K o n c a i, a n d K ado n jic, S e d n ic e , 2 3 1 - 3 4 8 .

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e m p l o y m e n t in ad m in istratio n ra th e r than p ro d u ctio n , as so m e republics had a lre a d y b e g u n to do w h en K idrič co m p la in e d ab ou t it th e previous April. In th e villages, the political agen ts of labor r e c r u it m e n t were still P o p u la r F r o n t activists actin g “voluntarily . . . as a g re a t p atriotic duty.”80 B u t alon gsid e th e labor offices set up in eac h district on S ep tem b er 1, ad visory cou ncils (savjeti ) w e re c r e a te d re p re s e n tin g all ol th e mass orga­ nizations (th e P o p u la r F r o n t , th e unions, the Antifascist W o m e n ’s Front, th e y o u th organ ization s, and others). Although K ard elj’s reform to im­ p r o v e th e v e rtical links in g o v e r n m e n t had legislated district branches of th e p a r ty ’s c o n tro l co m m iss io n on S e p t e m b e r 2 5 , th e com m issariats (abol­ ished in t h e m o v e to civilian con trol in 1947) w e r e also resu rrected on O c t o b e r 18 to give p arty m e m b e r s in th e militia and secu rity forces (w hich th e p roletarian brigades had b e c o m e by th en) su p ervisory roles in th e e x e c u tio n o f federal tasks. T h e h eads o f eac h com m iss a ria t w ere, how­ e v e r , to b e resp on sib le to th e e x e c u tiv e boards of t h e local governments w h e r e t h e y sat e x officio; th e b o a r d ’s p re s id e n t and s e c r e ta r y had final a u th o rity w ithin th eir territory . E a c h ministerial b ran ch in the republican g o v e r n m e n t s also c r e a t e d a section o f eac h p e o p le ’s c o m m i t t e e — for agri­ c u l t u r e , t ra d e and supplies, c o m m u n a l affairs, industry and crafts, fi­ n a n c e , lab or, ed u c a tio n an d c u ltu re , p ublic h ealth, social welfare, local tra n s p o rt, an d, w h e r e rele v a n t, for tou rism , c o n stru c tio n , forestry, and fishing. P lan n in g c o m m ission s w e r e set up in the district p e o p le ’s com­ m i t t e e s with the a u th o rity to c r e a t e b ran ch d ire c to ra te s w h e re m ore than on e e n t e r p r i s e in a b ra n ch o f p rod u ctio n o p e ra t e d locally. T h e republican g o v e r n m e n t s w e r e in stru c te d to set up com m ission s for imm ediate ad­ m in istrativ e reo rg anization o f th e local p e o p l e ’s c o m m i t t e e s — proposals w e r e to b e finished by D e c e m b e r 1, internal conflicts resolved by the fifteenth, reo rg an ization c o m p le t e d by th e th irtieth, and n ew sessions c o n v e n e d no later th an M a rc h 1, 1 9 4 9 . 81 T h e separation o f th e p arty from its w a rtim e coalition also gave formai a u t o n o m y to its allied organizations. This a u to n o m y was celebrated in c o u n tr y w id e c o n g re s s e s b e tw e e n O c to b e r 1 9 4 8 — with con g res s es of the U n i t e d U n io n s, S K O J , th e Antifascist W o m e n ’s F r o n t, the league of engi­ n e e r s an d tec h n icia n s, the Serbian and S loven e a c a d e m ie s ol science, the fed eral a c a d e m ic council, and th e phy sicians’ association, as well as a c o u n t r y w id e y o u th festival— and April 1 9 4 9 , w h en th e last o f the republi­ ca n , reg ion al, an d urb an p arty c o n g re s s e s o p e n e d th e way for the third c o n g re s s o f t h e P o p u lar F r o n t and th e e lectio n of assem blies that would a u th o riz e th e tax, labor, and requisitioning policies of the drive for self­ relian ce. 80 K id rič , " G o v o r n a p r e tr e s u o p ste d rž a v n o g b u d ž c t a za 81 O p c e u p u tstv o no.

79, Službeni List,

no,

770

1948 godi im,” 253. 18, 1948): 1399,

(O cto b e r

MILITARY SELF-RELIANCE D ecem ber

129

1 9 4 8 - A u g u s t 1949: T h e P r i c e

ok T rad e

R e o rie n ta tio n

The com m odity-trade a c co u n t in th e Yugoslav b alan ce of p a y m e n ts for 1948 was m ore favorable than in any o th e r y e a r after W o r ld W a r II until the late 1980s. T h e im p o r t cuts and fo rced exp o rts did not, h o w e v e r , forestall a b a lan ce-o f-p av m en ts deficit that year after two years of surplus, and the th reat o f a fo re ig n -e x c h a n g e crisis loo m ed for early 1949. T h e Yugoslavs’ success in tra d e n egotiations with th e W e s t only m e a n t g r e a te r obligations of ex p o rt c o m m o d itie s and fo re ig n -e x c h a n g e earn in gs to pay the interest on tra d e c re d its th at had b e e n n eg o tiated on “b e g g a r ’s t e r m s ’’ (up to 11 p e rc e n t in te re s t and r e p a y m e n t of principal in no m o re than (our to five years).82 O n D e c e m b e r f, the trad e proto co l with the U S S R for 1949 trimmed off s e v e n -e ig h th s o f th e value of th eir p revio us a g r e e m e n t, and by January 10, A m b a ss a d o r C an n o n was crow in g in a teleg ram to the U.S. secretary of state that th e trad e deficit would “inevitably force Yugoslavia [to] d iv e rt [a] m ajo r v o h im e [o f] trad e to [the] W e s t [, ] th e r e b y unexpectedly f u r t h e r i n g ] [an] im p o rta n t E B P [ E u r o p e a n R e c o v e r y P r o ­ gram] aim. ”8:! E a rly in 1 9 4 9 , the Yugoslavs intensified efforts to find new markets in the E u r o p e a n E c o n o m i c C o m m u n i ty and th e U nited S tates for their minerals (especially c o p p e r and lead) and tim b e r; a g r e e d to the dinar-dollar e x c h a n g e rate that th ey had refused in 194 5 , so as to obtain IMF credits; used in te rm e d ia rie s (especially o n e Austrian bank) to buy coking coal and

m achinery

in cognito

in

the

E a s t;

and

applied

for

commercial-bank c re d its in th e U n ite d States. By May, th e deficit was $50 million and r e s e rv e s w e r e at .$34 million (of which $ 2 3 million had been set aside for essen tial im p o r ts — such as coking coal, oil, c o tto n , and machinery— and p a y m e n t o f th e I M F quota). Reviving a wartim e practice (which would b eco m e a postwar institution— usually called a

sustanak kod druga Tita, a “m e e tin g at th e b e h e s t of

Comrade T ito”), T ito s u m m o n e d a “kitchen c a b in e t 81 of tru s tw o rth y c o l­ leagues on D e c e m b e r 8, 1 9 4 8 , to a g r e e on policy p rior to his N ew Y e a r ’s speech to the a ssem b ly and th e s e co n d p le n u m o f th e p a r ty ’s c e n tr a l c o m ­ mittee on Jan u ary 2 8 - 3 0 , 1 9 4 9 . 85 Politically, th e y would not a c c e p t that the actions of th e U S S B and th e p e o p l e ’s d e m o c ra c ie s would “not b e tern*2 V u k m a n ov ic -T e m p o , Revolucija koja t e c e , vol. 2, ** Foreign Relations o f the United States, 1949 5 : 8 5 4 - 5 5 .

8,1This

was T i t o ’s o w n la be l, a c c o r d i n g to A d a m ic , T he E agle a n d the R oots ,

*5 V D e d ije r, Novi prilozi 3 : 2 3 8 - 4 1 . T h e s e c o n d p l e n u m w as th e first e l e c t e d p a r t y forum to dis cuss p a r t y po lic y s in c e O c t o b e r 1940, It m e t o n ly d a y s a fte r p a r t y le a d e r s learned that th e y w o u l d n o t b e i n v ite d to t h e f o u n d in g m e e t i n g o f t h e C o u n c i l for M u tu a l Economic Assis ta nce, t h e id e a f o r w h ic h t h e y c l a i m e d (in t h e i r n o t e of p r o te s t) to h a v e originated.

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p o r a r y , ” and should b e fought in an ideological b attle, c o n sid e re d as “sab­ otage” to p reven t Yugoslavia “from constructing socialism.”86 Economically, this d ecision m e a n t re o rie n tin g th e ir trad e to h a r d -c u r r e n c y m arkets in th e W e s t , s eek in g its aid to re p la c e S oviet aid, and a c c e p tin g th e eco­ n o m ic an d political c o n s e q u e n c e s o f this shift. In th e six m o n th s since th e C o m in fo rm resolution, th ey had b een able to in c r e a s e req u isition in g quotas. B u t n ow th e additional d e m a n d was so g r e a t as to re q u ire in crease s in o u tp u t— and this atten tio n to production m e a n t atte n tio n to labor. T h e c o n tin u in g difficulty in attra c tin g engineers and skilled lab or to federal p rojects in h eavy in du stry and defen se could also no lo n g e r be ign ored. B o th th e in stru m e n ts o f a policy to deal with th e s e p ro b le m s and th e p ro p ag an d a cam p aign (the “w a r of the radio w a v e s ”87 b e g u n in early D e c e m b e r ) took th e le a d e rs ’ political radicalism a s te p fu rth e r and e x a c e r b a te d th e tensions b e tw e e n it and K idrič’s eco­ n o m ic m e th o d s . T h e conflict b e tw e e n principle and reality also led to a con fu sin g com b in a tio n of centralization and d ecen traliza tion . T h e quar­ rels b e t w e e n fed eral and rep u blican au thorities o v e r in v e s tm e n t and fi­ n a n c e (especially foreign) led the c e n t e r to assert e v e r - g r e a te r control; but th e tasks o f p ro d u ctio n in industry and agricu ltu re led to a radical dem oc­ ratization in factory, farm , and local g o v e r n m e n t and (in c o n trast to the rational calcu lation s integral to th e le a d e r s ’ policy

011

labor) to campaign

m e t h o d s an d e x tra o rd in a r y mobilizations, as in the fall. T h e s e quarrels had th eir p erson al side as well; th e palpable tensions within th e leader­ ship o v e r im m e d ia te policy m e a s u r e s — b e tw e e n Kidrič and Tito, Kardelj and Ran k ović, Salaj and V u k m a n o v ić -T e m p o — reflected d e e p differences in a s su m p tio n s and a p p r o a c h e s , as well as th eir recog nitio n of th e conse­ q u e n c e s for lo n g -te r m s tra te g y and institu tion s.88 T h e p rim a r y p ro b le m of e n f o r c e m e n t o f policy in this p eriod , as Tito told his c o lleag u es D e c e m b e r 8, n ow lay with th e republics. T h e foreigne x c h a n g e crisis r e q u i r e d th e c e n t e r to give priority to im p orts for projects “th a t c o n tr ib u te to capital p r o d u c tio n — h eavy industry, mining, trans­ p o rt, th e a r m y . ” This would r e q u ire “iron discipline” a m o n g republican a u th o rities o v e r “w h o is p e r m i t t e d to im p ort w h a t , ” but it also m ean t that th e lead ers h ip would stop food im p orts and e v e n in crease exp orts of agri­ c u ltu ral p ro d u cts and o th e r p rim a r y c o m m o d itie s to pay for critical im­ p orts an d to pay th e in te re st

011

loans. Any in v e s tm e n t that did not

d e v e lo p fuels, tran sp o rt, o r capital goods had to be p ostp o n ed , and the Nr- I b i d . , 239. 87 B akari ć, in a s p e e c h to t h e C r o a tia n p a r l i a m e n t in J a n u a r y 1949 (“V e z a n a trgovina p o l j o p r i v r e d n i h i i n d u s tr ijs k ih p r o iz v o d a i n je n o o g ra n ič a v a n je p o ra s ta kapitalističkih ele­ m e n a t a n a s e l u ”). S e e t h e d is c u s s io n , e s p e c ia lly o n K id r ič ’s r e p o r t on e c o n o m i c policy a n d Neskovics r e p o r t 0 1 1 s u p p lie s a n d food, at t h e s e c o n d p l e n u m o f th e C P Y c e n t r a l c o m m i t t e e (in Petr a n o v ić , K o n č a r , a n d R ado n jić , S c d n ic e , 132-7 7).

MILITARY S E L I ' - R LL I A NC K

131

republics would have to a c c c p t responsibility lor th e p rod u ctio n of “basic accumulation

(supplying the basic n eed s of the population). It was no

longer a matter of finance b u t o f s ho rtages in real factors of p r o d u c tio n — which was a c o n s e q u e n c e , Tito a rg u e d , of th e refusal o f rep u blican g o v ­ ernments to plan and d e v e lo p ag ricu ltu re; to o b e y cen tral regulations on wages and their implicit limits on e m p lo y m e n t ; or to b alance th eir go v ­ ernment budgets or a c co u n ts in th e ir cash plans. “T h e rep u blics ca n n o t behave in 1949 as th e y did e a r l i e r , ” Tito w a r n e d . 89 The central c o m m i t t e e p le n u m at the end of Ja n u a ry re v e a le d raging conflicts of in terest, in fact, b e tw e e n c e n t e r and rep u blics, w hen Tito, Kitlric, and Kardelj c o n fro n te d rep u blican d elegates with th eir obligation to implement cen tral d ire c tiv e s. Rep u blics had followed th eir own in t e r ­ ests, producing m ach in es ra th e r than articles o f mass co n su m p tio n and housing and totally n e g le c tin g a g ricu ltu re in th e ir in v e s tm e n t plans for 1949. W h ere federal au tho rities had taken te m p o r a ry c o n tro l— for e x a m ­ ple, on the grain-g ro w in g farms of V ojvodina— the results c o n tra s te d sharply with th e in attention o f rep u blican m in isters of a g ricu ltu re and party cadres alike, w h o did not c o n s id e r a g ricu ltu re an im p o rtan t b ran ch of a socialist e c o n o m y . 90 T h e d istrict and rep u blican g o v e r n m e n ts had not implemented the regulations on c o m p u lso ry d eliveries, ten din g instead to favor the rich p easan t, hide d ata about yields and re s e rv e s from the fede.ral authorities, com p lain loudly ab ou t the in equ itable division of planned quotas a m o n g rep u blics, and waste valuable tim e bargaining with the- planning com m ission o v e r quotas for labor and farm p u r ch a se s w hen they should have b een on th e grou nd c o llectin g grain and o th e r p ro d u ce . Nor did they lift a finger to stop th e u n d erg ro u n d tra d e a m o n g factories, ministries, and unions. B u d g e t deficits in the rep u blics that d istu rb ed macroeconomic balances and led rep u blics to go b eggin g for federal assis­ tance in 1947 and 1 9 4 8 could b e tra c e d d irectly to “irrationalities in labor use in their state ad m in istratio ns and “antiplan in creases in m o n e ta r y authorizations’ by rep u blican m inistries and e n te rp rise s ; o v e r e m p l o y ­ ment and the high salaries paid to civil servan ts w e r e p articu larly glaring in the deficits of Slovenia and Bosnia d uring 194 8 . T h e m in ister of h eavy industry. F r a n c L esk osek , com p la in e d that although th e decision to g u a r ­ antee en gineers to h eavy industry had b een taken D e c e m b e r 8, nothing had yet been d o n e . 91 The lead ers’ solution was a fun dam ental shift in th e federal c o n tra c t. S!l V. D e d ije r, N o v i p r ilo z i 3:239 w: I’etr,movie, K o m a r . a n d R ado n jie , S e d n ic c . SI S3: s e e also p p . 55, 72. 91 Ib id .. 165 A d a m ie also re p o r ts , fr om his \ is it in 1949, th a t t h e r e w as a g re a t slioi ta ge of engineers a n d te c h n ic i a n s , m o r e o v e r , t h e c o n s tr u c t io n ol th e L ito slr oj m a c h i n e a n d d ie works— L e s k o se k ’s '' d r e a m ' as a m e t a l w o r k e r b e f o r e t h e w a r — a n d o f t h e S tr n is c e a l u m i ­ num factory (both fe d e ra l p ro je c ts in Slovenia ] still s u fle re d (rom s h o r ta g e s ol la b o r, w h ic h were alleviated w ith w o r k e r s from Italy ( T h e E agle a n d th e Hoots, 1 7 6 - 8 I ) .

132

CIIAITKH 4

T h e y insisted

011

“g r e a t e r organization and planning, particularly in rela­

tions b e t w e e n rep u b lican and federal ministries, 92 im p osed a ceiling on n e w i n v e s tm e n t by th e rep u blics o f 5 p e r c e n t o v e r 1 9 4 8 figures and oblig­ a to r y self-financing of th at in v e s tm e n t from e n t e rp ri s e profits and savings within th e

rep u blic,

and

req u ired

republics to p ro d u c e

m o re wage

g o o d s — agricu ltural p ro d u cts an d w o r k e r s ’ a p a rtm e n ts esp ecially— and to rationalize e m p l o y m e n t and th e supply system so as to m ake m o re inter­ nal re s e r v e s available for federal en te rp rise s . T o re d u c e b u r e a u c ra c y fur­ t h e r and e n s u r e loyal ex e c u tio n , the national c o m m itt e e s (republican p a rty lead ersh ip s) w e r e c h a r g e d with cleanin g h ou se, im p ro vin g th e qual­ ity of m in istry staffs, and placing "re lia b le ” p eop le in th e governmental a p p aratu s (especially in trad e and c o m m e r c e ). T h e shortages o f necessi­ ties an d th e u n au th o riz e d m o n e ta r y expansion finally, th e lead ers said, gav e t h e m no c h o i c e but to cen tra liz e con trol o v e r supplies and ration goods tem p o rarily . F o r K idric, c e n tr a liz e d c o n tro l o v e r distribution posed a serious prob­ le m b e c a u s e it th r e a te n e d th e fu n dam ental in stru m e n t o f e c o n o m ic in­ c e n t iv e s to p r o d u c e r s and the in extricab le relation b e tw e e n production and distrib u tion (the “law of v a lu e ”). N early b urstin g with im p atien t anger and frustration at the s e co n d p le n u m , Kidric le c tu r e d th ose “economic w o rk ers an d lead ers

w h o c o n tin u e d to b elieve mistakenly that “so-called

d istrib u tive plans are th e alpha and o m e g a o f a p lann ed e c o n o m y , that th ey r e p r e s e n t th e u ltim ate in socialist planning te c h n iq u e "; th e “idiocy” of th eir “sterile p r a g m a tis m ” was the p rim ary ob stacle to any solution to th e ir daily b reak do w ns in p rod u ctio n . “C o m r a d e s who think that every­ th ing can be; resolv ed with d istrib u tive plans forget that th e source of national in c o m e , th e so u rc e of social w ealth, of its am p le assortm en t, is p ro d u ctio n and not distribution. . . .

In short, not e v e n th e b est planner

o f d istrib u tion can distrib u te w h at is not p ro d u ce d , no m a t te r how great th e c o n s u m p tio n d e m a n d . ” T h o s e w h o b elieved in m aterials balances and th e ad m in istra tiv e allocation o f supplies “forget th e role of

money in a

p lann ed e c o n o m y of s o c ialis m ,” while th ose who b elieved that raising w ages would i n c r e a s e p rod u ctio n “forget th e role o f the fund o f supplies.” T h e op eratio n of e c o n o m i c laws— the relation b e tw e e n d e m a n d and s u p p ly — was, h e insisted, “e v e n m o re im p o rtan t in the p eriod of building socialism ” than it had b e e n b efore.

The system o f p lan n ed distribution

p r e v e n t e d p ro g res s in th e quality and a s so rtm e n t o f goods and the nor­ m alization of daily e c o n o m ic life, which only th e release o f “socialist free t r a d e ” cou ld bring. O n ly with e c o n o m ic in cen tives to in crease th e supply of n ece s sitie s and with strict a d h e r e n c e to p lann ed wages would economic 1,2 3 .24 0 .

T ito , at t h e k i t c h e n - c a b i n e t m e e t i n g o f D e c e m b e r 8 , 1 9 4 8 , in V. D e d i j e r , Novi prilozi

133

MILITARY S E L F R E L I A N C E

laws function p ro p e rly and “th e d ire c t influence o f co n su m p tio n , i .e . , th e

market, on direct p r o d u c tio n ’’ re s t o r e b alance to the e c o n o m y . 91 The purpose of supply cen tralizatio n (and the division of the M in istry of Trade and Provisions into two) was largely political: to “simplify” th e sys­ tem of guaranteed provisions and p u rg e th e “old m e r c h a n t s ” who still managed nationalized firms in th e state tra d e n etw ork and w h ose “b usi­ ness criteria” w e r e feed in g inflation. N ow c o n s u m e r goods in sh o rtage would be provided only to th ose w h o c o n trib u te d d ire c tly to “e x p a n d e d reproduction” (capital in v e s tm e n ts ) and “who realize th e five-year p lan ” (essentially, w orkers in p u b lic-s e cto r in du stry and agricu lture). P eo p le with access to food at h o m e would no lo n g er r e c e i v e an y state provisions; what they could not p ro v id e for th e m s e lv e s th ey cou ld buy th ro u g h linked trade by selling th eir farm surplus to th e state (and d ire c t c o n t r a c t ­ ing between state firms and co o p e ra tiv e s would in crease p e a s a n ts ’ p r o ­ duction of fat and meats). B e t t e r y et, th ey cou ld join th e g e n e ra l f a n n e r s ’ cooperatives; th ese had a c ce s s to industrial goods th rou gh d ire c t c o n tra c ts with public-sector firms, and th e lead ers now e n c o u r a g e d th e m to invest their trade profits in small m an u factu rin g and craft activities of th e c o o p ­ erative. Those w h o w e r e u nab le to s u p p o rt th e m s e lv e s th rou gh a gricu l­ ture, such as the rural p oor re w a r d e d for th eir P artisan s e rv ic e with barely cultivable p arcels o f land, should m o v e p e r m a n e n tl y into industry or mining, w h e re th ey would again b e eligible for g u a r a n te e d provisions. The squeeze on th e p riv a te s e c to r and th e in crease of 3 0 p e r c e n t in g u a r ­ anteed provisions to th o s e e m p l o y e d in state and c o o p e ra tiv e p ro d u ctio n would act as e c o n o m ic in cen tives to join that public s e c t o r and in cr e a se its labor productivity. P eo p le would no lo n g er “g e t things for free, as th ey did in 1945 and 1 9 4 6 , ” T ito alm o st b ark ed at d eleg ates to the s e co n d p arty plenum in Jan u ary 1 9 4 9 . All c o m m e r c ia l food estab lis h m en ts such as greengrocers, inns, an d re s ta u ra n ts th at w e r e not ab so lutely essential had to be closed. In th ose few p laces w h e r e n e w inns w e r e n e ce s sa r y (as for tourism),

g o v e r n m e n ts

should

s u p erv ise

b ut

m anagem ent

must

be

private.94 For Kardelj and Rankovic, h o w e v e r , th e m o m e n t req u ire d shifting far greater authority to th e party.

As M iha M arinko said at th e s eco n d

plenum in the discussion on K id ric ’s re p o rt on th e e c o n o m y , “w e n e e d to have people w hom o n e can discipline. ”95 A lthough not all c e n tr a l c o m m i t ­ tee members a g r e e d with h im , Kardelj insisted that th e only solution to the lack of discipline o v e r w ages and labor was “to lead th ro u g h the

I

petra no vie, K o n c a r, a n d R adonjic, S ed n ice , 1 0 2 - 4 , 91 Tito, at the s e c o n d pie mini o f th e C P Y c e n t ra l c o m m i t t e e , ibid .,

Neskovics repo rt on pro vision s and distribu tion , 1 1 3 - 3 1

f Ibid., 151.

71;

s e e also 5 8 - 5 9 and

134

C H A P T KH 4

P a rty . ”96 T o i m p l e m e n t T i t o ’s b elief that “th e faster ou r P arty becomes c a p a b le , s tron g, and o rg an ized , th e s o o n e r p ro b le m s and tasks presented to it will b e e x e c u t e d rapidly and well, and th e c lo s e r socialism will b e ,”97 R an k ovic p ro p o s e d a long list o f reform s, including th e system of nomen­ klatura for nine th ou san d positions, obligatory p arty m e m b e r s h ip for the h e a d s o f th e radio and p ress, an d, taking ev e n Tito by surprise, the rec­ o m m e n d a t io n th at th ey c r e a t e a n ew g o v e r n m e n ta l level b etw een the r e p u b lic and th e d istric t— a region (oblast ) along th e lines of th e wartime o krug — to im p ro v e e c o n o m i c c o o r d in a tio n .98 At th e sam e time, the p a r t y ’s organ ization al im p r o v e m e n t s would b e ineffectual w ithout im­ p r o v e d social stand ing in th e c o m m u n ity . C itin g th e m iseries p arty cadres suffered in co m p a ris o n with th e status and privileges o f g o v e r n m e n t offi­ cials, D ju ro P u c a r u rg e d b e t t e r pay and ap a rtm e n ts. T i t o ’s vision of au­ th ority was less m u n d a n e , as h e d esc rib e d th e m ajesty o f th e new central c o m m i t t e e b uilding u n d e r con stru c tio n in B e l g r a d e . " In th e c o n c e p tio n o f t h e c o r e lead ership , th e p a rty was not a debating o r au th o rita tiv e fo ru m , b u t a body o f h and s-o n, loyal activists whose task was to w ork at th e local level to c o o r d in a te th e e c o n o m y , supervise gov­ e r n m e n t e x e c u t io n , d e v o te substantial effort to agitation and propaganda, m a n a g e th e h u m a n an d political side of th e subtleties in th e ir agricultural policy an d th e grow in g au sterities, and p rov id e th e information that was n ot r e a c h in g th e lead ers h ip ab ou t w h y policies w e r e not b ein g imple­ m e n te d c o rr e c tly . T ito told th e d e leg ates in p reface to K ard elj’s plenary r e p o r t on policy tow ard th e village: I th in k , c o m ra d e s , th at you n e e d not c o n s i d e r that you have c o m e to give s o m e th e o re tic a lly fo rm e d definitions. W h a t w e n e e d is for you to b rin g forth facts, to give us e x am p les , c o n c r e te things. W e kn o w th at s o m e things will be * I b i d . , 169. 97 I b i d . , 251. Ibid., 2 0 2 - 6

O n s im ila r re g io n a liz a tio n in t h e U S S U b e t w e e n 1923 a n d 1926, see

C a r r , Socialism in One Country, 1924-1926 2 :2 7 3 - 3 0 3 . A c c o r d in g to M. Kovačevič, this f u r t h e r " te r r i to r ia liz a tio n " o f t h e la b o r office a n d la b o r in s p e c tio n w as K a r d e lj’s id e a and was u n d e r t a k e n b e c a u s e r e p u b l i c a n m in is tri e s , e sp e c ia lly in C r o a tia a n d S e rb ia , w e r e not super­ v is in g su ffic ie n tly ; to r e d u c e a p p a r a t u s a n d i m p r o v e t h e p l a n n i n g a n d tra in in g of labor, oblast offices o f t e n to fifte en civil s e r v a n ts w o u ld link m in is tri e s a n d p e o p l e ’s committees (“P r i p r e m e za o r g a n iz a c ijo o b la s n i h p o v c r e n i š l a v a ra d a u NK Srb iji”). I.a b o r inspectors, on t h e o t h e r h a n d , in g r o u p s o f t h r e e to e le v e n , w e r e e l e c t e d by w o r k e r s in t h e p o p u la r Iront a n d u n i o n , a n d t h e i r w o r k w as " v o lu n ta ry , hon o rif ic , a n d I r c e ’ (Bulletin du Conseil Central

d e la C o n féd ératio n des Syndicats de Yougoslavie 4, nos. 6 - 7 [1949]: 14). us P e t r a n o v i é , K o n č a r , a n d Kadonjié, Sednice, 2 5 2 - 5 3 , 251, Djila s b e c a m e know n later for c ritic iz in g b o t h t h e “g r a n d io s e p la n s ” for pa la ce s, o p e r a h o u s e s , a n d s tate buildin gs and, e sp e c ia lly , t h e p riv i le g e s t h a t t h e p a r t y e lite w e r e g ra n t i n g t h e m s e l v e s in 19 4 5 -48 . Tile c ritic a l a n aly sis th a t e s ta b lis h e d his global re p u t a t i o n w as T he New Class (1957); a descrip­ t io n of t h e g r a n d io s ity is in his la t e r Rise an d Fall, 6 2 - 6 9 .

135

MILITARY S E L F - R E L I A N C E

repeated, b u t t h e r e a re so m a n y v a rie d o r d i n a ry tilings th a t a re n o t kn o w n to us, and I w ould give I d o n ’t k n o w w h a t for us to k n o w th e m . T h e r e , t h a t ’s what is ne ce ssary h e r e , at this p l e n u m . No g re at s p e e ch ify in g is re q u ir e d , but facts th at life b rin g s forth d a i l y . 100 Rankovic co m p la in e d th at p a rty c a d r e s s p e n t all th eir tim e building up party co m m itte e s in stead o f a tte n d in g to e c o n o m i c m a tte r s as th e y should, and p ro b le m s aro se w h en p arty in stru ctors and c a d r e s trav eled around the c o u n tr y . P a rty c a d r e s had to b e “s e ttle d ” with a p articu lar territory. W ith p ro p rie ta r y instincts like th ose th ey h o p e d to n u r tu r e among p e rm a n e n t e m p lo y e e s in s o cial-secto r firms and farms, p arty offi­ cials in the localities w ou ld g o v e rn as

g azde , 101 w h o k new th eir terr ito ry

like the back o f th e ir h an d and w h o re s p o n d e d to p ro b le m s personally as they aro se .102 This policy m a d e it essential that e v e r y village have a party organization— in S loven ia alon e, o n e -th ird o f all villages w e r e ou tside the party network. Alongside this d e c en tralizatio n o f p o w e r in th e p a r ty ’s o p eratio n s , th e r e was a d em ocratizin g im p u lse in its res o rt to th e aid and solidarity of th e population, as in analogous c i r c u m s ta n c e s in 1 9 3 8 - 4 0 and 1 9 4 2 - 4 4 . At the D e c e m b e r 8 m e e tin g , T ito r e e m p h a s iz e d th e critical i m p o r ta n c e of nurturing th e “c r e a t iv e initiativ e” and “socializing p o te n tia l” o f mass p a r ­ ticipation and specified t h r e e political fo rm s— public opinion, e c o n o m i c democratization, and th e ru le o f law. M o s t im p o rtan t, local p arty c o m m i t ­ tees should im p ro v e th e ir inform ation ab ou t and supervision o v e r local conditions by d e v e lo p in g c riticism th rou gh th e p ress, con su ltin g p eop le “from below” (ordin ary p eo p le, not local influentials o r p a rty org an iza­ tions) to e n s u re tim ely d isc o v e ry o f p ro b le m s , listening to th e “vo ice of the people, ” an d su b je ctin g th e local e x e c u tiv e of th e p e o p l e ’s c o m m itt e e s to election by local assem b lies. T h e form alization o f this id ea o f con su lting popular opinion in th e n e x t reform of local g o v e r n m e n t was, Kardelj told the national a s se m b ly in J u n e 1949, th e “e xp ressio n of d e e p d e m o c r a tic desires of th e p o p u lar m asses for se lf-m a n a g e m e n t, for d ire c t p a rticip a ­ tion in the ad m in istratio n o f t h e s t a t e . ”103 T h e m otivation for this earlier 100 Petrano v ič, K o n č a r, a n d R ado njič,

Sednice,

240.

101 Originally m e a n in g “lan d lo rd ” o r “h e a d o f h o u s e h o l d / t h e w o rd c a r r ie d th e co n n o t a ­ tion of "boss. ” 102 Na

licu mesta,

o r “on th e sp o t” (P e tr a n o v ič , K o n č a r, a n d R adonjič,

Sednice ,

2 0 3 ) At

the same tim e, th e p r a c t ic e was in tr o d u c e d o f d e le g a tin g p a r ty m e m b e r s from th e ce n tra l committee for lo n g e r p e rio d s to im p o rta n t pla ce s o f c o m m u n ic a tio n , in d u stry , m ining , and so forth, in o r d e r to assist t h e local p a r ty o rg anizatio n

na licu mesta

and to inform t h e ce n tra l

committee regu larly a b o u t th e actu al sta te o f im p le m e n ta tio n

103 Radonjič, Sukoh KPJ s Kominformom i društveni razvoj Jugoslavije, 1948-1950, c h a p . Informativni Priručnik Jugoslavije, Jo v a n D jo rd je v ic , a legal sch o la r and p r im a ry a d v ise r to K ardelj, iden tified the 3, pt. 2* In his exp o sitio n o f th e n e w " sta te o r d e r ” for th e 1 9 4 9

136 versio n o f

CHAPTER 4

glasnost was th e p ro b le m of e v e r -f e w e r goods in th e markets,

f u r t h e r “differentiatio n ” b e tw e e n b eneficiaries of g o v e r n m e n t supplies an d th o s e left to fend for th e m s e lv e s , and th e w ar against inflationary p r e s s u r e s and its natural s ca v e n g e rs , th e “sp ec u lato rs ” in goods markets. U n d e r th e c i r c u m s ta n c e s , it was n e ce s sa r y to give p e o p le nonmonetary in s t ru m e n t s for c o m m u n ic a tin g th e ir d e m a n d s an d to d evise nondisruptive b a r o m e t e r s o f d iscon ten t. In addition, w orking p eo p le would b e m obilized in d e m o c r a tic forums to a s s e r t “c o n tro l from b e l o w ” against the w ealthy and powerful of the p re v io u s o r d e r w h o m ig h t o b s tru c t th eir path tow ard socialism. M anage­ m e n t b oard s in the fa r m e r s ’ co o p e ra tiv e s and p e o p le ’s c o m m itt e e s would c o n t in u e to h an d le daily an d tec h n ical m a tte r s , b u t th eir decisions would b e s u b je c t to ap proval by e l e c te d assem blies. T h e g en eral law on people’s c o m m i t t e e s o f J u n e 6, 1 9 4 9 , a d d e d n eigh b o rh oo d v o t e r s ’ m eetin g s and e l e c t e d assem b lies alongside th e r e f o r m e d e x e c u tiv e b ra n ch e s, and the re v ise d b asic law on co o p e ra tiv e s o f J u n e 9 req u ired th e full mem bership o f th e g e n e ra l fa r m e r s ’ co o p e ra tiv e s to m e e t in a ssem b ly annually (in s o m e re p u b lic s, such as C roatia, tw ice yearly) to discuss and ap p rove the distrib u tion o f total in co m e for the y e a r and th e rule book that defined o p e ra tio n s b e tw e e n sessions. An additional ad van tage of th e se vehicles of local d e m o c r a c y was, o f c o u rs e , th eir relatively low e x p e n d itu r e o f eco­ n o m ic r e s o u r c e s . Salaries did not h ave to b e paid or offices funded to m obilize th e p u b lic ’s p articipation in th e rituals o f state p o w e r o r to gain its h elp in k e e p in g local politicians a c co u n ta b le in th e use of public funds. T h is was also tru e of th e rule o f law that T ito o r d e r e d to in crease the e c o n o m i c au th o rity o f th e federal g o v e r n m e n t. T h e issue th at focused atten tio n on law was th e sho rtage and uneven d istrib u tion

of professionals,

such as d o ctors,

e n g in e e rs ,

and veter­

inarians. S o m e lead ers , like the Bosnian P u c a r, th o u g h t that in th e case of m e d ic a l d o c to rs th e y should solve th e p ro b le m by con scrip tion and forced relo catio n to c o m m u n iti e s in n e e d . T ito ’s resp o n se at th e seco n d plenum was th at c o e r c io n “will poison th e p e o p l e . ’’ W h e n P u c a r c o u n t e r e d that “o u r p e o p l e w e r e c o m p l e te ly satisfied with G e rm a n d o c to rs [who were] p ris o n ers o f w a r , ” Tito defined a m o r e gen eral political prin cip le for the n e w s tate: “N o n e t h e l e s s , w e c a n ’t ju st g a th e r th e m up as you suggest; one m u s t pass a la w .” 104 R e s p e c t for the rule of law was essential to state au th o rity , from th o s e at th e top all th e w ay to the lowest rungs of the h ie ra rc h y , b u t p easan t c u ltu re in Yugoslavia also d e m a n d e d it. “W e can’t play a ro u n d with th e p e o p l e ’s trust, b e ca u se if w e n e e d an yth in g— we “e s s e n t i a l c h a r a c t e r ” o f "local o r g a n s ” as t h e i r c a p a c ity to b e “s e lf -m a n a g in g ” (s a m o u p ra v ­ no st), a d d i n g th a t t h e s c o p e o f local s e l f - m a n a g e m e n t was, a c c o r d i n g to L e n i n , t h e primary d i f f e r e n c e b e t w e e n socialis t a n d b o u r g e o is (“ fic tive”) s e lf -g o v e rn a n c e (1 4 4 -4 5 ). 101 P e t r a n o v i č , K o n č ar, a n d R ad o njič , S e d n ic e , 253.

137

MILITARY SELF-R15LIANCE

need that tr u s t.”105 F o r exa m p le ,

p arty c a d r e s w h o had filled their

planned quotas of agricu ltural d eliveries ior 1 9 4 8 hut had brok en th e g o v ­ ernment's regulations of that J u n e to do so w e re playing a d an g ero u s game: "I think t h e r e is not a single p eop le in E u r o p e with such an a ttitu d e toward legal m e a s u re s . T h e y r e s p e c t th e m and ac t in a c c o r d a n c e with them. But w hen those laws are tran s g res sed and w h en th ey are unjust, then [that pcople| c a n n o t b e re c o n c ile d . T h e n things cross o v e r into jokes, jesting, and stories, and who knows w h e re it can lead in th e end?’1(>e The burning question for lead ers was labor for federal p rojects. This was no longer only a m a t te r of daily sh o rtages, K idrič told o n e a u d ie n ce after another, but o f a c h a n g e in th e social s tru c tu re itself. T h e faster tempo of socialist tran sform ation is the policy m ost olten associated with this period, but it is usually taken to m ean the decision to collectivize: agriculture for the p u r p o se of p rov ing loyalty to the international w orkers movement and to Stalin. Policy tow ard the village' was in d eed the focus of the second p len u m o f th e c en tral c o m m i t t e e , b ut th e goal was to p r e ­ vent the political e rro rs o f a “too-rapid, c o e r c i v e ” ap p roach to socialization of the village that would resu lt from a “m ech an ical, m istaken adoption of the Soviet line in collectivization. I0/ As Tito told th e d eleg ates,

w e can t

go that route and w e have no n e e d to take that road. 108 At the e n d of December, Vladim ir B ak aric (increasingly the p arty spokesm an for agri­ culture, after Kardelj) also told a m e e tin g of C r o a t pop ular-front activists ol the problem with p artv m e m b e r s w ho tried to show th eir loyalty to

Tito

with “loud d eclaratio n s” that “socialism had alread y arrived in the vil­ lage.” “The struggle against kulak p re s s u re and influence in the village is, it is true, a c o m p o n e n t p art of ou r policy of alliance of w o rk er and p easan t in this p eriod ,” B akaric said, “b u t it isn’t its en tire c o n te n t, nor e v e n its most significant part. 100 That most significant part was to in crease p rod u ctio n , and this was a matter of production in cen tives and farming skills. Tito told the p len u m delegates: 11,5 Tito (ibid., 137). Tito (ibid) 1117 Mijalko T o d o r o v ič (ibid., 84; s ee also 85). lm Ibid , 85, T ito w as p a r tic u la r ly c o n c e r n e d in this c a s e a b o u t li v e sto ck lor e x p o r t a n d for urban c o n s u m p t io n , p r o d u c i n g d a ta on the. loss o f c a ttle d u r i n g t h e p c i iod ol c o lle ctiv iz a ­ tion in the USSR a n d m e n t i o n i n g t l u 1 d ille r e u c e s “b o th politically a n d e c o n o m ic a lly tween the Soviet a n d t h e Yugoslav s itu a tio n s

be­

W e can av oid s u c h losses b \ foll owing the

correct lint* of th e c e n t r a l c o m m i t t e e on t h e village,

h e a d d e d “ It s not a q u e s ti o n ,

h e h ad

said moments e ar lie r, "ol oui d r e a m i n g u p s o m e t h i n g b e c a u s e w e w a n t to d iff e r e n t ia t e ourselves from th e So v ie t p a th ; r a t h e r , w e a re s olv in g th a t q u e s t i o n in a m a n n e r th a t is b e st ior us, taking into a c c o u n t p a rtic u la r 1} th e c u r r e n t sit u a tio n in o u r c o u n t r y (7 5 - 7 6 ) l
138

CHAPTER 4

I t w o u l d n ’t h e d i f f i c u l t t o s a y t h a t t h i s y e a r w e ’r e g o i n g t o l i q u i d a t e c a p i t a l i s m in t h e v i l l a g e , h u t w e w o u l d a l s o l i q u i d a t e t h e g r a i n s u p p l y f o r n e x t y e a r — an d n o t o n ly th e g rain fu n d , h u t a w id e r a n g e o f o th e r a g ric u ltu ra l p r o d ­ u cts. . .

W e m u s t find a m o r e c o r r e c t p a t h f o r o u r w o r k in t h e c o u n t r y s i d e

s o a s n o t t o c u t off t h e b r a n c h w e r e s i t t i n g o n , w h i c h m e a n s t h a t t h e d e v e l o p ­ m e n t o f s o c i a l i s m in t h e c o u n t r y s i d e m u s t p r o c e e d p a r a l l e l w i t h t h e p o s s i ­ b i l i t i e s o f c r e a t i n g f u n d s o f f o o d s t u f f s for t h e p o p u l a t i o n . W e r e it p o s s i b l e . . .

t o c r e a t e r e s e r v e s — t h a t is, p a y f o r f o o d a b r o a d so t h a t w e c o u l d m a k e up

f o r w h a t t h e k u l a k w o u l d n o t g ive—

t h e n o u r s i t u a t i o n w o u l d b e d i f f e r e n t . 110

A ltho ug h th e p olitb u reau itself was not o f o n e m ind on agricultural policy, c au sin g “f r e q u e n t discussio n ’’ late into 1 9 4 9 , 111 th e line Kardelj p r e s e n t e d at th e p len u m was “ L e n i n ’s co o p e ra tiv e policy o f 1921 . . . as has b e e n o u r policy all a l o n g .” 112 T h e r e w e r e m an y routes to incorp orat­ ing th e kulak an d m id d le p easan t in the social s e cto r, and th e p arty would c o n t in u e to e n c o u r a g e a variety o f “transitional” form s o f c ooperation to a t t r a c t t h e m — especially th e village-based gen eral f a r m e rs ’ cooperatives, which w ould e x p an d only gradually by investing th eir own trad e profits into craft and industrial p ro d u ctio n . M e m b e r s h ip in any typ e o f coopera­ tive would d e v e lo p a c o o p e ra tiv e con sciou sn ess and p r e p a r e peasants for h ig h e r stages o f socialization later. It was ju st as im p o r ta n t for the long run to win th eir political allegian ce and o v e r c o m e th eir re lu c ta n c e to mar­ ket th e ir p r o d u c e u n d e r u n c e rta in ty , re lu c ta n c e th ey had am ply demon­ s trated with c u tb ack s d uring 194 8 .

A g r e a te r p ro b le m , acco rd ing to

Bak arič, w e r e th e “left-wing id eo lo g u es ” in th e party w h o refused to ad­ mit kidaks into labor c o o p e ra tiv e s. This difficulty was c o m p o u n d e d by the m in isters o f a g ricu ltu re in C ro atia and Serbia, w h o let ap plications to form lab or c o o p e r a tiv e s pile up on th eir desks and refused to p rov ide funds that m ig h t make- pay in th e p easan t labor coo p e ra tiv e s a ttrac tiv e to middle and rich fa rm e rs , an d by th e m an y p arty m e m b e r s (as village lead ers, often rich p easan ts th e m s e lv e s) w h o refused to join. T h e c o n s e q u e n c e was that p ro d u ctio n c o o p e ra tiv e s w e r e d o m in a te d , as w e re the state forms, by p e o p le w h o had had little o r no land b efore th e w ar and th erefo re pos­ s ess ed few o f th e organizational and farming skills n e ce s sa r y to large-scale p ro d u ctio n . T h o s e kulaks w h o wished to b e a p art o f th e n ew o r d e r must be allowed to join and, it th ey w ished, to b rin g only part o f th e ir landhold­ ings and stock with th e m , k e ep in g th e rest as p rivate holdings. Although th ey w ou ld h ave “o n e foot in th e capitalist s e c t o r , ” th ey would also have “o n e foot in th e socialist s e c t o r , ” Kardelj said often. If th e kulak joined, n» Petranovic, Končar, and Radonjič, Sednice, 69 111 Kardelj, at the third p l e n u m of the CPY central committee, in Petranovic, Končar, and Radonjič, Sednice, 451. 112 Ibid., 26,

139

MILITARY S E L T m i L I A N Œ

then the wary middle p easan t w ould, t o o . 11:1 T h e fact that th e r e w e re more agronomists with s e c o n d a ry e d u c atio n e m p lo y e d in the federal m in ­

Î

istry tor light industry than in the federal agricultural m in istry and all its institutes was only a ludicrous exten sio n ol th e sam e d isregard for a g ricu l­

ture and thus the skills n e e d e d to im p ro v e its p r o d u c t i v i ty . 11'4

In the. first months of 1 9 4 9 , the. lead ersh ip o r d e r e d th e withdrawal into

the i n t e r i o r o f all d efen se -re la te d industries (mills, w areh o u s es, oil refinp e s j t h a t were located in vu ln erab le n o rth ern b o rd erlan d s such as wjwdina and M ed ju m u rje, in cluding the rem oval of steel p rod u ctio n Irom Slovenia to Bosnia. In this "strateg ically defined

sanctuary in the.

central mountains (above all in Bosnia), new7 steel mills and munitions plants were built and supply b un k ers h idden. T h e s e areas, rich in ores

and t i m b e r , were already the site of a large p rop ortion ol federal projects, and th i s s h i f t led to the relo catio n of m o re than 1 0 0 , 0 0 0 w o r k e r s . 115 T h e costs ol transportation alon e w e re h u g e . O p e ra tiv e labor plans for the first six m o n t h s o f 1949 called f o r m o re than 2 . 3 million n ew w orkers c o u n t r y ­ wide when e m p lo y m en t stood at 1 , 1 2 0 ,8 9 1 in N o v e m b e r 1 9 4 8 . ,H’ Al­ though recruitment r e a c h e d only 6 1 , 9 p e r c e n t ol this targ et, this was more t h a n t h r e e times as m an y n ew w orkers as in the c o m p a ra b le period uf 1948 (when the target o f 7 5 0 , 0 0 0 was realized 0 0 p e r c e n t ) . 117 L a b o r

;

t u r n o v e r severely h a rm e d both the q uan tity and quality of p ro d u ctio n ; the f i g u r e s for 1949 arg u e that for e v e r y 100 w orkers e m p lo y e d in p e r m a ­ nent positions. 5 8 7 w orkers had to be re c ru ite d and, on a v e ra g e , an o th e r

3.00 members of special P o p u lar F r o n t brigades and 7 0 m e m b e r s of the

L ea g u e of'People s Youth (the p arty-linked organization for y o u t h ) . lls F a c t o ry managers s e e m e d to think they had a “divine rig h t to re p la c e the plan with the c om p etitive stru ggle for labor" and to bid for w orkers with w e r - h i g h e r w a g e s .119 T h e n ew m in ister of finance, D o b riv o je Rad osavIjevic. was particularly rankled by those w ho c o n tin u e d th e traditional " t h i r t e e n t h pay” (en d -o f-year holiday bonus) and by state officials who

111 l!>i(!., 31. Set-- V t 'r d r r y . T r m is t /lr u n i m i \'ill
Bi* *37. j r 1'1* Tito’s s peech to (lie p a r l i a m e n t on D e c e m b e r 27, 1948 (“T h e Real R ea s o n s b e h i n d t h e pjufe - fifth« C om info rm C o u n t r i e s t o w a r d Y u go slav ia ”}* T h e N o v e m b e r 1948 e m p l o y m e n t pure was only Ï0 0 ,0 0 0 m o r e th a n th a t fo r D e c e m b e r 1947 T i to a lso said in his s p e e c h th a t MOO im\\r wf(>rke.rs w o u ld b e n e e d e d for fe d e ra l p ro je c ts in 1949, a n d a total for t h e y e a r of

WlfX № ! Has, * l ) r u s tv e u o - e k o n o m s k i osv rt na p r o b l e m z a p o s le n o s t i." 142. r

Vnjosevic, “O n e k i m p r o b l e m i m a r a d n a s u ag e . Kit! rie, re p o rt to t h e s e c o n d p l e n u m o f t h e C P Y c e n t r a l c o m m i t t e e , in P e tr a n o v ic ,

Koncar. and Rad onjic, .S'e d n ic a , 103.,

140

CHAPTER 4

c o n c e d e d to staff p ay r a i s e s .12« T h e s e v e re sho rtage of goods led to a ve rita b le n o m a d is m 121 as w orkers w e n t u n p red .ctab ly f on. o n e factory to t h e n ext o r b e t w e e n factory and farm stead in seai eh o K

1

w ag es , food and cloth in g, and stores with goods on the shelves. Despite its p ub lic re s e rv a tio n s, th e lead ersh ip also c o n tin u e d to supplem ent the c o r e o f p e r m a n e n t industrial labor with v o lu n te e r brigad es from the vil­ lages. L o c a l p e o p l e ’s c o m m i t t e e s , with th e aid of P op ular F r o n t brigades, w e r e able to m obilize m o r e than a million p eop le m response to the h i g h e r q uo tas, tw o-th ird s of w h o m w ork ed an en tire m o n th ; a large num­ b e r w e r e called up m an y tim es and w itho u t w arning, against all the w.itte n r e g u l a t i o n s .122 P a rty organizations w e re req u ire d to form specia “C o m m u n i s t b rig a d e s ” to do two m o nth s

s ervice in th e mines anc in

c o n s tr u c tio n . T h e m an y m o r e o r d e r e d into th e a rm y , after conscription was r e n e w e d in 1 9 4 9 , found th e m s e lv e s doing m u c h o

the same

“v o lu n ta ry ” lab or in th e m in es, at con stru c tio n sites, in the forests, and in grain fie ld s.123 L o c a l p a rty o rgan izers found th e assem blies and vo ters

m eet, gs n

villages a useful v eh icle for mobilization. A lthough e c h o in g Stalin s UralsS iberian m e t h o d , th e s e assem blies w e r e u sed not to aro u se class tensions for dekulakization b u t to mobilize t e m p o r a ry labor p o w e r, and paity c a d r e s r e p o r t e d su c ces s not with slogans of class stru ggle b u t with appeals to p a trio tic c o n s c ie n c e and village unity. F o r e x a m p e, a re p o rt from Zeo s n ia -H e rz e g o v i n a , is delight at. the case wi 1 nica, B Bosnia-iiei/.e&uviii*, K* filled with s u rprised 1 , w h ich th e y tu r n e d th e tide against rec alcitran t villagers w h en they ,ead P r e s id e n t T it o ’s 1949 N e w Y e a r ’s s p e e c h on th e

real reasons

fo.

e

activities of th e U S S R and the p e o p le ’s d e m o c r a c .e s (they wished to sabo­ ta g e Yugoslavia's revolution and in d u s t r i a l i s t ,o n ) . -

A n o th e r , epor f ™

a local p a rty organization r e c o m m e n d e d that o th ers try a tactic it had i U r n e d w h e n it a c c e p t e d villagers’ d esire to go a lto g e th e r to worksites r a t h e r than individually, fo rm in g a b rigad e along village lines made every­ th ing go s m o o t h l y . 125 M a n y d istrict c o m m i tte e s , h o w e v e i, took easie >*> At t h e s e c o n d p l e n u m o f t h e C P Y ce n tra l c o m m i t t e e , .b id , 156.

121 Kidric s quaint phrase was seljakanje s posla (ibid., 122

H as

“D r u stv e n o -e k o n o m sk i o sv rt,

... " o , ™ . p t

.1.« P...W

285).

142.

.

...................

w h e n t h e b r i g a d e s w e r e r e v i v e d in 1951 ( D jo k a n o v .c ,

* ■ *

1

C la n o v . p a r t . j c , u U ju c c n j e u ud,

b r i ™ F o r t h e s p e e c h , s ee T ito , " T h e R eal R ea s o n s b e h i n d t h e S l a n d e r o f th e Ominfonrf

c '™ ;“

»

nicko m srezu ”

S

S

!

....... ..... ........™j " « » » ■ ■

--

141

MILITARY S E L F - R E L I A N C E

routes to filling th eir lab or quotas, m obilizing a n y o n e th ey could find, sometimes cru d ely and with fo rc e. T h e p easan t labor c o o p e ra tiv e s, with their concentrations o f labor and ideological c o m m i t m e n t , w e r e p a rti c ­ ularly vulnerable targ ets o f s e a rc h e s for "v olu n tary

labor in con stru c tio n

and the forests; the result was great harm to local agricultural p ro d u ctio n ,126 The. real innovations in this p eriod w o re a res p o n se to the c o n s e ­ quences that high labor tu r n o v e r , “a n a rc h ic nuses,

and

political

la b o r - r e c r u it m e n t

in creases in wages and b o­

cam p aign s

had

for

internal

stabilization. Kardelj b egan to a s sert e v e r m o re frequ en tly, for exa m p le , that the essen ce of socialism was that individuals should be paid a c co rd in g to their labor, n ot th eir m a r k e t p rice, and should be defined by th e social relationship s u rro u n d in g r e m u n e r a t e d labor

(radni odnos). If w ages di­

rectly linked w o r k e r s ’ effort and rew ard , ou tp u t and p u rch asin g p ow er, then productivity would rise b e c a u s e w orkers would be able to s e e the link between th eir labor and s tand ard o f living im m ed iately ; the a g g r e ­ gate effect would b e to b ala n c e m o n e ta r y funds o u tstan d in g and c o n s u m ­ able goods. T h e p ublic s e c to r, w h e r e such relations p revailed , had to be consolidated fu rth er;

and

factories

had

to

b ecom e

ever

m o re

self­

sufficient, building h ou sin g for th eir w orkers, c o v e r in g 4 5 p e r c e n t o f th eir own consumption, and g row in g m o r e v eg etab les on th eir own farms. T h e peasant labor c o o p e ra tiv e would b e c o m e a “socialist w ork c o m m u n ity

of

permanent m e m b e r s w h o “feel it as th eir own socialist holding. 127 Greater regularity in w ages and p rod u ctio n would be sought th rou gh the introduction of individual e m p lo y m e n t c o n tra c ts . On April 2 7 , 1 9 4 9 , a ruling ( rešenje ) offered special benefits to agricultural w orkers who w e re willing to sign c o n tra c ts obliging th e m to rem ain at th e sam e jo b for at least one year. H ig h e r benefits w e n t to th ose willing to in clude th e ir fam ­ ily. W orkers’ e m p l o y m e n t card s w e r e also revised, and t h e re was a c a m ­ paign to get industrial w o rk ers to sign similar e m p lo y m e n t c o n tra c ts tying them to a factory o r a m in e. These m eas u res w e r e only a p re lu d e to the m o re-rad ic al c h an g es in workplace organization and to th e cam p aign against officials and m an ag ers that took place in April 1 9 4 9 . F o r lead ers such as V u k m an o v ié-T em p o , now chief at M ining, th e s h o rtages of skilled labor and low p rod u ctiv ity provided a m p le reason to attack the “p re w a r e x p e r t s ’’ in th e ministries who interfered with “w ork ers initiatives’’ in the factories; those on district party c o m m itte e s w h o ro b b e d factories of th eir b e st fo rem en to do a d m in ­ istration and t h r e a t e n e d disciplinary action against d ire c to rs w h o p r o ­

126 Kidrič, “T e k u ć i zadaci u b o rb i za i z v rš e n j e P e to g o d iš n je g p la n a ," s p e e c h at t h e th ir d plenum ol th e C P V c e n t r a l c o m m i t t e e , in P e tra n o v ić , K o n č ar, a n d R adonjič , Su d nic e, 3S4-89. 127 Kardelj, s p e e c h on a g r ic u ltu r a l po licy at th e s e c o n d p l e n u m ol t h e C P Y c e n t r a l c o m ­ mittee, ibid., 32.

142

CHAPTER 4

te s te d ; and p arty m e m b e r s w h o refused to do h eavy labor. Ridiculing the claims to expertise m ad e by bureaucrats glued to their desks, VukmanovicT e m p o e x to lled th e “d e v o tio n ” and “am b itio n ” of p ro d u ctio n workers w h o, like “th e field s o ld ie r,” go into th e t r e n c h e s and “fig ht.” T h e path to i n c r e a s e d p ro d u ctiv ity w itho u t w age inflation was a d e m o c ra tic recon­ s tru ctio n of factory life. D ire c to r s w ould share m anagerial authority with th e p a rty and union s e c r e ta r ie s (the “S oviet troika”) to elim in ate the waste o f parallel c o m m a n d h ierarc h ies and to ch e c k willful factory managers. L a b o r in sp ecto rs would again b e e le c te d , this tim e jointly by the union an d th e P o p u la r F r o n t. P ro d u ctiv ity c o n fe re n c e s and w o r k e r s ’ advisory c o m m iss io n s w ou ld b e rev iv ed to identify loyal w orkers w h o would help find “in tern al r e s e r v e s , ” im p ro v e p rod u ctiv ity , and m ak e th e daily adjust­ m e n t s to supply b ottle n e ck s so that th e y w ould save on en gin eers, who w e r e in s h o rt supply, and k eep w orkers in p r o d u c t i o n .128 T h e c e n t e r p i e c e o f this d e m o c ra tiz in g p ro c es s was th e reorganization of p ro d u ctio n on th e shop floor and in th e m in es a c co rd in g to a system of a u to n o m o u s p ro d u ctio n b rigades. A cc o r d in g to V u k m an ov ic-T em p o , the p r o b l e m with th e c u r r e n t s y stem was th at skilled w orkers w e re demor­ alized b e c a u s e no m a t t e r how g re a t th eir own effort to surpass the norms and th us b rin g g r e a t e r re w a rd to th e ir b rigad e, th eir individual pay was t h e s a m e as th at o f e v e r y o n e else. P ay d e p e n d e d on actual output, and w h e n o u t p u t fell t h ro u g h no fault of th eir o w n — such as b e ca u se of pro­ d u c tio n b o ttle n e ck s th at had led to delays by a p revious shift of workers— t h e y w e r e effectively penalized for th e w ork p e rfo rm a n c e of others. W o r k e r s th o u g h t factory adm in istrato rs (especially fo re m e n who recorded resu lts th at d e t e r m i n e d actual pay) should a c c e p t responsibility and not take away from w o r k e r s ’ in co m es. T h e y also b lam ed fo re m e n for the de­ lays c a u s e d w h en w orkers c h o se to stay away w itho u t notice for days. T h e refo rm o f p ro d u ctio n b rigad es into p e r m a n e n t, collective units of e igh t to tw e n ty w ork ers, led by a skilled w o r k e r but using group disci­ pline an d grou p evaluation o f w o r k e r p e rfo rm a n c e , took p lace in April, B asin g th e reform on th e system in a g ricu ltu re, the lead ership aimed to r e d u c e tu r n o v e r o f skilled w orkers w itho u t raising w age rates, by giving skilled w o rk ers c o n tro l o v e r p rod u ctio n and p a y m e n t decisions; and to a ttack th e s h o rtages o f t rain ed staff by making t h e m superfluous in orga­ nizing w ork, discipline, and pay. A fter c o n fe re n c e s to discuss labor orga­ nization c o llectiv ely , th e skilled w o rk er (the

hrigadir , or b rigad e leader)

w ould assign tasks, assist less skilled w o rk ers w h en n e ce s sa r y , and move a m o n g b rig ad es to m ake su re th at m ac h in es w e r e o p eratin g at full capac­ ity. B rig a d e s co u ld s et up a ssem b ly lines to sp e e d p ro d u ctio n so that each tZH D iscu ssio n at th e se c o n d p le n u m o f th e C P Y c e n tra l c o m in it t e c , especially by V u k m a n o v i c - T e m p o a n d K ardelj, ib id ., 1 5 9 - 7 3 -

1.43

M I U T A H Y SELK-KK1. IANC. T.

brigade p u s h e d t h e n e x t , a n d w o r k e r s w e r e e n c o u r a g e d to d e v i s e new' tools that w ou l d d o t h e w o r k oi s e v e r a l o p e r a t i o n s a n d to s u g g e s t o r g a n i z a ­ tional c h a n g es s o t h a t m a c h i n e s w e r e no t lef t id le. As t h e w o r k o f t h e brigade uni t still d e t e r m i n e d o u t p u t , t h e m o r a l p r e s s u r e o f t h e b r i g a d e ' s honor and t h e d i s c i p l i n a r y p r e s s u r e of t h e g r o u p w o u l d a c t as p o w e r f u l weapons to i n c r e a s e l a b o r d i s c i p l i n e a n d r e d u c e t h e t u r n o v e r t ha t f r e ­ quently h a l t ed p r o d u c t i o n — in c o n t r a s t to t h e p r e v i o u s m e t h o d , b v w h i c h the party o r g a n i z a t i o n w o u l d r e s p o n d to a d a y s l ow o u t p u t w i t h a c a m ­ paign tor m a x i m u m e f l o r t t h e f o l l o w i n g d ay . W o r k e r s w h o w i s h e d t o b e absent woul d h a v e t o g o t p r i o r a p p r o v a l f r o m t h e i r f e l l o w w o r k e r s , so t h a t their tasks c o u l d

be

reassigned

in a d v a n c e .

The

brigade

le a d e r and

workers w e r e f r e e t o r e d e f i n e n o r m s a n d f ir e s l o w e r w o r k e r s . F o r e m e n , now su p er fl uou s t o t h e o r g a n i z a t i o n o f p r o d u c t i o n , c o u l d r e t u r n t o I ho line, whi ch m e a n t a d d i t i o n a l s a v i n g s on a d m i n i s t r a t i v e c o s t s a n d f e w e r

quarrels wi th l o c a l p a r t y c o m m i t t e e s . P a r t y c a d r e s w o u ld al so b e m o v e d h’oni stall p o s i t i o n s t o p r o d u c t i o n b r i g a d e s , w h e r e t h e i r po l i t i c a l w o r k with those w h o w e r e n o t p a r t y m e m b e r s w o u l d b e e a s i e r ; a n d “C o m m u ­ nist

b r i ga d e l e a d e r s w o u l d f e e l a d d i t i o n a l p r e s s u r e to i n c r e a s e o u t p u t

through c o m p e t i t i o n s h e l d a t p a r t y m e e t i n g s w h e r e t h e r e s u l t s o f f e l l o w members w e r e c o m p a r e d . T h e b r i g a d e s w o u ld a ls o s e r v e as a s y s t e m o f on-the-job t r a i n i n g t o i m p r o v e w o r k e r s ' t e c h n i c a l s k ills a n d , t h r o u g h t h e Communication of p o li t ic a l i n f o r m a t i o n at b r i g a d e m e e t i n g s , t h e i r i d e o l o g ­ ical e duc a ti on as w e l l , I2'' Ent hu si a sti c r e p o r t s I r o m t h e f ield f l o o d e d p a r t v j o u r n a l s a n d n e w s ­ papers in t h e m i d d l e of 1 9 4 9 . B u t t h e r e p o r t Ir o m t h e c o a l m i n e of in Bosni a— w h e r e worker,

Al ij a

the

ne w system

Sirotanović,

began

apparently

playing

■Stakhanov— w as l e s s r e a s s u r i n g . 1 10 T h e r e

Breza,

w ith o n e e x e m p l a r y skille d the

r o le

o f a Yugoslav

t h e t e c h n i c a l s t al l ’ w e r e o p ­

posed to t h e b r i g a d e s , p e r m i t t i n g o n l y 1 0 p e r c e n t of all w o r k e r s t o t r y o u t the new s y s t e m ; a n d t h e f a c t o r y a d m i n i s t r a t i o n , p a r t v , a n d u n i o n o r g a n i ­ zations all c o n t i n u e d t o i n t e r f e r e w i th its e x t e n s i o n e v e n w h e n its r e s u l t s argued o t h e r w i s e .

O t h e r r e p o r t s p r o v i d e a m p l e e v i d e n c e ol w h v st a ff

might h av e b e e n

le s s t h a n e n t h u s i a s t i c a b o u t t h e s u g g e s t i o n s fo r i m ­

proved o r g a n i z a t i o n t h a t w o r k e r s m a d e at w e e k l y b r i g a d e c o n f e r e n c e s and about w o r k e r s

m a n y c r i t i c i s m s of p a r t y a n d u n i o n o r g a n i z a t i o n s a n d

technical staff f o r n o t i m p l e m e n t i n g r e g u l a t i o n s . 131 M o r e o v e r , t h e b r i I i'“3 According to a union new spaper* th e s y ste m "m a d e a big d i l i c r e n c e in su rp assing the plim in metallurgy

(at steel mills in Z e n ic a , S m c d e r e v o , and j e s c nice and at th e D juro

Djaković factory, lor exa m p le ) and in raising pro d u ctivity (Bulletin du C onseii C en tral dc la

(tonfćdćration das Syndicate dc Yaugiislavia ■{, nos, 'i —1 [1 9 4 9 ]), 1,‘° Hadziu,

Zašto se i d a lje raz vija b o r b a za visoku p ro d u k t i v n o s t ra d a u r u d n i k u Brezi,"

1’* 1'or e x a m p le s c itin g e v i d e n c e of p a rty r e s is ta n c e to t h e p r o d u c t i o n b r ig a d e s , s e c Had/.ić, Zašto sc; i d a lje razv ija b o r b a ; a n d T r n in ić , Kako j e p a rlis k a o rg a niz a cija u r n d -

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gad es at coal m in es c o n tr a d ic te d th e official policy of settling th e work­ fo rc e, for th e y m ig ra te d from o n e m in e to an o th e r in highly publicized p ro d u ctiv ity cam p aign s.

A u g u s t 1 9 4 9 - J u n e 1952: E c o n o m i c C o e r c i o n o f U nem ploym ent

an d

the

R ise

T h e g e r m o f rev ersal from th e unusual tw elve m o n th s o f S e p t e m b e r 1948 to A u g u s t 1949 was p lanted on F e b r u a r y 17, 1949 (not at the p arty con­ gress o f 1952), with a shift in U .S . policy to “k eep T ito afloat”; 132 by Au­ gust it had s p r o u te d . T h e life raft was at first only a t e m p o r a r y relaxation of e x p o rt-lic e n s in g con trols on m o st C o c o m c a te g o rie s and permission to ap ply for In tern atio n al Ban k for R e c o n s tr u c tio n and D e v e l o p m e n t (IBRD) loans, in e x c h a n g e — at th e in sistence o f the U .S . s e c r e ta r y o f defen se and th e P e n t a g o n — for c o n cessio n s that in clu ded no m o re aid for the Greek g uerrillas. B u t it did o p e n th e w ay to a lo n g e r -t e rm trad e and payments a g r e e m e n t with B ritain , full m e m b e r s h ip in th e I M F , a E u r o p e a n Co­ o p e ra tio n A d m in is tra tio n 133 a g r e e m e n t on F e b r u a r y 22 to buy Yugoslav c o p p e r an d lead, and a tra d e a g r e e m e n t on M a rc h 22 with th e Joint E x p o r t - I m p o r t A g e n c y o f th e Allied occup ation in W e s t G erm an y . In July, th e Yu goslav g o v e r n m e n t closed its b o r d e r with G r e e c e . B y August

1949, th e t ra d e b lock ad e from th e E a s t had b eg u n to take effect; domestic riots and hints o f a political u n d e rg ro u n d s u g g es ted th e e x te n t of hardship at h o m e , a rrests of W h i t e G u ard s in Slovenia b ro u g h t an official Soviet p r o t e s t, an d th e Yugoslav am b as sad o r to W a s h in g to n , Sava Kosanovic, p led w ith S e c r e t a r y of S tate D e a n A ch eso n on A ugust 16 and 2 2 to speed actio n on Y u g o slav ia’s loan re q u e sts to th e I M F , I B R D , and U .S . E xp o rt­ I m p o r t Ban k (in cluding T it o ’s p oign an t r e q u e s t for toilet articles along with m in in g and agricu ltural m ach inery). Also in A ugust, th e first World Ban k mission arriv ed , Yugoslavia jo in e d th e Coal C o m m i t t e e o f the E co ­ n o m ic C o m m i t t e e for E u r o p e to re p la c e Polish and C z e c h coking coal,

n icim a ‘T i t o ’ u c e s tv o v a la u organizaciji rada po n ovom m e t o d u . ” T h e b rig a d e system was r e i n t r o d u c e d in th e S o v ie t U n io n in t h e la te 1 9 7 0 s , b u t th e p r o d u c tio n brig a d e s did not e v o l v e into w o rk e rs ’ se lf -m a n a g e m e n t, as th e y did in Yugoslavia, A c co rd in g to Slider (“The B r ig a d e S y s te m in S o v iet I n d u s tr y ”) this was b e c a u s e factory and union officials effectively o p p o s e d it. A n d r e a R u th erfo rd p ro p o se s instead , in h e r 1 9 8 8 thesis on th e brigades (Yale U n iv e r sity ), th at th e brig ad es w e r e not as successful as th e y w e r e said to b e , especially in re so lv in g t h e su pply situation. O n a sim ilar sy ste m in tr o d u c e d in H un ga ria n factories in the m i d - 1 9 8 0 s , th e E C W A s , se e Stark, “C o e x is tin g O rgan ization al F o r m s in H u n g a ry ’s E m e rg ­ ing M ix e d E c o n o m y / ’ 132 T h e N ational S e c u r i ty C o u n cil d ir e c tiv e was N S C 1 8 /2 , S e e M ug o ša, “O dnosi Jug­ oslavije i S A D - a .” 133 O n th e E C A, se e H o g an , T he M arshall Plan, 1 0 2 - 4 .

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and the E x-Im Bank c r e d it o f $ 2 0 million, w hich th e Yugoslavs had sought doggedly for four years, was finally ap p ro v e d on th e tw e n ty -fifth .134 U .S . policy now having b e e n established , th e Policy P lann ing Staff o f th e U .S . State D ep artm en t c o n firm e d th e se cre d its with a final c h a n g e in policy on September 10 to “all-out su p p o rt

in d efen se o f T ito ’s lead ership ; an d on

November 17, the National Security Council pledged to assist Yugoslavia’s defense against possible m ilitary a t t a c k . 135 By the end o f 1 9 5 0 , tw o-th ird s of the Yugoslav c u r r e n t-a e c o u n t deficit was covered by U .S . loans (largely for A m e ric a n m a c h in ery ), b u t th e p rice of the long-sought foreign assistance to finance im p orts and the grow ing trade deficit would b e h i g h . 13'4 T w o I M F drawings, $ 3 million a p p r o v e d on September 2 2 and $ 6 million on O c to b e r 14, had to b e repaid within two years; British loans in S e p t e m b e r w e r e good for only n inety days, and on the condition th at B ritish-Y u gosla v c o m m o d ity -tr a d e a g r e e m e n ts b al­ ance first; the W o r l d Bank loan for $ 2 5 million was finally given on O c t o ­ ber 25, but on the condition th at th e n ew state first rep ay p re w a r d ebts to Britain, P ran ce, B e lg iu m , and Italy; and im m e n s e U .S . p re s s u re on B e l ­ gium to allow Yugoslavia to p o s tp o n e r e p a y m e n t o f its $ 6 million trad e credit due in 1 9 5 0 only p e rs u a d e d Belgiu m to a c c e p t p a y m e n t in kind rather than in hard c u r r e n c y . T h e E a s te r n b loc now c a n c e le d all treaties of friendship and m u tu al secu rity; th e S oviet lead ership o r c h e s tr a te d both a campaign against T ito on th e slogan that he had “sold Yugoslavia to W all Street” and trials again st “T i to i s ts ,” b egin nin g with th at o f Laszlo Rajk in September; and a s e co n d C o m in fo r m resolution on N o v e m b e r 2 9 , 1 9 4 9 , finalized the break. By the end of A ug ust, foreign d ip lo m a ts ’ field rep orts c o n c u r r e d with assessments at th e h igh est levels in th e Yugoslav party: th e p eriod b e ­ tween S e p te m b e r 1 9 4 9 and J u n e

1 9 5 0 would b e unusually difficult.

Stocks of fertilizer and agricu ltural m a c h in e r y w e r e ex h a u s te d and could not be replaced for at least o n e y e a r and likely th r e e ; by early fall, grain reserves w ere d an g ero u s ly low, and so m e rep u blics had not b o t h e r e d to store grain at a l l .137 K idrič calcu lated that rationin g would have to con F

Kosanovic ask ed th e U n ited S ta te s to delay a n n o u n c e m e n t o f th e c r e d its until S e p ­

tember 8 so as not to in te r f e re with Yugoslavia's plan to seek fu r th e r r e co gn ition w ith a seat on the UN S ecurity C o u n cil, b eg in n in g with K ardelj s sp e e c h to t h e G e n e r a l A sse m b ly on September 6 in w hich h e d e n o u n c e d th e U S S R . T h e Yugoslavs, a ctiv e ly su p p o r te d by the United States, w e r e successful in th e i r bid for th e se a t on O c t o b e r 2 0 , 19 4 9 . 115 NSC 18/4- “U .S . P olicy to w ard th e C onflict b e t w e e n t h e U S S R and Y u g o sla v ia ,” in

Foreign Relations o f the United States, 1949 5 : 9 7 8 . Foreign Relations o f the United States, 1949 5 : 9 2 6 , 9 4 1 - 4 4 , 9 5 9 - 7 8 ; a n d D uisin , “T h e Impact of United S ta te s A ssistan ce on Yugoslav Policy, 1 9 4 9 - 1 9 5 9 . ” S e c also T o m a s e vich, “Yugoslavia du rin g t h e S e c o n d W o r ld W a r , ” 112. r 1:17 Kidrič, at the third p le n u m o f th e C T Y c e n tra l c o m m i t t e e , in P e tr a nov ic, K o n č a r, and Radonjič. Sed nice, 3 9 0 - 9 1 .

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tin u e for a n o th e r two years b efore free m ark ets could re s u m e . Budget outlays for national d efen se alone took 2 2 p e r c e n t of th e national income in 1 9 4 9 . F o r e i g n - e x c h a n g e earnings from exp orts w e re 3 6 . 3 p e rc e n t lower than in 1 9 4 8 (down from $ 3 0 2 . 2 million to $ 1 9 2 . 3 million), and imports had b e e n c u t by 8 p e r c e n t , alm ost en tirely from c o n s u m e r goods.138 N o n e t h e le s s , Kardelj told th e third p len u m of th e cen tral committee ( m e e tin g on D e c e m b e r 2 9 - 3 0 , 19 4 9 ) th at “th e m ost im p o rtan t battle of socialism n o w " — national in d e p e n d e n c e — had b een won with the change in W e s t e r n policy, for Y ugoslavia was now c o n sid e re d w o rth y of material s u p p o rt and m ilitary d efen se as an altern ative m odel of socialist democ­ ra cy to S oviet “state c ap italism ” and “b u r e a u c ra tic d e fo r m a tio n .”139 In tern atio n al recog n itio n an d a n ew foreign policy both allowed and r e q u ir e d , in th e views of Kardelj and Kidric, a retu rn to the Slovene m o d el for th e e c o n o m y an d g o v e r n m e n t and to th e political alliance with m id d le p easan ts and urban professionals— w h ose sup port, Tito com­ p lained , t h e y had w o rk e d so h ard to c a p tu re with policies of differentia­ tion an d w h ich th e “ad m in istrativ e m e th o d s ” o f a state cen su s and political r e c r u i t m e n t of lab or had n early cost th e m . T h e im m e d ia te e con om ic tasks w e r e to face th e e v e n g r e a t e r d e m a n d s of d efen se and th e external-trade a c c o u n t, an d thus fu rth e r cuts in d o m e s tic c o n su m p tio n , that these new con d itio n s r e q u i r e d an d to re s to r e m a c r o e c o n o m ic stability through mas­ sive cuts in e m p lo y m e n t, a b ove all by re tu rn in g people to the country­ side. This policy shift would c o m e to be identified in m ost socialist c o u n tr ie s as an e c o n o m ic and political “reform p r o g r a m ”; the Yugoslav le a d e rs h ip in D e c e m b e r called it a “n ew s trateg ic and tactical o r d e r ,” but its p rim a r y ob je c tiv e was to r e tu rn to m o n e ta r y in cen tiv es — what Kidric n o w called “e c o n o m ic c o e r c i o n ”— to cut m o n e ta r y d e m a n d furth er while in creasin g ou tp u t. Kardelj e la b o ra te d th e “n e w ” principles o f foreign policy in December. T h e le a d e rs w ould c r e a t e “as w ide a d e m o c r a ti c front as possible”— a global versio n of th eir pop ular-front strateg y d uring th e w a r— to exploit conflicts within th e c a m p s o f th e ir e n e m ie s by ap pealin g to the masses ab ro ad ; it w ou ld also b e th e ideological basis for n o n alig m n cn t six years later. This s tra te g y r e q u ire d unity on all foreign policy, w hich therefore had to b e s u b ject to p arty c on trol, and a stron g military d e t e r r e n t .140 T h e y had to p r o c e e d

as i f th e re would be w ar to m o rro w . All investment

138 T o m a s e v i c h , “Y ugoslavia d u rin g t h e S e c o n d W o rl d W a r ” 139 P e t r a n o v i c , K o n c a r, and R adonjic, Sednice, 4 7 4 14° K a rd elj, in his r e p o r t on “F o r e ig n -p o licy q u e stio n s,” at th e third plen um of the CPY c e n t ra l c o m m i t t e e , ib id ., 4 8 0 - 8 1 . As K ardelj put il, “All o u r internal political m easures must to d a y m o r e than e v e r b efo re b e co o rd in a te d w ith o u r stru g g le for th e m asses in the world, w ith o u r f oreign p o licy ” (480), T his c o u r s e in clu d e d giving th e a r m y se p a ra te representation in t h e c e n t r a l c o m m i t t e e o f th e p a rty .

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not related to d e fe n se w ou ld b e c u t and th e plan goals for th e n e x t two years revised d o w n w a rd (to th e “k ey i n v e s tm e n t p r o je c ts ”) . 141 E x p o r ts would be e xp an d ed and im p orts c u t a fu rth e r 2 0 p e r c e n t d u rin g 1950. Military conscription was r e n e w e d in O c to b e r . D e fe n s e in du stries would continue to have priority in supply allocations (including o n e -th ird o f p e r ­ mitted imports), and civilian con stru c tio n firms would b e obliged to u n ­ dertake capital c o n s tr u c tio n p ro je c ts for th e arm y . B u t b e c a u s e th e reform also called for stabilization to r e d u c e th e trad e deficit and rep ay loans— which m eant c u ttin g d o m e s tic co n su m p tio n , especially federal e x p e n d i­ tures— this con tin u in g priority of d e fe n s e -o rie n te d p rod u ctio n p laced contradictory d e m a n d s on federal policy. T o co n tin u e th e se federal o b ­ ligations, the lead ers h ip would slim down th e federal adm inistration and transfer back to th e rep u blics ju risd iction o v e r th e ir b u d g ets and enteiprises— or, as was said at the time, restore the republics’ “sovereignty. ” 142 The return to th e p r e - 1 9 4 8 federal c o n tr a c t was exp lain ed th e s a m e way as its suspension th e p revio us D e c e m b e r . At the third p len u m in D e c e m ­ ber 1949, Tito e x p lo d e d in e x a s p e r a te d fury at rep u blics th at r e m a in e d , despite the clarity o f th e Ja n u a ry 1 9 4 9 policy, “closed within th eir co co o n s , . . of n a rro w - m in d e d n e s s ,” ob je c tin g to e v e r y federal regulation, c a u s ­ ing costly delays in e x e c u tio n ot policy, and refusing to p rov ide supplies to federal entei prises in th eir terr ito ry or to o t h e r rep u blics at th e sam e tim e that they d e m a n d e d s u p p le m e n ts from federal stocks for g u a ra n te e d p r o ­ visions and foiled to fulfill p r o c u r e m e n t quotas and labor p l a n s . 14:î Kidrič chose sarcasm: “T w o tim es two is four, c o m r a d e s , not s ix .” 144 T h e tasks of production called for r e n e w e d atten tio n to d istrict-level party c o m m it te e s and planning co m m iss io n s, b ut R an k ović’s regionalization plan was a fail­ ure, Kardelj arg u ed at a c o n fe re n c e in O c to b e r 1 9 4 9 called to discuss difficulties with re p u b lic an p arty and ministerial c a d r e s . 145 In stead of moving skilled c a d r e s from rep u blican capitals into th e field to im p ro ve implementation, th e plan had taken staff from localities, w hich th e y could not easily sacrifice, and c r e a t e d y e t a n o t h e r layer of g o v e r n m e n ta l b u ­ reaucracy. T o e n fo r c e g r e a t e r discipline on rep u blics' use o f labor and supplies and th e ir b u d g e t a r y e x p e n d itu r e s , th e lead ersh ip would req u ire 111

Tito, in d iscussion at th e third p le n u m o f the C P Y c e n tra l c o m m i t t e e , ib id ., 4 0 6 ;

Kidrič, in his r e p o rt on “c u r r e n t tasks in the stru g g le for co m p le tio n of the i iv e -v e a r p la n ” (393-94), On th e “key in v e s tm e n t p r o je c ts ” str a te g y , se e also T o m a s e v ic h , “Yugoslavia (lur­ ing the Second W o r ld W a r ”; a n d M ladek, Š tu re , and W yczalko w sk i, “T h e C h a n g e in the Yugoslav E c o n o m i c S y s t e m .” MZ Informativni Priručnik Ju goslav ije, 3 2 3 . 643 V u k m an o vić-T em p o at th e third p le n u m of the C P Y c e n t ra l c o m m i t t e e , in P e t rano vie, Končar, and R ado njič, S ed n ice , 4 1 7 . T ito a d d e d , “ N o u n d e rsta n d in g for o t h e r s ’ t r o u b l e s .” w* Ibid., 3 9 1 . ¡11

Blaževič, at t h e third p le n u m o f t h e c e n tra l c o m m i t t e e , ib id ., 4 5 1 ; se e also Kid h e ’s

more general discussion o f th e p r o b le m ( 3 8 6 - 8 8 ) and T i t o ’s c o m m e n t s ( 4 0 1 - 2 ) ,

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re p u b lic a n g o v e r n m e n ts to be financially self-sufficient, operating on p rin cip les o f profit-and-loss acco u n tin g . O n e c o n o m ic g rou nd s, republics w ou ld be fo rced to re le a s e civil servants and professionals to th e district c o m m i t t e e s and to firms, b ut th e repossession ol e n te rp rise s taken tempo­ rarily into fed eral o w n ers h ip at th e b egin nin g of 1 9 4 8 would also increase th e ir r e v e n u e base, if th e y m an ag ed it well. S o m e relief would c o m e from fed eral subsidies to local g o v e r n m e n ts to help th e m hold onto skilled c a d r e s an d from th e tran sfer of p ensions for v e te r a n s and w ar invalids to th e fed eral b u d g e t, in line with its jurisdiction o v e r defense. T h e res to ratio n o f th e rep u b lic s ’ p r o p e r ty rights of 1 9 4 6 - 4 7 also en­ tailed th e r e tu rn o f e c o n o m ic ministries, reliev ing the federal budget of substantial e x p e n d i tu r e s on salaries and offices.

B u t planning offices

w ou ld c o n tin u e to be su b ord in ated to territorial on es, for th e planning co m m iss io n b e c a m e p art o f th e e c o n o m ic council o f each republic. The m id lev el b ra n c h d ire c to ra te s for se cu rin g and d istributing supplies for p u b l i c -s e c to r e n te rp ris e s w e r e to o p e r a te on profit-and-loss accounting an d socialist c o m m e r c e (m ark etin g by p ro d u cers), form ing autonomous “h i g h e r e c o n o m i c association s” of e n te rp rise s in an industrial branch to p r e v e n t firm s’ c o m m e r c i a l orientation from b e c o m in g “disloyal’’ competi­ tion a m o n g firms (that is, with profits gain ed by c o m p e titiv e m arket pric­ ing r a t h e r than r e d u c e d costs o f p r o d u c tio n ).1IH B u t th e d e c en tralizatio n of m o st e c o n o m ic ministries and republican financial a u to n o m y would re q u ire n ew in stru m en ts of coordination and co n tro l o v e r th e e c o n o m y as a w hole. A n ew ad m in istrative apparatus w ou ld d e fe a t th e p u r p o se o f d e cen tralizatio n , so coordin ation of the na­ tional e c o n o m ie s would o c c u r th ro u g h

councils o f representatives from

th e g o v e r n m e n t , party, and h igh er e c o n o m ic associations o f e ach repub­ lic. In following th e d e m o c r a t ic p rinciple in tro d u ce d in local governments an d agricu ltural co o p e ra tiv e s in th e spring o f 1 9 4 9 , the lead ership hoped to r e d u c e th e c o n s ta n t com p lain ts and quarrels with federal decisions by inviting rep u b lican lead ers to “p articip ate in the revisions" of th e invest­ m e n t plan and a d m in strativ e s tru c tu re . Tito and Kidric ceremoniously a n n o u n c e d this reorganization of th e state adm inistration of the economy on F e b r u a r y 8, 1 9 5 0 , calling it a “blow to b u r e a u c r a t i s m .” T h e imple­ m e n tin g d e c r e e s b e tw e e n F e b r u a r y and J u n e a im ed to leave to the fed­ eral g o v e r n m e n t (the “s t a t e , ” in th eir s p eech es) “only as m u c h operative, I4(i T h e s e associatio ns w e r e like th e trusts in t h e Soviet c a s e (see C a n a n d D a v ie s, Foun­ dation s o f a P lann ed E con om y, 19 2 6 - J 929). In this p ro ce ss of rationalizing th e ministerial s t r u c t u r e , t h e r e was an i n t e r m e d ia te ste p d u rin g w hich th e federal m inistries, w hich had p ro life ra te d into e v e r m o r e specific e c o n o m i c function s, w e r e g ro u p e d by g e n e ra l function (su ch as light in d u stry o r h e a v y industry) and co n solid a te d . T h e h ig h e r e c o n o m i c associa­ tions soon c a m e to b e calle d econom ic' ch a m b e r s (p ricredn e ko m o r e ) an d , like th e ministerial b r a n c h offices th ey r e p la c e d , w e r e su bdiv ided territorially.

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personnel, and reg u lato ry au th o rity as is n e ce s sa ry (u n d e r th e given level of material p ro d u ctiv e forces, social con sciou sn ess, and the g en eral e c o ­ nomic difficulties c a u s e d by th e in ten s e stru ggle for th e five-year plan) to protect general p lann ed prop ortion s. 117 Financial stabilization d e p e n d s on real stabilization— the p rod u ctio n and consumption o f g o o d s — and K idrič c h o se to i n te rp re t that p ro b le m as excess e m p lo y m en t in th e p ub lic secto r. T h e “c h a n g e in social s t r u c t u r e ” had been excessive, in his view ; the in atten tion o f r ep u blican au thorities and the depletio n o f c a d r e s from th e d istrict state and p arty apparatus made it “thoroughly im possible to c o m p l e te tasks related to industrializa­ tion and agricu lture w itho u t m aking political mistakes '; and d esp ite the policy of Jan u ary 1 9 4 9 to r e d u c e the n u m b e r of p eo p le on g u a ra n te e d provisions, the state was supplying m o re. T h e e n e m y of food p rod u ctio n was no longer th e kulak— the private tra d e r h oarding grain in o r d e r to speculate— b ut a n ew social s tratu m lie called “ flu ctu ato rs,” w h o s p e c u ­ lated with their labor. T h e s e p e asan t-w o rk ers , w h o w orked th eir land for food hut took industrial job s to obtain the right to g u a ra n te e d provisions for their families, w e r e causing serious h arm to industrial p rod u ctio n with their irregular p r e s e n c e and tu rn o v e r, and th ey c o n s u m e d state p rov i­ sions that ought to h ave b een re s e rv e d for w orkers with no a ccess to land and family food supplies. T h e v o lu n te e r labor brigades had also in creased the demand for food— from p eo p le w h o should have b een p ro d u cin g it hut who w e re sent to th e forests, c o n stru ctio n sites, and m in es instead. Still-higher p r o c u r e m e n t quotas for grain and industrial crop s for 1 9 5 0 and again for 1 9 5 1 cou ld be m e t (if rep u blics no lon ger balked at federal quotas) by in creasin g th e a c r e a g e sown, b ut th e re was insufficient labor for the task. Kidrič now arg u ed that it was “c o m p le te ly u n -M a r x is t” to think that industrialization could be ach ie v e d by “p e tty -b o u rg e o is work brigades” ra th e r than consolidation of th e w orking class itself.l ltS E c o n o m ­ ically, the brigades' low p rod u ctiv ity , drain on state food re s e rv e s, and diversion of the tru e labor surplus away from p e r m a n e n t e m p lo y m e n t meant a net loss for tlu; state; politically, th ey w e re clearly no lon ger voluntary, for youths b rok e th eir “legs and h e a d s ” trying to flee and p e a s ­ ants even lost th eir lives r e s is t in g .119 Begin n ing in 195 1 , brigad es would serve only local p ro jec ts; o n c e a y ear, for two or t h re e m o nth s and with advance warning, p e o p le could c o n trib u te their labor w h e r e th ey could directly see its valu e to th e ir own lives. As for p easan t-w ork ers, th ey had to choose. T h e y w e r e

m o re than w e l c o m e

117 Kidrič, " O reorganizaciji d r ž a v n e u p ra v e p r iv re d o m .

to re tu rn to the village, T h e o ccasio n was his s p e e ch on

June 27, 1950, asking p arlia m e n t to co nfirm th e ch a n g e s. • 1,IS At the third p le n u m of th e C P Y c e n tra l c o m m i t t e e , in P e tra n o v ic, ltodonjic, SeihiicG, 3 9 2 . 1,19 Tito, ibid., HO

K o n ča r, and

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w h e r e a s th o s e w h o cou ld not survive in a g ricu ltu re w itho u t state provi­ sions should leave for in du stry p e rm a n e n tly . T h e only way to persuade village h ou seh old s to rele a s e surplus labor for industry, Kidrič argued, was th e “e c o n o m ic c o e r c i o n ” that th ey u n d erstoo d . If d e n ie d th e right to linked tra d e , th ey would leav e for industry “n atu rally .” 150 At a c o n f e r e n c e in A ug ust 1 9 4 9 on agricultural p rod u ctio n , Tito and K ardelj r e m i n d e d p arty c a d r e s from th e republics th at th e party line on “co lle ctiv iz a tio n ” was

not all-out collectivization, let alone a forced pace—

in K id r ic ’s w o rd s (at th e third p len u m in D e c e m b e r ) , “we a r e n ’t creating c o o p e ra t iv e s ou t o f a ny

la rp u rla rtism e ”151 T h e y had to c o n c e n tra te ma­

c h i n e r y in existin g c o o p e ra tiv e s, intensify p ro d u ctio n , and p e rm it labor c o o p e ra tiv e s only w h e r e th e y m a d e e c o n o m i c sense (in grain-growin g re­ gions and for cattle , a key ex p o rt c ro p , b ut not in “passive reg ion s”). It was also n e c e s s a r y to p u t p u b lic-s e e to r labor coo p e ra tiv e s on self-financing t e rm s (the r e g i m e o f e c o n o m ic acco un ting ) and rep lace all remuneration

truclodan . 152 B u t official policy o n c e again favored th e gen era l farm ers’ (mar­ in kind by c a s h — e i t h e r hou rly w ages or p ie ce rates instead of the

keting) c o o p e ra tiv e s . T h e p ro b le m with agricultural prod u ctiv ity , Bakarič told th e sixth p arty c o n g re s s in N o v e m b e r 1 9 5 2 (four m o n th s after com­ pulsory d eliv eries had c o m e to an en d), was that th e p easan t labor cooper­ a tives had b e e n “u n d e r m e c h a n iz e d and o v e r m a n n e d . ”153 Although the c o r e o f K id r ic ’s a r g u m e n t for th e c h a n g e in labor policy had to do with food— c u tt in g food im p orts, ex p o rtin g m o re agricultural products, and r e s t o r in g m a c r o e c o n o m i c b alances by re d u cin g th e size of th e public s e c t o r — th e third installm en t of the E x - I m Bank loan in A ugust 1950 ($20 million w h en th e c o u n t r y ’s foreign d e b t was at $ 1 8 0 million, in mostly s h o r t-t e r m c red its ) was u sed to p u r ch a se food. T h e form al r e q u e st to the U n i te d S tates on O c to b e r 2 0 for non m ilitary aid, again for food, was an­ s w e re d on N o v e m b e r 2 1: o v e r th e following four m onth s, 2 7 9 , 0 0 0 metric tons of food w e r e ship p ed at a cost of $ 3 7 . 8 million (including transporta­ tion c o s t s ) . 154 T h e n e w policy on a g ricu ltu re was a n n o u n c ed th ree days r ,° K idrič, ib id ., 3 9 1 , 4 6 6 . 151 "A rt for art's sak e” (ibid., 3 8 9 ). T ito and K idrič had a lready in sisted, at an August co n f e r e n c e of p arty c a d re s on peasant labor co o p e r a tiv e s , on str e n g th e n in g the existing co o p e r a t i v e s and not in creasin g theii nu m b e rs. 152 T h e “labo r d a y ” o f ten ho urs (the trudodni o f Soviet p ra ctice ) by w hich laboi was o rg a n iz e d and paid, in a g ric u ltu re as in in d u stry — with plan ned w age norm s foi output per unit o f t i m e — and by w hich th e peasant labor co o p e ra tiv e s w e r e to be organized. Lil T h e r e w e r e also two serious d ro u g h ts, in 1 9 5 0 and 19 5 2 . r>l T h e political m o m e n to u s n e ss of this decision is perh a p s re fle cted in the fact that

011

th e sa m e day , th e p u blic p r o s e c u to r was told to r e le a se Žujo vie from p riso n — after' lie had b e e n willing,

011

N o v em b er 11, to go b e fo re the c e n tra l c o m m i t t e e and confess to having

e n g a g e d in e n e m y activ ity , and on co nd itio n that hr1 w rite a public le t t e r explain ing that lie Irad b e e n w r o n g to b e liev e in th e U S S R blindly ( published in B orb a

011

N o v e m b e r 25 , 1950,

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151

later, on the t w e n ty - f o u r t h , 155 and th e N o v e m b e r issue of th e p arty j o u r ­ nal published an a rticle justifying in ternational loans in th e transition to socialism,156 On D e c e m b e r 2 9 , P re s id e n t T ru m a n signed th e Yugoslav Emergency Assistance A ct of 1 9 5 0 g ran tin g food up to $ 5 0 million. The restructuring o f p u b lic-s e e to r e n te rp rise s to re d u c e labor tu rn o v e r and cut the w age bill also re t u r n e d to th e 1 9 4 7 system . E n t e r p r i s e m a n ­ agement once again b e c a m e resp on sib le for e m p l o y m e n t and training; th e economic c oercion

of b u d g e t con train ts a im ed to regain discipine on

wages and provide in cen tiv es to im p ro v e w o r k e r s ’ skills; and y e t a n o t h e r innovation in w ork p lace organization to k eep w ages in line with real p r o ­ ductivity began. In th e fall o f 1 9 4 9 , th e tim e o f this n e w policy, th e c o u n ­ try was at the h eigh t of the lab or-b rig ad e cam p aign (only th e p revious April called the “n ew s ystem of lab o r”); n e w sp a p e rs from S e p t e m b e r to December 1949 con tain little else than stories o f b rigad es from all areas of the country, acco lades for th e w o r k e r s ’ advisory com m ission s that told factory administrators how to in crease p rod u ctiv ity , and the location of the hero of the h o u r, Alija Sirotanovie, w h o was on tou r with his b rigad e to teach miners all o v e r th e c o u n tr y th eir n ew m e th o d for in creasin g o u t­ put.157 But the lesson lead ers d re w from th e “Alija Sirotanovie M o v e m e n t for Higher L ab o r P ro d u ctiv ity ” was that th e re re m a in e d im m e n s e “i n te r ­ nal reserves ’ of labor in in du stry that justified a series of “rev isio ns’ in th e number of em p lo y ed . The new system was in tro d u ce d in a cam p aign o f t h r e e battles d uring 1950: the “battle to stabilize the labor fo rc e ” with e m p lo y m e n t c o n tra c ts ; the ‘battle to b alance goods and m o n e ta r y fu nds” th ro u g h e n t e r p r is e level balances a m o n g w ages, labor plans, and g u a ra n te e d provisions; and the "battle to e x e c u t e th e p ro d u ctio n plan with re d u c e d quotas o f l a b o r .” Their sum was the s ystem later known as s e lf-m a n a g e m e n t in w orkp laces, which began in D e c e m b e r 1 9 4 9 with th e election o f w o r k e r s ’ councils. According to th e R egulation on S ettlin g L a b o r o f early Ja n u a ry 1 9 5 0 , workers would not b e p e r m it te d to work after M arch I w itho u t a w ritten p. I). Žujović ag re e d to t h e s e co nd itio n s w h e n h e h e a r d , in new s r e p o rts o f the p e rio d since ITiis arrest given him by Djilas, o f attacks at th e trial o f Laszlo Rajk on p e rso n s h e kn ew well and on the Yugoslav p arty as fascist, ■ L 5'5 Tomasevich su gg ests, in “C ollectiviz a tio n o f A g ricu ltu re in Y u g o sla v ia ,’’ that d e c o l l e c ­ tivization may have b een a co n d itio n for food aid; bu t th e a r g u m e n t of this book is th a t no p l i condition was n e c e s s a r y . ■Lil5fi Guzina, “M ed ju n aro d n i zajm ovi i socijalistička iz g ra d n ja .’’ O n S e p t e m b e r 6 , 1 9 5 0 , th e Jugoslav represen tativ e to th e I M F m a rk e d th e c o u n t r y ’s e le ctio n to t h e b o ard w ith a ;Spmh maintaining that internatio nal d e v e lo p m e n t aid to p o o r e r c o u n trie s w as n e c e s s a r y for work! peace— an a r g u m e n t th e Y ugoslavs had b e e n pu sh in g sin ce 1 9 4 5 (Borim , S e p t e m b e r f e 1950). B

See, for e x a m p le , th e front p a g e of a lm ost e v e r y issue of B o rb a from S e p t e m b e r 1 0 to

October 10.

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e m p l o y m e n t c o n t ra c t, and e n te r p r i s e d irecto rs would b e held legally re­ spo nsible for an y w o rk ers w h o did. T h e c o n tr a c ts — w hich w ere set the p rev io u s April for six m o n th s in basic industrial b ran ch es and three m o n th s in o th e rs and w hich now defined e m p l o y m e n t, in Kardelj’s lan­ g u ag e, as an “e m p l o y m e n t relationship "

(radni odnos )— had to guarantee

w o rk e rs a jo b c o m m e n s u r a t e with th e ir skill levels. T h e law was thus used to e n fo r c e d i r e c t relations b e t w e e n e m p lo y m e n t, skill level, and the legis­ lated w ag e for e a c h job classification. U n e x c u s e d a b s e n c e from work was reclassified as e c o n o m i c sabo tage; w orkers w e r e sub ject to criminal pros­ e c u tio n an d cou ld be p u n ish ed by a m o n e ta r y fine o r up to th re e months’ c o m p u ls o ry labor d oin g rep airs. B e c a u s e the m in ister of labor and the p ub lic p r o s e c u t o r had b e e n too cavalier ab ou t broken contracts, the l ead ers a rg u e d , th e y would use the c ou rts and th e civil and criminal law to p r o t e c t w o r k e r s ’ l ights, e n fo r ce labor and w age regulations, and, not in cid entally, re p la c e a n o th e r g o v e r n m e n t bureau with th e initiative of individual w o rk ers o r m a n a g e r s in b rin gin g claim s. T o e n fo rce the wage plan, th e y w ou ld turn to th e N ational Bank, w hich c on trolled the cash plans an d w a g e funds o f e n te rp ris e s th rou gh its local affiliates.158 While ratio nin g c o n tin u e d , con trol o v e r th e level o f e m p lo y m e n t would be t h ro u g h th e s t a t e ’s allocation of g u a ra n te e d provisions; factories with iarm s had th e ir cash w age fund re d u c e d , thus d irectly balancing wages an d goods within th e firm. P hysical as well as financial stabilization was to be en fo rced by with­ d raw in g th e right to g u a ra n te e d provisions from w orkers who moved a m o n g e n te r p r i s e s , calcu lating the size ol w o r k e r s ’ rations accord ing to th e tim e th e y s p e n t in stead y e m p l o y m e n t , and fo rcing w o m en “economi­ c ally” into th e lab or force by d en y in g g u a ra n te e d provisions to workers’ families. I n s u r a n c e benefits would also be d e t e r m in e d not by individuals’ c on trib u tio n s to th e fund but by th e length of t im e th ey had b een regu­ larly e m p lo y e d (o n e ’s

staz, in which the g o v e r n m e n t now included time

s p e n t in w ar s e rv ic e , im p ris o n m e n t, in te rn m e n t, or rev olu tion ary activ­ ity), an d benefits w ou ld b e financed by a lu m p -su m state tax on enter­ p r i s e s . 159 It was as su m e d that to a ttra c t w o m en to p rod u ction and keep 1 *s D e s p it e p r e p a r a tio n s sin ce 194(j, th e jo u rn a l ol th e finance m inistry, Finansije, con­ c e d e d that th e cash plans b eg an se riously only in S e p t e m b e r 1 9 4 9 (“ Nekoliko zapazanja p o v o d o m obilaska n aro d n ih o d b o r a ,” M a r c h - A p r i l 1 9 5 0 ), 159 T h e re v is e d law on social in s u ra n ce for w o rk e rs, officials, and th e ir families, pro miti­ g a t e d J a n u a r y 12, 1 9 5 0 , was e n ta n g le d in p a rlia m e n ta ry d e b a t e th e e n t i r e y e a r; o n e reason was its revision ol o ld -a g e pen sio ns. T h e prev iou s law had in clu d e d a w aiting period before t h e in s u re d co u ld d r a w ben efits b e c a u s e lo n g -te rm in su ra n ce had b e e n e n a c te d in prewar Yugoslavia o nly in 1 9 3 7 , thu s leaving o ld e r insured perso ns at a d isadv antag e, Another w e a k n e ss in t h e old law was th e s e p a ra te c o v e r a g e and regu lation s for officials. T h e new law i n c lu d e d all e m p lo y e d p e r so n s an d also th o se not in a radni odn os bu t d o in g "socially useful a n d n e c e s s a r y activ ities, su ch as p e o p le e l e c t e d to r e p r e s e n ta tiv e o rgans and ce rta in social

M11JTAIIY S E L F- RE LI A NO E

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them there, firms would h ave to take into a c co u n t th eir n eed s , such as day-care c e n te r s. This regulation (H arm on ization o f L a b o r - F o r c e Plans with the W a g e - F u n d Plan and th e G u a ra n te e d -P ro v isio n s Plan, also from early January) r e q u ire d e n te rp ris e s and b ran ch d ire c to ra te s (now h igh er economic associations) to d ra w up lor approval, within eigh t days, d y ­ namic labor plans with c o r r e s p o n d in g w age funds based on th eir gen eral economic and p ro d u ctio n plans. O n ly w h en th e ir m axim u m q uo ta o f e m ­ ployed persons was a p p r o v e d would authorization to issue c o n s u m e r c o u ­ pons be given.

In

the co u n tr y s id e ,

district labor offices signed the

employment c o n tra c ts for m e m b e r s of p easan t labor c o o p e ra tiv e s, issued consumer cou po ns to p e o p le w h o had the right to provisions b u t were« without a p u b lic-s eeto r c o n t r a c t, and w ith d re w that right from persons living in households with two or m o re h e cta re s o f cultivab le land or an income p er h ou seh old m e m b e r o v e r th r e e th ou san d dinars a y ear. T h e people's c o m m i tte e s r e c e i v e d d isc retio n ary au th o rity to disallow th e right to ration cou po ns to p ers o n s earn in g less that that. T h e ir e x e c u tiv e boards assessed eligibility for lin k ed -trad e c ou po ns, d en y in g th em to households that held surplus lab or ( d e te r m i n e d ac co rd in g to th e n u m b e r of a h o u s e ­ hold's able-bodied m e m b e r s in relation to the size o f its landholding and type and m e th o d o f cultivatio n). Finally, the long stru ggle to e n d w orkers' ability to bargain o v e r w ages and benefits th rou gh m a r k e t s tren g th e n te r e d its final battle.

Leaders

complained that th e in trod u ction of e m p l o y m e n t c o n tra c ts in the spring of 1949 had only led w orkers to shift from w age d e m a n d s to negotiation o v e r working conditions and benefits, such as housing and food. But, Kardelj insisted, clauses on th e se m a tte r s

"cannot be sub ject to negotiation in our

conditions.”160 Such n egotiations w e r e also inflationary, e n c o u r a g in g fre­ quent tu rn over and "disloyal c o m p e tit io n ” a m o n g e n te rp ris e s for s ca r ce labor— as well as p e r p e tu a ti n g the i n c o r r e c t idea, M in ister of L a b o r Arsov wrote in J u n e 1 9 5 0 , th at m a n a g e m e n t and labor did not have th e sam e interests u n d er social o w n ersh ip , that s o m e h o w “the socialist firm is s e p a ­ rate from its w ork c o llectiv e ra t h e r than o n e unified w hole. iH1 I m p r o v e ­ ments in w orkin g conditio ns and w o r k e r s ’ living standards had to be adjusted to th e “real d e v e l o p m e n t of m aterial forces. The p urpo se o f th e w o r k e r s ’ councils in tro d u ce d at th e e n d o f D e c e m -

organizations,” It also o p e n e d th e possibility o f in s u ra n ce for in d e p e n d e n t professionals. T h e primary p u rp ose o f th e n e w legislation, h o w e v e r, was to e n c o u r a g e r e t i r e m e n t s o f o ld e r workers anc! soldiers by e x te n d in g c o v e r a g e to all w o rk e rs insured b e fo re t h e w a r a n d raising the pension to 1 0 0 p e r c e n t o f th e p rincip al; thu s the locus of d e b a te was on o ld-ag e p en sions (see Jelcic, Socijalno p ra v o , 1 8 - 2 0 ) . T h e sa m e sy ste m was in p r a c tic e in the Soviet U n ion after J 9 3 4 (see D av ies, T h e D evelopm ent o f the Soviet B udgetary System, 2 6 5 ) IW) Q uoted in A rso v , "R e sa v a n je pitan ja ra d n e s n a g e , ” 3 0 iril Ibid.

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b e r 1 9 4 9 was thus to gain w o r k e r s ’ assistance in the w age restrain t and e m p l o y m e n t cuts n e c e s s a r y to restabilize th e e c o n o m y and to restore the a u th o rity of e n t e r p r i s e m a n a g e m e n t and tech n ician s o v e r prod u ctio n, in­ clu d in g labor. T h e cou ncils would c o m b in e the c ollectiv e incentives and d isciplin e o f th e p ro d u ctio n brigades with m anagerial accountability for e n t e r p r i s e b u d g e ts . At first, this sub stitu te for c ollectiv e bargaining in the m a r k e t a t t e m p t e d sim p ly to e n c o u r a g e an e x c h a n g e of information about th e e c o n o m i c con d itio n s o f th e firm with m a n a g e r s ’ explanations for the b usiness reason s b e h in d th e ir decisions so as to teach w orkers the “per­ s p e c t i v e ” (lon g-run ra th e r than s h o rt-ru n in terests) ap p ro p ria te to their position in socialism , an d to train a n e w g en eratio n in m anagerial skills. T h e e x c h a n g e o f such information was in te n d e d to e n h a n c e incentives to h i g h e r p ro d u ctiv ity by m aking th e link to ou tp u t m o re tran sp aren t and m a n a g e r s m o r e c r e d i b l e — in the lan gu age o f ratio n al-ch o ice theory, by in creasin g c o m m i t m e n t . At th e sam e tim e, th e councils w ou ld rationalize ad m in istratio n by con so lidatin g into o n e e le c te d b od y th e functions of the lab or in sp e cto rs , ad visory c o m m ission s, p ro d u ctio n c o n fe re n c e s, workers’ in sp e cto rs , an d state labor offices. As specified by th e instructions for w o r k e r s ’-cou ncil e lec tio n s issued jointly by th e F e d e r a l E c o n o m i c Coun­ cil a n d th e C e n tr a l Board o f th e U n ited Unions in D e c e m b e r to republi­ can union offices, “th e form ation o f w o rk e rs ’ councils does not lessen the significance o f th e d ir e c to r in m an agin g th e en te rp rise . . . . [His] author­ ity, obligations, an d responsibilities do not c h a n g e in any way. ”1H2 And alth ou gh th e c o u n c ils ’ p u rp o se was “to in te re st o r activ ate ever-larger n u m b e r s o f w o rk ers in solving p ro b le m s of p ro d u c t io n ,” rep lacin g the b rig a d e s y s te m an d V u k m a n o v i c - T e m p o ’s d e v o te d p rod u ctio n workers, d e l e g a te s w ou ld n o n eth eles s only rev iew th e p rod u ctio n plans, labor al­ location s, an d work s ch ed u les fo rm ulated by en g in e e rs and technical staff, w h o k n ew b est how to rationalize. A lthough the w o r k e r s ’ councils w ou ld a p p e a r to re p la c e the unions, union chief D ju ro Salaj told the third p le n u m in D e c e m b e r 1 9 4 9 that th e union lead ers had b e e n “blowing this h orn for two years n o w . ”163 In th eir view, p rod u ctio n w orkers had re­ c e i v e d too m u c h atte n tio n in relation to en g in e e rin g and tech n ical p er­ son n el an d e v e n , p e rh a p s , e x a g g e ra te d wages. It was en g in e e rs who had to b e paid well; p ro d u ctio n w orkers w e r e only re c e n tly arriv ed from the villages, an d h ig h e r w ages would only e n c o u r a g e th eir faster re tu rn to the land (sin ce it w ou ld take less tim e to earn th e cash th ey sought) and would re in fo rc e th eir p e tty -b o u rg e o is p ro p e rty -h o ld in g instincts ra th e r than tran s fo rm in g th e m into industrial workers. T h e p rob lem of the living s tan d ard c a m e ab ou t n ot b e c a u s e inflation u n d e rm in e d p rod u ctio n incenIf’2 “U p u ls lv o o osnivanju i nulu radničkih saveta državnih privred nih p r e d u z e ć a ," in P e tr a n o v ić and Zečt'vić, Jugoslavija, 1918-1988, 8 5 2 - 5 3 . ir,3 P e t r a n o v ić , K om 'ar, and R adonjić, Sednice, 4 3 3 .

155

MILITARY S E L F - R E L I A N C E

lives as Kidrič had b e e n arguing, b ut b e ca u se of th e m oral e c o n o m y of peasants.1&l I n d e e d , Salaj w e n t so far as to say th at w orkers n e e d e d to b e led by en gin eers as well as by th e p arty organization. B e c a u s e skilled workers and e n g in e e rs d o m in a te d the unions as in th e p r e w a r p eriod , th e line of d escen t for th e w o r k e r s ’ councils from th e K nights of L a b o r and the Austromarxists was i n t a c t . 165 The unions w e r e assigned two functions: to o rgan ize council electio n s and nominate ca n d id a te s , and to d efend w o r k e r s ’ rights to social in su r­ ance and b enefits— w hich would now d e p e n d on the e c o n o m i c results of firms and on cou ncil d elib eratio n s, with th e en d of w age b argain in g and the close of in su ran ce b u reau s . In th e first ro un d of electio ns, d u rin g the second half of Ja n u a ry 1 9 5 0 , th e councils w e r e lim ited to th e largest firms of the defense d r iv e — 2 1 5 state e c o n o m ic e n te rp rise s that had b e e n u n ­ der federal ju risd iction an d had had brigades; th ese w e r e firms in mining, machine tools, shipbuilding, printing, tran sp o rt, gas and ele c tr icity , iron smelting,

h osiery,

and

c e m e n t . lbfi

As

th e

D ecem ber

instructions

explained: 1,11 Confronting llu; p r o b le m of tu r n o v e r ami a b s e n te e ism , Kidrič a rg u e d the im p o rta n ce ol political work by m anag erial staff instead of e c o n o m i c ince n tive s. W o rk e rs from the vil­ lages were absent to c e l e b r a t e religious holidays, and b e c a u se th e y w e r e O rth o d o x , C a t h o ­ lics, and Muslim s,

this m e a n t s e p a ra te days for e a ch b e co m p la in e d ; to r e d u c e such

absences, m ine w o rk ers w e r e b e in g given h ig h e r w ages

"I think that it has no p a rticu la r

effect to offer him an e v e r h ig h e r w ag e, b e c a u se as all can se e , the h ig h e r the w ag e he receives, the less h e works. l i e is a c c u s t o m e d to living on a ch u n k of b r e a d and b a con , and when he has this, h e s satisfied. Instead , it s n e c e ssa ry to do political w ork with su ch p e o p le . . . and first ol all, e n ab le him to know w hat his obligation is to the sta te . . . lift [his] cultural standard . . . and in s o m e way tie him to th e fa cto ry ” (K idrič, at th e third p le n u m of the CPY cen tral c o m m i t t e e , ibid ., 4 1 1 ). O n this C hay ano vian analysis, se e J. Scott, T h e

Moral E c o n o m y o f th e Peasant; and C ox 's analysis o f the Soviet d e b a te s in the 1 9 2 0 s (Peas­ ants, Class, a n d C ap ita lis m ). On the K nights o f L a b o r , see H a tta m , “ E c o n o m i c Visions and Political S tra te g ie s"; and C. M artin,

Pu b lic Policy and I n c o m e D istribution in Y u g o sla v ia ,” 2 7

tromarxist s c h e m e , the

In th e Aus-

c h a m b e r s ol la b o r” lor w o rk ers and salaried e m p lo y e e s w e r e se p a ­

rate from the “c h a m b e r s o f c o m m e r c e and i n d u s tr y ,” paralleling th e dis tinction

that

developed in th e Yugoslav c a s e b e t w e e n th e w o rk e rs ’ co un cils within firms and the e c o ­ nomic ch a m b e rs , w hich associated firms by bra n ch and repub lic. T h e m o d e l was clearly there in the sim ilar distinction b e tw e e n the works co un cils (organized a cc o rd in g to the shopfloor) and the tra d e unions (o rg anized by branch) in w hich the work s' co un cils w e r e subordinated to tile track1 unions and n e v e r a ch ie v e d any im p o rta n t m anag erial functions (Gulick, A u s t r i a f r o m H a b s b u r g to H i t l e r 1 :2 0 2 , 2 1 .3 - 1 4 ) . Iw’ Branko H o rv a t inform s m e that th e idea lor the councils began sp on ta n e o u sly in the cement lactory in Split, alth o u g h Kidrie s w ritings du rin g W o rld W a r II on w o rk e rs' c o u n ­ cils, the W e i m a r e l e m e n t s ol th e Slo v e n e co n stitu tion al proposal of 1 9 2 1 , and the e x p o su re nl at least S lo v en es and C ro a ts to A u stroin arxism w ould sugg est a lo n g e r g estation. T h e n e e d to rationalize labo r costs in h eav y ind ustry and e x p o rt p ro d u ction was m ost im m e d ia te , however, as o n e can se e in th e beg inn ing s ol industrial reform s in o t h e r socialist s t a t e s — for example, in Poland in th e 1 9 7 0 s (see W o od a ll. T h e Socialist C o r p o r a t i o n a n d T e c h n o c r a t i c

Pmver)

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F o r now, until t he n e c e s s ar y e x p e r i en ce is g ained, w or k er s ’ council s will be foun ded on ly in a c e r t a in n u m b e r of the bes t and most import ant collectives in our c ount r y. . . . B e f o re the election of w or k er s ’ council s, you need to or ga ni ze c o n f e r e n c e s . . . inviting res pons ible minister s and di rect ors of gen­ eral , or main, d ir e c t o r a t e s of the enter p r is es in w hich elect ions are being he ld, and also t h e e n t e r p r is e d ir ector s, s ecr etaries of the part y organizations, and pr e s i d e n t s o f t h e s e e n ter p r is es as s ociations .1'’7

F r o m late Ja n u a ry 1 9 5 0 th ro u g h 1 9 5 1 and 1 9 5 2 , unions organized fac­ tory ele c tio n s of d e le g a te s , from w h ich re p re s e n ta tiv e s to branch-level w o r k e r s ’ cou n cils would then b e ch o sen . T h e s e re p re s e n ta tiv e s would he, a c c o r d in g to th e n e w s p a p e r publicity d rive, th e “b e s t ” w orkers, engineers an d tec h n ician s, an d w ork ers h o n o red as innovators and rationalizers.168 In th e rationalizations o f 1 9 5 0 , h o w e v e r, th e m o st im p ortan t task of the w o rk e rs cou ncils was, as for th e federal councils that rep lac ed the minis­ tries, to s e c u r e w o r k e r s ’ c o o p e r a t io n — by b e in g allowed to rev iew man­ a g e m e n t ’s d ecis io n s — in th e u p c o m in g e m p lo y m e n t revisions that would r e d u c e “surplus lab o r” and “hoard in g” and send “on e p art eventually [back] to th e villa g e .” T h e labor quotas for 1 9 5 0 w e r e re d u c e d by more than a million w ork ers, leaving a total of only 1 . 3 million e m p lo y e d in the pub lic s e cto r. T h e c u ts and reallocations w e r e m a d e in tw o waves: pro­ d u c tio n w o rk e rs in th e spring, and p rim arily g o v e r n m e n t administrative staff in th e fall. A ltho ug h lead ers insisted on “political p re p a ra tio n ” at the third p le n u m , 9 9 , 7 2 2 p ro d u ctio n w orkers w e r e m o v e d from one eco­ n o m ic b ra n c h to a n o t h e r d u rin g M a rc h and April w ithou t explanation or c h o ic e . F e a r s of u n e m p l o y m e n t raised earlier in political circles were e c h o e d in p o p u lar slogans such as “Surplus lab or!” “U n e m p l o y m e n t!” and “T h e crisis has b e g u n !” C ritics insisted that a r e tu rn to the village was “a step b a c k w a rd ” an d “into u n e m p lo y m e n t. ”169 F a c t o r y d irecto rs ju m p ed at th e o p p o rtu n ity to fire les s-d esired w o rk ers — invalids, w o m e n (especially p r e g n a n t w o m e n ), ailing and o ld e r w orkers. Office staff c u t workers by e lim in atin g w h ole c a te g o r ie s , such as rep air workers, from factory em­ p l o y m e n t r o l l s , 170 an d local g o v e r n m e n ts elim in ated e n tire activities, such as artisanal and h o s telry firms in Vojvodina. T h e s e cuts led to such u’7 “P o p r a t n o p ism o uz up u t sivo o osnivanju i radu radničkih save ta državnih privrednih p r e d u z e ć a ,” in P e t r a n o v ić and Z e č e v i ć , Jugoslavija, 1918-1988, 8 5 3 . IfiK S e e , for e x a m p l e , Politika, J a n u a r y 2 8 a n d 2 9 , 1 9 5 0 , on e le ctio n s for w o rk e rs’ councils in th e B r e z a co al m in e in B o s n ia -H e r z e g o v in a , th e Hade K o n č a r m a ch in e factory in Zagreb, th e C u k a r i c a sh ipbuild ing firm , th e K u ltu ra prin tin g firm in B e lg ra d e , and sev en firms (in clu d in g th o se for h o sie ry , e l e c t r i c tra m s , and city gas) in Sarajevo,

im A rso v , “R eš a v anje pitanja ra d n e s n a g e ,” 2 1 - 2 2 . J70 I b i d ., 2 3 . A c c o rd in g to H a s, giving this o p p o rtu n ity to m a n a g e rs led to o verly "tech­ n o c r a tic ” ev alu atio n s in e n te r p r i s e s , a ltho ug h this s e e m s to h a v e b e e n th e l e a d e r s ’ intention (“ D ru S tv e n o -e k o n o m sk i o s v r t ,” 1 4 8 - 4 9 ) ,

MILITARY SELF-RELIANCE

157

dislocation ol s e r v i c e s t h a t w o r k e r s h a d t o h e c a l l e d h a c k to t h e i r f o r m e r jobs several y e a r s l a t e r . M a n y w o r k e r s r e f u s e d to m o v e to t h e i r n e w a s ­ signments (for e x a m p l e , ol t h e f o u r h u n d r e d that t h e S u b o t i c a l a b o r of f i c e sent during t h e s p r i n g t o w o r k in P a n e e v a e k i Hit, o n l y s ix t y w e n t ) , a n d local officials s y m p a t h e t i c t o t h o s e w h o s h i e d f r o m t h e m i n e s o r h e a v v industrial j o b s f o u n d t h e m

o t h e r j o b s r a t h e r t h a n i m p o s e l e g al p e n a l ­

ties.171 On J u n e 10, 1 9 5 0 , d a y s a f t e r t h e b a s i c a n d d y n a m i c b r a n c h l a b o r plans bas ed

on

enterp rise

production

plans

su bm ilted

in

January—

February w e r e d u e , T i t o w e n t to t h e n a t i o n a l a s s e m b l y w i t h t h e n e w l aw on "the m a n a g e m e n t of state- e c o n o m i c e n t e r p r i s e s a n d h i g h e r e c o n o m i c associations b y t h e w o r k c o l l e c t i v e .

A lthough the work co llective m ean t

everyone in t h e f ir m , a n d t h e la w a s s i g n e d leg al r e s p o n s i b i l i t y t o e n t e r ­ prise m a n a g e m e n t f o r l a b o r a n d “d i r e c t o p e r a t i o n s ,

it w a s , i n t h e h y p e r ­

bole of th e i d e o l o g i c a l s t r u g g l e , a f u l f i l l m e n t of t h e h i s t o r i c p r o m i s e o f -socialism that w o r k e r s w o u l d r u n t h e i r f a c t o r i e s : " P e a s a n t s in c o o p e r a t i v e s , which they m a n a g e t h e m s e l v e s , a n d w o r k e r s in f a c t o r i e s , w h i c h f r o m n o w on they will m a n a g e t h e m s e l v e s , t o d a v h a v e t h e i r o w n f ate t r u l y i n t h e i r own hands.

1,2 O n J u n e 2 7 , t h e d a y b e l o r e t h e s e c o n d a n n i v e r s a r y o f t h e

f irstComi nfon n r e s o l u t i o n , t h e a s s e m b l y e n a c t e d “w o r k e r s ’ c o n t r o l . ” 171 B y August a nd S e p t e m b e r , w h e n t h e r e n e w a l o f e m p l o y m e n t c o n t r a c t s o f ­ fered a n o t h e r o p p o r t u n i t y f or d i s m i s s a l s , l e a d e r s w e r e e x p r e s s i n g c o n f i ­ dence that " r e s u l t s w ill b e e v e n b e t t e r b e c a u s e of w o r k e r s

councils.

171

Also on J u n e 2 7 , K i d r i č a s k e d t h e a s s e m b l y to c o n f i r m t h e r e o r g a n i z a ­ tion of st ate a d m i n i s t r a t i o n in t h e e c o n o m y . B e t w e e n S e p t e m b e r a n d D e ­ cember, t h e s e c o n d l a b o r r e v i s i o n c u t an a d d i t i o n a l 1 2 2 , 5 0 0 w o r k e r s a nd reallocated o l f i c e w o r k e r s a n d a d m i n i s t r a t i v e staf f, i n c l u d i n g 5 0 , 0 0 0 d e ­ moted i nto i n d u s t r i a l o r a g r i c u l t u r a l p r o d u c t i o n ( t h e s e w e r e p e o p l e w h o s e lack ol pr o f e s s i o n a l q u a l i f i c a t i o n s m a d e t h e m “i n c a p a b l e of p e r f o r m i n g administrative t a s k s s u c c e s s f u l l y " ) . 175 I n t h i s r o u n d t h e l o a d e r s w e r e “e s ­ pecially c a r e f u l , ’' 17'’ a l l o w i n g t h e r e a l l o c a t i o n s to d r a g o n l o n g e r , d i s c u s s ­ ing the tr a n s fe r s in b r o a d c o n s u l t a t i o n s in t h e f e d e r a l l a b o r m i n i s t r y , a n d setting up c o o r d i n a t i n g c o m m i s s i o n s o f “i n t e r e s t e d p a r t i e s ” i n d i s t r i c t s and rep ub l i c s. “T h e p r o b l e m of d e c e n t r a l i z a t i o n is to e n s u r e t h e c o r r e c t allocation of p r o f e s s i o n a l c a d r e s , " r e a d t h e t itl e o f an a r t i c l e in t h e A u g u s t ­ September i s s u e o l

Ekonom ski Pregled.

H e r e , too , h o w e v e r , m a n y w h o

refused to t a k e p r o d u c t i o n j o b s o r r e t u r n 1:1 Arsov. ‘tto šav an jc pitan ja r a d n e sn ago,

to t h e c o u n t r y s i d e w e r e i n-

22-24

■ P - T i t o , "V ru d b en ičk o upravljanje, p r i v r e d o m , ’ 2ft,

m * ibid, ,f_l Vjttcestuv H o ljev ac , w h o took o v e r from A rso v as federal m in is te r o f labo r in J u ly 1950, in “P roblem rad no sn age: N ek a ¡skusiva i/. p rv o g pol ugodiš t a , ” Dular, ‘Stru k tu ra osoblja / a p o s l e n o g n našoj priv redi, * 4 3 3 . 17,5 Kas, “ D iiištv en o -ek o n o m sk i o s v r t ," 14 5 .

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d u lg ed . M a n y o th e rs took m a tte r s into th e ir own h an d s— such as the h u n d r e d -o d d staff m e m b e r s o f th e M inistry o f L ig h t In d u s try who refused to a c c e p t th e ir n ew a s sig n m en ts and, two m o n th s after th e ministry s April dispersal to th e rep u b lics, w e re seen going d o o r -to -d o o r in search of a lte rn a tiv e offers in th e c a p i ta l.177 T h e r e w e r e substantial criticism s o f this reform p ro g ra m within the le a d e rs h ip , in spite of T ito ’s r e p e a te d a tte m p ts to sway critics with stories o f political e x c e s s in th e p r e c e d in g year. T h e “n arro w in g on the labor

“f o r socialism ," while the “organi­ m ust b e u n d e rs to o d as n e c e s s a r y in th e given situa­

fron t” was b e in g d o n e , K idrič a rg u e d , zational m e a s u r e s ”

tion to s e c u r e th e P la n ”; if “th e y d o n ’t see t h e m as socialism, th en we can go to th e d evil an d c r e a t e a b u r e a u c ra tic s y s t e m . ”178 F o r som e senior p a rt y m e m b e r s , th e c h a n g e was b e in g m a d e too soon and too quickly; the l e a d e r of th e V ojvodina p a rty, Jovan V eselinov, was c o n v in c e d that the p easan ts w ou ld w a n t to join co o p e ra tiv e s if only the g o v e r n m e n t ’s grainreq u isition in g rules w e r e less d iscou rag ing , and th at th e transition to eco­ n o m ic an d in ten sive m e th o d s and away from state responsibility for labor w ou ld n ot p e r m i t c o m p le tio n o f the plan u n d e r p revailing conditions and c o u ld n ot b e m a d e o v e rn ig h t w itho u t serious e c o n o m ic consequences. D ju ro P u c a r c o n tin u e d to a rg u e on b eh alf o f m an y th at labor problems w ou ld b e b e t t e r resolv ed by assigning p e o p le to job s than by withdrawing g u a r a n t e e d provisions, w hich w ould only c au s e th e loss o f labor already r e c r u ite d . A t o n e final c o n f e r e n c e in th e M inistry of L a b o r on the eve of its elim in ation , in S e p t e m b e r 1 9 5 0 , p articip an ts a g r e e d that this new s y s t e m — in w h ich lab o r was “a p ro b le m that only an e c o n o m i c organiza­ tion can so lv e” with e c o n o m ic m e a s u r e s — had benefits, b u t b o d e well for e m p l o y m e n t

it did not

at first. ”179 T h e conflicts w e r e particularly

in te n s e at th e fourth p le n u m o f th e c e n tr a l c o m m i t t e e in Ju n e 1951, when p ric e s in retail m ark ets for c o n s u m e r goods w e re freed. Kidrič once again railed again st th e “b u r e a u c r a ti c m e n ta lity ” th at insisted on “socialist de­ te rm in a t io n o f p lan n ed p rices

and that did not s e e that free prices and

th e o p e ra tio n o f th e “law o f v alu e” w e r e essential in cen tives to increased p ro d u ctio n . O n th e o th e r h and, fo rm e r h ealth m in ister Pavle Gregorič, ad d r e s s in g a d isp u te o v e r th e disposition o f m ed ic in es held in federal w a re h o u s e s , p r e s e n t e d searin g d ata on h o rre n d o u s h ealth conditions; h e q u e s tio n e d th e w isd om o f freely selling instead of rationing scarce 177 A rso v , “R ešav an je pitanja ratine s n a g e ," 23. 178 K id rič, in P e tr a n o v ič , K o n č a r, and R adonjič, Sednice, 3 9 4 . H e did add , how ever, that t h e y w ould n o t “in te rfe re with local initiative w h e r e it is truly b ased on local sources ol m a t e r i a l s .” 179 H as, “D ru štv e n o -e k o n o m sk i osv rt,

147. Arsov also re p o rts that th e se reallocations

r aised fears o f u n e m p lo y m e n t am o n g so m e , bu t that th e con tin u in g sh ortag es in mining and c o n s tru c tio n sh ou ld h av e told th e m that “t h e r e was no d a n g e r of that in o u r econom ic sys­ t e m ” (“R e ša v a n je pitanja r ad n e s n a g e ,” 21).

159

MILITARY S E L F - R E L I A N C E

goods to people in n e e d , an d then p re d ic te d n ew h orrors in health and social welfare as a c o n s e q u e n c e of e n d in g all central au tho rity for health. Others argued that financial m e th o d s would p rov ide very weak in cen tives to lahor r e c r u it m e n t and labor p rod u ctiv ity , given the goods shortages and the prevailing “c u l t u r e ” o f “transition lrom individual to socialist forms.”1*0 The resolution to this conflict on th e ap p ro p ria te m e th o d s for th e t ra n ­ sition lay, in Kardelj's view, with th e party. T h e transition would be m ad e through “agitation and p ro p ag an d a

by party activists to d ev elo p "socialist

consciousness" (a c c e p t a n c e of sacrifices in the in terest of lo n g -term o b j e c ­ tives); “initiative” (m o re effort with n e ith e r force nor im m e d ia te e c o n o m i c reward, on the promise; of fu ture gain); and “d e m o c r a tic relations in our production" th ro u g h th e forum s for p articipation, such as th e w orkers' councils. This w ou ld also be the b est policy of national d efen se, b e ca u se an international rep u tatio n for d e m o c r a ti c p articipation “is ju st w hat will enable us to show the world th e d ifference b e tw e e n us and t h e m . ’ 1M T h e return of control o v e r ed u c a tio n and c u ltu re to th e rep u blics in 1 9 5 0 would “win s y m p ath y in circles o f intellectuals, scientists, e tc , " 1'’2 P eop le without a p u b lie-sec to r e m p l o y m e n t c o n tra c t but who p e rfo rm e d “socially useful and n e c e s s a r y activities, such as p eop le e le c te d to re p re s e n ta tiv e organs and certain social o r g a n iz a tio n s,” would r e c e iv e rights to social insurance, as in d e p e n d e n t professionals p robably also would later. And, Tito said, “b e c a u s e of o u r policy toward the imperialist world, w e m u st now take special c a r e , p articu larly with y o u n g e r m e m b e r s o f th e P arty, to see that th ey not forget that w e are a socialist c o u n t r y . ” 1’’3 During 1 9 5 1 , Yugoslavia's reo rien tation to W e s t e r n tra d e and aid also led to a reform that e n d e d th e m o no po ly of th e M inistry o f F o re ig n T ra d e over foreign-trade tran saction s, h an d ed to th e E c o n o m i c C oun cil th e a u ­ thority to re g u late tra d e in p articu lar p ro d u cts w h en the social in terest (that is, defen se) d e m a n d e d it, gav e jurisdiction o v e r c u sto m s and tariffs to the finance m in istry, an d b egan an activ e e x c h a n g e -r a t e policy by d e ­ valuing the c u r r e n c y from 5 0 to 3 0 0 dinars to the U .S . dollar. On N o v e m ­ ber 1, the first $ 1 6 million installm en t o f U .S . m ilitary aid u n d e r th e two countries’ M utual D e f e n s e A ssistance a g r e e m e n t 184 arrived in B elg rad e, and A m erican

efforts

to

p e rs u a d e

th e

French

and

British

to

sell

Yugoslavia arm s and tanks m aterialized d u rin g that m o n t h . lsr’ 180 Pe t ran o vic, K o n č a r, a n d R ado njič, S ed nice, 6 6 2 - 6 7 . 1,S1 Kardelj, at th e third p le n u m o f th e C P Y c e n tra l c o m m i t t e e in P e tr a n o v ic, K o n ča r, and Radonjič, S ed n ica , 4 5 4 ; A rsov, “R ešav anje pitanja rudne s n a g e .” l!s2 Kardelj, in P e tr a n o v ic , K o n č ar, a n d R adon djic, S e d nice, 4 8 0 . ^

Ibid,

18,1 Ibid., 4 7 8 . 1,5

B etw e e n m i d - 1 9 5 1 an d 1 9 5 5 , th e U n ite d S ta te s co o rd in a te d aid from th e U n ite d

States, Britain, a n d F r a n c e , B y N o v e m b e r 1 9 5 2 , th e e c o n o m i c and m ilitary aid that had

160

CHAPTER 4

F e w m o n th s had p assed b efore the p red iction o f th e labor conference in S e p t e m b e r 1 9 5 0 p ro v e d c o r r e c t . T h ro u g h o u t 1 9 5 1 and 1 9 5 2 , en ter­ p rises w e n t o v e rb o a r d in th e stru ggle for profitability ( rentabilnost ), g u id ed b y th e “m aterial in terests o f work c o l le c ti v e s .” F ir m s increased both a c c u m u la tio n and w ages by firing all w h o did not “im m ed iately pro­ duce

an o u t p u t , ” in cluding th ose

in m a in t e n a n c e jo b s — who would

c le a rly b e n e e d e d la te r — and w orkers c o n sid e re d (as in the spring of 1 9 5 0 ) less p r o d u c tiv e , such as w o m e n , th e infirm, and th e a g e d . 18B Two d ro u g h ts w ithin th r e e years sen t agricu ltural ou tp u t p lu m m e tin g , and the s tart o f t h e K o re a n W a r in J u n e 1 9 5 0 b ro u g h t a disastrous shift in global te r m s o f tra d e against i m p o r te d fuels, strategic m aterials, an d machinery. M a n y in du stries sim p ly c a m e to a halt, and o th e rs re d u c e d production significantly; th e ad ju s tm en ts in th e fields of e n e r g y an d m in in g alone cut e m p l o y m e n t 1 4 . 6 p e r c e n t b e tw e e n Ja n u a ry 1 9 5 1 and Ja n u a ry 1 9 5 2 and 1 7 . 4 p e r c e n t by J u n e 1 9 5 2 . 187 T h e lead ers had d e cla r e d an “e n d to unem­ p l o y m e n t ” in S e p t e m b e r 1 9 4 7 ; five years later, th e official unem ploym ent o f p u b lic -s e c t o r w o rk ers had surpassed levels “norm al for W e s t e r n E u ­ ro p e a n

c o u n t r ie s ” (referrin g

to the

m o n e ta r ists ’ “norm al

ra te ” of 5

p e r c e n t ) . 188 T h e “c o r r e c tn e s s o f th e n ew e c o n o m ic m e a s u r e s ” was demon­ s tra te d , a c c o r d i n g to discussion at th e sixth p arty c on gress in November 1 9 5 2 , b y th e c o m p le t io n o f the p rod u ctio n plan for in du stry “at th e same tim e [that] th e n u m b e r o f w orkers has notably l e s s e n e d .”189 Delegate S im o K ok otic r e p o r t e d , “N o t only has th e B o r m in e successfu lly com­ p l e t e d its plan tasks, but it has also re d u c e d its costs o f production in p ro p o r tio n . T h e B o r m in e n ow c o m p le t e s its plan tasks with about three t h o u sa n d fe w e r w o rk ers than it had in 1 9 3 8 . ”190

C

o n c l u sio n

T h e r h e to r ic o f th e Y u g o slav -S o v iet p rop agan d a w ar o f D e c e m b e r 1948 to N o v e m b e r 1 9 5 2 e n c o u r a g e d an in terp retatio n of the Yugoslav system as

a rriv e d from the W e s t to taled $ 2 8 6 . 6 million in g ra n ts, $ 2 6 7 . 2 million in credit.s (from the U . S . E x p o r t - I m p o r t B ank , I B R D , I M F , L o n d o n C lu b , a n d individual co u n trie s), and $51 million in w a r re p a r a tio n s, m ainly from G e r m a n y

M ilitary aid c o n tin u e d until 1 9 5 8 ; and by

m i d - 1 9 6 2 , U . S . aid h ad r e a c h e d $ 2 . 3 billion, o f w h ich $ 7 1 9 million w as m ilitary aid (Mugoša, “O d n osi J u g oslavije i S A D - a ”; T o m a s o v ich , “Yugoslavia d u rin g th e S e c o n d W o rld W ar,’’ 1 0 5 - 7 , 1 1 2 ; H offm an an d N eal, Yugoslavia a n d the N ew Comm unism , 8 8 - 9 1 ) . 180 H a s , “D n iš tv e n o - c k o n o m s k i o s v r t , ” 1 4 8 - 4 9 . 187 E kon om ska Politika, A u g u st 2 8 , 1 9 5 2 , 4 2 2 , 188 H as, “ D r u štv e n o -e k o n o m sk i o s v r t ,” 1 4 1 . S e e also K rstu lov ić, “S taln o podizanje pro­ izv od no sti r a d a ,” 189 C alić, “E k o n o m s k a p ro b le m a tik a na V I. ko ng resu sa v e z a k o m u n is ta ,” 3 2 5 , 190 Ib id .

161

М П Л Т Л Н У SKI .K -H K I .I AN 'C K

an al te r n a t i v e

to

the

Soviet

system ,

an

alternative

characterized

bv

workers' c o n t r o l , a n t i l m r e a i i e r a t i e s o e i a li s t d e m o c r a c y a a n d d e c e n t r a l i z a ­ tion. In its i n t e r n a t i o n a l p o s i t i o n , it d id d if f e r s u b s t a n t i a l l y Iro m t h e p a t h followed in E a s t e r n

E u r o p e l r o m t h e e n d o f 1 9 4 7 ( and e s p e c i a l l y e a r l y

1949) until 1 9 5 3 . T h e c o u n t r y c r e a t e d an i n d e p e n d e n t a n d p o l i t i c a l l y s i g ­ nificant a r m e d f o r c e s , r e c e i v e d W e s t e r n m i l i t a r y a n d e c o n o m i c ai d a n d trade, a nd as a r e s u l t w a s a b l e to r e t u r n to t h e g r a d u a l i s t p o s i t i o n on agricultural s o c i a l i z a t i o n a n d t o t h e m e t h o d s ol e c o n o m i c c o n t r o l c o n s i d ­ ered a p p r o p r i a t e t o l ig h t m a n u f a c t u r i n g a n d p r o c e s s e d g o o d s l o r d o m e s t i c consumpti on a n d e x p o r t . T h e n e w c o u r s e r e e m e r g e d

in H u n g a r y .

Po­

land, and t h e U S S R in 1 9 5 3 a n d , f o l l o w i n g a d e t o u r , a l t e r 195fi ; a n d w h i l e their re fo r m s a n d t h o s e in C z e c h o s l o v a k i a in t h e 19b() s d i f f e r e d f ro m t h e Yugoslav o n e s in p o li t ic a l t r a j e c t o r y a n d i n t e r n a t i o n a l t i m i n g , t h e s i m ­ ilarities in e c o n o m i c c o n c e p t i o n s , t h e c o m m o n l e g a c y o f L e n i n i s t i n s t i t u ­ tions and t h e N L P ' s “ r e g im e : ol e c o n o m y " in i n d u s t r y a n d a g r i c u l t u r e , an d even th e p a r a l l e l s w i t h S o v i e t i n d u s t r i a l r e l a t i o n s of t h e 1.930s a r e u s u a l l v

ignored.191 Dece n t r a l i z a t io n a n d w o r k e r s ’ co n t r o l w e r e also no t w ha t t h e y ar e c l a i m e d to have b e e n . O n e of t h e p u r p o s e s of d e c e n t r a l i z a t i o n w as to “s t r e n g t h e n centralism by d e v e l o p i n g its d e m o c r a t i s m ,

15,2 a n d o n e o f ' t h e p u r p o s e s o f

workers c o n t r o l w a s t o r e d u c e t h e p o w e r o v e r w a g e s t h a t t ig h t l a b o r m a r ­ kets and t h e n t h e p r o d u c t i o n - b r i g a d e s y s t e m h a d g i v e n to w o r k e r s . T h e dynamic ol t h e p e r i o d w a s n o t b e t w e e n c e n t r a l a n d local p o w e r a n d a u ­ thority, o r b e t w e e n m o r e o r le s s p a r t y p o w e r ; it i n v o l v e d t h e d i f f e r e n t

kinds of a u t h o r i t y p o s s e s s e d b y e a c h of t h e t h r e e l e v e l s — f e d e r a t i o n , r e ­ public, a n d c o m m u n e (as l o c a l i t i e s b e g a n to b o c a l l e d ) — w i t h e a c h c h a n g e of poli cy. T h e “e c o n o m i c " m e t h o d s ol w h a t I h a v e c a l l e d t h e S l o v e n e model ol K a r d e lj a n d K id r ic w e r e m o r e c e n t r a li z e d an d “a d m i n i s t r a t i v e — in the s e n s e

that they

em phasized

central

regu lation s on

w'ages a n d

capital -l abor r a t i o s , v e r t i c a l li n k s in e c o n o m i c a n d p o li t ic a l c o o r d i n a t i o n , and m a n a g o r i a l - t c c h n o e r a t i e a u t h o r i t y — t h a n

w ere

the

" p o l i t i c a l ” a nd

“cam pai gn ’ m e t h o d s d u r i n g 1 9 4 8 - 4 9 ol t h e К о с а m o d e l , w i t h i ts radi cal d e m o cr a ti z a t i o n in p r o d u c t i o n , p o p u l a r s u p e r v i s i o n a n d c h e c k s a g a i n s t all admin i str a tor s t h r o u g h and

lo c a l a s s e m b l i e s ,

m edia,

and vo ters' m e e tin g s ,

local i m p r e s s ol p a r t y c a d r e s a n d m i l i t a r y . T h e d i f f e r e n c e in t h e r o l e

ol “b u r e a u c r a c y " in t h e s e t w o a p p r o a c h e s w as m o r e a m a t t e r o f w h e r e than h o w m u c h .

T h e s y s t e m ol w o r k e r s

councils transferred authority

from w o r k e r s t h e m s e l v e s b a c k to s tall — m a n a g e r s , e n g i n e e r s , a n d u n i o n s . “E c o n o m i c

m e t h o d s l e d t o t h e c o n c e n t r a t i o n ol p l a n t a n d a r e d u c t i o n in

li,i F o r th e y e a rs o f d ir e c t parallels, s e e C a r r and D avies, / ' oundationx o f a Planned Щопоту, 1926-1929, vol. I, no. 1; and D o b b , Soviet E con om ic D evelopm ent since ¡917 I liJ~ ln jon n ativn i Prirucnik Jug o slam jc, 19 5 0 1 3 2 3 .

162

CHAPTER I

th e p ro p o rtio n o f w ork ers actually in p rod u ctio n (to re d u c e costs of pro­ duction). A nd th e g en eral fa r m e r s ’ c o o p e ra tiv e s, re s to re d to the c e n te r of agricu ltural policy as th e lead ership had in ten d ed in 1 9 4 6 , e m p lo y ed pri­ m arily

ad m in istrato rs ,

not

farm ers:

in

195 5 ,

of 5 1 ,3 9 3

perm anent

“w o r k e r s ," only 8 , 4 7 1 w o rk ed exclusively in a g ricu ltu re; 4 , 5 9 3 worked in shops c o n n e c t e d to ag ricu ltu re, while 3 8 , 3 2 9 w e re e m p lo y e d in non­ p ro d u ctio n ta s k s .193 T h e idea that “e c o n o m ic c h o i c e for th e “m a r k e t

m eth od s rep resen ted a

was tru e only in the sense that p rices w ere freed

in retail goods m ark ets ; and in c o n tra s t to th e e x ten siv e labor mobility and t u r n o v e r o f th e 1 9 4 8 - 4 9 e x tra c tiv e policies, th e re was no m arket alloca­ tion o f factors o f p ro d u ctio n in the “n ew e c o n o m i c s y s te m ”— th e employ­ m e n t c o n t ra c ts , c o n c e p t of socialist work c o m m u n itie s, and workers’ cou ncils all a im e d to imm obilize the w orkforce. T h e real aim o f th e s e c h an g es was to diminish th e federal government: to r e d u c e its b u r e a u c r a tic offices and m o v e ministries to the republics, to c u t th e size o f p u b lic -s e c to r e m p lo y m e n t in o r d e r to cut the cash-wage bill and th e n u m b e r ol p eo p le prov isio ned by state supplies, to eliminate c e n tr a l supply allocations and giv e au tho rity to firms and th eir branch a s s o c ia tio n s ,194 to c u t th e federal b u d g e t for stabilization purposes by tran sferrin g tasks and ju risd iction s to low er levels, to retu rn responsibility for lab or supplies and au th o rity o v e r hiring and firing to en terp rises, to c u t fu rth e r th e federal g o v e r n m e n t ’s role in p rod u ctio n and investment, to use “lean

m o n e ta r y in stru m e n ts o f e c o n o m ic d irectio n , and to nudge

foi-ward th e p ro c e s s o f th e “w ith erin g aw ay ” of th e state. And whereas historically, as J o y c e A p p leb y w rites, “th e s o c ie ty ’s d e p e n d e n c e upon the food sup ply p ro v id ed , after all, th e rock b o tto m reason for political control of e c o n o m i c activ ities, 195 th e le a d e rs ’ c o m m i t m e n t to a gradual transfer o f lab or from a g r icu ltu r e to in d u stry— tem p orarily re v e rs e d in 1 9 4 8 - 4 9 by t h e ir e v e n g r e a t e r c o m m i t m e n t to build a stron g d efen se, through th e ir ow n efforts if n e c e s s a r y — led in th e op p osite d irection: to reducing 'in p rivre(la FN RJ u p eriod u 1947-1056, se ction on th e ag ricultural population, 164-65. I!" A lth ou gh p rices w e r e freed in retail m ark ets in 1 9 5 1 . th e form er d ire cto ra te s— now b r a n c h p r o d u c e r organizatio ns, o r e c o n o m i c c h a m b e rs (p rivred n e ko m o r c )— assumed au­ th o rity o v e r allocating s c a r c e p ro d u ction m aterials b e c a u se , as an a rticle in F.konomska Poli-

tikn re p o rt e d f'S p o r a z u m n a d is lrib u cija ,” D e c e m b e r 17, 1 9 5 3 , p 1 0 1 2 ), th e "m a rk e t" would give c e m e n t , steel, wool, e tc , only to the e co n o m ica lly stro n g est r a th e r than to those whose n e e d w as g re a te s t. T h e p riv red n e kom orc would a ct as in te rm e d ia rie s am o n g producers, c r e a ti n g a forum to estab lish a g r e e m e n t s a m o n g th e m on priorities (what c a m e to he called in th e 1 9 7 0 s th e c o n tr a c tu a l, o r dngovorna, e co n o m y ), w hile leaving s o m e room lor contracts b e tw e e n individual firms ("tho ug h also not forg etting the peasant m arket '). They would “e v e n tu a lly ” solve the p ro b lem o f supplies with im po rts in the fii st half o f 1 9 5 4 and then, by e x p o r tin g p ro d u c tio n in the secon d hall of th e y ear, pay for the im ports. A cco rd ing to Ward, th e s e p r o d u c e rs associations w e r e esp ecially im p o rta n t in "co n tro llin g th e allocation of for­ eig n e x c h a n g e a m o n g firm s’' (“Industria l D e ce n tra liz a tio n in Y u g o sla v ia ,” 171n). 11,5 E con om ic T hought an d Ideology in Seventeenth-C entury England, 101.

M I L I T A KY S K U ' - K K U A N C K political c o n t r o l a n d c u t t i n g t h e p u b l i c s e c t o r in t h e f a c e ol n e a r f a m i n e . a reversal m a d e p o s s i b l e w i t h A m e r i c a n c r e d i t s . 11" ’ To the e x t e n t t h a t t h e r e w a s an “a d m i n i s t r a t i v e p e r i o d

in t h e i m m e d i ­

ate po stwa r y e a r s , it b e g a n in J a n u a r y 1 9 4 8 w i t h t h e c r e a t i o n o f ' a l a b o r ministry a n d t e m p o r a r y f e d e r a l c o n t r o l o v e r l a b o r , s u p p l i e s , a n d m a n y industries in o r d e r t o b u i l d d e f e n s e w i t h d o m e s t i c r e s o u r c e s , a n d i t e n d e d with the c l o s i n g o f t h e s t a t e l a b o r o f f ic e s in S e p t e m b e r 1 9 5 0 a f t e r c o m p l e ­ tion ol th e l a b o r r e v i s i o n s o r d e r e d t h e p r e v i o u s D e c e m b e r . T h e f u n d a ­ mental d i f f e r e n c e b e t w e e n t h a t p e r i o d a n d t h e p o l i c y o n e i t h e r s i d e ol it was the a p p r o a c h t o t h e e m p l o y m e n t o f la b o r . But t h e r e d id e m e r g e , o u t ol w h a t w as in f act a m o r e c o m p l e x f o u n d i n g period ol c o n s t a n t l y c h a n g i n g m e t h o d s a n d i n s t i t u t i o n s , tw o t e n d e n c i e s that woul d r e s u r f a c e a l t e r n a t e l y in t h e n e x t f o r t y y e a r s . T h e s e t e n d e n c i e s were d ef i n ed b y t h e d i f f e r e n t e m p h a s e s in p r o d u c t i o n — w i t h t h e i r d i f f e r ­ ing systems ol e c o n o m i c in c e n t iv e s , e m p l o y m e n t s , an d p olitical o r g a n i z a t i o n — that re sul t ed as in t h e f o u n d i n g p e r i o d , f r o m p o l i c y r e s p o n s e s t o c h a n g e s in i n t er n a ti on a l c o n d i t i o n s . T h e a v a i l a b i l i t y a n d r e q u i r e m e n t s of f o r e i g n financing, sh i ft s in t e r m s o f t r a d e a n d m a r k e t a c c e s s as t h e y a f f e c t e d b o t h foreign d e m a n d f o r Y u g o s l a v g o o d s a n d f a c t o r p r i c e s lo r d o m e s t i c m a n u ­ facturers, a n d t h e n e e d s o f d e f e n s e a l t e r n a t e l y f a v o r e d t h e c o n d i t i o n s o f supply c o n t r a c t s ( m i l i t a r y p r o c u r e m e n t , p r o d u c e r s ’ i n p u t s , b i l a t e r a l t r a d e a greements , o r a d v e r s e t e r m s ol t r a d e u n d e r w h i c h g a i n s c o u l d c o m e o n l y through i n c r e a s e s in s u p p l y ) a n d t h e c o n d i t i o n s o f d e m a n d in re t a i l m a r ­ kets (both d o m e s t i c a n d e x p o r t , a n d t h e r e f o r e m a r k e t n i c h e a n d pri ce. more than q u a n t i t y a d j u s t m e n t s ) . In the first c l u s t e r , t h e e m p h a s i s w as on t h e p r o d u c t i o n of f n e l a n d foo d grains, t h e e x t r a c t i o n o f m i n e r a l s a n d o t h e r p r i m a r y p r o d u c t s , ca p i t a l goods, a n d m i l i t a r y e q u i p m e n t a n d s t o c k p i l e s ; in t h e s e c o n d c l u s t e r , t h e emphasis wa s o n p r o c e s s e d g o o d s a n d l ig h t m a n u f a c t u r i n g , g a r d e n f a r m ­ ing, and o t h e r c o n s u m e r g o o d s . T h e S l o v e n e m o d e l p r e f e r r e d t h e p r o d u c ­ tion pr ofil e of t h e s e c o n d c l u s t e r , a n d th a t m o d e l c o n t i n u e d t o s h a p e t h e dominant e c o n o m i c a n d p o li t i c a l i n s t i t u t i o n s f or t h e e n t i r e p e r i o d . N o n e ­ theless, t h e i m p o r t a n c e of a n i n d e p e n d e n t d e f e n s e , t h e p r i v i l e g e d p o s i ­ tion of m a n u f a c t u r e r s of final g o o d s , a n d t h e u n p r e d i c t a b l e f l u c t u a t i o n s in foreign d e m a n d a ls o k e p t a l iv e t h e F o c a m o d e l , P o l it i c a l d i s a g r e e m e n t s over po l i c y c o n t i n u e d , a n d t h e d i f f e r e n t i a l e f f e c t s o n r e g i o n s a n d e m p l o y ­ ment s e c t o r s w e r e s i g n i f i c a n t . B u t it w as t h e u n c o n t r o l l a b l e i n t e r n a t i o n a l en viro n m en t t h a t r e m a i n e d d e c i s i v e f or g o v e r n m e n t a l p o lic y . IA)iVT h e lead ers g ave tw o reasons for not w a n tin g to u n ite with Bulgaria (d e s p ite S talin’s pressure) that r ein fo rce th e in te r p r e ta tio n in this hook oi t h e i r l o n g -te rm s tra te g y ; that B u l­ garia was on th e less ind ustrialized a n d p o o r e r e n d of th e Yugoslav s p e c tru m and w ould shift the domestic b alan ce nway from th e d e v e lo p e d n o r th w e st; and that as a m o r e urban p a r ty o f industrial w o rk ers , th e B ulgarian C o m m u n i s t p a rty w as m o r e willing to c o lle ctiv iz e a g ric u l­ ture (see, for exa m p le

Kardelj in \

D e d ije r, Nniti, prilozi 3 : 3 0 2 ) ,

C h ap te r 5 A REPUBLIC OF PRODUCERS

T

h e

c h a n g es

in th e organization o f th e e c o n o m y in 1 9 5 0 and of foreign

t ra d e in 1 9 5 1 had to b e c o n firm e d constitutionally, b e ca u se economic rec o g n itio n o f Yu goslav s o v e re ig n ty p e r m it te d norm alization at home an d b e c a u s e e c o n o m i c re s tru c t u ri n g (the “n ew e c o n o m ic system ) re­ q u ir e d political re s tru c tu rin g . T h e Basic L a w a d o p te d by th e national as­ s e m b ly on J a n u a ry 13, 1 9 5 3 , was only th e seco nd o f five constitutions; a b attle o v e r th e sixth, b eg in n in g in 1 9 8 2 , led to th e final disintegration of th e Y u go slav state in 1 9 9 0 . M ost analysts o f its collapse, particularly do­ m e s t i c critics o f th e r e g im e , a s crib e its e c o n o m i c and political downfall to th e 1 9 7 4 con stitu tion and th e related constitutional d o c u m e n t on la­ b or relations o f 1 9 7 6 , th e L a w on A ssociated L a b o r (colloquially called t h e “w o r k e r s ’ c o n stitu tio n ”). B u t th e principles o f th e 1 9 7 4 constitution h ad a lread y b e e n established before 1 9 5 3 , in th e p eriod chron icled in th e p re v io u s c h a p te r ; and e a c h successiv e con stitu tion after 1 9 5 3 was a f u r th e r s te p in th e p ro c e s s o f realizing th e original l e a d e r s ’

idea of a so­

cialist s o c ie ty — a s ystem in th e p ro c es s o f b e co m in g th ro u g h constitutive laws. T h e d ifferences in th e con stitu tion s and in sy s tem ic laws in intervening years reflect th e unfolding o f this idea as th e lead ership c on fro nted differ­ e n t in tern a tio n al con d itio n s — in th e areas of national secu rity, term s of tr a d e , and t e r m s for finance, refinan ce, and ex p o rt earn in g s — by alternat­ ing b e t w e e n tw o b asic a p p r o a c h e s to p rod u ctio n with re s p e c t to labor in ce n tiv e s , industrial organ ization , and priority secto rs. This is because th e institutions o f th e d o m e s tic o r d e r c o n tin u e d to be defined by the con d itio n s o f its origin, w h en national i n d e p e n d e n c e was defined in terms o f m ilitary th re a ts to te rr ito ry and w h en th e capital n e e d e d for industrial­ ization was in short sup ply— b oth m a c h in e r y and trad e finance, and hu­ m an capital (skilled tech n ician s,

m an ag ers,

and w orkers with steady

industrial habits). This sca rcity defined a m en tality toward th e economy t h at n e v e r c h a n g e d . 1 D e s p ite th e o n e -p a rty state and the political purges 1

A co n tin u in g d isp u te in th e lite r a tu r e

011

socialist sy ste m s, prim arily those of Easlcrn

E u r o p e and th e U S S R , c o n c e r n e d w h e t h e r th e y w e r e best un d e rsto od by H ungarian econo­ mist Jan o s K ornai's c o n c e p t of “sh orta g e e co n o m ie s " I do not e n t e r this discussion here, e x c e p t to r e m a r k that th e r e is p e rsu a siv e em pirical e v id e n c e against th e argu m e n t (see

165

A REPUBLIC O F PRODUCERS

of op p o n en ts , d isp u tes o v e r h o w to resolv e those sh o rtag es and how to increase capital c o n tin u e d b e c a u s e of the p e rs iste n t conflict b e tw e e n the Slovene m o d e l, w hich won institutionally, and th e F o c a reality arising from th e l e a d e r s ’ m u ltiple goals, th e c o u n t r y ’s h e te r o g e n e it y , and its c o m ­ plex in tern atio n al position. T h e political s y stem b e c a m e critical to the leaders

o b je c tiv e s b e c a u s e c h a n g e s in th e ap p ro ac h to p rod u ctio n r e ­

quired institutional a d ju s tm e n ts an d b e c a u s e th e political system was e x ­ p ected to m a n a g e and h a rm o n iz e th e rem ain in g conflicts. U n d e rs ta n d in g th at political m o del is p articularly im p o r ta n t to u n d e r ­ standing Y u go slav u n e m p lo y m e n t, as well as the u ltim ate collapse o f the system itself, b e c a u s e m o st exp lanations o f b oth focus

011

the political

system. F o r a d h e r e n ts o f th e original W a r d m o del (elab o rated in th e next chapter), Yu goslav u n e m p l o y m e n t was g r e a te r than it n e e d e d to be b e ­ cause o f t h e d ecis io n -m ak in g rights at th e w o rk p lac e— b e c a u s e o f th e in­ stitutions for con su ltation b e t w e e n m a n a g e m e n t and p rod u ctio n w orkers in the p ub lic s e c to r (w h e th e r e c o n o m i c e n te rp rise s o r social s erv ices and institutions) o v e r w ages,

b enefits,

in v e s tm e n t, and e m p lo y m e n t.

For

others, th e b argain in g a m o n g rep u blican d e le g a te s within councils of the federal g o v e r n m e n t as a resu lt, it is arg u ed , o f the 1 9 7 4 con stitu tion caused th e d e clin e of th e e n tire e c o n o m y and with it the s y stem itself (although w e h ave seen th at th e se councils had alread y b egu n to rep lace the min isterial s t r u c t u r e by 1 9 5 0 and even tu ally would re p la c e all o th e r go vernm ental offices in th e e c o n o m y ). In th e first in stan ce, it was m ark et socialism (as th e Yugoslav s ystem was often labeled) that failed; in th e second it was d e c e n tra liz a tio n — to th e gre a t d isa p p o in tm e n t of th e m an y who c o n tin u e to s u p p o rt both. This b ook arg u e s that it was n e it h e r w o r k e r s ’ councils with an inability to im pose w a g e re s tra in t n or th e conflicts a m o n g the re p u b lic s ’ political elites w ith th e ir inability to a g r e e on policy th at was th e c au s e of u n e m ­ p loym ent and d isin tegratio n ; it was instead th e effect o f c o n trad ictio n s in the le a d e r s ’ s tra te g y for d e v e lo p m e n t and national in d e p e n d e n c e

011

eco­

nomic p olicies, social organization, and political action. To u n d e rs ta n d these o u tc o m e s , th e w orkers councils and fed eral decision making m u st be seen in th at b r o a d e r c o n te x t, as th e lead ers in ten d ed th em and as th ey interacted with o t h e r parts o f th e system .

Burkett, ‘ S e a r c h , S e le c tio n , and S h o r t a g e ,” for a discussion and r e fe r e n c e s to th e e m p irica l research b y R ich a rd P o r te s a n d o th e rs). A la rg e part o f t he actu al sh o rta g e s was a result of rationing

111

r e s p o n s e to internatio nal p r o b l e m s — a p r o b le m that m igh t o r m igh t not have;

been reso lvab le by o p e n m a rk e t e c o n o m i e s . T h e p o s tc o m n u m is t p e rio d will pro vid e b e t t e r answers. M o re im p o rta n t to this stu d y is th e e a rly e x p e r i e n c e in th e h istory o f socialist regimes w ith s h o r ta g e s o f p ro d net ion inputs and skilled la b o r a n d th e institutionalized stru c­

turing of t h e s e so cieties th e r e a f te r as if th e p r im a ry p ro b le m w e r e su ch shortages*

166

CHAPTER 5

M

is u n d e r s t a n d in g s

T h e first th ing th at m u s t b e clarified ab ou t this n ew system is th at it was not, an d n e v e r b e c a m e , a s ystem of w o r k e r s ’ control. T h e c o n c e p t of a la b o r-m a n a g e d firm and an e c o n o m y organ ized aroun d lab or-m anaged firms, on w h ich an e n t ir e th e o re tic a l literatu re later aro se, does not a ccu ­ rately reflect th e rights an d p o w ers assigned to p rod u ctio n w orkers in Yu go slav e n te r p r is e s o r th e p u r p o se o f w o r k e r p articip ation in en terp rise m anagem ent.

In fact, th e s y stem no lon ger re c o g n iz e d u np ro pertied

w a g e e a r n e r s , e i th e r as a class or a status. T h e c o n c e p t o f labor as an actor s e p a r a te from capital c e a se d to exist. It was re p la c e d by th e cen tral c on ­ c e p t o f a p r o p e r t y o w n e r w h o was a p r o d u c e r of value and by its operative p ri n c i p le — th e

incentive to increase produced value (that is, productivity,

o r n e t value), an in ce n tiv e that would d e riv e from rights of political and e c o n o m i c d ecision making. T h e s e units of p ro p e rt y -o w n i n g p ro d u ce r s w e r e actually associations of p e o p le d efin ed individually by t h e ir e m p lo y m e n t c o n tra c t placing them in a lo n g - te r m e m p l o y m e n t position ( radni

odnos), w h ich was a right to

re c e i v e i n c o m e in p ro p o rtio n to work as d efined by th e legally regulated job classification o f that c o n tra c t. T h e e s s e n c e of socialist em p loy m en t (th e

radni odnos), K ardelj told th e s e co n d p le n u m of th e cen tral c o m m it­

t e e in Ja n u a ry 1 9 4 9 , was “the m e th o d o f p a y m e n t . ”2 As collectivities, th e se associations of p ro d u c e r s w e r e defined by th e p r o d u c e r s ’ political rights to p articip a te in decisions on th e creation and disposition of net

income (“surplus v a l u e , ” o r gross re c e ip ts m inus costs). T h e ir particular organization o f associated labor

“lab ors’ th at th e y jo in ed to g e th e r in an

distin gu ish ed t h e m a c c o rd in g to functions within the organization and a c c o r d i n g to th e rights and relativ e shares to in co m e and benefits within th e w ork (capital) c o lle ctiv e ( radna

zajednica). B u t th e re f e r e n c e in policy

d e b a te s to d i re c t p ro d u c e r s o r to th e w o r k e r s ’ c olle ctiv e m e a n t not w o rk ers b u t e n te r p r i s e s , w h o s e r e p re s e n ta tiv e s w e r e alm o st always from m a n a g e m e n t or th e p arty organization. M o r e o v e r , alongside this organi­ zation of th e p ublic s e cto r, t h e r e was a p rivate s e c to r of p ro d u ce r s — individuals o r hou seh old s also defined b y th e right to d raw in co m e on t h e i r n e t earn in gs an d lim ited in th eir rights to dispose o f capital assets— b u t th e y could “join th eir lab or” (associate and co n tra c t) only with socials e c t o r firms, and t h e ir political rights to p articip ate with o th e r producers in th e allocation o f surplus w e r e con fin ed to th e local level w h e re they paid fees an d in c o m e tax. W h a t jo in e d th e se p ro d u c e r s /w o rk in g p e o p le c o n cep tu ally was the c o r e id ea o f this e c o n o m i c and political system : the early liberal idea of 2 P e tr a n o v ić , K o n č a r, and Kadonjić, Sednice Centralnog kom iteta KPJ (1948-1952), 32,

167

A HKP UBL IC O F P R O D U C E R S

economic interest as th e m o tiv e o f social good (an idea often associated with A d am S m ith , alth ou gh c u r r e n t ly alive in ratio n al-ch o ice th e o rie s of behavior) and th e re fo re the s o u rc e of right. T h e p ro p e rty -rig h ts school, in the A ustrian school version o f Carl M o n g e r , defined the philosophical underpinnings o f this individualist-societal link: The

state

can

g reatly

harm

th e

citiz e n 's

in terest

by

in te rfe rin g

to o

m u c h . . . . B e i n g r e s p o n s i b l e a n d c a r i n g (o r t h e w e l l - b e i n g o( o n e s s e l f an d fa m ily is a p o w e r f u l i n c e n t i v e f o r w o r k a n d i n d u s t r y . T h e d i s c h a r g e ol t h e s e d u ties b e c o m e s th e p u r e s t jo y and tr u e s t p rid e o f th e fre e c itiz e n , . .

Any

i n c e n t i v e w h i c h m a k e s t h e w o r k e r s w o r k h a r d e r m a y b e r e g a r d e d as a g a i n to t h e e c o n o m y . T h e m o s t e l l e c t i v e i n d u c e m e n t ( o r t h e w o r k e r s lie s in t h e i r re co g n iz in g th at (h e ir re w a rd d e p e n d s on th e ir ow n d ilig e n ce . 1

Tito p r e f e r r e d to call this in d u c e m e n t “p e r s p e c t i v e ”:4 w o r k e r s ’ eflort and short-term w ag e re s tra in t followed from th e k now ledge that th ey had p o ­ litical con trol (the “p e o p l e ’s p o w e r ” that, K idrič insisted in 194 6 , d istin ­ guished th e ir socialism from

state capitalism).

T h e conflict b e tw e e n

capital and lab or was n ow only o n e of tim e horizons (and th e re fo re in v e s t­ ment), as classical th eorists often saw i t / ’ It is the c ase, as th e la h o r- m a n a g e m e n t literatu re stresses, that the effective focus o f p r o p e r ty rights, and thus th e work c o ll e c ti v e ’s e c o n o m i c incentive to maintain and e n h a n c e th e value o f its assets, was the c o lle c ­ tive’s

income (w h a te v e r th e s o u r c e — p rod u ctio n realized in sales, or b u d ­

getary grants from c o r p o r a t e tax r e v e n u e s ) / ’ B u t the p u rp o se of b u d g e ta r y autonomy (th e c o r e idea o f “s e lf -m a n a g e m e n t’ ) was w h at that literatu re treats as its c o n s e q u e n c e — to in crease gain by c u ttin g costs of p rod u ction so that in c o m e rose only in p rop ortion to real gains in p rod u ctiv ity . M o r e ­ over, the a s s ig n m e n t of responsibility for b u d g e ta ry discipline to m a n ­ agers and th e banks, to p r o te c t against the moral hazard possible given this freed o m , c r e a t e d th e p otential for conflicts b e tw e e n w orkers and 3 T h e s e e x c e r p t s a r e from th e p rim a ry s o u r c e o f M e n g e r ’s ideas, the 1 8 7 0 l e c t u r e n o te ­ books o f C ro w n P r in c e H ud olf o f A u stria, cite d by S tre issle r in “ W h a t Kind ol E c o n o m i c Liberalism M ay W e E x p e c t in ‘E a s t e r n ’ E u r o p e ? ” 1.98. S tre issle r identifies t h e s e ideas with the p ro p e rty -rig h ts school w ithin liberal th o u g h t. 4 Tito, at t h e third p le n u m of th e C P Y c e n tra l c o m m i t t e e , in P e tra n o v ic, K o n ča r, and Radonjič, Sednica, 4 0 4 . ’’ In the e v e r -d e v e lo p in g , sp ecialized lang uag e for this sy ste m , cap ital w as increasingly referred to afte r th e m i d -1 9 6 0 s as minuli r a d ( past la b o r”); the. t e r m becam e, official with the 1974 co n s titu tio n . O n th e d is p u te critical to th e o rie s of'labor m a n a g e m e n t o v e r w hat c o n s t i ­ tuted the o b j e c ti v e function for w o rk e rs u n d e r s e lf -m a n a g e m e n t, and w h e t h e r w o rk ers would take a lo ng tim e h o rizon , s e e T y so n , “A P e r m a n e n t I n c o m e H y p o th e sis for the Yugoslav F i r m . ” (i T h e la t t e r s o u r c e would b e for g o v e r n m e n t s (called

sociopolitical c o m m u n i t i e s ”) and

financially a u to n o m o u s p ro v id e rs of pu blic goods and s e rv ice s su ch as e d u ca tio n o r roads [eventually calle d “c o m m u n i tie s of in t e r e s t ”).

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CHAPTKR5

t h e ir e l e c t e d r e p r e s e n ta ti v e s , b e tw e e n w orkers council and m an ag em en t b o ard , and b e t w e e n th e e n tire w ork c ollectiv e and outside regulators, s uch as th e social a c c o u n tin g s e rv ic e within th e banks and o th e r adminis­ trato rs of legislated rules. d e n c e (the w o rd

S e lf-m a n a g e m e n t m e a n t financial in d ep en ­

sovereignty was used for rep u blics)— as it did in 1927,

w h en the g o v e r n m e n t w ith d re w its c o n trib u tio n from financing for u n e m ­ p l o y m e n t c o m p e n s a tio n and left w o r k e r s ’ c h a m b e r s solely responsible, and in 1 9 3 7 , w h en T ito strov e to p u t th e C P Y on its own financial footing b e c a u s e th e C o m i n t e r n refused to s u p p o rt it further. In te r f e r e n c e with th at i n d e p e n d e n c e , w h e t h e r th e “d e p e n d e n c e ” of d e b t o r th e reduced fr e e d o m o f p ub lic claim s on the c o lle c t iv e ’s in co m e , c a m e to be seen as a limit on th at s o v e re ig n ty , on se lf-m a n a g e m e n t. T h e le a d e rs ’ p u rp o se after 1 9 4 7 in localities, rep u b lics, e n te rp ris e s , and social services, however, was to e n fo r c e e c o n o m i c responsibility w itho u t res o rt to state power, u sin g (as th e lan gu age of th e early 1950s called the b u d g e t con strain t of an e n t e r p r i s e ’s n et realized in co m e) th e “a u to m a tic con trol o f the m a r k e t.”7 “W o r k e r s ’ c o n tr o l” was only o n e a s p e c t of the retu rn to “e c o n o m ic c o e r ­ c i o n ” after A ug ust 1 9 4 9 in o r d e r to stabilize th e “m a r k e t”; th e behavioral p rin cip le o f individual e c o n o m ic in t e re s t was, in the explanation offered in M ay

1 9 5 2 by e c o n o m is t and party r e p la c e m e n t at F in a n c e

Kiro

G ligo rov , in te n d e d to bring co n su m p tio n o f w ag e goods back into line with existin g (dwindling) supplies while stim ulating p rod u ctio n , and to r e s t o r e value to th e c u r r e n c y as an in stru m e n t of e c o n o m i c calculation an d policy. “ By th e logic o f his own i n t e r e s t ," th e p easan t w h o was forced to pay cash for industrial goods and m e e t h ig h e r tax obligations would in c r e a s e p ro d u ctio n for th e m ark et, and this in cre a se d supply would in turn b rin g p ric e s dow n. Similarly, Gligorov exp lained , devaluation of the d in ar w ou ld ac t as a stim ulus to i n cr e a se d p rod u ction for exp ort, given the obligation to k eep e x p e n d itu r e s (including w ages and benefits) within the limit o f a firm ’s r e c e i p ts . 8 C u ts in public ex p e n d itu re s (in v es tm en t, offi­ cials’ salaries, and g u a ra n te e d provisions) would au tom atically release re ­ s o u rc e s for m an u fac tu rers. I n d e e d , th e a r g u m e n t that financial accoun tability was m o re effective than state c o n tro l was the reason given for e n d in g the “administrative p e r i o d ” and tran sferrin g “c o n c e r n for finding labor from state organs to 7 A ty pical e x a m p l e ca n h e found in G o n i pie, “ U lo g a e k o n o m ista u našoj priv red i ; see also M lad ek , Š tu re, an d W yezalkow ski, “T h e C h a n g e in the Yugoslav E c o n o m i c S y ste m .” E n th u s ia s ts in th e n o r th w e s t, p articu la rly , c riticiz e d th e “d o m in a n t n o te in the co n te m p o ­ r a ry e c o n o m i c th o u g h t of b o u rg e o is c o u n t ri e s ’ — th e d e m a n d for a “str e n g th e n in g of the e c o n o m i c function s o f th e s ta te ”— as “an exp re ssio n o f the g ro w ing d ish a rm o n y betw een p r o d u c t i v e forces a n d p ro d u c tio n relation s in capita lism and a reflection o f th e g e n e ra l crisis o f ca p ita lis m ” (D a b č e v i ć , “Neki su v r e m e n i e k onom isti o ekonom skoj ulozi d r ž a v e ,” 37) 8 K, G ligo rov , “F a c t o r s iu O u r E c o n o m i c Stab ilizatio n .”

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the firm, w h ich u n d e rta k e s m e a s u re s for the m o re c o r r e c t utilization of labor.”9 As an official in th e M in istry o f Social Policy exp lained , th e state labor offices “had led to th e e x p e n d i tu r e o f financial re s o u rc e s for the employment in th e e c o n o m y of n ew labor that after a short stay left the firm, often not ev e n c o n trib u tin g en o u g h to c o v e r th e costs of its e n g a g e ­ m ent.”10 T h e first in stan ce of e x te n d in g th e financial discipline o f self­ m anagem ent to social s ervices and p ublic utilities that did not “c r e a t e value” but u sed th at c r e a t e d by o th ers , called social se lf-m a n a g e m e n t, was in social in su ran ce, b e c a u s e “th e office o f social in su ran ce and e c o ­ nomic e n te rp ris e s that had use o f th e se funds had not b e e n m aterially interested in th e rational e x p e n d i tu r e of th ese res o u rc es . T h u s it o c c u r r e d that th e re w e r e firms th at m isu sed th e funds, taking from the socialinsurance a c c o u n t sum s that th ey cou ld not justify and that th ey used as their own w orkin g capital. 11 It is also m islead in g to call this system “m arket socialism. concept o f

T h e le a d e r s ’

socialist com m odity production was not a m a r k e t e c o n o m y ,

although final goods (“c o m m o d it ie s ”) m ark ets o p e r a t e d largely by a free price m e c h a n is m and c o n s u m e r d e m a n d was m e a n t to be th e p rim ary incentive to p ro d u c e r s . In c re a s in g p ric e liberalization also o c c u r r e d in the foreign s e c t o r — p articu larly after 1 9 6 1 , w hen th e seco n d stage of reform s for G A T F (G e n e ra l A g r e e m e n t on Tariffs and T ra d e ) m e m b e r s h ip r e ­ placed m u ltiple coefficients with

a uniform

gressively liberalized, an d, after 1 9 7 2 ,

tariff,

d uties w e r e

pro­

th e e x c h a n g e rate b e c a m e an

active i n s tru m e n t of p o l i c y .12 Hut the m ark et did not apply to factors of production— labor, capital and in te rm e d i a te goods, raw m aterials, c re d it in the form of w orkin g and v e n tu r e capital— although m o n e ta r y p rices were assigned to facilitate allocation and c o m p a ra tiv e valuation and a re n t was c h a rg e d on fixed capital and b o rro w ed funds. This was not th e m o del of market socialism

id entified with

O scar

Lange,

F r e d e r i c k Taylor,

E. Baro ne, and o th ers , for th e r e was no cen tral calculation o f shad ow prices to im itate a m a r k e t an d in v e s tm e n t c h o ices w e r e increasingly d e ­ centralized. P ric e regulation was used in place of a p ro d u ctio n plan in order to a c h ie v e b alan c ed d e v e l o p m e n t as well as m o n e ta r y eq uilib riu m by influencing in cen tives to p r o d u c e r s , 13 so th at th e g o v e r n m e n t k ept the 9 Has, “D ru štv e n o -e k o n o m sk i o sv rt na p ro b le m z a p o sle n o s ti,’’ 146. 10 M aričić, “N eki p ro b le m i org a n iz a cije i rada biroa za p o sre d o v a n je r a d a ,” 6 6 2 11 M ato vić, “S a m o u p r a v a u socijalnom o s i g u r a n j u / ’ 4 3 0 . 12 'Hie r e is m u c h d is p u te abo ut ho w liberalized tlie foreign transm ission o f p rice s actually was; see T y so n

and

N eu b erg er,

“T h e Transm issio n o f Internatio nal

D istu r b a n ce s

to

Yugoslavia.” O n th e in a p p ro p ria te n e ss of p r ice m e ch a n ism s as a policy in s tru m e n t for for­ eign trad e, s e e D v k e r , Yugoslavia: S ocialism , D evelopm ent, a n d D ebt, 9 7 - 1 0 1 and passim. 13 S ee L a n g e and T a y lo r, On {he E con om ic T heory o f Socialism, and H e im a n n , “ L i t e r a ­ ture on th e T h e o r y o f a Socialist E c o n o m y . ” Also, co n tr a st th e m o r e c o n t e m p o r a n e o u s ae-

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p r i c e o f factors o f p ro d u ctio n , n e cessities (such as grains), and strategic goods relativ ely low and allowed p rices o f m an u fac tu red and consumable g ood s to re s p o n d to d e m a n d . T h e m a c r o e c o n o m ic c o n ce p tio n of an econ­ o m y b e h in d th e m arket-socialist m o d el (the “ K eynesian rev olu tion ”) did not inform its institutional c o n str u c tio n , n o r d oes th e m o d el pay much atte n tio n to th e goals assigned to th e Yugoslav state (the federal govern­ m e n t): d i r e c t e d d e v e l o p m e n t for stru ctu ral c h a n g e in e c o n o m ic capacity, and m a n a g e m e n t o f foreign relations (including defense). P a rt o f th e confusion lies in w h at to call a socialist e c o n o m y that is not a p lan n ed e c o n o m y . T h e p lann ing system th at e m e r g e d by 1 9 5 2 was only a s e t o f policy goals for p ro d u ctio n and i n v e s tm e n t in th e c o m in g plan pe­ riod (goals w e r e s et annually until 1 9 5 6 and at five-year intervals thereaf­ te r, b u t with in terru p tio n s) that w e re sup po sed to define c red it, price, and fo re ig n -tra d e policies, an d a fo recast o f the actual grow th path of eco­ n o m ic a g g re g a te s b ased on th e p rod u ctio n plans of firms and develop­ m e n t plans o f localities and rep u blics. It was not a set of commands, q u an tity c on trols, o r d ire c te d allocations, n o r was it th e apparatus to ef­ fec t t h e m , 14 alth ou gh th e g o v e r n m e n t did re s o r t to ad h oc quantity con­ trols w h e n th e n e e d for im m e d ia te re s p o n se p re c lu d e d use of financial in s t ru m e n ts (w hich took lon ger to show results). E n t e r p r is e s w e re opera­ tionally a u to n o m o u s , although s u b je ct to substantial regulation; but the m o n e ta r y s ystem did c o n tin u e to o p e ra te on th e sam e principles as mone­ tary p lan n in g in th e S oviet sy s tem , including non co nv ertib ility , account­ ing p rin cip les in th e p ublic s e c t o r , 15 and a tte m p ts both to maintain social c o n tro l o v e r m o n e y an d finance and to c a p tu re re s o u rc e s from th e private s e c t o r an d foreign so u rc es for p ublic use in o r d e r to in su re public deter­ m in ation o f in v e s tm e n t. A n on p lan n ed socialist e c o n o m y is not neces­ sarily a m ark et-socialist e c o n o m y , and its principles of allocation may e v e n vary across t im e and e c o n o m i c secto rs (as w e saw in th e previous c h a p t e r ) . 16 A n o th e r p a rt o f t h e confusion o v e r c h a r a cte riz in g th e Yugoslav system a ro se from th e s y s t e m ’s use o f m a n y m ark et e le m e n ts and from its fre­ q u e n t r e f e r e n c e s to th e m ark et, re f e re n c e s that in fact had varying mean­ c o u n t from a C h in e s e au th o r, w hich parallels m o r e d ire ctly th e Yugoslav p r a ctice (Jiang, 'T h e T h e o r y o f an E n t e r p r i s e - B a s e d E c o n o m y "). 11

T h e plan ning co m m issio n s b e c a m e advisory c o m m itte e s to re pub lican governm ents,

and th e p la n ’s goals w e r e not legally binding. 15 S e e L a v i g n e , “T h e C re a tio n o f M o n e y by th e S tate Bank of th e U S S R ," for a cleai discussion o f this sy stem . P o r te s , “C e n tr a l Plan ning and M o n e t a r i s m ,“ gives an interesting i n te r p r e ta tio n o f th e relation b e tw e e n this system o f m o n e ta ry plan ning and monetarism. 16 This variation and the u n se ttle d c h a r a c te r o f th e Yugoslav sy ste m in th e 1950s are m a d e p a rticu larly c le a r in W a r d ’s d o ctoral d issertatio n, “ F r o m M arx to B a r o n e .” On the a r g u m e n t that th e Y ugoslav sy stem was a form o f m a rk e t socialism , se e also N ove, The

E con om ics o f F easib le Socialism; and Bid e le u x , Communism an d Developm ent

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171

ing for different people and at different times. Most com monly, the market m eant th e operation of the “law of value" on which Kidrie insisted, siding with L en in against Bukharin in arguing that the “equilibrium co n ­ ditions o f re pro du ction” would hold under socialism as w e l l .17 T hey b e ­ lieved, namely, that to balance demand and supply one must stimulate supply as well as, in the short run, limit dem and and ration supply; for that, consu m er dem and in retail markets (with free prices for finished goods) was fundamental as the econom ic incentiv e to producers. T h e e n ­ thusiasm for the “m a rk e t” at the first congress o f the new professional association o f econom ists in 1952 was for such “econom ic laws" (and an increased role for their s c ie n c e ) ,18 although some economists, like many party leaders at the third plenum in D e c e m b e r 1949, worried that it might be too soon becau se of severe sh orta ges.19 But the m arket could also mean what Kidrič called the “capitalist principles of accumulation" (commercial profit) and “econom ic coercion, which would continue to govern econ om ic behavio r in relations with W e stern markets and in the private sector of individual producers. In a third use of the word, market was in fact applied to decentralization, perhaps on the assumption that ever less central direction and eve r more autonomy for actors within the economy necessarily m eant that market principles would e m e rg e. It was this idea that led teams of econom ic advisers from the I M F to insist on decentralization as a Trojan horse for niarketization (especially in the 1950s and 1960s), and it could explain in part why each I M F program was followed by further decentralization o f some k ind .20 But decentralization in the sense o f subsidiarity was also critical to the lead ers’ idea that the incentive o f individual econ om ic interest operated b e tte r when the d eci­ sion making and supervision necessary to macroeconom ic stabilization were closer to those who actually produced. Cheeks and balances o p er­ ated best within budgetary units, w here financial accountability was as­ sessed, not in the society at large. D ecentralization along budgetary lines (according to work units that produced market value), profil-and-loss ac­ counting in the econom y, and balanced budgets in “nonproductive;” aetiv17 S e e S u tela, “Ideology as a Means of E co n o m ic D e b a te .” 18 Gorupić, “Uloga ekonomista u našoj privredi,” This th em e weaves through th e e c o ­ nomic journals in 1.952-54 and also through the discussion on em ploym ent policy in 1954 (reported in Has, “D ruštveno-ekonomski osvrt”). Author’s interviews in J9 8 2 with economists who wore present a( I he third plenum; see Ekonomski Pregled 3, nos. 1--2 (1952). This concern is one o f th e reasons that Mile.nkovitch argues that th e rapid dism antling o f planning in 1 9 5 0 - 5 2 must have been political

(Plan and Market in Yugosl/iv Economic Thought , 7 3 -7 7 ) . 20

Jan Mladek, personal comm unication in Washington, D .C . , 1987; Sanja Crnkovie,

personal comm unication at the Institute o f Econom ies in Zagreb, on h er studies of this pattern, 1982. S e e also Mladek, Sture, and Wye/.alkovvski, “T h e Change in the Yugoslav Economic System/*

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ities did not mean that this “hard bud get constraint” was achieved by a m ark et-clearing price m echanism or was im m u ne to contradiction for o th er policy priorities. T h e y did mean that macroeconom ic equilibrium was conceived as a sum o f m icroeconom ic behaviors. T h e political links among the socialist units of the econom y were not horizontal, b u t vertical, as D ragolju b Jovanovič complained in the debate over farm ers’ cooperatives in 1946. T h e institutions w ere based on Kard e lj’s image of autonomous socialist com m unities— w h eth er a villagebased cooperative, a c om m u ne, or an organization o f associated labor (workplace and unit o f account)— linked by representation in assemblies and the party hierarchy. E conomically, autonomous producers were linked partly through the hierarchy o f the banking system and monetary control, and partly through cooperative contracts. T h e s e bilateral rela­ tions w e re primarily for the exchange o f raw materials and industrial goods b e tw e e n farm ers’ cooperatives and public-sector enterprises, so as to bind private suppliers to the social sector and eventually incorporate them into it; or, after the mid-1970s, for investm ent and jo in t ventures b e tw e e n e nterprises in the developed republics and enterprises in the republics or regions classified as less-developed. B u t there was also hori­ zontal consultation among functional groups within territorial units. For exam ple, the ch a m b e rs o f c o m m e rc e and industry, the unions, and local gov ernm ents consulted on incomes policies, and producers within an industrial branch conferred (cartel-like) over price policy, rationing prior­ ities when essential inputs were scarce, and economic-policy recomm en­ dations. B u t these organized “interests” would then aggregate territorially through the hierarchy o f the federal system to participate in policy­ making or to im p lem e n t central policies locally. Goods would naturally How across borders, and th e re was a divisive debate over citizenship be­ fore the constitu ent assembly, in order to facilitate labor mobility, chose to m ake Yugoslavs citizens o f the country as well as of th eir republic (as in Swiss cantons) or th eir ethnic nationality and country (as in the USSR ).21 N onetheless, the budgetary system intended limits on the horizontal flow o f m oney and credit; and, as the official complaints from the labor minis­ try in 1949 show, there continued to be political resistance to border crossings by producers or localities to find cheaper sources of labor or higher profits (in contrast to the purchase of raw or finished goods). The 2i

i thank C arol I.illy for inform ation about this d eb ate, H ondius elaborates on th e history

o f citizen ship laws and th eir outcom e in 1946

(The Yugoslav Community o f Nations, chaps.

1 -3 ) ; he makes clea r that citizen ship in a republic was consid ered prim ary because the federal gov ern m en t did not m aintain citizenship lists sep arate from republican rolls (184). But h e appears to b e unaw are o f th e d eb ate that led to th e reason for what h e calls federal sta te a lle g ia n ce ." T h is d eb ate o ccu rred , o f cou rse, b efore th e leaders' strategy was politically secure (before the 1946 pohtbureau m eeting and 1 9 4 8 - 4 9 purge)

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leaders’ concern lor social stability through settling labor and households was, however, superseded by the mid-1950s by local and republican gov­ ernments concept ol econ om ic interest, which aimed to protect their tax base and prevent "expatriation ol profits or the influx of unwanted migrants, One might say that the Yugoslav svstem was a mixture ol liberal and socialist assumptions about econom ic behavior and goals for econom ic and political life. Organizationally, it was a hybrid ,22 based on an idea ol social-property rights that w ere simultaneously econom ic and political; its methods of allocating econ om ic resources and ol making and enforcing public choices relied on n either the com petitive price mechanism of cap­ italist society nor the planning bureaucracy of statist society, but on the idea ol dem ocratic consultation and a greem ent among autonomous and sell-interested but also cooperative property owners (governments and the work collectives with rights to manage social assets) on com mon rules tor value and d istrib ution,23

l v \ I P L ( I Y M K N '1 '

The new constitutional order was based on the authority o f labor— “all power derived from working p e o p le ,” which meant persons employed in producing value. T h e constitutional right to work was not a right to a jo b , but a right of persons already employed to participate in decisions on the use of assets they help ed create and to receive an income on the basis ol their labor.24 Gu arantees o f this right to work lay not in governmental policy but in the property rights guaranteeing subsistence (and thus p r e ­ venting the un em p lo y m en t associated with proletarianization) that u n d e r­ lay the leaders’ tw o-sector strategy. By law, firms in the public sector had 22 Iii describing the Hungarian system this way, llankiss assumes that it was a composite of inherited systems, spontaneous changes, and ad hoe adjustments (“In Search of a Para­ digm ). T h e re was som e o f that also in the Yugoslav ease, but I believe that far m ore pattern can be discerned in th ese two cases o f reformed socialism if one starts with the ideas of economic and political strategy that guided them b oth — with some identifiable d ifferences, such as that one was a unitary and the oth er a federal system and the differences in agri­ cultural policy and organization resulting from the differences in agricultural organization at the time o f the formation o f dom estic political alliances by th eir respective Communist parties (I thank Juhasz Pal for this information on Hungary). T h e Yugoslav economist Branko Horvat approached the issue in the 1960s from the standpoint of the organi /.at ion of authorily in a system designed to elim inate bureaucracy and hierarchy, which he portrayed with a circular chart. 20 According to Kardelj, th e key social question was how national income (sometimes called surplus product) gets distributed. F o r one ol his numerous statem ents ol this point.

sve Problemi naše socijalističke izgradnje 2:133, In the language of social-choice theory, this is the contractual (in contrast to the exploitative) con cep I of the slate, 21 Krajger, “ Dohodak pr.eduzeca u našem sistemu.

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to pay the guaranteed wage first, after material costs w ere paid. This min­ imum wage was calculated in term s of the prevailing prices o f a bundle ol basic com m odities (an index that the governm ent adjusted downward w h en stabilization pressure was intense). Laws also required firms to maintain a reserve fund for basic wages and to contribute to a commune solidarity fund on which firms could draw temporarily if they were short o f cash to pay the basic wage. Adjustm ents to the business residts of a firm w ere made within the annual accounting period by varying income rather than jo b s , until a decision to rationalize led to dismissals or transfers. The private sector, as a reserve to collect and re lease labor for the public sector as the latter adjusted, was guaranteed subsistence by government regulations to protect smallholdings and shops against the concentration and differentiation that this sector’s capitalist principles would otherwise effect on landholdings and private capital. T h e key to em p loy m e n t expansion, and therefore to moving persons from the private to the public sector, was rising productivity. Although productivity was defined in its Marxist sense of declining socially neces­ sary labor time, and although social control over investm ent was intended to expand capacity and productivity, the system of industrial relations assumed that the primary source of growth was rising labor productivity in existing firms, s upp lem ented by local initiative. In his parliamentary address introducing “workers’ co n tro l,’’ Tito spoke of the “particular im­ portance for the councils o f the working collectives to use their influence to e n su re as rational a distribution of labour as possible, so as not to allow unproductiv e labour to b e c o m e ensconced in their enterprises . . . [and to] p re v e n t the infectious disease known as bureaucracy becoming en­ d em ic in our co u n try .”25 In a 1951 closed-door session of the Economic Council (which was assigned what little federal concern for employment would remain), Kidric' specified this right to fire as well as hire: “An enter­ prise can e xe cu te a rationalization in the interests of savings and the goal o f realizing g reater production and, as a co n se q u e n c e of that, can fire surplus lab o r.”21’ T h e party organization (aktiv) in the firm was tasked primarily with leaching workers the “habit of intensification.” If a firm failed to cov er costs and depreciation with receipts, it would have to ac­ cept the force o f “e c onom ic law” and close shop. Similarly, private arti­ sanal and farming households would release their “surplus labor” for industrial, public-sector e m ploy m ent when they could not sustain family m e m b e r s with their own production and the free-market earnings that constituted tlu: household “b u d g e t.” Like workers, they would be taught by “e c onom ic c o e rcio n ” to calculate the use of their own labor in indus25 Tito, Sc lee tad Speeches and Articles, 1941-1961, 111 2ii M irjana I’avlovio, “Boris Kidric o principima trzisne ek onornije,” 1188. T h e first law on bankruptcy was introduced in 1954 (Ward, “From Marx to B aro ne,” c h a p , 1)

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trial rather than agrarian term s: they would perceive a direct relation between their consumption preferences and th eir contribution to real (and realized) output. Labor’s price (incomes) in the public sector should, it was believed, be a direct measure of its contribution to productivity (in the real sense o f output above what workers consum ed, and in value term s defined by savings 011 the costs o f production), not a measure o f its scarcity and b ar­ gaining power on an external market. In fact, labor turnover and co m p eti­ tion among firms for workers only raised costs of production without contributing to increased output. In place o f labor mobility, there would he a contract with a work com m unity for long-term , stable m em b ership; and in place of the market wage, there would b e legislated job classifica­ tions and wage scales to reward those who remained with the firm (the criterion of seniority), increased their skills (the criterio n of certified qual­ ifications), or took on managerial responsibility. In accordance with the principle of self-m anagem ent, each firm’s rule book on wages, although based on republic-level legislation on jo b s and wages, had to b e approved by the workers' council; the proportion of profits (also affected by accou nt­ ing regulations) distributed as wages and social benefits would b e dis­ cussed by the work collective at the end-of-year accounting; and managers proposals for hiring or fil ing em ployees would be subm itted for approval to the m anag em ent board (and eventually the workers’ council) along with the plan for production and modernization for the following year. The new wage system that passed the assembly in D e c e m b e r 1951 and was in practice by April 1952 formally ended all central determ ination of wage norms and labor quotas (although the system had never applied to more than a handful of federal industries).27 Already in the first round of free decisions by w orkers’ councils in 1 9 5 0 - 5 2 , skilled production workers on the m anag em ent board did not protest firings o f unskilled workers (who “contrib uted less to productivity "), and workers’ councils approved the wage scales developed by eng ineerin g staffs that gave raises to administrative and technical staff and skilled workers and then cut the wages of unskilled w o rk ers.28 T h e resulting wage explosion led authorities to backtrack and assign regulatory authority to local governm ents, includ­ ing the authority to set a firm’s statutory wage rates (with the “active participation’ of the union organization and the firm’s management). In 2‘ Wage norms re m ained on the statute books until 1955, not as the guaranteed wage and profit share that succeed ed them , but as a minimum wage and proportional (piece) rates for output, ^ Ward, “From Marx* to B a r o n e ,” 1 6 0 - 6 5 , 169. S e e also his discussion in “Industrial Decentralization in Yugoslavia” on the separate treatm ent of administrators, which pro­ tected them from dismissal.

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1955, the last distinctions betw ee n wages, salaries, and profits fell. Wages w ere redefined as income; they w ere no longer considered a cost o( pro­ duction b ut w ere paid after material costs, and they were composed ot th ree separate ele m e n ts: (1) output norms, differentiated as incentives to productivity; (2) bonuses for contributions above the average (norm), m easured for production workers by increased effort, cost efficiencies, or technical innovations; in services, by budgetary savings; and for manage­ rial and technical staff, by market profits; and (3) a share in net profits, distributed at the end o f the year after the firm had paid taxes and contri­ butions to social services and em ploy ee benefits (for example, the housing fund). Basic wage rates w ere set for each industry by the econom ic cham­ b ers (privredne komore, the association of producers’ branch associa­ tions), unions, and republican governm ents, and the profit share in individual wages might well be negative— a reduction in income over several months until budgets recovered losses and were again balanced. R esponsibility for preventing un em ploym ent lay with the unions and local governm ents. Managers w ere obliged to consult the union if tliey planned to dismiss m ore than five workers at once, and when a shortage o f cash to pay minim um wages was clearly only temporary, they could draw on the c o m m u n e ’s solidarity fund to prevent unnecessary layoffs and dismissals. B ecau se the problem o f un em ploym ent was viewed in term s o f the pace at which persons from agriculture could get jo bs in industry and in term s o f the redundancies caused by a firm’s rationaliza­ tion, it was assumed to be primarily a question o f local ju d g m ent and capacity: localities should assist firms in finding new labor and help per­ sons tem porarily made redundant; and where the pace of aggregate eco­ nom ic growth was too slow, they should intervene to develop smaller local industries and services that would be both labor-intensive and consu m ption-oriented . T h e regulatory and tax powers granted local gov­ e rn m e n ts w ere extensive: to license all productive and trade activities of th e private sector; supervise the accounts o f local enterprises and hold managers of public-sector firms legally responsible for these accounts, assuming e m e rg e n c y authority over internal restructuring if necessary to forestall bankruptcy; use revenue from the profits tax on public-sector enterp rises and from the incom e tax on private-sector households to fi­ nance new enterprises, grant credits and guarantee bank loans for firms wishing to expand, and invest in local housing, roads, sewers, elementary schools, and o th er infrastructural needs; formulate social policy; and even regulate prices and wages if n eed ed to stabilize the local economy. B eca u se the leaders saw frictional unem ploym ent as normal, they re­ op ened the “labor mediation b ureaus” (employment service) in 1951 to aid dismissed workers in finding new jo b s and to reduce the “long-term disharm ony” b etw ee n the needs o f firms and the supply of labor. Open

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unemployment was acknowledged, hut as a m atter o f social, not e c o ­ nomic, policy; it was thus assigned to the Council for Public Health and Social Policy and to the province o f social insurance for the “involuntary, temporarily u n e m p lo y e d ,” including health insurance for those registered as looking for work. This attitude was thoroughly consistent with the ov e r­ all strategy. No charity, sympathy, or welfare for the unem ployed was appropriate, for it would only red uce the resources going to real accu ­ mulation and give monies to people who w ere not contributing to real output. M o reover, as Tito put it in his attack on the system o f guaranteed provisions in January 1949, “budgets create d e p e n d e n c e .”29 Only persons who had b e e n em ploy ed for a m inimum period w ere eligible for u n e m ­ ployment com pensation, since they had contributed to the tax on the wage fund o f e nterprises that financed it; and it was paid only for six months, on the assumption that reem plo y m ent might take that long. But if they had alternative means of support— in practice, it was usually women and youth, whose “families” (employed male heads o f households) were assumed to provide for them , that w ere considered to have such support— they w ere eligible only for health insurance b ecause their sub­ sistence was not threatened, and they w ere therefore not considered truly unemployed.30 By the same reasoning, public works w ere not considered an appropri­ ate response to u n em plo y m en t b ecause they w ere not “ec o n o m ic ”— they drained budgets rather than earning their way. Although the volu nteer labor brigades mobilized the unemplo yed in 1945 and 1 9 4 8 - 4 9 , these were seen not as social m easures, to be rein stituted when open u n e m ­ ployment rose in 1952, but as econom ic m easures— a source o f labor for short-term dem ands for capital construction and a way to p rotect the pu b ­ lic sector from resorting to a policy of extensive e m p lo y m e n t— and as an instrument o f cultural revolution for the young. Tito sought an end to the biigades from 19 46 on, first for fear that the deteriorating physical cond i­ tions o f the camps interfered with this revolutionary objective, and then because the brigades' dem and on supply stores threatened supplies for the army and e xacerbated budgetary deficits and inflation. B eca u se they consumed m o re wage goods than they produced, they had in effect b e ­

29 TitH- at *he second plenum o f the CP Y central com m ittee, in Petranovic, Končar, and Radonjič, Sednice , 93. 10 When the econom ic assumptions about productivity com bined with the cultural p re ju ­ dices of the period, h o w c v e i, and a rash o f dismissals in 1 9 5 1 - 5 3 fell largely on war invalids, women, and unskilled workers, the governm ent chose to ignore its grant o f autonomy to films. It decreed prohibitions against the dismissal of workers needing “special consid er­ ation of personal, family, and o th er circum stances” and, as early as April 12, 1952, imposed fines on enterprises that fired women because they were pregnant (Maričk", "N eki problemi organizacije,” 663)

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co m e institutions o f “welfare” (ironically, given the horrendous decline in youth h ealth).31 Finally, the e m ploy m ent bureaus had to be selfmanaging as well— free to manage as they saw fit the local grants they received , but responsible for balancing th eir budget. This approach to un em plo y m en t gave the e m ploy m ent bureaus32 a dual identity: as the local social-welfare agency, they d eterm ined eligibility for un em p lo y m en t com pensation, health-care rights, and grants for retrain­ ing and for travel to prospectiv e jo b s ; and as the agent o f society’s interest in rational em p loy m e n t, they w ere to collect and publish data on jobs and to work with local firms and policymakers to improve e m ploy m ent oppor­ tunities. T h e ir location, however, reflects the system ’s organization around producers. F irm s w ere the b est ju d ge of em ploym ent, and the bureaus, like the state labor offices in 1 9 4 8 - 5 0 , w ere services for firms in their search for labor. T h e y could contract labor for public-sector firms only, and officials re c o m m en d e d locating them at the point of labor de­ mand, not supply— w h ere industries w ere concentrated and where their “eco n o m ic in te res t” would generate links b etw ee n the bureaus and local authorities in neighboring areas in which e m ploy m ent levels were lower and w h ere “by nature th e re ought to exist surplus la bor.” Exceptions ac­ com m od ated , instead o f correcting, the developm ental conditions of the period: w h ere th e re w ere no professionals trained to perform its tasks (a p roblem ev e ry w h e re outside of Slovenia and parts o f Serbia), a bureau could not b e established; on the other hand, the very poor state of inter­ district transportation links in the less-developed republics, especially M aced onia and M o nteneg ro, required the proliferation of bureaus (de­ spite the administrative costs) to every locality, so that workers were ef­ fectively assured their rights to u n em ploym en t assistance and so that temporary u n em plo y m en t did not prevent people from continuing to live w h ere they wished. Local approaches to un em plo y m en t varied substantially in these first years. In Croatia and Bosnia, e m ploy m ent bureaus favored the first strat­ egy: settin g up in an industrial c e n te r or in a locality w here industry was co n c en trated and then creating a network with the bureaus of three or four neighboring districts in which a rural labor surplus prevailed. In Macedonia, district em p loy m e n t b ureaus frequently faced the problem of substantial seasonal unem ploym ent; they sought to resolve it by collective contracts with e nterprises in other republics, sending hundreds of workers to construction jo b s lasting under two months. In Serbia, many 31 Tito, at the third plenum o f th e C P Y central com m ittee, in Petranovic, Koncar, and Badonjic, Sednice, 4 3 3 - 3 4 , 32 In a later stage o f self-m anagem ent, th ese w ere called “comm unities o f interest for em p lo y m en t-”

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local bureaus organized conferences with local businesses to obtain “much greater understanding and willingness to coo p e rate ” on the part o f firms, and to “take g reater account o f firms’ real needs for workers and staff with specific skills and qualifications.” In the Serbian town of Niš, the bureau engaged local firms to organize multiservice workshops to employ u n em ­ ployed skilled artisans, and it called meetings o f the unemplo yed to ask them to establish priorities for who should be hired first. A n u m b e r of other districts also invited the unemployed to discuss solutions for their employment. T h e republic-level e m ploy m ent service in Croatia devised a plan with the cooperation of managem ent boards of public enterprises to solve two problem s at once by substituting female labor for male: creating jobs for women and a supply of “essentially technically qualified and physically a b le " men need ed for priority investm ent projects. O therwise, republican g overnm ents were accused of doing little to assist coordina­ tion; even though som e published regular bulletins o f em ploy m ent data (Serbia, Croatia, and Slovenia), the information was o f little use b ecause it was in com plete, obsolete, or inaccurate.33 The bureaus resources w ere hardly in proportion to th eir mandate, which was to “eliminate the con se q u e n ces o f structural and long-term disharmony.” In addition to the shortage o f trained professionals and us­ able data, the budgetary constraints o f their self-management status led frequently to choices that further localized activities. Outlays legally r e ­ quired for the costs o f travel and lodging for jo b searches in other lo­ calities w ere often considered wasteful because the bureaus estim ated the risk that jo b s would not materialize as too high, thus also making the collection of data on jo b openings o f little u s e .3,4 F u rth e rm o r e , u n e m ­ ployed persons hesitated before looking for work away from hom e b e ­ cause of the serious shortage o f housing, without which one could not accept new work at any w age.35 B ecau se new housing construction was a local responsibility, financed by a tax on the wage fund of those currently employed in local public-sector enterprises, this problem also had 110 ready solution. T h e n u m b e r o f technical training schools declined sharply after 1 9 5 0 - 5 1 for the same reason— local governments saw no reason to spend scarce funds 011 training workers who might move elsew here; and even though jo b vacancies remained becau se the specific skills that local firms sought could not b e found in the area, local governments invested 3,1 Maričic, “Neki problem i organizacije.” Ibid ;V5 ln N o v e m b e r 1947, M inister o f Lab or Vicko Krstulovic toki the fifth plenum o f the central co m m ittee of the unions, ’'T he most difficult problem fin the em ploym ent o f new labor] is that o f housing. Until that is resolved, we cannot solve th e labor problem

It is one

of the main reasons for people leaving th eir jo b s, and th e problem o f instability in the labor supply” (“Stalno potiizanje proizvodnosti rada,” 194).

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instead in schools for general edu cation.3'’ T h e managerial side o f selfm a n a g e m e n t— the g ov ernm ent o f soeial-serviee institutions by a manage­ m e n t hoard com posed o f representatives o f “social interests” (the start, local firms, and local administration)— did not appear to overcom e these constraints with cooperation and initiative, as was intended. In Slovenia, the hoards reportedly dealt largely with clerical tasks; the Split (Croatia) authorities re je cte d the idea of a social-management hoard entirely; and most hoards found their time taken up with hearing appeals from persons denied eligibility for un em ploym en t compensation by the bureau.

T h k State T h e eco n o m ic reforms o f 1 9 5 0 - 5 1 did not resolve political disagreements over m ethods of econom ic allocation or political organization— despite the political purge of the inner circle and o f the entire party, which left large nu m bers o f persons languishing in prison on Goli Otok and in cen­ tral Bosnia and sent many others into perm anent re tirem en t or exile.37 A revised constitution, b ecause of quarrels over it, took more than a year to negotiate through com m ittees and the national assembly. In D ecem ber 1951, Kardelj instructed Mosa Pijade, the ideological e ld er of the prewar party, to prepare this revised constitution on the basis o f Kard elj’s sugges­ tions and consultations with a com m ittee of legal experts. Intending to bring it to the assem bly in Ju n e (probably for the symbolic echoes with Ju n e 1948 and 1950), Kardelj presented the draft to the politbureau in April 1952. Pijade, substituting for an ill Kardelj, took it to the central c o m m itte e on May 27, w here he was bombarded with criticisms and sug­ gested am en d m e n ts rather than the veneration and applause one might have expected. E v e n Tito admitted indecision on several matters, includ­ ing the choice b etw ee n direct and indirect elections, and Pijade was un­ able to pre sen t a revised draft to the constitutional commission of the national assem bly until N ovem ber. W h ile Tito and Kardelj expressed in­ creasing exasperation over the character of d ebate in the press (including the party newspaper, Borba ) and the p u blic’s proposals (which “smell of e n em ie s but are prettily masked ), once the path of public discussion Jh Itsidor Izrael, speaking at t lie discussion on th e labor force held at the Bel grade Insti­ tute of E con om ics in 195-4 (Has, “Drustveno-ekonomski osv rt,” 1 5 7 -5 8 ),

:il Aleksandar Ran ko vie later admitted that fifty-one thousand persons had been caught up in the purge and e ith er killed, imprisoned, or sentenced to hart! labor (Petranovic, Koncar, and Radonjic, Sethii.ee), S e e also Banac’s study o f this group, who were collectively labeled “Com inform isls” (ibeovci ) even though only a certain portion o f th em actually sided with the C o m in form resolution or Stalin (With Stalin against Tito),

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had been taken, it had to b e allowed to run its negotiated course. Closure was reached only by postponing definition of the property sy stem .38 Although obliged by the party statute adopted at the fifth congress in July 1948 to call a m e e tin g again in 1951, Tito did not open the question until the fifth plenum of the central co m m ittee on May 27, 1952— and not for statutory reasons, but because they w ere “com pleting our Five-Y ear Plan and nearing com pletion of the “entirety o f our internal social c o n ­ struction, and particularly the question o f power [vlast]’'; and despite r e ­ peated assurances that it would convene on O cto b e r 19, the sixth congress finally m et on N ov em ber 7 - 9 . Indecision delayed a new party program, although Djilas admitted that the cu rre n t one “obviously . . . no longer fits. 39 W ith the exception of minor “correctio ns” in the program, such as extend ing the period betw ee n party congresses bevond three years, a new one was not adopted until 1957. The sixth party congress did affirm the political defeat of all those who had argued for centralized allocation of scarce professionals, skilled labor, and consum er goods, and it reinforced the tactic o f justifying or co m b a t­ ing on political grounds— above all, nationalism— what were in fact choices b etw ee n e conom ic models and growth strategies, and the assign­ ment of rights and powers each entailed. S p e ec h es at the congress gave short shrift to the econ om ic and political reforms and to dom estic policy (despite the continuation in 1 9 5 2 - 5 3 of extraordinary defense e xpend i­ tures and stabilization austerities required by reorientation to W e stern markets and military and food aid), so as not to distract from its main theme: T ito ’s sermon on their relations with the Soviet Union and the Cominform and the importance of their national independ en ce. W h e r e Hebrang had b ee n tarred with Croat nationalism ,40 Zujovic with tre a­ son,41 and all dissenters and waverers with “Com inform ist” loyalty to S ta ­ lin rather than Tito, the charge was now Serb nationalism— the penalty iiS Discussion at th e fifth plenum of th e C P Y central com m ittee, in Petnm ovic, Koncar, and Kadonjic, Serinic<’., 661. ny Ibid*. 646, 1,0 In Kardelj s speech at th e fifth party congress in July 1948; see also Banac, With Si a! in

against Tito. In addition to the many quarrels over H ebrang’s leadership of the Croat party (luring the war, the. main examples cited of his nationalism w ere his insistence, while he was minister lor industry in th e provisional governm ent, on a b e tte r exchange rate in the pur­ chase of Croatian wartim e c u rren cy and his insistence, as head ol th e planning commission, that a “S lo vene” aluminum factory b e moved closer to its source ol bauxite ore, which hap­ pened to be in Croatia. -11 The “re is much eviden ce that Zujovic was reporting to the Soviet em bassy in Belgrade, though the m atter is in dispute. T h e argument h ere is that the m ore consequential conflict was over substantive policy, and that th ese disagreem ents— rather than th e charges o f treason— w ere far m ore significant for Yugoslav developm ent.

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b eing a purge (as o f Rade Žigič and Duško Brkič, Serbs from Croatia and allies o f H e b ran g who argued at the second plenum in January 1949 that central allocation o f scarce professionals was economically more rational and that decentralization would inevitably dem and more administrators)42 or marginalization (as of Pavle Gregorič, who thought health care should b e a question o f econ om ic investm ent and federal concern, not ju st social policy and local c o n c e rn ).43 No proposals for central solutions to the question o f labor— whether shortage or surplus— ev e r again received a hearing. T h e antagonism to state eco n o m ic power in the liberal Marxism o f the northwest parties and th e definitive 1928 vote on the national question against the party centralizers prevailed, and the party was renamed the League o f Communists of Yugoslavia (LCY), to signify its confederal essence. Tito had insisted that the sixth congress b e held in Z agreb— “in the spirit o f our decentralism,” Milovan Djilas explained to the central c o m m ittee, to which Tito added, “becau se o f the role o f the working class of Zagreb in the prewar p e rio d .”44 T h e slogan for the labor revisions o f 1950 that aimed to make the state lean again and to return to the land or the family unskilled labor, peas­ ants, and peasant-workers employed in the public sector (the “Huctuators” who speculated with th eir labor)— a slogan as well lor the workers’ coun­ cils that would instill habits o f labor rationalization— was “the consolida­ tion o f the working cla ss.” T h e congress affirmed it by convening on a Sunday— “so th a t,” Tito insisted, “it can b e arranged a little more ceremo­ niously, and m ore delegations o f workers will b e able to c o m e . ”45 Beyond such ce re m on y , workers w ere to focus their econom ic and political inter­ ests within their “working com m unities” and to view their common inter­ ests in the struggle for labor productivity and restraint on demands for h igher wages and benefits within its bounds. T h e vision o f the state in the Slovene model was that o f the national d em ocratic revolution by a substitute bourgeoisie discussed in chapter 2. T h e state would defend territorial integrity and national property against 1,2

Petranovič, Končar, and Radonjič, Sednice, 1 4 4 - 5 0 . On the still-unresolved questions

surrounding tile case o f Žigič and Brkič, including the Lika-Kordun affair in the .summer of 1950 over th e Cazin revolt, see Roksandič, Srbi u llrvatskoj. 1 4 7 - 5 0 43 At the second plenum of the C P Y central com m ittee (Petranovič, Končar, and Radon­ jič, Sednice, 2 5 4 - 5 9 ) ; see also his remarks at the third plenum on (raining new doctors (336­ 39) and his warning at the fifth plenum about the "unusual difficulties" in Switzerland legarding health care “because they have no central authority that decides" and “each canton is a state o f its own" (662) 11 At the fifth plenum o f th e C P Y central com m ittee, in Petranovič, Končar, and Radon­ jič, Sednice, 647 15 Ibid

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foreign occupation, ownership, or dictate. As a coercive, feudal, m e rc a n ­ tilist, and b u reaucratic force, it would disappear. Assemblies o f delegates from a “league” o f C om m u nists would d eb ate policy goals, and assem blies of producers’ representativ es would decide on the distribution o f monies they created. C entral, societywide institutions would consist o f a bank, an assembly, and a party. All o th er functions would b e “socialized”: in the shift in this co n c ep t that Charles Gulick attributes to Karl R e n n er, it meant that the “functions previously perfo rmed by the state (police, courts, g ov ern m e n t intervention) [would be] 'regained’ by so ciety .”46 Public services should b e financed separately, as institutions in depend en t of state budgets. Producers had to control finance, not financiers producers. T herefore, the tasks o f c o m m e r c e and finance should, it was believed, b e integrated into firms; incom e from m arket power (w hether due to market advantage or to natural monopolies, such as in mining) should b e taxed for provision of public goods;47 and interest charges on money advances should b e low and stable to red u ce cu rrency arbitrage. Since bond or capital markets could give governm ents leverage over producers, opening the way to fi­ nancial crises, and cu rre n cy convertibility would open the door to foreign definition o f dom estic values produced, both w ere abju red. Instead, the system o f production incentives and financial accountability m eant that economic in te rest and political right had to b e jo in e d , ju st as in the workers councils. T h e r e could b e no taxation without representation of those who produced value, and fiscal illusion should be avoided by e a r­ marking all budgets by their purpose and preventing any later shift of monies to purposes or territories other than what the creators o f those funds (e lected representatives o f taxpayers) had intended. T h e federal division o f the budget, as m inister o f social policy Anton Kržišnik e x ­ plained it in 1 9 4 5 ,48 and the autonomy o f social-insurance funds (and later of all social services) w ere to pre ve n t such drift and give political control over funds to those who had a direct econ om ic interest in their rational use. Th e same principle would later b e used to prevent the investm ent o f 4(5 Gulick, Austria fro m Habsburg to Hitler 1:222 n. 120, citing R e n n e r’s Wege der Verwirklichung. 17 Bakarić spent much tim e on the problem o f rents in agriculture (see "O zemljišnom rentu ), and it was decided q uite early to abandon a tax on natural monopolies because of the difficulty in calculating it. But the principle remained in wage regulation, w here net p er­ sonal incomes substantially above average w ere taxed at a progressive rate above th e indus­ try average— not to equalize incom es, as is usually asserted, but on the assumption that high incomes must include windfall profits and would therefore distort direct incentives (which is a different issue from w h ether the average citizen reacted to such incomes with a populist sense of a “ju st wage”) 48 See chap. 3, p. 72.

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child -allo wancc funds in day-care centers or the investm ent o f the local re serv e fund for wages in new workplaces;49 by the same logic, subsidies to export producers had to com e from customs duties. T o im p lem e n t this innovation in producers’ control over finance capi­ tal, the 1953 constitution created a second ch a m b e r in all legislative bodies w h ere ele cte d delegates from public-sector work collectives would d eb a te and review all econom ic-policy documents (prepared by technical staff in the executive branch)— the state budget, the social plan and an­ nual resolution on the econom y, tax laws, rulings o f the price office, and decisio ns on subsidies, tax credits, and premium s. Kidrič introduced this idea to the fifth plenum in May 1952 with great enthusiasm— these coun­ cils o f producers would realize the “dictatorship o f the proletariat, ” taking the place o f the bureaucracies o f planning and finance.50 Seats would be apportioned by industry, according to each o n e ’s contribution to national wealth (a contribution m easured at the time by the proportions set for that sector in the social plan o f the upcoming period). B u t given the great disparities in industrial d ev elopm en t at the time, the strict application of this electoral principle would give unfair advantage to the mored ev eloped repu blics— with the result, Kidrič warned, that at the federal level the c h a m b e r would b e composed almost entirely of Slovene and C roat workers. T h e re fo re , proportional representatio n would b e deter­ mined by wealth within each republic, but each republican delegation would re ce iv e equal re presentation in the assembly (this corporate princi­ ple o f rep u blic quotas, called nacionalni ključ — literally, the “national k ey”— applied after the 1963 constitution to positions in federal govern­ m ent organs as w ell).51 In time, specialized, autonomous investm ent funds proliferated, each managed by representativ es o f producers with tax obligations and there­ fore interests in that specialty from each re public (for example, delegates o f th e L eag u e o f Agricultural C h am bers managed the F un d for Agri­ cultural Modernization). Social services funded from tax monies were managed by a board with trilateral representation— from government 49 S e e (lie complaint of' Milan Vujačić in 1967 in "D e č ija zaštita ili zaštita fondova 50 Petranović, Končar, and Radonjič, S a d n ic e , 6 7 7 - 7 9 . 51 T h e principles o f representation, electoral laws, and organization of' parliaments changed with each constitution (there were new ones in 1953, 1963, and 1974 and draft am en dm en ts in 1987). T h e 1963 constitution, for exam ple, replaced th e councils of pro­ ducers with four functional cham b ers— for the economy, education and culture, social wel­ fare and health, and organizational-political questions— to which delegates from workplaces w ere still electe d ; the federal cham b er was composed o f two sections— delegates from mu­ nicipal assem blies and delegates of republican and provincial assemblies. S e e Ilondius, The Y u g o s la v C o m m u n i t y o f N a tio n s , 2 8 6 - 9 1 ; and Burg, C o n flic t a n d C o h e s io n in Social Y u g o s la v ia , passim. On the changes in electoral laws, see Soroka and Smiljković, Political O r g a n i z a t i o n s in So cialist Yu g o s la v ia

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(representing society s interests) and public-secto r firms (which had finan­ cial interests as the creators of the value taxed) as well as em ployees o f the service. Banks reflected the cooperative principle more directly, being managed after 1964 by representativ es ol their depositors— that is, enterprises— with votes in proportion to their deposits. By 195S, the te r­ ritorial principle of the federal system had priority over all sectoral organi­ zation of capital— banks, funds, transfers. Autonomy for producers and socialization of state functions radically narrowed the sphere of public choice to questions ol distribution and r e ­ distribution o f monies. It was essential that the state maintain the value of the currency, but disputes remained over how best to organize a banking system to do th a t.° 2 B ecau se a stable value depended in large part on the financial discipline of producers, the g overnm ent could regulate princi­ ples of distribution (such as for wages), supervise budgetary accounts, and adjust accounting rules when that discipline was lacking (for example, it coidd d eterm ine what could be counted as a cost, establish the order in which obligations w ere to be paid, or make changes in the re serve r e ­ quirements and depreciation allowances). It had no instrum ent of deficit finance or other countercyclical policy' to wield power over m acro­ economic aggregates; it could only cut money in circulation (for example, by adjusting the turnover tax, altering ju risdictions for public e xpend i­ tures, setting higher re q u irem en ts for self-financing or cash reserves, p e r­ forming end-of-year tax reassessments to balance g ov ernm ent budgets, or altering the exchange rate with foreign currencies) and raise production incentives. The federal g overnm ent, as Zujovic complained, had no ownership of productive activities (except temporarily in 1948 and 1949) and therefore no revenue “from p ro d u ction .”53 Its revenues cam e directly from its juris­ dictions: the tu rnover tax, to regulate aggregate demand and supply on an all-Yugoslav m a r k e t;’ 1 customs duties, to manage the foreign-trade bal­ ance; foreign loans guaranteed by the central bank; and a portion o f e n t e r ­ prise taxes granted to the federal budget from the re p u blics.55 B ecau se of this responsibility for the market (final consumption), (he lower chainSet; Ced eon ,

Monetary Disequilibrium auil Bank Reform Proposals in Yugoslavia,” on

the various schools, ranging Irom proponents o f an independent central bank to those using the it*al-bills doctrine to defend decentralized, cooperative banks (the latter school was largely based in Zagreb), j 5:3 The constitution gave specific powers to the federation and all residual powers to the republics. ^ I he turnover tax was replaced betw een 1964 and 1967 by a retail sales tax on con su m er goods, for budgetary reven ue m ore than as an instrument o f price policy (llorvat, “Yugoslav Economic Policy in th e Post-W ar P eriod,” 237). in 1986, the last quarrel over financing for the federal budget produced a reform that limited its financing to federal revenues only.

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b e r o f th e federal assembly (the Federal C h am ber) had jurisdiction over q uestio ns o f labor and social welfare and its delegates cam e from local g ov ernm ents; and localities whose per capita incom e was below the coun­ trywide average and whose personal income tax was thus insufficient re­

ceived grants-in-aid from the lederal budget.*® T h e upper chamber— the C ham ber o f Republics and Provinces, with representatives from republi­ can assemblies— reviewed the social plan, federal budget, and economic policy, in accordance with the return in 1950 to republican jurisdiction over transportation, energy, and education alongside light manufactur­

ing. agriculture, and labor. Businesses and larms in the private sector, which paid fees and income tax to localities, had corresponding political rights to elect delegates to local assemblies. Persons in private employ and households could also, as a “political manifestation" of citizenship most significant after that of elections, ' contribute to state revenues in bond issues— such as the second National Bond for the Five-Year Plan of J u n e 12, 1950 (the first was in Ju n e 1948), organized by the popular front and trade union in all b ra n c h e s.57

Socialization o f the state— its “withering away”— implied devolution of its administrative functions to lower governments, civilian supervision through assemblies representing property owners (governments and public-sector workplaces), and as much as possible the automatic opera­ tion of econom ic laws ' through self-managed budgets. Conditions in the 1950s,

however,

required

some

state

intervention,

administrative

powers, and selective credit. Socialization would be a process adjusted to material conditions ; but such conditions, as Kidrič explained the appli­ cation o f proportional representation o f enterprises within republics, re­ quired supplemental adjustments to the long-term goal, not a change of institutions or their underlying assumptions, ll ie s e temporary conditions were two: the developmental disproportions iu the economy among sec­ tors and regions, and a still-hostile world of atomic (later nuclear) powers, closed trade, and defense alliances. I bus industrialization required some redistribution of capital for investment in less-developed areas and sec­ tors, and som e administrative intervention— but not an apparatus. The General Investment Fund, financed at first by federal monies and later by I h e s e niants began in July 1964, when the comm îmes becam e financially responsible for social services, although by 1967 responsibility had shifted to separate '‘self managed com m unities o f interest" for education, child care, child allowances, and other social ser­ vices (see T m čin ović, '‘Financing Socio-political Units"). In 1971, the federal chamber's jurisdiction was reduced to international treaties, courts, and the few other remaining fed­ eral responsibilities (Burg, C o n flic t a m i C o hesio n). 57 Informativni Priručnik Jugoslavije, 1950, 3 6 3 - 8 7 . Subscription lasted until Septem­ ber.

A REPUBLIC O F PRODUCERS

187

a direct capital tax on re p u blics,58 would therefore be managed by re p u b ­ lican governments. It would distrib ute monies from republics above the average in gross dom estic product (a measure o f dev elopm en t and also of market advantage that could b e fairly taxed) to those below it, redefining republics and provinces as “m ore-d e ve lop e d ” (richer) or “less-developed” (poorer).59 “Socialism in one cou n try ” also m eant interacting in a world that was not socialist, so the federal g ov ernm ent would retain responsibility for managing that interaction. F oreig n trade would b e liberalized gradually; foreign assistance would b e n e ed e d for some tim e to supplem ent d o m e s­ tic savings; and national in d e p e n d en ce under conditions o f hostility from the two ideological camps required trade diversification to lessen the vul­ nerabilities o f 1 9 4 6 - 5 0 . Thus, while foreign-trade firms and o th er e n t e r ­ prises could engage directly in W e ste rn markets, the g ov ernm ent would remain active in foreign trade b ecause o f its responsibility for d ebt repay­ ment and therefore for im plem enting the conditionality programs for IMF credits; and it would have to negotiate official loans, many c o m m e r ­ cial credits, and bilateral trade agreem ents. In trade contracts with the clearing area o f the E a stern bloc and in the bilateral exchanges m ore c o m ­ mon with developing countries, it would have to serve as interm ediary, advancing monies from the federal budget to d om estic firms operating abroad (for example, in construction) until paym ent arrived. But the ad­ justment of the model to this global reality remained problem atic; as Croat economist Ivo Perisin wrote in the early 1980s, the system regulat­ ing international e c onom ic relations and integration into the international division of labor was “still in the process o f transformatio n.”60 National-defense doctrine also com bined two separate forces and prin­ ciples: the goal of demobilization to civilian militias under the control of the republics, and the m aintenance of an all-Yugoslav standing army u n ­ dercentral com m and and federal jurisdiction. Prepared to d eter and ulti­ mately defend against a “massive nuclear attack o f blinding power and aerial onslaught on Yugoslav te rritory ,”61 the army would also be 5NAt that time, it was renam ed the Federal Fu nd for M ore Rapid D evelop m ent o f LessDeveloped Republics and Regions. 59 By 1975, enterprises w ere perm itted to fulfill up to half o f th eir contribution to th eir republic’s obligation to th e fund by investing directly in another en te rp rise— forming a join t venture— in a less-developed area. By 1980, th e fund s board was even composed o f d e le­ gates from enterprises (taxpayers) in order to give producers control over th e form er sp here of public investment itself, on the grounds that governm ents wasted en terprise tax monies in bad investments. In the early days o f the fund, certain regions within a m ore-developed republic (as in th e case o f Croatia) could also receive aid. ■ w Perisin, “T h e Banking System and M onetary P olicy.” 61 Les forces am ices de la HSFY, 75, 79.

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equ ipp ed with advanced light arms for conventional warfare to support th e territorial defense forces, which would he prepared to wage a “p e o p le ’s war” with armed citizens defending localities. Accordingly, the federal budget included the pensions and benefits for veterans and sal­ aries for the Yugoslav P eo p le s’ Army (YPA); the secretary o f national de­ fe n s e 62 controlled a federal council for trade in special goods and let contracts with dom estic manufacturers for military equ ip m ent and sup­ plies; and the federal gov ernm ent maintained a national food policy and e n erg y controls for strategic self-sufficiency. T h e leaders policy of neu­ trality b e tw ee n blocs included a one-third rule on all military equipment and arm am ents in order to guard against d ep en d e n ce on a single supplier (a rule that also kept them in several global markets): one-third of equip­ m e n t and supplies could com e from NATO countries (eventually primar­ ily licenses), one-third could com e from the Warsaw Pact (eventually heavy artillery and e q u ip m en t from the U S SR ), and one-third must come from d om estic production (under the budget o f the federal secretary for national defense). T h e process of demilitarization of the economy that began in 1953 affected not only investm ents, plant conversion, and eco­ nom ic models, but also the police, state security, industrial (party) mili­ tias, and intelligence services. T h e devolution of these functions to civilian sectors or lower governm ents also occurred in stages, in response to changes in p erceiv ed security threats— in 1 9 5 5 - 5 6 , 1 9 6 5 - 6 6 , 1968, and 1 9 7 4 .63 In the lead ers’ view, u n em ploym en t was a short-term inevitability of d ev elo p m en t and problem s in foreign trade, but it would not result from th e ir system of social ownership and producer control once these condi­ tions evaporated. Thus, although the social plan for investment specified a target for the rate o f e m ploy m ent growth, it was only a residual of the (i2 Although cab in et ministers w ere still referred to colloquially as ministers, officially they w ere renam ed secretaries, and their bureaus called secretariats instead oi ministries, to sym bolize th eir anti bureaucratic and anti-Soviet revolution. 63 F o r exam ple, border tasks w ere divided betw een the YPA and the civilian police and customs officials in 1953; the National Army Act o f 1955 appointed national-defense commit­ tees in republics and commissions in districts, the Internal AiFairs Act o f 1956 subdivided state security (intelligence, alien control, etc.) betw een the party and police; and the Basic Act on Internal AiFairs of 1966 devolved to republics and localities administrative jurisdiction over state security, public peace, fire protection, passports, b ord er control, and other mat­ ters. Alongside devolution cam e socialization: party militias b ecam e th e core o f the terri­ torial defense forces in 1968, and after 1974 defense was incorporated into production, The c e n te r o f th e new defense system based on territorial militias— the comm ittees for social self-protection o f the “all-national defense” (opcenarodna odbrana )— were the primary units o f econ om ic organization in th e public-sector workplace, the basic organizations of associ­ ated labor (B OALs), S e e B e b le r, “Yugoslavia’s National D efen se Sy stem ”, Ilondius, The

Yugoslav Community o f Nations; D ean, “Civil-Military Relations in Yugoslavia, 1971-75”; Las fo r c e s Armees; and chap, 7,

A R E P U B L I C OK P R O D U C E R S

189

calculations made for p ro je c te d growth in productivity and in total indus­ trial output. This target was adjusted for expected dem ographic change, on the argum ent that it was in society's interest to have the public sector grow fast enough to employ youth as they e n te red the workforce. N one of the consultative or legislative institutions, of course, represented the un­ employed. T h e unem ployed did not fulfill the conditions for econom ic decision makers becau se they created no value and therefore had neither an “interest” in econ om ic policy nor the right to participate. To the extent that un em ploym ent occu rred , it was a question o f local jurisdiction. The L C Y and the United Unions organization had the organizational capacity to re p re s en t the virtual interests o f the unemplo yed, in the sense that social d em ocracies with full e m ploy m ent are said to b e successful because unions are com prehen sive, centralized peak organizations that can im plem ent pro em p lo y m e n t policies chosen when the workers’ party controls the governm ent. B u t the principle officially linking political voice to economic interest, defined as belonging to those who created value and therefore financed public goods, applied to these organizations o f labor as well. M e m b ersh ip in the union was in principle obligatory, but only for those employed in the public sector (of whom 8 0 to 95 pe rce n t actually joined, depending on the year and the industry). Although unified within branch, then republic, and finally countrywide federation, and although officially re p re sen ted in policy forums that touched on e m ploy m ent and incomes, the union was nonetheless confined in its official responsibilities to implementing ag re em en ts and regulations on these matters within e n ­ terprises. Its control over elections o f workers’ councils and m anagem ent within the firm might influence hiring decisions, but it primarily had the right to red istribu te — to review and winnow the list o f pro jected layoffs prepared by technical staffs and to assist in the retraining or reassignment of “surplus la b o r .” Membership in the LCY , in contrast to the union (and the Socialist Alliance of W ork ing People, which succeeded the Popular F ro n t in 1950), was limited to 5 to 7 p e rc e n t of the population above the age of eighteen and was su b ject to rigorous admission and continuation standards. Th e party s task was not to rep resent separate interests o f labor, which no longer existed, but to provide the bond of com m on purpose that would replace the coe rcive instrum ents o f the state and “harm onize interests" that might temporarily appear in conflict. As the state administration d e ­ volved or socialized, the party apparatus would as well: to the republics, localities, and workplaces that would pay its m e m b ers salaries and social insurance.M Accord ing to Djilas, Kidric ended the party’s special privi61 The n um b er o f party functionaries was cut drastically in 1 9 5 2 -5 1 and again in the second half of I he 1960s; by 1964, republican parly congresses w ere held before the all-

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leges and stores in 1951 b ecause they w ere an “anomaly of financial a cco u n tin g .”65 O v e r time, therefore, the state would be replaced by the societywide rules negotiated by property owners (representatives o f republics and firms), central monetary policy, and, w here necessary, the enforcement power of party loyalty and “c o n s c ie n ce ” in localities and workplaces. The leaders saw no need for supplem entary political institutions to forge con­ sensus and resolve conflicts among cooperative producers in this coopera­ tive state when the producers interests did not immediately dictate it.6fi Yugoslav congress, and in 1965 the central control and cadre commissions were moved to the republics. W h e th e r party organizations w ere to be located in enterprises or in com­ m unes remained a point o f persistent conflict betw een Croatia and Serb ia that reflected the developm ental conflict b etw een the Slovene and Koca models. T h e conflict lay in the degree o f industrialization and incorporation o f the working-age population into the socialized sec­ to r and the corresponding de gre e o f need for com m une-level coordination o f a population that included many em ployed in services and administration outside enterprises, as well as a larger private sector, efi Djilas, Rise and Fall, 18. (iG T h e model o f L e n in ’s State and Revolution was not by accident,

Chapter 6 UNEM PLO Y M EN T

of the Yugoslav party leaders that they had set in m o­ tion by 1952 a system in which u n em ploym en t might be a temporary

Th e e x p e c t a t io n

problem of d ev elo p m en t but not an outcom e of the system itself proved wrong. People moved increasingly out o f private, subsistence agriculture; but the public sector did not grow at a pace sufficient to give them , or youth entering the workforce for the first time, the jo bs they sought. Although there w ere periods o f rapid growth in em ploym ent, the total growth in em p loy m e n t contracts in the social and private sectors b etw een 1957 and 1982 was only 0 .5 2 percent, because of the decline in private agricultural e m p l o y m e n t.1 T h e average annual rate of increase in e m ploy­ ment in the social sector was 4 .0 percent, and the rate o f decline in private-sector em p loy m e n t was 3.1 percent. M uch o f the change was due to transfer of people from wage-labor status under private hire to social­ seetor em ploym ent; and the gap betw ee n the two rates, representing the ability to absorb the labor surplus, grew wider. T h e n u m b e r of people registered with e m ploym ent bureaus as looking for work rose without cease after 1950, at an average of 11.4 pe rce n t a year in the precrisis period of 19 52 —75. This official measure of un em ploym ent continued to rise for the entire postwar period, from about 5 p e rce n t in 1952 to 17 percent in 1 9 8 8 .2 The image o f a population neatly divided into two settled com m unities of secure su b siste n ce — the public and private sectors— hid from view the growing groups of people in n e ith er world: workers who had b ee n ju d ged superfluous by m anag em ent and workers’ councils yet who wished to r e ­ main in industry or had no land to which they could return; a highly mobile collection of unskilled laborers traveling from one short-term c o n ­ struction jo b to another; the unem ployed who gathered at dawn to wait for recruiters in informal day-labor “markets” on the outskirts o f major cities; a large n u m b e r o f peasant-workers who continued to live in the 1 Primorac and Babic, System ic Changes and U nem ploym ent Growth"; figure in origi­ nal ms version (available from Em il Primorac), 11. 2 Data are available in the many studies and journals of the Federal Bureau o f Statistics (Savezni Zavod /a Statistiku), Belgrade, and in the O E C D Yearbook on Economic Statistics See also Malacic, “U n em ploym ent in Yugoslavia from 1952 to 1975”; Primorac and Della Valle, ‘U nem ploym ent in Yugoslavia: Som e Structural and Regional Considerations"; and Mcsa-Lago, Unem ploym ent in a Socialist Economy: Yugoslavia.

192

♦

(1) » ( 1 + 2 )

CHAPTER 6

; f c ( 1 + 2 + 3) A ( 1 + 2 + 3 + 4 ) +

( 1 + 2 + 3 + 4 + 5)

F i g u r e 6-1. E m p l o y m e n t G ro w th , in T h o u sa n d s, 1 9 6 2 -1 9 7 5 . Source: M e n c in ge r, “U tjec a j p r i v r e d n e a k tiv n o sti na z a p o s le n o s t.” Note: (1) social sector, econom ic; (2) social se c to r, n o n e c o m o n ie ; (3) p riv a te se c to r (dom estic a n d abroad); (4) regis­ t e r e d u n e m p l o y e d ; (5) i n d e p e n d e n t farm ers.

village and migrate seasonally to industry and mines; and an ever-larger p e rce n tag e o f the younger generation waiting at hom e for a first jo b. As late as 1955, the polutani (peasant-industrial workers) formed a majority o f the labor force em ployed in the textile, wood, brickmaking, and con­ struction industries, a significant n u m b e r o f the workers in the chemical and agro-industrial branches o f the econom y, and three-fifths of the min­ ers in S e rb ia and B o sn ia .3 T h e final countrywide census o f 1981 showed a population o f tw enty-two million Yugoslavs, including thirteen million b e tw e e n the working ages o f n ineteen and sixty; o f these, only seven million w e re em ployed in a regular e m ploy m ent position ( raclni odnos). O f th e rem aining six million, only one million w ere registered at an e m ­ ploy m ent bureau as unem ployed (at least half of these one million were actively looking for work), while another one million w ere working te m ­ porarily in foreign countries. This stark picture was drawn in O ctob er 1988 by the sitting presid ent o f the L C Y during the d ebate over condi­ tions for yet another I M F loan, enacted two months later. H e concluded, “I f an efficiency-oriented reform w ere put in place, 2 to 2 and one half million would b e thrown out o f w o rk .”4 3 Kostic, Seljaci-industrijski radnici, 2 1 - 2 2 . 4 Stip e Suvar, at the international roundtable “Socialism

in the W o rld ,” Cavtat,

Yugoslavia, O c to b e r 1988, cited in D en itch , Limits and Possibilities ,

Figure 6-2. Unemployment, in Thousands, 1952-1988. Sources: For 1952-58: Macura, "Employment Problems under Declining Population Growth Rates and Struc­ tural Change,” 496; for 1959-88: Mencinger, “Privredna reforma i nezaposlenost,” 36.

Figure 6-3. Percentage Rate of Unemployment, 1959-1988. Source: Mencinger, "Privredna reforma i nezaposlenost,” 37.

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T h e s e figures led many to question th eir meaning, to re duce the num­ b ers with estim ates o f “real” unem ploym ent, and to emphasize the rapid rate o f jo b creation over the period. L ittle attention was given to the faster rate o f growth in un em ploy m en t, the disproportionately high numbers am ong w om en, youth, and unskilled workers, and the shift over time from frictional to deeply structural causes, whereas it b ecam e ritual to acknowledge the very high rates in the southern and eastern parts of the country as if there w ere nothing to explain. Explanations for unemploy­ m e n t ca m e largely from econom ists, divided b etw een a smaller group of developm entalists and a large school of economists of mainly marginalist persuasion who saw in the labor m anagem ent o f firms a built-in bias against e m ploy m ent. Specialized journals filled with data analysis for em p loym ent-b u roa u administrators arose in the republics when the bu­ reaus gained full self-m anagem ent status in the 1970s, and a few statisti­ cians and sociologists not directly paid for such work did analyses of the u n em p lo y ed ;5 but the s u b je ct never attracted political analysts. In com­ parative historical term s, studies o f the unemplo yed them selves— living conditions, methods o f getting by, extent of social marginalization— were in 199 0 at the point Jo hn Garraty assigns to the 1850s and 1860s in west­ ern E u r o p e . 6 Although un em ploym en t was classified as a question of so­ cial policy, e n te rp ris e s — which financed social science research after the early 197 0s— w e re not interested in the systematic study of poverty. Po­ litical harassm ent followed the few independ en t studies, such as those done in S e r b ia — including the work of lawyer-activist Srdja Popović. The Yugoslav Booths, Mayhews, Jahodas, and Lazarfelds had yet to emerge.

The M

ea n in g o f

U n e m pl o y m en t D ata

in

Yu g o s l a v i a

D e s p ite th eir quantitative representatio n, which makes them appear com parab le across time and space, un em ploym ent data represent very different realities in different societies and in the same society at different times. B eca u se th e re w ere no household surveys in Yugoslavia, the re­ liability o f the data had no test; but it is clear that th eir coverage varied substantially, as did the methodological instructions to statistical-bureau surveyors.7 T h e data’s relation to the labor supply could be assessed only 5 Exam ples o f such journals are Zapošljavanje i Udruženi Rad, a monthly in Croatia; and Socijalna Politika, formerly the house journal o f th e Ministry oí Social Policy and Health (adopted wholescale from the Croat ministry o f the 1939 Cvetkovic-M aeek Agreement pe­ riod) but long an autonomous publication o f the federal Institu te for Social Policy. T here ure also th e rare em pirical studies such as the one by Mladen Zuvela and Josip Županov, re­ ported in Zuvela, “G ru p e stanovnika pojačeno izložene nezaposlenosti;” and Filipović and H rnjica, “Psihološki aspekti nezapošljavanja om ladine,” 6 Garraty , Unemployment i ti History, 91--115. 7 This is a characteristic o f unem ploym ent data in general, not o f the highly professional Yugoslav Fe d era l Bureau o f Statistics.

UNEMPLOYMENT

195

once a censual decade. T h e one constant deriv ed from the official and popular consensus that em p loy m e n t must b e voluntary and that u n e m ­ ployment was short-lived. T h e unem ployed w ere those people who vol­ untarily registered with a local em ploym ent-service bureau (renamed "communities o f interest for e m p lo y m e n t” in 1969)8 as “looking for work” in the public sector. The reason to register as unem ployed was to obtain health insurance and child allowances, some cash assistance, and access to retraining p ro­ grams. Un em p loyed people who did not need or w ere ineligible for the bureau's services would not register. O v e r the entire postwar period, the employment bureaus found work, on average, for only 2 2 p e rce n t of people newly em ployed each year, and this n u m b e r declined to 8 . 3 p e r­ cent a year by 1 9 7 3 - 8 0 . U n em p lo y m en t compensation, as a paym ent for past labor, was available only for those who had held a legal e m ploym ent contract in the public sector (and only if they had no alternative means of support, ju d g ed according to family income or ownership o f agricultural property), and the amount paid was in proportion to the time employed and the position’s legislated wage rate. T h e local bureau made such d e t e r ­ minations, on th e basis o f central principles and local monies. T h e right to health insurance also belonged only to those previously employed in the public sector (until 1960, when coverage was extend ed to independ en t farmers).9 T h e proportion o f the re gistered unem plo yed who qualified for compensation varied over the period 1 9 5 2 - 8 5 , from a high o f 18 p e rce n t to 3.5 p e rce n t in 1 9 8 4 — only 1 1 .6 p e rc e n t o f those with previous em p loy ­ ment; and the am ount was so m eag er (an average o f 6 ,5 0 0 dinars a month when average salaries w ere 2 0 0 ,0 0 0 ) that it could scarcely be considered assistance. Its average duration was only 2 5 - 2 7 days, in accord with the view (inaccurate by the 1960s) that u n em ploym en t was frictional and short-term and that “w elfare” was uneconom ic d e p e n d e n c e .10 T h e effect of these restrictio ns was to discourage registration in the first place. 8 “Com m unities o f in terest” was the label given public and social services once they became, after 1969, fully ind ependent funds and agencies for em ploym ent, roads, housing, social insurance, e t c .; they w ere managed by em ployees and an annual assem bly o f d e le ­ gates from th eir direct financers in enterprises and from government. 9 See P arm alee, “M ed icin e under Yugoslav Self-M anaging Socialism ,” 9 7 - 1 0 0 , 2 1 6 - 1 8 . Between 1952 and 1960, ind ependent professionals becam e covered by health insurance, to which they m ade payments; in 1 9 5 9 - 6 0 , as part o f a program to encourage farmers to con­ tract with social-sector m arketing and processing firms, they received basic care as part o f long-term deliv ery contracts. Beginn in g in 1973, Slovenia mandated unification o f workers’ and farmers’ insurance, followed by Bosnia-H erzegovina, M ontenegro, Serb ia proper, and Vojvodina during th e 1970s and by Croatia in 1980. Inequalities in th e kind and am ount o f coverage b etw een th e two sectors remained, however, as Parm alee discusses extensively (passim), 10 T h e se data are calculated from th e official federal statistics published annually in Sta­ tistički Godišnjak Jugoslavije; see also Malačić, “Unem ploym ent in Yugoslavia from 1952 to 1975.”

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M o reover, to register one had to b e in generally healthy condition, be of working age ( 1 5 - 6 0 for m en, 1 5 - 5 5 for women), and reappear regularly to maintain active status— an obstacle for people who lived far from a bu­ reau, particularly in rural and mountainous areas. O n e also had to sign an affidavit agreeing to accept whatever position the bureau staff offered, regardless o f w h ere it was. Sophisticates knew that the bureaus had no means to enforce this rule, b u t many unem ployed who w ere unable to resettle (such as married women) or those with poor prospects for housing (such as youth who relied on their parental hom e and sustenance) would b e d e t e r r e d . 11 T h e official rate ot un em plo y m en t says more about the leaders’ concept of e m p lo y m e n t than the reality o f unem plo ym ent. Based on Kardelj’s c o n c ep t o f em p loy m e n t as a stable “e m ploy m ent position” in a publicseetor work collective and its separation from a world o f stable subsistence in the private sector, the rate was actually a measure of the nonsubsis­ te n c e population; in contrast to the standard measure in developed cap­ italist econom ies, w h ere the rate is a proportion of the total population or of th e potential labor f o r c e ,12 it was the unem plo yed portion of the socials ector e m p lo y m e n t pool— those currently employed in the public sector with rights to self-management and those formally registered as seeking work. Thu s the base o f this ratio excluded people working permanently abroad, those in the employ o f the state secretariats for national defense and internal affairs, and those working in diplomatic establishments in foreign countries. On the other hand, the data made no distinction be­ tw een full-time, p e rm a n e n t contracts and part-time or temporary con­ t r a c t s ,13 even though the latter did not fit K a rd elj’s definition; the n u m bers o f such contracts rose significantly after the mid-1960s. Wage e arners on legal contract in the private sector w ere counted as employed in som e periods only, but the num bers excluded those with no cash in­ c om e. F o r example, although in 1948 all rural women of official working age w ere counted as econom ically active because it was known that they shared fully in family farming activities, by 1953 women in agricultural households w ere no longer counted among the e m p lo y e d .14 Th e narrower definition o f em p loy m e n t that was first systematized in the instructions for u n em p lo y m en t surveys in 1954 tended to p re v a il,15 but fluctuation in 11 On th e unwillingness to move in Croatia, see th e study by J uresa-Persoglio, “Neke značajke socio-ekonomskog položaja nezaposlenih u SR H ” 12 M yers and C am pbell, The Population o f Yugoslavia. S e e th e discussion o f alternative m easures in Mulina, Nezaposlenost, uzroci i karakteristike u sadašnjoj faz i razvoja

privrede, 13 M oore, Growth with Self-Management, 1 1 7 -1 8 . H M yers and C am pb ell, The Population o f Yugoslavia 15 Savezni Zavod za Statistiku, Uputstva za polugodišnji izveštaj o zaposlenom osoblju (1954).

S e e also Savezni Zavod za Statistiku,

zaposlenom osoblju (1958),

Uputstvo za sprovodjenje izveštaja o

UNEMPLOYMKNT

197

the definition o f econom ically active persons was enough to make any assessment oi the rate of un em ploym en t or of the proportion of the active population that found em p loy m e n t over time extrem ely rough. It was com m on for individuals to move on and off the unem ploym ent rolls, depending on their level of discouragement and the need they felt for income. Following a pattern in many countries, registered unem ploy­ ment tended to rise when price inflation or falling real wages cut into households real incom e, forcing additional m em b ers to p rotect consu m p ­ tion levels by seeking paid em ploym ent. U nem ploym ent figures also rose when em ploym ent grew, providing some indicator of the num bers of d i s ­ couraged jo b seekers who returned to the registers when there was hope of finding w o rk .16 T h e seasonal rhythm o f agricultural labor was in part captured becau se re gistered un em ploym en t always increased in off­ seasons, but the extent of the rural labor surplus was surveyed only in the decade after 1953, by developm ental economists continuing prewar prac­ tice; it was estim ated that year at 3 .2 to 3 .3 million persons (31 p e rce n t o f the farming population) and in 1 9 6 0 - 6 4 at ] to 2 m illio n .17 Although all regions except Vojvodina still had substantial labor reserves in the cou n ­ tryside and in agriculture into the mid-1970s (despite the precipitous d e ­ cline in the proportion of the active male population that was engaged in agriculture, from 69 p e rce n t in 1953 to 21 p e rce n t in 1 9 8 1 ) ,ls these re ­ serves did not e n te r into the measures of e m ploy m ent and unem ploy­ ment used by planning authorities and policymakers. Attempts to assess the real extent o f unem ploym ent were rare, and they occurred at m om ents when sharply rising unem ploym ent (during the severe recession of 1 9 6 6 - 6 8 and the econom ic crisis of the 1980s) motivated officials to reduce the count of the “truly unemployed. Y et the official studies actually found that the rate understated their numbers. For example, a 1967 study by the Federal Council on Labor (made public in April 1968) estim ated that the official rate o f 7 .2 percent (2 6 9 ,0 0 0 p e r ­ sons) understated u n em ploym en t by almost 3 percent. Another 15 3,0 0 0 persons actively looking for work had not registered with an e m ploy m ent bureau; the hidden surplus among the employed added an estim ated 200,000 to 2 5 0 ,0 0 0 ; and latent un em ploym ent in agriculture was 1,400,000. On top of that w ere 4 0 0 ,0 0 0 persons (an additional 10 percent) officially working abroad but not considered unemployed. T h e study also l(> Hasevie, Mulina, and Macnra, The Determinants o f Labour Force Participation in Yugoslavia. 23. '■ Macura, Stanovnistvo kao cinilac phvrednog razooja Jugoslacije; Nikola C o b e ljic and Kosla Mihailovk;, speaking at the 1954 sem inar discussion on flit* labor force held at the Belgrade Institu te oi Econom ies and reported in Mas, “Dmstveno-ekonom ski osvrt na pro b ­ lem zaposlenosti, 1 5 7 - 6 2 ; Puljiz, Eksodus poljoprivrednika

lH Myers and C am pbell note that the 6 9 percent figure for 1953 was “one o f th e highest rates in the world (The Postulation o f Yugoslavia), For the 1981 figure (based on th e 19S1 census), see Statisticki Godisnjak Jugoalavije, \983,

198

CHAPTER 6

estim ated that the figures for the previous year (1966) undercounted the n u m b e r o f persons without work and actively looking by 2 0 percent; those for 1967, by 5 7 p e rce n t; and those for 1968, by 82 p e r c e n t .19 In 1981, a revision by the F e d e ra l Bureau o f E m p lo y m e n t o f the criteria of “true” u n em p lo y m en t conclu ded that, despite popular b e lie f to the contrary, 82 to 9 0 p e r c e n t of the registered unem plo yed in that year did m e e t these c rite ria .20 And b ecau se such periods of conc ern w ere also times when campaigns to red uce the cost o f labor by rationalization and open unem­ ploym ent w e re un der way, attention focused on the additional unemploy­ m e n t hidden in the workplace. A semiofficial study during a campaign to intensify labor use in 1 9 6 1 - 6 2 estim ated hidden un em ploym ent at 1 0 -1 5 p e rc e n t o f industrial jo b h o ld e rs ,21 and the 1967 study put the number at slightly less than the n u m b e r of registered unem plo yed; b u t more often th e estim ates o f redundancy (such as in the studies for the long-term sta­ bilization program of 1 9 8 2 - 9 2 ) were so consistently set at 2 0 - 3 0 p e r c e n t— without supporting e v id e n ce — that one doubts they repre­ sen ted system atic analysis. Equally difficult to ju d g e was the extent of e m ploy able resources lost to employed persons who held second jo bs, did o v ertim e work, or received consulting fees for work at another workplace, although officials estim ated in the 1980s that such resources would create 3 0 0 ,0 0 0 additional positions.22 B u t nowhere was there an attem pt to iden­ tify the actual labor supply, and o f all the categories o f people not cap­ tured by the un em plo y m en t data— those who w ere discouraged, at a distance from an em p loym e n t bureau, culturally inhibited from register­ ing, am ong th e agricultural surplus, or resigned to the world of noncon­ tractual, casual labor— official attention was paid only to redundancies among the em ployed and to workers temporarily employed abroad. This latter category was the focus o f a long-running, important debate about w h e th e r to classify workers in foreign countries (gastarbeiter, or guest workers) as unem ployed at home. Periods o f emigration always low­ e red the un em p lo y m en t rate. F o r example, its sharp drop in 1 9 5 5 - 5 7 can b e attributed almost entirely to the perm anent exodus o f ethnic minor­ ities and political m alcontents when borders opened, and the fall in un­ e m p lo y m e n t in 1961 corresponded to the federal government’s organization o f tem porary labor migration abroad. T h e n u m ber of workers who left in 1 9 6 9 - 7 3 , about 5 0 0 ,0 0 0 , was almost equal to the increase in ly Za]>oslenost i Z a p o š l j a v a n j e , April 1968. See also Livingston,

Yugoslavian Unemploy­

m en t T ren d s/ ’ 20 Author s interviews with top officials o f the Fe d eral Bureau o f E m ploym en t (Savezni Zavod za Zapošljavanje) in Belgrade, N o v e m b e r -D e c e m b e r 1982; and data from the bu­ reau’s in-house reports. 21 Livingston, “Yugoslavian U n em ploym ent T re n d s,” 756. 22 M en cin ge r, “O tvore na nezaposlenost i zaposleni b ez posla.”

UNEMPLOYMENT

• Gross Rate ♦

199

Net Rate

Figure 6-4. U n e m p l o y m e n t P e r c e n t a g e s : G r o s s a n d N e t R a te s , 1 9 6 4 - 1 9 7 2 . Source: Babić an d P r i m o r a c , “A n a l iz a k o r is ti i tr o š k o v a p r i v r e m e n o g z a p o š l ja v a n ja u i n o z ­ emstvu,

ta b l e 2. N ote: G r o s s r a t e s r e f e r to b o th d o m e s t i c a l l y e m p l o y e d a n d th o s e

re gistered as w o r k i n g a b r o a d . N e t r a t e s r e f e r to d o m e s t i c a l l y e m p l o y e d o n ly .

social-sector e m p lo y m e n t during the same period. T h e serious ju mp in unemployment during the 1970s was due in part (although less than is often asserted) to the expulsion from recession-plagued northern E u ro p e of less-skilled Yugoslav laborers; in 1 9 7 4 - 7 5 alone, 1 5 0 ,0 0 0 workers re ­ turned (30 p e r c e n t m ore than the natural increase in the labor force that

year).23 The data on temporary workers abroad capture only those who went through official channels, although personal networks and the un­ derground of informal and illegal labor burgeoned after receiving coun­ tries imposed stricter criteria in 197 4-75 . Before this sharp rise, in the ccnsus of 1971, the official total of those employed abroad was 6 7 2 ,00 0 (17 lor every 100 persons employed at home); semiofficial estimates spoke confidently o f more than 800,000. and experts close to the subject ven­ tured a figure closer to one million.24 Both Jože M encinger and Emil 23 Sehrenk, Ardalan, and El Tatawy, Yugoslavia: Self-Management Socialism and the Challenges o f Development, 2 6 6 - 7 0 . 21 Rašević, Mulina, and Macura, Determinants , offers an easy summary, but the data are extensive. S e e Statistički Godišnjak Jugoslavije and the publications o f the Institute o f M i­ gration (Institu t za Migraciju), Zagreb, including its jo urnal, Migracije.

200

CHAPTER 6

F i g u r e 6-5. Jo b S e e k e rs a n d Yugoslavs W o rk in g T e m p o ra rily A broad, in Thou­ san d s, 1 9 6 0 -1 9 8 4 . S o u r ces : F o r j o b see k ers: Statistički G o d išn ja k Jugoslavije, v arious years; for m ig ra n ts, 1 9 6 0 -6 4 : Z im m e rm a n , O pen B o r d e r s , Nonalignment, a n d th e P olitica l E v o lu tio n o f Y u goslavia, tab le 4.4; for m ig ra n ts, 1965-84: Pri­ m o ra c a n d B abić, “S y s te m ic C h a n g e s a n d U n e m p lo y m e n t G r o w th in Yugoslavia, 1 9 6 5 - 1 9 8 5 ,” ta b le 3. . -

P rim orac argue that th e y should be included in unem plo yment figures, while W illiam Z im m erm a n maintains that their exodus also provided a political safety valve.23

T he U nem ployed

D u r in g the 1950s, the F e d e ra l Bureau of Statistics gathered detailed data on the characteristics o f persons in public e m ploym ent and those who w ere fired from their jo b s . B ut by 1964, data conform ed to the new sys­ tem o f income relations, a system that identified people not by occupation or fo rm er em p loym e n t, b ut according to social categories defined by the system o f wage differentials and that system ’s assumptions about individ­ ual capacity to pro du ce— that is, according to age, certified skill and edu­ cational qualifications, and gender. Societal measures of productivity and labor use had disappeared. T h e data do show significant change over time in the characteristics o f individuals affected by unem plo yment, although 25 S e e , am ong others, Z im m erm an , Open Borders, Nonalignment, and the Political Evo­ lution o f Yugoslavia; M en cin ge r, "P rivredn a reform a i nezaposlenost”; and Primorac and Babić, “Sy stem ic C h a n g e s.”

UNEMPLOYMENT

201

these shifts do not correspond to the com m on benchm arks o f political discussion— th e 1965 econ om ic reform and the 1974 constitu tio n.26 T h e re is a first period, b e tw e e n 1950 and the end o f 1957, when both dismissed industrial workers and the agricultural surplus w ere largely unskilled or semiskilled laborers, m ore than half of them women. Industries hardest hit by supply bottlen eck s due to harvest failures or the difficulties in for­ eign trade, such as textiles and tobacco processing, and cyclical activity in construction accounted for most layoffs. Overall, this was a period o f high growth in dem and for labor, lasting until 1964; but it would b e inaccurate to characterize it, as many do, as one o f extensive e m ploy m ent, and un­ employment also rose in 1 9 5 6 - 5 7 . W aiting time for jo bs was usually short (between one and six months after first registration), and a higher propor­ tion of workers found jo b s through em p loy m e n t bureaus in comparison to later periods. T h e r e w ere also stark regional differences: M acedonia had a very high rate o f un em ploym en t, followed closely by Kosovo; more m o d ­ erate rates prevailed in a middle group o f industrializing republics (M o n ­ tenegro, Bosnia, and Serbia proper, in that order); and the three fo rmer Habsburg regions o f Vojvodina, Croatia, and Slovenia (lowest o f all) e n ­ joyed relatively low rates. A second period, in the decade 1 9 5 8 - 6 8 , began with very high levels o f layoffs from industry (in 1958 and 1961), followed by a recessionary stag­ nation in new e m p lo y m e n t in 1 9 6 4 - 6 7 that was so severe as to re duce the absolute size o f the employed population. Jo b vacancies grew after 1957, with a peak in 1 9 6 3 - 6 4 and a dramatic drop to their low in 1 9 6 7 - 6 8 . T h e first political conc ern for u n em plo y m en t occurred in S erbia in 1962, when the Socialist Alliance o f W orking P eo ple convened a con feren ce on the problem and quarrels over econom ic policy erupted betw ee n party fac­ tions. U n em p lo y m en t lasted substantially longer, un em ploym ent c o m ­ pensation d ec lin ed — in part b ecau se o f the rising proportion o f youth under the age o f twenty-five seeking their first jo b who did not qualify and also becau se eligibility criteria tig h te n ed — and after 1 9 6 3 - 6 4 , em p loy­ ment bureaus placed an ever-sm aller proportion o f those who sought their services. T h e rate o f increase in u n em ploym en t actually flattened out in 1 9 6 4 - 6 8 b ecau se many workers withdrew from the pool out of discouragement or in order to leave the country. W o m e n continued to be harder hit than m en. An even m ore blatant sign o f structural unem ploy­ ment was the w orsening regional inequalities according to the “historical” ranking m entioned above for 1 9 5 0 - 5 7 . 27 T h e decad e o f the third period in the data, 1 9 6 8 - 7 8 , was similar: a gradual rise in unfilled vacancies beginning in 1 9 6 7 - 6 8 peaked at the 20 Both were, in fact, formal markers of previous changes. 27 Primorac and Della Valle, “Unemployment in Yugoslavia.’’

F i g u r e 6-6. L e n g t h o f T im e W a itin g to B e E m p lo y e d , 1 9 5 7 -1 9 8 9 (by thousands of jo b see k ers).

Source: Statistički Godišnjak Jugoslavije, various years.

F i g u r e 6-7. L e n g t h o f T im e W a itin g to Be E m p lo y e d , 1 9 5 7 -1 9 8 9 (by percentages o f j o b see k ers). Source: Statistički Godišnjak Jugoslavije, v arious years.

UNEMPLOYMENT

203

Fig u re 6-8. W o m e n a m o n g th e R e g is te r e d U n e m p lo y e d , in T h o u sa n d s, 1957—1989. Source: Statistički Godišnjak Jugoslavije , various years.

same time as layoffs in the recession of 1 9 7 8 - 7 9 . Alter a lull in 1 9 6 8 - 7 1 in official u n em plo y m en t growth, when discouraged applicants sought jo b s outside the social sector— in private-sector agriculture, crafts, tourism, and hom ew ork and in “g u e st” (temporary) e m ploy m ent abroad— the rate of un em ploym ent rose 1 p e rce n t each year. D eclining participation rates as one w ent from one re public to the next told a story o f continuing r e ­ gional inequality: by 1973, Slovenia, with effectively full e m ploy m ent at 1.8 pe rce n t un em p lo y m en t, had 35 persons employed for every 100 in­ habitants and even faced labor shortages in a n u m b e r o f industries, such as construction and mining; in the same year, registered u n em ploym en t in Kosovo and M aced onia was at 25 pe rce n t, while only 9 persons per 100 inhabitants w ere e m p lo y e d .28 F ig ure 6-11 and Tab le 6-1 show the co n ­ trast am ong republics in the broader categories of econom ically active population and proportion o f the labor force employed. T h e majority of the unem ployed after 1971 were youth under the age o f twenty-five, usu­ ally without work exp e rien ce or claim to compensation; they accounted for almost 8 0 p e rc e n t o f the rise in un em ploym ent b etw ee n 1972 and 1983.29 W o m e n continued to form the majority of the unemplo yed, but after 1968 this could not b e attributed to their educational level because they no longer differed from men in that re spect; they increasingly fell 2H Rase vie, Mulina, and Macura, Determinants, 28. 29 Primorae and C h arette , “Regional Aspects ol Youth Unem ploym ent in Yugoslavia**”

F i g u r e 6-9. U n e m p lo y m e n t P e r c e n t a g e R ates by R epublic: T h e N o rth , 1 9 5 2 -1 9 9 0 . S o u r ces : F o r 1 9 5 9 -8 8 : M e n c in g e r , " P r iv re d n a re fo rm a i n e z a p o s l e n o s t ,” tab le 1; for 1 9 8 9 -9 0 : Statistički G o d išn ja k Ju g o sla v ije (1990), 16.

ovina

F i g u r e 6-10. U n e m p lo y m e n t P e r c e n ta g e R ates by R ep ublic: T h e South, 1 9 5 2 -1 9 9 0 . S o u r ces : F o r 19 5 9 -8 8 : M e n c in g e r, “P r iv r e d n a re fo rm a i n e z a p o s l e n o s t ,” tab le 1; for 1 9 8 9 -9 0 : S tatistički G o d išn ja k Ju g o sla v ije (1990), 16.

60

1953

I

1961

Yugosl avia

S3 Sl o v e n ia

B

1966

1971

Bosnia-H er/.ego vina ^ M a c e d o n i a

H

C r o a ti a

C ] Vojvodina

S serbia

Proper

1981

M om cnegro

CD K o s o v o

Figure 6-11. P e r c e n t a g e s of E c o n o m ica lly Active P o p u la tio n by R e p u b lic o r Province. Source: Statistički Godišnjak Jugoslavije, v arious years.

Tabli*: 6-1 Kate o f E m p l o y m e n t b y R e p u b lic o r P ro v in c e ( p e r c e n ta g e s o f w o rk in g -a g e po p u latio n )

I960

1965

1970

1975

1980

1986

1990*

Yugoslavia

26.4

3 0,6

30.1

35.2

40.1

45.8

4 5.3

L ess-developed region s B o sn ia-H erzego vin a M aceđon ia M o n te n e g ro Kosovo

2 1.8 2.3.7 22.7 14.4

24.4 27.2 25.8 16.0

23,5 26.6 25.5 16 0

27.6 31.1 29.9 19.0

30.2 3 5.9 34.1 20.8

37.3 41.1 41.4 23.1

3 7.5 3 9,5 40.2 2 2.2

43.2 29.7

50.6 35 .2 25.1 26.6 34.7

50 .7 .34.0 26.0 28.1 31,5

6 0.5 .39.7 31.4 33.1 .36.7

68.2 46.8 3 7 .0 39.3 41.4

71.6 54.0 42.0 44.8 47.8

6 8.5 5 3.9 42.4 46.1 48.4

D eveloped re g io n s Slovenia Croatia Serbia Serbia p r o p e r Vojvodina

21.3 22.7 29.3

Source: Statistički Godišnjak Jugoslavije, various years. Note: T h e rate o f em ploym en t is defined as th e relation betw een (be n um b er o f em ployed persons in th e social and private sectors and the working-age population (women ages 1 5 - 5 9 and men ages 1 5 -6 4 ). * Estim ate

1.400

1.200

1.000

800

60 0

400

200

0 Figure 6-12. Unemployment by Age Category, 1957-1989 (by thousands of job seekers). Source: Statistički Godišnjak Jugoslavije, various years.

I Below IK E2 19 to 24 Yean Uj ;S in 19 Yean £2<0 10 49 Year* KjSU Year« or More

gfb

lT*5

lJ o

a V a ' j a V a *}

tv * qTV

o~o

Figure 6-13. Unemployment by Age Category, 1957-1988 (by percentages of job seekers). Source: Statistički Godišnjak Jugoslavije, various years.

UNEMPLOYMENT

207

Figure 6-14. W o m e n , N e w E n tr a n t s , a n d t h e E d u c a t e d a m o n g th e R e g is te re d U n e m p l o y e d , 1 9 5 2 - 1 9 8 9 (by th o u sa n d s o f j o b seekers). Sources: Statistički Godiš­ njak Jugoslavije, various years; Yugoslav Survey, v ariou s issues. Note: “H i g h e r e ducation” re fers to th o s e w ith a u n iv ersity , college, in te r m e d i a te , or se c o n d ary education.

into the categories o f highly skilled workers and college-educated or above. T h e e m p lo y m e n t bureaus w ere ev e r less helpful, placing on aver­ age only 8 . 3 p e rc e n t o f the newly em ployed each year from 1973 to 1980. The increasing displacem en t o f the costs o f un em ploym ent onto the younger generation was b eyond any doubt by 1985, when 5 9 . 6 p e rc e n t of the registered un em ployed w e re under the age o f twenty-five. W h ile only 15.4 p e rc e n t o f th eir cohort w ere unemplo yed in 1972, 3 8 . 6 6 p e rce n t were looking for work by 1 9 8 5 .30 W h e n firms raised requ irem en ts after the late 1970s for previous work e x perien ce to two to five years, only 11 percent o f the unem ployed had e x perien ce o f m ore than one year, and 71.4 p e rc e n t o f the registered unem plo yed in 1985 (youth leaving school or housewives forced to work by the depression) had none at all. Although employers also sought ev e r m ore highly schooled jo b candidates, this did not diminish th e ir n u m b e rs among the unem plo yed: 4 3 . 3 p e rc e n t had technical-college or university diplomas in 1980, and 5 6 .3 p e rce n t did in 1985. B eg in n in g in 1965, the wait without work was ever longer as well; 30 Ib id., 30.

208

CHAPTER 6

W om en A First Time + H igher Education*

F i g u r e 6-15. W o m e n , N e w E n tr a n t s , a n d th e E d u c a t e d a m o n g th e R egistered U n e m p lo y e d , 1 9 5 2 -1 9 8 9 (by p e r c e n ta g e s of j o b seekers). Sources: Statistički Godišnjak Jugoslavije, v ario us years; Yugoslav Survey, various issues. Note: “ H i g h e r e d u c a t io n ” re fers to th o se w ith a u n iv ersity , college, in te rm e d ia te , or s e c o n d a ry e d u c a tio n .

in th at year, 1 6 .6 p e rc e n t o f the unemplo yed sat one year or longer. In 1985, 5 5 . 3 p e r c e n t rem ained on the registries for two years or longer, and fully a fifth of the unem plo yed had found no jo b after th ree years. The exclusion o f youth also exacerbated regional inequalities. In 1984, regis­ tered un em p lo y m en t was 1.7 p e rce n t in Slovenia, 7 .2 p e rce n t and declin­ ing in Croatia, 19.1 p e rce n t in M ontenegro, 2 1 .1 p e rce n t in Macedonia, and 3 3 . 3 p e rc e n t in Kosovo.

E x p l a n a t io n s o f Y u g o sl a v U n e m p l o y m e n t

Yugoslav u n em plo y m en t has a special place in the theoretical literature of neoclassical econom ics, w h ere B en ja m in W ard ’s thesis o f 1958 on the backward-sloping supply curve for labor in “labor-m anaged firms” (a theo­ retical construct) created a veritable industry, particularly for the many who value the idea o f a decentralized econom y with worker participa­ tion31 or sought a way to com b in e the efficiency o f markets with the wel■ 1l S e e W ard, "T h e F irm in Illyria”; its elaboration by Domar, “T h e Soviet Collective F arm as a Produ cer Cooperative”; and the criticism by ] Robinson, “T h e Soviet Collective

19 65

1970

1975

H S Io v e n ia

1960

1963

196*

1985

E 3 C r o a t i a C3 V o j v o d in a E3 S e r b i a

Figure 6 - 1 6 . Y o u t h U n e m p l o y m e n t P e r c e n t a g e R a t e s : T h e N o r t h . S o u r ce: P r i ­ morac an d C h a r e t t e , “R e g i o n a l A s p e c t s o f Y o u t h U n e m p l o y m e n t in Y u g o s l a v i a ," 218. N ote: “Y o u t h ” r e f e r s to p e r s o n s a g e d 2 7 y e a r s o r y o u n g e r .

1965

1970

I

1975

B o s n ia -H e rz e g o v in a

1980

0

M a ce do nia

1963

EDM o n t e n e g r o 0

1964

19 85

Kosovo

F ig u re 6 - 1 7 . Y o u t h U n e m p l o y m e n t P e r c e n t a g e R a t e s : T h e S o u t h . S o u r ce: P r i ­ m orac a n d C h a r e t t e , “R e g i o n a l A s p e c t s o f Y o u t h U n e m p l o y m e n t in Y u g o s l a v i a ," 218. N ote: “Y o u t h " r e f e r s to p e r s o n s a g e d 2 7 y e a r s o r y o u n g e r .

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fare o f socialism. This fascination also characterized a larger literature on the co n s e q u e n ce s o f Yugoslavia’s special institutional settin g— a literature that was strangely divorced from issues of developm ent, as if the leader­ ship’s dual strategy toward labor had infected scholarly research. I will follow that division by classifying approaches to Yugoslav unemployment into two catchall schools: “d evelopm entalists,” concerned with the trans­ formation o f an agrarian society; and “liberals,” focused on institutions and m echanism s o f “rational” allocation o f resources that are largely given.

Agrarian Exodus T h e developm entalists conceived o f d evelopm ent as did the Yugoslav leadership, in terms o f time and the absorption of an agricultural surplus population into industry and industrial habits. In the early years, devel­ opmentalists in Yugoslavia fell into two groups: (1) the demographers, statisticians, and developm entalists who continued the interwar focus on overpopulation, such as Miloš Macura, Rudolf Bićanić, Vladimir Bakarić, Ivan Krašovec, Zoran Pjanić, Vladimir Obradović, Dragan Vogelnik, Zoran Tasić, Ivo Lah, Milica Sentie, and Dušan Breznik; and (2) the econ­ omists who turned their attention more to the problem o f inadequate d em and, a problem that lay in the un derdevelopm ent o f productive re­ sources within the country (for example, Nikola Č o b e ljić and Kosta Mihailović). Both groups focused on the pace of rural exodus, which was faster than the lead ers’ gradual strategy intended, and on the necessity of expanding productive capacity. T h e r e was a te nd ency, however, for analysis to reflect political context; for example, certain perspectives b ecam e increasingly identified with cer­ tain republics (though not necessarily the nationality o f the individual expert) and with views on the role that central policy could and should play in growth. This tend ency began in the late 1950s, as republican juris­ diction over research centers and d evelopm ent policy brought the reap­ pearance o f prewar legacies, particularly the demographic and agrarian traditions o f the Croatian school o f rural sociology and the influence of econom ists from the Croat Peasant party on the one hand, and the ten­ d en cy o f developm entalists to congregate increasingly in Serbia (and later in M acedonia and M ontenegro) on the other. This difference became m ore pronou nced after 1 9 6 2 - 6 4 , when the political victory o f economic reform ers led to a purge o f many developm entalist economists in Bel­ grade and to the declinin g influence on policy of federal research institu­ tions. At the same time, concern over excess labor supply became a Farm as a Produ cer Cooperative: C o m m e n t.” Outside o f a few Yugoslav commentators, however, little o f this huge literature actually discusses unemployment.

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preoccupation with dem ographic explosion in southern regions (p artic­ ularly Kosovo and Macedonia), hut the possible econom ic causes took a back seat to cultural explanations. A 1960 con feren ce on population policy revealed clearly the kernel o f a growing antagonism— already pre sen t in the conflicting argum ents at a 1954 conference on the results o f the 1953 census— b etw ee n the pers pectives of northerners (in Croatia and Slo­ venia) and those of the rest o f the country, and the success o f the form er in defining the nature o f the u n em ploym en t p r o b le m .32 F ro m then on, developmentalists of liberal persuasion and many economists o f a socio­ logical bent (such as Branislav Soškič in Belgrade) who still wrote about external causes of rising labor supply or about developm ental obstacles focused in their policy analyses on the need for microlevel efficiencies, on rationalizing labor cuts, and on structural barriers to a functioning labor market, while those who attributed rising un em ploym en t instead to the marketizing e c onom ic reform and the abandonm ent by the late 1950s o f societywide d evelopm ental policy w ere increasingly marginalized. By the 1970s and 1980s, the issue of capital investm ent reduced to political distortions o f rational investm ent choices, and the issue o f s ur­ plus labor focused on areas o f the country and their governments where unemployment was high. T h e concern was over improper investm ent of development credits transferred from north to south and excessive b irth ­ rates in the south (the Muslim com m unities in Kosovo and M acedonia were singled out for the greatest attention). T h e re was even a te nd ency to worry more about the growth o f em ploym ent, which econom ists were inclined to explain as a political response to the rising social protest in 1968-69 that encouraged featherbed d ing and jo b protections. Although the older developm entalist tradition persisted, especially in the south— in Macedonia, M o n te n eg ro, and to a certain extent in Bosnia and Serbia— these voices w ere only weakly heard, as in the d evelopm ent plans of these republics and in the negotiated com prom ises in the sub­ commissions set up to work out the stabilization program in 1984. Although researchers outside Yugoslavia tended to fall into the second 32

Ante Novak, who first organized th e Federal Bureau of Statistics for Boris Kidrič in

1948 and who was present at the I 9 6 0 conference, argues that the absen ce o f discussion at tin's conference on th e aching n eed for a population policy has a political explanation— that southerners, especially from Kosovo, saw th e idea o f such a policy as national discrimination and an implied threat o f genocide (Author’s interview with Novak, Ljubljana, O c to b er 1982), But th ere was also th e view that Malthusian concerns would disappear automatically with economic developm en t (see, for example, Stupar, Praktikum za socijalnu politiku). Bese meres writes that “population policy is dominated by northern liberalism dispropor­ tionately” and that "even i f the republics followed appropriate family planning policies now, they could not make up in decades for conseq uen ces in th e age structu re o f differential fertility rates c reated by past policy ; the tim e to make a diflerence in demographic composi­ tion has long passed” (Socialist Population Politics, 237),

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cam p, those who might b e classified as developinentalists brought the Todaro paradox to the Yugoslavia of the 1970s and 1980s in order to ex­ plain the contin uin g rise in its u n em ploym en t rate despite econom ic de­ velopm ent. T h e Todaro and Ilarris-1 odaro models of rural-urban migration argue that econ om ic growth itself induces unemployment in industrializing countries b ecau se o f their dual structure o f employment and wages. Since wages are higher in the urban industrial sector and in v e stm e n t tends to b e lower in rural areas, people move more rapidly than e conom ic growth from the rural to the urban sector in search of hig her wages and opportunities. T h e paradox enters because they adjust their migration to the probability of obtaining urban jo bs, making policies that aim to red u ce urban u n em ploym en t by expanding the number of urban jo b s self-defeating. T esting the hypothesis on Yugoslav data for 1 9 5 7 - 7 4 , W illiam B artlett found a strong positive correlation between migration and intersecto ral incom e differentials. B u t in place of the pre­ d icted elasticity of migration in response to urban em ploym ent oppor­ tunities, he found a pattern o f unstable equilibrium as urban vacancies oscillated. 33 Arnold Katz, on the other hand, argued on the basis of data for 1 9 6 5 - 8 0 that the paradox o f growth-induced unem plo ym ent held so well for the less-developed republics and provinces that it could explain the pattern o f regional variation in the unem plo ym ent rate almost en­ tirely, and he concluded that macroeconom ic policy to favor employment would b e ineffective in reducing un em p lo y m en t.34

Industrial Unemployment M ost analyses o f Yugoslav u n e m p lo y m e n t h av e focused on firms deci­ sions to e m p lo y lab or m o re or less efficiently, n o t on th e n e e d for struc­ tu ral c h a n g e o f th e e c o n o m y as a w hole. T h is liberal school contains three s e p a ra te a p p ro a c h e s— th e labor school orig inatin g w ith W a rd s Illyrian m o del, th e capital school, an d th e in stitutionalists. W a rd s objective was to discover w h e th e r firms managed by workers instead of a private owner would exhibit different econom ic behavior b ecause their business deci­ sions would take into account the likely effect on em p loy e es’ wages as well as overall profits. Controlling for extraneous factors by assuming that the two types o f firms operate in the same environm ent, W ard focused on the firm ’s response to a change in demand for its products. Assuming further that workers objective function would b e the same— to maximize theii in­ co m e, or share o f net profit— h e suggested a contrasting world: assuming 33 Bartlett, “A Structural Model o f Unem ploym ent in Yugoslavia.” 34 Katz, “Growth and Regional Variations in Unem ploym ent in Yugoslavia, 1965-80, particularly 4 1 - 4 5 . S e e also Sapir, “E con om ic Reform and Migration in Yugoslavia.

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that net profit is fixed at the m o m en t of distributing income, then the fewer workers who receive income, the larger the individual share. U n ­ certain about the ou tcom e of th eir decision to expand or restrict pro du c­ tion, workers would take fewer risks and show more caution than the capitalist who could freely fire labor or cut wages to protect profits if revenue declined. W ard conclu ded that labor-m anaged firms would tend to restrict output when faced with an increase in market demand because expansion would requ ire taking on more workers and potentially leaving everyone worse off than before. This perverse o u tco m e — that the Paretooptimal decision un der labor m anagem ent was the opposite o f that under private ow nership— also led to monopolistic behavior by workermanaged firms: reducing risk and seeking gain through increases in price rather than output. T h e aggregate result for a society o f labor-managed firms, from the irrational decisions on investm ent and from the marketdistorting co n se q u e n ces o f monopolistic behavior, ceteris p a rib us , would be less expansion o f em p loy m e n t than in a capitalist society. An entire school o f d ebate and analysis e m erg ed from this thesis as well as from its implications for producers cooperatives in g e n eral.35 In the Yugoslav case, Ja m es M ead e, for example, argued that W a rd ’s results would disappear if one rem oved his assumption that incomes are distrib­ uted equally within the firm or that workers seek to maximize their in­ come rather than som ething e ls e .3fi Laura Tyson argued that workers with virtual te nure in their firms might well have longer tim e horizons (Tito’s reference to w orkers’ “persp e ctiv e ” com es to mind) and could, even given their ob jective function o f maximizing individual income, choose to risk a less-than-maximum incom e in the short run in order to spend resources on investm ent that expanded productive capacity.37 Saul Estrin estim ated along-run model o f W a rd ’s argu m ent with Yugoslav data for 1 9 5 7 - 7 3 and found support for it: when enterprises w ere freer to allocate th eir e a rn ­ ings after th e reform o f 1965, the capital intensity o f production rose sharply in th e aggregate and in all industrial branches. He inferred that workers did choose to raise th eir wages in the long run, but with invest­ 35

Se e Fusfeld, “Labor-M anaged and Participatory Firm s: A Review Article"; and the

special issue on participatory economics of the Journal o f Comparative Economics (March 1986), especially the articles by Putterm an (“Self-M anagem ent and th e Yugoslav E co n o m y”) and Milanovic (“T h e Labor-M anaged Firm s in th e Short-Run: Com m en ts on Horvat’s ‘T h e ­ ory of the W ork er-M an aged F irm Revisited ”). 3(5 Meade, “T h e Th e o ry o f Labour-M anaged Firm s and o f Profit-sharing”; idem, “LabourManaged Firm s in Conditions o f Im perfect C o m p etition.” Roger M cCain uses implicitcon tracts th eory to show that there is no reason to expect wages to be? sticky in a labormanaged econom y and th erefo re no reason to expect W ard ’s results necessarily (“T h e E c o ­ nomics o f a Labor-M an aged E n te rp ris e in the Short Run: An Implicit Contracts’ Approach ” 37 Tyson, “A P erm an en t Incom e Hypothesis lor the Yugoslav F i n n . ”

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m ents in fixed capital stock to raise th eir productivity rather than through m o re e m ploy m ent. Estrin also used this posited behavior o f labor man­ a g e m e n t to explain the failure to absorb rural labor, by showing that the urban-rural wage gap widened in the mid-1960s when unemployment rose sharply. Such insensitivity o f the firm in its decisions on wages and e m p lo y m e n t to the pre sen ce of surplus labor outside it and the downward rigidity o f public-sector wages also explained regional inequalities, he ar­ gued: the rich e r regions with lower un em ploym en t tended to set the res­ ervation wage for poorer regions, while the inflexibility of wages under self-m anag em en t had m o re severe conseq uences for regions with lower overall savings.38 T h e te n d en cy o f Yugoslav firms toward capital intensity stimulated a second school o f argum ent on unem ploym ent. This capital school main­ tained that un em p lo y m en t was caused not by labor m anagement, but by the ab se n ce o f a true capital market and thus a means to evaluate the relative opportunity costs of capital and labor. T h e artificially low price of capital, d espite the relative abundance of labor and scarcity of capital, caused firms to favor capital-intensive investm ent over the employment o f labor. S om e analysts com bined the two schools to argue the opposite: that a rise in the price o f capital, or other nonlabor costs, would lead firms to em ploy more labor in order to spread the burden of higher costs by red ucing the marginal increase per w orker.39 M ore important than w h e th e r existing firms expanded or not, S tephen Sacks argued, were the barriers to en try of new firms when capital markets did not exist. Since cred it was cha nneled primarily to public-sector firms, and the only founders who had rights to draw a return on invested capital alone were g ov ernm ents, th e re w ere n e ith er incentives nor resources to create new firms outside this channel that might employ more p e o p le .40 O n e need not choose betw ee n labor and capital schools, according to B ranko Milanovic’s application o f Austrian theory (especially Wicksell) to cooperative (labor-managed) firms. Such firms, he concluded, respond to 38

Estrin, “T h e Effects o f Self-M anagem ent on Yugoslav Industrial Growth”; idem, Self­

Management: Economic Theory and Yugoslav Practice :ra S e e Vanek and Jovičič, “Uloga kapitalne opremljenosti rada u formiranju i raspodeli dohotka u Jugoslaviji”, and Vanek, A General Theory o f Labour-Managed Market Econ­ omies. E irik Fu rubotn and Steve Pejovic's property-rights subgroup o f the capital school argues that any firm operating with less than absolute property rights for owners will be less efficient than a pure capitalist firm in its use of production factors. But others argue that this is true only by their definition o f property rights and capitalist firms, unrelated to firms actual operation, while F. Drè/.e disproves it formally (see Fusfeld, “Labor-Managed and Participatory

F i r m s ,” 772;

C.

Yugoslavia”; and Petrin, “T h e

Martin,

“Public

Policy and

Incom e

Distribution in

Potential o f Sm all-Scale Industry for Employment in

Yugoslavia”). Sacks, Entry o f New Competitors in Yugoslav Market Socialism, passim.

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an increase in the rate of interest 011 capital, or to technological progress, in ways that lead to higher un em plo y m en t than when equivalent capitalist firms make wage and em p loy m e n t d ecisio ns.41 The more varied school of institutionalists focused on other organiza­ tional harriers to the mobility o f labor and capital. For some, the federal system e xacerbated the effect of labor managem ent in protecting higher wages in richer republics and urban areas from lower-wage com petitors in poorer republics and rural areas, by imposing political and cultural b ar­ riers to m o v e m e n t outside o n e ’s republic of origin.42 O thers examined the effect of the organization of credit. In a survey o f attitudes to reconcile other survey data showing that firms chose to increase total income (in­ cluding capital) with W a rd ’s assumption that they aimed at maximizing individual incom e per worker, Janes Prašnikar found in Slovenia that firms differed according to their size. F ro m surveys of three strata of d eci­ sion makers (managers, w orkers’-eouncil m em bers, and production workers) in forty S lovene firms, he argued that large firms o f five hundred workers or m ore sought to increase total income in order to increase their bargaining power over the allocation of bank credit and governmental price concessio ns, whereas smaller firms of fewer than five hundred workers, unable to hope for such influence, aimed to increase total in­ come so that they could pay higher personal incomes per em ployee. Both strategies raised unem ploym ent. Smaller firms restricted e m ploym ent, as Ward posited, while larger firms expanded through mergers with other firms that would increase th eir econom ic weight; the con se q u e n ces were growing industrial concentration, potential for monopolistic behavior, and aggregate em p loy m e n t lower than it might otherwise be. In analyzing Slovene firms that operated in an essentially full-employment e n viron­ ment, Prašnikar also measured an effect of the repu blics’ econom ic auton­ omy o f the federal system, for he found that these firms aimed to pay ever-higher wages— b ecause they w ere com peting to hold on to workers who moved am ong firms within the tight labor market of Slovenia in search o f higher incomes and living standards— instead of attracting cheaper labor from o th er republics. This effect thus contributed to the lower than necessary level of e m ploy m ent in the country as a w h ole .43 W h e th e r or not these results applied in the different conditions in other parts of Yugoslavia, they did caution against assuming that all firms were 11 Milanovic, "T h e Austrian T heory of the Cooperative F in n " ; but see also his critique of the 'incom e school (rlolwdoci, or dohodovmi škiliti) of Yugoslav economists for ignoring the necessity of a m acroeconom ic poliev for an economy of labor-managed firms (“LaborManaged Firm s in the Short Kun"), 12 On ethnic barriers to mobility, see Hawrylyshyn, "E th n ic Affinity and Migration Flows in Postwai Yugoslavia li Prašnikar, "T h e Yugoslav Sell-M anaged F in n and Its Behavior '

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C HA PT KK fi

alike. Finally, Tyson, applying a version o f Janos Kornai’s argument that socialist econom ies w ere based on soft budget constraints, focused on the inflationary co n se q u e n ces o f the political unwillingness o f governmental or bank authorities to enforce hard budget constraints on firms; to protect the incom es anil jobs o f em ployed workers, she argued, these authorities e xtend ed cred it to cover losses, which then worsened unem plo ym ent in the long ru n .4'1 Although all th ree schools o f argum ent concentrated on the economic distortions and efficiency loss o f not pricing labor and capital in com peti­ tive markets, they also had political implications. T h e arguments on the effect o f labor m anag em ent resem bled those about the role of trade unions in creating structural unem ploym ent in capitalist eco n o m ie s .45 Ac­ cording to E strin, after 1965 labor managem ent b ecam e a vehicle for urban-seetor workers to monopolize th eir control over th eir jo bs and wages and maintain an artificial scarcity against any reserve-army effects, although he ne v e r specifies the agents or process by which this political struggle occurred. F o r liberal economists within Yugoslav political cir­ cles, un em p lo ym en t was a concern only after the social unrest of 1968­ 69, b eca u se it se e m e d to lead the party leadership to suppress the market reform o f the 1960s in favor o f a proem ploym ent, proworker policy of job protectio n. But, like Estrin, these economists never provided the politi­ cal details o f this backlash and its relation to the 1974 constitution and 1976 labor legislation to support their assertion. By the 1980s, more and m ore econom ists w ere focusing on the apparent wage rigidity and infla­ tionary pressure o f self-m anagem ent as the primary cause o f unemploy­ m ent. S o m e w ent so far as to say that only a true labor market would grant the unem ployed their rights.4H T h e first analysis o f un em plo y m en t in the postwar socialist period— the dissertation by Vladim ir Farkaš that appeared in 1955, the same year as the new wage regulations for self-management and the extension of w orkers’ councils from the higher econom ic associations (which replaced the branch directo rates) to individual firms— was also the last analysis of any kind to step outside the constraints defined by the new system and official policy.47 O n the developmentalists, Farkaš argued that they were simply continuing the dominant interwar approach, defining unemploy­ m e n t as overpopulation or hidden u n em plo y m en t— w h eth er measured in u Tyson, “A P erm an en t Incom e H ypothesis.“ 'lfi A survey can b e Found in Piore, Unemployment and Inflation. T h e insider-outsider hypothesis would seem to apply only to the Slovene firms; see Lind b eck and Snower, The

Insider-Outsider Theory o f Employment and Unemployment ,r> Le tica , “Pravo 11a rad i načrt zakona o udruŽenom radii.” 1,7 Farkaš, "Naša (zv. prenaseljenost i naš problem nezaposlenosti ’; idem, “Odredjivanje osnovnog uzroka nezaposlenosti u F N R J ”; Panic, “Racina snaga i zaposlenost u Jugoslaviji.”

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Malthusian term s of too many people for the amount o f food, or in n e o ­ classical term s of technical coefficients for the optimal quantity o f labor to increase marginal output as measured by labor’s cost (wage). He argued that in contrast to M arx’s law on population, according to which u n e m ­ ployment d ep en d e d on the character o f the social order, the d evelopm entalists conceived un em p lo y m en t as necessary in all econ om ic systems, a variable quantity taking the form o f overpopulation in agriculture or the level of em p loy m e n t (and therefore profit) in industry. In Fark a s’s view, the socialist idea was to build an order based on the assumption o f full employment, in which the population was the constant and the level of its productivity the variable su b ject to social correction. U n em p lo y m en t was then a measure of the gap betw ee n p e o p le ’s needs and their ability to satisfy them, so that registered un em ploym ent as one measure o f the d e ­ mand for earnings was only one small symptom o f un em ploym ent. O thers were increased productivity (hence its great variability) or the s earch— whether registered or not— for paid work. O ne indirect measure of un­ employment was the negative correlation in 1 9 5 3 - 5 4 b etw een household income and expenditures for most Yugoslavs (far more among rural than urban households); but much more relevant to the decision to seek work was the gap b e tw ee n individuals’ expenditures and their theoretical list of needs (what Farkas called psychological poverty, in contrast to material poverty). In d irect measures o f this gap w ere such everyday p h e n om en a as rural-urban migration, both periodic and perm anent; multiple jo bs, moonlighting, and supplem entary work; the m o ve m e n t o f women on and off un em ploym ent rolls in direct relation to shifts in the cost o f living; and economic crim e. This con cep t of u n em plo ym en t together with Yugoslav conditions led Farkas to criticize ruling policy as a “m echanical” application of K e y n e s ’s general th eory (“fashionable” at the time) to the profoundly nonKeynesian conditions o f underdevelo ped and socialist Yugoslavia. U n d e r­ development m eant that, contrary to Keynesian assumptions, (1) the cost curve was distorted and e m ploy m ent did not d epend primarily on costs of production, so that real wages and e m ploy m ent w ere not in direct rela­ tion; (2) the propensity to consum e was greater than one, so that the multiplier and the accelerator did not work to translate higher investm ent into higher em p loy m e n t; and (3) Keynesian policies in developed cou n ­ tries continually worsened the gap b etw ee n desires and the capacity to satisfy them in the less-developed countries with policies to increase d e ­ mand for d ev eloped cou ntries’ products through foreign aid, continued international inequality in the distribution o f national income, and sup­ port for the production of raw materials in less-d eveloped countries in place o f dom estic industries that might satisfy those needs at home. T h e socialist ch ara cter o f the country, moreover, m eant that (1) the guaran­

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te e d m inim um wage was paid regardless o f the success of a firm; (2) social m an a ge m e n t o f the conflict b etw ee n wages and e m ploy m ent occurred within production units rather than in macroeconom ic policy; and (3) user costs o f capital w ere widely regulated by society. Applying a Keynesian calculus to conditions in which production costs might regularly exceed e xp e cte d re v e n u e and in which the criterion for investm ent of effective d em and conflicted with the basic welfare assumption o f satisfying basic needs led to a range o f negative econom ic results, such as inflationary p ressure, incom e spillover in certain fields, poor quality and assortment o f goods, monopoly, and dishonest com p etition .48 As long as employment was treated as a m atter o f profit levels and incentives to invest and expand productive capacity in relation to the nu m ber registered as work, Farkas argued, there would continue to be wrong choices and underutilized capacity; as long as the method for ductivity was incom e incentives, it would exacerbate pressures.

looking for investment raising pro­ inflationary

U n em p lo y m en t was above all an international phenom enon that could only b e resolved internationally, Farkas maintained. T h e roles left for d om estic policy could only b e to try, in the econom ic sphere, to bring production closer to its theoretical potential of social productivity so that needs w ere m o re c om pletely satisfied and the demand for jo bs declined; in th e social-policy sphere, to distribute national income so as to harmo­ nize the individual’s interest in rising wages and the society’s interest in lowering un em p lo y m en t within domestically given constraints; and, in the cultural sphere, to redirect aspirations from the developed world’s consum ption standards (which international competition encouraged) to a m ore realistic assessm ent o f needs. Clearly, Farkas was too radical politically to b e heard; at the time, the point was to b e c o m e more like the developed world, not less, although to do it without capitalist crises and foreign exploitation. But his analysis was apposite nearly forty years later. Both the conseq uences of focusing largely on dem and m ech a n ism s— and eventually that meant adjusting to shifts in international d em and — and the pertinent institutional factors he cited reveal difficulties with the dominant schools of thought. As for those standard schools of explanation for Yugoslav unemploy­ m e n t, they had th e opposite problem . T hey criticized the Yugoslav sys­ tem from the theoretical perspective o f a market econom y rather than the system as it was constitu ted, as if the leaders had not had reasons to con­ struct an alternativ e in the econom ic crises and unem ploym ent that mar­ ket e con om ie s produced. T h e possibility that the e lem ents those schools criticized w ere part of an integrated conception and strategy of economic d ev elo p m en t and sustained growth was ignored. 48 Farkas, “Nasa tzv. p renaseljen ost,” 59.

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The obstacles to a m arket for capital and credit w ere placed not out of some blind antagonism to markets but in order to have som e domestic control over the developm ental con se q u e n ces o f investment. Since cap­ italist market econom ies continued to exhibit unem ploym ent, inflation, and u n d erd evelo p m ent in ways that Marxian analysis could explain, the arguments supporting such institutional changes had not lost their power. Moreover, th e capital intensity o f production was encouraged by myriad acts of policy. A market price for labor would have un derm ined the sys­ tem of incentiv es and the gains from workers’ proprietary responsibility for limiting wages within real accumulation. F o r that reason also, the comparison o f opportu nity costs b e tw e e n capital and labor was to b e made by firms. T h e apparent protection o f urban workers from the competition of rural labor was intended to favor rising productivity and was not a cause of unem plo ym ent, leaders would argue, as long as the guarantees o f lim ­ ited property in the private sector w ere protected. T h e two sectors did not operate on the same principles. M oreover, in addition to the e c o ­ nomic causes o f rapid turnover in conditions o f underd evelopm ent, there were non eco nom ic reasons o f social order and national defense for settling the population. Questions o f efficient allocation o f capital and labor w ere faced within the firm, and this made it doubly important to have central control over the financial system that would give econom ic information to firms and to have central guidelines on labor and incomes through accounting regula­ tions. Contrary to the literatu re on labor-m anaged firms and “w orkers’ control,” wage rates w ere “set outside the firm ,” by accounting rules on incomes, local solidarity funds, rules on enterprise reserve funds for guar­ anteed wages, and rules on the guaranteed minimum w a ge .49 D ata on wages and un em p lo ym en t showed no mutual relationship or evidence of any Phillips curve. W ages did correlate highly with productivity, rising as productivity rose (as one might expect with the indexing o f jo b classifica­ tions and in c o m e ).50 Rules also required that taxes for social funds and investment b e paid before incom e shares could b e paid, and rules on depreciation and reserves w ere varied to prevent depletion of savings to augment incomes. N egotiated social compacts in the 1970s restrained wages while un em p lo y m en t grew, so that after 1978 real wages fell with­ out relief.51 E xten siv e research on participation and decision making in labor-managed firms concluded that managers and their technical staff H9 C . Martin, “P ublic Policy and Incom e D istribution,” 1 1 0 - 1 1 , 137* S e e also Adizes,

Industrial D em ocracy, Yugoslav Style, 50H’.; and Mates, “R ecen t T en den cies in the Regula­ tion o f Incom e Dis tribution*’’ 50 Gapinski, Skegro, and Zuehlke, Modeling the Economic Performance o f Yugoslavia, 1 3 9-4 1, 122. 01 C . Martin, “Public Policy and Incom e Distribution’*; Gapinski, Skegro, and Zuehlke,

Modeling , 23.

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made most decisions, and that workers’ councils d ebated but had little influence on choices betw een higher incomes and employmentexpanding in v e s tm e n t.52 At the same time, critics o f the federal institu­ tions should have included the effect o f real goods markets within this institutional context; as E strin argues, the richer republics w ere able to affect th e actual reservation wage for the country, and Farkaš’s analysis of the effect o f Keynesian policies in developed countries— artificially rais­ ing dem and in less-developed countries by worsening psychological pov­ erty and increasing the gap he called u n em plo y m en t— had its analogue in the Yugoslav space. It is interesting to consider that W a rd ’s formal result runs directly c o u n te r to the expectations for “workers' control” implied in the political sp e ech e s of the Yugoslav team of Kidrič, Kardelj, Tito, Bakaric, and others in 1 9 4 9 - 5 0 . T h e leaders counted on socially owned firms to make econom ically rational decisions in response to market demand for their output, if firms w ere free to make the decisions on factor mix, source of inputs, and expansion or restriction o f production in pursuit o f market profit (su bject to some regulations known in advance). T h e conflict lies in part in different assumptions about workers’ behavior, the educational role of party activists, legal regulations, and the obligation o f managers and technical stafl to explain their decisions on production and internal distribution to w orkers’ representatives in socializing workers to think as the creators and owners o f capital (officially called minuli rad, or “past lab o r,” by 1973). As long-term , stable m e m b ers of a workplace with a d irect stake in its real growth, workers would, as Tyson proposed, take the long-term perspective. But there was also a conflict betw een the po­ litical rhetoric and the intention behind workers’ control. T h e primary o b je ctiv e of worker self-m anagem ent was to have workers accept the con­ s eq u en ce s o f declining productivity or net revenues and limit their in­ com es, and to have them decide which o f their peers w ere not sufficiently productive. T h e circum stances of its introduction as an alternative to mar­ ket d eterm ination, moreover, w ere the difficulties of pursuing a develop­ mental policy in the p re s en ce of major external shocks to the firm, from drought, revolutionary transition, and especially foreign-trade difficulties. No assessm ent o f the Yugoslav econom y in the socialist period can be limited to em ployee-m anaged firms, for it woidd ignore the far more lim­ ited rights o f all those in “nonproductive” and administrative positions, the very large portion of the econom y outside the social sector (the unem­ ployed or ind e p e n d en t farmers and artisans), and the e con om y ’s openness 52

A good sum m ary of this research, clone by Yugoslav sociologists such as Josip Ob-

radovič, Josip Zupanov, and Vladimir Arzenšek, can b e found in Comisso, Workers’ Control

it ti(1er Plan and Market , and Hawin, “Managem ent and Autonomy in Socialist Industry ”

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to the in te rn a tio n a l ec o n o m y an d its relian c e on foreign capital to s u p p le ­ ment d o m e stic r e s o u r c e s .53 O n e m ig h t ad d , w ith F. D re z e , th a t th e w age regulations d e fin e d su b stan tial d ifferentials w ith in firm s, an d th a t th e d e ­ m o graphers’ level c h a rg e ag ain st th e Yugoslav so u th o r th e ec o n o m ists’ campaign ag a in st in v e s tm e n t choices in th e so u th can b e m a in ta in e d only if econom ic ev alu atio n is co nfined to highly a g g re g a te d d a ta a n d th e boundaries o f re p u b lic s (for th e e n tir e p o stw a r p e rio d , for ex am ple, S erb households h ad on av e rag e 1.1 ch ild ren , and in M a ce d o n ia th e r e was, even m ore th a n fifty years ago, su b stan tial variation in b irth ra te s am o n g com munes). L evels o f in v e s tm e n t efficiency an d p ro d u c tiv ity also varied within re p u b lic s .54 H e te r o g e n e ity across rep u b lics a n d localities in th e level of u n e m p lo y m e n t, h e te r o g e n e ity w ith in rep u b lics acco rd in g to th e nature o f p ro d u c tio n an d historical paths, an d differen ces in conclusions d ep end ing on th e p erio d iza tio n o f statistical series all sug gest th e n e e d to move to th e level o f policy. W h a t n e e d s explanatio n by th e politics of power is th e failure to re sp o n d w h e n th e system d id n o t m e e t expectations— n o t exp e ctatio n s th a t it w o uld o p e ra te as m ark ets should, but th at it w o u ld o p e ra te as th e le ad e rs in te n d e d . 33

On this last, critical e lem en t, it is perhaps ironic that Ward takes Horvat to task, in

“Marxism-Horvatism: A Yugoslav T heory o f Socialism ,” 516. 54 Connock, "A Note on Industrial Efficiency in Yugoslav R egions.”

Chapter 7 T H E FAUSTIAN BARGAIN

T h e c o r e conclusion of th e scholarship on full e m p lo y m e n t is that po­ litical variables define success: a c o m m it m e n t by public authorities to p r o m o te e m p lo y m e n t; a political consensus on th e necessity of a macro­ ec onom ic , or system w id e , policy; a n d th e political institutions to im ple­ m e n t effective policies of in tern ational a d ju stm e n t. T h e failu re o f th e Yugoslav socialist g o v e rn m e n t to p r e v e n t rising un­ e m p lo y m e n t ca n n o t b e a ttr ib u te d to a lack of political co m m itm e n t. The strateg y th a t d e fin e d g o v e rn m e n ta l in stitu tio n s an d policy gave to govern­ m e n t th e p rio rity o f p ro m o tin g ec o n o m ic g ro w th in th e se n se of an everrising so cietal capacity to e m p lo y — w itho ut th e financial crises that led to u n e m p lo y m e n t in m ark et eco no m ies. Explicitly aim ed at p io v e n tin g cap­ italist u n e m p lo y m e n t, this strateg y favored an ex p a n d in g realm of social o w n e rsh ip ol p ro d u c tiv e assets so th a t in v e stm e n t choices w ould s e i s e th e p u b lic in te re s t in rational use o f eco n o m ic reso u rce s, n o t ju s t private gain; a n d so that th e c o m p e titio n b e tw e e n w ages and profits w ould be elim in a te d . In c o n tra st to ce n trally p la n n e d ap p ro a ch e s to economic g ro w th , th e sta te was to d im in ish in size o v er tim e so as n o t to waste r e so u rc e s on n o n p ro d u c tiv e e m p lo y m e n t th at r e d u c e d real grow th. And in c o n tra s t to K eynesian ap p ro a c h e s, th e p rim ary eco n o m ic role of the sta te was to r e g u la te th e v alu e o f m o n e y an d c re d it to p re v e n t financial crise s at th e ir so u rc e — b y m ain ta in in g a stable c u rre n c y ; by k e e p in g costs low on c r e d it for in v e stm e n t "to ex p a n d p ro d u ctiv e forces” and ensure sectoral prop o rtio n s; and by regu lating econ om ic incentives to rising la­ b o r p r o d u c tiv ity directly, not th ro u g h i n d e p e n d e n t capital m arkets and w age bargaining. . . . . , T h e c o n c e p t of p la n n in g was r eta in e d in th e role an d institutions ot m o n e ta r y control a n d financial in stru m e n ts , b u t oth e rw ise central policy h a d no n e e d to r e p r e s e n t the se p arate interests of w age ea rn ers or society against capital. A society org an iz ed aro u n d au to n o m o u s pro d u ce rs who co n tro lled th e use an d d istribution of e a r n e d capital w ould obviate the need for countercyclical policies and require instead a liberal, or pro­ business,” policy of monetary stability and fiscal conservatism to provide the favorable climate for savings and investment decisions by the repub­ lics, localities, and firms that would expand employment. Despite the views o f critics who attributed governmental policies that diverged Irom

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this model to the ruling party’s c o m m itm e n t to jo b security and em p loy­ ment protection (such as their charges that the reversal o f marketizing economic reforms after 1972 was a conservative reaction to un em ploy­ ment in the 1960s, that indeb ted or nonprofitable firms were kept alive with “soft b ud get con stra in ts,” and that investm ents in southern republics were “politically” motivated instead of economically rational), this model explicitly re je cte d any direct federal role in promoting or protecting employment. Although there w ere also critics ol this Slovene model, as we have b een calling it, th e re was a broad consensus on this econom ic role of govern­ ment within the ruling circles o f the party and among mainstream e co n o ­ mists. T h e problem lay with adju stm ent to international conditions. The irreducible role o f the federal gov ernm ent was in foreign affairs; yet in this regard its e conom ic record was dismal. T h e trade account was in deficit every year betw ee n 1952 and 1983 except one (1965). Both monetary-fiscal policy and credit policy gave priority to reducing that d ef­ icit. Like the orthodox, anti-inflationary, d em and-restricting monetary policy o f busin ess-oriented governm ents in capitalist econom ies, the Yugoslav g ov e r n m e n t’s m acroeconom ic policy had a recessionary bias, e x ­ acerbating un em p lo y m en t and fueling the very financial crises (of e n t e r ­ prise debt, foreign d ebt, and rising inflation) that its monetary system was designed to prevent. Cycles o f restrictive, anti-inflationary policy were followed by involuntary expansion (rather than Keynesian-like, or d elib ­ erate “soft budget constraints") as monetary authorities w ere forced to monetize the debts accumulated in the restrictive phase. Instead o f pro­ viding a buffer against international downturns, dom estic policy e x a ce r­ bated global trends, becom ing restrictive when global dem and fell and truly expansionary only with the inflow of new foreign money. The primary goal in the annual econom ic resolution in thirty-two out of the forty-two years betw ee n 1949 and 1990 was external stabilization— and, as Kiril Miljovski wrote in 1983, “u n em ploym en t [in Yugoslavia] is a direct c o n s e q u e n c e of the idea by which every stabilization begins with restrictions in em p loy m e n t regardless o f the effects for e c onom ic growth.”1 E v e r y five-year econom ic plan from the second (1 9 5 7 - 6 1 ) to the last ( 1 9 8 5 - 9 0 ) , moreover, gave priority in investm ent policy to re stor­ ing liquidity to the c u rre n t account, whatever the con se q u e n ces for e m ­ ployment or for the sectoral balance of the domestic e conom y considered 1

“E c o n o m ic D eve lo p m e n t, Long-Term Goals, and N eeds” (pap er presented at confer­

ence o f th e Serbian Academy o f Scien ces and Arts, Belgrade, January 2 7 - 2 9 , 1982). Mil­ jovski was one of th e country's most respected economists. A M acedonian trained in Zagreb liefore W orld W a r II , h e was a Partisan “first fighter,” wrote extensively on econom ic devel­ opment and regional inequalities, was elected to parliament and held posts in th e federal government, and was eventually electe d to the Macedonian Academy of Scien ces and Arts.

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necessary to steady growth. In ve stm e n t and labor policies alternated be­ tw een the Slovene and I* oca models, not because oi a politics ol libera] pressures and conservative reaction, but b ecause o( the requirements ol tia d e and d efense policy, ju s t as had bee n the case in the initial periods ol socialist rule. In the debates over sources o f capital for initial industrialization and over the policy of “socialism in one country" in 1 9 4 6 - 4 8 , the winning coalition in the leadership had laid its bets on “people's power” and on peaceful coexistence. In the context of the cold-war division of trade and defense blocs, “national c om m u n ism ” b ecam e a Faustian bargain. Playing on their in d e p e n d en ce of Moscow and availability to W estern military strategy, signaling to each side their willingness to switch to the other, the Yugoslav leaders cam e to d ep end on the dom estic means for this dip­ lomatic in d e p e n d en ce and military strength that gave them special access to W e s t e r n loans and capital markets and to favorable trade agreements in th e nonaligned bloc. In place of lull access to W e stern markets and export revenues, the source o f their comparative advantage internationally be­ ca m e the army and Yugoslavia’s global position outside the blocs. Tito understood this advantage and pursued it consistently for reasons inde­ pe n d e n t o f his personal power and glory, despite vvhat critics charged. In spite o f the perverse effect on the operation o f the monetary institu­ tions and industrial policy that were designed to prevent unemployment, the gov ern m e n t gave priority to maintaining access to foreign capital and leverage in foreign trade. This then began to underm ine the basis of the party’s political co m m itm e n t to un em ploym ent as well. T h e initiative for policy cam e from the international environm ent, and the political strength o f the federal party was related not to the bargaining strength that com es from low un em ploym en t, but to its bargaining strength with capital abroad. At the same time, the country’s vulnerability to external shocks made it even more important to guard the bases of economic sov­ ereig nty at hom e: the principles o f people s power — social ownership, no m arket for factors of production (capital and labor), and nonconver­ tibility o f the cu rre n cy — that defined the institutions of international ad­ ju s tm e n t. O p e n n ess required greater domestic control— not less, as W e s t e r n econom ists insisted there should be.

T h e Yu g o s l a v St h a t e g y in t h e C o n t e x t o f

In t e h n a t io n a l O p e n n e s s

T h e strategy chosen in 1946, and made possible by W e stern credits after 1949, was to use monetary instrum ents (such as price regulations, credit policy, special funds and subsidies, and exehange-rale policy) to direct a Ricardian growth path. Manufacturing and processing firms producing

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final goods for sale at hom e and abroad would be encouraged with the import o f advanced technology and capital e q u ip m en t and with cheap wage goods and raw materials. Foreign trade offered the most rapid path to increased productivity. Capital for initial industrialization would come from the inherited d om estic capacity o f manufacturing (largely in the northwest o f the country)— the “wager on the strong”2— and from foreign supplements. This strategy would also protect the leaders’ dom estic polit­ ical base in the northwest parties, among the middle peasantry that was to be gradually incorporated into the socialist sector o f industrial work and remuneration, and among urban worker and middle strata whose stan­ dard would otherw ise fall dramatically b ecause o f industrial investments. At the same time, the federal gov ernm ent had to guard the needs o f pro­ duction for a strong d efense (on which access to foreign capital dep ended): it had to maintain the one-third rule o f domestic origin for military e q u ip ­ ment and arm am ents, as well as the national food policy and strategic stockpiles o f fuel, food, and o th er necessities that would be produced at home if th ey could not b e imported. Until the 1980s, the country was able to sustain a very high rate of capital formation. B u t in contrast to the initial reliance on foreign credits only, growth was increasingly based on foreign borrowing.3 T h e rate of overall e c onom ic growth varied with the availability o f foreign supple­ ments.4 Im pressive growth rates in the 1950s were largely due to foreign credits,5 while the recessions o f the 1960s reflected both business down­ turns in the United States and W e ste rn E u ro p e and the re treat in official lending. T h e growth of the 1970s (like that of most developing countries) was “import-led. ”6 Such borrowing, the refinancing o f d eb t already after 1961, and the substantial increase in com m ercial credit to banks and firms after 1969 (which the National Bank did not borrow but had to guarantee) together led to a deb t-service obligation so high by the late 1970s that it cut directly into d om estic growth. On the basis of th eir econom etric anal­ ysis of the Yugoslav econom y betw ee n 1953 and 1984, Jam es Gapinski, 2 Maier, 'T he Two Post-W ar E r a s," 343. 1 Babić and Primorac, “So m e Causes of (lie Growth of the Yugoslav External D eb t, accessible work among a wide literature

011

is ail

the subject in former Yugoslavia.

1 Oskar Kovač argues, in Platnobilansna politika Jugoslavije, that the use of foreign fi­ nance vvas always d e term in ed by supply in Yugoslavia. S e e also Babić and Primorac, “Som e Causes of the Growth ol the Yugoslav External D eb t " 5 Foreign sources provided about 33 percent of the funds for dom estic investment in the 1950s (L jub om ir Madžar, personal communication, from research at the Yugoslav Institute for Econom ic R esearch 111 Belgrade) Babić and Primorac. “Som e Causes of the Growth of the Yugoslav External D eb t In 1970-75, foreign funds accounted for 3 1 .9 percent of the annual gross expenditures for investment in fixed and working capital (Gapinski, Skegro, and Zuehlke, Modeling the E co­

nomic Performance o f Ytigoshwia, 110).

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Borislav Skegro, and Thomas Z uehlke concluded that “Yugoslavia’s per­ form ance at hom e crucially depends upon its perfo rmance abroad.”7 T h e “habit for rationalization” that I le b r a n g expected from workers in socially owned firms b ecam e instead an enduring inclination on the part o f investors— w h eth er enterprise m anagem ent or officials— to seek the solution to growth and global com petitiveness in imports of the most modern capital e q u ip m en t and in technological modernization. T h e econ­ omy b e c a m e increasingly d ep en d e n t on imports of machinery and espe­ cially in term ediate materials and spare parts for domestic production; by the early 1980s, 9 9 .6 p e rce n t of imports w ere essential to production.8 D e s p ite Yugoslavia’s m aneuverability among global markets, moreover, the credits, capital goods, and interm ediate materials on which the econ­ omy relied cam e largely from W e stern , hard-currency markets. Th e re­ sult was an im p enetra ble imbalance in the com modity composition and term s o f trade among the cou ntry ’s trading areas that seem ed to require further borrowing. It is not surprising that Laura Tyson and E gon Neub c r g e r find that, for the 1960s and 1970s, “a 1.0 percentage point decline in average growth rate in W e ste rn E u ro p e produces a 1,0 to 1.6 percent­ age point decline in Yugoslav exports.”9 In the 1970s, betw ee n 75 and 89 p e rc e n t o f the deficit on both trade and capital accounts was with coun­ tries o f the O E C D (Organization for E co n o m ic Cooperation and Develop­ m e n t);10 and betw ee n 1950 and 1975, foreign credits covered 90.7 p e rc e n t o f the deficit on cu rrent a c c o u n t.11 As a result of the increasingly structural d ep en d e n ce of production on imports and becau se of the importance of a well-defended national sover­ eignty for the lead ers’ strategy and for access to foreign markets, federal policy gave priority to maintaining trade liquidity for firms— to protecting the level o f foreign-eurrency reserves and the balance of foreign pa y m en ts— in an effort to sustain the confidence o f foreign creditors. The federal g ov e r n m e n t’s preoccupation with the trade deficit, foreign debt, and conditions for access to foreign capital affected domestic employment in two ways. First, it undermined the operation of federal macroeconomic policies that w ere meant to foster e m ploy m ent growth: the preferences for investm ent in new capacity laid out in the federal and republican so7 Capinski, Skegro, and Zuehlke, Modeling, 21 8 Borislav Skegro, personal eomniuniealion, fall 1982 (at the time, Skegro was ail assistant at the Zagreb University Institu te o f Economics; in 1993, he becam e deputy prime minister of Croatia) E v e n farming was im port-dependent: agricultural economist Vladimir Stipetic reported at the O c to b er 1982 annual m eeting o f the Yugoslav Association o f Economists in Opatija, Croatia, that milling was one-third dependent, cooking-oil production was 48 per­ cen t depen den t, and cattle raising was 65 percent dependent. 9 Tyson, The Yugoslav Economic System and Its Performance in the If)70s, 92n. 10 Ib id., 87. 11 Capinski, Skegro, and Zuehlke, Modeling , 156

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eial plans (which w ere to guide bank credit policies, subsidies, decisions of the price office, and grants) w ere d eterm ined by the trade balance and availability o f foreign capital, and the stabilizing function o f monetary and fiscal system (to maintain clear and direct incentiv es to increase produc­ tivity and to invest) was oriented toward external stabilization. Th e second effect on em p loy m e n t cam e through the g ov ern m e n t’s m ethod of restoring external equilibrium and repaying debt. The S lovene model, like most econom ic models, presum ed a closed system— not one (imbedded in a world econom y and (in the case o f a socialist econom y) also e m b e d d ed within a domestic econom y in which a large segm ent o f activity, including most o f agriculture, was also external to the model b ecause it was private. T h e task of monetary, fiscal, and exchange-rate policy in the ruling paradigm was to prevent the financial crises that could lead to industrial un em p lo y m en t— by keeping money in circulation tied to actual production. According to the logic o f monetary planning, by which governance through “econom ic instrum ents’ was meant to op erate, the normal balancing o f monetary demand and actual supply was to occur at the m icroeconom ic level of self-m anagem ent ac­ counts. All budgets in the public sector (in the econom y, social services, and government) w ere legally obliged to balance accounts quarterly; if this was not sufficient, the federal authorities mandated changes in a c­ counting regulations. Policy to correct an im balance b etw een monetary holdings and goods available for purchase (that is, inflationary pressures) worked simultaneously on the demand side and the supply side. It began with short-term limits on consumption, achieved by cutting money in circulation, and an attem pt to stimulate increased output through produc­ tivity incentiv es in publie-sector firms. Tight money might be effected through limits on cred it and on prices, regulations tying wages more strictly to productivity, or rules raising reserve ratios in banks and firms. Supply incentiv es w ere both generalized and specific, directed at both firms (managers) and workers; they included liberalized prices, tax cuts, lower depreciation allowances, wider wage differentials, and targeted subsidies. B ecau se em p loym e n t was the province of autonomous firms and local g overnm ents, it was critical that the federal governm ent m ain­ tain monetary control as the system prescribed, providing the econom ic environment for simultaneously growing productivity and em ploym ent. Although there w ere dom estic sources of inflationary pressure (above all the consistently low productivity o f agriculture), the g ov e r n m e n t’s ability to perform this task of m acroeconom ic m anag em ent— of keeping control over the quantity o f money in circulation and therefore over the value and clarity o f wage and incom e incentives to production— was seri­ ously weakened by foreign borrowing, the contractual obligations of bilat­ eral trade, and im ported prices. T h e inflow of foreign credits (and on

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those rare occasions o f a current-account surplus, of net earnings) ex­ panded the m oney supply in the same potentially inflationary way as the printing o f new money, and the lend er o f last resort b ecam e in fact not the National B ank but the I M F . Although both had the same ideological ap­ proach to stabilization, the I M F could b e ignored less easily. Nonconvert­ ibility made the econom y m ore vuln erable to the effects of business cy­ cles in the two countries to which the currency was tied— the United States and, after the mid-1960s, the Fe d e ral R epublic of G erm any as well. Balance-of-paym ents supports provided by U .S . aid and loans in the 1950s and 1960s and by worker rem ittances from G e rm a n y after the early 1960s thus b e ca m e vuln erable at the very time they w ere most needed becau se foreign dem and for com modities was down. Trade contracts in the clearing region and bilateral trade, on the other hand, operated on the same accounting principles as the dom estic monetary system, which m ea nt that the National Bank was the interm ediary b etw een the foreign contractor and the dom estic producer. But since a promised trade con­ tract was sufficient to dem and cash from the Bank, any delay in a foreign p a rtn e r’s paym ent resulted in a monetary emission without cover. F i­ nally, dom estic prices could not b e protected from the influence of import costs, which w ere responsible for one-fourth to one-half o f a domestic inflation that averaged 2 2 p e rce n t by the early 1970s, moderated momen­ tarily, shot up to 40 p e rce n t in 1979, and continued to rise until triple­ digit hyperinflation hit in 1 9 8 5 .12 On the one hand, the G A T T and the I M F d em anded price liberalization as a means to reduce the trade deficit. O n the o th er hand, enterprises w ere perm itted to accommodate im­ ported costs in prices so as not to distort productivity-related incentives with the market. D esp ite the constant political th e m e that wages were the primary cause o f dom estic inflation, which justified further cuts in em p lo y m e n t as well as incomes, Gapinski, Skegro, and Zuehlke found that price inflation was affected more by the money supply and import prices than by wages. T h e rise o f import prices actually forced the real wage d o w n .I;i Th roughout the p o st-1952 period, the g overnm ent faced a nearly con­ stant deficit in trade in the convertible-cu rrency area and, after the early 1960s, nearly constant inflationary pressures. A vicious circle thus arose b etw ee n external stabilization and domestic stabilization, each one re­ quirin g and simultaneously underm ining the other. But the choice of sta­ bilization policy was driven by pressures for external stabilization and by 12 Organization for E co n o m ic Cooperation and D evelopm ent, Economic Survey: Yugoslavia for the relevant years. Se e M accsich, Yugoslavia: The Theory and Practice of Development Planning, on the critical role o f import costs in dom estic inflation and the lim ited ways that Yugoslavia, ¿is a global price taker, had for adjustment. 1:1 Gapinski, Skegro, and Zuehlke, Modeling, 138.

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the need to adjust to external conditions over which the gov ernm ent had little control. T h e solution to the trade deficit was to seek new short-term credits and to re sort periodically to I M F loans. Resort to the I M F re in ­ forced the re strictive monetarism (in effect) and fiscal conservatism o f the demand-management side of the lead ers’ policy: to re duce the trade defi­ cit, repay d ebt, and red uce inflation by restricting dom estic consumption (including imports) and promoting exports. T h e effect o f tight monetary policy and cuts in imports was almost im m ediately felt in production; nonessential imports w ere only a tiny portion o f the total. F i n n s w ere told to exploit internal reserves, cut production costs (and therefore labor), and use internal savings for new investment. G o v ern m e n t budgets had to he cut, and then essential im ports— if necessary, through administrative controls for a short-run effect. T h e effect at first was always a domestic recession like those that occur in market econom ies under orthodox stabi­ lization, which the policy cam e to resem ble. Because working capital for public-sector enterprises cam e only from the cash accounts and advances o f banks, the first effect o f tight money was a liquidity crisis, affecting paym ent for delivered production supplies even before pay m ent of the guaranteed wage to workers. To keep produc­ tion going, firms created new instruments of payment, usually writing IOUs to suppliers (a form of involuntary trade credit). T h e banks, which were both cooperativ e (managed by enterprise depositors) and organized territorially (each re public being responsible for econom ic policy on its own territory), felt obliged to acknowledge these I O U s — in large part because the situation disadvantaged all producers of primary and in te r­ mediate goods whose incomes d ep end ed on paym ent by producers of final, m arketable goods. Thus, the cash-flow problem s o f the form er clearly had to do with stages o f production rather than inherent prof­ itability, and there was no reason to penalize them with bankruptcy. Moreover, such firms tended to concentrate in poorer regions, which would b e devastated by wholesale bankruptcies. As lender o f last resort in the domestic econom y, however, the National Bank was then presen ted by its m e m b e r banks with fa its accomplis that it had to monetize through primary emission in order to avoid threatening countrywide econom ic crisis and thus defeating the purpose o f monetary re s tric tio n .14 T h e alter­ native (as occu rred in the early 1980s when the National Bank, under IM F pressure, refused to bail out such republican banks) was for n e t ­ works of managers and republican politicians to choose to forestall b an k ­ ruptcy by socializing the d eb t over the territory o f the bank among all of its enterprise depositors. The control by producers over finance— through cooperative banks and 14 Shirley G ed eo n , personal com m unication; see also h er "M onetary D isequilibrium and Bank Reform Proposals in Yugoslavia" and “Post-Keynesian Theory o f M o n ey.”

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contractu al relations with suppliers— therefore made it possible for larger, processing and manufacturing firms to try to keep production going and wages paid in the face of central restrictions by shifting costs to others. T h e bias in favor of large firms to the d etrim ent of smaller and poorer firms was com pou nded by the territorial organization of the bank­ ing system. Two highly publicized examples in the 1980s— when the Z agreb Bank and the B elgrade Bank were near bankruptcy as a result of the d eb ts o f their largest depositors (the Croatian oil producer INA and the S m e d e re v o steelworks, respectiv ely)— dem onstrate that firms consid­ e red o f m ajor c o n s e q u e n c e to a re pu blic’s econom y w ere more likely to b en e fit from this socialization o f d e b t . 15 F irm s also responded to the external shocks of overnight rises in im­ ported costs due to devaluation and the frequent administrative controls on imports (imposed when price instruments w ere ineffective or too slow) by seek ing g reater security of supplies outside the channels affected by m onetary regulation. Long -term contracts and informal relationships be­ tw een suppliers and final producers (the “netw ork” against which Kiclric railed in 1 9 4 7 - 4 8 becau se it made producers less susceptible to central control and rein forced nonprice mechanisms of allocation), as well as ver­ tical integration in order to internalize suppliers or gain market leverage, increased industrial concentration and monopolistic tendencies. Even sh ort-term shortages enhanced the power of the branch-level economic ch a m b e rs in rationing and allocating supplies among m e m b er producers and enforcin g price agreem ents. T h e overall eflect of firms’ response to anti-inflationary policy, there­ fore, was to un de rm in e not only the policy, but also the effectiveness of the instrum ents of financial regulation and the long-term authority of m onetary and fiscal policy. M ac ro e co n o m ic stabilization policy, in fact, followed a stop-and-go pat­ tern o f restriction and expansion that created recessions but did not connl,r> T h e system o f proportionality in decision milking gave large producers with large ac­ counts the primary influence over bank policy in any case. As m em bers o f the banks’ govern­ ing boards, the managers o f large firms w ere often personally (and politically, through party m em b ersh ip or connections) vulnerable to political pressure from a republic’s leadership to take decisions said to b e necessary to protect the republic’s econom y, rather than decide on the basis of banking criteria alone; see the 1982 Start interview with Toinislav Badovinac, th e tem porary m anager appointed to restructure the E co n o m ic Bank o f Zagreb (Frivreclna Banka Zagreba) after the affair that nearly bankrupted this primary bank o f Croatia. In analyzing th e bank's liquidity crisis, Badovinac (and others) focused

011

the lack o f indepen­

d e n c e in banking and on the effect o f federal price and trade regulation of the strategic oil industry (84 p ercen t o f the bank’s $ 1 1 billion foreign d ebt was due to the losses of the prim ary oil producer in Croatia, INA, and the primary electricity produce,!*, Eleclroprivreda). O 11 th e o th er hand, little attention was paid to the trouble that Citibank decided to cause for the E co n o m ic Bank when it was tw enty-four hours late on repaym ent of out­ standing loans on M arch 3, 1982,

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teract them with Keynesian-like new credit to increase e m ploy m ent because the transactions being monetized had already occurred. Instead of counteracting global m ovem ents, policy exacerbated th eir effect. It b e ­ came restrictive when global dem and fell, tightened further until e n t e r ­ prise d eb t forced m onetary expansion, and was truly expansive only when new foreign m oney was available. T h e first c o n s e q u e n ce o f expansion b e ­ ing a surge in imports, however, the resulting trade deficit would start the cycle a n e w .16 T h e analysis by Gapinski, Skegro, and Z uehlke found that unem ployment grew when the money supply expanded because expan­ sion created a trade deficit. Increases in nominal g ov ernm ent expend i­ tures lowered un em p lo y m en t in a “Keynesian-like . . . big, real e ffe c t,” but generated a new round of u n em plo y m en t and foreign d eb t b ecause of the effect on the foreign s e c t o r .17 Fiscal policy could not b e intentionally expansionary in support o f e m ­ ployment becau se its purpose was to supp lem ent monetary policy in maintaining balanced budgets and b ecause deficit financing through do­ mestic instrum ents was not institutionally possible. As an accounting mechanism, taxation increased when revenues d e c l i n e d .Ifi B ecau se stabi­ lization policy c o m b in ed dem and repression with trade liberalization and supply-side tax cuts 011 firms, its effect was to re duce dramatically federal revenue— customs duties, the turnover tax (later the sales tax), and grants from the re p u b lics ’ taxes on enterprises. Cuts, not increases, in public expenditures had to follow. To cover essential expenditures (particularly for defense, which was the largest item o f the minimalist federal budget) that could not b e cut, the federal g overnm ent had to search for other sources o f re venue. It had th ree self-defeating choices: to dem and more from republican budgets, reducing monies for developm ental investm ent and em p loy m e n t expansion in the republics; to borrow more monies abroad, only creating the n eed down the road for renew ed stabilization policy; or to print m oney, thus also reviving the impulse for antiinflationary policy. T h e federal gov ernm ent did have means to spend ou t­ side the b ud get that could expand e m ploy m ent, and it was constitu­ tionally obliged to do so for purposes o f national security and basic infrastructure. B u t w h ere these monies did not com e from republican lfi S e e D y k er, Yugoslavia: Socialism, Development, and Debt; Horvat, The Yugoslav Economic System; and Bajt, “Lessons from the Labor-M an agem en t Laboratory.” Horvat cites a 1973 study by Marko K ra n jec that shows that fiscal policy after 1965 exacerbated cyclical activity 6 6 to 9 9 p erce n t (251) 17 Gapinski, Skegro, and Z uehlke, Modeling, 2 1 1 - 1 2 . 18 W ith out a bond m arket, the govern m en t could not use fiscal policy to counteract the effects o f th e m arket, foreign or dom estic. Not only could the governm ent not borrow from the population, it actually was th e len d er to the population, through intergovernm ental transfers (from republics and provinces to the federation and from the federal go v ern m en t— through cred its— back to producers and lower-level governments).

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contributio ns in a direct trade-off with republican investm ent and e m ­ ploy m ent promotion, they w ere largely foreign credits (above all, World B ank d ev elop m en t loans for infrastructure). T h e cycle shows up in the Gapinski, Skegro, and Zuehlke analysis: a period of foreign borrowing was always followed by a period of dom estic taxation, and the availability of foreign cred it d eterm in e d the current marginal tax rate on enterprise in­ co m e (“profits”) . 19 T h e conflict b e tw ee n the monetary instruments designed for a closed, socialist, and industrializing econom y and the dem ands of international op enness b e co m es particularly clear when one considers the burd en that e xchange-rate policy should have b orne in international adjustment. The questio n o f its role also introduces a more fundamental problem: whether the g o v e r n m e n t’s policies w ere appropriate to the conditions it faced. A constant feature of m acroeconom ic stabilization policy and the “stop” side o f the stop-and-go cycle of international adju stm ent was devaluation of the dinar. In the language o f Kiro Gligorov’s explanation of the 1952 de­ valuation, it was an instrum ent of “econom ic coercion to force producers to increase supply.30 T h e failure of devaluation as a way to resolve trade deficits and o f exchange-rate policy in the 1970s, when the dinar was allowed to float but b e c a m e overvalued, was attributed to a mercantilist pro tection of d om estic manufacturers. Such protection could b e seen to originate in the lead ers’ early strategy for industrialization and then to be perpetuated over time, in manufacturers’ economic power and the favorit­ ism shown to exporters because of persistent trade deficits. But the prob­ lem of devaluation and, later, o f a m arket-clearing exchange rate as instru­ m ents to manage foreign trade had far more to do with Yugoslavia’s partic­ ular niche in the international economy.'21 T h e cou n try ’s primary problem was not fluctuating dem and for its ex­ ports in which price m attered most, but supply shocks— in the price of credit, the prices of imports necessary to production (raw materials, fuels, equipment, and spare parts), and the political barriers imposed unpredictably against Yugoslavia’s exports, regardless of price. Its primary export markets, m oreover, operated not on com petitive dem and principles but on bilateral contracts in the East, the South, and even the W e st (financed by suppliers credits or, by the 1970s, on countertrade terms). The impoit d e p e n d e n c e o f most production for export to W e ste rn markets not only made exchang e-rate policy largely ineffective where it might have oper­ ated, b u t also m eant that devaluation always fueled inflationary pressures at hom e. B ecau s e Yugoslavia was a small country in the global economy, 19 G a p i n s k i , Skegro, a n d Z u e h l k e , M o d e lin g , 97, 2 ) 5 - 1 6 . 20 K. Gligorov, “Factors in O ur E con om ic Stabilization, 21 On the reasons that devaluation and exchange-rate policy w ere ineffective and inap­ propriate instru m ents, see especially D yker, Yugoslavia, 9 7 - 1 0 1 .

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with no control over the price of imports or terms ol trade, producers could increase revenues only by increasing supply. But this ran up against the supply b ottlen ecks caused by import restrictions. T h e primary way producers adju sted to the shift in price structures due to devaluation was thus not to expand exports but to cut production or shift temporarily to domestic suppliers where“ possible. As was the case with monetary policy, the segmentation ol markets, accounting character of financial institu­ tions, and pervasive use of supply networks among firms or vertical in te ­ gration made reliance on price mechanisms for adju stm ent less than effective.22 Instead, the conjunction of the lead ers’ guided Ricardian strategy with foreign cre d ito rs ’ insistence on foreign-trade liberalization and 011 the benefits o f foreign com petition had the effect (without any need tor politi­ cal pressure 011 the part o f firms) o f transforming exehange-rate policy into an instillm ent of industrial policy. An overvalued dinar favored manufac­ turers with cheap im ported supplies so that they could be more c o m p eti­ tive in foreign markets, ju s t as dom estic price policy favored them with regulated raw-material prices. Price liberalization exposed dom estic pro­ ducers of production inputs (such as farmers) to foreign com petition, forc­ ing them to produce at lower cost (or go out of business).23 T h e aim ol foreign-trade protection, however, was primarily to safeguard national­ security concerns (such as the food and energy policy and sectors such as shipbuilding, iron and steel, and machine building— all of which were also export producers, though more often for markets in the East and .South than for hard-curreney W e stern ones). The. aim of liberalization was to force down prices of raw materials at home. As lor em p loy m e n t, the effect of repeated devaluation of the currency was instead to feed the inflationary spiral o f domestic prices; in raising the nonlabor costs o f production, particularly where supply bottlenecks made an im m ediate supply response difficult, it required firms to adjust by low­ ering labor costs— that is, by cutting (or not expanding) e m ploym ent. The leadership was not oblivious to the ineffectiveness of its instru­ ments to re duce the balance-of-payments deficit and restore growth, but its interpretation o f the problem (often aided by I M F advisers) was that "financial discipline was missing and that the econom ic incentives had 22

C o m m a n d e r , in "In fl at io n a n d t h e T r a n s it io n to a M a r k e t E c o n o m y ,

a n a l y z e s tile

inflationary c o n s e q u e n c e ol sta bi liz at io n policv from t h e spec ial p e r s p e c t i v e ol socialist e c o n ­ omics in t r a n s it io n to m a r k e t e c o n o m i e s in t h e e ar ly I9i)0s, w h e r e in st it u ti o n a l p a r t i c ­ ularities (su ch as a s e g m e n t e d financial s y st e m ) a n d th e b u r d e n s lelt Irom th e p r e v i o u s r e g im e (s u c h as a st ock ol i u t e i e n t e r p r i s e d e b t ) m u s t he ta k e n int o a c c o u n t in a p p l y i n g s u c h po lic y . 21 A u t h o i s d is c u s s io n s w ith Ži vk o P r eg l a n d I ' e r d n a n d T r o st in Lj u bl ja na . 19S2, a n d w ith Božo M a r e n d i c a n d Borislav Š k e g r o in Z a g r e b near ly a lw ay s o v e r v a l u e d e x c h a n g e ra te

M ost e c o n o m i s t s cr it ic iz e d t h e c o u n t r y s

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b e c o m e distorted. To restore both discipline and the effectiveness of pro­ duction incentiv es, the g overnm ent would initiate another round of de­ centralizing institutional reforms, extend the realm of “self-management” to include m o re activities in the regim e o f econom ic accounting and fiscal responsibility, and attem pt to reassert the role o f enterprises in keeping wages and expend itures within the constraints of actual earnings, against contrary d ev elopm en ts in the interim since the last reforms. F o r exam­ ple, in place of cuttin g g ov ernm ent expenditures whole categories of ex­ penditures would b e rem oved from the federal budget and handed to budgetary authorities closer to producers or to independent agencies with autonomous, self-managed funds (as in the case of social services). By 1975, public expenditures and tax authority w ere shared by more than eight thousand parastatal “self-managing com m unities of interest."24 E v e n the federal fund for less-developed areas— the sole remaining di­ rect role o f the central g overnm ent in econom ic d ev elopm en t— was re­ stru ctured in the late 1970s to improve financial discipline over the use of th e monies by giving republics more control over their contributions. R epublics could b e absolved from up to half o f their tax obligation to the fund if th e ir firms invested directly in firms in the southern republics and provinces targeted by the fund (bypassing federal, republican, and pro­ vincial authorities). In the 1980s, authorities replaced the fund’s manag­ ing board with re presentatives elected from enterprises instead of republican governm ents. In other words, the response to ineffective pol­ icy was to decentralize and to reduce further the scope of governmental

policy. An unusually difficult problem was to settle on a system for allocating foreign exchange that would allow it to reach those most in need of West­ ern imports (and that would resolve bitter political fights over access) while not worsening the deficit. T h e primary principle that enterprises w ere most likely to b e financially responsible gave to firms that earned foreign exchange the right to retain a certain (and growing) percentage as an export incentiv e. B u t this left many dom estic producers of raw and inte rm e d iate materials, who nonetheless could not produce without im­ ports or could do so m ore profitably with che a p e r foreign supplies, with­ out access to foreign exchange or in the position o f having to bargain for it in p ro d u ce rs’ associations. Bankruptcy was no solution (regardless of the c o n s e q u e n c e s for unem ploym ent) b ecause such firms often supplied goods essential to export producers as well as those serving the domestic m a rk e t.25 Proposals to lower re tention quotas and give more control to 24 “Fiscal System and Fiscal Policy,” 27-28. 25 The primary demand o f the student demonstrators during the events o f 1970-71 in Croatia was an increase for Croat firms in the retention quota for foreign exchange; although

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the National Bank succu m bed to the politics of econom ic power within the system, d efeated by the obje ctions of powerful export producers and the republics (especially Slovenia and Croatia) into which the largest share of hard cu rre n cy flowed. The g overnm ent s response was to give firms and territorial banks greater freedom to borrow abroad, so as to increase the supply o f foreign currency while getting it into the hands of those best able to guarantee repayment as ju d g ed by the foreign lender. Yet, as a co n se q u e n ce o f in­ ternational changes after the early 1970s in its regim e toward foreign b o r­ rowing, the federal g o v ernm ent had to guarantee most of this d eb t and therefore repay a m ounting foreign d eb t that it had had 110 part in borrow ­ ing. Hy 1976, the g o v ernm ent had divided the balance of payments into separate republican accounts in order to hold each re public directly re­ sponsible for repaym ent. Republic-level “self-managing com m unities of interest for foreign econ om ic relations ’ were established to give pro­ ducers’ organizations g re ate r control over export policy and foreignexchange allocation, on the basis of a fund created with half o f the federal customs r e v e n u e s .26 In contrast to the pressures toward concentratio n and financial ce n tra l­ ization found in open market econom ies, the Yugoslav governm ent sought further decentralization, deconcentration, and producer control. The reasons for this choice multiplied with time. In making enterprises responsible for stabilization, the leadership remained com m itted to its the political leadership was rem oved, th e demand was granted. On the difficulties that domestic producers selling on the dom estic m arket had in obtaining foreign exchange to pay for imports o f essential inputs, and th e resulting b ottlenecks for o th er producers— including those earning foreign exchange through exports— see, for exam ple, the article in Bo rim (June 26. 1982) on the ru b b e r and chem ical industry “Balkan” in Suva Reka, Kosovo; and Skrbic. “M anjak— cetiri m ilijard e,' on the steel industry and iron metallurgy complex at Zenica, Bos nia-H erzegovina. A 1982 article in Ekonomska Politika (“P rerada m e tala: St rah od ijiei/.vesnostT) discusses th e pressure from the m etal-processing industry— complaining of rising uncertainty o ver supplies from the dom estic steel industry because of foreignexchange shortages—-to give steel the same priority status as oil in access to foreign ex­ change. This pressure led th e federal “self-managing com m unity of interest for foreign eco ­ nomic relations” to propose that $ 8 0 million be set aside for steel mills; the National Hank opposed this move unless the resulting export production was sold to coiivertible-currency countries. In 1 9 7 7 -7 8 , banks w e re p erm itted to issue securities. T h e Agrokom erc scandal o f 1987 can be traced to this regulation; the Bosnian conglom erate issued bonds far in excess of its cover, which w ere purchased in large amounts by banks throughout the country— above all Ljubljana Ban k— apparently on the assumption that the im portant political connections of the Agrokomerc d irec to r and the political assurances of the Bosnian political elite were ¿sufficient guarantee. M ajo r W estern com m ercial banks made a similar mistake in lending to Eastern E u ro p e on th e assumption that the Soviet um brella was sufficient guarantee of repayment.

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strategy ol dismantling the state and com bining political right with eco­ nom ic interest. T h e I M F campaigned for decentralization and reduced governmental interferen ce in the economy, ostensibly because these would encourage market forces. T h e interests of profitable producers and w ealthier republics in gaining greater autonomy over their resources (above all, foreign exchange) w ere even stronger alter periods of restric­ tions and recession. And the further decentralization proceeded, the more the political representativ es of the republics and enterprises saw a vested interest in keeping rights over assets, reducing fu rther the compe­ te n ce and finances o f the federation, and opposing any proposal lor re­ centralization, even if it meant a more effective policy. Nonetheless, th ese reforms did continue to reduce the federal government's capacity for m onetary control and macroeconom ic management, and therefore for producing the noninflationary growth necessary to prevent industrial un em ploym ent. Alongside the recessionary bias of m acroeconom ic policy, therefore, there was a decline in the federal role in preventing unem plo yment ol the dev elopm en tal kind by seeing to the developmental investm ent and sec­ toral proportions necessary to absorb the agricultural surplus and demo­ graphic increase; and this role was in any case also subordinated to foreign policy. T h e first stage of decentralizing reforms after 1952 was the transfer (by 1958) of federal seetoral-investm ent funds and responsibility for de­ velopm ental investm ent to territorial banks and planning offices in the republics. By 1971, federal authorities had lost all control over credit pol­ icy .27 As the vacuum in federal investm ent funds was filled by foreign monies, influence on the policies (if not always the consequences) of de­ velopm ental investm ent cam e increasingly from multilateral and public le n d e rs — above all the W orld B ank— as one can see clearly in the Green Plan for agriculture, which was initiated in 1973, and the priorities of the social plan for 1 9 7 6 - 8 0 . 2K From the early years, however, priority sectors of the social plans w ere defined by the priority placed on reducing the balance-of-paym ents deficit and guarding national security (with actual investm ent prefe re n ce s depending on particular international condi­ tions). In place of planners’ calculations of investm ent to protect the sec­ toral balance of dom estic production and maintain steady growth, the 27 D yker, Yugoslavia, 120, 147. 28 On the G r e e n Plan o f 1973, by which the W orld Bank made available 1 billion dinars for in v estm ent credits in agriculture— channeled through contracts with the social sector but available only for approved developm ent projects in the private sector— see Miller, Socialism and Agriculture in Yugoslavia,” 38 n. 64; and D yker, Yugoslavia, 155-56* On the notable similarity b etw een the Yugoslav social plan o f 1976—8 0 and the World Bank pro­ posals for structural adjustm ent, see the discussion in the W orld Bank’s Yugoslavia: Adjust­

ment Policies and Development Perspective#

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federal plan emphasized a com bination of export promotion and importsubstituting investm ents, whim national security and the external terms ot trade for m anufacturers’ key production supplies favored dom estic pro­ duction. E m p lo y m e n t rem ained a residual of the plans— but, as we will see in the next chapter, the preferred means for international adjustment directly affected the use of labor in the same way that they had in the first decade o f power.

Po l it ic a l C o n f l ic t a n d

P o l ic y C iio ic k

The influence o f international openness and ad ju stm ent did not only un­ dermine the governmental capacity to im plem ent the lead ers’ strategy for economic growth and full em ploym ent; it was equally important in its effect on the lines of political conflict over policy. Critics of Yugoslavia’s failure to adopt successful policies of international adju stm ent and to re ­ verse the m ounting foreign debt, persistent trade deficits, and d e p e n ­ dence on borrowing, refinancing, and the I M F and foreign banks tend to focus on elite conflict. Some argue that the problem lay in the lack of consensus (surely exac­ erbated by— though not originating in— a voting system at the federal level that re qu ired consensus and gave each republic a veto). D is ag re e ­ ments caused prolonged delays in formulating policy and diffident im ple­ mentation. Y et countries renowned at the time for their success at international ad ju stm ent, such as Japan and S w eden, also w ere known for prolonged gestation periods for formulating policy and reaching co n ­ sensus. T h e weakness ot e n fo rcem en t mechanisms discussed in the p re ­ vious section was due not to elite conflict but to the strategy on which the leaders agreed. Others argue that political leaders were divided b etw een econom ic re ­ formers and conservative antireformers, and that the failure o f econom ic policy was due to the success of conservative forces in preventing lull promulgation o f liberal market reforms. This obstruction, it is said, grew' largely out o f conservatives reaction to the unem ploym ent threat from “efficiency-oriented” reforms. According to this argument, econom ic pol­ icy in the postwar period had two major turning points: the marketizing economic Reform o f 1965 (it is always capitalized, to distinguish it from other reforms) and the constitution o f 1974 legislating its reversal at the hands of party conservatives. Yet, as with the great divide attributed to 1948 and the Tito-Stalin conflict, as well as with the “end o f the adminis­ trative s y s tem ’ in 1952, a closer examination of econom ic policy reveals a different chronology than is suggested by political rhetoric. As with 1946­ 52, the conflict is b e tte r portrayed as one b etw een opposing econom ic institutions and policies intended to facilitate microeconom ic adjustments

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to a change in international conditions— the tension identified in chapters 2 and 4 b e tw e e n the Slovene and F oca models— than as one between liberal reformers and conservative reactionaries. T h e difficulty was that the existence of elite political conflict did not bring forth policy alternatives to counteract the effect o f openness on the eco n o m ic strategy chosen in the early period. In contrast to the historical origins o f pro em plo y m ent policy in the W est, no political group organized to challenge the c e n t e r ’s growth policy on the grounds that it caused u n em p lo y m en t— not even when this policy of macroeconom ic stabiliza­ tion, w o rk place-centered measures of productivity, and antigovernment (decentralizing and “socializing”) reforms failed to achieve its explicit ob­ je c ti v e o f restoring noninflationary growth and reducing trade deficits. Instead, elite conflict focused primarily on the distributive conse­ q u e n c e s of such stabilization policy: contributions to the federal budget and to the federal dev elopm en t fund, the nature of expenditure cuts, and the regim e for allocating foreign exchange. M ore significant than elites’ disa g re e m en t was their com m on solution to such conflicts over money. By increasing the pie through m ore foreign credits or federal seigniorage and by com pensating for cuts with greater autonomy over the use of funds, they only increased the difficulties in controlling the money sup­ ply, fed inflation, and added to the financial segmentation that resulted from autonomous, self-managed budgets. T h e vicious circle of such econom ic policy and conflict over distribution was intensified by the political outcomes. T h e more unsuccessful interna­ tional ad ju stm ent was, the more openness and flexibility among foreign markets w ere valued. T h e more the criteria o f international participation dominated federal policy choices, the less room there was for genuine policy d eb ate among dom estic actors and the less effective becam e the political institutions necessary to successful international adjustment. The more unsuccessful that adju stment was, the m ore important federal pol­ icy was to the econom ic fate o f republics and localities, and the less eco­ nom ic authority it retained. W h e re as P e te r Katzenstein argues that Austria’s and Sw itzerland’s success “continuously relegitim ize[s]” the po­ litical institutions necessary to national policy and strengthens the “com­ patibility of views” b etw ee n the bargaining parties that precedes such co o p e ratio n ,29 one can see the mirror image in the Yugoslav case. Failure continuously dclegitimized federal institutions and weakened consensus and cooperation. In contrast to the view that there were sharp policy divides in 1965 and 1974, the findings o f the literature on social demo­ cratic regim es fit Yugoslavia as well: the institutions of political and eco­ nom ic pow er adopted by 1952 limited later choices. 23 KalzensU'in, Corporatism and Change, 29

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Thus, although liberals accused conservatives of obstructing market r e ­ forms, they w ere unwilling to abandon the rights of republics and e n te r ­ prises to control econ om ic assets (rights that increased with each stage o f (reform, including stages called reactionary) in favor of market-oriented policy on the grounds that this was recentralization; nor would they r e ­ nounce the policies favoring final-commodity producers (called “profit­ able” firms) and export production in favor of a real market economy. Although they promoted “westernization” and accused conservatives of an eastward inclination, the econom ic power of most liberals lay in their access to all th ree trading spheres. E ven if full m e m b ersh ip in W estern organizations had b ee n within the country’s reach (through the E uropean Community and N A TO or the neutral states’ E uropean F r e e Trade Asso­ ciation), the most successful manufacturers w ere those producing for both civilian and military needs30 and able to arbitrage their participation in all three foreign markets when international conditions changed. Unwilling to recognize the co n se q u e n ces o f th eir preferred reforms for domestic producers o f raw and interm ediate goods and for areas lacking a welldeveloped com m ercial infrastructure or geostrategic advantage in foreign markets, and able to obstruct market allocation of foreign exchange and impose territorial restrictions on the m ovem ent o f labor and capital, most liberals contrib uted both to the political necessity of Kaldorian com p en sa­ tions to the less profitable firms and areas (compensations that they often condemned) and to the ineffectiveness of central policy.31 While it is true that conservatives had no love for marketizing, w estern­ izing econom ic reform because it resulted in un em ploym ent in 1 9 5 0 - 5 2 and the 1960s and also in econom ic inequality, their influence on e c o ­ nomic policy was secondary once the decisions on the form o f the state had b een made. And although the decisions o f 1965 w ere politically sig­ nificant, not for e conom ic reform but for security policy, only a minority among the conservatives would have preferred jo ining the Warsaw Pact and the Council for Mutual E co n o m ic Assistance (C M E A ) as full m em 30 Such m anufacturers w ere identifiable by th eir m em bership in the association o f firms producing on military contract created in the 1980s, the Com m unity for Arm am ents and Military E q u ip m e n t o f Yugoslavia (Z IN V O J). 31 In the (Nicholas) Kaldor version o f the compensation principle in welfare economics, “gainers com p ensate losers”: there is compensation “o f potential losers by gainers, so as to leave the form er with al least the same real incom e as they had enjoyed under the original distribution oi incom e before the change- T h e second version is the (Tibor) Seitovsky prin­ ciple oi “losers bribing gainers”: “T h e payment ol a compensation or b rib e by those likely to he damaged by a change to the gainers from it: a paym ent adequate to dissuade the latter from advocating the change and still leave the potential losers b e tte r off than they were destined to be i f the change w ere to b e made,” (D o b b , W elfare Economics and the Eco­

nomics o f Socialism, 8 4 - 8 5 ) , D o b b also discusses the possible contradictions in both ver­ sions, as well as in the proposal by Seitovsky to jo in the two (8 6 - 1 1 8 )

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hers. Conservatives w ere in conflict with liberals primarily over invest­ m ent p r e fe re n c e s — favoring dom estic producers o f fuels, grains, and capital goods— but not over the country’s international position. They w ere unwilling to challenge the Faustian bargain o f “national com mu­ nism ” that traded in d e p e n d en ce o f Moscow for a special role in world diplomacy and access to W e s te rn finance. F o r most conservatives and liberals, the risks of abandoning this international comparative advantage w ere too great. Y et the policy consensus on a macrosystem s approach to international ad ju stm ent to which scholars attrib ute much o f the success with full e m ploym ent, from Austria to S w e d e n ,32 surely had its source in the choice in the im m ediate postwar period to orient those countries to­ ward the U .S .-o rg an ize d trading and security regim es while retaining suf­ ficient in d e p e n d en ce for that macroeconom ic policy. Contrary to the findings o f the literature on econom ic policies of labororiented g ov ernm ents, th en, the initiative for Yugoslav policy came not from dom estic pressures but from international developm ents. Because those events w ere largely unpredictable, felt mainly through a crisis in foreign accounts or a threat to national security, they tended to preempt system atic organization of dom estic political pressure as well. T h e federal gov ern m e n t a ttem pted to re present the interests of labor— in Kardelj’s redefinition, income recip ients in socialist com munities o f work— but its bargaining was with international capital, not domestic organizations of capital. T o prevent un em p lo y m en t— which was defined as being left without means o f su b siste n ce — the governm ent adjusted regulations in the m icroe con om ic sphere to increase labor’s productivity and to rational­ ize e m p lo y m e n t in accordance with international conditions. (The conse­ q u e n ce s of these adju stments for unem plo yment are the subject of ch a p ter 8.) T h e data on u n em plo ym en t discussed in chapter 6 reveal the path of central eco n o m ic policy m ore clearly than does the political rhetoric of dom estic party factions and independ en t econom ists. Policy cycles can be identified roughly each decade, as changes in national security, foreign trade, and the supply of foreign capital led to domestic policy shifts. The transitional period continued after 1950 until 1957; the next period was 1958 to 1967, then 1968 to 1978, and finally 1979 to 1989. I f there were defining m om ents, such as 1965 and 1974 were said to be, they were rather 1961, when the proportion of the labor force employed was at its maximum and after which increm ental capital-outputs ratios continued to ris e,33 and 1971, after which the already-rising rate of unem ployment es­ calated sharply and un em ploym ent was clearly structural. 12

S e e especially

Leh m b ru ch , “L iberal Corporatism and Party G overnm ent ’; and

Scharpf, “E co n o m ic and Institutional Constraints o f Full-K mploy men t Strategies,” ™ Pavle Sich erl, personal com m unication, Ljubljana, O c to b er 1981, based on un-

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1953-1957 Policy in this first postwar period was governed by the availability o f for­ eign credits (particularly U .S . food and military aid) and the gradual re ­ duction of regional security tensions. T h e y made it possible for the leadership to shift away from the investments of military self-reliance, to proceed with demobilization and cut the defense budget, to increase in­ vestments in c o n su m e r goods and light manufactures for the urban and industrial population and for export, and to increase trade relations su b ­ stantially. T h e end of the Korean W ar ameliorated international shortages and price inflation o f d efense-related raw materials, and the cou ntry ’s terms of trade began to improve. T h e death of Stalin in 1953 revived dehates throughout the E astern bloc on “ncw -cou rse” policies like the ones the Yugoslavs had begun several years earlier. Regional peace seemed secured in 1954 with the end o f the Allied occupation in G e r ­ many, the resolution of the T ries te crisis (which was largely responsible for delaying demobilization of the Partisan army), and the neutralization of the Tru m an D o ctrin e in the Balkans, marked by the Balkan Pact b e ­ tween Yugoslavia, G r e e c e , and Turkey. In 1955 the peace treaty was signed in Austria, and Yugoslav m e m b ership in the Organization for E c o ­ nomic Cooperation op ened the possibility o f b e tte r trade relations with Western E u ro p e and rem oved barriers to emigration. T h e g overnm ent agreed to issue passports upon demand, making open borders a reality for citizens. T h e founding con feren ce of the nonalignment m o ve m e n t the same year brought favorable agreem ents for oil and strategic materials from developing-country allies.34 R appro chem en t with the new Soviet leadership o f G eorgy Malenkov and Nikita Khrushchev brought an end to the Eastern blockade; trade ag reem ents with the Soviet Union for import of heavy weaponry, other military equ ipm ent, and a nuclear reactor; and, in f9 56, ob serve r status in the C M E A . These international conditions made possible a continuation o f the pol­ published studies done on contract in possession of the author. D yker sum m arizes a num ber of studies over th e postwar period (Yugoslavia, 46, 104, 140). The m ove to petroleum fuels occurred in Japan and the U S S K as well; but in Yugoslavia the switch caused a m ajor d eb ate am ong technocrats in 1955—5 8 because th ere were substantial dom estic sources o f en ergy (coal and especially hydroelectric power, for which Yugoslavia’s technical innovations w ere internationally respected) and because o f the costs of user conversion and external dependency. T h e d eb ate began with an en g in eer at Elektroprivreda and continu ed with a 1963 study tor the federal E co n o m ic C h am b er (Pri­ vredna Komora) on capacity use (see the report on the en gin eerin g study in Ekonomski

Pregled, nos. 3 - 5 [1968]). M any accused the main oil company, IN A (Zagreb), o f making profits by im porting m ore crude oil than was needed dom estically and stim ulating demand by getting people to switch. T h e d ebt problem s o f the 1970s and th e persistent political problems with coal m iners, especially in 1968—70, w ere unforeseen.

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icy toward labor outlinc'd in the program o f the sixth party congress in N o v e m b e r 1952. Able to reduce the defense b u d get’s drain on the econ­ omy from its high o f 22 p e rce n t of G N P in 1952 down to 8 . 5 percent in 1957, the g ov ernm ent oversaw a boom period from 1954 to 1957 based on foreign credits that enabled the cheap import of grains, other foods, and raw materials from the W e st (52 .2 p e rce n t of the deficit on current ac­ cou nt up to 1955 was cov ered by grants and only 16.2 pe rce n t by loans).35 Thus “the n u m b e r o f workmen [could] b e reduced in agriculture with mechanization o f state and cooperative farms to improve yields, fn the rest o f agriculture, credits, tax relief, and governm ent regulations aimed to encou rage intensive cropping and the d evelopm ent of small industries to process agricultural goods “in which part of the relieved labor could be engaged. ”:3fi This policy also made possible the idea of a settled citizen soldiery for the territorial defense forces, essential to demobilization of the standing army. In M a r c h - M a y 1953, a second agrarian reform legal­ ized th e end o f the peasant labor cooperatives and also limited private landholdings to ten hectares (over Bakarić s objections), transferring land above that amount to remaining cooperatives to com pensate them for land withdrawn by peasants retu rnin g to private ownership. As the ave­ nue to socialization through market control, the general farmers’ coopera­ tives in the villages w ere given a monopoly over the purchase of private farm ers’ produce and their access to fertilizers, machinery, and improved s e e d s .37 Although the key projects o f the five-year plan of 1 9 4 7 - 5 1 were not com p leted until 1956, in 1953 the leadership confirmed the shift in investm ent policy to light manufacturing and consum er goods and to what Kardelj called a “p re fe re n c e ” for agriculture. T h e adoption ol this policy by th e party’s executiv e co m m ittee in 1954 was accompanied by the trans­ fer o f in vestm ent planning to independ en t funds at each level o f govern­ m e n t (the federal fund was called the General Investm ent Fund, or GIF). N onetheless, unsettled international conditions required the policy’s reaffirmation at a high-level m eeting ol party leaders (.savjetovanje kod druga Tita, or con feren ce with T ito — the informal gathering of close ad­ visers used for the decisions of D e c e m b e r 1948) on S e p te m b e r 25, 1955, 35

M acesich, “M ajor T ren ds in the Postwar Kconomy o f Yugoslavia.” “W h eal imports rose

to an annual average o f 700*00 0 tons in 1952—54 as against only 1 00 ,0 0 0 tons in 1948 -5 1 . , [and] in 1 9 5 5 - 5 8 , . . [to] the very high rate o f over a million tons per annum ” (YVamner,

Revolution in Eastern Europe , 71). An agreem en t in January 195(i (or American wheat, cotton, and lard was the largest Public Law 4 8 0 program for any country to that date, 3fi Kardelj, in his address to the sixth congress o f the LC Y in 1952. 37 T om asevich, “Collectivization o f Agriculture in Yugoslavia”; Rusinow, review of Die

Kooperation zwischen den privaten Landwirt.schaftshetrieben und den gesellschaftlichen Wi-rtschaftso rga n isa t ione n , by Ivan Lon carević; “Poljoprivredna stanovništvo,” in Privreda ENRJ u periodu 1947-1956; Savez Komunista Jugoslavije, Borba Komunista Jugoslavije za socijalističku demokratiju; W arriner, Revolution in Eastern Europe,

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followed in O c to b e r by a formal consultation with econom ic experts. T h e next year, the lead e rs ’ assumptions about the international political co n ­ juncture of regional security and peaceful coexistence w ere again in te r­ rupted. T h e formation o f N A TO in 1948 and the Warsaw Pact in May 1955 had already revived internal party disputes over international align­ ments that the nonalignm ent m o ve m e n t had not fully dispelled. T h e lib ­ erals pressure in favor o f the territorial defense forces in the republics, which would allow the standing army to b e cut, and in favor o f republican authority over manufacturing and investm ent was undercut by the global debate on nuclear warfare and d eterren ce , which gave renew ed life to the YPA and to the institutes and personnel engaged in the dom estic atomieenergy pro g ram .38 T h e prospect that American military aid would end in 1957,39 the growing hostility o f the U .S . Congress at Yugoslavia’s rap­ prochement with the U S S R and the organization of the nonalignment movement, and then the Suez crisis— which endangered both oil sup­ plies and the principle o f nonalignm ent— s eem ed to bring a renewal of the threats o f war and isolation o f the late 1940s. Unrest in Poland, the occupation o f Hungary in O c to b e r 1956, and Soviet cancellation once again of new trade ag reem ents and credits the next F e b ru a ry 40 forced a delay in the second five-year plan (intended for 1 9 5 7 - 6 1 ) , and the lea d e r­ ship re verted to some e le m e n ts of forced self-reliance and defense p re ­ paredness. This included the reinstitution, betw een 1956 and 1958, o f the volunteer youth brigades that had b ee n disbanded “fo rever" only three years before. T h e r e was a renew ed effort in the spring o f 1957 at the “socialist transformatio n” of agriculture, called a “break-through on a nar­ row front” in the party platform written at the end of the y e a r.41 C om m on or uncultivated lands w ere taken into the public sector (a form o f “e n clo ­ sures”).42 F a r m e r s ’ cooperatives received exclusive control over new in18 Until 19 61 — the high point o f investm ent in nuclear en ergy— this program received 60 percent o f the country's expenditures for research and developm ent S D ed ijer, "T ito ’s Bomb,’ discusses the origins o f the program and gives some data on it. On the Soviet nuclear-warfare deb ate, see Garthoff, “T h e D eath o f Stalin." 39 Most studies (for exam ple, Lainpe, Prickett, and Adamovic, Yugoslav-American Eco­ nomic Relations since World W ar II) argue that the Yugoslavs requested term ination o f U .S. aid But this must have b een only a formality to protect the idea of ind epend ence, for they knew aid was bein g ended (as it was at the same time for similar recipients, from Spain to South Korea). 1(1 They w ere reinstated in July 1957, and Tito and Khrushchev m et secretly in Bucharest in August. B u t in N ovem b er an “antirevi.sionism" resolution was read at the Moscow c e le ­ bration o f the O c to b e r Revolution and the draft program o f the L C Y platform was criticized strongly— and in D e c e m b e r the credits w ere again retracted, for another five years. 41 W arriner, Revolution in Eastern Europe, 79; the reference again is to Stalin's 192S speech on collectivization 12 This was accom plished with two laws on land use in 1957, the Uncultivated Land Act and the Expropriation Act.

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v e s tm e n t in the private sector, to encourage their extension from marketing into production. And private fanners w ere required to join district m arketing hoards (business leagues, or poslovni savezi)43 and en ­ couraged to form jo in t ventu res with social-sector fanners in order to get access to d ev elopm en t credits, agricultural services, and machinery. N onetheless, at the end o f 1956, Kardelj argued that the “lessons of H u ngary’’ required a new “lib eralization.’ T h e econom ic growth in 1957­ 61 would eventually be based largely on foreign com m ercial loans and suppliers’ credits that had to b e repaid with interest (in 1 9 5 6 - 6 0 , 10.7 p e rc e n t o f the trade deficit was covered by grants, 4 3 p e rce n t by loans) and on revenues from commodity exports. T h e latter seem ed to require trade lib eralization.44

1958-1967 T h e difficulties with aid now forced to a head a d eb ate already in progress about the primary cause o f the persistent trade deficits. Liberals among the politicians, influential economists, and industrialists from the mored ev eloped western republics (above all Slovenia, personified by Boris Krajger) w ere convin ced that the solution was export orientation and link­ ing up with the process of E uropean trade integration that was taking a leap forward in 1958 with the Treaty o f Rom e (a policy they called “inte­ gration into the international division o f labor ”).45 F earin g the conse­ q u e n ce s o f exclusion from this process on the basis o f Yugoslavia’s particular neutrality and governm ent-negotiated trade, liberals pointed to the boom in processing industries that favorable prices and cheap im­ ported raw materials had brought. This was also the era o f fascination in socialist countries with the potential for econom ic growth and human lib­ eration prom ised by the “scientific-technological re volution,” a view al­ ready pre sen t in Kidrie’s Slovene model. Yugoslav liberals accordingly argued that growth should b e based on technological modernization through im ported W e ste rn machinery and cheaper production supplies. T h e latter would eventually be replaced by domestic supplies when for­ eign price com petition forced domestic producers o f raw materials and wage goods to raise their productivity and cut costs. In opposition to this 13 S e e chap. 3, n, 67 H L ju b o in ir Madžar, personal com m unication.

45

O n the co n seq u en ces for Yugoslavia o f the decisions by W estern European countries to m ake their cu rren cies co nvertible, end the European Payments Union, and create the Eu ropean M onetary Fu nd in 1958, see the article by B Filipović in the journal of the National Bank, Finansije (May 1959). Filipović also discusses the change in 1958 in the role o f th e U .S . dollar and the m ajor influence this change had on world trade, on the IM F , and on econ o m ic aid ►

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view, the developm entalists, whose professional base was most closely identified with Belgrade, had b ee n arguing throughout the 1950s that the root cause of the trade deficit was the importation of food, especially wheat,46 as a result o f low agricultural productivity at h o m e .47 In 1958, as the liberals had hoped, the decision was taken to seek m e m ­ bership in the G A T T , to obtain IMP’ standby credits to cover the difficult transition o f trade liberalization (in 1958 and again in 1961 and 1965), and to begin a new stage of e c onom ic reform and institutional change n e c e s ­ sary to m e e t the G A 'IT conditions. Arguing that by 1958 Yugoslavia had reached the “middle level o f developm ent, ” by which they meant that its natural resources w ere fully utilized, its econom y stable, and its industry able to satisfy most d om estic n e e d s ,48 the leaders also announced that there was no longer any need for federal investm ent in developm ent. T h e republics should assume responsibility for their own d evelopm ent policy, and territorial allocation of investm ent, foreign exchange, and supplies should accordingly replace the sectoral plans. T h e socialization of invest­ ment (as it was called) transferred funds from the G I F and sectoral banks (for industry, agriculture, and foreign trade) to republic-level (territorial) banks operating on com m ercial term s within their territory. Co m m u nes assumed responsibility for financing social services in place of federal grants-in-aid. By 1961, liberalization had replaced the multiple' exchange coefficients in foreign trade and diflerential tax rates appropriate to sectoral planning with uniform customs tariffs and tax rates, removed agricultural p ro te c­ tion, and reem phasized enterprise profitability. Because full “econom ic independence 49 was b eing granted to the republics while substantial dif­ ferences in levels of d ev elopm en t remained, the leaders also agreed to create a com pensation mechanism through low-interest loans to republics w In 1 9 5 1 - 5 4 , food m a d e u p 26 p e r c e n t o f total i m p o r t s — t h e t h i r d - h i g h e s t p e r c e n t a g e in Europe, a ft e r G e r m a n y a n d tile U n i t e d K i n g d o m , a n d t h e h ig h e s t p e r c a p i ta (P riv red a FNRJ, 1957, 280). P r iv r e d a F N R J u p e r io d u 1 9 4 7 - 1 9 5 6 la m e n t s , " I t ’s a s h a m e tha t, in th e return to t h e e a r l i e r po si tio n [on c o o p e r a t iv e s ] , t h e re s u lt s a c h i e v e d w e r e n t u s e d at least to co mbi ne f a r m s t e a d s of C o rn ie r c o o p é r a n t s . ” T h e a gra ri a n law ol M a y 1953 d i d i n c l u d e ar o n dacija ( c o n s ol id a tio n o f a s in gl e f a r m e r ’s p a rc el i/. e d ho ldi ngs ) for n e w e s t a t e s a n d e n c l o s u r e s of existing o n e s , b u t it w as n o t e x e c u t e d . I n v e s t m e n t in a g r i c u l t u r e in 1 9 1 7 - 5 6 r e p r e s e n t e d 9 p e rc e n t o f e c o n o m i c i n v e s t m e n t s a n d 7 p e r c e n t of total i n v e s t m e n t s in t h e e c o n o m y (I’r ivreda F N R J u p e r i o d u 1 9 4 7 - 1 9 5 6 , 161), 17 See, l o r e x a m p l e , t h e c o m p e n d i u m by e c o n o m i s t s o f t h e d e v e l o p m e n t a l i s t school edited b y R. St o j an o v ic , Y u g o s la v E c o n o m is ts on P r o b le m s o f a Socia list E c o n o m y ; C o b cl jic , Politika i m e lo d i p r i v r e d n o g r a zv o ja J u g o s l a v i a , 1 9 4 7 -1 9 5 6 ; a n d p a rt ic u la rl y P r iv r c d a FNRJ, 2.957. IS C i t e d in U 'S f o r c e s a r m é e s d e la R S F Y ; this la n g u a g e also p e r m e a t e s th e s p e e c h e s of the e i g h t h p a r t y c o n g r e s s in 1961 (see O sini h o n g r e s SKJ). 19 Ti to, a d d r e s s to t h e e i g h t h p a r t y c o n g r e s s , D e c e m b e r 1964, in O sini k im g r e s S K J , 3S,

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and regions designated as less d ev elo p e d .50 It would b e based on a 2 p e rc e n t (in place o f the previous 6 percent) capital tax on public-sector firms, and b ecau se these firms w ere within republican jurisdiction, the new federal fund would b e financed by republican taxation. In the third social plan o f 1 9 6 1 - 6 5 , emphasis was placed on “regional grow th.” T h e dual push for im ported technology and export promotion also af­ fected the army. It chose to modernize technologically by purchasing ar­ m am ents and licenses in world markets and, in order to pay for this in vestm ent, to increase the export o f arms. T h e policy o f export promo­ tion e xtend ed to services as well, most importantly the fu rther develop­ m e n t o f the tourist industry on the Adriatic coast, com mercial extensions o f th e m aritim e fleet, and the export o f labor (remittances from Yugoslav workers abroad soon cam e to cover more than half o f the deficit on cur­ re n t account). W h ile the dom estic reforms o f 1 9 5 8 - 6 1 were pre occupied with the lib­ eralizations d em anded by G A I T m e m b ership and the orientation toward E u ro p e a n trade, international price com petitiveness, and export promo­ tion, Tito e n te re d his most d eterm ined phase o f nonalignment. This in­ cluded advocating econom ic assistance for poorer countries as a faster road to peace than military blocs and (Tito him self having decided not to pursue a nuclear force) campaigning against nuclear weapons. T h e painful dom estic ad ju stm ent to global markets and to the criteria o f foreign com­ petition coincided, as in 1 9 5 0 - 5 2 , with two bad harvests (in 1960 and 1961) and with unfavorable conditions abroad, A serious recession oc­ curred in W e s t e r n econom ies in 1 9 6 0 - 6 1 and again in the mid-1960s, and relations with the superpowers w ere anything but calm in 1 9 6 0 -6 3 . The Yugoslavs party program o f 1958 and th eir choice for liberalization and a human-capital approach in response to Soviet reje ction brought a repeat o f the propaganda war of 1 9 4 8 - 4 9 , with the Moscow Declaration of De­ c e m b e r 1960 and then the sustained C h inese attack on the Yugoslav “w a y .”51 B u t the United States also o b je c te d to the Belgrade conference o f nonaligned nations in 1961 by cutting off the econom ic aid it had only ju s t granted when Yugoslavia’s quarrel with the U S S R revived. World 50 It was called the Fu n d o f the Federation, later changed to the Federal Fund for More Rapid D ev e lo p m e n t o f Le ss-D ev e lo p ed R epublics and Regions and then to the Federal F u n d for th e C red itin g o f th e Insufficiently D evelop ed Republics and Provinces to empha­ size its shift from grants-in-aid to repayable credits; finally, "regions” or “provinces” was replaced with “Kosovo”, T h e G I F continued to operate until January 1, 1964, however, until quarrels about the new fund could be stilled. 51 T h e new party platform o f 1958 was published in English as Yugoslavia's Way Criti­ cism o f M oscow ’s attack was taken up in particular by Veljko Vlahovic in his speech to the fourth party p lenum in 1962; Edvard Kardelj responded to the C h inese in his 1960 Socialism

and War,

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tensions skyrocketed with the Sino-Soviet split of 1961, the conflict b e ­ tween K h ru sh ch e v ’s pronuclear and aggressive third-world policies on the one hand and K e n n e d y ’s conventional-force buildup and focus on E u ­ rope on the other, and then the 1962 Cuban missile crisis and 1963 nuclear-force disputes within NATO. Once again the g ov ernm ent re acted by shifting the emphasis in invest­ ment policy b ack to basic industries during 1960 and 1961, and in 1963 the five-year plan for 1 9 6 1 - 6 6 was abandoned in midstream. M oreover, the combination of d om estic stagflation in response to the econom ic r e ­ forms, rising trade deficits after 1960, and disquiet over international events gave new life to the b itter political d eb ate over the reform, the federal g o v ern m e n t’s investm ent policy and its role in directing the rate and structure o f developm ental investm ent, and the remaining monopoly of the YPA over d efense financing. This d ebate end ed soon after relations improved with the U n ited States and the U S S R during 1963 and after the signing of the partial N uclear T e s t Ban Treaty in January 1964. At the m om en tou s eighth party congress of D e c e m b e r 1964, Tito rose to chastise party delegates for failing to com plete the econom ic reform, "although a decision on this m atter was arrived at a long tim e ago.” D e ­ spite one last effort by representatives o f Serbia to have agricultural pro­ duction valued “a d eq u a tely ,” the congress docum ents referred to federal transfers for agriculture and developm ental investm ent as “wasted aid” to less-developed republics that should be limited to the com pletion o f c u r­ rent projects and to the kind o f “technical and personnel assistance” that Yugoslavia was sending to less-d eveloped countries. D o m e s tic capitalgoods industries, many built largely for military self-reliance with govern­ ment funds, w ere labeled “political factories” that ought to b e closed. A reduction in g o v ern m e n t investm ent expenditures, accom plished by transferring to e nterprises far greater responsibility for th eir own invest­ ment (primarily from internal funds), was called a victory for “workers’ control over “political forces” in investm ent decisions that properly b e ­ longed to “direct p ro d u ce rs .”52 With the end o f the political battle over reforms in 1964 and the c o m ­ pletion of the two-stage liberalization for G A T T m e m b ership, the year 1965 is usually identified as a watershed— the year of the Reform , when the campaign surrounding two currency devaluations, two price revi­ sions, and a new dinar brought the liberal policies h om e to the urban public. T h e c o n s e q u e n ces o f the reform w ere also felt in a severe re c e s ­ sion in 1 9 6 5 - 6 8 . Probably far more im portant than econom ic reform, though, w ere the drastic worsening in Yugoslavia’s terms of trade and the 52

Osmi kongres SKJ (S ee “P ractice and T heory,'' English version of congress p rocee d ­

ings, p. 55.)

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W e s t e r n recession, which dim med hopes for export-oriented growth.53 T h e removal o f tariff protections after 1961 did cause a mass closure of private farms unable to co m p ete with cheap imports. T h e resulting con­ centration o f landholdings re ceived a boost from the export-oriented pol­ icy o f agro-industrial com plexes and the intensification campaign for ec o n o m ic rationalization in 1 9 6 5 - 6 7 , which brought further enclosures, com massatio n, and mechanization o f state farm s.54 Restrictions on the purchase o f agricultural machinery for private use cam e to an end in 1 9 6 4 .55 T h e g o v ernm ent chose to end its reliance on farmers’ cooperatives as interm ediaries betw ee n the social and private sectors, removing all rem aining federal rebates, subsidies, and investm ent credits to agricul­ ture and encouraging direct contracting betw ee n processing industries and private fa nn ers to support agro-industrial complexes (kombinats ). T h e federal fund for loans to less-developed regions began to operate (after quarrels among the republics over redistribution had delayed it four years), b u t th e effect was to red uce sharply interrepublican transfers for investm ent after 1965. At least as important a part o f the liberal victory sealed by the eighth party congress was its decision on defense: to forgo nuclear deterrence and orient military forces to the choice of conventional d eterren c e in E u­ rope. D e fe n s e policy would thus place the territorial defense forces on a near-equal footing with a smaller, more technologically sophisticated standing arm y (a move marked by forced retirem ents of senior army offi­ cers in 1964) and woidd choose in 1965 to keep the country outside the W arsaw Pact (a decision revealed by the absence o f Yugoslav delegates at the W arsaw Pact consultative political m eeting in 1966). A massive politi­ cal purge and dem otions o f military, internal-security, and party person­ nel (identified with the fall o f Aleksandar Rankovic at the fourth plenum in Ju ly 1966 but in fact having begun in 1964) followed the sharing of the last province o f federal in d e p e n d en ce — jurisdiction over foreign affairs and d efen se — with the repu blics.56 53 R ecession s in th e U .S . econom y occurred in 1 9 4 8 -4 9 , 1 9 5 3 -5 4 , 1 9 5 7 -5 8 , 1960-61, and 1 9 6 5 —6 7 — all years of difficulty in the Yugoslav econom y (Shonfield, Modern Capital­

ism, 1 0 -1 8 ) . 54 S e e M iller, “Socialism and Agriculture in Yugoslavia”, and Rusinow, review of Die

Koope ration. 55 Purchases then skyrocketed (Olga Supek, personal communication)

T o judge by

farm ers' com plaints in parliam ent that they found im ported agricultural machinery less suited to th eir conditions than dom estic products, which had b eco m e less available, this was not a policy to sell dom estic inventories when external demand was falling, 5(3 S e e Ilo n d in s, The Yugoslav Community o f Nations, 2 7 0 - 7 2 , 3 3 1 - 3 2 . T h e story behind Rankovic s fall from pow er remains to b e told, but the conventional wisdom— that it was due to im happiness with th e excessive power lie was said to wield domestically through the se c re t police (there w ere charges that lie was even bugging President T ito ’s private chain-

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At the same time, the policy toward foreign aid and finance e ntered a new era as a result o f the mounting foreign d ebt and the substantial loss of federal re v e n u e due to the successive devolution and socialization o f b ud ­ getary expenditures and the effect of trade liberalization on customs du­ ties. Instead of a declinin g d ep en d e n c e on foreign capital, as the economic strategy had intended, there was a growing dem and for it. T h e federal g o v e r n m e n t’s increasing reliance 011 foreign monies for domestic investment and its ev e r more frequent resort to refinancing and recycling of its foreign d eb t led it to seek new sources of foreign capital— one re ­ course being liberalization of rules on foreign investm ent. A new round of World Bank loans provided the bulk o f the credits for investm ent in new or modernized infrastructure— roads, harbors, and railroads (the credits were distributed, after negotiation, to republic p ro je cts).57 E nterprises, commercial banks, and republican governm ents gained the right to e n te r international capital markets independently. Legislation revised rules on social ownership to encourage jo in t ventu res that would bring foreign equipment and capital directly to domestic producers, without the need for hard cu rre n cy or new g ov ernm ent debt. Alter 1965, the d ep en d e n ce of dom estic production 011 imports of Paw materials and in term ediate goods (including capital equipm ent) also grew. T h e s e purchases, however, w ere supported not by the favorable terms of public assistance enjoyed in the 1950s, but with com mercial and Eurodollar short-term loans.58 Not alone among developing countries in facing the decline o f public, long-term loans in the 1960s, the maturation of debt assumed in the 1950s, trade deficits, and the need to seek debt relief, Yugoslavia managed to delay paym ent o f E xp o rt-Im p ort Bank debt until 1 9 6 8 - 7 1 by consolidating its d eb t from 1950 and the 1961 program loans. It red u ced the amount of its Public Law 4 8 0 obligations and d e ­ ferred them to 1 9 6 8 - 7 2 , and gained new assistance of $ 1 .2 billion from the U .S. g o v ernm ent (to be repaid after 1970). In 1967 it obtained an­ other I M F loan, and during 1 9 6 5 - 6 8 managed to persuadí1 many E u ­ ropean g ov ernm ents to refund d ebt until 1 9 7 0 .59 hers) and with his iron-fisted rule over Kosovo province— ignores im portant events for Yugoslav foreign policy and in the dom estic conflict that linked dom estic econ om ic policy with foreign-trade and defen se policy (for exam ple, the conflict in the U S S R o ver n u clear vs, conventional forces; th e term ination in S e p te m b e r 1964 o f K hru shchev’s sovnarkhoz reform and the rep lacem ent o f the regional councils vvitli the m inisterial and branch-indnstry struc­ ture; and th e beginnings o f Yugoslav participation in Warsaw Pact co m m ittees in mid-1965, which was reversed the next year at exactly the tim e oi Ran ko vic’s purge).

r?7 D ata and background can b e found in Lam pe, Prickett, and Adamovic, YugoslavAmerican Economic Relations, 3 5 - 3 8 , 64, 1 7 4 -7 6 . r,s S e e M. Unkovic, “Inostrani kapital u jugoslovenskoj privredi, 59 Bitterm an , The Refunding o f International Debt; see also Lam pe, Pric kett, anti Ad­ amovic, Yugoslav-American Economic Relations. On the availability oi new monies because

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1968-1978 I f th e re w e re any lingering doubts about the advisability o f the devolution o f authority over foreign affairs, particularly defense (and the army cer­ tainly had them), they w ere erased by external events in 1 9 6 7 - 6 8 . The Arab-Israeli war broke out in 1967, with firsthand participation by a Yugoslav conting ent in the UN peacekeepin g force. In August 1968, War­ saw Pact troops invaded Czechoslovakia to put a stop to an econom ic reform similar to the Yugoslav one. Finally, there was an escalation of the war in Vietnam . K a rd e lj’s parliamentary address at the end o f 1967 o p en e d the next stage o f “socialization,” which would culm inate in the 1974 constitu tion; that stage began with the army as concern rose over national security. T h e new strategic doctrine o f “all-national d efense” (a relabeling o f the “p e op le ’s war” concept from wartime and 1948—50) gave th e republican territorial forces equal status with the YPA and set in mo­ tion th e next stage o f decentralization o f national security and socialization o f th e coe rcive functions o f the state (military and police). All-national d efense (initiated in 1964 but formally adopted by the party leadership only in N o v em b e r 1968 and enacted in F e b ru a ry 1969) would make firms and local gov ernm ents th e core o f the defense and security system. Ac­ cording to the sy stem ’s principles, this integration o f military functions into civilian institutions at the popular level— the next stage in the “with­ erin g away o f the state” through its socialization— also required fuller party supervision o f the army and coordination with it in central party co u n cils.60 T h e process o f am ending the 1963 constitution b etw een 1967 and 1971 confirmed the change in foreign affairs. It also finalized the transfer to republican party c om m ittees o f control over cadre appoint­ m ents (in 1969) and the transfer o f the remaining federal bureaucracies to th e republics (in 1971), with coordination at the federal level by com mit­ tees o f republican delegates. Successful p o stp onem ent o f the foreign d eb t until 1969 m eant that eco­ nom ic policy could concentrate on rebuilding foreign hard-currency re­ serves. E xp o rt promotion to W e ste rn markets continued to have priority, so m uch so that in 1967 exporters w ere even required to get prior ap­ proval to export to the clearing area. A continuin g decline in W estern dem and for Yugoslav exports and the slow growth in developed countries in 1 9 7 0 - 7 1 , 61 however, led firms to seek markets in developing countries o f growing com petition b etw een U .S . and European hanks, see G riffith-Jones, “T h e Growth o f M ultinational Ban kin g.” fi0 T h e use o f in telligen ce from th e party unit within th e arm y lo bring trumped-up charges against Rankovic in 1966 and justify his forced resignation suggests that party control over th e arm y had b een won earlier. f>1 T his period also saw the steep est rise in comm odity prices since 1950 (International L ab o r Office, Employment, Growth, and Basic Needs, 2 6 - 2 7 )

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instead (especially India and Egypt). But the global expansion of U .S . and European com m ercial banks in the late 1960s provided a new source of trade financing, and in 1970 Yugoslavia succeeded in negotiating a trade agreement with the E uro pean Com m unity. In 1971, the g overnm ent fur­ ther liberalized the rules on foreign investm ent and took another I M F standby loan with its condition of a stabilization policy. To prom ote ex­ ports, it devalued the cu rrency annually from 1971 to 1974 (twice in 1971), and it raised the proportion o f foreign-exchange earnings that firms did not have to sell to the National Bank. Although the new constitution was not promulgated until 1974, the fundamental changes in the international environm ent in 1973— with the unilateral ab ando nm ent of Bretton W oods by the United States in the sum m er and then tin: first O P E C oil-price shock that fall— reinforced the shift already taking place after 1970 among Yugoslav firms to domestic suppliers or to suppliers and export markets in the East and nonaligned world. T h e s e changes also brought a sharp change in econom ic policy. At first the g o v ernm ent continued on the road to currency convertibility, creating a limited foreign-exchange market in May and shifting in Ju ly to a managed floating exchange rate. But the oil-price rise alone increased the trade deficit (or 1974 by 22 percent. T h e rise of W e stern European pro­ tectionism, with unforeseeable nontariif barriers against Yugoslav goods (such as the outright ban on Yugoslav b e e f imports in 1974 and ad hoc prohibitions on textiles, steel, ships, and b e e f in 1975), followed by the West G erm an recession of 1 9 7 5 - 7 6 , which sent ever-larger num bers of Yugoslav fiastarbciter (guest workers) packing, wreaked havoc with the balance of payments and the westward orientation of governmental policy. In contrast to the concerted effort in the 1960s to red uce the proportion of trade on clearing accounts and increase trade in convertiblecurrency markets/’2 the trade deficit and the needs of dom estic manufac­ turers forced Yugoslav firms to look east, especially to the Soviet markets, for import of production supplies (above all oil) and for export of the m a­ chinery, ships, footwear and clothing, electrical e q u ipm ent, and pro­ cessed foods excluded from W e stern m arkets.63 T h e altered global terms of trade also made domestically produced raw materials, energy, basic chemicals, and minerals less costly than imports and more saleable in Western markets, as evidenced by the rising share of primary com modities in relation to higher-value-added goods in Yugoslav exports after 1 9 7 4 .64 (l"'2 Exports to clearing-aeeount con n in e s w ere virtually stagnant in 1 9 6 5 -6 9 . 6:1 Exports to O E C D countries fell from an average ol 5 5 .2 percent o f total Yugoslav exports in 1 9 7 1 - 7 3 to 4 0 .5 p ercen t in 1 9 7 4 - 7 8 ; exports to C M E A countries rose from an average o f 3 5 , 6 p erce n t in 1 9 7 1 - 7 3 to 43 peree.nl in 1 9 7 4 -7 8 (Tyson, The Yugoslav E co­ nomic System , 88-91). M E co n om ic Com m ission for Eu ro pe, “T h e Relative Perform ance o f South European Exports,

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This shift in investm ent priorities has b een wrongly billed as a conser­ vative political reaction to the un em ploym ent o f the 1960s and as a policy of import substitution over export promotion. Instead, it re presented a shift in the kinds o f exports the country could and did sell. M oreover, the interruptio n o f d e te n te in E u ro p e and growing international tensions re­ vived the g o v e r n m e n t’s concern for defensive self-sufficiency. T h e result­ ing shift in investm ent priorities to defense-related industries and stocks conc urred with the rising dem and from alternate export markets and Yugoslav manufacturers for che a p e r domestic supplies.'’5 By 1969, these international tensions already had the YPA general stafl concerned about d efense p repared ness and financing for modernization. In 1974, the tenth party congress em phasized “the necessity of building up and developing the YPA as the armed force o f the working class and all the nations and nationalities of the S F R Y [Socialist Federal R epublic o f Yugoslavia].’ '’6 Nor was there any reversal in the perceived threats to national secu­ rity. In 1977, the new American administration refocused defense policy onto E u ro p e and N ATO began another buildup o f conventional troops (m atched by the W arsaw Pact the next year); the Soviet Union in­ vaded Afghanistan in 1979; and the superpowers failed to complete a nuclear-nonproliferation treaty. T h e se events heightened the Y PA ’s in­ terest in new weapons systems and its concern over the preparedness of the territorial d efense forces; by 1 9 8 0 - 8 1 , there was even renewed in­ terest in a d om estic nuclear force and nuclear energy to reduce oil d ep en d e n ce. In contrast to the unfavorable conditions in capital markets during the similar policy shifts in 1 9 4 8 - 4 9 , 1 9 5 6 - 5 8 , and 1 9 6 0 - 6 1 , the supply of recycled O P E C dollars in W e stern capital markets made it possible after 1973 for Yugoslavia to service its d ebt and finance balance-of-payments deficits with escalated foreign borrowing in place of commodity-trade earnings from the W est. That supply also favored the investment policy of the period. W orld Bank loans after 1975 supported investm ent in trans­ portation and agriculture/’7 and U .S . and European banking consortiums 05 T h e 1 9 7 6 - 8 0 social plan, adopted a year late because o f conflicts am ong republican leaders, aim ed to c orrect the deficit and reduce the import d epen d en ce of dom estic produc­ tion by investing in shipbuilding, agro-industry, tourism, ferrous and nonferrous metals, basic chem icals, eq u ip m en t, synthetic rubber, infrastructure, electric power, coal, petro­ leum, and gas (S ch rcn k, Ardalan, and El Talawy, Yugoslavia: Self-Management Socialism and the Challenges o f Development, 209; Chit lie, Industrialization and Manufactured Ex­ port Expansion in a Worker-Managed Economy, 106). m Les forces années, 861T. Just as the all-national defense doctrine was publicly pro­ claim ed only five years after its adoption in 1 9 6 4 -6 5 (at the ninth party congress in 1969), th e formal an no u ncem en t o f this course cam e only five years a fter the shift in policy (Bebler, “D ev elo p m en t o f Sociology o f Militaria in Yugoslavia,” 5 9 - 6 8 ) . (’7 Such loans am ounted to $7 50 million in 1977 and 1978 alone.

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financed joint ventu res in energy and petro chem ica ls.1’8 liven greater freedom was granted to banks (in 1975) and enterprises (in 1977) to in­ crease th eir foreign reserves by borrowing directly in foreign capital mar­ kets, leading major E uro pean banks to complain loudly about the rapid proliferation of unregulated borrowing requests and to demand that the federal gov ernm ent rein them in.*’9 After 1975, as an incentive to improve trade perform ance and d eb t repayment, the governm ent transferred co n ­ trol over half of customs re venues to manufacturing and foreign-trade firms through social funds at the federal and republic levels (“sellmanaging com m unities o f interest for foreign econom ic relations ). As the system's principles required , managem ent of these funds, and therefore a share in Ibreign-trade policy, was handed to the representatives of firms earning export revenues. T h e balance-of-payments account was also sub­ divided am ong the republics, each of which was assigned a proportion of foreign credits to which it had a “l ight and which it was obliged to repay. A further trade a g re em en t with the European C om m u nity was signed in December 1976, and talks began with the European F r e e Trade Associa­ tion in 1979.

1979-1989 Both legs o f e c onom ic policy after 1973— foreign trade and foreign finance— buckled under the external shocks of 1 9 7 9 - 8 0 . T h e short-run response was, as usual, to seek further assistance Irom the I M F . T h e E C trade a g re em en t o f 1976, up for renewal in 1979, unexpectedly ran into difficult bargaining. Talks on greater cooperation b etw ee n the C M E A and the E C that had encouraged thoughts of a real end to trade barriers in Europe cam e to an abrupt halt with the invasion of Afghanistan, In spring 1980, the jump in interest rates on the U .S . dollar sent Yugoslavia’s d ebtservice obligations soaring, as most of its d eb t was denomin; ited in U.S. dollars and 5 8 p e rce n t o f that d eb t was in high-interest com mercial loans.70 At the same time, Yugoslav trade in markets in the East and South was hit by the second price rise for O P E C and Soviet oil (by then (,,li Petrol Ljubljan a financed a natural-gas pipeline in the Eurodollar market through Bankers’ Trust International; INA, the Zagreb oil company, lorm ed a joint venture with Dow Chem ical in 1978 to build a petrochem ical-processing plant on the Croatian island of Krk; and a jo in t venture with Westinghou.se built a nuelear-power plant (Krško) in Slovenia. ® G reen , “C o m m e n t,” 2 4 8 - 4 9 , 7n Ledic, "D e b t Analysis and D eh t-K ela led Issu es.” T h e debt went Irom $2 billion in 1969 to S20 billion in J9 8 2 ; the h ard-cuirency d ebt-service ratio ju m p ed to 24 percent in 1978 and to 3 5 p ercen t in 1980; and the average burden o f repaym ent in the period 1 9 8 3 - 8 6 was 85 billion a year. T h e country began repaying princ ipal in 1985. S e e D yker, Yugoslavia, 1)4 -28 ; and Lam pe, Pricket t, and Adamovic, Yugoslav-Anwriran Economic Relations, 148­ 89.

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Yugoslavia was paying for it in convertible currency). T h e collapse in the prices o f primary com m odities, in part b ecau se the United States, F r a n c e , and others w ere dumping massive stockpiles of strategic raw ma­ terials onto the world market, sent prices o f Yugoslav mineral exports such as cop p er and aluminum p lu m m etin g .71 T h e trade deficit reached a record high in 1979, wholesale bankruptcy threatened dom estic industry as capacity utilization fell un der 7 0 percent, and foreign reserves were so low that an I M F cred it o f $ 3 4 0 million was drawn in May, followed by a re q u e st for a com pensatory loan facility.72 T his tim e, how ever, W e s te rn com m ercial banks chose to stop lending to E a s te r n E u r o p e — including in that category Yugoslavia— on the grounds that th e Polish crisis o f 1 9 8 0 - 8 1 would spread. D e sp ite the world recession in 1 9 8 0 - 8 3 (which reduced the net contribution of remittances from Yugoslav workers abroad to only 2 5 percent o f the trade deficit by 1981), th e re was no choice but to reem phasize com modity exports to hard -cu rrency markets and to negotiate with the I M F (now also taking a m u ch firm er stance on d eb t-repay m ent conditions) to “restore foreign c o n fid e n c e ,” as new prim e minister Milka Planinc’s mandate read in 1982. W h ile negotiations proceed ed on what was to b e c o m e the first of the I M F ’s th ree -y e ar standby facilities to developing countries, the gov­ e rn m e n t sought once again to refinance and reschedule existing debt (against vocal opposition within the assem bly and sections o f the party).73 T h e all-out campaign after 1980 for d eb t repaym ent through stabiliza­ tion and export promotion included another “econom ic reform ” to reor­ ient d om estic institutions to W e stern markets and foreign price com petition (“integration into the international division o f labor”) and to increase productivity in manufacturing, again by technological moderniz­ ation through imports. Ju st as in 1 9 5 9 - 6 0 , planners in Slovenia had be­ co m e increasingly worried after 1975 over their loss o f world market share, their technological ob solescence relative to W e stern traders, and a brain drain o f technically skilled professionals to Austrian firms that paid h igher salaries, while the drop in world market prices for most raw mate­ rials o n ce again made it che a p e r to import than to buy from domestic producers. A long-term stabilization program, written by a committee 71 Anton B e b le r (Slovene political scientist and defense expert), personal communication. 72 T h e Yugoslavs m ade th e request on th e grounds that the poor harvest that year, the earth qu ake in D alm atian tourist areas, and the declin e in rem ittances from workers abroad w ere beyond th eir control. 73 Substantial long-term loans w ere obtained in 1981 and 1982. After difficult negotia­ tions organized by th e U .S . ambassador and State D epartm ent am ong fifteen W estern coun­ tries, th e I M F , th e W orld Bank, six hundred com m ercial banks, and the Bank of Intern ation al Se ttlem en ts, a $2 billion loan package was arranged in January 1983- T he IMF standby loan o f 1 9 8 1 - 8 3 was followed by a second one in April 1984

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chaired by the S lovene Se rg ej K raig her,74 was adopted by the federal assembly in July 1983, and a new constitutional com mission established in 1983 produced a set o f 130 altered articles and 29 am end m ents to the constitution to be d eb ated first by the public, then within the party, and then in the assem bly, b eginning in January 1 9 8 6 .75 The d eb a te over reorientation to the W e s t was, as it had b een in 1 9 6 1 ­ 63, com plicated by the international situation. On the econom ic side, there w ere again signs o f op ening in the W est. In 1985, the E C began a new stage of m onetary integration (scheduled for com pletion in 1992), the CM EA and the E C resum ed the negotiations stalled in 1979, com m ercial banks reversed their lending policies dramatically, and in the U S S R P res­ ident Mikhail G orbach e v sped up the process of econom ic reform with perestroika and then glasnost. B u t national security rem ained p ro b le m ­ atic. T h e Croatian assembly and public opinion in Slovenia (especially through the Socialist Alliance-financed maverick youth weekly Mlailina and the opposition intellectu al jo urnal Nova Revija) began to insist that under the prevailing international conditions there was no longer any need for a standing arm y and that the territorial defense forces within the republics w ere sufficient. T h e army perceiv ed a very different world. E n ­ gaged in maintaining martial law in the rebellious province of Kosovo, alarmed at the rising social disorder and political d iscontent over the aus­ terity policies o f d eb t repaym ent, and fearing the attempts by the north­ ern republics to transform the territorial defense forces into “parallel armies’’— to the extent that the minister o f defense redrew military dis­ tricts to cut across republican borders in 1985 and urged the reintegration of major infrastructure such as railroads, electricity grids, and postal and telephone services76— the general staff also saw no apparent reduction in the hostility o f the external environm ent. An escalating arms race and increasing N A TO attention to the southern E uro pean theater (including 74 Not only was this program an obvious parallel witli the m arket-oriented econom icreform policy adopted b ecau se oi difficulties with foreign trade in 3 9 5 8 -6 1 , but that program was written by a co m m ittee chaired by a Slovene liberal oi the same name (though no relation), Boris Krajger. 75 T h e comm ission was initiated by a letter from Najdan Pasic— a political scientist, party member, and at th e tim e c h i e f ju stic e o f the sup rem e co u rt— to th e party presidency in Septem ber 1982, although a co m m ittee along these lines had b een set up by the twelfth party congress in Ju n e of that year. It was eventually named for Jos ip Vrhovec, the chair of the commission that drafted the final report. T h e am endm ents w ere based on an analysis o f the political system by th e commission and on its 3985 report, A Critical Analysis o f the

Functioning o f the Political System o f Socialist Self-Management (Burg, “E lite Conflict in Post-Tito Yugoslavia,” 192 nn, 56, 57). 76 Facing funding problem s for defen se from 1976 on, the arm ed forces sought ways to simplify, im prove coordination, and stream line, including the decision taken in 1983 to become self-sufficient in arms by 1990 (Gow, legitim acy and the Military, 9 7 - 1 0 3 )

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its m aneuvers in 1985 and 1986) seem ed to demand greater expenditures for d efense when the d ecline in federal re venues, slow econom ic growth, and the stabilization program dem anded cuts. Although political disagreem ents over the best way to repay the debt led th e federal ca b in e t to abandon the I M F program temporarily in 1985­ 86, the retu rn to the I M F in 1 98 877— and with it the institutional changes to im p le m e n t e conom ic liberalization— culm inated in eighteen new laws that d eclared an end to the system o f self-management and associated lab o r,78 op ened the e conom y to full foreign ow nership and repatriation of profits, and legalized market allocation of labor and capital. But while the I M F supported prime m inister Ante Markovic’s “shock-therapy” stabili­ zation program in the spring of 1990, the Slovene electorate voted that D e c e m b e r to seek full national ind ep end en ce by Ju n e 1991. D em ands by the Slovene and Croatian governm ents for com plete control in their terri­ tory over rem aining federal jurisdictions— the police, military, courts, and laws— succu m b ed , in the act of implementation, to civil war.

C o n c l u s io n

T h e first part o f an answer to the paradox o f Yugoslav unem ploym ent lies with the role o f g o v ernm ent in a socialist state. No longer a political force re p re sen tin g labor alone— not only b ecause it had created a one-party state but, m ore importantly, becau se o f the assumptions and institutional co n s e q u e n ce s of social ow nership — the g overnm ent aimed to represent the collective interests of society as a whole in ever-improving economic conditions and a territory free from war. Th e Yugoslav party leadership’s ch oice o f econ om ic strategy and its political prerequisites made this task one o f rep re sen tin g the cou ntry’s interests globally: securing capital for growth, responding to the conseq uences of global business cycles for do­ m estic growth, and protecting national security. T h e dynamic o f public policy was driven neither by electoral competi­ tion b e tw e e n political parties representing labor or capital at home, nor by a d om estic busin ess cycle, but rather by the federal response to inter­ national events: regional security concerns and the superpower contest, changes in foreign demand for Yugoslavia’s goods and in its terms of trade, and changes in the supply o f foreign capital to finance imports and s u p p le m e n t federal revenues and infrastructural investm ent. T h e data on u n em p lo y m en t show particularly clearly that the initiative for and path of central policy originated outside the country, and that elite conflict and 77 T h e federal cabin et cho.sc lo return to the I M F in Febru ary 1987, but the new program — called the May M easures— was not adopted until May 1988 7H Primary am ong them was the Law on En terprises o f January 1989

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(actional debates would follow a poliev decision in which the disputants had little say— except over when it would be ratified and what political purges might b e necessary. E c o n o m ic adju stments required political ad­ justments, not the o th er way around. Because policy decisions w ere made in response to international condi­ tions over which the leaders had no control, th eir im plementation was often interrupted unexpectedly, such as when an export-oriented liberal­ ization was undercut by a W e stern recession or by global tensions that demanded a tem porary retreat to the needs of defense. F ar more signifi­ cant in explaining the failures o f Yugoslav policy than the com m on accusa­ tions about elite dissensus is the uncertainty engendered by this vulnerability, which made it very dilficult to plan a response and im ple­ ment it consistently. T h e fact that policies w ere driven largely by crisis also made it extrem ely difficult to organize domestic opposition to govern­ ment policy and to act strategically. Yugoslavia’s international niche and its increasing d ep en d e n ce on for­ eign creditors for d om estic production and e m ploy m ent did put the cou n ­ try in a structural position com parable to that of wage earners in capitalist countries. Instead o f contesting this structure, however. President T ito ’s solution was to seek from within it as much gain as possible through non­ alignment and through third-world forums demanding redistribution of wealth. This strategy appeared to b e succeeding until the late 1970s, but with so much of d om estic production d ep end ent on imports (including production for export), what one might call a Keynesian-type deficit fi­ nancing was inappropriate to the country’s position. E ven with another refinancing in 19 82 —85, the conditions ol loreign-debt repaym ent and a long world recession d em onstrated its limits. T h e g overnm ent remained beholden to W e s te rn capital. The c o n s e q u e n c e for policy and politics was a series of vicious circles. The fundamental trap lay in the' leaders Faustian bargain betw een their strategic position internationally and access to foreign capital (both credits and trade). T h e symbiosis betw een the two increased the probability of unpredictable external shocks, b ecause trends in global capital and trade on the one hand and superpower conflict on the other did not run paral­ lel. As if struck by a series of hurricanes, the country might not re cu p er­ ate from one shock before the* next one hit, and policies to deal with one were not the same as for another. Yet to abandon one half ol the bargain would have b een to abandon the other. This would have required a funda­ mentally different internal order and the overthrow of one in which o th e r­ wise opposing political factions had developed vested interests. T h e vicious circle of foreign policy translated into political conflict. Th e primary difference b etw ee n liberal and conservative policies and interests was defined by the industrial policy (and its organizational prerequisites)

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requ ired by each side o f this foreign-policy bargain (foreign-trade earn­ ings in W e s t e r n markets on one side and military self-reliance on the other). This m eant that factional politics and elite dissensus were inevita­ ble. B ecau se policy shifts w ere defined by unpredictable external events, how ever, n e ith er side could eve r claim a total victory, and consensus was unachievable. This is scarcely unusual for any country, but it negated the fundamental prem ise o f the lead ers’ political strategy and institutions. Instead o f political harm ony and unity against the outside, there was con­ tinuing tension and weakness. Unable to resolve the policy stalemate, elite conflict focused instead on redistribution and control over capital. T h e result was to translate the political conflict back into econom ic conflict in a continual competition for funds— com petition betw een federal revenues and republican taxes, among potential recip ients o f foreign loans, betw een republics or firms benefiting from foreign econom ic policy and those demanding compensa­ tion. O n e way to resolve this conflict temporarily was with foreign credits. B u t this built-in, insatiable demand for foreign credits re turned the coun­ try full circle to its original vulnerability to external conditions and the need to protect its international bargaining strength as a precondition for d om estic stability. T h e political choice o f a gradualist path to protect the party’s domestic coalition and ease the costs o f initial industrialization by supplementing d om estic savings with imported credits and equ ip m ent was in time tu rned 011 its head. B ecau se dom estic production b eca m e more rather than less d ep en d e n t on imports, it also b eca m e more difficult to change d efense policy as liberals dem anded, while econom ic policy was shaped more and m ore by the particular supply of foreign-trade finance and its conditions. Instead of a temporary solution to econom ic development, this strategy b eca m e an econom ic trap, and the difficulty o f escaping it (as witnessed by the many other developm entalist countries in the world that had similar difficulties with shifts in military and d evelopm ent aid, global re cessions, external shocks, and foreign debt) was nonetheless then com­ pounded by the political conseq uences. T h e idea o f 'socialism in one cou n try ” was to provide a second logic o f collective action in domestic econ om ic institutions in favor of a country of wage earners, as opposed to th e first logic o f capital internationally. Instead, the openness to foreign capita] disto rted the functioning o f those institutions and the capacity of th e gov ern m e n t to adjust internationally and facilitate economic gro w th .79 79 As V ladim ir Gligorov observes, however, the idea o f socialism in one country was for the Bukharinist side th e decision not to export revolution, th ere thus being

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for a standing arm y (Gledišta i sporovi o industrijalizaciji u socijalizmu ) This fundamental p roblem for liberal reform ers, m entioned in ch ap ter I , was not resolved by the Yugoslavs in the international conditions of the cold war.

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The- effect on the- leaders strategy lor lull em ploym ent was adverse. Instead ot preventing the financial crises that lead to industrial unem ploy­ ment, the g ov ernm ent was pre occupied with external stabilization and therefore built a recessionary bias into policy without the institutional capacity to pre ve n t further inflation and to regen erate growth. T he greater the op enness to foreign capital and to price liberalization as the mechanism for adju stm ent, the less the monetary institutions o f the so­ cialist econom y w ere able to function as intended. Instead of providing the conditions for growth that would absorb surplus labor from agricul­ ture as well as new generations, the g ov ernm ent responded to th ese fi­ nancial crises by seeking to improve the financial discipline o f econom ic actors through decentralization, socialization, and financial autonomy. This undermined further the capacity of macroeconom ic policy to m ain­ tain a stable currency, In place ol governmental guardianship over s e c­ toral balance and infrastructural investm ent for sustained growth and declining regional inequality, there w ere social plans and developmental investments oriented to the needs of the foreign sector and the projects lor which external financing could b e found. Here, too, there were vicious circles. T h e I M F policies were partic­ ularly inappropriate, and each failure required a new dose of I M F credits and policies. M onetary and fiscal policy followed stop-and-go cycles, im­ posing restrictions to fight inflation that only fueled inflation and required further restrictions. [Expansionary policies w ere able to increase em p loy ­ ment in the short run il they were the result of g overnm ent expenditures rather than simply an increase in the money supply, but b ecause the initial result was a ju m p in imports, such a policy could not b e sustained. The government would then return to cuttin g demand by placing restric­ tions on credit and imports that required firms and lower governm ents to adjust by cutting production, nonproductive expenditures, and labor costs. These cuts all implied cuts in e m ploy m ent or its redistribution. At each point, the federal gov ernm ent had to face the vicious circle by adjusting with labor. Although it had no jurisdiction over em ploym ent, the federal policy had direct c o n s e q u e n c e s — to which we turn in the next chapter.

Chapter 8 SLOVENIA AND FOČA

L a b o r -o r ie n t e d

governm ents, according to the scholarly literature,

have b e e n able to approach full em ploym ent not only because of their explicit political c o m m itm e n t to bringing about full em ploym ent through the instrum ents o f gov ernm ent policy (particularly in regard to interna­ tional adju stment), but also becau se they have the political capacity to support those policies with discipline in the labor market. Centrally bar­ gained social pacts betw ee n organized labor and organized business (usu­ ally mediated by gov ernm ent representatives) can im plem ent incomes policies that overcom e the inevitable trade-off b etw een wages and jobs. T h e key to these “corporatist” pacts is labor’s promise of wage restraint— in exchange for lower un em ploym ent, governmental assistance in retain­ ing and relo cating workers when adju stm ent to shifts in market demand creates red und ant labor, a share in profits when they improve, and other benefits. C ontroversy surrounds the claims made for voluntary wage restraint and centralized bargaining m echanisms as guarantees o f fuller employ­ m ent. O n e o f the m ore telling criticisms is the ease with which monetary and exchang e-rate policies can undo the effect of incomes policies.1 In­ com es pacts did restrain wages in Yugoslavia, m oreover— real wages fell without re p riev e from 1978 on, at the same time that unemployment was rising fastest. B u t this fact did not influence the reigning explanation of Yugoslav un em ploym ent: labor m anagem ent of firms gave workers power over the trade-off b e tw ee n wages and jobs, and the incentive was to choose h ig her incomes over investm ent in new employment. There was no m echanism for disciplining labor’s demand for ever-higher wages without the threat o f un em ploym en t from profit-maximizing private owners (and therefore an end to self-management). Governments then 1

T h e rb o rn , for exam ple, warns against evaluating such corporatist mechanisms apart

from foreign-trade policy- Fin din g that wage restraint was not correlated with either full em p lo ym en t o r successful international com petitiveness and, further, that the cost ol labor p e r unit o f output as expressed in national currencies had no statistical relation to that cost expressed in international currency, he concludes that for O E C D countries in 1973-84, as least, “incom es policies can b e made as well as unmade by currency policies and changes in th e exchange rates” (Why Some Peoples Are More Unemployed than Others, 17). Waller­ stein, “C entralized Bargaining and W age R estra in t,” also questions the corporatist argu­ m ents about wage restraint.

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compounded the error by softening the bud get constraints on firms and by m aking new investm ents that w ere politically motivated and uneconomic— b oth policies aimed, it was said, at protecting jobs. In fact, a primary goal o f the introduction of workers’ councils in 1 9 4 9 -5 0 was to depriv e unions of their bargaining power over wages in export-producing firms at a time when skilled labor was scarce. E le c te d representatives o f skilled production workers w ere to b e consulted by managers on how to cut labor costs. T h e aim was to have workers accept limits on wages and benefits within enterprise net revenue, approve capital investm ents even if they cut into incomes, and sanction dis­ missals o f workers w h en required by budgets or modernization p ro­ grams. T h e e ss e n ce o f self-m anagem ent as it was extend ed to ev e r more public-sector workplaces over time was this attem pt to enforce incomes policies and financial discipline without state involvem ent or central re g ­ ulation. T h e trade-offs b etw ee n wages and investm ent (or, as the Yugo­ slavs put it, b etw ee n short-term pay and long-term income) w ere to be left to the “work collectives” o f public-sector workplaces. M oreover, consulting workers on their wages and on e m ploym ent questions within the firm was only one aspect o f the Yugoslav lead ers’ program for full e m ploy m ent. This program aimed both to utilize labor throughout the incom e-paying public sector in ways that kept productiv­ ity rising above consumption (creating capital and thus the capacity to employ) and to provide, temporarily, subsistence in a free private sector for all those who could not b e employed immediately in the public sector without defeating the first goal. W ithin the public sector, according to the leaders econom ic ideology, investm ents would prom ote capital by expanding productive capacity within a territory or capital intensity within a firm. In investm ent choices, labor productivity and a rising gross national product would take priority over e m p lo y m e n t if the two w ere in conflict.2 F irm s w ere to increase labor productivity— by keeping their bill for wages and benefits in line with productivity gains, capitalizing labor through m achinery and edu ca­ tion, and intensifying the use o f labor to cut relative costs. “R evalu ation” of labor, ra th er than its “devaluation” (falling wages and unem plo yment), required in v e stm e n t as well in improving the skills and education o f e m ­ ployed workers and in retraining workers in line with technological modernization. T h e system o f direct econ om ic incentiv es also had to b e protected. Thus, the rights to self-m anagem ent o f work collectives had to be p e ri­ odically review ed and revived. Incom e inequalities within branches, 2

Burger,

Yugoslavia, 208.

K ester,

and den O udem ,

Self-Management and Investment Control in

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windfall profits, market-driven rather than productivity-driven wages, and labor tu rnover all had to be counteracted to prevent market allocation o f labor, which would underm ine these incentives. W h ile firms were not to b e penalized by im ported costs over which they had no control, they also had to transfer to social use (through taxation for investment, local wage funds, and social services) a portion o f their income that reflected a m arket advantage o f which they w ere chance beneficiaries. Governm ent standards for wage differentials and jo b classifications aimed to bring in­ c o m e shares into line with individual “capital’’ (the capacity to raise pro­ ductivity, called “each according to his abilities” and “equal share for equal work un der equal conditions ”).3 Redundant labor was not to be fired, b ut “reassigned”— w h ere possible— to jo bs more in line with the p e rs o n ’s skills. S ocie ty also n e ed e d to be reorganized periodically to prevent the accu­ mulation o f unproductive e m ploy m ents— such as g overnm ent bureau­ cracy and administrative positions— and red uce them instead to a minim um . Social services w ere to b e financed by firms (through direct grants, local taxation, their provision within the firm, or contract) so that expend itures on nonproductive activities would b e governed by the limits o f achieved productivity. E ver-exp and ing socialization, by which employ­ m e n t in the public sector would expand and g overnm ent budgets decline in favor o f autonomous (self-managed) financing, would incorporate ever m o re o f society into the econom ic regim e o f “incom e relations. ” That is, more and more people would be employed in the system o f productivityo riented work incentiv es o f industrial organization and financial disci­ pline, in which earnings and benefits would reflect o n e ’s relative capacity to pro du ce and would re p re s en t a share o f realized incom e (though not more). j o b security, therefore, was not a right to a jo b , but a right to a guaran­ teed minimum wage for people who had publie-sector jo bs. (Temporary jo b security, however, aimed to p rotect the direct link betw een economic in te rest and political rights: there were prohibitions against firing people while they held ele cte d positions— as managers, m e m b ers of workers’ councils, or delegates to assem blies.) Protection against unemployment lay only in the legal limits on private e m ploy m ent and on the sale of land, so that smallholdings in the private sector could act as a safe haven when p u blie-sector growth was not sufficient to accom modate all those desiring e m p lo y m e n t (that is, a public-seetor job). In other words, because new e m p lo y m e n t was to b e limited by real econom ic growth b ut unemploy­ m e n t was to b e avoided, the relevant trade-off was seen not as the one b e tw e e n wages and jo bs, but as one betw ee n public-sector employment 3 Law on L a b o r Relations of 1965, cited in Yugoslav Survey 8, no. 3 (August 1967): 22.

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and the private reserve. Instead of adjusting wages and the level o f e m ­ ployment according to profits, firms and g overnm ent regulations would adjust by moving people b e tw ee n the two sectors. People who had guar­ anteed smallholdings in agriculture or crafts, w ere supported by families, or were working abroad could await expansion o f the public-seetor with­ out fear for their subsistence. Unemployment under Yugoslav socialism was not a result o f wage p res­ sure, guaranteed jo b security, or insufficient savings (the savings rate was comparatively h ig h 4 and investm ent generally ran around 4 0 p e rc e n t of gross material product).5 Its explanation lies with the disconnection b e ­ tween the program for full e m ploy m ent and the two sets of conditions within which it was operating— its international e n vironm ent 011 the one hand (as discussed in the previous chapter) and the dom estic labor supply on the other. G ov ernm ental policy to adjust to that international environment was in fact a set o f param eters for labor use. If trade def­ icits required cuttin g dom estic dem and and expanding exports— the stabilization policy for thirty-two years out o f forty-two— then incomes and em ploym ents had to adjust. I f difficulties in foreign markets or na­ tional security requ ired shifts in production or limited growth, then the entire organization o f society might be affected, not ju s t particular firms. Instead o f th e condition posed in B en jam in W a rd ’s Illyrian model o f the backward-sloping supply curve o f labor under labor m anag em ent— how workers’ councils would respond to an increase in dem and for their products— a far m ore com m on condition facing self-managed firms was the opposite: how would m anag em ent and workers’ councils respond to a drop in dem and or to stabilization-oriented restrictions on money, credit, and imports intended to force firms to use internal reserves m ore effi­ ciently and finance m ore of their own investm ents? Shifts in the cou n try’s terms o f trade in foreign m arkets— such as the market dem and most c o m ­ mon in trade with th e W e s t and long-term supply contracts in trade with the East and S ou th — and in the kinds o f com modities in dem and affected the m easure o f productivity and the accom panyin g incentiv es of gov ern­ ment regulations. Alongside the n eed for international adju stment, econom ic d ev elop ­ ment led to a rural exodus and population increase. T h e lead ers’ goal of a technologically advanced, highly productive, administratively lean, fullemployment econom y within the context o f the cou ntry’s international position ca m e to b e realized in only a small part o f Yugoslav territory— above all in Slovenia. T h e r e the norm throughout the postwar period was labor shortages rath er than surplus; the agricultural labor surplus had 4 Bergson , "E n tre p re n e u rsh ip under Lab o r Participation,” 207, 5 Babic and P rim orac, “S om e Causes of the Grow th o f the Yugoslav External D e b t , ” 78.

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b e e n exhausted by early commercialization o f agriculture and early indus­ trialization, and population increase was low as a result of w o m e n ’s em ­ ploy m ent and rising wages and household incomes. In most of the country, however, the norm was a growing disharmony b etw een govern­ m ental policies and/or international conditions on the one hand and the labor-supply conditions o f the locality or re public on the other. Institu­ tional reforms that aimed to improve financial discipline increased this disharm ony. Decentralization and socialization pareelized labor markets and cre a te d e v er-greater differences betw ee n the size o f a local labor sur­ plus and th e ec o n o m ic resources for its employment. T h e result was growing un em p lo y m en t, which was unevenly spread across regions and social groups.

P r o m o t in g

P r o d u c t iv it y

K id ric’s early insistence on the “law o f v a lu e ,” on an econom y that re­ spected th e “equilibrium conditions o f growth, ” occurred at a time of dire international conditions and a severe drought. As the previous chapter argued, how ever, these two conditions— insufficient export earnings in relation to im port needs or d eb t obligations, and low productivity of a griculture— continued to requ ire policy adju stments to restore equilib­ rium conditions. Thus, the reason that data oil un em ploym ent reflect the chronology o f policy aimed at adjusting to international conditions (affect­ ing trade, capital availability, and national defense) is that those condi­ tions set the limits o f public-seetor e m ploy m ent and the policies toward labor that, in restoring external equilibrium , aimed to reestablish condi­ tions for eco n o m ic growth at home. In the very specific adju stments to agricultural policy, government em­ ploym ent, lines o f industrial production, and income regulations, there non eth eless operated two very different ideological approaches, sometimes in com bination and som etim es in opposition. T h e s e two approaches— the models o f Slovenia and F o c a that e m erged from the wartime and immedi­ ate postwar period — had differential conseq uences for localities, regions, and eco n o m ic interests b ecause of the territorial organization o f economic m a n ag e m e n t and investm ent. T h e S lovene model, a “liberal” approach to econom ic growth within a socialist econom y , focused on the incentives to manufacturing and pro­ cessing firms o f export markets and consum er dem and in retail markets. It em phasized “world-market standards o f p roductivity,” price competi­ tion, and com m ercial orientation with its pressures for technological modernization— lowering unit labor costs while capitalizing labor with m achines and higher skills. Intensification and concentration (through cartels or vertically integrated firms) were pushed both by policy and by

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firms strategies to gain market advantage. Policy encouraged the flex­ ibility to hire and fire in response to market dem and and the market provision o f collective consumption (benefits, welfare, and social services) in the interest o f enterp rise savings and d em and-oriented efficiencies. The F o ca model, a developm entalist approach, focused instead on the production o f raw material, energy, infrastructure, produ cers’ goods, and food for hom e consum ption as well as export, largely on long-term co n ­ tract or in response to price-inelastic dem and. It therefore emphasized quantity increases that d ep end ed more on steady work, labor discipline, skills adapted to production, and shop-floor flexibility. Goods w ere to be allocated within workplaces as incentiv es to com m itm ent, and econom ic and administrative functions w ere to be incorporated (“socialized”) into firms to cut transaction costs and nonproductive services. D ece n tra liz a­ tion and divisionalization aimed to break-up industrial concentratio n (even w here policy in a liberal phase had encouraged it) so as to improve the directness o f work incentiv es, the visibility o f the relation b etw ee n productivity and reward, and accountability for budget constraints.6 The face o f self-m anagem ent in the first model was autonomy: the rights o f work collectives (enterprises) to retain th eir earnings and the authority o f managers and professional staff. In the second, it was partici­ pation: the rights of production workers to discuss ways o f raising their productivity while limiting their aggregate income. B u t in both ap­ proaches to the organization o f production and the con cep t o f produc­ tivity, the societal approach to econom ic growth through increasing pro­ ductivity required a progressive reduction or socialization o f no nproduc­ tive activities— that is, the state and public services. Alternation b etw een these approaches and their corresponding labor policies follows the p e ri­ odization set out in the previous chapter for international adju stment.

1952-1957 The mixture o f the S lovene and F oca approaches was particularly clear in the first period of th e new reg im e because o f the continuing insecurity o f international conditions. T h e g overnm ent proceed ed with its hopeful commitments to dem obilize the arm y and shift to civilian production and light manufactu ring for export and dom estic consu m er goods, but e x te r­ nal threats interrup ted on occasion. T h e capital investments o f the fiveyear plan and foreign credits provided the conditions for the lead ers’ preferred liberal policy toward labor within a context o f capital dev elop­ 6

T h e push for decentralization and divisionalization in the 1970s parallels similar d evel­

opments in o th e r countries. S e e , for exam ple, Shapiro and Kane, “Stagflation and th e New Right”; and How ell, “T h e D ilem m as o f P ost-F ord ism .”

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m ent: to increase d om estic savings and growth by industrializing both m anufactu ring and agriculture in the socialized sector, favoring mecha­ nization, few er workers, and a smaller federal budget. T h e fulfillment of K a rd e lj’s prediction that agricultural machinery would begin to roll off production lines in 1953 made it possible to reduce the labor force on state farms and in labor cooperatives. T h e 1953 agrarian reform and gov­ e r n m e n t subventions encouraged intensive cropping and small rural in­ dustries so as to b e able to return the “relieved” labor to the private sector. Private artisans w ere granted the right to em ploy up to five wage laborers (o ther than family m em bers), as w ere private farmers (subject to special taxation). In factories, workers’ councils (still only at the level of branch associations) gained more freedom in decisions on wages and em­ ploy m e n t in ord e r to make the necessary labor cuts and improve wage incentives to productivity. A bankruptcy law e n te red the books, and the discussion o f wage norms and labor rationalization in journal articles be­ trays the Taylorist ideology o f eng ineers and skilled workers at the time.7 Although th e social plan for 1954 proposed a growth rate of 8 percent for e m p lo y m e n t b ut 17 p e rc e n t for ou tp u t,8 the skilled workers and engi­ ne ers on the w orkers’ councils had b een so zealous in their firing in 1950­ 5 2 that e m p lo y m e n t expanded instead when factories found they had to re hire essential m aintenance workers. T h e explosion o f aggregate wages, due to th e h ig her wages voted for managerial staff and skilled workers and unplanned increases in actual e m ploym ent, led the governm ent to rein­ troduce wage regulations. In line with constitutional jurisdictions, local gov ernm ents w ere given the authority to impose limits on personal in­ com es w h ere ne cessa ry.9 B u t local g overnm ents w ere at the time faced with two huge tasks: finding em p loy m e n t for dem obilized soldiers and sacked political func­ tionaries, 10 and providing for the benefits, housing, construction work, and o th e r services perform ed until then by the m ilitary .11 To economize on local finances, governm ental reforms w ere introduced. Smaller com­ m unes w e re consolidated into larger units, local social services such as e le m e n ta ry education w ere divested onto “self-m anagem ent” footing, and the many local offices created in the fall o f 1948 to im plem ent the fiveyear plan w e re closed. E v e n so, local expenditures soared with the de7 S e e , for exam ple, D ere ta, “O nekim osnovnim pokazateljima rad no snage,” 8 Ekonomska Politika , M arch 4, 1954, 191 9 S e e especially W ard , “Fro m Marx to B a ro n e .” 10 T h e n u m b er o f party functionaries was halved in 1 9 5 2 -5 4 , and the federal bureaucracy was reduced from 4 7 ,3 1 0 workers in 1948 to 10 ,3 2 8 in 1956 (Hondius, The Yugoslav Com­

munity o f Nations, 191). 11 F o r exam ple, th e military-party commissions on national security, the KNOJ, were disbanded b etw ee n the en d of 1952 and M arch 1953, and the functions of state security were transferred to civilian agencies.

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mand for new housing, pensions, and public-sector jo bs. B ecau se lo­ calities cop ed by imposing tax rates so high that enterprises w ere left without working capital, the federal gov ernm ent reim posed controls on local fiscal a u th o rity .12 Federal legislation formalized the new system in 1955 with a new wage system and a proposed new Law on L abo r Relations. T h e previous wage norms and p iece rates w ere translated into general regulations to guide the writing o f e n te rp rise statutes on pay, which w ere then s u b je ct to ap­ proval by w o rk ers’ councils in order to institutionalize fu rther the selfdisciplining role o f “w orkers’ control” in wage decisions. W orkers would receive a guaranteed minim um wage “advanced” e ach month, but beyond that, incomes in th e socialized sector would no longer b e treated as a cost of production b ut as a share o f the net value added in production. M o r e ­ over, personal incomes could not b e paid (or docked, if the net was nega­ tive) until all costs, taxes, and depreciation had b ee n d educted from the market value o f that output in the end-of-year accounting. Thus, three years b efo re the g o v ernm ent abandoned sectoral investm ent and plan­ ning by global proportions in favor o f territorial banks and planning within republics, the basis o f e conom ic calculation shifted to enterprise prof­ itability (net revenue) and end ed the means for econom ywide calculation of labor p ro d u ctiv ity .13 Accordingly, workers’ councils w ere extended to the enterprise itself, and the right to hire and fire workers— not m anag e­ ment staff— was transferred from the directo r to the workers council (which had two standing commissions, one for hiring and firing and one for discipline). Although the decisions had b ee n made and w ere b eing im plem ented , political quarrels over this change in dev elopm en t strategy and the vic­ tory o f the incom e school and its marginalist approach did not fully abate, delaying until 1957 th e first congress o f workers’ councils (it had b ee n planned for 1954 to ce le b r a te the new system) as well as the new Law on Labor R elations codifying the changes since 1 9 4 8 . 14 Opposition also d e ­ 12 S e e W a rd ’s discussion o f th e “dead brigades” used in en terprises as a way o f reducing their accou nting profits and therefo re th eir taxes under the steeply progressive profits taxes before 1955 (“T h e F irm in Illyria,’' 5 8 4 -8 5 ) . 13 T h is new wage system is called th e victory o f the incom e school (dohodovna struja, or

dohodoci) o ver th e developm entalists; see D abćević-K u ear e l al., Problemi teorije i prakse socijalističke robne proizvodnje But this Croatian faction also had many m em b ers from Serbia. 14 T h e law was enacted in M arch 1957, It codified each period of labor regulations on the rights and statuses o f em ployed persons, and thus th e principles o f incom e distribution, jo b classification, and hiring and firing according to which en terprise statutes, rule books, and compacts with o th e r firms and governm ents w ere w ritten and enforced. R esearchers in Belgrade com plained, h ow ever, that m any people, such as shepherds (čobani), still had no regulated em plo ym en t status, or radni odnos (Privreda FNHJ u periodu ¡947-1956, 161).

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layed the seventh party congress, scheduled for 1956, until 1958. Accord­ ing to political leaders, this opposition cam e from those who considered the renew ed emphasis on labor productivity as the measure of growth to be a strike against the countryside. B u t international security also played a role; th e re was a b r ie f return to defense mobilization in 1 9 5 6 - 5 7 b e ­ cause o f revived insecurities on the eastern front and the impending end o f U .S . military aid. T h e youth labor brigades were brought back, and the em p loy m e n t o f professional party cadres increased in factory subunits. A ste ep ju m p in output norms for coal production at the same time that incom es d eclined under the stabilization of 1957 led to the first acknowl­ edged postwar labor strike;— at the Trb ov lje mine in Slovenia— at the end o f th e y e a r . 15

1958-1967 N onetheless, by January 1958, institutional changes in the system of wages and investm ent were reaffirmed by international conditions, and the liberal policy cam e much more clearly into its own. T h e application to G A T T , the further opening to W e ste rn trade in line with W estern E u ­ ropean d ev elopm en ts, and the modernization of industrial production through imported technology to improve productivity in existing plants all required massive changes in the e m ploy m ent structure of the social s ector to make it more com petitive and productive. U n der the code word “the human factor” and the slogan o f the “revaluation” rather than “deval­ uation" o f labor, the labor force in the public sector was to be “modern­ ized” as well by improving skills through retraining and workers’ education. Policies aimed at increasing the ratio o f skilled labor and engi­ neers “to operate the new m achines”16 allowed wage differentials to rise and, in order to keep a lid on the aggregate wage bill, allowed the firing of unskilled and otherwise redundant labor Postwar demobilization ex­ panded to the econom y with the re placem ent o f m e m b ers o f the o ld er,17 “Partisan” generatio n (who had e ntered industrial and managerial posi­ tions with the m eager education o f th eir prewar opportunities and on the basis o f their war record) by “skilled, schooled cad res.’’ T h e army also 15 T h e parly leadership responded by changing I lu; union leadership, installing Svetozar V ukm anović-Tem po, He had b een m inister o f mining in the mobilization of 1 9 4 8 - 4 9 and the cham pion o f production workers and of the brigade system in J9 4 9 , but he was also a con­ vinced “liberal” on econ om ic reform and opening. As a prom inent “first fighter” and orga­ n izer o f the Partisan struggle in Macedonia, he could oversee the dismissals o f unskilled laborers and Partisan veterans. On this and subsequent strikes, see Jovanov, Radnički

št raj ko vi. 16 Yugoslav Trade Unions, 1964. In J9 5 7 , a special tax (“contribution”) was assessed on firms to pay for training programs (doprinos za kadrove u privredi) 17 In th e sen se o f perspective, not age (although this was not always made clear).

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made massive cuts in personnel (especially in the more highly paid officer corps) in order to pay for its initial investments in technological modernization— the purchase o f armam ents and licenses in the world market.18 F acto ries built largely under federal jurisdiction for defense self-reliance and the production o f capital goods had eith er to close or restructure to m e e t the criteria o f market profitability for international “com petitiveness” and the G A TT-defined program o f liberalization. All firms had to adjust to the market by cutting labor c o s ts .19 By I 9 6 0 , price, tax, and accounting regulations rewarded increases in fixed assets and penalized e m p lo y m e n t.20 The effect of these policies to increase growth by cutting labor, ratio­ nalizing its use, and investing in new capacity and eq u ip m en t could be seen in rising un em p lo y m en t already in 1 9 5 6 - 5 7 and again in 1 9 5 8 - 5 9 . But the opening of borders after 1955 provided an ou tlet— first perm anent emigration, then te mporary work. By 1960, the g ov ern m e n t’s jurisdiction over foreign affairs had led it to re en ter the field o f e m ploy m ent concerns. A Federal Bureau of E m p lo y m e n t was established with the sole respon­ sibility o f facilitating and regulating the cross-border flow o f Yugoslavs wishing to work temporarily in W e st Germ any, Austria, B elgium , or Sweden, b ecau se o f the g ov e r n m e n t’s interest in capturing w orkers’ hardcurrency rem ittances and negotiating their welfare rights in foreign cou n­ tries and also becau se of the receiving cou ntries’ requ irem ents that the flow of workers be carefully regulated.21 An additional outlet for the un­ employed ca m e with the push for tourist dollars in the early 1960s and the new dem and for services that could be provided by the private sector. Th e most com m on form o f restructuring in this period was vertical in te ­ gration. C o m p etitiv e pressures abroad and especially supply difficulties at home due to d eclining agricultural productivity and recurring stabiliza1S

S e e th e discussion in weekly articles throughout 1957 in th e army newspaper,

Narodna Armijo; and T ito ’s speech to the federal assem bly in April 1958 (Tito, Tito u Skupstini, 295), 19 In Vojvodina, 5 0 p erce n t o f the firms w ere “nonaecu in illative”; they, along with others (such as th e m achine industry and crafts), complained about this damaging shift, which would undervalue th eir output even m ore (Narodna Armijo , issues for August 1957). 20 Horvat argues that until 1960 taxation created capital-saving inducem ents but after 1964 stim ulated labor-saving practices, making thousands of workers redundant; that the shift to payroll taxation in 1965, tog eth er with social-insu ranee contributions, made labor 60 percent m ore expensive “than necessary”; and that the Hat rates introduced a rigidity into econom ic b eh avior that tend ed to intensify business cycles (he cites a study by the eco n o ­ mist Peri) Ju rkov ic in 1972 showing that the levy o f taxes on factors o f production rather than on business results p reven ted “elastic cushions in recessions and boom s”) (The Yugoslav

Economic System, 2 3 6 - 3 8 , 244). 21 T h e 1963 constitution added a new federal agency, the Council for the Question of Expatriates, which essentially dealt with workers abroad (see Hondius, The Yugoslav Com­ munity o f Nations, 295).

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tion restrictions on credit and imports led firms to concentrate assets and to increase technical and com m ercial econom ies of scale for more effec­ tive com petition in foreign and local markets. T h e stabilization policy of 1961, which included a moratorium on new investment, tightened credit, and the expectation that firms would finance their own capital invest­ m ents (above all from internal funds), was even accompanied by a political campaign for integration in 1 9 6 1 - 6 2 . 22 To guarantee supplies and prices over a longer period when import restrictions, currency devaluation, and rising costs in agriculture w ere creating production bottlenecks, firms in­ tegrated th e ir suppliers or established long-term contractual relations, and the p ro du cers’ associations that w ere organized around supply and pricing functions (the branch cartels in each republic) w ere strengthened. Successful conglom erates, particularly the lucrative export-import trade firms, “saved” failing firms by assuming their debts in easy takeovers. Industrial firms enlarged to increase their bargaining power over the new com m ercial banks, which now allocated cre d it— but they did so through m ergers and buyouts instead o f by hiring new employees. In th eir super­ visory role over public firms, local governments perm itted firms with losses to remain in business if they m erged with profitable ones and ac­ ce p te d cuts in administrative staff and w orkers.23 T h e same process of rationalization o f resource use through concentration occurred in govern­ m ental administration, as the n u m b e r o f com m unes was reduced from 3 ,8 1 1 to 7 5 9 in 1962. B urd e n e d with eve r-g rcater tasks in relation to their resources, however, com m u nes b ecam e in fact more d ep end ent on re­ publican and federal funds. T h e 1963 constitution therefore encouraged the pooling o f budgetary funds among associations o f com m unes; in 1964, richer and poorer com m unes w ere encouraged to unite so as to increase their ability to finance the local infrastructure and social services for which they w ere now responsible. In 1964, the republics of BosniaIle rze g ov in a , Serbia, and M acedonia abolished district governments e n tir e ly .24 In support o f the liberal orientation to the econom ic incentive of con­ sum er d em and, and in part to relieve some of the burden of liberalized

22

Tliis c a m p a i g n was id e n ti fi e d e sp e c ia ll y w it h T i t o ’s N o v e m b e r 1961 s p e e c h in Skopje

(sec M a c e s i c h , Yugoslavia: The Theory and Practice o f Development Planning, 87), 21 S u c h m o v e s w e r e u su all y re s is te d , s o m e t i m e s succe ssf ull y, b y w o r k e r s councils; see

Yugoslav Trade Ihiions, no. 12 ( A p r i l - J u n e 1964): 6 6 - 6 7 , 7 0 - 7 1 . W o r k e r s in a profitable firm in M a c e d o n i a s t a g e d a s tr ik e la st in g forty-five day s in A u g u s t a n d S e p t e m b e r 1985 when t h e c o m m u n e g o v e r n m e n t (an d p a r t y o rg a niz a tio n) d e c i d e d to m e r g e it w it h an unprofitable firm to re s o l v e t h e l a t t e r ’s e c o n o m i c difficulties (a u th o r s in t e r v i e w s in B el g ra d e , 1985). 21 S e e C a r t e r o n t h e co n fu s io n a n d c o m p e t i t i o n th a t this i n t r o d u c e d in to th e el ect io ns of 1967 b e c a u s e c a d r e d e c i s io n s h a d p r e v i o u s l y b e e n m a d e by t h e di s tr ic t p a rt y c om m it te e

(Democratic Reform in Yugoslavia , 6 1 - 6 2 )

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(that is, higher) prices on the population, the g overnm ent introduced co n ­ sumer credit in 1 9 6 0 - 6 1 . B u t such an increase in m oney independ en t of production put an even greater prem ium on controlling labor costs. A semiofficial study in 1 9 6 1 - 6 2 supported the campaign to intensify labor use in existing firms with estim ates o f hidden u n em ploym en t among in­ dustrial jo b h o ld e rs o f 10 to 15 p e r c e n t .25 In the recession o f 1 9 6 1 - 6 2 , when “factory em p loy m e n t opportunities declined as econom ic activity slowed [and] un em p lo y m en t r o se ,” the g overnm ent “b e ca m e relu ctant to continue to open new, high-cost, labor-intensive industrial capacities . . . [thus] layoffs o f surplus labor w ere sanctioned, political organizations ad­ vising e nterprises that workers who owned land or had other nonwage income should b e discharged first.”26 Fighting inflationary pressures fu rther in 1962, the gov ernm ent began to negotiate incom es policies at the federal and republican levels in a process that was to b e c o m e the prim e m ethod o f wage regulation. Al­ though it still set central guidelines for enterprise statutes on income distribution, the g ov ernm ent began with proposals from the produ cers’ associations for wage rates for industrial sectors, sent them for review to the United Unions organization, and then sent them to the republics to be adapted into republic-level social compacts. E n fo r ce m e n t was in­ cluded in the supervisory role o f local governments, which inspected the cash accounts o f e nterprises from which incomes w ere paid and p e ri­ odically sent inspectors from the banks’ social-accounting office to exam ­ ine enterprise books. To cut public expenditures and leave enterprises with greater r e ­ sources for investm ent, a new round o f socialization extended self­ management to public services such as education and health care. E x ­ pected to respond to consu m er dem and (“strengthening the role o f p e r ­ sonal incom e in financing social r e q u i r e m e n t s ”),27 em ployees in social services w e re given rights o f self-m anagem ent as an incentiv e to greater efficiency through voluntary wage rationalization. That is, they w ere now free to adjust salaries within the limits o f their budget (according to the principles of the “in c o m e ” system and “pay according to re s u l ts ”) .28 In turn, g reater efficiency and the market allocation o f social services would make it possible to cut enterprise taxes and re duce internal funds set aside for “collective consumption goods.” 25 Livingston gives th e source o f th ese estim ates only as “unpublished official data” in his careful article (“Yugoslavian U nem ploym ent T re n d s,” 757; see also 760). 26 Ib id ., 7 5 6 - 5 7 . At the sam e tim e that massive layoffs occurred in May 1962, taxes on the private secto r increased sevenfold, elim inating ten thousand artisans— “barb ers, black­ smiths, cob b le rs, tailors, pastry makers” (M acesich, Yugoslavia, 203). 27 T h e social plan o f 1 9 6 4 -7 0 , 2HYugoslav Trade Unions, no* 10 (S ep te m b e r 1963): 3 0 - 3 5 ,

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T h e most explicit statem ents o f the conception underlying the liberal system are found in the s peeches of the eighth party congress, held in D e c e m b e r 1964, b ecau se it marked the end o f the liberals’ domestic polit­ ical battles against the developmentalists. T h e leaders began with the a n n o u n ce m e n t that Yugoslavia had e n te red the ranks o f the moderately d eveloped countries becau se per capita income had reached about $500. H ig h er wages and a shorter workday w ere victories of the workers’ move­ m ent, Tito claim ed in ju stifying the campaign to intensify the use o f exist­ ing capacities. T h e reduction o f the official workweek after 1963 from forty-eight to forty-two hours was their “second industrial revolution-’ be­ cause it replaced the rural day schedule with industrial (“standard E u ­ ropean ) working hours and forced peasant-workers and moonlighters to make a choice for one work relation. 29 T h e workweek was reduced fur­ th e r to forty hours in 1965 (with one hour overtim e perm itted), to thirtyeight (plus one) in 1 9 6 6 - 6 9 , and to thirty-six (plus one) in 1970. T h e congress was followed at the beginning o f 1965 by a new Law on L a b o r Relations that codified the changes since 1957 and extended legal pro tections to workers in private hire. T h e first federal (“basic”) law on e m p lo y m e n t attem pted to rationalize the organization and financing of em p loy m e n t bureaus and the principles o f jo b classification and retrain­ ing. T h e liberal approach was even clearer in the policy objectives of the social plan for 1 9 6 6 —70. It proposed that in order to ensure optimal pro­ portions with regard to the rate of em ploym ent, available accumulation, the level of labour productivity and living standards, it will be necessary to d ece lera te the rate of e m ploym ent in relation to preceding periods, especially in the first years o f the planned period, when, as a result of the reform, existing relative surpluses of manpower will be the first to he absorbed and more economically e m p lo y e d .”30 T h e emphasis on com m ercial profitability in foreign and domestic mar­ kets intensified in response to the severe recession o f 1 9 6 5 - 6 6 and declin­ ing W e s te rn dem and. W ith respect to labor, this emphasis was manifest in pressure on firms to increase middle-m anagem ent staffs and marketing d ep artm ents and give them more autonomy to respond to market condi­ tions.31 T h e guiding policy line was “to reduce costs o f production in gen­ eral and costs o f production pe r unit o f output, reducing above all the participation ol labor, in order to increase the com petitiveness of the Yugoslav econom y on the international m a rk e t.”32 T h e managerialist trend was re flected in constitutional am end m ents that sought to free man2” I l o n d i u s , The Yugoslav Community o f Nations. 321, n. 561 ,(1 Yugoslav Federal Assembly 4. n o 7 (1966); 12. 11 F o r a s t u d y o f tw o B e l g r a d e m a n u f a c t u r i n g firms d u r i n g this p e ri o d , s e e Adizes, Indus­

trial Democracy, Yugoslav Style. 95. 32 Soškić, "T rži šni s is te m so cijalističke p r i v r e d e i r e f o r m a . ’'

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agers from the oversight o f the m anag em ent board (with its two-thirds representation o f production workers). 33 University reform and expansion aimed to train professional strata while diverting youth’s dem and for jo bs into longer education. A new push for vocational education at the liighschool level re ce iv e d foreign assistance.34 Labor regulations re e m p h a ­ sized the responsibility o f enterprises as well in training and retraining their em ployees, and the legal obligation to accept one trainee for every fifty em ployees and to employ them after two years was reinstated. Yet the rise o f skill cre dentials pushed up aggregate wages, because wage rates w ere tied to skill level and educational certification. Thus, additional dismissals w ere ne cessary .35 T h e greater reliance on market allocation o f social services and benefits was also cuttin g the purchasing power o f wages. L ess well paid blu e-collar workers responded with wage strikes, and the union op ened a fight to reassert the principle of “socialist distribution according to work” (that is, in term s of output productivity and thus ad ju sted for inflation).36 Conflicts b etw een m arket-oriented di­ rectors and workers opposed to their disciplinary decisions,37 and b e ­ tween union leaders and their rank and file over wage inequalities and dismissals, culm inated at the end o f 1967 with the removal o f Svetozar Vukmanović-Tempo from the presidency o f the unions when he polemicized publicly against m arket-oriented managerial in te re s ts ,38 33 T h e trend was reflected above all in A m endm ent 15, adopted in D e c e m b e r 1968. It permitted the transfer o f authority over hiring and firing to the director and professional organs within m anag em en t— such as th e stručni kolegijum, or council o f exp ert advisers to the director

T h at authority was reversed in the am endm ents o f 1971 and in the 1974

constitution.

34 O E C D technical assistance through the M editerranean P ro je ct initiated discussions on reforming secondary education to increase vocational training, discussions that b ore fruit in experiments in Split and Vojvodina in 1 9 6 9 -7 1 and in a major reform o f secondary education after 1972, T h e r e w ere similar developm ents in university expansion and secondary-school reform in W e ste rn E u ro p e at th e tim e (for exam ple, in F ra n c e and Italy). T h e se reforms presumed an ability to plan m anpower effectively, but the linear assumptions o f the manpower-planning m odel on which th e O E C D project was based precluded such an abil­ ity, according to th e critical analysis by D oran and D e e n , “T h e U se o f L in ea r D ifferen ce Equations in M anpow er Plan n ing.” 35 Adizes’s study of* two Serbian en terprises during this period provides rarely available information on th e choices firms made. W h ile workplaces paid the costs o f em p lo yees’ extra training, Adizes reports that in o n e o f th e textile firms h e studied in 1967, anyone who had not acquired th e desired training by 1970 was to be transferred automatically to another workplace or jo b classification ( Industrial Democracy, Yugoslav Style, 50)

36 Yugoslav Trade Unions, no. 11 (Ja n u a ry -M a rc h 1964), S e e also Rusinow, The Yugoslav Experiment; C a rter, Democratic Reform in Yugoslavia; and Jovanov, Radnički štrajkovi. 37 T h e trade-union newspaper was filled with stories o f such conflicts during 1964. 38 His criticism appeared in the pages o f Ekonomska Politika (E co n o m ic Policy), the liberal Belgrad e w eekly similar in style and views to The Economist o f London.

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New e m p lo y m e n t stagnated from 1964 to 1967 and the labor surplus in th e social sector rose, as a result o f the policies o f export orientation, e c o n o m ic liberalization, and m acroeconom ic stabilization as well as the response to these policies in industrial concentration, administrative ra­ tionalizations, and “modernization. ”39 W h ile m ore and more people found incomes in the private sector or abroad, many others simply with­ drew in d iscou ragem ent from the u n em ploym en t rolls. R evised labor leg­ islation in 1968 a ttem pted to reverse the situation by requiring firms to give p re fe re n c e in hiring to the unem plo yed (not new registrants but those previously em ployed and let go) when persons o f otherwise equal qualifications applied. T h e law also required firms to rehire within one year persons laid off as a result o f business losses if conditions improved. Both in 1 9 60 and in 1969, legislation sought a way around this problem of a prior obligation to persons employed in the social sector when labor costs dictated dismissals by revising pensions to encourage earlier retire­ ments. It is also striking, given the legal obligations o f firms to employed pregnant w om en, that a law perm itting abortions was enacted in 1960 and that in 19 6 9 wom en gained the right to contraception. At the same time, however, the changes in defense policy in 1964 fa­ voring the territorial d efense forces and purging the state security police (the highlight being the purge o f Rankovie in Ju ly 1966), as well as the constitutional am en d m e n ts o f 1 9 6 7 - 6 9 to republicanize the remaining federal administration (followed necessarily by the republicanization of party personnel and finances), increased the n u m b e r of people looking for jo b s in enterprises. T h e s e decentralizations, induced in part by stabiliza­ tion to cut spending on “nonproductiv e” salaries, w ere accompanied by a nother consolidation o f c om m unes; their nu m ber fell from 759 to 501 in 1968. T h e “socialization” o f parliament, in which representation shifted to “d ele g a tes ” from self-managed workplaces (introduced in 1967 but effec­ tive only after the last multicandidate elections in localities in 1969), transferred financing for d eleg ates’ salaries and perquisites from govern­ m e n t budgets to enterp rise in c o m e .40 This change was followed by the extension o f self-m anagem ent autonomy in 1 9 6 9 - 7 0 to the bureaus of civil servants and experts responsible for social s ervices.41 T h e effect o f cutting public expenditures, however, was to shift costs back to firms and reverse 39 O n th e hitler process, see Adizes, Industrial Democracy, Yugoslav Style, 65, '10 T h e "d elega te system " referred to social-seetor workplaces as the “b ase” (baza) o f the sociopolitical system. 11

T h e s e “self-managing com m unities o f in terest” for schools, hospitals and clinics, the­

aters, roads, and public utilities w ere to manage th eir services autonomously and receive a budget directly from en terprises, which would send delegates to review expenditure plans and bud gets and to pledge “contributions” in annual meetings.

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the process o f cuttin g taxes on enterprise income begun in the early 1960s. Instead o f creating a leaner public sector, moreover, d ecentraliza­ tion actually accelerated the e m ploy m ent of administrators, as W a g n e r ’s law would predict.*12

1968-1978 W orkers’ strikes, peasants pressure to form th eir own cooperatives, na­ tionalist eruptions after 1967 in Kosovo, Slovenia, and especially Croatia (the “mass m o v e m e n t”), and student rebellions in Sarajevo, Belgrad e, and Pristina in 1968 and in Zagreb in 1970 occupied public attention in these years. T h e social unrest led most Yugoslavs to assume that the change in economic policies (which they date from 1972, when liberal party leaders in Croatia and Se rbia w ere purged) was a political reaction against this decline in civil order. B u t the conditions for a major change in policy toward labor p re ce d e d the political crackdown and had b ee n developing outside the country. T h e shift in foreign trade after 1969 to markets in the East and South (most o f which was governed by long-term bilateral co n ­ tracts) and the shift in dom estic production to greater concern with e n ­ ergy, raw materials, produ cers’ goods, and strategic supplies for domestic processors and manufacturers, for the army, and for W e stern markets'43 (and therefore greater concern with transport for domestic supply routes) meant that increasing revenues dep end ed on increasing quantities more than on price com petition and marketing. W hat was identified as a co n ­ servative reaction was in many ways a return to the production profile of the developm entalist model and its political correlates— the F o ca model. But b ecau se the changes w ere a result o f liberal policies and in no way implied a reversal of com m itm e n ts to foreign trade, openness, and co n tin ­ uing decentralization, this was not an institutional or ideological victory for the d evelopm entalist faction as much as it was a de facto, practical one that created , as in the 1950s, a mixed system. T h e restructuring and refinancing o f foreign d ebt throughout the 1960s made external stabilization even more critical after 1969, and policy­ makers now identified the cause o f dom estic inflation with the u n reg u ­ lated m arket o f the 1960s, particularly during 1 9 6 5 - 6 8 . Complaints from enterprises and unions about high turnover and absenteeism among 12

Goati reports that th e n um b er o f officials grew 0 .6 percent annually in 1 9 6 5 -7 2 , when

social-sector em ploym en t grew less than 2 .0 p ercen t a year; but it rose 7 4 percent annually in 1 9 7 2 -8 7 , when social-sector em ploym ent grew 4 .2 percent a year (“Savetovanje”). •n Yugoslav exports in the 1970s w ere increasingly com posed o f primary com m odities and lower-value-added goods; see E co n om ic Com m ission for E u rope, “T h e Relative P erfor­ mance o f South Eu ro pean E x p o rts,”

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skilled workers who earned second incomes in the informal market con­ tribu ted to this vie w ,44 while the anti-inflationary program took particular aim at m anag ers’ high salaries and the bonuses they received for turning a com m e rcial profit. T h e export o f labor services had probably reduced po­ litical d iscon ten t over un em plo y m en t and provided critical hard cur­ rency, but by 1970 the gov ernm ent had b e co m e increasingly concerned about th e brain drain o f technical experts and skilled workers to Western E u ro p e . It sought ways to persuade them to retu rn and attem pted to limit labor emigratio n to unskilled workers for whom there w ere no jo bs at h o m e . 43 T h e num erous reasons for renew ed attention to production skills, in­ cluding a rising rate o f jo b vacancies in the midst of rising unemployment, conv erg ed in a raft o f new legislation on labor and education. T h e 1974 Law on E m p lo y m e n t expressed renewed concern for manpower plan­ ning, legally obliging firms to p ro je ct their manpower needs and develop training plans, increase the n u m b e r of trainees, and give them permanent positions after they com p leted their training period. T h e new defense d octrine o f all-national defense rein troduced universal conscription and obligatory military-training courses in high schools and universities.46 F irm s and local governm ents b e ca m e the c e n te r of the system of defense; th e y w ere obliged to maintain stockpiles o f necessities and weapons and to re q u ire persons employed in the public sector to undergo regular, ac­ tive training in the reserves. A reform o f secondary education ended the traditional two-track system o f gimnazije (the university-directed liberalarts high schools, similar to the lycée or gymnasium) and technical schools (for vocational education directed at im m ediate employment). A compre­ hensive system e xtend ed general education two years beyond elementary 44 S e e D y k er on th e rules against private-sec tor activity, such as the ban on import oí sem ifinished goods for private businesses in July 1971 and the prosecution oí “business crim es” in 1973 (Yugoslavia: Socialism, Development, and Debt, 83).

45 Public discussions on em igration began in early 1970, and legislation appeared in Feb ­ ruary 1973 (Tanić, “Yugoslavia”). Many forces converged in this concern: the Slovene gov­ ern m e n t faced shortages o f technical exp ertise and was co ncerned about the replacement of Slo ven e em igrants with people from oth er regions o f Yugoslavia; Croat em igres in Germany reputedly had a role in the nationalist “mass m ovem ent” o f 1 9 6 7 -7 1 (a primary charge by the federal party leadership against Croatian leaders Savka D abčević-K u čar and MikoTripalo at th e Karadjordjevo “accounting” o f D e c e m b e r 1971); the YPA leadership was apparently co n c ern e d about the depletion o f essential dom estic skills; and debates in the federal assem­ bly w ere dom inated by th e general view that the social costs o f educating these skilled m igrants w ere not being recouped. T h e 1973 law on labor migration gave preference to the unem ployed and forbade those who had not com pleted their military service to emigrate. 46 T h e outflow o f reserve and retired officers into the civilian sector was not sufficient to m eet th e dem and for trained military instructors, so that five universities opened depart­ m ents for national-defense studies in 1975 (B eb ler, “D evelop m ent o f Sociology o f Militaría in Yugoslavia”).

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school and required universal vocational specialization thereafter in order to increase the supply o f production-related and technical skills and r e ­ duce the supply o f skills for which dem and was declining .47 F irm s offered high-school youth contracts that would pay their schooling and guarantee them jo b s if they trained as technicians or skilled workers. Authorities also argued that incentives to productivity had b e e n seri­ ously diluted by managerial in d e p e n d en ce and the monoliths o f industrial concentration and integrated conglom erates. To revive the pressures that self-management was intended to exert on workers to increase output while k eep ing wages within th e limits of their productivity and enterprise revenue, and to red uce transaction costs further, a campaign for division­ alization began. E n te rp ris es and cooperatives w ere subdivided into the smallest production units capable o f in depend en t accounting because they produced a m arketable product; these units w ere nam ed “basic orga­ nizations of associated labor” (B O A L s ).48 In a two-decade-long quarrel among econom ists over valuation o f labor, the “specific cost o f production school” won a m om en tary victory, in 1 9 7 4 - 7 6 , over the hegem ony o f the “income school” (dohodoci ) that had lasted since 1955. T h e latter was strongest in Croatia and Slovenia (although there w ere also m e m b ers in Serbia), w here the tre atm e n t o f income as a share in value-added favored firms producing final goods for the market; the “specific cost o f pro du c­ tion” school, on the other hand, had long decried official disregard both for the prices paid raw-material and intermediate-goods producers and for the need to calculate labor costs in relation to fixed assets and other pro­ duction inputs as a measure o f efficiency within the firm. L abo r legislation in 1 9 7 4 - 7 6 refocused attention on skilled production workers and the reduction o f turnover. Increases in the salaries o f managers and other administrative or social-serviee staff (“nonproductive” employees) w ere indexed to the gains o f production workers. Although this legislation included m o re-secu re guarantees for pro du c­ 47

This program was initiated by the O E C D -fu n d e d M editerranean P ro ject in the

mid-1960s and taken up by school reform ers, first in Vojvodina and then in the Croatian littoral. Its m odel in th e final stages was a m ixture of, ironically, the educational system s in Sweden and th e G erm an D em ocratic R epu b lic— the countries with th e highest em ploy­ ment rates in E u ro p e — although its origins are found in th e polytechnical ideas o f Napoleonic reform s. L a ter, however, it cam e to b e identified with th e unpopular sociologistpolitician Stip e Šuvar, who was m inister o f education for Croatia at th e tim e it was fully implemented. T h e “šuvarica” angered middle-class parents, required local budgetary re ­ sources to provide a fidl range o f vocational schools in accord with a freedom o f occupational choice that was unrealistic, and suffered from the planning assumptions that (as discussed in n. 34 above) characterized all such educational reforms (author’s interviews in Croatia, Slo­ venia, and Serb ia in 1975, 1978, and 1982). 'iH S e e Sacks, Self-Management, and Efficiency, on divisionalization and the similar trends in other countries at the tim e.

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tion jo b s , leading many to call the Law on Associated Labor o f 1976 a “w orkers’ constitu tion” that protected workers against unem plo ym ent, its prim ary focus was the stabilizing objectives (also seen in 1 9 4 9 - 5 0 ) o f reas­ serting direct incentiv es to labor productivity and reducing costly turn­ over and m arket-influenced wage and salary inflation. Accordingly, it s tre n g th e n e d rules requirin g parity b etw ee n a person’s individual quali­ fications and j o b classification, and it stiffened penalties against workers who th rea te n e d productivity through ab senteeism , damage to social property, laziness, or lack o f work discipline (in 1977, absence five days running without prior notice required dismissal, according to Article 215 of the 19 76 law; a prison sen ten ce or reformatory confinem ent o f three months or m o re — after 1976, six months or m o re — was sufficient grounds for “te rm in a tio n ,” as was any official decision declaring a person unable to work). Services that had moved out of enterprises into autonomous bu­ reaus or retail markets during the 1960s, such as marketing and services provided by accountants, lawyers, and doctors, w ere now reintegrated into enterp rises to get m ore control over costs and, in the case of doctors, to p re v e n t w orkers’ use o f paid sick leave as a cover for moonlighting. M o re ove r, despite the b e lie f that there was greater jo b security, e nter­ prises w e re increasingly cautious about employing new perm anent labor. L a b o r regulations perm itted more flexibility to hire on temporary, part­ tim e, or specific-p roject contracts when a firm’s need for labor was likely to b e te m p o rary — such as when it had to replace em ployees on military or training leave, respond to an abnormal rise in market demand or a lim ited-productio n contract, or do seasonal work.49 Firm s did not fill positions vacated by retiring employees. T h e governm ent attempted to get g re a te r control over aggregate wages by reviving societywide and repu blic-n egotiated social compacts on incomes policies (largely ignored in the emphasis on managerial autonomy), even though the shift to a flexible-exchange-rate regim e and rising import prices undercut the effec­ tiveness o f such policies.50 T h e voluntary character o f the compacts also made them un enforceable if firms w ere unwilling.51 Furthermore, w o rk ers’ real incomes began to fall steadily, since prices rose faster than wages and enterp rise incom e was barely sufficient to pay the contractual 49 Specific-p ro ject work was done on freelance term s (honorarno), often by retired pro­ fessionals. T h e am ount o f part-tim e, contractual, seasonal, and overtim e work jum ped sig­ nificantly after th e early 1970s (see Zukin, “Practicing Socialism in a H obbesian World”). 50 In co m es policies w ere ineffective worldwide in the stagflation of the 1970s (William Nordhaus, com m en tary in discussion at the Yale University C o n feren ce on the W orld Econ­ om y, J u n e 1988). 51 In 1977, according to the Z agreb daily Vjesnik , 8 0 p ercen t o f all enterprises in Croatia d isregarded th e social com pacts th ey had signed; Privredni Vjesnik (Business News) re­ ported in J 9 7 8 that 5 0 p erce n t o f the enterprises it surveyed in Croatia ignored the com pacts.

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wage (som etim es not even that), let alone bonuses or profit shares. T h e rate o f u n em p lo y m en t shot skyward. W hile th e private sector had b e e n intended as a refuge for surplus labor expelled from the social sector, during the 1960s it began to generate increasing w ealth, which th e governm ent, strapped for funds, attem pted to captu re for investm ent in new workplaces. T h e G re e n Plan o f 1973 encouraged private farm ers to pool their resources in cooperatives in e x ­ change for financial assistance to purchase modern e qu ip m ent; th e plan was in fact largely aim ed at getting W orld B ank loans that gave priority to the private s e c to r.52 It was also, however, one o f a n u m b e r o f efforts to encourage Yugoslav workers abroad to return and invest their savings in productive activities— in agriculture, services, and small busin esses— in order, authorities said enticingly, “to obtain work m o re quickly.” E m ­ ployment plans within th e annual federal econ om ic resolutions reserved a specified n u m b e r o f jo b s for retu rnees, giving priority in em p loy m e n t to some o f their occupations. N ew laws on property rights p erm itted re tu rn ­ ing migrants to invest their own funds in small factories in the public sector in exchange for e m p lo y m e n t— essentially, to buy them selves a jo b. In 1978, the g ov ern m e n t began to look to foreign loans specifically for e m ploym ent by establishing a special federal fund “for credits to increase em ploym ent in econom ically less developed regio ns”; the fund was to be based e n tirely on foreign monies and would encourage jo in t ventu res “where u n em p lo y m en t was g rav e.”53 A 1977 law on credit and banking opened m unicipal savings institutions to captu re private savings, e sta b ­ lished favorable rates on loans to marginal firms to pro te ct e m ploy m ent, and g uaranteed deposits and raised interest on individual accounts through the National Bank. Private persons w ere p erm itted to open fo reign-exchange accounts in banks and w ere paid interest in dinars. L o ­ cal gov ernm ents financed infrastructural projects, such as new e le m e n ­ tary schools and hospitals, with bond issues and local campaigns to “increase savings.”54 52 T h e first o f th ese loans was offered in 1971 by the W orld Bank along with the UN Food and Agriculture Organization; it was granted in 1976 after m uch difficulty. T h e second loan came in 1978. T h e story o f th ese loans tells much about the Yugoslav system; see D yker, Yugoslavia, 1 5 6 - 5 7 . 53 T h e fund was established by the Law on the P rocu rem ent and Use of Foreign R e ­ sources for the Purposes o fln cr e a sin g Em ploym en t and Providing Jobs for T hose R eturning from W ork Abroad. Its basic task was to collect resources from oth er countries on a grant-inaid or cred it basis to finance em ploym en t in economically underdeveloped regions and areas of m arked em igration. S e e the press conference of Kiro Gligorov, then president o f the federal assem bly, on Ju n e 18, 1977, cited in R F E iR A D Background R eport no 114 (Ju n e 21, 1977) from the story in Borba (Belgrade), Ju n e 19, 1977. 54 T h e citizens o f Bosnia-H erzegovina voted to pay a 3 p ercen t tax on their personal incom es for the 1984 winter O lym pic games,

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T h e political coloration of these labor reforms and their obvious paral­ lels to those o f the 1950s— together with the delay until 1974 in pro­ mulgating a new constitution to codify the decentralizing am endm ents of 1 9 6 7 - 7 1 and the delay o f the revised law on labor relations until 1976— contrib u ted to the perception that the changes were a reactionary re­ sponse to political and social turmoil. Yet, as early as 1977, managers began a revolt against the labor regulations, revisions w ere made, and party leaders insisted that managers b e given greater flexibility in dispos­ ing o f labor. B y 1981, enterprises had taken th eir dem ands to the legisla­ tures and won. T h e retu rn to an I M F -co n d itio n e d stabilization in August 1979 also initiated a new series o f wage controls and devaluations.

1979-1989 B e tw e e n 1979 and 1982, the full-fledged return to econom ic reform and exports to W e s t e r n markets in order to repay convertible-cu rrency debt necessitated rewriting labor legislation. Although the language o f ratio­ nalization and dismissal continued to re fer to the need for discipline on th e job, this now m eant the threat of unem plo yment. In the words of an econom ist on the Kraigher Commission, set up to draft a long-term stabi­ lization program acceptab le to the I M F , “a position o f em ploym ent is not a p riv ile g e .” I f no profit, then bankruptcy.55 Revised legislation now allowed firms to term inate a trainee’s employ­ m e n t contract after one year and to fulfill their legal obligation by putting multiple trainees into one position and choosing among them according to perfo rm ance on the jo b . L ow er budgets for social services and the mili­ tary due to d eclining growth forced cuts in th eir staffs. Lim its were placed on university e nrollm ents in fields with the gre atest surplus o f skills— which happened to b e liberal (noneconomic) professions, such as medi­ cine, dentistry, and the liberal arts and social sciences. F irm s resisted the pressure to hire additional family m e m b ers and generally excluded wom en and youth from consideration by adding the qualification in the obligatory ad vertisem ents o f jo b openings that candidates “must have co m p le te d th e ir military s e r v ic e .”56 New full-time positions carried everh igher re q u irem en ts for prior work experience, often o f a specialized na­ ture, and d em anded a host o f special internal qualifications and equiva­ lents o f formal schooling. By 1989, the Law on E nterprises, written to e n cou rag e foreign investment, gave managers fidl rights to hire and fire labor and erased the system o f self-management. Prime M inister Ante M arkovic gave top priority to privatization of public-sector firms. 55

A u th o r’s interview in Ljubljana, O cto b er 1982 Laws facilitating bankruptcy appeared

in 1987; see Knight, Financial Discipline and Structural Adjustment in Yugoslavia Ru/.a First-Dilic- first alerted me to this practice.

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D uring the 1980s, ju s t as in the early 1960s, official concern for the em ploym ent c o n s e q u e n ces o f stabilization restrictions and export pro m o­ tion led to yet a nother reduction in the workday, calls for multiple work shifts, revisions of pension laws to encourage earlier re tirem en t, and some increase in the m inuscule monies for un em ploym ent compensation. Taxation also shifted back from enterprises to personal incomes, and so­ cial services, housing, and utilities w ere again to be financed through user fees and retail markets instead o f enterprise funds. Social compacts on incomes w ere revised to p erm it lower taxes on e n te rp ris es ’ gross wage bill on the arg u m ent that Yugoslavia’s comparative advantage in exports was in low labor costs. T h e basket o f com modities defining the guaranteed minimum wage rate b ecam e smaller in 1982. At the end of 1984, the terms o f ag re e m e n t with the I M F produced a nationwide com pact on incomes policy, signed by republican governments and sent to all basic organizations o f associated labor. T h e primary proposals for expanding e m ploym ent also relied, as b e ­ fore, on the e n co u ra g em en t of small firms and services in the private sector (mala privredd) and on calls for redundant labor to return to agri­ culture. This time, however, attempts to rem ove the limits on landhold­ ings su cceed ed in Croatia, and later in Serbia. O nly Slovenia explicitly held out, arguing that its bord erlands were already in danger o f dep o p ­ ulation and that smallholdings plus tax relief to private peasants w ere necessary incentives to keep the peasants there. Many republics also structured tax-relief packages to encourage em ploym ent. In Serbia, for example, beginning in 1 9 7 9 - 8 0 , tax authorities excused from taxation people in traineeships, small firms in their first year or two of business, and firms that em ployed the handicapped.57 In 1987, the g overnm ent negotiated grants from F ra n c e (30 million francs) and the Federal R e p u b ­ lic of G e rm an y (33 million marks) to assist the return o f Yugoslav profes­ sionals working abroad by creating projects that would provide them with jo b s . 58 A new policy on federal aid to less-d eveloped areas o f the country al­ lowed republics to fulfill up to 5 0 p e rce n t of their obligations by e n co u r­ aging their firms to invest directly in jo in t ventu res in these areas. Like the argum ents made at the eighth party congress in 1 96 4— when liberals and developm entalists clashed on the necessity o f a fund to aid lessdeveloped areas and Tito argued for the latter to receive technical assis­ tance o f the kind Yugoslavia was then giving to third-world cou ntries— the new policy differentiated the econom ic space of the country accord­ 57 T . Ha ice vie, personal com m unication, Belgrade, N ovem ber 1982. Set1 M ates, “R ecent T en d en cie s in the Regulation of In co m e D istrib ution,” on changes in accounting rules for taxation of personal incom e 5H “R ates o f Em plo ym en t and U nem ploym ent, 1980—1 9 87 ,” 10.

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ing to export specialization and corresponding comparative advantage. T h e m ore-d e ve lop e d regions o f the north, as an area o f “highly modern, technically advanced export indu stries,” would invest in the south as an area o f low-wage, labor-in tensive industries “to absorb the problem of e m p l o y m e n t.”59

D is h a r m o n ie s

T h e rh eto ric o f central policy rarely stepped away from employment, but responsibility for im p lem e n tin g central policy and for em ploym ent re­ sided with republican and local governm ents. T h e primary investors were these republican and local governm ents, enterprises, and, in most cases, the territorial banks, which lay at the intersection o f the three by provid­ ing c re d it in response to governmental social plans and enterprise appli­ cations. T h e expansion o f productive capacity and developmental in v e stm e n t was the ju risdiction o f republican governments after 1958, and even w h ere federal investm ents continued, the republics were handed th e com p leted p rojects and thus the obligation to maintain them. E c o n o m ic planning was therefore a republican affair, in which the indus­ trial and sectoral policies o f structural change w ere focused on regional d ev elo p m en t using the financial resources that a re public could capture— in its territorial bank, from federal grants and subsidies, and from the foreign m onies earned or borrowed by its enterprises. At the same time, re publican authorities, like the federal governm ent, saw employment promotion as a c o m m itm e n t to growth in general. Local governments, particularly through the activities o f e m ploy m ent services that put pres­ sure on local officials and worked with enterprise directors, performed the function o f a market wage in capitalist countries— adjusting the (local) supply o f labor to the dem and for it. T h e c o n s e q u e n c e was a growing disjuncture over time b etw een policies addressed to th e external environm ent, guided by a particular model of growth, and th e reality o f the labor supply in the country. It was manifest in an increasing disparity b e tw ee n the dem and from the social sector of labor and the pattern o f both agrarian exodus and generational turnover. As a result especially o f th e territorialization o f capital flows (within re­ publics and in federally mediated transfers b etw een republics) and of hum an-capital formation (system o f schooling), there w ere “vastly differ­ e n t labor m ark et conditions among the various repu blics.”00 And the in­ 59 Proposals from the Kraigher Com m ission's working group on em ploym ent (un­ published version); Branislav Soskic, sp eed ) at the annual m eeting o f the Yugoslav Associa­ tion o f E co n o m ists, Opatija, Croatia, O c to b er 1982. (’° Sch ren k , Ardalan, and E l Tatawy, first draft o f th eir analysis o f th e W orld Bank mis­ sion; but see th eir Yugoslavia: Self-Management Socialism and the Challenges o f Develop­ ment, 2 4 4 - 4 5 , and th e detailed elaboration at 2 4 5 - 4 9 and 28 6- 315.

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creasing disparity over both time and space b e tw e e n dem and and supply created an e v e r-g re a te r disproportion b etw ee n n eed and resources for new in v e stm e n t at th e local level. In the re p u b lic-ce n te re d world o f statistical data and political re p re s e n ­ tation, how ever, the reality of growing un em plo y m en t contrasted sharply with conditions in Slovenia. T h e r e the model underlying governmental policies— an industrially advanced, lean socialist core o f skilled workers and com m ercially attuned manufacturers participating fully in W e s te r n trade, a settled labor reserve o f private farmers and artisans, and a gov­ ernment o f experts and a local militia— seem ed to b e the cause o f full employment. It was easy to conclude that the choice o f growth strategy and accom panying institutions (including republican econom ic sover­ eignty) was correct, and that unem ploym en t in o ther republics, rising as one w ent east and south, was due to political in terferen ce with that model or to “cultural” differences. B u t Slovenia was also the one republic w here the initial dev elopm en tal and labor-supply conditions and existing plant on which th e original Slovene model was based actually h e ld .61 The first problem in all the o ther areas was the imbalance b etw ee n the pace o f industrial dem and for labor and the pace at which surplus labor was released from the countryside. T h e historical dim ension of differences among the republics rem ained clearest. T h e contrast was particularly sharp b e tw e e n labor-im porting Slovenia, with its early c o m ­ mercialization o f agriculture and d ev elopm en t o f light manufacturing and its universal ele m e n ta ry education, and areas untouched by industry even in th e 1930s. T h e areas o f greatest population density w ere those where industry was least d eveloped before the war and w h ere land was scarcely arable, such as the Dalm atian hinterland and the D inaric range of H erzegovina and M o n ten eg ro (where population density in th e 1930s was as high as in C h ina or Java). T h e exodus o f Partisan veterans onto the plains o f Vojvodina and Slavonia in 1 9 4 6 - 4 7 was insufficient to p re ­ vent the poorly d eveloped regions from remaining “regions o f e m ig ra ­ tion.” P eople continu ed to em igrate according to prewar traditions and access to external ro utes— to the W e st, to urban c e n te rs in the poorer republics, and, eventually, to Slovenia. Policy con trib u ted to this disharmony. A d ev elop m en t strategy based for political reasons on a gradual approach to capital accumulation that took advantage o f im ported capital and existing capacity in processing and manufacturing and on federal investm ent in new capacity in heavy indus­ 61

In 1945, 78 p erce n t o f industry in Yugoslavia lay north o f th e D anu be-Sava line. By

1968, the proportion o f industry in th e central and eastern parts o f th e country had grown from 22 p e rce n t to 4 5 p erce n t, b u t m uch o f that was heavy and defense-oriented industry; it was not sustainable in the economically difficult decades after 1965, while light manufactur­ ing in th e north could b e m odernized (Hamilton, “T h e Location o f Industry in E ast-C entral and Southeast E u r o p e ,” 177, 183),

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try, raw-material extraction, and infrastructure for defense needs directly intensified th e inherited differences. State policies toward defense, in 1 9 3 8 - 3 9 and again in 1 9 4 7 - 4 9 , located strategic industries in the interior and left vu ln erab le borderlands declared as security zones with little in­ dustry (such as Vojvodina and Croatian M ed ju m urje) or with only admin­ istrative towns (as in Macedonia) until the 1 9 6 0 s .62 Investm ents in infrastructure also reproduced inherited geopolitical profiles: federal pro je cts (including the volu nteer brigades) and monies w ere dedicated to d efen se -o rie n te d infrastructure, largely in the interior, whereas republi­ can expend itures and foreign loans for infrastructure after 1960 were m ore o rien ted to foreign-trade earnings and favored areas with mored ev eloped transportation and com munication links to W e stern Europe, the tourist and shipping industries o f the Dalm atian coast, and inherited infrastructure in river valleys.63 E v e n in the 1970s and 1980s, offshore processing and assem bly w ere purposely located near W estern markets, in Slovenia and parts o f C roatia,64 whereas the energy, mining, and heavy-industry sectors w ere in areas of Bosnia, Kosovo, Serbia, and M a ce d o n ia — which w ere more isolated from foreign markets, particularly co n v e rtib le-cu rre n e y markets. Foreign credits and investm ent for various purposes flowed to m ore-developed areas with b e tte r infrastructure and international co n tac ts.65 62 Borders closed to eco n o m ic exchange by the split with the Co m in for m in 1 9 48 -49 w e re doubly affected— by both federal policy and external hostility. W h ile Croatia and Ser­ bia b en efited from Hungarian and Romanian openness during the 1960s, Macedonia was particularly harm ed by th e effects o f poor political relations— not only the Eastern blockade (and th e fact that Bulgaria was fully oriented to its Eastern markets until the mid-1980s) but also th e closing o f th e b o rd er with G r e e c e when Yugoslav authorities conced ed to Western demands in 19 4 9 and again in th e 1960s, as relations betw een Yugoslavia and G r e e c e under th e ju n ta tu rn ed hostile. T h e tensions over the b ord er transformed market towns on the M acedonian side into administrative c en ters (for political control, customs inspection, radar stations, and watch towers) without their own econom ic base, discouraged firms from devel­ oping co m m ercial and export activities, and led many firms to use Slovene intermediaries for th e processing and m arketing o f Macedonian raw materials. Of the thirty communes in M acedonia, fifteen w ere in b o rd er areas; o f the fourteen least developed, seven were on the bo rd er itse lf and th e others w ere mountainous, food-deficit districts. Across two o f Macedo­ nia’s th re e foreign borders w ere areas even less developed, m oreover— Pirinsko Macedonia in Bulgaria and Albania (author’s interviews with D obri Dodevski and others at the Institute o f E co n o m ics in Sk opje, D e c e m b e r 1982), 63 Rusinow d escrib es the policy conflict produced in th e early 1960s by th e clash between th e “D a n u b ia n ” and “Adriatic” concepts o f econom ic developm ent— th e first favored by Serb ia, with its river transport and links to the east, the second by Croatia, with its maritime transport and access to th e west (The Yugoslav Experiment, 1 3 3 - 3 4 ; see also Wilson, “The B e lg ra d e -B a r Railroad”), 64 Slovenia and Croatia jo in ed a grouping initiated by northern Italian provinces in the 1980s to discuss regional cooperation in th e “Alpe-Adria” area (the name taken by the asso­ ciation) for tourist, econom ic, and cultural developm ent. 65 T h e w estern republics had far greater success in international capital and Eurodollar m arkets o n ce republics and firms w ere free to borrow (the former after 1965 and the latter

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T h e sectoral distinctions in agricultural policy and property also followed th e historical pattern o f geographical differences— b etw ee n private-sector, small-scale and household production o f fruits, vegetables, and livestock for retail markets, with few regulations and free prices, on the one hand; and the social-sector, large-scale production o f basic food­ stuffs (such as grains and oils) and industrial crops in Bosnia and in the plains o f Vojvodina, Slavonia, and M acedonia on the other. Social-sector agriculture received g o v ernm ent credits, which the private sector did not, b u t it was also regulated by a defense-oriented national food policy that set prices, re qu ired permission for export, and tied the areas w h ere it prevailed far m ore to th e d om estic market and negotiated p rice s.66 C o n seq u en tly , labor-intensive activities in industry and agriculture tended to p red om inate in areas with m o re-developed industry, div er­ sified activities, and low er agricultural surpluses and birth rates. Highly capital-intensive activities in en erg y , mining, and heavy industry were; located in less-d ev elop ed areas with large labor surpluses in th e cou n try ­ side and high b irth rates. T h e e x tre m e that d em onstrates the pattern was the p ro vin ce o f Kosovo, with b irth rates com parab le to those o f south Asia but industrial investm ent in sectors that are highly capital-intensive, such as energy, metallurgy, and sm eltin g .67 T h e availability o f investm ent r e ­ sources was in inverse proportion to th e dem and for jo b s as a result of price policy, which regulated industries and producers that happened to concentrate disproportionately in poorer areas and which allowed prices and goods to roam freely for final manufacturers and processing firms that tended to c o n c en tra te in m ore-developed areas. T h e policy o f firing women first in a recession, unless they w ere pregnant, com pounded the problem , b eca u se o f the interactive effect and inverse relation b etw ee n female e m p lo y m e n t and b irth ra te s.68 T h e incong ru en ce b etw ee n policy and dom estic conditions was not only geographic and d em ographic but temporal as well. In place o f grow­

after 1974); foreign direct investm ent also favored Croatia and Slovenia (including major energy and petrochem ical projects by Dow Chem ical and W estinghouse). Even research monies to firms and institutes te nded to llow along well-established networks; a World Health Organization study o f population control in the early 1980s, for example, was done in Slovenia rather than Kosovo or M acedonia because the Slovene research team was known in international social scien ce and aid circles. 68 T lle differences betw een Vojvodina and Slovenia are discussed in Bookman, "T h e E c o ­ nomic Basis oi Regional Autarchy in Yugoslavia.” 67 T h e birthrate for Kosovo declined from 4 3 .5 per 1(XX) population in 1 9 5 0 - 5 4 to 3 0 .0 per 1000 in 1 9 8 5 - 8 9 , in comparison to 28 8 and 15.2 per 1000 for all o f Yugoslavia in the same periods. Bu t the rate o f natural increase was 2 5 .5 per 1000 for Kosovo in 1 9 5 0 -5 4 , rising to 2 8 .9 in 1 9 6 5 - 6 9 and falling to 2 4.1 in 1 9 8 5 -8 9 ; the Yugoslav average had declined from 17 0 to 6 .1 , while in 1 9 8 5 - 8 9 Slovenia was at 3 .1 , Croatia at 1.5, and Serbia proper at 2 .4 (Statistički (Godišnjak Jugoslavije for the relevant years).

m F o r Yugoslav data (in this effect, see Mihovilović et al., '/.etia izmt’đju rada i porodice.

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ing dem and in industry for surplus labor released “naturally” from agricul­ ture, restrictive policies occu rred in all spheres at o n c e — in monetary and fiscal policy for m acroeconom ic stabilization and in labor policy in socialsecto r industry, agriculture, and public services aimed at increasing pro­ ductivity and red ucing labor costs; the released surplus was thus pushed in th e o th e r direction. Unskilled labor expelled from industry in the 1950s and 1960s did not find the countryside receptive because central policy— in 1 9 5 5 - 5 7 , in 1 9 6 5 - 6 8 , and again in 1 9 7 0 — was also aimed at raising agricultural productivity through concentration o f landholdings, m echa­ nization, and incorporation o f more land as well as marketing activities into the social sector. T h e s e w ere the same years in which imports of grain, cotton, and oil substituted for dom estic production o f coal and grains, releasing even m ore labor from the land and primary industries. T h e dem obilization and th en “socialization” o f the security apparatus and the arm y (in 1955, 1 9 5 8 - 6 4 , after 1966, and again in the 1970s) sent vet­ erans, police, and retiring officers hom e to areas that, because of the pat­ tern o f w artim e fighting and re cru itm ent into the Partisan army, were m ore agrarian and less well equipped with a range o f manufacturing and tertiary e m p loy m en ts (particularly Bosnia-IIerzegovina, Montenegro, and the fo rm er military bord er o f Croatia). Instead o f absorbing the agricultural labor surplus and reducing the p ro blem o f d evelopm ental un em plo y m en t after the 1950s (according to the ju stification for jo in in g G A T T in 1958, this was no longer an issue), the o p enness o f th e econom y during the 1960s and 1970s made the country vuln erable to serious W e ste rn recessions that affected export com modi­ ties and then labor— at the same tim e that the rural outflow was grow­ ing.69 M o reover, although gov ernm ent policy in the early 1970s was to induce skilled labor to return from abroad, the receiving countries changed their policies at the tim e in the opposite direction, expelling lessskilled labor and accepting only m ore highly skilled workers and techni­ cians in their lower quotas. T h e pace o f agrarian exodus actually quick­ en ed after 1971, only a few years before opportunities in W e stern Europe disappeared and Yugoslav gastarbeiter flooded b a c k .70 Thus, despite em ­

m Su ch recessions took place in 1960—6 1, in 1 9 6 5 - 6 7 , and m ore or less continuously after 1974. U. S . recessions in 1 9 5 3 - 5 4 and 1 9 5 7 - 5 8 w ere also significant in Yugoslav policy shifts during th e 1950s, when Yugoslav trade with the United States was higher (see Shonfield,

Modern Capitalism, 1 0 -1 8 ) . 70

B e tw e e n 1971 and 1981, the agricultural population countrywide declined 18 percent,

from 3 8 . 2 p e r c e n t to 1 9 .9 p erce n t of th e total population. B y republic, th e 1981 figures were 9 . 2 p e r c e n t in Slovenia, 1 3 ,0 p ercent in M ontenegro, 1 4.5 p ercent in Croatia, 1 6 ,6 percent in Bosnia-H erzegovina, 1 9.2 p ercent in Vojvodina, 2 0 .5 p ercent in Macedonia, 2 4 .0 percent in Kosovo, and 2 6 .6 p erce n t in Serbia proper (calculated from “T h e Non-Agricultural Popu­ latio n ,” 5).

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ployment growth in 1 9 7 3 - 7 5 , 71 the resident labor force increased in abso­ lute term s for the first tim e since the m id-1960s recession, and th ere was an explosion in the u n em plo y m en t rolls. By 1982, M acedonia was e m ­ ploying tw elve thousand new workers a year— but the dem and was for eighteen thousand j o b s . 72 In addition to the disparity b etw ee n industrial dem and for labor as d e ­ fined by official policy and the rate o f rural outflow, a second problem for areas outside those fitting the initial conditions o f the Slovene model was the cum ulative impact o f m acroeconom ic stabilization and d evelopm ent policy. D e s p ite th e early com m itm e n t to female equality, which urged women into the industrial labor force, equalized wages for a jo b regard­ less o f who held it, and em phasized universal education, the approach to welfare and un em p lo y m en t sent women packing first. As a result, w om en’s participation rates w ere (except in Slovenia) closer to those of southern E u ro p e than those o f socialist countries. Yet the secular rise in demand for jo b s , ind epend en t o f dem ographic change and agrarian e x ­ odus, was primarily a response to stabilization policies, as falling hou se­ hold incom es and living standards pushed second and third family m em bers into the labor force in search o f supplem entary wages. At the same tim e that w om en and youth w ere b eing fired, in other words, they were m ore likely to be seeking em ploym ent. In contrast, the liberals’ enduring battle to demilitarize the state, the economy, and society was in practice often legitimized by the official ap­ proach to external stabilization. Deflationary policies, which aimed at r e ­ versing the balance-of-paym ents deficits and building up hard-currency reserves, em phasized reducing federal expenditures by cutting co m p e ­ tences and the military budget. B u t the a ch iev em en t o f such cuts cam e at the price o f rising b urdens on local gov ernm ents— and thus an evergreater drain on resources w h ere effective investm ent for em p loy m ent had to occur. M o reover, the world environm ent was not always so a cc o m ­ modating as to red uce military threats when W e ste rn dem and for exports fell and capital markets w ere tight. M ore often— such as the late 1960s, after the m id -1970s, and throughout the 1980s— both situations d e ­ manded a policy response simultaneously. T h e contradictory dem ands on central policy had to b e im p lem e n te d , how ever, at the local level, and the effect was to magnify the existing disparities betw een investm ent re ­ sources and e m p lo y m e n t needs among localities. According to Pavle S ich erl’s dynamic analysis o f econ om ic inequalities in the cou ntry— a measure o f the time need ed by the less-developed republics to catch up 71 1974 was a good year for em ploym en t, and em ploym ent growth in 1975 was the high­ est in ten years (M enein ger, “U tjeeaj privredne aktivnosti na zaposlenost”). 72 T ripo M ulina, persona] comm unication, Belgrade, O c to b er 1982; Kiril Miljovski, per­ sonal com m unication, O patija, O c to b er 1982.

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to the m o re-d e ve lop e d ones in various econom ic indicators— the “most im portant single factor” in the differences in gross material product (G M P ) p e r capita was the level o f industrial, social-sector em ploy m ent.73 T h e d iscrepancy accruing from early advantages w idened substantially b e tw e e n 1961 and 1971. T h e policy-generated temporal disjuncture b etw ee n labor demand and supply also had a generational aspect. T h e great value placed on the “hu­ man factor” in growth led to substantial attention to education and train­ ing, b u t again the cycles w ere at odds. Attem pts to retire the Partisan generation to make room for a better-ed u ca ted , younger generation in the second h alf o f the 1950s and the early 1960s sent these often still young veterans into local econom ies at a time when investm ent in the economy and in schooling was b eing decentralized to republican and local bud­ g e ts .74 T h e postwar baby-boom generation e n tered the labor market in exactly th e same years as the serious em ploy m ent recessions surrounding the 1960s econ om ic reforms, especially after 1965. Instead o f the needed expansion, jo b creation was nearly at a standstill, dismissals w ere rising, and policy requ ired firms to hire first those whose jo b s had been made redundant by the reforms, so that turnover was strictly within the cohort o f persons already e m p lo y e d .75 T h e m ore importance that formal educa­ tional qualifications took on for em p loy m ent and incomes, the higher was the incentiv e to leave rural towns and villages. T h e ever-larger contingent o f th e rural exodus w ere youth who left, they told rural sociologists, not 73

Sicherl, “T im e -D ista n c e as a Dynamic M easure of Disparities in Social and Economic

D e v e lo p m e n t.” In 1971, according to Sicherl s measure ot time distance betw een the more developed repub lics” and the “less developed republics,” (he latter needed five years to “catch lip” in measures o f productivity, fifteen years to reach the same levels of employment, and forty years to equalize demographic rates. T h e tim e distance for per capita income (G M P per capita) b etw een the two groups of republics was 1 1.5 years, of which employment levels explained 5 .1 years, productivity 4 .4 years, and the demographic component 2 years (ibid.). 7,1 T h e co m m u ne budget for Mostar, Bosnia-Herzegovina, gave first priority and substan­ tial m onies to housing and schools; the least-funded categories w ere "intervention in the ec o n o m y” and “investm ent in the eco n o m y ,” and funding for them declined after 1965. In 1969, the budget for education was 2.3 million new dinars; for noneconom ic investment, 7 ,2 9 3 ,4 0 0 ; and for the two econom ic categories, a total o f 4 3 1 ,4 0 0 (Rosenblum -Cale, Appro­ priation P olitics,” 31 n. 41). in the 1980s, Macedonian towns with high female unemploy­ m en t did invest heavily in textile industries, however, because credits favored exportoriented processing and th ese industries w ere deem ed m ore suitable for women (authors interviews with D obri Dodevski and Olga Dim itrieva of the Institute of Economics in Skopje and T ripo Mulina of the Institute of Econom ics in Belgrade, fall 1982). 75 T his was the period when, according to Estrin, freer wage determination in firms made it possible for urban-sector workers to monopolize control over their job s (Self-Management: Economic Theory and Yugoslav Practice, 2 0 4 - 5 ) Adizes gives a far b etter picture of the actual decisions bein g made by managers for modernization and markets at the time (Indus­ trial Democracy, Yugoslav Style),

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because o f lower wages and insufficient investm ent in jo b s (as the Todaro model would argue), b u t b ecau se o f the lack o f educational op portu nity.7fi T h e reform and expansion o f university education in the 1960s yielded a cohort in the 1970s that sought jo b s com m ensu rate with their certifica­ tion, but e con om ic policy had shifted in favor of skilled production jo b s for which they had n e ith e r the skills nor the volition. T h e reform o f sec­ ondary education in the m id-1970s to encourage vocational training in needed technical skills gave localities the responsibility for providing the full range o f occupational training that local youth desired at exactly the point when th e next round o f governm ental decentralization, com bined with the new d efense role of localities, weighed heavily on local budgets for jo b s , housing, and unem ploym en t assistance. Most localities simply could not provide a full range o f choice, thus e ith er limiting the skills that employers could find locally or encouraging a fu rther exodus from smaller to larger towns. Secondary-school students had a choice o f e ith e r studying in the one or two technical schools their town could afford or emigratin g to cities, which could offer a fuller range but w ere accumulating everlarger pools o f un em ployed residents and migrants. This reform c o n tin ­ ued into the period of sharp m onetary contraction with d eb t repaym ent in the 1980s. M o reover, decentralization reduced only the n u m b e r o f “unproduc­ tive” administrators em ployed at one level, while it increased the total number. Although the expansion in em p loy m ent in services, govern­ ment, and o th e r administrative tasks in 1 9 7 6 - 7 9 was able to absorb some of the you nger generation and its skills, it was cut short by the renew ed econom ic reform and stagnation in new em ploy m ent after 1 9 79 — a re v e r­ sal in ten d ed in part to cut back on such “o v erem p lo y m en t.” T h e s e various disharm onies in the path o f dev elopm en t played th e m ­ selves out, how ever, within separate universes in each republic. Most republics contained internal differences. F o r example, there w ere wide differences among M acedonian towns that had traditionally specialized in specific crafts and that varied substantially in birthrates, com m ercial op ­ portunities, and administrative obligations. In Croatia, regional differ­ 76

D ilie, Seoska omladina danas . Studies in both Croatia and Serb ia have shown that

young w om en left at an earlier age than men because th eir disadvantages in em ploym ent, even m o re than prospects for a successful marriage, drove them to seek b e tte r education in the towns (author’s interviews with Olga Supek and Zagorka Golubovic, anthropologists who did field research in villages o f Croatia and Serbia). T o send them to secondary school, parents spent household savings that would in the past have b een a marriage dowry. O n the b eginning of this change, s e e Trouton, Peasant Renaissance in Yugoslavia. Sociologists also re corded th e increasing aging o f the agricultural population at th e tim e (see th e articles by Svetozar Livada and E d h e in D ilic in D ep a rtm en t o f Rural Sociology, Institute o f Agri­ cultural E co n o m ics and Sociology, The Yugoslav Village; 011 the same process elsew h ere in E a stern E u ro p e , see H. Scott, “W h y the Revolution D o esn ’t Solve E v e ry th in g ”).

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e n c es w e re substantial, b e tw e e n the interior (the fo rm er military border, w h ere tim b er, mines, and railroads provided work), the industrial com­ plex o f th e Z agreb region, the tourist industry o f Dalm atia, and the rich agricultural fields and agro-industry o f Slavonia and B a ra n ja .77 Federal in v e stm e n t in the 1940s and 1950s had an overall conception not limited to particular republics, and military production not only was spread throughout the country, for strategic reasons, but also followed a policy requ iring integration o f production phases among plants dispersed throughout th e country. N onetheless, the econom ic autonomy o f republics over the policies di­ rectly affecting labor— in education, investm ent monies, regional devel­ op m en t, incom es and welfare, and military conscription— and the fact that capital for in vestm en t flowed vertically among governmental budgets and the banking system m eant that republics had greater influence over e m p lo y m e n t outcom es. T h e allocation and concentration o f capital and cred it, w h e th e r derived from federal subsidies, foreign credits, taxation, or o th e r transfers, w ere territorially organized rather than sectoral or m arket-driven. In contrast to the flow of semifinished and finished goods, the cross-regional flows o f capital and cred it w ere low. All o f the differential con se q u e n ces o f central policies on inherited ca­ pacities, geographical position, and composition o f population had their e ffect on the monies available for investm ent. W h e n the republics first gained autonom y over investm ent cred it and began to define their sepa­ rate d ev elo p m en t strategies after 1958, for example, the cuts in overall in v e stm e n t rates, in the proportion devoted to heavy industry and agri­ cu ltu re, and in federal investm ent w ere made on the argument that the cou ntry had reached the middle levels o f d evelopm ent and that domestic industry was now able to satisfy dom estic needs. In fact, the republics w ere at vastly different levels of developm ent. T h e less-industrialized re­ publics w ere left to face the unfinished task o f massive infrastructural and industrial d ev elop m en t when policy favored technological modernization, fuller utilization o f existing capacity, and reorientation to W estern trade. In addition, the G A TT -d efined liberalization betw een 1958 and 1961 e lim inated the capacity for differentiation in federal policy, replacing multiple coefficients with uniform tariffs, progressive taxation with pro77

T h e policy shift in Croatia after 1972 to investm ent in the poor interior— such as in the

alum inum plant at Obrovac, to take advantage o f local bauxite (already on long-term con­ tract, it tu rn ed out, to the Soviet market)— received heavy criticism as irrational, “political’’ inv estm ent by th e new, m ore conservative Croatian leadership to buy back the allegiance of local S e rb s after the Croatian nationalist tensions in 1 9 6 7 - 7 1 . Bu t a more straightforward e co n o m ic explanation is suggested by the pattern o f similar investment choices elsewhere in Yugoslavia and in the rest o f th e world as a result o f the sharp rise o f commodity prices on world m arkets after 1969, which made the aluminum appear to be a cheaper source for dom estic producers and a m ore profitable export.

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portional rates, and sectoral priorities with foreign price com petition for producers o f raw materials and interm ediate goods.78 T h e fact that larger concentrations o f capital and longer gestation times w ere need ed for capi­ tal investm ents than for e q u ip m en t modernization m eant that the p ro b ­ lem o f tem poral disjunctures b e tw e e n federal policies o f international adju stm ent and dom estic em p loy m e n t b e ca m e ev e r greater the farther one m oved away from the northw est of the country. In 1963, for exam ple, the “en tire econom ic leadership o f S e rb ia ” was preoccupied with “how to put a stop to S e rb ia ’s further decline into rela­ tive e co n o m ic b ack w ard ness.”79 Losing the fight to change th e price structure m ore in favor o f agriculture and its contribution to G D P (gross dom estic product) and all m easures based on it, planners tu rned to major capital pro je cts o f “strategic” im portance for Serbian d ev elopm en t, such as the B e lg ra d e -B a r railroad,80 the com pletion o f the D anube-TiszaD anu b e canal (linking Hungarian agriculture and the Iron Gates hydro­ electric plant on the b o rd er with Romania), the oil refinery in Pancevo, the steelworks at S m ed erevo , the hydroelectric plant at D jerd ap, and regulation o f the Velika Morava River. T h e s e projects, treated as the “to be or not to b e ” for Serbia, w e re com p leted only in 1979, how ever, when the country was on a course o f global-m arket integration favoring light manufacturers and pro cessors.81 Similarly, massive investm ent in M a c e ­ donia in the 1970s went, with th e aid o f federal funds, to several large capital pro je cts (including the F e n i nickel plant and the Skopje ste e l­ works), which cam e on stream ju s t when producers faced world recession, adverse term s o f trade, liberal e con om ic reforms, and, shortly thereafter, the collapse o f th e E a s te r n m arket altogether. Substantial capital invest­ m en t in m ining and metallurgy in the interior o f Croatia in the early 1970s (such as the alum inum -processing plant in Obrovac) d ep end ed on a global price stru cture and E a s te r n markets that had already changed by the 1980s. T h e serious business losses that resulted w e re only one o f the rea­ sons for th e deindustrialization o f entire regions in the 1980s, similar to what o ccu rre d in the central industrial b elt o f Bosnia-Herzegovina. It was a p ro blem not only o f capital, but also of thousands of workers who b e ­ cam e un em plo y ed when the mines and plants closed but who had long ago b e e n displaced from the land. Structurally m ore vulnerable to recession, the less-developed republics 78 Gapinski, Skegro, and Zuehlke found that linear equations w ere very successful in modeling taxes o f all kinds, including sales and personal incom e taxes, and thus revealing that rates w ere effectively proportional, not progressive (Modeling the Economic Perfor­ mance o f Yugoslavia, 154). 79 Pesakovic, '‘Nisko savetovanje ekonomista Srbije, 1963 i danas.” 80 S e e W ilson, "T h e Belgrad e-B ar Railroad.” 81 Pesakovic, “Nisko sav etov anje.’’

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F i g u r e 8-1. P e r c e n t a g e o f E m p l o y m e n t in th e Social S e c to r by R epublic. Source: Statistički Bilten Jugoslavije (1977), c ited in Pleskovič a n d D o le n c, “Regional D e ­ v e lo p m e n t, in a Socialist, D e v e lo p in g , a n d M u ltin a tio n a l C o u n t r y , ” 12.

also saw the tim e necessary to catch up in em ploy m ent capacity lengthen with the ev e r more freq uent resort to m acroeconom ic stabilization policy and its approach to structural adju stment. B ecau se the “comparative ad­ vantage o f regions [was] crucially d eterm ined by the credit potential of sp ecific territorial banks, S2 policies to tighten d iscipline over banks by increasing th e ir reserv e ratios and lim iting cred it for working capital also had th e e ffe ct o f penalizing p o o rer regions and w eaker banks, causing particu lar hardship for en te rp rises with seasonal cre d it needs. T h e repub­ lican con trol o v er cred it tended to lead as well to duplication o f facilities and a resulting excess industrial capacity.83 This increased the tendency to idle capacity (with its effects on unem ploym ent) and the tendency for H2 Kovač et al.. Privreda Jugoslavije do 1985, 2 1 2 - 1 4 . T ech n ical capacity wus far too grca I for th e d om estic m arket after 1958. as each repub­ lic huill its own s l e d mills, oil refineries, and consum er-goods fuctorics for refrigerators, textiles, am i footwear. By 1965, for exam ple, th e re were five steel miles in lour republics producing 2 . 2 million tons per year altogether, although one mill had to produce at least 2 million tons annually to break even (llo n d ius.

The YuhusIiw Community o f Nationit, 319).

T his duplication o f Capacity was a primary th em e in the m ounting public criticism of the repuhlicanizatiou o f the econom y attributed to th e 197-1 constitution at the tim e o f the ioreign-debt crisis and the m ore general econom ic crisis beginning in 1979—1982

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large firms to find ways to stimulate dom estic dem and for their unsold inventories (even when federal policy aimed to restrict demand). M o re ­ over, republican banks’ control over credit was disadvantageous for e m ­ ployment b eca u se o f the bargaining power in these banks o f large industrial firms, which w ere m ore likely to enlarge by m e rg e r than e m ­ ployment expansion. Sm aller, m ore labor-intensive firms tend ed , t h e r e ­ fore, to b e m ore risk-averse and m ore d ep en d e n t on internal resources for both rising incom es and e m p loy m e n t expansion. Internally g en era ted resources (w hether for firms or republics) w ere also differentially affected by federal policy as a result o f the structural differences in production across territories. P rice regulation favoring in­ dustrialization worked to the disadvantage o f the less-developed areas, ironically, b ecau se prices for raw materials and interm ediate supplies were k ep t artificially low while industrial prices w ere high. Tariff policy and foreign-trade liberalization w ere used to expose producers o f such materials to foreign com petition while protecting manufacturers. Policies to prom ote exports with subsidies and rights to retain foreign-exchange earnings b enefited the m o re-developed republics (especially Slovenia and Croatia), w h ere export producers and hard-currency earnings c o n c e n ­ trated; so did advances on clearing trade if one includes Serbia. E xpo rt producers tended to b e price setters domestically also. T h e flow o f prized foreign exchang e from guest workers’ rem ittances and tourist earnings, in addition to fo reign-em ploy m ent alternatives for absorbing the rural surplus, disproportionately b enefited Slovenia and Croatia, which for reasons o f geographical proximity and cultural tradition (especially in Croatia) had the largest conting ent o f tem porary foreign migration. T h e role o f wages in lim iting savings for investm ent was also dispropor­ tionately harmful to the areas with higher u n em ploym ent. W ages in social-sector firms te n d ed to b e m ore equal across republics than would be p red icted by differences in their gross social product per capita. As a result, in the less-developed republics a higher proportion o f republican and local budgets and o f enterprise earnings w ent to wages and benefits than in th e m o re-d evelop ed republics, th e re by reducing local resources for new in vestm en t and jo b s — particularly when stabilization policies r e ­ q uired m ore reliance on internal resources. C ontrary to the literature on labor m an a g e m e n t and th e regular criticism from northern econom ists and politicians (particularly in Slovenia), this was a result o f the productivity-oriented wage regulations— which had an equalizing influ­ e n ce across rep u blics— and the fact that the reservation wage for the country was set by upward pressure on wages in full-em ploym ent S lo­ venia, w h ere the wage was highest. W ages in the less-developed re p u b ­ lics also w e re the target o f protests against budgetary subsidies and d ev el­ o p m en t credits from econom ists and politicians in the m o re-developed

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republics, even though the higher aggregate dem and that resulted from such wage levels disproportionately benefited those m ore-developed re ­ publics and in effect created a built-in dom estic m arket for their goods. T h e p ro blem was com pounded by the concentration in poorer regions of low-wage industries, which tend ed to distribute a higher portion of their net receip ts to wages, and a far larger proportion of “nonaccumulative” firms (basic industries) that d ep end ed on budgetary subsidies.84 While social-sector wages w ere higher than strictly marginal rules within firms would predict, they w ere not as high as in richer areas, making it difficult for firms to pay the wages (and particularly benefits) necessary to attract and retain skilled labor. T h o se who em igrated from poorer areas, whether to th e m o re-developed republics or abroad, w ere not the least-productive “surplu s,” but the most skilled and ambitious. Aware o f the biases o f these policies, the leadership and the representa­ tives o f richer firms and regions conced ed to com pensation for those who w ere losers. It b ec a m e ritual for Tito to point out that the mored eveloped republics had an econom ic interest in the rapid development of th e o t h e r s .85 But the political system was organized around questions of allocation and distribution, and without econom ic growth, the conse­ q u e n c e o f the socialist m onetary system was that “what [was] a plus in one region [was] necessarily a minus in a n o th e r .”86 T h e federal transfers for d ev elop m en t in the form of low-interest, long-m aturing loans b ecam e the su b je c t of constant criticism, even though they amounted to less than 2 p e rc e n t o f G D P annually. Political debate could, and did, occur over ac­ tual taxes and transfers, but not over the effects o f invisible redistribution due to the regulation o f econom ic activity through, for example, regulated prices, special funds, selective credits, export incentives, and tariffs— all o f which worked to the n e t advantage o f firms in the more-developed re g io n s.87 And it was at the m om en t of declining growth and restrictive m acro eco n om ic policy for stabilization and d eb t repay m ent— when such fi'1 Vojvodina complained frequently about this problem ; see the discussion as early as 1956 in the pages o f Narodna Armijo (see n. 19 above). s:' S e e the citation from his address to the ninth party congress in 1969 in Wilson, "The B elgra d e-B a r Railroad,'’ 3 7 7 - 7 9 ; and his speech to the eighth party congress in 1964, in which he outlined the new policy for developm ent of the less-developed republics through "technical and personnel assistance from the com m unity” o f the kind Yugoslavia was provid­ ing o th er countries. l i e also laid out the trickle-down arguments underlying the policy (Osmi honp,res SKJ, 4 1 -4 2 ) . ilfi Miljovski, “Possibilities for the D evelop m ent of U nderdeveloped Areas,” 10 87

E v id e n c e was widespread that the effect o f price regulations “was relatively unfavor­

able to the less developed republics” (D ub ey et al,, Yugoslavia: Development with Decen­

tralization, 1 9 3 -9 4 ) ; on the bias o f investm ent and liberalization against the less-developed republics, see 200fl, D yker cites Macedonian research on the effect of the policy-dictated price structu re that draws the same conclusion (Yugoslavia, 77).

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compensatory transfers m attered most to poorer and less foreign tradeoriented e n terp rises and areas and when the dem and for em p loy m e n t was rising— that th e fight to red u ce taxation and federal redistribution was at its height. At the least, this wrangling m eant long delays in d isbursem ents while conflicts over priorities and funds w ere negotiated. Alternative m onies, e ith e r from direct federal investm ent or from for­ eign cred its, w ere always project-specific. B eca u se federal monies w ere limited by jurisd iction to capital projects, infrastructure, and defense, this avenue reinforced th e bias o f investm ents toward capital intensity, single­ industry towns, and production o f strategic raw materials. M oreover, these p ro je cts — such as the F e n i nickel plant in M acedonia, the O brovac aluminum plant and Knin railroad line in Croatia, and the Sm e d ere v o steel plant in S e rb ia — w ere eventually transferred to republican “m an­ agem ent” after com pletion, often b eco m ing heavy, long-term burdens on republican b u d g e t s . F o r e i g n credits through jo in t ventures w ere often given on th e condition that the Yugoslav firm import technical personnel from the supplier, and they fed import d ep en d e n ce and foreign d ebt without necessarily enhancing d om estic capacity.89 E v e n though such credits increased local e m p loy m e n t in places, the republicanization o f r e ­ sponsibility for foreign d eb t after 1977 obliged poorer republics to repay with th e ir own resources in a period o f very rapid dinar devaluation and dollar revaluation. T h e A grokom erc financial-corruption affair o f 1987, in which th e Bosnian conglom erate was found to have floated un secu red promissory notes totaling $ 8 65 million to at least fifty-seven banks in four republics b e tw e e n 1984 and 1987, illustrates the use o f one o f the rare domestic alternatives (given the tend ency o f republics to hoard monies where possible), for it was occasioned by the denial o f federal funding for the c o n g lo m era te ’s proposed d ev elop m en t p ro je c ts .90 M oreover, during periods o f liberalization when capital and labor began to move across r e ­ publican bord ers, rich e r republics and towns instituted protectionist poli­ cies in th e in te rest o f tax revenue to prevent the entry o f new producers from o th e r localities or republics (to which, as final owners, they paid their “in c o m e ” taxes); argued against policies that would allow capital to circulate outside their grasp, such as a m arket would imply; imposed reg88 Author’s interviews» O n Sm ed erevo , see Burger, Kester, and den O u d em , Self­

Management and Investment Control . 89 T h e jo in t v entu re b etw een D ow C h em ical and IN A Zagreb to build a petrochem ical plant on th e Croatian island o f Krk im ported everything it n eed ed, did not use or intend to use local labor, and had the effect o f displacing many local occupations (such as tourism, fishing, and agriculture) while bringing in a stratum o f m ore educated outsiders that created local tensions (Cichock, “Reevaluating a D eve lo p m e n t Strategy”). 90 At th e sam e tim e, th e G en era l Accounting Service reported that th ere was $ 8 .5 billion in unsecu red en te rp rise credits in th e country (Rem ington, “Yugoslavia”).

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illations on immigrants (w hether from other republics or surrounding rural areas); revived discussion about local posting during army service so as to k e ep desired skills at hom e; and in the main acted in ways that fu rthered the segm entation o f capital and labor markets in territorial e n c la v e s .91 Slovenia began the postwar period with shortages of skilled labor. It was ab le to achieve full em p loy m ent rapidly and sustain it for forty years (u nem ploy m ent never e x ceed ed 1 .5 p e rce n t until 1985). Its planners as­ sessed progress in term s o f international standards o f productivity and growth, and they succeeded in persuading central policymakers to adopt th e se crite ria .92 T h e y argued, for example, that technological moderniza­ tion should re c e iv e priority b ecause by 1958 the country had reached the m iddle levels o f d ev elop m en t and the dom estic raw-material base was b ein g exhausted; and that declining rates o f relative productivity growth in th e 19 70 s— felt with particular intensity in Slovenia because it was losing skilled professionals across its northern b order and having to fill shortages o f production labor with tem porary migrant Bosnian and ethnic Albanian (Kosovar) workers in the late 1970s and early 1980s— created a d esp erate need for renew ed technological advantage in the 198 0s.93 Slo­ v e n e planners worried about a serious labor shortage in the 1980s. The re p u b lic ’s unions and firms tended to lead the country in labor strikes, protesting wage controls and restrictive policies; they w ere the first to b rea k ranks over federal wage controls, arguing that b ecause they had shortages o f labor, they should not b e prevented from raising wages to k e ep and attract labor. As a result, they set the reservation wage for the co u n try .94 T h e first instance o f a parliamentary vote of no confidence in th e country, in D e c e m b e r 1966, forced the resignation of prime minister Ja n k o Sm o le when the Slovene assem bly failed to pass the governm ent’s bill to re d u c e the level o f social-insurance contributions by enterprises and increase w orkers’ share. In 1982, under similar reform-oriented and 91 As owners o f capital and primary “venture capitalists” in the country, the republican governm ents sought federal regulation in ways similar to those used by private firms in S tig ler’s analysis o f regulation in market econom ies; those with greater resources won rights to exclud e com petitors, while those with few er resources settled for grants of money (“The T h eo ry o f E c o n o m ic Regulation”). 92 T h e following information was obtained through the author s interviews in October 1982 with Zivko Pregl (then director o f the Slovene planning bureau); Einil Pintar (author of the b ureau's report on th e Slovene D evelo p m ent Plan to the Year 2000); and other Slovene research econom ists and sociologists, including Jo ze M en cin ger, Stane Saksida, and Pavle Sicherl. 93 T h e y estim ated that th e migration o f skilled Slovenes abroad in the 1970s was equiva­ lent to th e loss o f th irty thousand units o f schooling, while th ey considered tin* budgetary costs o f encouraging migrants from oth er republics too great by 1980 (interviews cited in n 9 2 above; Informativni Bilten). 94 C< M artin, “Public Policy and In co m e Distribution in Yugoslavia.”

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restrictive policies, S lovene accountants made a successful public protest against th e g o v ern m e n t’s attem p t to red u ce the minimum wage by chang ­ ing th e m ea su re o f sub sistence (the price o f a basket o f consumables) on which it was based. Slovenians w ere also the most insistent voices for local postings during military service; in th e early 1980s, they w ent to the e x trem e by d em anding “national arm ies” in which th e re would be no s er­ vice outside o n e ’s republic. Capital investm ent in Slovenia as well as Croatia in th e 1980s focused on a transportation network c o n n ec te d with international ro utes— th e “B ro th erh o o d and U n ity ” trunk highway co n ­ necting E u ro p e with the M iddle E a st through Yugoslavia, the Z a g re b ­ M aribor links, th e Adriatic coast highway (magistrala ), and the highway to D alm atia through Bosnia. Croatian planners, on the o th er hand, faced far greater internal varia­ tion am ong subregions and com m u nes than existed in Slovenia b ecau se the process o f d ev elop m en t had b e e n one o f “polarization and co n cen tra ­ tion o f e c o n o m ic activities.”95 D e v e lo p m e n t plans consistently favored the valley o f th e Sava, the Z ag reb-R ijek a link, and the Adriatic coast, w hereas 8 0 p e rc e n t o f th e em ployed in the less-developed interior areas of th e rep u blic worked in traditional branches (lum ber, textiles, food, and industrial construction materials). F irm s in these b ranches, although labor-intensive and m ore efficient in th e use o f materials than firms in the m o re-d evelop ed areas, had low levels o f ne t profit and therefore insuffi­ cien t resources for new in vestm en t and local d evelopm en t. Zagrebc e n te re d industrialists had succeeded in blocking policy c h a n g e ,96 while politicians focused on the loss o f C roat workers to foreign markets and on d eclining C roa t b irthrates in comparison with the higher rates among na­ tional m inorities and potential migrants from the south. In S e rb ia, planners and politicians focused far m ore on intra-Yugoslav com parisons and, after losing the fight over d ev elop m en t strategy in 1 9 5 8 - 6 4 , on th e capital and infrastructural projects necessary to th e re ­ p u blic’s industrialization and consistent with its geographic position (in the c e n t e r o f the Balkan peninsula and d ep en d e n t on river and rail trans­ port, for example). Studies in 1979 for the rep u blic’s long-term plan dis­ c ov ered that for S e rb ia proper, despite the massive capital investm ent after 1964 to re d u ce disparities, th e “d eg ree o f d ev elop m en t o f its produc­ tion capacities is at th e level o f th e th ree un derd eveloped republics and [its] social product p e r capita is 5 p e rc e n t below the average for the c o u n ­ 95 B a le tić and M arendić, “Politika razvoja privredno nedovoljno razvijenih područja S. R. H rvatsk e,” 357. 96 O n the study o f Croatian regional econom ic developm ent in 1 9 7 6 - 8 0 that was m ade for the long-term plan to th e year 2000, see Ekonomski Pregled 32, nos. 7 - 8 (1981), especially the articles by M arendić, T určić, and M ates, “M je re n je i analiza razvijenosti o p ćine”; and B a letić and M arendić, “Politika razvoja.”

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try .” Its tax obligations, how ever, ranked with those o f the developed republics, with which it was still officially classified.97 E v id e n c e that it was “lagging b e h in d ” th e rest o f the country continued to appear in 1981— 84. And, amid serious levels o f unem ploym ent, planners foresaw a new rural exodus b eca u se farm ers still made up 28 p e rce n t o f the population in 1 9 8 1 — a proportion they exp ected to continue falling until it reached the S lo v e n e level o f 10 p e r c e n t .98 T h e d ev elopm en tal profiles o f the republics in the 1980s and the level and c h a ra cter o f their un em ploym en t, despite fundamental econom ic and social change, reflected the decisions o f the late 1950s— to participate fully in global markets, to favor the Slovene model o f developed econ­ om ies, and to end econom yw ide d ev elopm en t planning except as a by­ product o f foreign e con om ic and defense policy. T h e farther an area was from n o rthern markets, d eveloped transportation networks, and the b en­ efits o f early industrialization (light manufacturing, industrial habits, and literacy), and the larger the proportion o f its population em ployed in agri­ cu ltu re, in “non prod u ctive” occupations (such as the army, security forces, and civil service), in low-wage and “nonaccumulative” industries, and, most important, in th e private sector, the greater its unemployment. Although th ere was m uch variation across towns within a republic, official un em p lo y m en t figures surpassed 2 0 p e rce n t in Kosovo, Macedonia, S er­ bia proper, and B osnia-H erzegovina by the mid-1970s, and they contin­ ued to rise. B u t by the 1980s, the registered jo b seekers w ere increasingly urban— often m en assumed to b e heads o f household with skills appropri­ ate to pu blic-secto r industry, or educated youth from urban homes. The rural basis o f u n em p lo y m en t and the official rem edy had b ee n sub­ stantially replaced by rapid urbanization and by long-term industrial re c e ssio n — excep t in Kosovo. T h e re people w ere indeed returning to the land. W ith the pooled resources sent hom e by youth working temporarily in the n o rthern republics (prim arily in private shops) or abroad, extended families in the Albanian com m unity w ere buying up land.

Su rplu s L abor

T h e principles guiding the Yugoslav leaders’ approach to labor set in 1 9 4 8 - 5 0 retained their force throughout the period o f socialist rule. Cen­ 97 Milovan Markovic, speech before the C h am b er of Republics and Provinces of the federal assem bly, February 28, 1985 (printed in Foreign Broadcast information Service, M arch 1, 1985, 1 4). 98 T h e se data did not take into account the immigration of Serbs and Montenegrins from Kosovo at the tim e. T h e num bers o f these immigrants were far less significant than their potency as em otional and political symbols for segments of the Serbian population and the leadership in Relgrade

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tral policy would establish guidelines and standards for em ploym ent. R e ­ publics could not b e consid ered econom ically sovereign without final authority over w h ere and how their population was employed. B u t those responsible for the issue o f em ploy m ent had to b e attuned to the vast variety o f local conditions and had to recognize the point at which political grievances about u n em p lo y m en t would first appear and when they could best b e addressed so that they did not accum ulate and threaten the sys­ tem. W h e t h e r it was a m a tter o f state-d irected mobilization in 1 9 4 8 - 4 9 or of stabilizing e m p lo y m e n t through workers’ participation in local assem ­ blies and w orkers’ councils after 1949, local authorities (in th e govern­ ment, th e econom y , and the party) w ere most suited to this highly sensitive political task. W h e n local firms did have to fire people “in the interests o f rationalization” or when “material conditions” did not perm it a sufficient pace in the transfer o f labor from agriculture to industry and from private to socialized sector (at the tim e o f these justifications by Kidric and Kardelj, in 1 9 4 9 - 5 2 , local authorities had the opposite p ro b ­ lem in most o f the country, excep t Macedonia), then the resulting u n e m ­ ployment was seen not as an econom ic problem but a social one. And welfare, too, was the responsibility o f local com m unities. C onsonant with the lead ers’ d ecentralized, e nterp rise-b ased approach to m acro eco nom ic stabilization, th e com m itm e n t to what is called in cap­ italist cou ntries an “active labor-m arket policy” was also to b e fulfilled at the local level. In line with the distinction b etw ee n industrial and agrar­ ian u n em p lo ym en t, th e re was a division o f labor among local agents. To minimize industrial u n em p lo y m en t (that is, dismissal o f persons already employed), workplaces w ere legally obliged to find new positions for workers made redundant by rationalization or technological change. To minim ize agrarian u n em plo y m en t, local authorities w ere responsible for econ om ic d ev elo p m en t within their territory that was attuned to e m p lo y ­ m e n t conditions and the pace o f deagrarianization and socialization. W ith in firms, for exam ple, investm ent plans for modernizing produc­ tion included funds for improving workers’ skills or reassigning them , and the union b ranch lobbied firms to contrib ute to local retraining programs. W h e n layoffs o f m ore than five persons w ere econom ically necessary, m an ag e m e n t was obliged to consult the union branch within the firm on who should go and how to find them new assignments. T h e trade-union jo u rn a l R a d (Labor) is filled with such cases: for example, when workers from a small craft en te rp rise that closed in Toplica, Serbia, w ere trans­ ferred to a local construction firm in 1963, or when the integration o f two firms into the pharm aceutical giant Galenika the same year created a sur­ plus o f 160 workers in the Belgrad e area. T h e union’s self-congratulatory re telling o f the latter transfer process illustrates well the principles at work (see th e appendix to this chapter). Youth in traineeships and women

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w ere let go first (with the exception o f pregnant women, whose employ­ m e n t was pro tected by law) on the grounds that their families could sup­ port them . D e s p ite the social norm valuing consultation where possible prior to firing and reassignm ent, th ere w ere legally acceptable conditions for in­ voluntary d i s m i s s a l." E m p loy e es could b e fired if a work unit was elimi­ nated, if th e re was no equivalent jo b in the organization for a person whose position was b eing elim inated, if the firm’s business volume de­ clined for an extend ed period, if an expert commission ruled that a per­ son’s abilities did not m e e t the needs of the jo b , or if a person slated for reassig nm ent refused to undergo retraining. All w ere instances that up­ held the formal principles o f parity (betw een a p erson’s qualifications and jo b classification) and labor productivity. Local e m p loy m e n t bureaus thus spent most o f their time and monies on retraining programs. T h e ir staffs negotiated em ploym ent contracts for retrained workers with local firms. In areas of high unem ploym ent, they also pressured firms to hire univcrsity-educated youth and the appren­ tices from vocational schools whom firms had agreed to train but then did not employ. Local governm ents would, understandably, take a wide range o f m easures to p reven t the bankruptcy of a large local employer b eca u se they w ere responsible for solving the resulting problem s of un­ em ploy m ent. M o re b u rd en som e in normal times than local dismissals, how ever, was the responsibility for absorbing people released from fed­ eral jo b s or administration by the policies o f decentralization and social­ ization. T h e return to localities o f dem obilized, purged, or “retired” veterans or army officers— in 1955, after 1965, and again in the 1970s during the socialization and localization o f d efense— and the return of m id dle-level civil servants and administrative staff from farm cooperatives p re sen ted local pension boards, housing funds, and employers with a dif­ ficult task. T h e s e surplus gov ernm en t em ployees w ere frequently encour­ aged to e n te r e le ctio n s— in 1955, when the newly created school boards op ened local posts, and in 1967 and 1969, when th ere w ere multicandi­ date elections for parliament. But the delegate system, which “socialized” political representatio n (elections w ere based in enterprises, which then

n

m owevor, these conditions on dismissal did not represent the real restraints on man­ agers, who had far m ore flexibility. In interviews with the author, enterprise directors con­ sistently d enied the com m only held view that “with the exception o f cases o f criminal or sev ere personal misconduct affecting the whole working comm unity, workers cannot be laid o ff” (S ch ren k, Ardalan, and El Tatawy, Yugoslavia, citing Article 19 o f the 1976 Law on Associated L abor). It was necessary to follow legal procedures preventing arbitrary dis­ missal, th ey adm itted, but it simply was not the case that workers and em ployees could not b e fired. Articles insisting that th ere was no “right to em ploym en t” or even to a particular jo b appeared frequently in the specialized literature on em ploym ent and in the social sci­ en c es as well.

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paid d ele g ates’ salaries), erased this opportunity after 1969. T h e poorer the area, th e m ore likely it was that many people had left for jo b s in the civil service or army and that it would b ea r a disproportionate b urd en in their reintegration. B eh in d the frequently heard complaints about the ethnic disproportions in governm ental bureaucracies lay a hard reality: as a result o f the concentratio n o f wartim e com bat in poorer regions, the decentralization o f the security apparatus placed a higher burden, per capita, on local e m p lo y m e n t in poor towns or regions in the interior, which w ere m ore often ethnically mixed. In conditions o f declining growth and rising u n em p lo y m en t generally, choices in the rationing of ever-fewer jo b s in relation to the n u m b e r o f jo b seekers could (in fact or in perception) b e made according to eth n ic c r ite r ia .100 E v e n in the fall of 1948, when localities w ere handed many ’’federal and republican tasks” to “readjust th e disproportion b etw ee n capital construction and living stan­ dards,” party lead er Vladim ir Bakarić worried about the disproportion in the location o f local industries— worst, he said, in Croatia, w h ere 5 6 .8 percent o f “local b u sin esses” were in Zagreb and there w ere “none at all” in thirty-five districts or to w n s .101 Zivan T a n ić ’s analysis o f the 1973 federal legislation to “stimulate the return o f workers from abroad and their em ploy m ent in Yugoslavia through programs o f intensified econom ic d ev elop m en t” applies more generally. T h e program ran into problem s, he writes, b ecau se the e m ­ ployment bureaus w ere not up to the task o f retraining retu rnees, poor com munes lacked the resources for d ev elop m en t programs, and informa­ tion to migrants was insufficient. In many places, the local authorities simply had not im p lem e n te d the policy— not for lack o f a g re em en t am ong political elites but for lack o f econ om ic re s o u r ce s .102 T h e m ost difficult e m ploy m ent-related problem for local governm ents was actually the problem o f housing. F actories that chose to expand p ro­ duction w h en they expanded their markets tended to op en new plants in neighboring com m u n e s so that they did not have to build m ore housing at the existing p la n t.103 T im e spent in com m uting long distances to work continued to b e a problem for productivity long after 1 9 4 9 - 5 0 . 104 T h e io° T his was not a topic on which system atic research could h e done, however, because o f its political sensitivity. Such bias was largely inferred from highly aggregated data on ethn ic disproportions in particular occupations, or was simply an untested perception. 101 Bakarić, “Vezana trgovina poljoprivrednih i industrijskih proizvoda,” 106. 102 Tanić, “Yugoslavia.” 103 Such stories from Serb ia and Bosnia are told in Yugoslav Trade Unions, A p r il-Ju n e 1964, 71. 104 T h e re is a large literature on th e exten t and costs o f “daily migration” (dnevne mi­ gracije) and th e ph en o m eno n called “peasant-workers” (seljaci-radnici ) . Hawrylyshyn calls them a “landed proletariat”; for a summary, see his "Yugoslav D evelop m ent and Rural­ Urban M igration,” 3 4 1 - 4 2 ,

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v e te ra n s ’ organization (S U B N O R ) b eca m e infamous for its political pres­ sure on localities to build housing for retired Partisans. T h e shortage of housing was a particularly serious obstacle to labor migration, discourag­ ing both individuals’ search for jo b s elsew here and expenditures by em­ ploy m e n t services on travel costs to facilitate that search (despite the rights o f the un em ployed to such assistance). T h e result was that enterprises w ere vulnerable to pressure from their e m p loy ees to hire family m e m b ers or local friends. T h e more difficult the e c o n o m ic tim es, m oreover, the greater the pressure. Legally required to pay local tax obligations first, before wages and contractual obligations, firms w e re often faced with rising taxes at the same tim e that they were under this pressure to employ, because local welfare and investment need s w e re rising. W h e n the em ploy m ent services b eca m e “selfmanaging com m unities o f in te re s t” after 1967, and thus (along with other public services) financially autonomous o f local budgets, this meant addi­ tional taxes for enterprises. “Insurance in case of un em ploym ent” was th e n paid by firms out o f the personal incom e o f each employed worker, b u t at rates that varied among republics b ecau se o f differences in levels of un em p lo y m en t. In 1982, the rate was lowest in Slovenia and highest in Kosovo (1.5 p e r c e n t).105 To k e e p local industries and the com munal tax base alive, the com­ m u n e ’s office o f the social accounting service also requ ired firms to pay the claim s o f o th er local firms before those o f distant suppliers. Local monopolies on trade, agricultural purchasing, and exporting firms often arose for th e same purpose— to prevent firms from outside the territory from capturing “local re s o u r ce s .” To com pensate for higher tax rates or to forestall a firm ’s decision to move, a variety o f concessions to local publicsector firms w ere often necessary, as well as lax en forcem en t of accounts and price regulations. T h e search for credits as an alternative to internally g en era ted rev e n u e s en cou n tered the same vicious circle that produced growing inequalities among republics: the lower the value of a firm’s fixed assets, the lower the chance o f obtaining bank credit and the more cir­ cu m scrib ed the selective investm ent funds to which firms or governments could apply for building up local fixed assets. Inv e stm e n t choices were thus e v e n m ore likely to be driven by the source o f cred it (and especially by the official priority on investm ents that sought to develop exports for foreign exchange) rath er than by m arket criteria. W h e n using local re­ sources for explicit em p loy m e n t promotion, local governm ents tended to choo se investm ents according to the characteristics o f the people in need o f jo b s (for example, building textile plants to employ women) instead of according to th e likely profitability o f the products or services. 105 3, 1982.

Author’s interview with Tripo Muliiui, Institute of Econom ics, Belgrade, N o ve m ber

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Th e conflict b e tw e e n central policy and local resources over em ploy ­ ment prom otion was most striking in the central role played in both by the private sector. In all federal proposals after the m id-1960s, and for most leading econom ists, th e only available (and, many thought, th e best) solution to growing u n em p lo y m en t was to develop the mala privreda — the sector o f small-scale, “in d e p e n d en t” firms in services and manufactur­ ing. M ost local governm ents, how ever, usually resolved increasing p re s ­ sure on local revenues by raising license fees and taxation on privatesector b u s in e s s e s .106 This was not for ideological reasons of antipathy to private activity, as was often asserted, but for lack o f sufficient resources to perform the tasks assigned. To reduce tensions with public-sector firms, local authorities sought monies w here they w ere available, from household savings and private firms that w ere less able to exit. At the local level, therefore, th ere was a growing conflict b etw ee n policies to minimize industrial un em plo y m en t and those designed to employ the rural surplus and d em ographic increase. T h e sector o f in d e p e n d en t smallholdings and trades rem ained essential to full e m p lo y m e n t in the lead ers’ strategy. “Private agriculture collects workers from [industry, social-sector agriculture, and other social-sector activities] when they are redundant and releases them . . . when they are n e e d e d ,” according to Gapinski, Skegro, and Z u e h lk e .107 B ut the most com m on response to u n em p lo y m en t was migration. W ithin Yugoslavia, day-labor exchanges in large cities served new com ers and unskilled la­ borers, and construction projects attracted migrating unskilled workers from all parts o f the country. Youth left rural towns for higher education and e m p lo y m e n t in cities, primarily in the republic of th eir nationality b ecau se republics defined school curricula and family networks provided housing. Skilled workers and professionals sought the higher incomes (and especially the benefits) available in Slovenia, w h ere labor shortages prevailed during most of the socialist p e rio d .108 B u t the most important outlet for d om estic u n em p lo y m en t was foreign migration. In 1 9 4 8 - 5 3 , roughly 1 0 0 ,0 0 0 persons left the country, followed in the next four years by an oth er 1 9 5 ,0 0 0 (equivalent to 10 p e rce n t o f social-sector em ploym ent 10H An eco n o m ic explanation o f local authorities' attitude toward private entrepreneurs seem s sufficient, but the tendency to explain it as ideologically based antagonism n o n e th e­ less prevailed. Sacks focuses on the limits to entry in the Yugoslav economy, which are partly explained by the level o f fees and taxes; these fees and taxes usually absorbed the first year’s profits for small firms (Sacks, Entry o f New Competitors in Yugoslav Market

Socialism). 107 Gapinski, Skegro, and Zuehlke, Modeling, 133. By the late 1970s, one-q uarter of the labor force in Slovenia was from elsew here T he

H I»

figure was lower than it would have b een had the Slovene governm ent not regulated the flow carefully to minim ize “social costs’’ (it feared social intolerance if non-Slovenes ex­ c eed ed an acceptable level, and it would have to expend additional resources 011 infrastruc­ ture that could otherw ise be directed to improving Slovene living standards).

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in 1 9 5 7 ).109 After 1960, both p e rm a n e n t and temporary migration to W e s te r n E u ro p e and the U nited States com pensated for the decade of labor-cutting e co n o m ic r e fo r m .110 After 1974, when Yugoslav unemploy­ m e n t was no longer frictional or cyclical but structural, W e ste rn recession pu sh ed th e em igrants back home.

C o n c l u s io n

T h e last Yugoslav policy toward labor appeared in the supplementary doc­ um en ts o f the long-term stabilization program adopted in 1983. It re­ flected what Claus Offe labeled the “realist position” em erg ing in the 1980s on the E u ro p e a n ideological left as well as in the cen ter. Although he was discussing G erm any , his description o f the policy goal also applied to Yugoslavia: “State policy should cease aspiring to the impossible, such as political guarantees o f (the restoration of) full e m p lo y m e n t.” Arguing not only that Keynesian instrum ents had “b eco m e b lu nt” but also that “th e re are no alternative ways o f achieving this goal, ” the realists, accord­ ing to Offe, abandon the orthodox goal o f integrating the unem ployed into th e “stable army o f em p loy ed ” and think “m ore in term s o f excluding labour from the m a rk e t.” F irst immigrants, then wom en, older workers, and young people should b e encouraged to drop out o f the labor force by policy m easures such as a “flexible reduction” o f paid working time, more “freed om of action” in self-help, “redundancy paym ents” through family policy and th e “sym bolic cu rrency o f ‘social recognition’, ” and a redefini­ tion o f work so as to maintain fa m ilies.111 In Yugoslavia, this policy was in effect an open admission— the first since the e m p lo y m e n t bureaus w ere reestablished in 1952— that the so­ cialist co m m itm e n t to full em p loy m ent could no longer be met. Yet there was nothing new for Yugoslavia about the solutions proposed by this “real­ ist” position in W e ste rn E u ro p e. This had b ee n the Yugoslav policy to p ro te ct individuals’ subsistence in periods o f unem ploym en t since 1952, and it had shaped the structure o f Yugoslav society, its moral economy regarding sub sistence and the right to work, and political attitudes about u n em p lo y m en t and the unem ployed. As the next chapter discusses, the social, cultural, and political conseq u ences o f the policy toward unem109 Su ch data w ere not collected for 1 9 4 8 - 5 3 , but indirect calculations from the census yield very rough estimates. T h e largest contingent after 1955 w ere ethnic Turks, while the earlier exodus also appears to have b een national in motivation. G erm ans, Italians, Turks, and Je w s left, largely as a result o f W orld W ar I I (Macura, Stanovništvo kao činilac privred­

nog razvoja Jugoslavije, 69), 110 Gapinski, Skegro, and Zuelilke, Modeling, 135, 111 Offe, “T h r e e Perspectives on the Problem o f U n em plo ym en t,” 9 0 - 9 1 . l i e goes on to dem o n strate the lack o f relation betw een th ese proposals and the characteristics o f unem­ ploym ent, and thus that this approach is no solution (9 2 -9 5 ).

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ploym ent in turn b e ca m e obstacles to political action that m ight have dem anded or proposed alternative solutions. T h e realism b eca m e self­ fulfilling, in that u n em p lo ym en t rem ained hidden. T h a t did not, how ­ ever, p re v e n t its effects from having m ajor political co n se q u e n ce , as will be d iscussed in th e final chapter.

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A p p e n d ix “G a l e n i k a T a c k l e s t h e P r o b l e m o f R e d u n d a n t W o r k e r s ”

At the beginning o f this year, the planned task having b ee n completed, the w o rk ers’ council ordered the services in the m anagem ent to make a new systematization o f jo b s (a schem e indicating precisely the jobs ne ed e d in the factory, the n u m b e r o f workers and em ployees, and the qualifications they must have) and services need ed in the new enterprise. After a m onth, having c om p leted the systematization, the services concluded that the factory would have a surplus o f 160 workers and em ployees. T h e workers council informed the factory trade union com m ittee, the P e o p le ’s Youth c o m m ittee and o ther organizations about this, and asked th em to give their views on the proposed systematization, i.e ., the reor­ ganization o f the enterp rise. After close discussions at their sessions, the leaderships o f these organizations accepted the changes suggested. But they again pointed out the seriousness of the problem , and asked that it should b e systematically and carefully tackled. In the view of the political activists o f the factory, including the factory trade union com m ittee, the w o rk ers’ council should pay attention to certain principles when transfer­ ring workers to o th er econom ic organizations or institutions, and stick to them when deciding which man should go to another collective. T h e first o f these principles was to avoid transferring workers who had b e e n working in these factories for many years. T h e second principle was to transfer inferior workers, i.e ., those who had b ee n negligent in their duty. Suggestions w ere also made that when transferring people attention should b e paid to w h eth er he or she was the only e arner in the family, and if so, to transfer primarily those whose husband or wife worked. Among the workers there w ere som e who had retired and had pensions but, b e n ­ efiting by the legal regulations, they continued to work. T h e standpoint of th e political activists was that such workers should b e the first to be trans­ ferred, and that those with the right to a pension should retire in any case. O f course th e re w ere other suggestions too, one of the most significant am ong them b eing that the transfer o f workers must be discussed by their com rad es in their e con om ic units. T h e w orkers’ council adopted these suggestions and worked out a list of workers that w ere supposed to go to o ther enterprises. T h e list was sub­ m itted to th e factory trade union co m m ittee with a requ est for remarks, if any. In o rd er to have a clea re r picture o f every worker proposed for trans­ fer, the trade union im m ediately organized the distribution of a question­ naire to all these workers and employees. Thus these trade union R ep rin ted from Yugoslav Trade Unions, no. 10, (S ep te m b e r 1963): 4 2 - 4 4

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members had to say what their vocational qualifications w ere, what kind of jo b th e y had done and for how long, w h eth er they w ere married, whether th e wife (or husband) worked, how many children they had, what the family incom e was, w h eth er they had received awards in the factory, or had b e e n punished for lack o f discipline, and if so why, and whether they had b e e n e le c te d to the workers’ council. Having received these data, the trade union organized m eetings of workers in the e con om ic units, at which they gave their opinion of this or that worker who was proposed for transfer. According to the original plan o f the m anagem ent, P . B . , a worker in the sales unit, was to b e transferred. M eanw hile, the econom ic unit held a different view, saying that he was a very good worker and that th ere were inferior workers in this service, and it proposed such a worker to the workers’ council for transfer. This view was supported by the political activists o f the factory, and o f course it was adopted by th e com mission o f the w orkers’ council in charge o f transfers. In an oth er e con om ic unit R . K . , an office em ployee, was also on the list for transfer. B u t at the m e e tin g of the econom ic unit it was said that she was pregnant and th erefore pro tected by the law. T h e change was made. O .M . was also to leave the factory. H e r e conom ic unit said that she really did not work satisfactorily, but added that she had b e e n a good worker at h e r previous jo b , and that she might b e sent back there. How­ ever, it was stated that h e r previous post was already filled, and so she was e n te re d on the list for transfer. T h e w orker D .S . was also on the list for transfer, but his e con om ic unit stressed that he was very conscientious and industrious and that he should rem ain in the factory. This view was adopted by the commission. It should b e added that in normal conditions the opinion o f the e c o ­ nomic unit on dismissal or transfer, as well as on admission of workers, is valid and final. As the situation was exceptional in these cases, the e c o ­ nomic units could only make suggestions, while the final decision was taken by the w orkers’ council through its commission. N evertheless, the views and suggestions o f the econom ic units considerably influenced the final decision o f the commission. According to the original plan, 160 workers w e re redundant. After discussion in the econom ic units this n u m b e r was red u ced to 148, b ecau se work was found in the factory itself for som e workers and em ployees who had b ee n proposed for transfer. Although th e action for transfer had b een extensively exam ined and carried out, fifty-four workers and em ployees who had to leave the factory appealed to the m anagem ent board o f the factory. To d ecide on these grievances as fairly as possible, the m anagem ent board subm itted them all to the trade union, with a requ est for its opinion. T h e trade union con v e n ed new m eetings in the econom ic units, and the workers reconsid ­

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e red each case. T h e trade union then submitted the workers’ views to the m an ag e m e n t board, which had b ee n authorized by the workers’ council to make the final decision. After a detailed study o f the complaints, the m a n a g e m e n t board allowed thirteen, so that finally the n u m b e r of those who had to go to o th er collectives was 135. B u t this com p leted only one part o f the business. T h e o ther part was to find work in o th e r collectives for the workers who had to leave the factory owing to redundancy. T h e w orkers’ council therefore ordered the expert services o f the e nterprise to contact im m ediately the neighboring facto­ ries and institutions to find jo b s for these workers and employees. Two m onths later this task was com pleted successfully. H e re are a few exam­ ples [of] how it was carried out. After the reorganization o f the new enterprise, the factory was left with som e em p ty business premises. T h e Prokupac enterprise for the sale of spirits was inte reste d in these p rem ises— it wanted to use them for the bottling o f wine. E vidently Prokupac was expanding its business. The G alenik a expert services learnt of this and agreed to hand over these p rem ises to Prokupac on condition that it should employ a number of G a len ik a ’s workers. Prokupac agreed and took over twenty workers. T h e institute for the training o f workers in Zemun was another partner with whom an a g re em en t was reached on the em ploym ent o f redundant workers. A sideline o f this institute was packing, and it did this for Gal­ enika. S in ce Galenika increased its production after the integration, it n e e d e d g re a te r quantities o f packing material, and this m eant in practice g re a te r production in the institute, i.e ., em ploy m ent of a g reater number o f workers. Thu s an arran g em ent was made with the institute for the e m p lo y m e n t o f a group o f redundant workers from Galenika. Sim ilar arrangem ents w ere made with the M etalac enterprise and some o th er collectives, so that all 135 workers and em ployees got new jo bs with th e help o f th e ir factory. After three months of intensive work on the p ro blem o f redundant manpower, the question was finally solved. M eanw hile the w orkers’ council was interested in what the workers in th e factory thought o f its action. At its request, the factory psychologist made a form o f inquiry in the collective: he talked with sixty workers and asked th e m th ree questions: why a n u m b e r o f workers had to leave the factory; what they thought o f the transfer procedure; and what, in their view, was the role o f the trade union in this action. T h e answ er to the first question was that the transfer o f workers had b e e n d em and ed by integration, i.e ., the e conom ic interests o f the enter­ prise. T h e answer to the second was that the procedure was democratic, that every bo dy in the factory could say what he or she thought of the red und an t workers. How ever, some w ere o f the opinion that the weak­ nesses o f th e individuals who w ere proposed for transfer should not have

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been spoken o f in public, b u t com m unicated to them personally. As for the trade union role, the reply was that it was a good thing that the trade union had b e e n constantly consulted in this whole m atter; that it played its part successfully; and that its authority in the factory had risen since then.

Chapter 9 DIVISIONS O F LABOR

of socialist governm ents with full em ploym ent begins in th e n in etee n th century, when workers vulnerable to unemployment saw that it was in their econom ic interest to demand governmental re­ dress and eventually em p loy m e n t promotion. By the second half of the tw en tie th century, governm ents of all political persuasions were watching th e un em p lo y m en t figures b ecau se o f the potential for political conse­ q u e n ce s: strikes, civil unrest, or at least protest votes. In an analogy to the eco n o m ists’ co n cep t o f a natural rate of unem ploym ent, according to which a m arket econom y must expect b etw ee n 4 and 7 percent of the labor force to be “frictionally” unem ployed at any time, there is an un­ spoken assumption that th e re is also a natural level o f social tolerance for

T h e a s s o c ia t io n

un em p lo y m en t, above which such tolerance evaporates rapidly. Although C o m m u n is t parties ruling socialist states w ere not vulnerable to electoral defeat, this did not pre v e n t them from b eing con c ern e d as well about possible d iscontent and maintaining their authority as working-class par­ ties. T h e party’s power and the re g im e ’s political stability, it was gener­ ally argued, rested ultimately on the political legitimacy that came from full em p loy m e n t: on the basis o f a tacit social contract b etw een govern­ m e n t and wage or salary earners, citizens rem ained politically passive in exchange for jo b security. I f socialist parties originated in the struggle against un em p lo y m en t in capitalist societies, surely unem ploym ent in so­ cialist societies would lead to political opposition and demands for a change in policy. T h e failure o f socialist g o v ernm ent in Yugoslavia to prevent unemploy­ m e n t from rising above frictional rates or to alter policies that led to not only cyclical b u t even structural un em ploym en t by the mid-1960s can be explained by the lead ers’ continuing b e lie f in their strategy (reinforced by foreign creditors), the vested interest o f influential producers and repub­ lican g ov ernm ents in their particular international niche, and the vicious circles o f policy and politics d escribed at the end o f chapter 7. But these cannot explain the virtual silence about un em p lo y m en t1 and the absence 1 W ritin g in 1982, Iwo years after Yugoslavia luid achieved the highest level o f unemploy­ m en t in E u ro p e, Tijanie and Andjelie reported, “T h e re are economists who think we were late by a quarter o f a century in putting em ploym ent into midterm [economic] plans, hut it was still pushed to the bottom of the list of goals and tasks" (“Obieno nezaposleni mladi”).

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311

of political protest by the unem ployed or by persons vulnerable to u n e m ­ ployment who recognized their interest in com m on cause. W h y did groups that w e re system atic losers econom ically in Yugoslav society— such as w om en, youth, unskilled urban labor, the rural reserve, poorer com munities, and the less-developed regions and repu blics— not choose to improve their e co n o m ic position through, following the model o f labor parties, political organization and mutual alliances to press for change in central policies? This paradox arises from the final e le m e n t o f the leaders approach to labor. Although their strategy failed to prevent un em ploym en t, it suc­ ceeded in its goal o f elim inating capitalist unem ploym ent. T h e re were certainly obstacles to political organization in the constitutional privileges of the C o m m u n ist party and the limits on ind epend en t political associa­ tions, but far m ore significant in explaining the a b sence o f a politics of unem ploym ent w ere the characteristics of socialist un em ploym en t and the a cce p ta n ce in Yugoslav society o f the official attitude toward it. By aiming to avoid mass layoffs and to prevent proletarianization with a public guarantee o f subsistence, the regim e transformed the p u b lic’s view of un em ploy m en t. In place o f the oppositional logic of private property and class solidarity o f labor against capital, moreover, the system o f em ploy ­ ment, reward, and reassignm ent created a logic o f individual com petition and status achieved according to regulated criteria for m em b ership and exclusion. Conflict occu rred over those criteria and over com petition to improve individual “capital” as a means to em p loy m e n t— w h eth er through schooling, personal or political contacts and loyalties, or migration. T h e division o f society into public and private sectors, to pro te ct the strategy’s co m m itm e n t to a lean public sector and rising labor productivity, also elim inated the reciprocal relation b etw ee n econom ic and political power that is found in m arket econom ies with private ownership and that formed the basis o f a com m on interest b etw ee n the em ployed and the unem ployed. T h e dual face o f capitalist un em plo y m en t discussed in ch a p ­ ter 1, which lim ited w orkers’ power but also provided the political incentives to organize societywide against u n em ploym ent, was thereby elim inated as well. B eca u se labor markets w ere primarily local or re p u b li­ can, the countryw ide level o f u n em plo y m en t had little influence on labor’s strength in bargaining with managers or governm ents over jo b s and wages, and th e level of un em plo y m en t had little influence on the political strength of a party whose power dep end ed not on electoral support but on in terna­ tional lev erage (and, in local and republican com m ittees, on control over econ om ic resources). T h e reason labor governm ents pursue full e m ­ p loym ent in m arket e co n o m ie s— that it serves both the econom ic in­ te re st o f th e ir constituents and the political interest o f their political organizations— did not hold.

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T h e socialist com m unities o f K a rd e lj’s vision, ironically, did not create societywide solidarity but instead segm ented society into separate uni­ verses o f decision making on em ploy m ent and in co m e — by the division of p roperty rights b e tw e e n the two sectors, the separate labor and capital m arkets of the republics, and the long-term em ploym ent contracts and autonom ous bargaining over wages and benefits within self-managed workplaces. E x ten s iv e decentralization and the absence o f a formal mar­ k e t for labor (so as to maintain direct incentives to productivity) were substantial barriers to the perception o f a com mon interest in reducing u n em p lo y m en t and to the construction o f societywide social alliances nec­ essary for effective pressure. As some intellectuals complained in the 1960s, this was a society com posed of many distinct “reservations.”2 In sum, social identities, moral econom y, and political organization w ere shaped by the lead ers’ strategy toward labor— and in turn sustained that strategy.

S o c ia l I n v is ib il it y o f Un e m p l o y m e n t

T h e official c o n c ep t o f un em ploym en t in socialist Yugoslavia was to be without means o f subsistence; as Bakarić said in 1982, the unemployed w ere “p eople with now here to go. ”3 H e n ce the political importance of the m echanism s that aim ed to prevent this: the guaranteed minimum wage for p e o p le in pu blic-sector jo b s and protected smallholdings in privatesector agriculture and services. Popular opinion reflected this official con­ ception. T h e most com m on response of both citizens and specialists when confronted with the facts o f un em ploym en t was that it was “not the E n ­ glish k in d .” In this view, un em ploym en t did not mean the penury or proletarianization o f classic industrialization; anyone who wished could always return to the land and survive. This attitude was reinforced by the official solution to unemployment: to move truly surplus labor from agriculture into industry and, when eco­ nom ic rationalization created surplus labor in industry, to fire those who had sources o f subsistence such as land or a family— thus making dis­ missal decisions a family affair involving the farm household or workers’ organizations within the socialist-sector work community. Although the goal o f these transfers was to incorporate an ever-larger proportion of the population into the income relations o f industrial organization and princi­ ples o f socialist accumulation (direct incentives to increase individual and collective productivity), the effect was to build society around social rela­ 2 S e e M . M irić, Rezervati. ;i Bakarić, who was speaking with a delegation from Titograd University (Montenegro), i.s q uo ted in T ijauie and An djelić, “O b ično nezaposleni mladi.” Tijan ić and An djelić add that Bakarić must have been “thinking th ey ’re a m inority,”

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tions and concepts o f welfare m ore closely resem bling those o f the p re in ­ dustrial household. K a rd e lj’s m odel o f socialist com m unities harks back to an earlier age o f agrarian moral econom y, particularly in the ideal type associated with the theories o f A. V. Chayanov, author o f the classic study of Russian smallholding and peasant econom y, or with the populist glori­ fication o f th e zadruga in the Balkans.4 T h e socialist com m unity was like­ wise c e n te re d on production, guaranteed subsistence to its m e m b ers, and— only after the basic survival o f individuals and the collectivity was assured, and on the basis o f d em ocratic consultation among adults— distributed ne t earnings to m e m b ers according to their seniority, m ana­ gerial authority, and contributions to output. In socialist Yugoslavia, the public-sector e n te rp rise (divided into basic organizations o f associated la­ bor), th e farm household, the urban family, and the migrant keeping close ties to family at hom e all practiced collective solidarity to provide subsis­ ten ce.5 O nly “when a work collective cannot guarantee the constitutional right to work’ 6 from its reserve fund and the c o m m u n e ’s standing soli­ darity fund would the larger social com m unity e n te r to provide temporary relief for people made un em ployed as a result of industrial restructuring. U n em p loym en t was a social, not an econom ic, problem o f redistribution after a production cycle. It was as if the populist e le m e n ts o f th e 1940 alliance and the private, small-property sector defined the model for so­ cial relations in the urban socialized sector, rather than the o th er way around.7 According to this con cep t o f u n em ploym ent, people differed not in tlieir vulnerability to u n em p lo y m en t (except for the few m onths’ waiting time that was consid ered normal for a first jo b or for reassignment), but in their disposable incomes. T h e problem o f jo blessness was supplanted by that o f living standards, so that u n em plo y m en t itself did not arouse much sympathy. Although families differed substantially in the vulnerability of their m e m b e r s to u n em plo y m en t, its co n se q u e n ces w ere seen only as part o f th e m ore g eneral personal struggle to improve living standards and as part o f the continu um of incom e inequality, which d ep end ed on many factors. T h e discrimination against women and youth in hiring and firing 1

On this moral econom y, see J Scott, The Moral Economy o f the Peasant; on the role oi

Chayanov’s views in Soviet debates, see Cox, Peasants, Class, and Capitalism; and on the

zadruga, see Byrn es, Communal Families in the Balkans. 5 T h e mixed farm er-w orker households o f Slovenia, w here an extensive netw ork of good roads and diversified local industries and services made it possible for households to engage in a variety o f e co n o m ic activities while rem aining settled, may have b e e n th e unconscious model instead. T h e Law on Labor Relations o f 1967, cited in Yugoslav Survey 8 ,

110.

3 (August 1967):

21.

7 In this and many oth er situations, Yugoslavs familiar with th e programs o f th e Croat Peasant party in the interwar period have seen many parallels.

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was a cc e p tc d b ecause the “family” (the cash earnings of the employed m e m b e r ) would take care of them, redistributing what it had to ensure th e survival o f all m e m b ers. U nem ployed urban youth remained in pa­ rental hom es while they waited for public-sector jobs. Urban and rural families relied on networks o f kin and ritual kin for private exchange of agricultural produce and connections with urban schooling and jo bs. Mi­ grant w orkers— w h e th e r C roat eng ineers in Germ any, Bosnian factory workers in Slovenia, S e rb villagers in Austrian and G erm an construction, or Albanian confcctioners in the northern Yugoslav republics— sent m oney hom e to sustain their families and contribute to their means of d om estic subsistence: the house, farmland, and bank account for durable goods. T h e underlying solidarity on subsistence and incom e— not on em­ ploy m e n t and its associated rights in the socialized sector— even led to unions’ willingness to fire persons who could earn second incomes in the private sector, as well as to a widespread but largely incorrect view that m u ch h ig h er incom es could b e earned in the private sector. T h e c o n s e q u e n c e o f this approach was to make the truly unemployed invisible. T h e relative a b se n ce o f sociological and psychological studies on the un em ployed helped to nurture the prevailing view. Popular opinion m irrored th e n in etee n th -cen tu ry idea in the official presentation of un­ e m p lo y m e n t data— that un em ploym en t was voluntary or short-lived, a ch oice for leisure instead o f work made according to household stan­ dards o f consum ption. O pen un em ploym en t was equ ated with foreign m igration— citiz e n s’ choosing to work temporarily abroad for the higher incom es they could earn in the more industrialized north of Europe.8 Official jo b s eek ers at hom e w ere dismissed as persons who registered with e m p lo y m e n t bureaus in order to get health insurance and still be at leisu re— a view that was a poorly disguised preju d ice against “women who d o n ’t really want to work” and who bloated the unem ploym ent fig­ ures. T h e m ore prevalent image was o f the “un em ploym ent of the em­ p lo y e d ”9 in pu blic-secto r offices, an image based on the milling throngs on urban streets during working hours— people who ought to be at their desk b u t w e re enjo y ing a coffee or a stroll instead. T h e physiocrats’ “le e c h e s ” w ere alive and well in popular culture. In th e search for higher incom e, unskilled and semiskilled blue-collar HW h ile som e economists in the 1970s and 1980s began to include this foreign migration in m easu res o f “tru e” unem ploym ent at h om e (see Primorae and Babic, "System ic Changes and

U nem ploym en t

G row th ”;

and

M encinger,

“U tjeeaj

privredne

aktivnosti

na

zaposlenost”), official views pointed to the large n um ber o f migrants abroad who had been em ployed as professionals and skilled workers before they left. T h e fact o f joblessness (the pro b lem o f “filling em pty b ellies”) was, in these views, separated from the motivation to m igrate outside the country for higher incom es or to solve the migrant s “housing problem” at h o m e (which, according to opinion surveys, was a more frequent reason for migration). See. “S o m e Basic F eatu res o f Yugoslav External M igration.” 9 M en cin ger, “Privredna re forma i ne zaposlenost.''

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315

workers did resort to work stoppages and strikes. B u t skilled production workers, who had w h atev er m arket leverage th ere might have b ee n over wages b ec au se th e y w e re m ore often in shortage and w ere politically re p ­ resented, w e re m ore inclined to improve their prospects in the unofficial economy, w h ere opportunities for moonlighters (electricians, repair workers, and those in th e building trades) could b e lucrative. T h e stratum of “fluctuators” so harshly criticized by Boris Kidric in 1949 stretched from peasant-w orkers to th e c ore o f the industrial class. Skilled industrial workers did th e opposite o f what Kardelj planned for the kulaks: to end their control o v er rural m ark ets— without destroying th e ir productive capacity— b y gradually incorporating them into the socialist sector and its industrial m entality and thus w eakening their foot in the private sector. Instead, skilled workers k ept one foot in the secure and benefit-granting public sector and stepped with the o th er into a second, private jo b to su pp lem ent their in com e and pro tect them selv es against u n em ploym ent. Middle strata in cities and tourist areas, too, e n te re d the world o f private profits by renting to subtenants or foreigners, dealing in foreign cu rrency, or taking on work in private-sector tourism, retailing, or a g ricu ltu re.10 T h e diluted principles o f th e socialist sector w ere not replaced, how ­ ever, by those o f th e m arket, for the markets in which these people par­ ticipated w e re local, specialized, and unregulated. As with the reversion to a m o re traditional institution in the co n c ep t o f the work com m unity, a halfway house b e tw e e n agrarian and socialist society see m e d to em e rg e in which personal conn ections, early advantages in urban housing and socialist-sector em p loy m e n t, and nonm arket allocation o f goods replaced K idric’s idea o f th e rational calculation o f econom ic incentives to in­ creased productivity and production for m arket dem and. W h e n villagers sent th e ir child ren to live with urban cousins for education b eyond e l e ­ m entary school and in exchange provided their relatives with food, the urban hou seh old ’s consum ption o f agricultural produce expanded, divert­ ing that produ ce from th e m arket; the effectiveness o f m onetary in c e n ­ tives to b oth farm ers and their urban relatives was diluted; and local bal­ ances b e tw e e n labor supply and dem and w ere disrupted by outsiders seek ing access to socialist-sector jo b s through th e ir relatives. Migrants without family in th e cities form ed urban clubs o f people from th e ir own region or republic, creating a network o f mutual assistance for housing and jo b s along regional and eth n ic lines; or they relied on political a venu es— party m e m b ersh ip and political activism— to improve their access to housing and a jo b . T h o se without rural ties and d irect access to food, such as the d escendants o f the core o f th e prew ar industrial work­ ing class, felt m o re intensely th e fall in the value o f their incomes. T h e principles o f selection for deciding whom to fire first in a rational111 S e e I Bicanic, “T h e Inequality Im pact of the Unofficial Eco n o m y in Yugoslavia.

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ization also p erp etu ated the social attitudes and habits that originally shaped those principles. T h e assumption that women or rural residents would not lack for housing and material support (despite the large num­ b e r o f single or divorced women and the many villagers without land) reinforced traditional attitudes toward w o m e n ’s em p loy m ent and family roles. Rural households held onto land as insurance, leaving aged women to cultivate it alone and thus reinforcing the low productivity o f the land and th e p reju d ices against peasant-w orkers— that their mentality re­ m ained that o f small property ow ners “tied to their land.”11 W o m e n were m ore likely to accep t downward reassignm ent and retraining and to re­ fuse nomination to e lective positions (such as in the workers’ council or parliament) so that they would have more time for the additional house­ hold duties— above all child c a re — imposed by the traditional division of household labor and the inadequate d evelopm ent of public services.12 T h e result was to dim inish further their political influence on spending priorities and e m p loy m e n t and to rein force preju dices about their productivity. Rules designed to pro tect workers— such as the obligation of manage­ m e n t to inform the union when dismissing five or m ore workers at once, the assignm ent o f jo b s com m ensu rate with skills, and the prohibition against layoff o f workers who w ere on leave for military service or voca­ tional training, w ere pregnant, or had infants up to age o n e — became reasons not to em ploy certain persons in the first place: youth who had not co m p le te d their military service, women who might b eco m e preg­ nant, and the disabled, the unskilled, and others o f presum ed lower pro­ ductivity (especially re ce n t migrants from the countryside), all of whom filled th e u n em p lo y m en t rolls in such high proportions. E n te rp rise direc­ tors insisted that th ere w ere no restrictions on dismissing a worker, as long as they followed the rules on prior warning and kept good records; but the long and involved process may have encouraged caution in hiring. F a c e d with high rates o f female un em ploym ent, local authorities and e m ­ p loy m ent bureaus also reinforced occupational divisions o f labor by chan­ neling w om en into jo b s for which they were “suited”— textiles, food processing, health care, education, and office work. B u t these w ere lowwage sectors more vulnerable to fluctuation in world market price and d em and and to labor cuts for rationalization in g overnm ent and enterprise b u d g e t s . 13 11 Like so m uch else in this social portrait, this was a widespread characteristic in socialist Eastern Europe. S e e H. Scott, "W h y the Revolution D oesu t Solve Everything. 12 M ihovilovié et al , Žena izmedju rada i porodice. 1:1 T his strategv was particularly explicit in Macedonia (Tripo Mulina, interview with author, O c to b e r 1982) In 1978, women made up 78 percent o f the labor force in the produc­ tion o f finished textiles and til percent in linen and textiles (Woodward, W o m e n ," 246)

The Rights of

DI VI SI ON S O F LABOR

317

The con cep t o( e m p loy m e n t as a bundle oi rights attached to a social relation o f work" (radni odnos) in the public sector also created a world of social distinctions and com petition within that sector that w ere based on status. E m p lo y m e n t was regulated by statutory rules in the constitution, legislation, and negotiated ag reem ents on eligibility, incomes, and reas­ signment. It defined a status in society, o n e ’s relative prestige and share in incom e and benefits, based on the assumptions about productivity built into these rules. Most important, it defined a status legally separate trom that ol the un em ployed person or person employed in the private sector. Protests against threats to em p loy m ent took the form, as the official sys­ tem expected , ol individualized appeals— to fellow workers on the inju s­ tice oi a dismissal or unwanted reassignment, or to law courts, lawyers, and paralegal bodies on its legality. D esp ite the political rhetoric praising the worth of production workers, the statutory rules on incom e distribution and jo b -rela te d perquisites (in­ cluding rules formulated in bargained “c o m p a c ts ’ among governm ent, business, and labor) actually reinforced earlier values as well. T h e e m ­ phasis on formation of human capital and on parity b etw ee n jo b classifica­ tion and formal skill qualification gave those with higher education a higher social status, wage rate, and priority lor benefits such as housing, and it maintained the im portance that formal education was accorded in the prewar c u l t u r e . 14 Those who achieved the appropriate educational qualifications cam e to expect em ploym ent, often viewing their school di­ plomas as a right to a job ol a particular category. Anecdotal evidence is rich with instances of unem ployed youth who refused jo b offers b ecause the position was b eneath the status ol the occupation for which they had trained. Education was particularly important to parents in the private sector, who saw investm ent in their ch ild re n ’s education as the avenue to public-seetor jo b s , upward social mobility, and a family’s inheritance. At the same time, it was com m onp lace to explain un em ploym en t in poorer regions as the “overproduction o f intellectuals” trained in liberal profes­ sions (a phrase also used by the king to justify closing rural gimnazije during the depression of the 1920s and 1930s) and to attack as irrational the investm ent in proliferating universities in provincial and regional towns (such as Pristina, Rijeka, and Nis) in the 1970s. But at an individual level, this strategy for upward mobility was rational. T h e Slovene model of Kardelj and Kidric envisioned the state as a body of rule-m aking experts that needed no authority with independ ent pro­ ducers o ther than that afforded by expertise and professional c o m p e ­ tence. But the lead ers’ need to build authority rapidly after 1950 led them to draw heavily on the symbols of status in the culture of the 1940s. T h e fourth plenum of the central co m m ittee in Ju n e 1951 devoted most of its ' 1 S e e Trim ton, Peasant Renaissance in Yugoslavia

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agenda on the design o f the new state to the authority o f the law courts and ju d g es (“one o f the strongest weapons we had and that a state can have in its own h a n d s ,” Kardelj explained). T h e y would gain the public’s re sp ect, Tito and Kardelj insisted, if professional standards w ere raised and prew ar qualifications revived, and if their social status were improved with h ig her salaries, b e tte r housing, and a return to the offices in their prew ar buildings, w h ere p o ss ib le .15 Liberal campaigns in the 1950s, 1960s, and 1980s that aimed to replace an “older, poorly schooled Partisan g e n era tio n ” holding down positions o f authority on the basis of war ser­ vice (and by implication, all those in the army and police apparatus) with th e younger generation on the basis o f formal skill qualifications also im­ puted g re a te r authority to formal criteria o f expertise. T h e ir language of productivity and m odernity rein forced the perception o f a privileged sta­ tus for human capital and education and the lower social worth ascribed to the realm o f the “political. ” This began early, as can be seen in the skepti­ cal receptio n given R ankovic’s proposal at the second party plenum in Ja nu ary 1949 for improving the authority o f party cadres by upgrading their perquisites (and thus status). This conflict in values was exacerbated in those cases in which jo b com­ petition did o cc u r— when youth waiting for e ver-scarcer openings com­ p e te d with th e administrators, security police, and military personnel sent into the econom y with the successive waves o f demobilization and d ecentralization, and when educated youth who chose not to join the party co m p e te d with their peers who did. A national survey in 1971 of the Partisan e lite (the “first fighters,” who had jo in e d the Partisans in 1941) found that m ore than half had b ee n retired before pension age, that 27 p e rce n t had incom es below the legal minimum, and that they “com­ plained most o f social isolation, inactivity, and lack o f prestige. ” In 1972, o f 4 3 7 , 7 0 9 veterans in Serbia, only 3 2 pe rce n t w ere e m p lo y e d .16 This p ercep tion o f com petition and relative worth was nurtured by the regula­ tions on e m p lo y m e n t and reward, b ecause they specified differentials among legally defined groups to which individuals belonged according to th e ir jo b qualifications. Qualitative im provem ents or upward mobility cam e not with increased effort but by moving up through categories of relative status. T h e re w ere generally two legitimate means: educational advance (through special courses, training abroad, or night school)17 or 13 Pc-tranovic, Koncar, and Radonjic, Sednice Ccntralnap, kumitetu KPj (1948-1952), 565; see also Kankovic’s report, p. 534. This was the same reason Rankovic gave, in his report on the party to th e second plenum o f the central co m m ittee in January 1949, for improving what h e called th e miserable living conditions o f party cadres; this argum ent was reversed in 1952 (ibid , 2 0 2 - 6 , 251), ,(i D e a n , “Civil-M ilitary Relations in Yugoslavia, 1 9 7 1 - 7 5 , ” 54 n 34, 5 0 17 O n e especially com m on path was to take a m aster’s d egree in middle age so that the category o f o n e ’s position, and th erefore one s pension, was raised

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political activism. Although many com bined the two routes, th e growing unem ployment o f educated youth after 1972, the greater d irect party in­ volvement in decisions on managerial and professional appointm ents d ur­ ing the 1970s, and th e further ’’’socialization” o f political cadres in the party, security forces, and army rein forced the b e l ie f that th e re was a contest b e tw e e n educational a ch iev em en t and the political reliability of party m em b ersh ip . Moral-ideological com missions created to review ap­ pointments in education and the mass media after 1974, although they rarely o v ertu rn ed the recom m end ations o f p eer-review personnel c o m ­ missions ju d g in g professional qualifications, gave new life to this belief. When youth did not secu re the jo b their schooling had ordained, the language o f e m p lo y m e n t regulations and political campaigns made it nat­ ural to assum e (and difficult to refute) that the rules had not b e e n applied, that th e re was discrimination. Rival candidates had won, they assumed, only b eca u se o f party m e m b ersh ip or political con n ection s— or, in areas of mixed nationality, b ecau se o f national quotas (the ključ) or eth n ic p re ju ­ dice and p r o te c tio n .18 At the same tim e, the dem and for production workers o f all kinds in the 1970s often w ent unfilled. Heavy physical labor in low-paying jo b s , such as mining, was perennially short o f takers. Unskilled and sem iskilled in ­ dustrial workers had no prospect o f anything m ore than marginal im ­ provem ents in pay. T h e ir wage gains from work stoppages and strikes did not co m p en sa te for th e depressive effect o f stabilization policies, incom es compacts, and growing inflation (especially after the m id-1970s) on their real incom es; and th e system o f individualized layoff and reallocation m ar­ ginalized them politically. Training in industrial skills was unpopular. As the Se rb ian labor secretary M arija Todorović com plained in 1982, the “greatest p ro blem o f harm onizing personal and collective in terests” in the Yugoslav system lay “in the contradictions expressed in the field o f e m ­ ploym ent and reassignm ent to m ore-com p lex tasks”; its most fre q u e n t manifestation was the “many who argue for the education of youth in productive tasks and highly skilled [technical] education b u t who send their child ren into occupations for which th ere are already tens o f th o u ­ sands o f u n e m p lo y e d .” Stipe Suvar, the Croat sociologist-politician most closely identified with the reform o f secondary education, warned the same y ear that the country was “in for difficult tim es in this d eca d e ” b e ­ cause o f the conflict b e tw e e n a slowing econom y and the “expectations” o f 1N T h e presiden t o f the Serbian League o f Youth complained in 1982 that a “greater p roblem than un em ploym en t itse lf is th e com petition, myth, corruption, familiarity, co n ­ nections, e t c ., in finding a j o b . ” R eflecting on the additional role o f social status, h e contin­ ued, “A youth will wait patiently for four to five years, knowing the eco n o m ic situation and low dem and for his profession, but his p atience is lost if som eone who graduated after him with poorer grades but from a b e t te r social position gets a jo b first” (quoted in T ija n ić and Andjelić, “O b ičn o nezaposleni mladi”).

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youth, which had led to a “hyperproduction o f ‘nonproductive’ intel­ ligentsia in the towns” and an “explosion o f higher education to a patho­ logical e x te n t.” H e com plained that “peasant children and workers’ child ren will do anything to avoid their p a rents’ fate and want to leave d irect production, w hereas those in the middle classes are striving to maintain or improve their position. Any petty office work is to he chosen over factory w o rk .”19 T h e official rheto ric prom oting increases in capital, including human capital, was im bu ed with the idea of achieved, not ascribed, status. But access to e m p lo y m e n t b eca m e ev e r less an issue of the expansion of the p u blic sector to incorporate a primarily peasant population and ever more a m atter o f in ternal turnover within the socialized sector and of the per­ sonal or political influence that an urban younger generation had with individuals already employed. W h ile parents in the private sector viewed education expend itures as their ch ild re n ’s patrimony, fathers in the pub­ lic sector w e re reported to see their legacy to their children as having a jo b waiting for them. In a comparison of the unemployed in Split, Croatia, in 1968 and 1981, sociologists Josip Zupanov and Mladen Zuvela found the sam e groups represented : youth, women, the unskilled or dis­ abled, migrants, and poorer strata. B ut their social origins had changed significantly. P eo ple o f peasant stock w ere less well represented, because th e ir nu m bers had dropped in the population at large. Children o f profes­ sionals or white-collar workers w ere no b e tte r represented in 1981 than in 1 968, reflecting their continued good position and political power in soci­ ety. Similarly, w orkers’ children had opportunities for work abroad if they did not already have access to public-sector enterprises. B u t two groups suffered particularly for their lack of influence in the public sector of the econom y. T h e children o f private artisans depended for their oppor­ tunities on continuing their schooling, but they could not com pete with w o rk ers’ or professionals’ children after graduation because their parents had no conn ections with a public-sector jo b that they could pass on or use as an e n tre e to another. T h e children o f parents in the defense establish­ m ent, in which th e re was no m ore dem and for personnel, fared worst; their p a re n ts ’ influence was outside econom ic enterprises in the socialist s e c t o r .20 P o l it ic a l E x c l u sio n

A seco nd c o n se q u e n ce o f the system created by the leaders’ strategy and its approach to u n em p lo y m en t was to segregate the political world of the 19 Suvar, “Plave i b e le kragn e.” 20 Zupanov and Zuvela, “K riteriji inferioniosti nezaposlenih.” T h e mothers ol children in the la tter category had lived with a double disadvantage in access to jo b s — on top ol their

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em ployed from that o f th e unem ployed. In addition to social invisibility, there d eveloped a form o f political invisibility as a result o f the end to unem ploym en t in its mass, involuntary form and as a result o f the dual­ sector approach to u n em plo y m en t, with its distinction in political rights that arose from a political system structured around the econ om ic system. T h e level o f un em p lo y m en t significantly affected bargaining power in the econom y— b u t in bargaining over m oney and credit b etw ee n collective units o f property owners (republics, enterprises, and banks), not b etw ee n workers and em ployers, or among workers in ways that could lead to the political solidarity o f workers with the unem ployed. T h e threat o f u n em p lo y m en t in the socialized sector was individu­ alized, and e m p lo y m e n t and wages w ere regulated according to measures of individual capital (econom ic, political, and social). W h e th e r the loss o f a jo b in th e socialist sector led to retraining, reassignment, or expulsion into the private sector, it was executed by w orkers’ organizations (the workers’ council, its disciplinary c om m ittee, the union, or the self­ m anag em ent courts), not by managers or political authorities. Social ow n­ ership bound em ployed persons’ interests in higher wages and secure jo b s to th e e c o n o m ic results of their employers, even if those results w ere not sufficient to guarantee their continued em ploym ent. In the political system , as d escribed in chapter 5, “e con om ic in te re s t” was a constitutional concept, granting political rights to participate in e c o ­ nom ic decisions and policy in proportion to e con om ic value produced in the pu blic sector. T h o se who did not produce value (the unem ployed) did not have such official rights, while those who did had no need to organize. In te re s t was not an unstructured political incentive defined by labor­ m arket com petition or w orkers’ organizational resources. To b e u n em ­ ployed m ean t above all to b e politically excluded from the full citizenship accorded to the status o f em p loy m e n t in the socialized sector o f the e c o n ­ omy. P eo ple em ployed in the private sector could b e re p re sen ted politi­ cally only in local and neighborhood assem blies o f voters and could organize according to e con om ic interests only through contractual rela­ tions with a socialist-sector enterprise. C entral policy was formulated by a host o f councils, assem blies, par­ liaments, and corporatist negotiations, all of which rep resented only social-sector producers (though variously called workers, organizations of associated labor, or enterprises). Alliances to influence policy occurred gend er, they w ere often outsiders in their com m unities because they moved frequently to accom pany th eir husbands. In a survey o f attitudes in M acedonia in 1981, respondents ranked unequal em ploym ent opportunities as th e first and most painful source of social inequality,” far m ore important than housing, education, wages, and o th e r material goods (Kimov, “Da li se povecavaju socijalne razlike?”).

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am ong managers o f e n terprises, along industrial-hranch lines within the e con om ic ch am b e rs (privredne komore), and am ong e le cte d delegates in the halls of parliaments. Such alliances w ere highly influential— above all those o f the exporters, on whom the cou ntry’s capacity to import (and increasingly to produce) d epended. But if such virtual representation did not m e e t the interests o f workers or o f the unem ployed waiting for openings, then the institutional assignm ent o f jurisdiction over labor and e m p lo y m e n t to republics, localities, and firms and the vertical, terri­ torial organization o f the political system m eant that the independent in­ terests ol labor or the unem ployed could b e represented only by the single voice o f their e n te rp rise or republic. T h e institutional avenues of political influence and bargaining gave no way to assess the economic costs o f u n em p lo y m en t in the country at large, or to formulate political trade-offs b etw ee n wages and jo bs. In all these ways, the dual face of capitalist un em ploym en t had been su n d e re d — by the system o f econom ic dem ocracy that linked political representatio n to pro d u ce r-ce n te re d econom ic organization and by the property division b etw ee n public and private sectors (instead of between labor and capital). T h e two organizations explicitly representing the inter­ ests o f labor— the C o m m u n ist party and the union organization— are usu­ ally dismissed in the literature as having failed this task because they also b e c a m e official organizations, guaranteed political power constitutionally instead o f having to co m p e te with o th er parties and unions for it. But this view is insufficient to understand the roles they did play, which (as with com p etitive parties in a m arket economy) were defined by the particular organization o f the econom y and the state that resulted from the leaders’ ideology. T h e idea of social ow nership means that the party should represent the collective interests o f all working p eople— o f society as a w hole— above th e ir particular interests (served by the many other official forms o f repre­ sentation, such as firms, localities, industries, and professional groups). In Kardelj s model o f progressive socialization and decentralization to evis­ ce rate federal (state) power and to cut social expenditures on “nonproduc­ tiv e ” labor, the C o m m u n ist party’s importance and its p resen ce in social life w e re supposed to grow in proportion as the state (the bureaucracy, army, and police) was dismantled and its functions integrated into firms and co m m u n e s. But b ecause the party did not have a separate administra­ tive b ureaucracy or the formal system of nomenklatura found in countries o f “b u re au cra tic socialism ,” it increasingly d ep end ed for its power on the ability to influence who held authoritative positions within society. B e c a u s e the e conom ic criteria o f professional co m p eten ce and productivity-related skills could not be ignored, the party’s solution was to recruit managers and professionals into its m em bership. Industrial workers ne v e r composed more than 36 pe rce n t of L C Y m em b ership, a

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figure from the height o f the recru itm en t campaign o f 1 9 6 0 - 6 4 to favor skilled workers; two years later, rising un em ploym en t sent that propor­ tion plum m eting, the most frequent cause for expulsion being nonpay­ ment o f d u e s .21 Peasants had com posed half the party’s m e m b ersh ip after the war, but their num bers declined with the campaign o f the fifth party congress to recru it workers in 1948 and then dropped drastically after 1952, from 2 2 p e rc e n t in 1954 to less than 5 p e rce n t by 19 7 6 .22 By 1964, the party had b eco m e an organization of administrators and professionals. A Yugoslav c ontrib u tor to a study of “w orkers’ m an ag em en t” for the I n te r ­ national L a b o r Office gave this explanation: “T h e proportion of League m em b ers is generally higher in managerial organs and in delegations than among the workers who e le c t them . M e m b ersh ip in the League is, in fact, a criterion for election to such bodies in some cases, since L eague m em bers are d e e m e d to b e motivated to defend and develop the m anage­ ment rights o f w o rk e rs.”23 Managers w ere e le cte d by em ployees in a firm (though approved by the local party com m ittee and governm ent), unless the firm was under tem porary local governance in a prebankruptcy re ­ structuring; a firm ’s representatives in the assem bly were also chosen by employees. But to prevent conflicts o f interest in the decisions they took, those perform ing e le cte d functions w ere granted job security. T h e law prohibited their involuntary dismissal, and it protected the jo bs to which they would return if they w ere voted out or when their tenure ex p ire d .24 Labor regulations also required firms to hold open the jo b s and continue the salaries o f e m p loy ees on leave for official business or military service. Managers with d em onstrated loyalty to the local party c o m m ittee would, if temporarily unem ployed, receive a salary from party coffers until a new position could b e found. T h e s e protections for party-approved managers were the source of widespread criticism , from the accusation that the party had created a privileged “new class” (Milovan D jila s ’s thesis in his revival o f a classic socialist th e m e in the 1950s) to the charge that it had reproduced an infor­ mal nom enklatura indistinguishable from that of state-socialist regim es of the Soviet type. M e m b e r s o f this stratum of managers who owed their positions to party m e m b ersh ip or approval defended these protections, however, as the basis of in d e p e n d en ce from popular pressures within a firm when hard econ om ic decisions had to b e made (along the lines of theories of insulated b u rea u cra cies).2'’ No mention was made from e ith er 21 S e e S e r o k a , C h a n g e a n il R e f o r m o f th e L e a g u e oj C o m m u n i s t s in Y u g o s la v ia , 2 9 - 3 3 . 22 Y u g o s l a v S u r v e y 17,

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s

1.2 ( F e b r u a r y , M a y 1976).

23 I n t e r n a t i o n a l L a b o r Office, E m p lo y m e n t., G r o w t h , a n d B as ic N e e d s . K it 21

T e n u r e w as l i m i t e d a fte r 1963 to tw o t e r m s , b u t t h e lim ita tio n w as o lte n i g n o r e d in

p r a c tic e 25 S e e t h e S ta r t i n t e r v i e w w ith T o m is la v R ado vi nac , th e m a n s e n t in to o v e r s e e th e r e s t r u c t u r i n g ot t h e i n d e b t e d F.coiioinic Bank ol Z a g r e b (t he r e p u b l i c a n b a n k ot Croa tia).

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cam p o f tlie fact that e le cte d representatives in parliamentary bodies were im m u ne from un em plo y m en t and therefore any personal econom ic inter­ est in solidarity with the fate of the unemployed. M o re ov e r, the effect of growing unem ploym ent, as well as the party’s rationalizing response to it, was not to create a political opportunity to revive its identity as a labor party or its collective interests in the potential threat to social order from the unem ployed, but to further narrow its power. T h e party’s d ep en d e n ce on managerial loyalty grew over time as it gave up o th e r instrum ents o f control and as the expansion of educational opportunity increased the n u m b e r o f people capable of holding such posts. Party m em b ership was only an additional qualification and not al­ ways necessary for positions o f authority, but it b eca m e an increasingly im portant distinguishing device after the early 1970s, when unem ploy­ m e n t rose am ong the university-educated. Although m em b ership was once m eant to b e a mark o f a ch iev em en t and honor, its selectivity forming the primary basis o f the party’s claim to authority from the civic virtue of its m e m b e r s ,26 it m ore and more b eca m e an instrum ent of exclusivity to limit entry to political and managerial posts and to raise their value by creating an artificial scarcity. T h e factors prom oting this d ev elopm en t cam e into play only shortly after the political campaign surrounding the econom ic reform of 1 9 5 8 -6 5 . B eca u se the very public display surrounding the purge ol Ranković and the central cadre commission in 1 9 6 6 - 6 7 seem ed to promise greater op enness, the disappointed expectations bred resen tm e n t in those ex­ cluded. As the n u m b e r o f new jobs narrowed, rules w ere introduced to cheek power within this managerial network through limited tenure within specific posts and obligatory rotation among those already e m ­ ployed. At the same time, the m arket-oriented econom ic reform, which rewarded managers for turning a com mercial profit, had undercut the vertical lines o f party accountability and led to a purge of managers most conspicuous for creating trade-based em pires and expanding outside their repu blic o f property registration (through horizontal rather than vertical organization).27 T h e result was that in fact an ev e r more closed, narrow

2fi Piisic argues that th e party still represented “virtue* in the early 1980s as the dominant criterion in choosing representatives; th ere were election slogans of “Klect the best!” and co m m ittees to assess “moral-political suitability" of individuals For positions of responsibility in political, managerial, and social functions (“Uloga kolektivnog odlučivanja u realizaciji radničkih in te r e sa ,” 223), 27 Inform al explanations attribute this purge to nationalism, on the argum ent that firms crossing republican lines te nded to be export-im port based conglom erates originating in the adm inistrative period in Belgrade (such as G en ex) that expanded toward profitable oppor­ tunities in th e 1960s, such as tourism on the Dalmatian coast. In this case, the Croatian go v ern m en t and Dalmatian towns (such as Dubrovnik) opposed th eir intrusion on the

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group circulated among directorships in the econom y and governm ent. The effect o f growing u n em p lo y m en t on the L C Y , in sum, was its m e ta ­ morphosis into a craft union o f managers and politicians and a further decline in its governing role apart from its managerial function. The u n io n’s success in preventing mass u n em plo y m en t also had the paradoxical c o n s e q u e n c e o f weakening, not strengthening, its political r e ­ sources. This was because its success narrowed the basis for solidarity on economic in te rest and for political action and included the loss o f labor s traditionally powerful weapon, the general strike. T h e political alliance between peasants and workers that was critical to the party’s revolution­ ary strategy did not survive the institutional separation o f the private and public sectors that originated in the policy against rapid socialization of agriculture. D e s p ite the protections in labor regulations against co m p e ti­ tion from this private-sector “reserve o f the u n em p lo y ed ,” the unions tended to see th e sub sistence guarantee o f property ow nership in the private sector as reason to give p re fe re n ce to their m e m b ersh ip — urban dwellers, usually m en assumed to b e heads o f household, with industrial or administrative skills and work habits appropriate to public-sector jo bs, and with no source o f incom e or housing should they b ec o m e u n e m ­ ployed. Unions had little sympathy for those who could earn m oney in the private sector, for wealth earned through m arket advantage or what they considered specidation, or for workers absent from work, on the assum p­ tion that they w ere off working on their own land or at second jo b s and therefore in no need o f a jo b when others w ere truly unem ployed. L a bo r-m a rk et com petition largely took the form o f migration to places with labor shortages or h ig her incomes and benefits, such as Slovenia and the D alm atian coast. T hu s it was governm ents (local and republican) rather than unions that acted to protect social-sector wages and jo b s by erecting formal or informal barriers b etw ee n residents and immigrants, or by im porting “foreign” labor (from outside the area) on lim ited contract for specific p r o je c ts .28 Confined to tem porary work and dorm itory hous­ ing, classified as new com ers on local rolls, and su b je c te d to informal p re s ­ sures w h ere th e re w e re differences in language and culture, immigrants

grounds that th ey w ere Serbian. No system atic study has tested this hypothesis against the one offered h ere . S e e also D jodan , The Evolution o f the Economic System o f Yugoslavia; and Sosić, 7 a čiste račune. 28

Through out th e socialist period, local and republican governm ents acted to prevent

com petition for th eir industries and populations with myriad limits on entry o f labor, indus­ tries, or goods (such as th e Serbian boycott o f goods trom o th er republics, especially Slo ­ venia, in 1990), in ways analyzed by Stigler for capitalist societies— except that in the Yugoslav case th e re was no n eed for separate pressure from industries for governm ental regulations b ecau se o f social ownership and the fiscal system . S e e Stigler, “T h e T h eo ry o f E c o n o m ic R egu lation,"

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without familial conn ections often found it difficult to overcom e initial disadvantages in resid ence and schooling.29 W h e n the system o f w orkers’ councils replaced collective union bar­ gaining affecting the trade-off b etw een higher wages on the one hand and in v e stm e n t and jo b s on the other with debate and review of managerial proposals within the firm, the unions' new task confined them to the public sector o f the econom y. Like the L C Y , they were to represent so­ cial interest (in overall growth and its derivative, rising employment); their role was to participate in the discussions about central rules 011 productivity-based wages and wage increases and then to implement those rules. At the same tim e, they w ere to rep resen t the interests of workers against managers in reviewing and im plem enting managerial de­ cisions within firms on rationalizations and dismissals. Contrary to the concep tion o f unions as “transmission b elts” for central policy that domi­ nates the literature on C om m u nist-governed states, this dilemma be­ tw een their official and representative roles led, according to Ellen Comisso, to alternating pressure b etw ee n “plan” (central regulations) and “m a rk e t” (enterprise autonom y).30 In fact, the unions resolved the di­ le m m a in a way that distanced them even more from any societal role regarding u n em plo y m en t. On the one hand, they fought to protect their authority to im p lem e n t central regulations through their legal right to nom inate candidates to e nterprise decision-making councils, therefore fighting for the authority o f workers’ councils in general against man­ agerial e n croa ch m en t. At the same time, they fought to increase the e c o n o m ic resources available for the firm’s wage bill, working in col­ laboration with m an ag e m e n t and against central authority in support of g re a te r e n te rp rise autonom y over disposition o f its income and of taxation for the c o m m u n e ’s solidarity fund (which provided firms with insurance to pay the guaranteed wage). As a result, how ever, the authority of the union organization at the firm d ep en d e d on im p lem en tin g central labor regulations and policy, making it difficult to support a w orker’s appeal against regulations. Workers who appealed dismissal com plained frequently that they received

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29 A uthor’s interviews with Josip Županov on I he fate o f migrants to Split from villages in its h interland, with Slovene sociologists and Silva Mežmirić on the restrictions Slovenia im posed on labor from o th er republics; with Ivo Banac and Olga Supek on the activities of local authorities in Dubrovnik to protect local labor against the influx o f employers from o th e r republics who would bring labor with them ; and with Radoslav Stojanovič on local reactions against the expansion o f Serbian foreign-trade firms, such as C en ex, into domestic m arkets in th e 1950s

(0 1 1

the same conflict in th e 1960s, see also Šošić, Za čiste račune). On

the introduction o f a distinction in som e municipal statutes after the 1963 constitution be­ tw een long-term residents and recent settlers, see Hondius, The Yugoslav Community of

Nations, 3 0 8 -1 0 * 30 C om isso, Workers' Control under Plan and Market,

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support and w e re inclined as a result to take their complaints individually to self-m anag em en t courts, w here town lawyers outside the firm were more likely to co m e to their d e fe n s e .31 T h e unions’ influence, on the other hand, grew out o f the social bonds o f relatively stable m em b ership and personal relations with the director, m anagem ent board, and te c h n i­ cal staff within th e firm, making it difficult to contest a managerial d ec i­ sion. Instead o f organized militancy, the unions chose vagueness and dissembling so as to pro tect the personal relations underlying their influ­ ence. In place o f collective bargaining in the interest o f workers against managers or gov ernm ent, they fought to increase econ om ic resources within th e firm. T h e union-led “Battle for In c o m e s ” in 1 9 5 7 - 5 8 , as it was called at the tim e ,32 for example, was not a battle for higher wages (al­ though it had that c o n s e q u e n c e in some firms), but a jo in t battle with liberals to re d u ce e n te rp rise taxation, increase the portion o f earnings retained, free firms to make decisions on profit allocation that affected jobs and incom es (decisions regarding personal incom es, investm ent in new e q u ip m e n t and plant, funds for collective consumption goods, and expansion o f em ploym ent), and transfer authority over hiring and firing from th e m a n a g e m e n t board to the w orkers’ council. T hat alliance fell apart in 1968, how ever, when liberals took the next step and sought to transfer th e unions’ authority over hiring, firing, and incom e distribution by way o f the w ork ers’ council to the director and appointed council of technical advisers. Although the conflict cost V ukm anovic-Tem po his leadership o f the union, the union won restoration o f its authority (in the constitutional am e n d m e n ts o f 1971 and 1974) when central policy shifted after 1969.

T h e D iv is io n s o f S e l f -M a n a g e m e n t

A third c o n s e q u e n c e o f th e lead ers’ strategy and the resulting structure of econom ic and political organization was to make solidarity and alliances across social divisions on issues o f governm ental policy that influenced e m p lo y m e n t and u n em p lo y m en t extrem ely unlikely. In the classic case of social d em ocracy, the Keynesian political revolution had two elem ents: a new consciousness about the need for a m acroeconom ic conception of e con om ic activity and for active governm ental policy to cou nteract the 31 H ayden, “L abor Courts and W o rk ers’ Rights in Yugoslavia,” Hayden writes that in an analysis o f the self-m anagem ent courts (courts of associated labor) in 1977 and 1978 by the federal c ab in et in preparation for a proposed reform o f these courts, “the passive role ol the trade unions was castigated, particularly insofar as the unions do not protect individual workers (and, by extension, organizations) from im proper activities by managem ent and m anagem ent organs” (254). 32 S e e Rusinow, The Yugoslav Experiment, 1 16

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aggregate paradoxes of autonomous, m icroecon om ic decision making and laissez-faire; and the formation o f broad electoral alliances— among po­ litical parties rep resen tin g industrial labor, and other wage-earning, salaried, or small-property groups— in opposition to the unemploymentcausing policies o f orthodox stabilization and business protectionism. Col­ lective opposition to such policies in Yugoslavia was difficult to forge be­ cause both e le m e n ts were lacking: a societywide conception of collective interest in m acroeconom ic policy to counteract the powerful forces for decentralization and segm entation, and a social alliance across groups and eco n o m ic interests sufficient to exert pressure from below for policy change. T h e exam ple of social dem ocracy is usually considered irrelevant to the socialist states b ecau se their single-party systems did not operate by the com p etitiv e logic o f elections. T h e defining characteristic of social democ­ racy, after all, was its historic com prom ise with capitalism in accepting a parliam entary road to power and social change. Are not the privileged position of the ruling party and police harassment of dissident and opposi­ tion groups sufficient to explain the failure of effective political demand for chang e in socialist regim es? B u t they p revented n either the broad horizontal alliance against the party leadership in the case of the Soli­ darity m o vem en t in Poland after 1 9 7 9 — which jo in e d trade unions, intel­ lectu als’ clubs, farm ers’ associations, the Catholic church, and local party officials (the “horizontalists”)— nor the grand alliances, however, m om en­ tary, o f revolutionary protest against Com m u nist regim es in E astern E u ­ rope in 1989. At first glance, a Keynesian political alliance (which Adam Przeworski calls a com prom ise with capitalism to nationalize consumption rather than production)33 would seem to have b ee n possible in the Yugoslav case, w h ere, as was argued at the beginning of this chapter, the concept of e m p lo y m e n t as subsistence and “incom e relations” had replaced political solidarity on em p loy m ent with solidarity on income. Since social owner­ ship m eant that few held wealth-producing assets and that everyone in th e public sector of the econom y was a wage or salary earner, and since private ow nership was limited to smallholdings, one might expect that a broad political alliance could have b e e n formed among consumers against the dem and-cutting restrictions imposed by m acroeconom ic policy on their purchasin g power, in opposition to those who might support an antiinflationary policy to restore external liquidity (such as the strongest firms or the political elite in the m o re-developed regions). H ow ever, despite the principles of political and econom ic unity on wh ich the Com m u nist party built the state and social orderjp-a single 33 Pr/.cworski, Capitalism and Social Democracy, 3 6 - 3 8 .

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party and union, a popular front with allied social strata, social ownership, a single accounting and m onetary system, a com m on market, and uniform central ru les— the lea d ers’ methods o f gaining flexibility through foreign capital, a private sector, and extensive operational decentralization c r e ­ ated a society riven by divisions and factional conflict. T h e re was no ab ­ sence of social conflict or political protest over e conom ic policies in this society. Alliances could b e formed and reformed among enterprises and even gov ernm ents on policies concerning monies and credit, and govern­ ments w ere able to mobilize social protest in support of their demands. But no alliances e m e rg ed across social groups to pose, in Claus O ffe’s words, a cou nteracting logic to defend labor in opposition to this logic of capital54— or, to put it in Yugoslav term s, to reverse the localization or privatization o f questions of em p loy m e n t and make un em ploym en t an issue o f e co n o m ic policy. The massive e vid en ce about wage formation and investm ent decisions showing how little say workers had over their incomes and jo b creation argues against the thesis that un em ploym en t in Yugoslavia was a result of workers’ power over wages in labor-managed firms. T h e system o f self­ management did contrib ute substantially to u n em ploym ent, on the other hand, as a political obstacle to a change in m acroeconom ic policy b ecause it was the means to shift the locus o f bargaining over wages and jo bs to the level of the firm or lower, even though its system o f wage discipline was phrased in term s o f rights and political power. T h e political conseq u ences of self-m anagem ent had far less to do with the nature of decisions that could b e made within self-managed units than with the character o f soci­ ety com posed ol such units and the nature o f the links connecting them. The ostensible freedom o f self-managed firms with respect to labor, re v e ­ nues, and individual incom es focused political energies on the firm rather than the state— in the same way that in Poland the central setting of prices and wages helped to focus political energies instead against the g overnm ent and to foster organization across social groups, in opposition to the rising price of food and the negative c on seq u en ces for labor norms and wages in export industries.35 T h e p re s e n ce ol a retail m arket and free prices for consu m er goods also was not sufficient to create a basis for political action among consum ers (as it was in the successful alliances b etw ee n workers and farmers in the ease of the Swedish Social D em ocrats in 1 9 3 2 - 3 4 and in the case of Solidarity in Poland) b ecau se that market was only one among multiple, unlinked 31 OHe, 'T w o Logi cs o f C o lle c t iv e A ction. 35 S e e W o o d a l l, T h e Socialis t C o r p o r a t i o n a n d T e c h n o c r a t i c P ow e r, on s im il a ri ti es w ith the Y ugos la v c a s e in E d w a r d G i e r e k ’s “im p o r t - l e d ’ g r o w t h s t r a te g y in t h e 1970s a n d th e origin of b o t h c c o n o m i o r e f o r m o r i e n t e d in d u s tria l po li cy a n d re o rg a n iz a tio n a n d w o r k e r p ro te s ts in e x p o r t s e c to rs , s u c h as s te e l, textiles, s h ip b u ild in g , coal, a n d c h em ic a ls .

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inodes of exchange. C o n su m e r goods might b e obtained through family reciprocity or with cash purchase— in nonconvertible dom estic currency, in foreign cu rre n cie s earned working abroad or bought e ith er legally or illegally, or in c red it or goods in kind from a place o f em ploy m ent in the socialist sector. E c o n o m ic solidarity on falling standards o f living did not lead to political solidarity w h ere people operated in separate distributive and exchange networks. W h at political organization could bridge the dif­ fere n ce s b e tw e e n those who had a hedge against inflation in foreigncu rre n cy holdings from foreign emigration or in private links to Western markets and those who did not? b etw ee n those who had access to food from private farmers through family ties and those who had no source of food outside what their m oney wage could buy? b etw ee n those who re­ ceiv ed benefits (such as housing credits, health and accident insurance, vacation stays, meal coupons, and winter food staples) from a social-sector jo b and those who had to purchase everything on the open market? and b etw ee n those for whom the effect o f monetary and exchange-rate policy was to increase their purchasing power and those for whom it meant a sharp decline in what they could buy? T h e end o f the “wage struggle” with the introduction of self-man­ ag e m e n t, which replaced unions’ rights and attempts at collective bar­ gaining with the rights o f w orkers’ councils to debate, be consulted, and discipline workers, did not end bargaining over wages. It only pushed that bargaining into the workplace, creating conflicts rather than soli­ darity am ong workers in their “socialist com m u n ities.” T h e most conten­ tious decision within firms was the adoption o f the rule book on wage and incom e scales. Not only did actual personal incomes vary as a result of changes in production costs, profits, and taxes, but they also depended on the rate assigned a p e rso n ’s jo b classification. This created divisions be­ tw een b lue-collar and white-collar wage earners and across strata defined by skill certification. T h at conflicts over purchasing power erupted within the Yugoslav firm is d em onstrated by the dismissals and rising wages of skilled workers in 1 9 5 0 - 5 3 , by the wage-push inflation in the 1960s when regulations w ere eased substantially and un em ploym ent skyrocketed, and by the fre q u e n t work stoppages against the union leadership and manage­ m e n t within a plant to protest wage cuts or forced job-saving mergers with unprofitable local firm s.® In contrast to Hungary, w here managers o f autonomous enterprises could choose, for example, to alter internal salaries as long as they kept within the limits o f the assigned wage bill (such as by hiring more lowcost, unskilled labor in order to increase wage payments to skilled labor), ,(i Snell work stoppages grew more frequent alter 1958. In A u gust-Septem b er 1985, a strike in M acedonia by workers from a profitable plant protesting such a decision lasted forty-five davs.

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in the Yugoslav system rank-and-file discontent over visible inequalities within the workplace alternated with the inflationary pressures o f the ag­ gregate wage bill on the money supply or price levels. T h e gov ernm ent responded to wage and price inflation by alternately regulating and d e ­ regulating wages and contributions for social benefits. W ork stoppages usually had managers ru nning to the factory floor and g overnm ents c o n ­ ceding to wage dem ands in order to protect the myth o f self-m anagem ent (as worker control) and to prevent strikes from spreading beyond the c o n ­ fines o f the firm. B u t these im m ediate solutions p reem p ted broader polit­ ical mobilization (as they w ere intended to do) while feeding inflation and eventually requ iring a new round of anti-inflationary restrictions and la­ bor rationalization. T h e a u thorities’ solution to the wage dem ands o f professionals and civil servants, who w ere so contentious in 1 9 4 7 - 4 9 (for example, in the attack on the M inistry o f F in a n ce under S reten Zujovic), was administrative decentralization and socialization o f g overnm ent services (and thus em ployees)— transferring the activity to the budgets o f firms or to inde­ pendent agencies financed by en te rp rise taxation. In the 1970s, salaries for those in administrative positions and the “nonproductive” sphere of social services (referred to as people on “guaranteed salaries”) w ere in­ dexed to the wage rates and gains o f production workers. 37 Politically, this indexation crea ted a silent alliance, in no need o f organization, among public-sector em ployees; but it also made wage restraint difficult to im ­ plem ent when administrators responsible for discipline b enefited directly from wage increases, and it transposed the trade-off b etw ee n econom ic and social in vestm en t and jo b s into escalating tax rebellion. Both m e c h a ­ nisms o f wage control in the public sector refueled inflationary pressures as well as rounds o f intensification and stabilization restrictions that in­ creased u n em ploym ent. But there was no political m echanism for b a r­ gaining over the trade-off excep t to lobby for tax concessions that had the effect o f shifting taxation onto the private sector. E cono m ic-p olicy shifts created other conflicts among incom e earners that also inhibited political alliances. In addition to the divisions a ccord ­ ing to skill categories m entioned above, tensions b etw ee n the separate decision-making hierarchies o f production workers on the one hand and technical and administrative staff on the o th er intensified w h en e v e r new labor regulations shifted favor from one to the other. B ecau se the a c­ counting rules requ ired that taxes to finance public services be paid be17 T h e categories o f federal expenditure were also indexed as a percentage o f gross do­ mestic product (a category excluding services), which put additional p ressure on th e capacity to collect federal tax revenues to m eet the legislated percentage. T his is why the military increasingly com plained in th e 1980s about the instability und unpredictability o f its actual budget

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fore w orkers’ ne t-in co m e shares, the jo bs of civil servants and employees in social services w ere in direct conflict with workers’ incomes. Conflicts arose b e tw e e n e conom ic enterprises and nonprofit cultural and social ser­ vices when e n terprises responded to the austerities of stabilization policy with an attack on the cost o f financing public services and lobbied for their taxes to be cut by adopting user fees, relying more on market purchase, or cu ttin g the d efense budget and the nu m ber o f parastatal agencies (the self-managing com m unities o f interest). A fundam ental role of political organizations is to create the perception o f com m on in te rest that is necessary to collective action even in the pres­ e n c e o f seem ingly insurmountable conflicts of interest. In theory, the unions had the organizational basis to play this role— to fashion broad alliances within and across industrial branches or to propose policy change on the occasion o f writing labor and wage regulations or negotiat­ ing incom es-policy agreem ents. Alliances b etw een industrial-branch unions and those in the social services were difficult to form, however, becau se th e re was no role for union bargaining in workplaces whose bud­ gets w ere the result o f grants (as witli social services) instead of being “earned. ” In fact, th e powerful professional and civil-service unions of the 1940s w ere no longer unions as a result of this transformation, and they p erfo rm ed functions with little relation to those of unions in the enter­ prises. T h e y served as welfare organizations for visiting sick colleagues, sending birthday greetings, or organizing festivities within the workplace (such as for International W o m e n ’s Day), and they jo ined local, republi­ can, and federal associations to promote professional developm ent and define policies for reskilling and benefits. T h e incentives discussed above for union officials to focus on increasing their firm’s total revenues and collaborate with m anag em ent made alliances betw een the unions and en­ terprise directors or e conom ic liberals possible— until these allies turned against union authority and workers’ decision-making rights within the firm. Although the cou ntry ’s international position and its stop-and-go mac­ ro eco nom ic policy created an unpredictability o f conditions that made it difficult to act strategically, the conflicts over trade liberalization in the 1960s did dem onstrate the possibilities o f broader alliances on matters of federal e con om ic policy. F o r example, at the end o f 1967, students and workers in som e republics organized marches in sympathy with miners’ strikes protesting gov ernm ent neglect of their industry. An open fight at the sixth union congress in Ju n e 1968 over the damage to the textile and m ining industries caused by the decade-long trade liberalization and re­ pe a te d recessions produced a full union resolution of solidarity. w The «* O n t h e c o n g r e s s a n d floor fight, s e e C a r t e r , D e m o c r a t i c R e f o r m in Y ugos la v ia , 165.

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party’s ch oice to replace Vukm anović-Tem po, Dušan P etro v ić-S a n e — who was an oth er Partisan “first fighter,” was not known for his liberal views, and was from Bosnia, w here the strikes b eg a n — suggests that union opposition was com pounding on several fronts. N onetheless, more important than this change to m ore loyal leadership in p reventing the d evelopm en t o f a b road er social alliance was the unions’ ambiguity on em ploym ent. In response to rising youth un em ploym en t and the massive social protest in the universities only weeks before, the union congress gave only a tepid nod to the stud ents’ own plight. In its Resolution on E m p loy m en t, it chose to “con d em n . . . work organizations closing in on themselves . . . conserving the existing qualification structure . . , [in] opposition to th e e m p lo y m e n t o f all categories of schooled cadre. . . . T h e unions must b e engaged in the co rrect application o f the law 011 obligatory admission o f trainees and [must] fight for im plem entation o f the rulebook on tr a in e e s .”39 T h e unions and the youth wing o f the party had b een the C o m m u n ists’ most radical and com m itted activists in the days o f revolution, b u t as em ploy m ent q uestions w ere funneled into the self-managed workplace and union authority outside the firm into setting the principles of labor regulations, the two w ere driven into separate “reservations’ with no sta­ ble grounds for political alliance. In the period after 1968, when u n e m ­ ploym ent b e c a m e increasingly the plight of youth who could not get a first jo b , th e primary d em and o f the L eague of Youth (Savez Omladina) was that high-school youth and university students be given the constitutional classification o f “w orker” and thus rights to representation and participa­ tion in e co n o m ic decisions in their schools and localities. T h e attem pt failed, and th e league b ec a m e known for its inaction at the grass roots; it was used instead as an avenue o f individual ad vancem ent for political careers in the party leadership. D e p e n d e n t on funding from the party’s front organization, the Socialist Alliance o f W orking People, and assured of e m p lo y m e n t as long as they rem ained loyal activists, youth leaders continu ed to perform their assigned task o f organizing youth labor b ri­ gades and, when u n em p lo y m en t b eca m e severe in the 1980s, of making strident p ro n ou n cem en ts in youth journals and at congresses. To the e x ­ tent th e y w e re heard at all outside these forums, these protests w ere relegated to the category o f “problem s o f youth. ” Nor did they lead to the mobilization o f “troops” among youth or to sustained pressure, b ecau se of quarrels among the youth leag u e’s separate republican b ranches over the priority o f th e ir different dem ands and concerns. Perhaps the most significant effect of the system of workplace decision making called self-m anagem en t was to end the party’s identity with the '19

Yugoslav Survey , 1968, p. 63 8

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working class and its interest separate from those o f enterprises or gov­ e rn m e n ts. Although informed observers within the country insisted that th e party never lost the loyalty of industrial workers and emphasized the im portance to its ruling power o f the web o f personal and political connec­ tions among party politicians throughout the country, n either this infor­ mal network nor workers’ silent loyalty was the same as creating political alliances across the various divisions within society in support of labor. W h e re a s th e progressive socialization of the state and o f econom ic func­ tions was intended to give the party a more important role in governance by resolving differences and “harm onizing” conflicts, the party itself was not im m u ne to the divisive effects o f decentralization and socialization. T h e “socialization” o f the party m eant that m em bers belonged to units at their workplace (which paid their salary) and w ere active there. T h e rankand-file party m e m b ers thus identified with and owed their first loyalty to their work collective (em ployer).40 Party m em b ership offered no spe­ cial privileges and requ ired paym ent o f dues (at 12 p ercent o f salary); and, unlike the tim e spent in self-m anagem ent meetings, time spent on party m eeting s and duties did not receive compensation as time worked. S tudies o f dissent within party organizations found far m ore criticism in the villages— w h ere private-sector em ploy m ent dominated and party organizations w ere territorial, rather than e nterp rise-b ased — than in pu blic-secto r firms and institutions, where party m em b ership did not p ro tect individuals from b eing fired.41 Party m em b ers were no different than non-party m e m b ers in their conflicts o f econom ic interest with p eople em ployed in offices and services supported by enterprise taxes. T h e primary means o f enforcing party policy was by influencing appoint­ m ents to managerial positions, but the appointm ent and accountability of e n te rp rise directors was an additional source o f conflict betw een the com­ m u ne and e n te rp rise party com m ittees. Conflicts b etw ee n com m une and e n te rp rise party organizations over tax revenues and retained earnings might b e resolved by com m on cause against the private sector, but the shift o f taxes and fees was guided not by the prejudices o f socialist ideol­ ogy (as it was usually alleged) but by econom ic interest. Divisions within 10 C o m i s s o w rite s , “T h e ro ots o f t h e LC Y 's r e c r u i t m e n t d i l e m m a s e e m s [.sic] to lie in a la ck o f i n c e n t i v e s for b lu e - c o lla r w o r k e r s to p ay t h e costs o f political act ion p a rty m e m b e r ­ s h i p e n ta ils for t h e m . W h e n w o r k e r s as a g r o u p d e r i v e b e n e f its fr om p a r ly actions, the b e n e f its t a k e t h e fo r m o f ‘p u b l i c g o o d s ’ w h ic h a c c r u e (o t h e w o i k c o ll e ctiv e as a w hole , o r to w o r k e r s in g e n e r a l , r e g a r d l e s s o f p a r t y affiliation o r t h e lack of it. T h i s e n c o u r a g e d free r i d i n g an ti m a d e t h e p a r ty r e s p o n s i v e to tile w o r k e r s n e e d s w h e n

his i n t e r e s t s co incided

w i t h t h o s e o f socie ty o r w it h th o s e ol t h e e n t e r p r i s e , ” b u t " s h o u ld t h e y conflict, h e could h a r d l y t u r n to t h e p a r ty o f t h e w o r k i n g class for s u p p o r t ” (“C a n a P a rty of t h e W o r k i n g Class B e a W o r k i n g - C l a s s P a r t y ? ” 72, 86) 11 S e e C a r t e r , D e m o c r a t i c R e f o r m in Y u g o s la v ia , 71

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the party thus occu rred in line with the budgetary divisions of the e c o n ­ omy w h ere e m p lo y m e n t and wage decisions w ere made Behind the frequent criticism that delegates e le cte d to political office were primarily party cadres was the presum ption of party unity, disci­ pline, and com m on purpose that in fact did not exist 011 questions of money and e m p lo y m e n t capacity, unless the productivity of the firm rose or an infusion of capital from outside provided resources to redistribute. The politics o f producivity in a redistributive regim e, as C harles M aier has argued for the United States, depends on prior econom ic growth to circumvent conflicts, 12 Party leaders in the various republics and prov­ inces co m p eted for resources; after 1969, their own em p loy m ent and power d ep en d e d on the proportion of resources they could control and keep at hom e. W ith rare exceptions, the basis of political representation in units of autonom ous (“self-m anaged”) budgets had little relation to pol­ icy positions and factions on federal policy toward foreign trade, defense, and investm ent. Instead, the fo rm er cam e to define the latter: conflicts over substantive policy w ere redefined as conflicts over the distribution of money— over budgetary revenues and tax policy, transfers and subsidies, and the locus of control over monetary policy, foreign-exchange alloca­ tion, and banking. Studies o f effective political organization in o ther socialist states e m ­ phasize the critical role that intellectuals play in forging broad social alli­ ances, by explaining the links b etw een particular and general interest and providing a language and symbols for political action.'13 In the Yugoslav leaders’ vision o f the state, professional experts had substantial authority. They wrote the rules for the legislative and executive branches o f govern­ ment, perform ed the analyses in research institutions to propose or justify investm ent projects, and wielded substantial critical influence in journals, universities, and party forums. In their criticism of public policies, the economists, sociologists, and party leaders with social science b a ck ­ grounds who p resen ted professional studies to party forums or spoke at public gatherings did, over time, identify and make public many im m e d i­ ate causes of u n em ploym ent. T h e y pointed out, for example, that g ov ern ­ ment policy and en te rp rise demand did not correspond to the traits of the labor supply; that the preoccupation with small-property firms as a pan­ acea to u n em p lo y m en t assumed a category of resident skills and resources that w ere in deficit, not surplus; that allowing earlier re tirem en t with full 12 M aier, ‘‘T h e Politics of Productivity." 1:1 T his th em e runs through the literature on econom ic reform in socialist countries and why it failed politically in Czechoslovakia hut brought revolution in Poland, for example A gocxl representative o f this literature from I ho more recent period is Staniszkis, Poland’s Self-Limiting Revolution- F o r a critical view o f the thesis, set? Laba, The Roots o f Solidarity

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pension in the 1970s and 1980s would only worsen the shortage of workers with industrial skills; that e nterprise demands for several years prior work e x p e rien c e w ere unrealistic, and certainly would do little to red uce u n em p lo y m en t among youth; and that labor regulations for reas­ sig nm en t discrim inated against new entrants to the labor force. Y et the republican ju risdiction o v ered u c a tio n , research institutes, and d ev elo p m en t planning, made effective by budgetary autonomy, centered such analyses within republics, whose very real differences in labor markets led to separate worlds and perceptions. A planner from fullernploym ent Slovenia and a planner from Kosovo or M acedonia facing open un em p lo y m en t o f 15 to 3 0 p e rce n t had little in com mon. W ith rare exceptions, the com m on ground across republics of the various proposals for rem ed y in g policy mistakes was no different from previous policy: fo­ cusing on alternative methods o f adjusting and allocating the supply of labor or finding new avenues for em ploy m ent in the private sector. Lik e the unions, professionals proposed nothing that would challenge the basis o f their own authority, focusing largely on qualifications and productivity. In the early 1980s, as in the early 1960s, they criticized barriers to the e m p loy m e n t o f “young, schooled cad res” and the monop­ oly over existing jobs by workers with less skill, work effort, and creativity than un em ployed youth, which kept productivity suboptimal; and they argued for “d ifferentiation” in favor ol “those who work and against those who do n o t .”4 * B u t in cases w h ere their proposals extended to societywide e co n o m ic policy, the differences in approach among expert communities in the republics prevailed. F o r example, one proposal originating in S er­ bia in the late 1970s, for long-term social planning ( 1 9 8 5 - 2 0 0 0 ) for the en tire Yugoslav space, was resisted by Slovenia because the Serbs insis­ ted on using their m ethod of planning and the Belgrade Institute of E c o ­ nom ics, while the Croats insisted on their method and the Zagreb Institute o f E co n o m ics; the Slovenes preferred a third m etho d — one com binin g social, econom ic, and dem ographic aspects. Slovene econo­ mists argued that the S e rb proposals for devoting greater attention to dev elopm en tal planning, setting proportions among key sectors, recog­ nizing the links among phases and sectors o f production in final output, introducing a federal investm ent fund, and strengthening the revenue base of federal functions w ere a return to the system o f the 1950s and that im proved m acroeconom ic m anagem ent could not make up for micro­ e co n o m ic defects in the efficiency o f capital when investors w ere not free to manage and earn a return on capital.45 " S e rb sociologist Silvano Bolčie, in Razvoj i kriza jugoslavenskog društva u sociološkoj perspektivi, 192. T h e ''basic condition for overall progress' in Yugoslav society, Boleić con­ tinues, is an ''affirmation of lab o r.” 15 Review o f econom ic proposals fioni Ljub o m ir Madžar and his group at the Yugoslav

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Experts and intellectuals w ere not defined by their republican origin. Schools o f thought crossed republican lines, and both formal and informal professional contacts maintained the frequent exchange o f ideas. B u t the progressive transfer of federal funds and com p eten cie s to the republics gradually d eprived experts of a base independ en t o f the republics w here they were em ploy ed, and resid ences and spheres o f political action had to he chosen. By the 1980s, social scientists’ proposals for change in labor­ market institutions varied largely with their rep u blic’s m ilie u .46 In S e r ­ bia, for exam ple, Silvano Bolcic proposed greater gov ernm ent involve­ ment in the problem s of em ploy m ent, blit within the local context: E f f e c t i v e s o c ia l a c tio n to c o n q u e r u n e m p l o y m e n t r e q u i r e s e a c h c o m m u n e to c o m p l e t e a c o n c r e t e a n a ly s is o f t h e p o s s i b i l i t i e s fo r e m p l o y m e n t in e v e r y w o rk o r g a n i z a t io n in its t e r r i t o r y . . . a n d w o r k o u t a p r e c i s e a n n u a l p la n o f e m p l o y m e n t . . - w ith s p e c i f i c s c h e d u l e s o f w h o w ill b e e m p l o y e d in th a t p e r io d

. . . C o m m u n e o r g a n i z a t io n s o f t h e L e a g u e o f Y o u th c o u l d fo rm

'‘c o m m i t t e e s

fo r e m p l o y m e n t ” in

w h ich

re p re se n ta tiv e s

o f u n em p lo y e d

y o u th w o u ld a c t i v e ly p a r t i c i p a t e . W i t h t h e c o l l e c t i o n o f id e a s fo r e m p l o y ­ m e n t a n d c o n s t a n t s o c ia l p r e s s u r e o n all in s t i t u t i o n s a n d o r g a n i z a t io n s th a t c a n c o n t r i b u t e to o p e n i n g n e w p o s itio n s , m o r e f a v o r a b le p o s s i b i l i t i e s w o u ld b e c r e a t e d . 47

In the northw estern republics, in contrast, econom ists and sociologists spoke increasingly o f the de facto existence of a labor market and the need to recognize not only its existen ce but its superiority as a method of allocating labor and resolving the irrationalities that produced u n e m ­ p loy m ent.48 In full-em ploym ent Slovenia and in Croatia, w here u n e m ­ ployment had fallen below 5 p e rce n t by the first half o f the 1980s, the con se q u e n ce o f tighter labor supply and even shortages had b ee n the creation of marketlike conditions; surveys on labor turnover by the Yugoslav Institu te on Productivity dem onstrated that for many years, professionals in these republics had b een moving frequently among Institute of Economic; Research in Belgrade (bv then a section o f the Institute for Social Sciences) by Jo/.e M en cin g e r (first m inister of the economy for Slovenia after the multiparty elections o f 1990) in Ekonomska Politika (1987), No republic o r province in Yugoslavia can b e treated as a “unitary a c to r,’’ for economists and politicians within republics divided among schools o f thought and economic-policy advice. Bu t at any m om ent th ere w ere also différences am ong republics, and th e two positions cited h ere from Slovenia and Se rb ia best represent the main alternatives o f influential opinion in 1 9 8 7 -9 1 . V erd ery analyzes a Romanian version o f intellectual competition with a nationalist com ponent in National Ideology under Socialism. 47 Bolcic, Razvoj i kriza, 2 1 6 - 1 7 48 T h e Slovene sociological association held a co nference in Ljubljana on th e “labor m ar­ ket” in O c to b e r 1982. Am ong those most prom inent on the subject in Croatia w ere Bran ko Horvat, Slaven L etica, and Josip Zupanov.

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firms in search of higher incom es and b etter conditions. By 1990, ex­ perts in these republics had equ ated their b e lie f in the rem edy o f real labor markets with abolition o f the system o f worker consultation in firms (self-m anagem ent) and had dem anded full privatization o f the pub­ lic sector. I f managers w ere not free to hire and fire, they argued, and il foreign investors w ere not assured o f these rights, the econom ic crisis of the 1980s would not end. T h e difficulties o f forging cross-republican political alliances on ques­ tions o f e m p lo y m e n t w ere most apparent in the group in which conditions for collective action w ere best and that was most prone to political protest: university students. W ithin two years o f the decline in absolute numbers o f persons em ployed, the universities exploded in Priština (in 1967 and repeated ly thereafter), in Belgrad e and Sarajevo (in 1968), and in Zagreb (by 1971). B u t b eca u se university education and em ploym ent conditions w ere un der republican ju risdiction, students differed in their perception o f the cause o f their potential unem ploym ent. As a result, they pursued q uite different dem ands and political tactics, despite many personal and professional conn ections among student leaders and the professors and critical intellectuals who inspired them. In B elg rad e and Priština, the capitals o f S erbia and its province Kosovo, surplus labor ca m e largely from the rural exodus as youth attempted to e n te r the public sector by way o f the universities, and protests were led by poorer students from village backgrounds whose excellent grades were not sufficient to win them e ith er party m em b ership or good prospects of e m p lo y m e n t.49 T h e ir attack on the state c e n te red on the L C Y as a sys­ tem o f spoils in em p loy m ent, whose monopoly on access to jo b s conflicted with the open and egalitarian ideals of the system. T h e ir slogan, “down with the Red B o u rg eo isie!” d em anded a change in who controlled access to jo b s , not an alternative program for unem ploym ent. Nonetheless, de­ spite th e se com m on interests and political programs within the same re­ public, the two groups could not ally b ecause of the budgetary system and the ethnonational legitimation o f its division. In Kosovo, for example, the students defined the struggle as one against Belgrade for greater control over both local education and g overnm ent budgets; the primary cause of u n em p lo y m en t was seen as the ab sence of such local control, which made possible national discrimination favoring Serbs over ethnic Albanians in education and in jo b s in the socialized sector o f the econom y and govern­ m ent. F e w discussed who actually benefited from the policy of invest­ m e n t in raw-material extraction and capital-intensive heavy industry in the province that generated so few jo bs. In Croatia, as rural surplus labor emigrated for work in Europe and as 19 Tomanović, Omladina i socijalizam, 7 3 - J0 0 .

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339

the e co n o m ic reform for greater integration with W e ste rn markets fa­ vored many areas o f the republic, students in Zagreb in fact agreed with their republican party leadership that un em ploym en t was the result of “B elg ra d e ’s” taxation o f Croat resources (above all foreign-exchange r e ­ ceipts from tourism, transport, and guest-w orker remittances). T h e y took to the streets to add force to their lea d ers’ dem ands for greater autonomy over resources that they claimed b elonged to Croatia. Although their r e ­ volt beg an with a university reform in 1 9 7 0 - 7 1 , by the time they w ere in the streets, they w ere focusing their dem ands on higher retention of foreign-exchange receipts than allowed by the quotas set by the National Bank, a decentralization o f the banking system to give local producers greater access to bank c r e d it,50 and an end to the capital tax for d ev elop ­ m ent aid for o th er republics. In full-em ploym ent Slovenia, similarly, stu­ dents allied with party leaders and unions who saw the drain o f “S lo v e n e ” resources to B elg rad e and the poorer republics as reducing their potential for h ig her wages and social w elfare.51 T h e s e differences also held for alliances that students in one republic might c re a te with others: students in Belgrade and Sarajevo could orga­ nize support for workers in coal mines and textile factories, but they w ere unable to extend this alliance to republics that b enefited from W e stern market liberalization.

T h e O r ig in s o f P o l it ic a l C h a n g e

W h e re p ressu re for political change in socialist Yugoslavia did occu r and originated at least partially in econom ic interest, social forces, and popu­ lar dem and, it ca m e from the cou ntry ’s two outliers on unem ploym ent. Full e m p lo y m e n t in Slovenia and nearly full un em ploym ent in Kosovo were the two exceptions that prove the rule o f this c h a p te r’s arguments about the relation b etw ee n political dem and and the society created by governm ental e con om ic policy. In Slovenia, w h ere nearly full em p loy m ent and spot shortages o f skilled 50 G ed eon identifies th e differences in the hanking proposals o f the ('m a t, Serb, and Slovene econom ic schools in “Monetary Disequilibrium and Bank Reform Proposals in Yugoslavia." 31

T h e first governm ent to resign in postwar Yugoslavia was the Slovene governm ent ol

Janko Sm ole in D e c e m b e r 1966, when the cham b er on health and welfare o f the Slovene parliament re jec te d its program for cutting enterprise contributions for social insurance and shifting th e tax onto workers' wages (the vote was later reversed, however, and th e govern­ m ent withdrew its resignation). In 1985, the "catalyst for nationwide abandonment ol wage austerity under the I M F program was the rapid midyear rise ol wages in Slovenia; the "Slov en e governm ent claim ed that wage compression had reached the limits of social tolera­ tion, although its wages had fallen least and were the highest above average" (H enderson, “T h e International M onetary Fu nd and Eastern Europe").

B Kosovo S Slovenia E Bosnia-Herzegovina

F ig u r e 9-1. P e rc e n ta g e R ate o f U n e m p lo y m e n t: Kosovo, Slovenia, and BosniaH e rz e g o v in a . Source: M e n c in g e r, “P riv r e d n a re fo rm a i n e z a p o s le n o s t,” tab le 1.

1965

1970

1975

I

K os ovo

1980

0

S lo v e n ia

1983

198«

1985

EEB o s n ia -H e rz e g o v i n a

F ig u r e 9-2. P e r c e n ta g e R ate o f Y outh U n e m p lo y m e n t: Kosovo, Slovenia, and B o sn ia -H e rz e g o v in a . Source: P rim o ra c a n d C h a re tte , “R egional A spects o f Youth U n e m p lo y m e n t in Y ugoslavia,” 218. Note: “Y o u th ” re fers to p e rso n s a g ed 27 years o r y o u n g e r.

341

D I VI S IO NS O F LABOR

1960

1965

1970

1975

I960

1966

1990

H Kosovo 0 S lo v e n i a Q] B o s n ia -H e rz e g o v i n a

F ig u re 9-3. P e r c e n ta g e R a te o f E m p lo y m e n t: Kosovo, Slovenia, a n d BosniaH e rz e g o v in a . Source: Statistički Godišnjak Jugoslavije, various years. F o r th e n u m b e rs , se e ta b le 6-1. Note: T h e ra te o f e m p lo y m e n t is d e fin e d as th e re la tio n b e tw e e n th e n u m b e r o f e m p lo y e d p e rso n s in th e social a n d p riv a te se c to rs a n d th e w o rk in g -a g e p o p u la tio n (m en ages 1 5 -6 4 a n d w o m e n ages 1 5-59 ).

workers and professionals prevailed throughout the postwar period, a so­ ciety had b e e n crea ted in which labor had real bargaining power over incom es, benefits, and jo b s . D esp ite arguments that such power cam e from th e institution o f “w orkers’ control’’ and “labor m an ag e m e n t” of firms, labor did not have such power in the o ther republics, w h ere self­ m anag em ent also prevailed. T h e exercise of that power at the level of en terprises and in republic-level politics had led in time to a pluralist politics as w ell— a burgeoning “civil society .” (It is necessary to note, how ever, that the financing for most o f these activities cam e from the party-affiliated Socialist Alliance o f W orking People). Full em ploy m ent had created de facto labor-m arket conditions within the republic, leading to the d ev elop m en t of the social and political relations that accompany labor markets. S lovene political activity increasingly resem bled that found in m arket econom ies: parliamentary responsiveness to popular pressure, gov ernm ental concessions to loosen federal restrictions on wages and social welfare, multicandidate elections, and, when d em ocratic elections occu rred in 1990, com petitive party politics in which th e sp e c­ trum o f political tend encies resem bled central European traditions. P ete r

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K a tz e n s te in ’s argu m ent for Austria and Switzerland applied equally well for Slovenia: the very fact o f econom ic success “continuously re ­ leg itim iz ed ” the political institutions necessary to governmental policy and s tre n g th e n e d the “com patibility o f views” betw een the bargaining parties, w h e th e r labor and g overnm ent or labor and m an ag e m e n t.52 This situation d ep end ed , however, on protecting the conditions for full em p loy m e n t, which w ere republican ju risdiction over labor and control over the e con om ic resources necessary to Slovenia’s choice o f develop­ m e n t policy. D uring the 1980s, as will be discussed in the final chapter, the Slovene g o v ernm ent was able to strengthen its ability to act as a sov­ ereig n unit by giving political activities within the republic freer reign and by d irecting Slovene society ’s capacity for collective action against the outside. T h e goal was to protect these conditions— by adopting protec­ tionist labor policies, organizing a successful rebellion against the federal g ov ern m e n t when Slovene control over capital and em ploy m ent and the internal political system appeared threatened, and in the end pressing for total national independ en ce. T h e o th er outlier was Kosovo. It also dem onstrates the reciprocal relation b e tw e e n em p loy m e n t conditions and political action. H ere un­ e m p lo y m e n t was so high and the opportunities for socialist-sector em ­ ploy m ent so few that nearly 8 0 pe rce n t o f the rep u blic’s population, and an even larger proportion of ethnic Albanians, was confined to the private s ecto r— working in agriculture, trades, household labor, and family busi­ nesses (particularly in o ther republics or abroad in temporary economic migration), or registered as unem ployed. W hile this lack o f opportunity for pu blic-secto r em p loy m e n t excluded them from the full enjoym ent of political rights, it provided the econom ic basis for an alternative com mu­ nity c e n te re d in family-based social organization and ethnically based po­ litical identities. E x ten d e d families lasted longer than in o ther parts of the cou ntry and am ong o th er national groups, serving in part as a vehicle for strategies of e co n o m ic diversification.53 Migrant workers and entrepre­ neurs sent earnings hom e, and families used the incom e to buy up land. Eventu ally , th e ir e con om ic and therefore political exclusion produced a political network in families and villages— an entire parallel society alongside the formal econom y o f the Serbs, M ontenegrins, and a few Albanians— which gave the leaders an impressive capacity for mobilizing collective action. 52 Katzenstein, Corporatism and Change, 29, 53 According to research on the zadruga in several areas of the country in the late 1960s by th e anthropologist Zagorka Golubovic and h e r students at the University o f Belgrade, households o f a hundred m em b ers w ere not rare in Kosovo (G olubovic, personal communi­ cation). In contrast to th e rest o f the country, where the zadruga had died out, it appeared to b e alive and well in the early 1970s among Albanian families in Kosovo. This basis for

DIVIS IO NS O F LABOR

343

Although this political network was not in a position to ignore federal rules on wages and benefits in the socialist sector (as full em p loy m ent allowed the Slovenes to do), its political capacity to mount lasting sedition and to threaten a m ajor rebellion b eca m e clear after 1981 when Albanian nationalists began another round in their efforts for political in d e p e n ­ dence (at the time, for a separate republic). Although the response of Serbian and federal authorities to the internal war was to intensify politi­ cal and police rep ression— arresting suspected troublem akers, closing schools, purging Albanian leaders from the party, and eventually im pos­ ing martial law in the province with federal troops— the provincial au­ thorities’ political capacity also enabled them to extract ever-larger compensatory grants and credits from the federal governm ent. This b rib e (or blackmail), when no one in the country was willing to accede to their political dem ands, reflected the redistributive foundations of Yugoslav politics, which would grant money rather than change the d ev elopm en t strategy and the investm ent, foreign-trade, and price policies that w ere the cause o f the u n em ploym ent. In addition, while politically cou n terp ro­ ductive for S e rb ia and the country as a whole and in c om p lete violation of both d om estic and international declarations o f human rights, this gov­ ernm ental response streng thened the internal political unity o f Albanian nationalists that had originated in their e conom ic condition outside the public sector of em ploym ent. T h e Albanian uprising helped create popular support for nationalist in­ tellectuals in Serbia, providing the glue of anti-Albanian sen tim ent for a social m o v e m e n t in Se rb ia o f the East E uro pean type. W h e n a similar alliance among C o m m u n ist party leaders, parliamentary delegates, na­ tionalist intellectuals, and popular sen tim ent in Slovenia made the choice for full in d e p e n d en c e, the crucial political m o m en t cam e in a m o m e n ­ tary alliance b etw ee n Slovenia and Kosovo against Serbia. In F ebru a ry 1989, th ree m onths after the Slovene gov ernm ent had refused to partici­ pate in an all-Yugoslav referendu m on a new federal constitution, argu­ ing that this was a m a tter o f republican and parliamentary authority and that it intended to institute a multiparty system instead, the Slovene C o m m u n ist party leader Milan Kucan told a mass m e e tin g — which took place in L ju b lja n a in support of striking Albanian miners at Stari Trg, Kosovo— that the strike was a defense o f “AV N O J Yugoslavia.’ T h e p re ­ vious O cto b e r , Slovenia had bargained for federal concessions on the c o n ­ stitutional a m e n d m e n ts in exchange for approving the retraction of Kosovo’s autonom y in S e rb ia ’s republican constitution. B u t by throwing down the gauntlet to Serbian nationalists, for whom the 1943 com m itdiversified econ om ic strategies across many econom ic environm ents and countries becam e important in the 1970s and 1980s,

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m e n t to a postwar federal state o f six republics rep resented the disempow ering o f Se rb ia through the federal division of its nation, Kučan was able to consolidate his support with the Slovene public, defend Albanian political rights with the constitutional principles of territorial sovereignty and the re p u b lics’ and p rovinces’ right o f secession, and identify Serbia and its leader, Slobodan Miloševič, as the en em ie s o f Slovene democracy and o f Yugoslavia. W h ile this did not prevent Slovenia from voting in the federal presid ency to im pose em e rg en c y rule over Kosovo in M arch 1989, it did help push increasing nu m bers o f S e rb citizens into open support for M iloševič and Serbian nationalism. O p e n nationalist confrontation b etw ee n intellectuals and then govern­ m ents in Slovenia and Serbia broke the rules of Kard elj’s political system and sev ered irreparably the alliances o f conv enience betw een Slovenes and S e rb s that had kept the country together under similar economic conditions in the interwar period. N onetheless, this political dynamic was a result o f g overnm ental policies o f international ad ju stm ent to those con­ ditions, with the aim o f restoring growth and preventing capitalist unem­ ploym ent. I t was a return to policies of global market integration and W estern iz ation , and the requisite changes in em ploy m ent and in social and governm ental organization, that led to this confrontation and to the system ic breakdown discussed in the final chapter of this book.

Chapter 10 BREAKDOWN

o f the 1980s began with a shift in governm ental policy, a return to an explicit program o f marketizing, “efficiency-oriented ” e c o ­ nom ic re form — the pure version o f the Slovene model. It closed in 1989 with legislation end ing the property rights o f the socialist system and with a declaration by Slovenia’s gov ernm en t o f its intention to “dissociate” the republic from Yugoslavia. E c o n o m ic crisis had led to political crisis, then to a siege o f th e federal governm ent, and by 1991 to implosion and m ulti­ ple civil wars. T h e r e w ere com p etin g explanations. Presid ent T ito ’s death in May 1980— which, fortuitously, occurred within months o f this return to the I M F and e co n o m ic reform — retrospectively confirmed the popular view that th e system had b e e n held to g ether by his charismatic leadership and could not survive it. H e h im s elf had b e e n inclined to tell foreigners, in Louis X V fashion, “after m e, th e re will be c h a o s .”1 A second line saw an anticom m unist revolution paralleling events throughout the region: a popular revolt from below dem anding free e nterprise and dem ocracy and reflecting an ideological crisis— a loss o f faith in com m unism and in the legitimacy o f the ruling party. A third explanation repeated the political rhetoric that accom panied all “liberal” econom ic reform within the c o u n ­ try, citing opposition to reform from Com m u nist conservatives and c e n ­ tralist S erbian nationalists. Instead, th e period and its outcom e are b e tt e r understood as politics as usual in unusual tim es. T h e gov ernm ent attem pted to adjust to changing international conditions in the same way it always had, b u t both the in te r­ national and th e d om estic conditions on which the lead ers’ strategy had b e e n based until th e n no longer held. T h e international system underly­ ing their Faustian bargain of national com m unism was breaking down, and th e society that had to respond with the em p loy m ent adju stments

The decade

had b e e n transformed by their strategy o f econom ic d ev elop m en t since 1946 and by previous governm ental policies o f international adju stment. 1

Personal com m unication from Pamela Harriman (1993), to whom Tito said this when

she was staying as a guest at his villa near Split in 1979 after attending th e funeral for Edvard Kardelj with h e r husband, Ambassador Averell Harriman, as official U S representatives. Lenard C oh en gives the political scientist’s explanation: “T ito ’s death not only removed the principal symbol o f the re g im e’s legitimacy, but also the only public figure able to forge— or if necessary force— a working consensus among the increasingly divided political elite’ (The

Socialist Pyramid , 441).

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C H A P T E R 10

W ith means used for decades to buy time ev e r less available, the politi­ cal re q u ir e m e n t of a new round of stabilization, structural adjustment, and sy stem ic reorganization was not charismatic leadership. It now mat­ tered crucially that the political institutions of the lead ers’ strategy could not, as was argued in chapter 7, perform their intended tasks of enforcing financial discipline, reg en erating growth, and managing political conflicts over e co n o m ic resources. In contrast to the thesis that th ere arose out of this e co n o m ic crisis an ideological crisis and a popular, anticommunist m o v e m e n t for political change, the existing political system — for reasons discussed in chap ter 9 — could not generate such collective action coun­ trywide, let alone an alternative policy more appropriate to the changed conditions. W h e re a s the ou tcom e had e lem ents of conservative reaction by C o m m u n ist party leaders and e lem ents o f Serbian nationalism, the m o v e m e n t for system ic change was initiated by party leaders in the north­ western republics, primarily Slovenia, who were reacting to the threat to th e ir pow er over capital that was posed by the institutional reforms being d em and ed by international creditors and by a policy of macroeconomic stabilization. T h e y ju stified their opposition, moreover, with the system’s ruling ideology. B u t in contrast to the liberal Marxist vision o f the state critical to that ideology, the withering away o f the Yugoslav state did not b ring harm ony. U n em p lo y m en t rem ained far down the list o f public concerns in this period o f e co n o m ic and political crisis, politically invisible to the en d — as it had b ee n in the previous three decades. But the collapse of the Yugoslav socialist system cannot b e understood without reference to it. As the Salais group found in the case o f F ra n c e at the same time, the institu­ tions set up to deal with un em ploym en t in the 1920s and 1930s retained their force into the 1980s, but they could no longer do the j o b . 2 The severity o f the ad ju stm en t program had finally brought the threat of so­ cialist u n em p lo y m en t— which m eant a fall in social status and political rights— to the core o f the most privileged in the public sector: the admin­ istrative stratum and its children. T h e ir response was to attack the institu­ tions o f e m p lo y m e n t allocation for such positions— the party’s influence o ver managerial positions, the affirmative action o f national quotas, and the educational reforms. Republican governm ents assailed the govern­ m ental functions financed by the federal b u d g et— the army, federal of­ fices, military pensions, and welfare subsidies to local g overnm ents— so as to red uce the h e ig h ten e d burden on their incomes. Y et another shift in labor policy for international reorientation disproportionately affected p o orer localities in the interior, w h ere populations w ere m ore ethnically mixed and d efense industries concentrated , and the result of the sectoral 2 S e e Piore, "Historical Perspectives and the Interpretation ol Unem ploym ent

BREAKDOWN

347

and geographical biases com m on to such market reorientation (as dis­ cussed in chap ter 8) had a pronounced territorial (and thus governmental) dim ension. Finally, the approach to labor rationalization— to cut labor costs in th e public sector and raise productivity by excluding “less pro du c­ tive” persons who had alternative, private sources o f su b siste n ce — introduced a new category of differentiation b etw ee n public and private em ploym ent: a p e rso n ’s national identity. F o r all these reasons, the leaders’ strategy toward u n em plo y m en t led to nationalism and the d e ­ struction, rather than transformation, o f the Yugoslav state.

In t e r n a t io n a l A d ju s t m e n t

T h e pressure for change in Yugoslav econom ic policy and for political reform in the 1980s cam e as it had in the past— not from d om estic politi­ cal fo rces b u t from the international system. T h e re w ere th ree crucial m om ents: in 1979, 1985, and 1989. T o review the situation as discussed in previous chapters, problem s began in 1979 when the trade deficit and skyrocketing foreign d eb t forced the g overnm ent to draw em e rg en c y cred it from the I M F . W h e n the Croatian delegate Milka Planinc b ecam e prim e m inister in 1982, her mandate was to restore the confid ence of foreign creditors. By 1982, negotiations with the I M F had also brought a three -y e a r standby loan that was conditional on econom ic reform. A long­ term stabilization program aimed not only to cut dom estic dem and suffi­ ciently to red uce the foreign d eb t and trade deficit to manageable levels, but also to make the: institutional changes necessary for more effective financial discipline and greater exports to W e stern markets in the long run. T hat is, external stabilization was once again aimed at lowering labor costs; in order to reduce inflation, improve the com petitiveness o f m anu­ factured exports, increase production efficiency and invest the savings in technological modernization, and cut the drain o f state expenditures (ad­ m inistrative e m ployees, defense, and federal subsidies and transfers for local welfare and d ev elop m en t credits) on productive investment. E c o n o m ic reform cut short the expansion in em ploy m ent that occurred during the 1970s; after 1979, em p loy m ent stagnated and public rhetoric em phasized the problem o f ’ov erem p lo y m en t." Unlike in the early 1960s, when the previous such econom ic reform took off and registered u n em p lo y m en t was around 6 p ercent, the official un em ploym en t rate was now close to 14 p ercent. C oncealed within this n u m b e r w ere the stru c­ tural ch a ra cter of u n em ploym ent, its unequal regional distribution, and the fact that more than hall of the jo bless w ere under the age o f 25 and had en g in e e rin g or university diplomas. M o reover, while the problem of u n em p lo y m en t had most affected the peasantry and unskilled workers in the 1950s, the pensioned officers and security police and the university

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students from poor (usually rural) origins in the 1960s, and rural migrants to the cities (especially Belgrad e and Skopje) and the children of private artisans and military personnel in the 1970s, by the 1980s unemployment was th reaten in g industrial workers and especially the children of the ur­ ban middle class. T h e prospect o f additional un em ploym ent thus faced the b eneficiaries of socialism— industrial workers and budget-financed administrators, professionals, and office workers. Unlike in 1 9 47 or 1950, m oreover, the proportion o f the population working in agriculture had dropped dramatically, from 78 to 19 .9 percent by the 1981 census. T h e pace of urbanization had been particularly rapid in the 1970s as individuals left rural areas and poorer towns in search of e co n o m ic opportunity. T h e realism o f the g o v ern m e n t’s domestic solution for surplus labor— to send an increasingly urban strata of unemployed back to the villages and private-sector agriculture and trades— had thus b ee n red uced substantially. T h e foreign demand for labor, the primary outlet for the rural labor surplus and children o f private-sector parents, had b ee n on the decline since 1975 (cutting the contribution o f workers’ rem ittances from one-half to only one-fourth o f the trade deficit by 1979, for e x a m p le ).3 As in the previous periods when foreign-trade conditions required such e co n o m ic reform (in 1 9 4 9 - 5 2 and 1 9 5 8 -6 4 ) , adju stm ent again began with substantial cuts in public investm ent, the leaders relying on internal sav­ ings and d om estic sacrifices for recovery b ecause a global recession was hind ering export trade, W e ste rn protectionism was again on the rise, and Yugoslavia’s terms of trade had deteriorated. F re s h capital was available only to refinance debt. B ut while there was a short-term econom ic recov­ e ry in 1 9 8 5 - 8 6 and a resumption of lending to E a stern E u ro p e by foreign banks, both of which allowed the g overnm ent to abandon the I M F pro­ gram in favor of m ore moderate sacrifice and some growth stimulus, for­ eign trade and dom estic growth did not recover, unlike in the earlier periods. And instead o f a reduction in international tensions or a military threat fio m the W arsaw Pact (which would favor conventional-war doc­ trine and decentralization to the territorial defense forces)— either of which would have b een com patible with the ongoing cuts in the federal d efense b u d g et— the threat from N ATO continued to mount, requiring a ttention to the air and naval defense o f the seaeoast and cities against a possible blitzkrieg attack and stimulating a new arms race in sophisticated w e ap o n s.4 W h ile a coalition o f econom ic liberals and international crediD e b a te s ill the federal assembly in 1 9 7 5 - 7 6 gave vent to anger at the workers who were re lu m in g . S e e Politika, O c to b er 10, 1975, 7; and April 11, 1976, 8 (cited in Resemeres,

Socialist Population Politics) 1

Military expenditures in developed countries, particularly NATO m em bers, peaked in

1987; in Yugoslavia (as in oth er developing countries, including G reec e and Turkey), the high point was 19<S3 (Isakovic, "The Ralkan Arm ies,” 2).

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tors worked throughout the decade to restore value to the cu rrency and the authority o f financial indicators and monetary regulation, by 1985 a spiral toward hyperinflation had begun with double-digit inflation. T h e dinar was replaced in d om estic transactions by foreign hard currencies, and by the end of 1989, a new prim e minister had initiated a “shocktherapy” program aimed toward im m ediate stabilization and cu rrency convertibility within the year. T he g ov ern m e n t did succeed, as it had in the 1960s, in negotiating a debt-refinancing package during 1 9 8 3 - 8 5 , which was coordinated by the U.S . State D e p a rtm e n t to support P rim e M inister Planinc and the e c o ­ nomic reform. B u t this help was prem ised on the c o ld -w a r assumptions of Yugoslavia’ special status— on its Faustian bargain. By 1985, these as­ sumptions w ere seriously challenged as a result o f changes in E urope. The moves toward greater E uro pean integration after 1 9 85 — in the W e s t with th e program for E C m onetary unification in 1992, and in the East with G o r b a c h e v ’s e con om ic reform in the U S S R , the resumption o f n e g o ­ tiations b e tw e e n the C M E A and the E C , and the move in C M E A trade away from long-term bilateral trade agreem ents toward world market pricing— suggested that the division o f the world econom y into separate markets, which had given Yugoslav manufacturers some flexibility, might end. W h ile foreign econ om ic opportunities e m erg ed for Slovenia and Croatia in tourist and trade associations with neighboring countries, the perception o f a rising military threat due to N A T O ’s posture in th e east­ ern M ed ite rra n ea n prolonged the arm y’s concerns for defensive self­ reliance. Throughout the country, but particularly in the northwest, the debates that originally shaped the lea d ers’ strategy during the 1920s and 1930s, as discussed in chap ter 2, w ere b eing revived. T h e issues o f identity and boundaries, including international econom ic and military alliances, once again revolved around the question, “W h o are we in E u r o p e ? ’’ And b e ­ cause all regions and social groups w ere experien cing declining standards of living and rising un em plo y m en t as a result o f the d ebt and trade crisis— even though differences w ere also b eing e x a ce rb ated — the q u e s ­ tions of what com m on econom ic program and constitutional form would fit their he te rog e n e ou s conditions w ere also raised again. T h e answers given to the second question by the long-term stabilization program of 1983 and the party com m ission ’s report on constitutional reform (made public in 1985) still reflected the com prom ises that had characterized the political-econom ic mix of the Slovene and F o c a models. B u t the pressure from the international system for homogenization and a choice for the Slovene model was intensifying. By 1989, the collapse of the Warsaw Pact, the political revolution in E a stern E u ro p e , and the term ination of Yugoslavia’s special relationship with the U n ite d States had rem oved the rationale for the country’s neu-

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trality and defensive strength in the Balkans. Although negotiations with the E C and the E u ro p e a n F r e e Trad e Association had not b een as expan­ sive as the Yugoslavs had hoped, and although their neutrality had left them as outsiders in the E a s t-W e s t rapprochem ent in security and eco­ nom ic relations, th e re was a consensus within the federal government (including the army) in favor o f westernization and liberalization. There no longer see m e d to b e any purpose to the roles played in the past by the Yugoslav P e o p le ’s Army, the nonalignment m ovem ent, and domestic pro­ duction to support military independ ence. E v e n had Tito lived, the global era in which h e had created his primary function as a leader— his international role in balancing among foreign blocs and his domestic role in balancing b etw ee n the institutions and political factions o f the Slovene and F o c a m odels— was com ing to an end. T h e real question facing the g overnm ent was how to manage politically this task of im p lem en tin g e con om ic reform and policies for debt repay­ m ent. W h a t d om estic political resources would com pensate for the loss of the custom ary sources o f te m porary flexibility and maneuverability in the strategy for e con om ic growth— access to foreign capital and export mar­ kets and expulsion o f labor into the private sector and agriculture? T h e federal g o v ernm ent proceed ed to im p lem ent macroeconom ic sta­ bilization in the usual manner, introducing institutional reforms of the public sector that would increase financial discipline and labor productiv­ ity by improving pro d u cers’ e conom ic incentives to use resources more efficiently (to b e profitable) and by strengthening the vertical links of con­ trol through m onetary institutions and uniform (central) rules appropriate to a single market. According to Yugoslav econom ic liberals, I M F econo­ mists, and foreign creditors, the extrem e decentralization and segmenta­ tion o f the econom y in the 1974 constitution and subsequent legislation on foreign borrowing and d eb t obligations had b eco m e counterproduc­ tive, causing constant delays, financial indiscipline, and an immobilized g ov ernm ent. F o cu sin g first on the need to create a renewed capacity for e ffective m onetary policy in the hands of an independ ent central bank, by 1985 the I M F in particular began to insist on a strengthened federal ad­ ministration as w e ll.5 B y 1987, the I M F and W orld Bank placed priority in negotiations for new loans on this political capacity for macroeconomic policy, referring to “radical surgery’’ to rem ove the remaining socialist e le m e n ts inhibiting m arket allocation o f capital and labor. T h e constitu5

It is difficult to assess th e influence o f the I M F and oth er foreign creditors (such as the

Bank o f International Settlem en ts) in the political quarrels o f the time, although the IM F ’s credits and im prim atur w ere more critical than e v e r before. But it is perhaps ironic that, after a hall century o f urging “decentralization” as a precondition for niarketization (and even using it as a code word for the same), the I M F and oth er W estern advisers would now be the proponents o f a strong federal administration and a renewed econom ic center.

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tional a m e n d m e n ts em bodying the resulting federal program called these institutions o f a neoliberal m arket econom y “functional integ ratio n.” T h e goal o f m onetary discipline and reduced inflation not only gave authority back to th e National Bank (evident in, for example, its refusal to bail out in d e b ted republican banks); it also requ ired greater diligence with re s p ec t to the constitutional obligation to balance g o v ernm ent b ud ­ gets. B e ca u s e federal tax revenues w ere declining as a result o f trade liberalization and m acro eco nom ic stabilization policies, the outflow o f taxes from republican coffers increased. At the same tim e, the rep u blics’ revenues from b usinesses w ere b eing reduced by the supply-side in c e n ­ tives to e n te rp rises (which cut their taxes and shifted financing o f services to u ser fees and retail markets). A federal fiscal crisis necessarily implied a local fiscal crisis in all com m u n e s below the average in per capita G D P , and the q uestion o f w h eth er republican g overnm ents would have to as­ sum e th e ir welfare role was left open. Finally, structural a d ju stm ent to W e ste rn markets was b eing facilitated by wage restrictions and new labor legislation giving managers a freer hand to hire and fire in th e pursuit o f com m ercial profits and lower labor costs. Industrial policy guiding cred it policy and labor regulations r e e m ­ phasized both dem and for manufactured com m odities in W e ste rn m ar­ kets and technological modernization to co m p ete with international standards o f productivity. T h e e m p loy m e n t program within th e long-term stabilization policy brought the dual labor-sector strategy into the public sector, proposing to divide the country territorially into a high-wage, technologically advanced, export-oriented North and a low-wage, labor­ intensive South. T h e search for foreign investm ent in a m ore com petitive international e n v iron m en t soon began to drive labor legislation as well— to encou rage foreign investm ent by removing the last limits on foreign ow nership and all self-m anagem ent curbs on managerial authority over labor. B y 1988, legislation for privatization— private-property rights for foreign capital, th e end o f workers’ rights to consultation, and the end of the division o f firms into basic organizations o f associated labor— was b e ­ ing e nacted. W orld Bank recom m end ations w ere formulated into bank ­ ruptcy legislation. T h e effect o f new banking regulations was a political crisis in Croatia and S e rb ia when the debts o f the largest depositors in their republican banks (particularly the oil pro du cer IN A and the steel industry at S m e d ere v o ) could b e reduced only by spreading the d eb t among o ther depositors, thus socializing it across smaller firms within the republic. By 1987, the limits on new federal cred it had spread th e banking crisis to Bosnia-H erzegovina, w h ere the largest cong lom erate— A grokom erc— a tte m p ted to recou p its losses with unsupported promissory notes bought by banks throughout the country, most heavily by th e still-solvent, sue-

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cessful republican bank of Slovenia. A real-interest-rate policy (the last holdout o f th e federal authorities against the I M F stabilization program) made borrowing too costly for the small businesses that w ere the primary hope of the g o v e r n m e n t’s em p loy m ent policy. Tax rebellions by republi­ can parliam ents, which simply refused to pay the federal governm ent, led the latter to make up the shortfall in minimum legislated funds for the army and o th er federal obligations by ignoring limits on the money supply and accepting seig niorag e.6 D eclinin g subsidies to local governm ents un­ able to pay th e ir welfare com m itm ents led to rising taxes on the alreadysqu eezed private sector. Plant closures in declining industries (often in one-ind ustry towns) brought the first real appearance of unem ploym ent resulting from mass layoffs. By 1990, estimates of econom ic redundancies for the year (u nem ploy m ent due to bankruptcies and closures, not includ­ ing technological redundancies due to the introduction of new equipm ent or labor-saving procedures) nu m bered 4 4 5 ,0 0 0 in a labor force o f 10 mil­ lion (6 .6 million in the public sector) and w ere expected to b e even higher in 1 9 9 1 .”

T h e Po litic a l C onsequences

of

Unem ploym ent

T h e e co n o m ic success of this program, according to the governm ent’s strategy, d ep end ed on the renew ed gains in productivity and profit from the rationalizing and com m ercially oriented reforms of the public sector of th e econom y and on the en fo rcem en t power o f econom ic interest. The strategy, how ever, like all those based on classical or neoclassical models of e co n o m ic growth, had always presum ed not only a closed economy but full em ploy m ent. In the pre sen ce o f high unem ploym ent, its consequence was to u n d erm in e the political bases o f the system. Ju st as the political assumptions of the strategy intended, there was no politically mediated relation such as a political m o vem ent to protest the threat, and then the reality, of even higher unem ploym en t or to propose alternative policies; the effect was direct. T h e first effect of u n em plo y m en t was on the capacity to enforce policy goals. T h e vertical links of monetary control and econom ic interest in K a rd e lj’s political system ran on two tracks: the Com m unist party, and the parliamentary and eonciliar representation of econom ic interests. The two e n fo rce m e n t mechanism s w ere the hierarchical discipline o f the LCY and its affiliated organizations and their powers of persuasion with non­ 6 T h e relation betw een th e federal budget and the money supply in such a hybrid eco­ n om ic system is a complex and technical sub ject. S e e Mates, “Inflation in Yugoslavia” and “M easu rem en t of G o v ern m en t Budget D eficit”; and C om m ander, “Inflation and the Transi­ tion to a M arket E c o n o m y .” 7 Crosslin, “Labor Related Program s in Yugoslavia/’ 8.

353

BR E A K D O W N

m em b ers to accep t the rules established by experts and by social consul­ tation as b ein g in their collective, long-run interests; and the natural cooperation and “harmonization o f in terests” in deliberative councils and elected assem blies by delegates from self-governing, public-sector pro­ ducers (republican governm ents, and enterprises) whose econom ic in te r­ est lay in rational choices on econom ic policy. Both m echanisms b ec a m e ineffective as a result of unem ploym ent. As access to pu blic-secto r em p loy m ent b eca m e ev e r more restricted and u n em p lo y m en t grew particularly among those aspiring to administra­ tive positions (the category o f “guaranteed salaries”) because of their e d u ­ cation, the authority o f the party was increasingly underm ined by its transformation into a g a te k ee p e r for such positions— a form of craft union for managers and politicians. T h e reality o f declining em p loy m ent and increasing individual com petition reinforced individual strategies to im ­ prove personal capital— skills and years o f education, party activism, and networks o f recip rocal personal obligations. Those who failed to obtain e m p loy m e n t co m m e n su ra te with their formal qualifications, as the princi­ ple of parity requ ired , perceived an increasing com petition b etw een po­ litical and educational criteria. R e se n tm e n t over the party’s influence (or p erceiv ed influence) over high-status jo bs intensified, while the ever more fre q u e n t resort to personal and political connections further co r­ rupted application o f the ru les.8 W ithin enterprises, w h ere conflicts over incomes intensified with declining incomes and federal restrictions (the n u m b e r o f work stoppages and strikes rose 8 0 p e rce n t betw een 1982 and 1983; by 1987, 1 ,5 7 0 work stoppages involving 3 6 5 ,0 0 0 workers w ere re ­ ported officially),9 relations b etw ee n industrial workers and the party were also strained b ecau se the party’s role in supervising wage r e ­ strictions placed it increasingly in the role o f strik e b re a k e r .10 Since the program for marketization once again made professionals— no longer co n ­ tractual e m p loy ees of e n te rp rises— respond to consu m er dem and for their services, they b e ca m e an ind ep end en t source o f support, separate from the party hierarchy, for workers challenging a firing or wage regula­ tions (as discussed earlier in regard to Slovene accountants and lawyers in the c o m m u n e s ’ labor courts). T h e ad ju stm ent to changing international conditions and for econ om ic stabilization over the years by altering re g u ­ lations on m oney, labor, and constitutional ju risd ictions— and when the requ ired a d ju stm ent could not occur fast enough, by further altering the rules and convoking new a g re em en ts — had begun to un derm ine the le ­ H An especially popular proverb after the late J9 6 0 s was “A law exists so as to have a loophole” (Zakon postoji da ima nipu). 9 R am et, “Apocalypse C u lture and Social Change “Yugoslavia.”

in Yugoslavia,” 9;

Rem ington,

10 S e e Jovanov, “P ledoaje za dijalog o drzavi u socijali/.mu,” for this assessm ent.

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gitimacy of those rules. D ep riv ed of their essential attributes of stability and predictability, the rules lost authority; this could not help translating into degrading; the authority o f the party that was supposed to supervise th e ir im plem entation . Citizens did not enjoy the security of enforceable rules applied regardless o f station. T h e p arty ’s c o m m itm e n t to the general interest— a c om m itm ent e m ­ bodied in federal rules— was also strained by the party’s “socialization” in an e con om y without full em p loy m ent b ecause its m em b ers depended for their livelihood on their w o rk p laces.11 T h e leaders’ discipline over the party rank-and-file that was essential to the en forcem en t aspect o f d em o­ cratic centralism was so weakened as to appear nonexistent. In a period of sharply declining resources, the national com m ittees (republican party organizations) that com posed the L C Y w ere in com petition for the e co ­ nom ic resources necessary to their patronage on jo b s and credits within their republic. T h e second means o f enforcing policy goals— the c om m itm ent o f re p re ­ sentatives o f republican governm ents and organizations to the ag ree­ m ents they had participated in m aking— thus began to unravel as well, b eca u se their responsibility for the e conom ic d ev elopm en t o f their terri­ tory and its capacity for em ploy m ent and rising standards o f living d e­ p end ed on th e resources they could keep from being taxed away or could capture from federal funds. T h e idea o f a contractual state based on mu­ tual interests, cooperation, and “harm onization” o f differences (rather than the electoral choice o f winners and losers) was in conflict with the e co n o m ic reality. T h e role o f parliaments was to decide issues over which the gov ernm ents that w ere re p re sen ted had fundamental differences of e co n o m ic in te re s t— budgets, taxes and transfers, and reform legislation. U n able to agree, plagued by delays in decision making and growing in­ stances o f vote trading, logrolling, and deadlock resolved only by tem por­ ary d e cr e e s o f the federal cabinet, the federal g overnm ent exhausted the p a tien ce and lost the confidence of an ever-growing n u m b e r o f Yugoslav citizens and foreign creditors. B u t the problem was not, as many ob­ servers insisted, that th ere was no consensus among political leaders. The p ro b lem was that political consensus was the only m echanism available for resolving these conflicts and making hard choices. F orced to com e to som e a g re em en t by the risk o f losing foreign credits or by the constitu­ 11 Although criticized by self-management advocates as well as W estern economists, the party’s practice of “sanitization”— the procedure for restructuring a firm to forestall bankruptcy— made some sense. The local government and party committee appointed a tem porary outside manager who was, of course, part of the circulating stratum of the party’s managerial cadres. Asked about the basis of his virtues in attempting to restructure the Economic Bank of Zagreb in 1982, Tomislav Badovinac emphasized his “independence” and therefore his freedom to make necessary but unpopular decisions (Start interview).

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tional tim e ta b le according to which executive d ecree s would b eco m e law unless overridden by the assembly, the m e m b ers tend ed to achieve “pa­ per u n ity ,’ as it was called — b u t it was ag re em en t that could not be im plem ented . A second effect o f the lead ers’ strategy in a situation o f high un em plo y ­ m ent was to u n d erm in e the delicate balance in constitutional jurisdictions of the federal system b ecau se of the intensified com petition among prop­ erty ow ners to pro te ct their capital assets from declining further. In this system o f socialist property rights, those owners w ere the republican gov­ ern m e n ts. Conflicts in fe deral-republican relations over im plem enting federal policy occu rred in all th ree aspects of the reform that affected control over capital and e m p lo y m e n t— the recentralization of control over m onetary policy, the banking system, and foreign exchange; the r e ­ strictions to cut excess dem and, em bodied in control on wages, salaries, and cred it and in the rising taxation of republics to reduce the federal deficit; and the proposals to improve federal administrative capacity for effective m a cro eco n om ic policy. All three would deprive the republics and provinces o f the sovereignty over econom ic resources that they had gained b e tw e e n 1968 and 1978. Although most republics opposed this dim inution o f sovereignty, b ecau se o f the con se q u e n ces for their r e ­ sources for local investm ent and em p loy m ent expansion (and therefore political power), their bargaining strength in this contest varied according to their level o f un em ploym en t and their flexibility in international ad­ ju s tm e n t to p reven t un em plo y m en t from rising. W h ile the decline o f the federal party’s international bargaining position gave the republican par­ ties the illusion o f m ore freedom to go their own way, that freedom would also d ep end on international leverage. It was not the republics in the south with un em ploym en t o f 20 p e rc e n t or m ore that took the political lead, b u t Slovenia— with full em ploy m ent, labor shortages in industry, and only re c e n t threats to living standards. Full e m p lo y m e n t in Slovenia m eant that the costs o f liberalization and technological modernization w ere much lower. T h e re p u b lic’s extensive export orientation (in both W e s te r n and E a stern markets) and share of military industries also made it able to adapt more readily to changes in foreign econ om ic policy, even when it opposed a particular policy as less favorable to Slovene interests. In a context o f fre q u e n t labor shortages, g o v ernm ent econom ists w ere m ore inclined toward com prehensive plan­ ning over S lovene space, taking into account social and cultural as well as e con om ic factors in d ev elop m en t policy; and Slovene unions and firms consistently o b je cte d to the maxim ums placed on wages. W h e n stabiliza­ tion policies requ ired cuts in wages and social expenditures, the repu bli­ can g ov ern m e n t tended to respond to workers’ and managers’ protests by ignoring the controls.

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Although an export-oriented, marketizing reform would seem to have b e e n most advantageous to the republics earning the largest export reve­ nues in W e ste rn markets, the S lovene g overnm ent ob je cte d strongly to its loss o f rights to retain those revenues in Slovenia implied by the new re q u irem en ts for depositing foreign exchange with the National Bank. W ith ou t that foreign exchange, Slovenia’s program to raise worker pro­ ductivity back to E uro pean standards and to resolve labor shortages in industry with imports o f more-advanced equ ip m en t and technology was in danger. In view o f declining standards o f living in the republic and wage com petition with foreign countries for professional labor, its enter­ prises began to campaign against the rules on redistribution o f a portion of m ark et earnings from “above-average” to “below -average” firms and lo­ calities to replenish solidarity funds for guaranteed wages and the federal fund for credits to less-developed republics. In their view, this redistribu­ tion was weakenin g the incentives to higher productivity in Slovene firm s .12 O b je c tin g to federal taxation on similar grounds— that resources w ere b eing wasted on the less efficient or unproductive— the republican g ov ern m e n t began to protest against the visible beneficiaries o f the fed­ eral budget: the federal army, the less-developed republics, and the fed­ eral ad m in istra tio n .13 (Firm s receiving selective credits and subsidies, such as for export promotion, escaped criticism.) In a campaign directly co u n te r to the reform proposals to restrengthen the federal administra­ tion, S lovene authorities began to press for erasure of the last vestiges of federal pow er— the YPA, the federal fund, the federal constitutional court, and all federal legislation that was in conflict with its republican legislation. An early step in this p ro ject was to prevent a political coalition from m obilizing against it; the Slovenes proposed transforming the fed­ eral L eag u e of Com m u nists into a confederation along the lines of the conciliar federal governm ent, with multiple-candidacy elections for the party’s presidium and a shift in voting rules from majority principles to 12 T h e r e s e a r c h b y V o d o p iv e c to d e m o n s t r a t e this p o in t o rig i n a te d in this political cli­ m a te , m o s t p r o n o u n c e d in S lo v e n ia (“ P r o d u c ti v ity Effects o f R e d i s tr ib u tio n in a Socialist E co n o m y ”). 13 In th e first stages oí th e return to econom ic reform and emphasis on overemployment, in 1982, th e press in Croatia and Slovenia paid much attention to the rapid growth of em­ ploym en t in the federal administration. According to an article in the Zagreb daily Vjesnik on S e p te m b e r 8, 1982, the average annual increase in th e previous “few years” was 16 p erce n t, in contrast to the 2 . 5 to 4 , 5 p ercent for the country as a whole, and the party organization within federal offices held meetings (presided over by Slovene party leader Marjan Rožič) to reverse the growth, the “special con cern ” over the rising proportion of em plo yees with low qualifications,” th e hiring according to “personal interest” instead of by com petition, th e rising proportion o f administrative categories in which “income is deter­ m ined exclusively by established coefficients” regardless ol “work contribution and results of la b o r,” and the rising n u m b er o f persons em ployed part-tim e, on contract, and after retire­ ment (p. 5).

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parity by rep u blic and consensus (a system they called asym m etric fe d e r­ alism). B y 1985, Slovenia was proposing that the country itself b eco m e a confederation o f sovereign republics. T h e turning point in Slovene demands cam e after 1985, when e c o ­ nom ic d ev elop m en ts in E u ro p e suggested new opportunities— in d e ­ p e n d en t o f the federal g ov ern m e n t— for foreign capital, W e ste rn trade, and eventually, it was hoped, integration with central E uro pe. T h e r e ­ sumption o f com m ercial-b ank lending to E a stern E u ro p e gave profitable exporters a way to get around federal restrictions on foreign exchange; foreign in vestm en t began to flow into Slovenia and Croatia; and both Italy and Austria expanded e con om ic ties eastward, including the opening of affiliates o f four Austrian banks in Ljubljana. F o r the same external rea­ sons that caused a decline in the bases o f federal authority— the party’s bargaining power in a cold-war e n vironm ent that had given the govern­ m e n t and firms access to W e stern capital markets, fuels, and multiple export m ark ets— the Slovene party and g overnm ent saw its options m u lti­ ply. At th e same time, the Slovene econom y benefited less than in the past from federal g ov ern m e n t policies. T h e advantages to Slovene firms ol fed­ eral price regulations that favored manufacturers had dim inished substan­ tially with d om estic price liberalization, while the global decline in prices of primary com m od ities after their rise during the 1970s now made foreign raw materials ch e a p e r than d om estic p ro d u c ts .14 This, to g ether with the decline in the strategic threat on Slovenia’s own borders and its policy of keeping them populated with settled farm ers, made it even easier to ar­ gue against th e federal d efense budget and federal protection of dom estic producers o f those raw and interm ediate materials that w ere integral to the c o u n try ’s strategic policy of self-reliance. M oreover, even the Slovene un em p lo y m en t rate had risen to 5 pe rce n t by 1985, although the gov ern­ m ent continu ed to focus on the problem o f labor shortages. T h e S lovene gov ernm ent was not alone in opposing the reforms in property rights to e con om ic resources earned by producers on a re p u b ­ lic’s territory. T h e Croatian assem bly was more vocal in refusing to sup­ port the d efense bud get with its tax monies. Vojvodina and M acedonia were as often leading the opposition to recentralization o f the “planning sy stem ’’ (control over investm ent funds and industrial policy) and to the idea that the federal gov ernm en t should have some key e con om ic func­ tions necessary to a m acroeconom ic policy, even though their econom ies w ere d ep e n d e n t on d om estic markets for both supplies and s a le s .15 C o n ­ ditions in the labor markets of all the republics and provinces excep t Slo­ '** On th e greate r integration o f the Slovene econom y with international markets than with th e dom estic econom y in th e 1980s, see Bookman, "T h e E con om ic Basis oi Regional Autarchy in Yugoslavia/” 15 Bookman contrasts th e situation in Vojvodina with that in Slovenia (ibid.)

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venia (and Kosovo, whose case was discussed in the previous chapter) at a tim e when un em p lo y m en t could clim b fu rther gave them even m ore in­ ce n tiv e to maxim ize the funds under republican control (including federal grants and bud g et subventions). N onetheless, b ecause their lack o f inde­ p e n d e n t resources in international capital and goods markets (in contrast to Slovenia) kept them d ep en d e n t on the federal g ov ern m e n t’s good rela­ tions with foreign creditors and its access to foreign capital and trade, the o th e r republics and provinces could obstruct the changes but not initiate a lte r n a tiv e s.16 T h e only exception was Serbia. W h ile Slovenia was locked in a struggle with the federal g overnm ent, the political econom y of S erbia was in the opposite position. W h e re a s Slovenia had never had to take federal aid and its citizens felt penalized for their econom ic success, S erbia was also ineli­ gible for aid, consid ered a m ore-developed republic. But its economic indicators in the 1980s told a different story. It had fallen below the aver­ age on all m easures, but it was still paying federal taxes at rates assessed on those classified as m ore-developed; its G D P was declining, its un em ­ ploym ent rising, and a rural exodus continuing. T h e 1974 constitution had given its provinces control over their econom ies, including the federal grants-in-aid to Kosovo. Along the same lines as the federal proposals for increasing federal e co n o m ic capacity, liberals in Belgrade w ere attem pt­ ing to reverse the autonom ies granted by the 1974 constitution and regain constitutional powers over the whole o f the Serbian econom y — in oppo­ sition to those in Vojvodina dem anding continuing autonomy and an increasingly d eterm in e d Albanian population dem anding a separate re­ public for Kosovo. W ith u n em plo y m en t in Belgrade above 25 percent, a large portion o f it due to the rapid influx from rural areas and other repub­ lics after the late 1970s, proposals for a restreng thened federal administra­ tion w ere also clearly in S e rb ia ’s interest; Slovene proposals to end it entirely would, if enacted, add substantially to local un em ploym en t rolls.

,(i This position was confirmed hv the actions o f Yugoslavia’s foreign creditors in 1 990-91 when the country's breakup seem ed ev er more likely. As late as May 1991, hankers urged support for the econoinic-reform program o f the federal governm ent (under Prime Minister Ante Markovic) and therefore its capacity to service its foreign d e b t— the primary purpose ol the reform. T hey insisted that the country should be held together because only with the export-earnings capacity o f Slovenia and Croatia were the other four republics able to get reasonable credit terms in international capital markets; and without those two republics, banks had little prospect o f having their outstanding loans to the oth er four republics paid, (p ersonal comm unication from Charles Meissner, U .S. m em b er of the debt-refinancing teams o f th e 1980s and early 1990s). But as early as 1982, when the I M F adopted a far more rigid policy toward conditionality than with previous programs, a m e m b er of the I M F ’s team in Yugoslavia proposed talking directly to republican leaderships because it was clear to him that th e power ol im plem entation lay with them. He was told that this was not possible b ecause the I M F could negotiate only with sovereign authorities; he resigned trom the mission (author s interview with that mem ber).

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In all the republics except Slovenia, however, the reform policies di­ vided party leaderships, enterprises, and populations. T h e r e was no id en­ tifiable, single republican interest or party faction w h ere econom ics com bined socialist and private sectors; export and dom estic-m arket o rie n ­ tation; links with W e ste rn , E a stern , and nonaligned markets; com m ercial and productive activities; and distinct areas o f manufacturing and prim ary-com m odity production. B ecau se of the strong localization and territorial patterns ol econom ic activity, party com m ittees and leaders were directly affected by these differences. T h e most striking example was the “great sile n c e ” said to reign during the 1980s in Croatia. T h e party leadership had b een elected after the 1972 political purge o f party leaders accused of nurturing mass nationalism (th e so-called mass m o ve­ ment, or maspok) in order to win Croatian interests at the time o f the previous marketizing, W estern -o rie n te d reform in the 1960s. T h e y w ere said as a group to fear the co n se q u e n ces o f a repeat of the social turmoil and, in the ease o f some individuals, to rep resen t areas o f ethnically mixed (mainly S e rb and Croat) population in the poor interior and the D alm atian hinterland. But these areas w ere objectively suffering from the shift in policy and deindustrialization, with particularly hard-hit local industries— railroads, construction, tim ber, and mining. It was of some c o n s e q u e n ce politically that the areas with b e tte r prospects from the e c o ­ nom ic reform in central Croatia and Dalm atia had a more purely Croatian population, while the areas with declining prospects and severe u n em ­ ploym ent had mixed populations. T h e same was true in Macedonia, al­ though h e re as in Bosnia-IIerzegovin a, there was little difference among towns and areas of the republic in their exposure to serious econom ic hardship as a result of declining demand for their products, both at home and in export markets near collapse in the Middle East and in C M E A countries. W h ile Slovenia and, to a certain extent, Croatia were in the anomalous position from the point of view of econom ic reform of benefiting from m arket principles while refusing to abandon their rights o f “econom ic sov­ e reig nty to allow the free, countrywide, flow o f labor, capital, and for­ eign exchange that a market econom y implies, so the other republics and provinces sought com pensatory federal expenditures and foreign credits for d evelopm ental infrastructure, capital industries, and welfare transfers to local budgets at the same time that they w ere resisting any loss o f their constitutional authority over capital resources to the federal governm ent. T h e result was constitutional deadlock and no sign of a com prom ise position. A third political co n s e q u e n ce ol un em ploym ent was its effect on the system s capacity to adapt politically to the requ irem ents of new econom ic and social conditions. W h e re a s the Slovene rebellion against the constitu­ tional aspects of the e conom ic rclorm remained within the vertical hier-

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arehv o f K a rd e lj’s institutional system — taking the path o f territorial decentralization and republican sovereignty that the Slovene Communist party had b e e n pursuing since 1934 to its final conclusion— the conse­ q u e n ce s of g overnm ental policy w ere beginning to break down the rigid divisions of republican borders, ju s t as they had during the liberal reforms in the 1960s until the constitutional am endm ents of 1 9 6 7 - 7 1 interfered. F o r exam ple, as early as 1982, the econom ic e m erg en cy led Planinc to insist that she be allowed to ignore the rule on ethnonational parity in c ab in e t appointm ents; Slovenia traded concessions on the reform in 1985 for an exception to the constitutional order of rotation for prime minister, giving the post to Branko Mikulic from Bosnia; and by 1986 the I M F had successfully pressured the gov ernm ent to adopt a majority-decision rule in place of consensus for the board of governors of the National Bank. As part o f a m ajor reform o f defense policy, M inister o f D efen se Branko Ma­ mula red rew the borders o f military districts in 1985 to cut across republi­ can lines, and the federal army stepped up a campaign to reintegrate the m ajor infrastructural systems o f the country (transportation, com m unica­ tions, and energy). T h e r e were discussions in the mid-1980s (in which all republics e x ce p t Slovenia participated) about establishing a countrywide c ore cu rricu lum , with selections from all national literatures, for primary and second education, in order to break down educational barriers to labor mobility and to improve awareness and appreciation o f cultural plu­ ralism. Regional d ev elopm en t groups to regen erate areas devastated by industrial decline or shifts in investm ent priorities began to form, such as the one made up o f local planning authorities and econom ic experts in the krajina (an area shared by Croatia and Bosnia-Herzegovina). By 1988, workers from large industries in Croatia, S erbia proper, and Vojvodina had taken their wage protests out o f their factories and republics to the doors o f the federal a s s e m b ly .17 M o re ov e r, while full em p loy m ent in Slovenia had created marketlike conditions and the beginnings o f pluralist politics, elsew here the extent of rising un em p lo y m en t and falling wages, savings, and household incomes, as well as the e ver-h a rsh er prospects o f international adju stment, was such that o n e could imagine the fall o f political barriers as well in a coun­ te rfo rce of Jacksonian character against the Madisonianism of the smaller, ric h e r states of Slovenia and Croatia. Throughout the country, economic hardship, a ceiling on upward social mobility, stricter criteria for employ­ m e n t in the public sector, rising internal econom ic migration, and cul­ tural shifts to ju stify keeping women and youth at hom e were bringing a

17

C arter discusses the attempts by party organizations to obstruct workers’ efforts to

create cross-republican alliances in the 1960s (Democratic Reform in Yugoslavia, 164-67, 204-7).

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profound social upheaval. T h e r e was a kind o f Brownian motion o f e x ­ cluded groups— e ith e r discarded politically in some previous purge or never given entry into the public sector— though th e re w ere no obvious signs o f how they might coalesce. T h e deaths o f Kardelj in 1979 and Tito in 19 8 0 rem oved the last taboos on political speech and reactivated voices calling for a reassessm ent o f the war and o f those purged after the war— from Archbishop S tep inac in Croatia to the many Serbs and M o n ­ tenegrins charged as Cominformists in 1 9 4 8 - 5 0 or forced into re tirem en t as generals in 1 9 5 8 - 6 4 and m e m b ers o f the security apparatus in 1966. U nem ployed youth in many regions gave support to millenarian and fun­ damentalist religious m o vem ents and to right-wing ideas (such as revivals of C h etn ik , U s ta s h a ,18 and Nazi memorabilia and loyalties). C h u rches b e ­ came m ore politically active. U n em p lo y m en t pushed many urban dwellers into “gray’’ or even criminal activities, and it increased tensions b etw ee n long-tim e residents (favored by K ard e lj’s policy o f settled c o m ­ munities) and new com ers (such tensions dated back to the population resettle m e n ts on the northern plains in 1947, but they had shifted to the cities through individual migrations since then). Signs o f social disloca­ tion, “strains o f pessimism, gloom, resignation, escapism o f various kinds,” and “critical réévaluation . . . o f the central underlying myths and heroes o f the state" appeared e v e r y w h e r e .19 N onetheless, such a political revolution from this social upheaval would have to ov ercom e the segm entation by status, the republican divisions, and the personalistic, familistic, and informal channels for coping that resulted from the system o f em ploym ent. Any new arran g em ent required new political forms. B u t political response to econom ic difficulty was still institutionalized around the sy stem ’s two forms o f political action: redis­ tributing people among existing jo b s or b etw een property sectors, and redefining rights to assets and incomes in the direction o f greater auton­ omy (with the obligation o f balancing accounts and in the hope that there would b e a resulting initiative in increasing those assets). This was what Yugoslavs had learned to do. B u t this system also favored the republics, e n terprises, or individuals that had higher initial capital assets. T hose who organized the political path after 1985 w ere not the unem ployed but the em p loy ed who feared u n em ploym ent. In the society described in this book, this fear was the fear o f property owners that they would lose value and status. T h e ir fight was organized around a language o f rights. T h e first o f the two arenas o f this political fight, against redistribution of 18 The Chetniks were the armed bands formed around Serbian royal army units during W orld W ar II; the Ustashe were the elite paratroopers of the Croat fascist state. Both fought against the Partisans. 19 Rainet, “Apocalypse Culture and Social Change in Yugoslavia,” 3, 15; for a good sam­ ple of political and cultural manifestations, see 3-26, passim.

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labor in response to international conditions, was ce n te re d in the core of the public secto r— the core o f privilege. E v e n nnore than in the 1960s, the e co n o m ic reform in the 1980s was an attack on “nonproductive” ex­ pe nd itu res, budgetary financing, and administration o f any kind outside the e n te rp ris e s — for defense, local subsidies, social services. Efforts to rationalize and regulate through governmental policy in the 1970s had led the party to assert influence over managerial and professional appoint­ m ents, to the growing re s e n tm e n t of those whose education did not guar­ an tee them em p loy m e n t o f the status they expected, as was discusscd above. Su ch efforts also had led to educational reform, which by the 1980s (as in th e 1960s) had moved from elem entary and secondary education to the universities. This reform struck at the heart o f the middle class and its capital— its individual bases in formal education and its ability to pass on this in h erita n ce (its cultural capital) to its c h ild re n .20 T h e major reform of secondary education after the late 1970s was, in effect, an attem pt at so­ cial revolution from above at a tim e of declining opportunity. T h e abol­ ished gimnazije had b ee n a preserve of social privilege and exclusive access to university enrollm ent. T h e extension of general education to youth in vocational schools, giving them the equal right to enroll in uni­ versities and putting all youth on the same track o f universal and voca­ tional training, b ec a m e a lightning rod for the discontents of urban middle-class parents (although the com petition over enrollm ents in pre­ ferred specializations still b enefited those with cultural capital and cre­ ated a new hierarchy of elite and less-privileged schools and students).21 B y the early 1980s, limits w ere placed on university enrollm ents in liberal-arts and medical faculties because such professionals were already in surplus. Professional parents saw these limits as political discrimination against th e hum anistic intelligentsia; similarly, they viewed the expanded opportunities for university education in new regional universities as the party’s atte m p t to dilute standards and their status.22 This urban middle-class d iscontent was also manifest in an increasingly open conflict b etw ee n the civilian and military halves o f public-sector “n on prod u ctiv e” em ploym ent. T h e largest com ponent o f the remaining federal b u d g et after 1 9 5 8 - 6 4 , the federal army and defense industry were obvious ob je cts o f criticism, while the army was also facing the need to 20 T his was a widespread phenom enon, not limited to Yugoslavia. Hirsch identified it for W e ste rn E u ro p e in th e 1970s, in Social Limits to Growth; D a hren do rf returned to it in the 1980s in Life Chances. 21 In Slovenia, however, the bureau of education soon quietly reversed th e reform be­ cause o f parents’ protest and exp erts’ evaluations, 22 On the oth er hand, students from rural areas who failed th eir course exams (held all at on ce at th e en d o f the year, in Eu ro pean tradition), assumed they w ere victims o f an explicit policy to cut unem ploym ent by returning them to th eir farms (even if they owned no land, as parents complained to me in Vojvodina).

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rationalize resources without endangering d efense preparedness. Army leaders sought several reforms in th e ir concern about the declining q ual­ ity and availability o f military re c ru its ,23 about the difficulty of attracting Slovenes and C roats to th e officer corps b ecau se pay was higher in civilian jo b s in th e ir econom ies, and about the econom ic costs o f conscription. In the early 1980s, young m e n w ere requ ired to c o m p le te their military s e r­ vice b efo re attend in g university. By 1985, th ere was a shift to th e idea o f a professional arm y (as in many o th er countries at the time). W ithin the army, th e re was a growing threat o f rebellion among the middle ranks of officers, whose salaries and benefits w ere declining; a majority o f them w ere o f S e r b nationality, and they began to resent the limits on their prospects o f prom otion and higher salaries set by th e rules on national quotas and proportions for senior officers. O utside the army, a primary focus o f youth political activity in Slovenia (and to a certain e x te n t Croatia) was a campaign against th e army and conscription— to cu t the defense b u d g et on pacifist grounds,to gain th e right to conscientious objection, and to realize rights to use o n e ’s own language in the army and b e posted at hom e. T h e second arena o f political response to the threat o f e con om ic d e ­ cline, th e struggle for autonom y over capital, was dominated by the r e ­ publics in response to th e institutional reforms conc erning money and cred it and th e constitutional reform that followed. This struggle was led by Slovenia, which had the most to lose and the greatest organizational and e co n o m ic resources for the fight. T h e language used by its party lead­ ership, as well as by e n te rp rises resisting taxation o f m arket profits and by most republican assem blies, was one o f rights and restoration o f what they consid ered rights to fight recentralization and redistribution. F e d e ra l tax­ ation was seen as gov ernm ental in terferen ce with the constitutional rights o f e n te rp ris es and republics to “self-m anagem en t” and “sovereignty”— an in te rfe re n ce , it was insisted, with the “fre e d om ” o f e n terprises and of “w o rk e rs .” T h e Slovene g o v ernm ent even re je cte d the d efense m in ister’s proposal to resolve their mutual financial conflict with autonomy by e x ­ tend ing self-m anag em en t to defense, creating a separate, autonomously m anaged d efense bud get with a legislated portion o f the incom e tax .24 23 The concern over foreign emigration and loss of a large cohort of youth was particularly manifest in the defense establishment for this reason, although the support of Croat guest workers in Germ any for Croat nationalism in the 1960s and the ability of rebels from the Croat comm unity in Australia to p enetrate into Bosnia and attem pt to spur an armed upris­ ing in 1972 also influenced the military’s perception of national security. Emigrés played a similar role in 1990-91 funding the election of a nationalist to the Croatian presidency in 1990 and providing arms, mercenaries, and financing for the war that began in 1991. 24 T he compromise established in 1985 was to divide the federal budget into three parts: one for the army, one for export incentives and material reserves, and one for all other beneficiaries. In Novem ber 1986, however, the government agreed to finance the federal budget from federal revenues alone, breaking all remaining links to the republican budgets.

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Thu s, this political fight, contrary to the claims that it was a dem ocratic revolution against the Com m u nist system and the result of the party’s loss o f ideological legitimacy, was in fact led by Communists to justify the claim s o f property owners on econ om ic resources in terms clearly reflect­ ing the ideological hegem ony achieved by the parties in the more indus­ trialized northwest in the 1930s. T h e language of the conflict reveals how firmly the ideology underlying the party’s original strategy (as was argued in ch a p ter 9) had b e e n implanted. Using the language o f productivity, it was claim ed that monies transferred through the federal fund w ere e m ­ ployed less productively in the southern republics than they w ere in the north or when northern enterprises invested d irectly .25 Such transfers should b e assessed in term s o f the “differential contribution o f each re ­ p u blic” to gross dom estic product and the extent to which the “survival” of each rep u blic was aided or endangered (ugrožen). T h e proliferating autonom ous public services and utilities w ere “bloated b ureaucracies,” and military salaries w ere an “unproductive” drain on the econom y. Even the program o f the C o m m u nist party leadership in S erbia during the re ­ new ed process of constitutional reform after 1985— which aimed to re­ unify S e rb ia by ending the near-republican status of its two provinces and to increase its influence on federal policy, by means of mass dem onstra­ tions that brought political allies to the party leaderships in its provinces and in M o n te n e g r o — was called by M ilosevic an “antibureaucratie revolu­ t io n ,” as T ito and Kidrič had called the firings in ministries aimed at stabi­ lization in 1950. And although this attem pted Jacksonian revolution stayed within the Madisonian rules and used methods similar to those of C roatian nationalists in the 1960s, Slovenia and Croatia declared it to be against th e constitution. T h e final political co n se q u e n ce of un em ploym ent was its effect on the c o u n try ’s ability to continue to manage un em ploym ent itself. T h e consti­ tutional assignm ent o f labor questions to the republics in 1946 survived all s u b seq u e n t changes in policy and institutional reform. As discussed in chap ter 8, the territorial decentralization of the econom y and vertical lines of the formal political system, property rights, and capital flows had c re a te d and maintained separate labor markets within each republic. I n ­ dividuals em igrated to cities or different republics to improve their pros­ p ects, b ec a u se those prospects d ep end ed on the budgets that financed particular em ploym ents. T h e politics o f em ploy m ent and unemployment revolved within the republics and localities. As in the lead ers’ strategy for econom ic growth, protecting achieved status requ ired more than autonomy over capital; it was also necessary to 2r> On th e inaccuracy of’ this charge, sec Con nock, “A Note on Industrial Efficiency in Yugoslav Regions ”

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adjust tlie supply of labor to declining dem and with reorganization and downsizing o f the public sector and with expulsion o f the less productive back to the land, to the family, or into emigration, even if only te m ­ porarily. T h e “realism ’’ (to use Claus O lie ’s term) o f the last federal resolution on em p loy m ent, in 1 98 3 — which, as part of the long-term sta­ bilization program, deferred until the twenty-first century any a ttem p t to employ those now un em plo y ed — was up to the republics and localities to im plem ent, for labor fell within their ju risdiction. T h e political methods these authorities chose for im plem enting a “realistic” approach dealt the final blow in the process o f system ic breakdow n— an exclnsivist national­ ism that destroyed the country. In the early 1980s, even before the Slovene campaign to reduce the YPA to “national a r m ie s ,” Slovenia’s g overnm ent sought to send hom e Bosnian and eth n ic Albanian workers and to restrict entry by new mi­ grants. T h e planning bureau argued, on the basis of research studies, that their n u m b e r had reached the maximum o f social tolerance for nonS lovenes and that the econom ic costs o f additional infrastructure and social benefits for any new com ers would lower standards of living in S lo ­ venia.2*’ B u t S lovene authorities ju stified this decision on the grounds that their “national distinctiveness’’ and cultural identity were “th r e a te n e d .”27 In S erbia, the political rebellion in the province of Kosovo that began again in 1981 expelled many S erbs and M o ntenegrins, who left b ecause o f fear or pressure. C o m b in e d with the growing immigration o f Serbs from o th er republics (particularly from smaller towns with declining in­ dustry in Bosnia-Herzegovina), who sought econom ic opportunities in B elg rad e or claim ed refuge from jo b discrimination as Serbs, these waves of migration threa te n e d to bring lower living standards and even higher un em p lo y m en t in S erbia proper. It was not long before such immigration b ec a m e a focus of the discontents o f middle-class professionals and intel­ lectuals who attributed S e rb ia ’s declining econom y and status to the (con)federal T itoist system, which had, in their view, followed a policy of “divide and c o n q u e r” against the Serbian people since the A V N O J princi­ ples for a federal constitution declared in 1 9 4 3 .28 T h e com plex struggle over the autonom y o f the provinces and over Albanian rights in Kosovo 2<> Non-Slovene labor made up about 25 percent ol the republic’s laboi force at the lime This m easure o f “social tolerance’’ was also popular at the time in France, where it was said that the proportion ol North African immigrants in a town should not exceed 20 percent 2/ Author s conversations with oliicials and social scientists in Ljubljana Such language also pervaded the journals, press, and politicians' sp eeches by 1 9 8 6 - 8 7 ; lor a typical exam ­ ple, see Foreign Bromlcu-'it Information Service, Eastern Europe, for April 17, 1987, 14. 2M A c om m ittee ol th e Serbian Academy of Sciences and Arts wrote a Serbian “national program ” in 1986, though it was not published until 1993 (except for excerpts from a draft, on which much speculation about a political program was based; see “Memorandum SA N U ”). Slovene opposition intellectuals issued theirs in 1987.

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could not b e separated from the tend ency to reconstruct republican inter­ ests as “national i n te r e s t,” any more than this tend ency could b e avoided in Slovenia. T h e Albanians’ dem and for a separate republic was a demand for their “national rights to self-determ ination,” and in S erbia proper th e re w e re rising calls to defend the “hon or” and restore the “longaggrieved rights” o f the S e rb nation. In Croatia, the assem bly openly jo in e d Slovenia in the fight against the federal g o v ernm ent and the army, casting it as a struggle for Croatian national rights. T h e arm y ’s pressures for the reintegration of basic infra­ structure and for a restre n g th e n e d Com m u nist party, and the proposals from th e federal gov ernm ent and the I M F to strengthen macroeconomic administration, w e re identified with what were called the historical “cen ­ tralism ” and “unitarism ” o f Serbs. S erbs in Croatia w ere said to have been privileged in governm ental em p loy m ent in the police, army, and local administration, so that cuts in g overnm ent bureaucracies and a shift of resources away from the ethnically mixed interior to central Croatia and D alm atia began to b e justified with an anti-Serb campaign in the same way that the purge o f party leaders had b een in 1 9 4 9 - 5 0 . E v e n in B o s nia-flerzeg o vin a, dem ographic shifts in the ethnic compo­ sition o f local com m unities as individuals left economically declining vil­ lages and towns for work abroad (a pattern m ore characteristic of Bosnian Croats) or for schooling and possibly work in o ther republics (more char­ a cteristic o f Bosnian S erbs, who tended to go to Serbia) had also changed the e th n ic composition o f those who held local political and administrative positions, resulting in growing eth n ic tensions. And ju st as in the 1960s, the h ig her birth rate o f Muslims in Kosovo, Macedonia, and BosniaIle rz e g o v in a provided an excuse for the prejudice and scapegoating that arose from re sen tm e n ts over jo b com petition and declining status and incom e. T h e regulation o f statuses for the productive use o f labor and the poli­ tics o f exclusion from the public sector to protect the rights of those who rem a in ed th ere culm inated with the alteration of citizenship itself in 1989. O bliged to bring their republican constitutions into harmony with the intended 1988 eeonom ic-reform am end m ents to the federal constitu­ tion, republican assem blies in Slovenia, Croatia, and Macedonia re­ defined their republics as states o f their majority nation. T h e rights of national self-determ ination and equality that adhered to individuals’ m e m b e r sh ip in any constituent nation within the country, regardless of re sid e n c e, and the re q u irem en t for national quotas in governmental posi­ tions w e re de facto abolished. To confirm this final step toward full “na­ tional sovereignty” o f the republics, Slovenia and Croatia held democratic elections in April 1990, and those who campaigned on nationalist plat­ forms gained pluralities. Particularly blatant about this goal was the na­

BREAKDOWN

367

tionalist campaign o f F ra n jo Tu djm an, a retired general o f the federal army and fo rm e r C o m m u nist, who won th e Croatian presidency by c o m ­ bining an anticom m unist platform with a n ti-S erb rhetoric. E q u a tin g “decom m unization” with “d e-S erb ianization” o f gov ernm ent em ploy m ent, he rallied political support behind the b an n er o f jo b dismissal, to purge e v ­ ery one associated with the C o m m u nist re g im e — including not only party m e m b ers but any S e rb s as well. T h e nationalist exclusion o f people relegated by the constitutions to minority political status b e ca m e the goal o f rewritten citizenship rights in all the republics, in som e m ore openly than in others. Instead o f the liberal political goal o f transforming the d elegate sy stem — replacing the system o f representation o f producers with a state o f “equal citizens and w orkers” and the principle o f one person, one vote, which many proposed in 1 9 8 7 —8 9 — “national p re fe re n c e ” in jo b s and housing won out. As each rep u blic’s e c o n o m ic capacity to guarantee subsistence to all its citizens d eclined , the group receiving full citizenship rights dim inished further.

C o n c l u s io n

As with the capitalist system it aimed to replace, the underlying con tra­ dictions o f th e Yugoslav reform -com m unist system and its main lines o f sociopolitical conflict cannot b e understood apart from un em plo y m en t and the particular manifestation o f its threat. This book does not argue that socialist un em p lo y m en t played the same e con om ic or political role as does capitalist un em ploy m en t. B u t its causes and characteristics do reveal the prim ary m echanism s and dynamic by which socialist Yugoslavia fu nctioned — and declined. T h e politics o f socialist systems, and o f their postcom m u nist transition, mirrored their e con om ic system. U n d e r social ow nership o f productive capital, individuals’ em p loy m e n t defined their personal identities, e co n o m ic interests, and social statuses; social and po­ litical conflict, com petition, and collective action w ere organized a ccord ­ ing to th e criteria for individuals’ access to em ploy m ent and the criteria for financing those jo bs. T h e social and political system that Kardelj constructed (and repeatedly reconstructed ) according to a particular ideology o f econ om ic growth and its approach to the use o f human labor— called in this book the S lovene m o d e l— p re su m ed full em ploy m ent. It could not function as intended un der u n em plo ym en t. As real and threatened u n em p lo y m en t increased during the 1960s and especially after the mid-1970s, the key e le m e n ts o f the system began to cru m b le from within. T h e vertical lines o f authority— th e L C Y , federal rules and regulations, and the banking sy stem — w e re ineffective in enforcing policy decisions; in the p re s en ce o f u n em p lo y m en t or its threat, loyalty to an em ploy er or potential

368

C H A P T E R 10

e m p lo y e r— workplace, locality, or repu blic— took p reced en ce. When th e re was a threat o f un em ploym ent, with its immediate loss of status and all that that entailed, a state based on the cooperation and discipline of mutual in te rest among political representatives of autonomous producers and property owners (in econom y and governm ent) was not conducive to— indeed, was likely to b e in conflict with— the “financial discipline” of “e co n o m ic in te rest" o f the system of self-managed budgets. T h e legit­ imacy of the L C Y as the representative o f the com m on interest suffered irreparably from its transformation into a craft union for managers, as well as from com petition b etw ee n political and educational routes for manage­ rial and professional (“middle-class ”) em ploym ents in the public sector. And th e delicate constitutional balance o f the federal system and the rights of national equality could not survive the effect that financial re­ forms and the sustained fiscal crisis surrounding d ebt repaym ent had on the capacity of republican governm ents to employ and to negotiate wages. B y the early 1980s, the official solution to un em ploym ent itself was reaching its lim it— the institutions o f family, farm, schooling, and foreign migration could not absorb the level of un em ploym ent generated, and the society to which this approach was adapted had b ee n irrevocably changed by the program o f e con om ic growth. Yugoslavia was no longer an agrar­ ian, industrializing country. People could still talk about “going back to the fa rm ,” but this psychological reassurance (if it was applied to oneself) or com placency (if it was applied to others) had little basis in reality. Kard e lj’s model o f stable socialist com m unities com bining the productive in­ centives and distributive solidarity of industrial wage earners and small property ow ners (the alliance of workers, peasants, and free professionals) applied to an ever-dim inishing n u m b e r of people, and the social protec­ tions o f that model (u nem ploym ent was still defined as a social question, not an e co n o m ic one) no longer served a society characterized by rapid urbanization and internal econom ic migration. T h e re w ere instead a growing urban underclass of unskilled workers and rural migrants; an ever-larger stratum o f managerial and professionally trained people seek­ ing public-sector, nonindustrial em ploym ent; and deindustrialization in p o orer regions. Although no political organization of the unemployed oc­ cu rred, nor was th ere any such organization around the problem of unem­ ploym ent, th e result was an escalating social upheaval of revolutionary proportions by the late 1980s. D e clin in g prospects, lower relative incomes, and increased competi­ tion for em p loy m ent com m ensu rate with educational achievem ent and status expectations all led to open and growing re sen tm e n t within the established managerial, professional, and urban white-color stratum against the system ’s policies o f redistribution. Manifest in many groups, across social layers and regions, this unorganized discontent at public,

BREAKDOWN

369

in ten d ed ( namenjeni ) redistribution was focused on several fronts: th e e d ­ ucational reform , which appeared to th reaten privileged social position; the privileges o f party m e m b ersh ip , the L C Y ’s presu m ed control over high-status jo b s , and its network o f informal conn ections and aid; the taxes and contributions from earnings that w ent to local solidarity funds for guaranteed wages and to the federal bud get for the army and for cred its and subsidies to poorer localities and less-developed republics; and th e national quotas for g o v ernm ent em ploym ent. D em og ra p h ic shifts, particularly th e rising b irthrate o f M uslims in Kosovo and BosniaH erzegovina, evoked fears and p reju d ice from many sides. In place o f K a rd e lj’s settled com m unities with their sense o f proprietorship, latent conflicts rekindled into op en tension b etw ee n longtime residents and m igrants— r e c e n t migrants in urban areas and earlier migrants in towns and villages. And in the private sector o f rural, unskilled, and u n e m ­ ployed persons, th e re was re s en tm e n t at their second-class status and sen se o f inferiority— a re s e n tm e n t waiting to b e exploited. D e s p ite the exhaustion o f the approach to u n em p lo y m en t and this growing social d iscontent, th ere was not yet pressure for the system to adapt politically. T h o se with the greatest e con om ic and organizational r e ­ sources could still b en efit from dem ands for change along the lines d e ­ fined by th e existing e con om ic system and its ideology, further autonomy over incom e, justified as the right o f those who earn (and who have a d irect in te res t in financial accountability) to d ecide on the allocation of incom e; and fu rther rationalization o f “nonproductive” labor by cutting gov ernm ental expend itures (personnel) and expelling less-productive workers into the private sector. O thers continued to pursue individual and familial strategies for gaining em ploy m ent, with its status and b e n e ­ fits. No political cou nterforce was b eing g enerated to dem and changes th at m ight b ring action on u n em ploym ent. Instead, th e stabilization p ro­ gram to repay d e b t took the final step o f abolishing the entire system of protections against u n em p lo y m en t— the rules against mass layoffs and dismissal for reasons o f econ om ic rationalization; the limits on the free sale o f land and hiring o f labor that w ere intended to provide guaranteed smallholdings for farmers and artisans; and the guaranteed minimum wage. And despite th e e co n o m ic failure with regard to full e m p lo y m e n t and g uaranteed subsistence, the political system o f K ard e lj’s Slovene model had survived intact: dem ands for change and reform aimed to strengthen th e hierarchical organization o f political and econom ic power, th e vertical lines o f com m unication and conflict b etw ee n federal and republican polit­ ical authorities, and the states’ rights and property rights o f territorially organized g ov ernm ents and firms and their contractual relations. This p erp e tu a ted the dom inance o f relations b etw ee n international creditors

370

C H A P T E R 10

and th e federal gov ernm en t, b etw ee n federal and republican govern­ m ents, and b e tw e e n republican and local authorities, as against the hori­ zontal, cross-republican, and nonofficial associations and lines of com m unication that are m ore com m on to a m arket econom y (and socalled civil society). C o m p etitio n rem ained focused on rights to income and e co n o m ic assets. Although th e prevailing e con om ic ideology was an­ tagonistic to the state, periodic rounds o f liberalization led not to a m ark et-based political system but to e ver-g reater decentralization, re ­ gionalism, and disintegration. T h e logical conclusion o f this process was the dissolution o f the country itself.

E P IL O G U E

I n 1 9 8 9 - 9 0 , th e cold war ended. T h e conditions supporting socialist Yugoslavia’s Faustian bargain w ent with it. It was historically appropriate that the bargain, contracted in the events surrounding G e rm a n y ’s divi­ sion in 1 9 4 8 - 4 9 and Stalin’s retreat from the reform option, should lose its raison d ’ê tre at the tim e o f G e rm a n y ’s reunification and G o rb a ch e v ’s

reforms. W ithin Yugoslavia, the d eb ate on econom ic and political reform b e ­ tw een 1 98 2 and 1990 had, ominously, retu rned to the original bases o f political unity in the Partisans’ wartim e alliance— the struggles for na­ tional in d e p e n d en c e and against foreign econ om ic exploitation. “Nations” w ere “th r e a te n e d ” with cultural extinction and linguistic contamin ation; and they w ere “suffering” from the econom ic “exploitation” o f others. But this time, the nation was a republic or constituent people. T h e Slovenes suggested replacing the slogan “brotherhood and unity” with “to g eth e r­ ness” and “asym m etric fed era tio n .” T h e rhetoric of mutual accusations prepared people m entally for civil war, instead of a war o f resistance against the outside. Nationalism— this time o f independ en t states— turned inward, as if in an attem pt to destroy all that had b e e n a cc o m ­ plished in forty-five years. A war did indeed follow, o f vicious proportions. Contrary to the c o m ­ m entary by foreign journalists and politicians, which guided external pol­ icy and public opinion on the wars in the form er Yugoslavia, the historical m em ory o f antagonisms am ong its separate nations was at b est a tertiary factor— and it dated only to W orld W a r II. Although the argum ent in this book did not foresee a violent outcom e of the path it analyzed— everg reater disintegration for reasons o f econom ic ideology and international a d ju stm e n t— it does portray the real nature o f the conflict. E v e n in the cou n try ’s dissolution, the Slovene and F o ca models defined the p a ra m e ­ ters. O n the one hand was the internationally negotiated retreat o f the federal army from Slovenia and the recognition o f its secession from the federation (taking “d ecentralizatio n,” autonomy over capital, and sover­ eignty over e con om ic assets to their logical conclusion). O n the other hand was a bloody civil war, unleashed by politicians and persons e m ­ ployed by pu blic budgets and feeding off the d isconnected b u t mounting re sen tm e n ts (d escribed in chapter 10) that raged among secessionists, sections o f th e army, groups claiming national pre fe re n ce , and old and new settlers in the farm ing villages o f Croatia w here Partisans from “pas­ sive regions” had b e e n resettled after W orld W a r II, as well as in the

372

EPILOGUE

poor, deindustrializing interior o f Croatia and Bosnia-Herzegovina (which had b ee n d ep en d e n t on the production o f primary commodities, infra­ structure, and d efense industries). In place of the uneasy symbiosis o f the Slovene and Foča models that had lasted nearly half a century, international conditions finally forced a choice. T h e re q u irem en ts o f econom ic reorientation westward to repay foreign d e b t and then the loss o f Yugoslavia’s strategic role betw een the superpowers to g ether forced a process of homogenization. But except in Slovenia, the internal political econom ies o f the federal units were not hom ogeneous. M oreover, until a new European (or international) defense and e c o n o m ic order evolved to define the cou ntry ’s new options and pro­ vide th e basis for a lasting, stable ou tcom e in the region, domestic politi­ cians, regardless o f political camp, w ere continuin g to take the initiative along the lines o f strategic behavior in the socialist period: demanding political autonom y over e con om ic assets and redistributing persons a m ong jo b s and sectors. W ith the socialist constitutional and welfare systems removed from the reform -co m m u nist system , however, the national layer o f the wartime alliance was free to op erate unfettered. Political action cen tered on the dem and for national control over territory and the physical expulsion or reduction in status o f persons o f o th er nationalities. In the wars over land and local com m unity that resulted, it was predictable, according to the analysis in this book, that the latent conflict o f the underlying division of socialist Yugoslavia— b etw ee n the public and private sectors of e m p lo y m e n t— would explode into class war. It is com m only said that the end o f the cold war in eastern and central E u ro p e , including the disintegration o f Yugoslavia, was the result of an ideological crisis o f disillusionment. In fact, the econom ic ideology of re­ form com m unism was triumphant. In the midst o f war and mutual accusa­ tions o f g enocide, aggression, and destruction o f a country, governments in Slovenia, Croatia, the federal republic o f Yugoslavia (consisting of Ser­ bia and M ontenegro), and M acedonia w ere all im p lem enting an identical m a cro eco n om ic program — a business-oriented, orthodox stabilization policy to cut d om estic dem and (incomes, jo b s , and public expenditures). T h e ir primary problem s rem ained foreign d ebt and effective foreigntrade and exchange-rate policy. T h e leaders elected in 1990 were still in pow er in every state in 1994. T h e same could be said o f postcommunist econom ic policy throughout E a s te r n E u ro p e . D esp ite the introduction o f com petitive elections, the alternation in power betw een renam ed com munists and liberals, with th e ir respectiv e approaches to econom ic growth and to labor, was remark­ ably rem iniscent o f the alternations in Yugoslavia in response to changing international conditions chronicled in this book. T h e breakup of Czeeho-

EPILOGUE

373

Slovakia and th e Sov iet U nion follow ed paths nearly identical to the Yugoslav one o f the constitutional conflict, dem ands for national sover­ eignty o v er e c o n o m ic assets, and conflict over m acroeconom ic policy that accom pany socialist econom ic reform. M o re o v e r, th e successful exit o f Slovenia (in contrast to the rest o f the country) and its pluralistic politics made possible by full em p loy m e n t and a favorable trading position was not a com p lete victory for the Slovene model. T h e conditions that made th e F o č a model a constant factor in Yugoslavia began to confront Slovenia as an independ en t state. W h e re a s un em p lo y m en t had b e e n below 2 p e rce n t in 1988, it increased fivefold b e tw e e n 1989 and 1991 and stood at 14 p e rc e n t by m id -1 9 9 3 .1 This r e ­ flected th e loss o f much o f Slovenia’s form er internal (Yugoslav) m arket for goods, an uncertain international position econom ically, and substantial gov ernm ental d efense expend itures to build a new army and appeal polit­ ically to local nationalists. In response to the influx o f fifty thousand dis­ placed persons and refugees from B osnia-H erzegovina2 (though this was a small n u m b e r com pared to the m ore than half a million refugees in both Croatia and Serbia), th e re was a rise in antiforeigner activities; and a farright, x enophobic, nationalist party won 10 pe rce n t o f the vote in the elections o f N o v e m b e r 1992, which also saw a loss by the anticom m unist coalition to th e fo rm er C o m m u n ists.3 In S e p te m b e r 1992, the Slovene g ov ern m e n t closed its borders to further refugees. T o an even g reater e x te n t in Croatia and Serbia, the co n s e q u e n ces o f insistence on “states’ (national) rights” inclu ded the e co n o m ic drain o f substantial d efense budgets and the growing power domestically o f the police and army. In Croatia, un em ploym en t was b eing kept at bay by the fact that m obilized soldiers w ere not seeking work. B u t it was only a m a t­ te r o f tim e b efo re dem obilization would confront the g o v ern m ent with the ch oice b e tw e e n dealing with a serious social crisis and formulating a real policy toward un em ploy m en t. T h e war pro tected the g o v ern m e n t’s co n v e n ie n t segregation b e tw e e n the ministries o f e con om ic technocrats negotiating with international creditors and the ministries and lobbies o f the d efen se establishm ent. B u t eventually th ere would b e e ith e r confron­ tation or accom m odation b e tw e e n these local versions o f the S lovene and 1 Milan Andrejevich, RFE/RL Daily Report, no 166, August 31, 1993, citing a study by the respected Economics Institute in Ljubljana (renamed the Bajt Institute after its founder, Aleksandar Bajt). 2 Zerdin, "Tokens of Slovene Sovereignty," 4, citing data from UN High Commissioner for Refugees’ Office of the Special Envoy for former Yugoslavia, External Relations Unit, Zagreb. 3 The recipient of this 10 percent (well above the 5 percent minimum for parliamentary representation), Zmago Jelinčič, included in his campaign speeches the accusation that Bos­ nian refugees were fleeing economic deprivation rather than war (Financial Times, D ecem ­ ber 8, 1992, 2).

374

EPILOGUE

Foča models. Yet, in contrast to other areas o f the former Yugoslavia, Slovenia and Croatia were being offered relatively favorable international conditions. In the m eantim e, as war continued in Bosnia-Herzegovina, threatened to resum e in Croatia, and had not yet been avoided in Macedonia and Serbia, the autonomist impulse was still alive. As nationalist governments centralized power and economic control in the new capitals, they were countered by regionalist movements. In n eith er econom ic ideology nor political response had there been much change as a result of the end o f socialist Yugoslavia. Despite the terrible tragedy o f war in the name o f nations, there was only a holding action until a different approach to labor and employment could b e found.

Appendix STATISTICAL DATA

r a w d a t a used to create the figures in this book are presented here. E ach table o f data corresponds to the figure(s) o f the same num ber (for example, table 6-1 corresponds to figure 6-1). All the data were gathered by the Fed eral Bureau o f Statistics, which was created by Ante Novak at the request o f Boris Kidrič in June 1948 and which maintained a consis­ tently high standard o f professional expertise. Unemployment series were hampered, however, by changes in m easurement and definition, and the analysis o f rates of change is hindered by the absence of household sur­ veys on unemployment and by the fact that data on the population and on the actively employed are available only for census years. Statisticalyearbook data and the data o f the O E C D and the IL O (International L a­ bor Organization) are not consistent, but the differences are not substan­ tial enough to affect interpretation; I chose to stay with the longer series and more com prehensive data of the Federal Bureau of Statistics. In some cases, I have taken advantage of the hard work o f gathering and analyzing the bureau’s raw data that was done so carefully by economists Jože M en­ cinger, Miloš Macura, and Em il Primorac; and I am grateful for their generous assistance at several stages in this work. Dan Turner did the tedious work o f putting my many piles o f confusing data into computer files and performed what remain to me miracles in transforming them into graphs and tables.

The

A p p e n d i x T a b l e 6-1 a n d 9-3 Employment and Unemployment, 1962-1975

Social Sector, Economic A ctivity

1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

(1)

Social Sector, Noneconomic A ctivity (2)

Subtotal A (1 + 2 )

Private Sector, Home and A broad (3)

Subtotal B (1 + 2 + 3 )

Registered U nemployed (4)

Subtotal C (1 + 2 + 3 + 4 )

Independent Farmers (5)

Subtotal D (1 + 2 + 3 + 4 + 5 )

2775 2862 3064 3070 2942 2908 2898 3043 3140 3299 3424 3497 3658 3854

549 549 571 595 588 588 599 626 650 683 713 742 779 818

3324 3411 3635 3665 3530 3496 3497 3669 3790 3982 4137 4239 4437 4672

114 144 161 186 252 256 269 463 737 872 882 958 935 890

3438 3555 3796 3851 3782 3752 3766 4132 4527 4854 5019 5197 5372 5562

202 187 172 206 230 238 280 295 294 264 289 354 418 502

3640 3742 3968 4057 4012 3990 4046 4427 4821 5118 5308 5551 5790 6064

4292 4265 4160 4173 4164 4122 4111 4060 3950 3842 3741 3663

7932 8007 8128 8230 8176 8112 8157 8487 8771 8960 9049 9214

Source: M en cin g er, "U tje c a j privred ne aktivnosti na zaposlen ost.”

377

S T A T IS T I C A L DATA

A p p e n d i x T a b l e 6 -2

A p p e n d i x T a b l e 6 -3

Unemployment, 1952-1988

Unemployment Rate, 1959-1988

U nem ployed (in thousands)

1.952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

44.7 81.6 76.2 67.2 99.3 115.9 132.0 161.0 159.0 191.0 236.0 240.0 212.0 236.0 257.0 269.0 310.0 330.0 319.0 291.0 315.0 381.0 448.0 540.0 635.0 700.0 734.0 762.0 785.0 808.0 862.0 910.0 974.0 1039.0 1086.0 1080.0 1128.0

Source: F o r 1 9 5 2 - 5 8 : Macura, “E m ­ ploym ent P roblem s under Declining Pop­ ulation

Growth

Rates

and

Change, 4 96 ; for 1 9 5 9 - 8 8 :

Structural M encinger,

“Privredna reform a i nezaposlenost,” 36.

Percentage U nem ployed

1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

5.8 5.5 6.0 7.3 7.2 6.0 6.6 7.4 7.8 8.9 9.1 8.5 7.4 7.7 9.1 10.1 11.6 13.1 13.9 13.9 13.9 13.8 13.8 14.4 14.9 15.7 16.3 16.6 16.1 16.8

Source: M encinger, “Privredna reform a i nezaposlenost,” 37.

378

APPENDIX A p p e n d i x T a b l e 6 -4

Unemployment: Cross and Net Rates (percentages) 1964

1965

1966

1967

1968

1969

1970

1971

1972

Net unemployment Percentage change

5.6

6.3 12.5

6.4 1.6

7.0 9.4

8.0 14.3

7.8 - 2 .5

7.7 - 1 .3

6.7 -1 3 .0

7.3 9.0

Gross unemployment Percentage change

6.7

7.9 17.9

8.4 6.3

9.6 14.3

12.1 26.0

18.4 52.1

18.3 - 0 .5

19.3 5.5

19.3 0.0

Source: Babić and Primorac, “Analiza koristi i troškova privremenog zapošljavanja u inozemstvu,” tu lile 2 Note: The net rates include only the domestically employed; gross rates include those registered n working abroad as well.

A p p e n d ix T a b l e 6 -5

J o b S e e k e r s a n d M i g r a n t W o r k e r s ( th o u s a n d s )

Registered job seekers Percentage change

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

71.4

68.0

69.2

81.7

126.3

123.7

174.2

164.8

185.4

232.6

274.0

229.0

228.0

266.9

- 4 .8

1.8

18.1

54.6

- 2 .1

40.8

- 5 .4

12.5

25.5

17.8

- 1 6 .4

- 0 .4

17.1

18.0

28.0

42.0

80.0

105.0

130.0

203.4

260.6

316.0

309.0

333.0

396.9

Migrant workers Job seekers plus migrant workers 1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

Registered job seekers Percentage change

265.3

291.5

326.8

315.6

289.7

289.5

333.5

398.7

478.5

583.8

665.2

716.7

- 0 .6

9.9

12.1

- 3 .4

- 8 .2

- 0 .1

15.2

19.6

20.0

22.0

13.9

7.7

Migrant workers

190.0

220.0

260.0

430.0

600.0

680.0

770.0

860.0

810.0

770.0

725.0

705.0

Job seekers plus migrant workers

455.3

511.5

586.8

745.6

889.7

969.5

1103.5

1258.7

1288.5

1353.8

1390.2

1421.7

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

Registered job seekers Percentage change

737.9

775.0

789.2

833.2

887.8

916.3

1012.9

1063.9

1084.5

1087.1

1173.0

1244.9

3.0

5.0

1.8

5.6

6.6

3.2

10.5

5.0

1.9

0.2

7.9

6.1

Migrant workers Job seekers plus migrant workers

695.0 1432.9

690.0 1465.0

693.0 1482.2

675.0 1508.2

675.0 1562.8

650.0 1566.3

625.0 1637.9

Source: For job seekers: Statistički Godišnjak Jugoslavije, various years; for migrant workers, 1960-64: Zimmerman, Open Borders, Nonalignment, and the Political Evolution o f Yugoslavia, table 4.4; for migrant workers, 1965-84: Primorac and Babić, “Systemic Changes and Unemployment Growth in Yugoslavia, 1965-1985,” table 3.

A p p e n d i x T a b l e 6-6 a n d 6-7 Unemployment by Length of Time Waiting on the Employment Service Register (thousands)

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970

T otal

Less T han 6 M onths

Less Than 6 M onths (% Total)

6 -9 M onths

6 -9 M on ths (% Total)

9 -1 2 M onths

9 -1 2 M onths (% Total)

1 -3 Years

1 -3 Years (% Total)

123.7 173.7 164.5 184.9 232.6 274.0 229.0 228.0 266.9 265.3 291.5 326.8 315.6 289.7

92.9 134.2 119.2 133.5 157.0 173.9 150.8 148.1 159.8 151.2 163.6 181.2 166.2 145.8

75.1 77.3 72.5 72.2 67.5 63.5 65.9 65.0 59.9 57.0 56.1 55.4 52.7 50.3

9.5 13.9 14.6 17.8 23.6 29.4 22.5 23.4 30.7 29.9 33.4 40.7 38.2 35.6

7.7 8.0 8.9 9.6 10.1 10.7 9.8 10.3 11.5 11.3 11.5 12.5 12.1 12.3

7.9 11.8 13.6 15.2 25.4 29.4 22.6 23.6 32.3 29.3 34.8 39.1 38.2 38.8

6.4 6.8 8.3 8.2 10.9 10.7 9.9 10.4 12.1 11.0 11.9 12.0 12.1 13.4

11.2 11.2 13.8 14.7 20.3 34.8 25.9 25.1 32.7 41.9 44.5 48.3 50.5 46.7

9.1 6.4 8.4 8.0 8.7 12.7 11.3 11.0 12.3 15.8 15.3 14.8 16.0 16.1

L onger T han 3 Years

2.2 2.6 3.3 3.7 6.3 6.5 7.2 7.8 11.4 13.0 15.2 17.5 22.5 22.8

1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

289.5 333.5 398.7 478.5 583.8 665.2 716.7 737.9 775.0 789.2 833.2 887.8 916.3 1012.9 1063.9 1084.5 1087.1 1173.0 1244.9

153.6 167.9 198.3 224.9 255.3 258.3 257.8 259.0 272.8 267.5 293.1 305.5 292.4 303.4 301.0 290.3 279.4 273.0 235.8

53.1 50.3 49.7 47.0 43.7 38.8 36.0 35.1 35.2 33.9 35.2 34.4 31.9 30.0 28.3 26.8 25.7 23.3 18.9

32.8 40.0 46.6 57.6 68.5 75.4 75.2 68.6 68.4 64.0 66.4 74.7 77.7 84.0 86.6 82.9 83.8 85.3 96.5

Source: Statistički Godišnjak Jugoslavije, various years.

11.3 12.0 11.7 12.0 11.7 11.3 10.5 9.3 8.8 8.1 8.0 8.4 8.5 8.3 8.1 7.6 7.7 7.3 7.8

34.3 42.1 48.1 56.8 67.7 78.9 74.9 72.8 69.4 69.4 65.2 72.8 75.3 83.4 88.1 86.2 82.7 87.6 82.4

11.8 12.6 12.1 11.9 11.6 11.9 10.5 9.9 9.0 8.8 7.8 8.2 8.2 8.2 8.3 7.9 7.6 7.5 6.6

45.5 57.0 77.3 103.5 143.2 183.7 216.0 210.0 234.5 251.7 264.0 270.3 291.7 331.7 337.0 349.1 349.5 381.2 417.4

15.7 17.1 19.4 21.6 24.5 27.6 30.1 28.5 30.3 31.9 31.7 30.4 31.8 32.7 31.7 32.2 32.1 32.5 33.5

23.3 26.5 28.4 35.7 49.1 68.9 92.9 127.5 129.9 136.6 144.5 164.5 179.2 210.5 251.2 276.0 291.7 345.9 412.8

8.0 7.9 7.1 7.5 8.4 10.4 13.0 17.3 16.8 17.3 17.3 18.5 19.6 20.8 23.6 25.4 26.8 29.5 33.2

382

A P P E N D IX A p p e n d i x T a b l e 6 -8

Unemployment— Women

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

R egistered Job Seekers (thousands)

Percentage Change

62.1 84.2 86.5 97.9 108.9 124.2 123.9 126.0 125.2 121.2 127.7 142.1 143.0 141.9 144.8 166.6 203.8 248.1 299.0 337.0 370.8 396.4 425.2 445.0 478.0 512.0 520.0 568.0 596.0 611.0 606.0 641.0 675.0

35.6 2.7 13.2 11.2 14.0 - 0 .2 1.7 - 0 .6 - 3 .2 5.4 11.3 0.6 - 0 .8 2.0 15.1 22.3 21.7 20.5 12.7 10.0 6.9 7.3 4.7 7.4 7.1 1.6 9.2 4.9 2.5 - 0 .8 5.8 5.3

Source: Statistički Godišnjak Jugoslavije, vari­ ous years.

A p p e n d i x T a b l e 6-9, 6-10, a n d 9-1 Unemployment Rate by Republic or Province (percentages)

Yugoslavia Less-developed regions Bosnia-Herzegovina Macedonia Montenegro Kosovo Developed regions Slovenia Croatia Serbia Serbia proper Vojvodina

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

5.8

5.5

6.0

7.3

7.2

6.0

6.6

7.4

7.8

8.9

9.1

8.5

7.4

7.7

9.1

10.1

5.5 10.5 8.5 17.9

4.2 11.5 6.1 15.4

4.5 15.0 5.9 19.3

6.3 15.5 6.3 22.7

5.8 12.0 6.5 31.6

4.8 10.0 5.8 14.6

5.2 15.6 5.7 18.0

5.7 19.3 6.9 26.6

6.5 19.9 8.0 25.4

8.1 22.8 9.2 26.9

8.5 22.5 8.8 28.4

7.4 21.9 8.3 32.3

6.0 21.2 6.5 23.9

6.7 20.8 7.2 22.8

8.5 23.0 11.3 26.6

10.9 25.0 15.0 27.0

2.4 5.1 7.0 7.3 4.2

2.0 5.6 6.1 6.2 4.0

1.7 5.8 6.9 6.9 4.3

2.0 6.7 8.6 8.5 6.1

1.8 6.2 9.8 9.4 6.2

1.4 5.6 7.8 8.4 5.2

1.8 6.1 7.8 8.2 4.9

2.4 6.4 8.4 7.9 5.4

3.1 6.6 8.6 7.9 6.2

3.8 7.2 9.8 8.9 7.6

3.5 6.2 10.9 10.2 8.4

3.1 4.9 10.7 9.9 7.6

2.7 4.3 9.2 8.7 6.7

2.2 4.6 9.6 9.1 7.4

1.8 5.2 11.7 11.1 9.2

1.5 5.1 13.2 12.9 10.0

('c o n tin u ed )

Ap p e n d i x T a b l e

6-9, 6-10,

and

9-1

(C ontinued)

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990*

Yugoslavia

11.6

13.1

13.9

13.9

13.9

13,8

13.8

14.4

14.9

15.7

16.3

16.6

16.1

16.8

14.9

15.9

L ess-developed regions Bosnia-Herzegovina Macedonia M ontenegro Kosovo

12.9 26.8 17.3 30.7

14.8 28.2 17.8 34.1

15.2 26.8 17.3 35.7

15.8 27.2 19.0 36.8

16.5 27.5 19.3 37.8

16.6 27.9 17.5 39.0

16.7 29.0 18.1 39.1

17.9 28.1 19.3 41.0

20.3 26.4 21.6 44.5

23.0 26.7 23.5 49.9

24.4 27.6 24.6 54.2

24.3 27.7 24.6 57.1

23.1 27.3 23.6 57.0

24.1 27.1 26.3 57.8

20.3 21.9 21.6 36.3

20.6 22.9 21.6 38.4

D eveloped regions Slovenia Croatia Serbia Serbia p ro p e r Vojvodina

1.5 6.0 15.1 14.6 12.0

1.8 7.1 17.3 16.5 14.4

1.7 7.1 19.4 19,0 15.8

1.5 6.5 19.6 19.9 13.9

1.3 5.8 19.5 19.5 13.8

1.4 5.7 19.4 18.9 14.4

1.6 6.1 18.7 17.7 14.6

1.7 6.9 19.1 17.9 15.1

2.0 7.4 19.1 17.3 15.6

1.9 7.7 19.5 17.0 15.7

1.8 7.9 20.2 17.4 15.7

1.7 7.9 20.8 17.9 15.6

1.8 7.8 20.3 17.8 13.9

2.5 8.5 20.8 18.1 14.3

3.2 8.0 17.6 15.6 13.6

4.8 8.6 19.1 16.4 16.6

Source: F o r 1959—88: M en cin ger, “Privredna reforma i nezaposlenost,” table 1; for 1 9 8 9 - 9 0 : Statistički Godišnjak Jugoslavije (1990), 16. Note: T h e rate o f unem ploym ent is defined as th e relation betw een the n um b er o f unemployed (registered jo b seekers) and th e total n u m b er o f employed and unem ployed persons. * Estim ate

A p p e n d i x T a b l e 6 -1 1

Socioeconomic Structure of the Population by Republic or Province (percentages of total population) Agricultural Population

Economically A ctive Population

Urban Population

1953

1961

1966

1971

1979

1981

1953

1961

1966

1971

1979

1981

1953

1961

1971

1981

Yugoslavia

46.3

45.0

44.1

43.3

43.3

44.0

60.9

49.6

44.9

38.2

29.3

19.9

21.7

28.3

38.6

46.5

Less-developed regions Bosnia-Herzegovina Macedonia Montenegro Kosovo

42.5 40.8 36.4 33.2

39.2 39.4 34.3 34.8

37.8 38.8 33.1 30.1

36.7 38.3 32.7 26.0

36.7 38.2 32.7 25.9

38.7 41.8 34.3 23.8

62.2 62.7 61.5 72.4

50.2 41.3 47.0 64.2

45.1 45.8 41.0 58.4

40.0 39.9 35.0 51.5

28.9 28.9 26.0 42.2

17.3 21.7 13.5 24.6

15.0 26.1 14.2 14.6

19.5 34.9 21.1 19.5

27.9 48.1 34.2 26.9

36.2 53.9 50.7 32.5

Developed regions Slovenia Croatia Serbia Serbia proper Vojvodina

40.8 47.7 48.4 52.4 45.4

48.3 47.0 47.3 51.1 44.0

48.3 46.4 51.4 n.a. 43.6

48.4 45.5 45.7 51.5 42.7

48.4 45.5 51.5 n.a. 42.7

50.3 45.6 45.4 51.8 44.3

41.1 56.4 66.7 67.2 62.9

31.1 43.9 56.1 56.2 51.8

26.0 37.7 50.2 n.a. 40.6

20.4 32.3 44.0 44.1 39.0

12.5 24.1 34.5 n.a. 32.0

9.4 15.2 25.4 27.6 19.9

22.0 24.3 22.5 21.2 29.5

28.9 30.8 29.8 28.6 38.3

37.7 41.0 40.6 40.8 48.7

48.9 50.8 46.6 47.8 54.1

Source: Statistički Godišnjak Jugoslavije, various years.

386

APPENDIX A p p e n d ix T a b le

6-12

and

6-13

U n e m p l o y m e n t b y A g e S tr u c tu r e (tho u san d s)

123.7 173.7 164.5 184.9 232.6 274.0 229.0 228.0 266.9 265.3 291.5 326.8 315.6 289.7 289.5 333.5 398.7 478.5 583.8 665.2 716.7 737.9 775.0 789.2 883.2 887.8 916.3 1012.9 1063.9 1084.5 1087.1 1173.0 1244.9

21.7 19.8 24.1 20.3 24.2 24.6 29.7 36.0 31.7 29.4 31.6 30.7 27.4 29.3 31.1 34.1 40.4 38.6 50.3 45.9 48.8 49.7 54.5 55.5 60.2 68.1 75.7 83.1 81.9 79.0 80.4 77.6

9» 00

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

Total

Below 18 Years

Below 18 Years

19 to 24 Years

Below

(%

25

Total)

19 to 24 Years

Total)

Years

7.1 12.5 12.0 13.0 8.7 8.8 10.7 13.0 13.5 11.9 10.1 9.7 9.7 9.5 10.1 9.3 8.6 8.4 6.6 7.6 6.4 6.6 6.4 6.9 6.7 6.8 8.6 7.5 7.8 7.6 7.3 6.9 6.2

37.5 52.1 52.3 56.1 63.3 76.8 60.6 62.1 75.9 85.8 93.6 110.6 112.6 108.2 111.2 139.0 180.1 222.1 279.1 305.3 346.8 356.0 375.1 383.9 410.2 450.5 476.0 532.0 551.1 558.3 550.7 584.9 602.7

30.3 30.0 31.8 30.3 27.2 28.0 26.5 27.2 28.4 32.3 32.1 33.8 35.7 37.3 38.4 41.7 45.2 46.4 47.8 45.9 48.4 48.2 48.4 48.6 49.2 50.7 51.9 52.5 51.8 51.5 50.7 49.9 48.4

46.3 73.8 72.1 80.2 83.6 101.0 85.2 91.8 111.9 117.5 123.0 142.2 143.3 135.6 140.5 170.1 180.1 262.5 317.7 355.6 392.7 404.8 424,8 438.4 465.7 510.7 544.1 607.7 634.2 640.2 629.7 665.3 680.3

(%

Source: Statistički Godišnjak Jugoslavije, various years.

387

S T A T IS T I C A L DATA

Below 25 Years (% Total)

37.4 42.5 43.8 43.4 35.9 36.9 37.2 40.3 41.9 44.3 42.2 43.5 45.4 46.8 48.5 51.0 45.2 54.9 54.4 53.5 54.8 54.9 54.8 55.5 55.9 57.5 59.4 60.0 59.6 59.0 57.9 56.7 54.6

25 to 39 25 to 39 Years

Years (% Total)

48.0 64.9 61.5 70.8 94.1 121.8 97.5 94.2 105.2 101.4 119.0 142.9 128.4 113.0 102.5 114.9 130.0 158.9 194.2 219.1 236.5 245.0 259.0 261.9 277.5 288.4 290.0 322.3 344.7 361.1 374.3 416.9 258.9

38.8 37.4 37.4 38.3 40.5 44.5 42.6 41.3 39.4 38.2 40.8 43.7 40.7 39.0 35.4 34.5 32.6 33.2 33.3 32.9 33.0 33.2 33.4 33.2 33.3 32.5 31.6 31.8 32.4 33.3 34.4 35.5 20.8

40 to 49 Years

40 to 49 Years (% Total)

A b ove 50 Years

A bo ve 50 Years (% Total)

19.4 25.1 22.1 23.9 37.9 34.7 30.7 28.9 33.7 32.4 34.8 31.9 31.7 29.3 32.6 34.7 39.1 41.2 52.2 58.1 63.6 63.0 64.8 62.4 62.3 61.2 56.8 56.2 55.8 55.2 55.0 60.3 249.0

15.7 14.5 13.4 12.9 16.3 12.7 13.4 12.7 12.6 12.2 11.9 9.8 10.0 10.1 11.3 10.4 9.8 8.6 8.9 8.7 8.9 8.5 8.4 7.9 7.5 6.9 6.2 5.5 5.2 5.1 5.1 5.1 20.0

10.0 9.9 8.8 10.0 17.0 16.5 15.6 13.1 16.1 14.0 14.7 9.8 12.2 11.8 13.9 13.8 15.4 15.9 19.7 32.4 23.9 25.1 26.4 26.5 27.7 27.5 25.4 26.7 29.2 28.0 28.1 30.4 56.7

8.1 5.7 5.3 5.4 7.3 6.0 6.8 5.7 6.0 5.3 5.0 3.0 3.9 4.1 4.8 4.1 3.9 3.3 3.4 4.9 3.3 3.4 3.4 3.4 3.3 3.1 2.8 2.6 2.7 2.6 2.6 2.6 4.6

388

A PPENDIX A p p e n d i x T a b l e 6-14 a n d 6-15 Unemployment, 1952-1989 (thousands)

1952 Total registered jo b

7 1 .4

1953

1954

1955

1956

1957

1958

1959

1960

1961

68.0

69 .2

8 1 ,7

126.3

123.7

174.2

164.8

185.4

232.6

-4 8

1.8

18,1

5 4 .6

-2 .1

4 0 .8

-5 .4

12.5

25.5

n. a.

n.a

62.1

8 4 .2

8 6 .5

9 7.9

108.9

3 5.6

2 .7

13.2

11.2

5 0 .2

4 8 .3

5 2 .5

52.8

46.8

5 2 .7

61.8

66.6

seekers P erc en ta g e change Registered jo b

n a.

n.a.

n.a.

see kers— W o m en P erc en ta g e change P erc en tag e o f total P ersons seeking a jo b

157

16.9

18.4

19.7

29.8

3 2 .6

5 0 .2

7 .6

P ercen tage o f total

22.0

2 4 .9

8 .9

7.1

5 4 .0

5 .0

17.3

7.8

2 4.1

5 1.3 2 3 .6

9 .4

2 6 .6

2 6 .4

2 8 .8

3 2 .0

3 3.3

28.6

Job seekers with univ.,

n.a.

n.a.

n.a.

n.a.

n a.

7 ,5

8.3

8.2

5.3

for th e first time P ercen tage change

n.a.

college, intermedi­ ate, or secondary education* P ercen tage change P ercen tage o f total Migrant workers

4.3 n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

10.7

-1 .2

-3 5 .4

5 .0

4,4

2.3

18.0 203.4

260.6

n.a.

Jo b seekers plus

28,0

m igrant workers Jo b seekers receiving

n a.

n.a.

n.a.

n.a.

n.a.

21.2

23.1

22.8

20.5

29.1

9 .0

-1 .3

-1 0 .1

42.0

17.1

13.3

13.8

11.1

12.5

unem ploym ent compensation P ercen tage change P ercen tage o f total

Sources: Statistički Godišnjak Jugoslavije , various years; Yugoslav Survey , various years; for migrant workers, 1 9 6 0 - 6 4 : Zim m erm an, Open Borders, Nonalignment, and the Political Evolution o f Yugoslavia, tab le 4 .4 ; for migrant workers, 1 9 6 5 - 8 4 : P rimorac and Babić, “System ic Changes and Unemployment Grow th in Yugoslavia, 1 9 6 5 - 1 9 8 5 / ’ table 3. * Annual averages

389

S T A T IS T I C A L DATA

1'XU

J965

1966

1967

2 2 9 .0

2 2 8 .0

2 6 6 .9

2 6 5 .3

2 9 1 .5

17.8

-1 6 .4

-0 .4

17.1

-0 .6

124.2

123 .9

126.0

125.2

121.2

1962

/.96.3

274.0

1968

1969

1970

1971

1972

1973

3 2 6 .8

3 1 5 .6

2 8 9 .7

2 8 9 .5

3 3 3 .5

3 9 8 .7

9 .9

12.1

-3 .4

-8 .2

-0 .1

1 5 .2

19.6

127.7

142.1

143.0

141.9

144.8

1 66.6

2 0 3 .8

14.0

-0 .2

1.7

-0 .6

-3 .2

5 .4

11.3

0.6

-0 .8

2.0

15.1

2 2 .3

45.3

5 4 .1

5 5 .3

4 6 .9

4 5 .7

4 3.8

4 3 .5

4 5 .3

4 9 .0

5 0 .0

5 0.0

5 1 .1

83.8

8 2.6

9 1 .9

8 8 .3

8 7.4

9 2 .8

129.8

145.6

148.2

145.7

179.8

22 0 .4

25.8

-1 .4 36 .1

11.3

-3 .9

-1 .0

6.2

3 9 .9

12.2

1.8

-1 .7

2 3 .4

22.6

30.6

40 .3

3 3.1

3 2 .9

3 1 .8

3 9 .7

46.1

51 .2

5 0 .3

5 3 .9

55.3

5 .0

8.3

8 .7

10.7

17.2

2 6 .3

4 3 .0

4 3 .2

42 .3

41 .8

4 7 .7

6 3 .5

-5 .7

3 3 .1 15.9

66.0

4 .8

2 3 .0

6 0 .7

5 2 .9

63 .5

0 .5

-2 .1

-1 .2

14.1

1.8

3.6

3 .8

4 .0

6.5

9 .0

13.2

13.7

14.6

14.4

14.3

4 2.0

8 0 .0 3 0 9 .0

105.0 3 3 3 .0

1 30.0 3 9 6 .9

19 0.0

220.0

2 6 0 .0

4 3 0 .0

7 7 0 .0

8 6 0 .0

45 5 .3

5 1 1 .5

5 8 6 .8

7 4 5 .6

6 0 0 .0 8 8 9 .7

6 8 0 .0

316.0

9 6 9 .5

11 0 3 .5

1 2 58.7

3 4 .6

2 3 .8

21.8

3 2 .7

3 1 .5

3 2 .8

2 7 .5

16.8

10.6

10.5

10.2

11.5

18.9

-3 1 .2 10.4

-8 .4

5 0 .0

-3 .7

4.1

-3 6 .9

-0 .9

-2 .9

1 2.7

12.3

11.9

11.3

-1 6 .2 8 .4

-3 8 .9

9 .6

5 .3

3 .7

3 .6

3.1

2 .9

12.6

('c o n tin u e d )

390

APPENDIX A p p e n d ix T a b l e

6-14

and

6-15

(Continued)

1974

1975

1976

1977

1978

1979

mo

Total registered job seekers Percentage change

478.5

583.8

665.2

716.7

737.9

775.0

789.2

20.0

22.0

13.9

7.7

3.0

5.0

1.8

Registered job seekers— Women Percentage change Percentage of total

248.1

299.0

337.0

370.8

396.4

425.2

445.0

21.7 51.8

20.5 51.2

12.7 50.7

10.0 51.7

6.9 53.7

7.3 54.9

56.4

Persons seeking a job for the first time Percentage change Percentage of total

284.4

349.1

401.7

449.5

486.9

528.5

537 7

29.0 59.4

22.7 59.8

15.1 60.4

11.9 62.7

8.3 66.0

8.5 68.2

1.7 68.1

Job seekers with univ., college, intermedi­ ate, or secondary education* Percentage change Percentage of total

79.4

93.4

110.3

134.2

155.0

174.8

204 7

25.0 16.6

17.6 16.0

18.1 16.6

21.7 18.7

15.5 21.0

12.8 22.6

17.1 25.9

810.0 1288.5

770.0 1353.8

725.0 1390.2

705.0 1421.7

695.0 1432.9

690.0 1465.0

693.0 U82.2

11.3

17.1

18.7

17.2

18.4

21.1

19.7

- 1 .7 2.4

51.3 2.9

9.4 2.8

- 8 .0 2.4

7.0 2.5

14.7 2.7

-6 .6 2.5

Migrant workers Job seekers plus migrant workers Job seekers receiving unemployment compensation Percentage change Percentage of total

4.7

391

S T A T IS T I C A L DATA

m i

/982

1983

1984

¡985

833.2

887.8

916.3

1012.9

1063.9

1084.5

1087.1

1173.0

1244.9

5.6

6.6

3.2

10.5

5.0

1.9

0.2

7.9

6.1

478.0

512.0

520.0

568.0

596.0

611.0

606.0

641.0

7.4 57.4

7.1 57.7

1.6 56.7

9.2 56.1

4.9 56.0

2.5 56.3

- 0 .8 55.7

5.8 54.6

5.3 54.2

569.2

607.3

635.1

714.3

759.7

776.4

764.7

806.2

846.5

5.9 68.3

6.7 68.4

4.6 69.3

12.5 70.5

6.4 71.4

2.2 71.6

- 1 .5 703

5.4 68.7

5.0 68.0

236.6

280.0

315.6

357.7

384.6

401.0

400.5

420.0

446.3

15.6 28.4

18.3 31.5

12.7 34.4

13.3 35.3

7.5 36.2

4.3 37.0

- 0 .1 36.8

4.9 35.8

6.3 35.9

675.0 1508.2

675.0 1562.8

650.0 1566.3

625.0 1637.9

28

27.4

50.5

28.3

27.6

29.4

31.9

44.6

41.4

42.1 3.4

- 2 .1 3.1

84.3 5.5

- 4 4 .0 2.8

- 2 .5 2.6

6.5 2.7

18.7 3.2

27.8 3.8

- 7 .2 3.3

ii. a.

№

6

n.a.

1987

n.a.

im

n.a.

1989

675

n.a.

392

A P P E N D IX A p p e n d i x T a b l e 6-16, 6-17, a n d 9-2 Youth U nem p loy m ent Rates by R epublic or Province (percentages)

1965

1970

1975

1980

1983

1984

1985

Yugoslavia

20.6

15.3

22.2

27.7

33.0

35.1

37.3

L ess-developed regions Bosnia-Herzegovina Macedonia M ontenegro Kosovo

19.8 59.2 65.4 18.3

12.2 41.3 26.4 25.0

25.4 43.3 31.9 35.5

32.6 49.8 35.6 43.5

42.2 50.6 46.0 56.6

46.9 69.8 51.7 62.8

52.7 72.2 56.4 68.6

D ev e lo p e d regions Slovenia Croatia Serbia Vojvodina

5.5 20.1 23.4 15.7

5.8 8.2 22.5 13.9

2.9 13.3 28.9 24.0

3.0 14.2 35.5 34.0

4.4 20.8 37.0 35.4

4.0 22.4 36.1 34.1

3.7 24.3 34.9 32.7

Source: P rimorac and C h arette, “Regional Aspects o f Youth Unem ploym ent in Yugo­ slavia,” 218. Note: “Y outh” refers to persons aged 27 years or younger.

A p p e n d i x T a b l e 8-1 Social Sector E m p loy m ent by R epublic or Province (percentages of total em ploym ent)

1965

1975

Yugoslavia

18.4

21.9

L ess-developed regions Bosnia-Herzegovina M acedonia M ontenegro Kosovo

13.7 15.6 14.1 8.1

16.8 19.0 17.7 9.6

D ev elo p ed regions Slovenia Croatia Serbia Serbia p ro p e r Vojvodina

30.8 21.8 16.8 16.8 22.0

37.3 25.1 20.2 21.7 23.7

Source: Statistički Bilten Jugoslavije (1977), cited in Pleskovič and D olenc, “Regional D evelop m ent in a Socialist, Developing, and Multinational C o u n try,” 12.

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INDEX

Achesnn, Dean, 144 Adam, Jan, lln .2 2 administrative period, 64, 6 6 -9 7 , 163, 168 agricultural policy: agrarian reform, 5 7 -5 8 , 60, 70, 90, 242, 266; change to gain labor for production, 117; gradualist socializa­ tion, 161; Green Plan, 236, 279; for pro­ ductivity, 286; sectoral distinctions, 285­ 86; with self-reliance strategy, 108-21; Slovene and Foča models’ adjustment to, 2 6 4 -6 5 agricultural production: dependence on, 1 0 5 -6 ; drought years, 160; for export, 96, 130; policy to control, 112-14; pres­ sure to increase, 6 0 -6 1 , 75, 90 agricultural sector: employment decline, 191, 348; exodus from, 2 86 -89 ; labor force surplus, 67, 102, 2 6 3 -6 4 ; radicalization, 100; socialist transformation, 243; voluntary labor in, 140-41. See also farmers’ (marketing) cooperatives; labor brigades; landholdings, agrarian; private sector; villages Agrokomerc affair (1987), 295 aid, foreign: dependence on, 9 5 -9 6 ; indus­ trialization strategy based on, 7 7 -8 0 ; from postwar Soviet Union, 8 0 -8 1 ; re­ quests for and receipt of, 8 1 -8 3 , 100, 121; UNRRA assistance, 83, 95, 99; U .S., 99, 1 50 -51, 249; U .S. military, 159 See also credit, foreign; military sector Albanians: land purchases, 298; national­ ism, 40, 343, 358, 3 6 5 -6 6 ; as political force, 3 4 2 -4 4 Alt, James, 27, 28n Antifascist Council for the Liberation of Yugoslavia (AVNOJ), 5 2 -5 4 , 57 Appleby, Joyce O , 17, 162 Arab-Israeli War (1967), 250 Arsov, Ljubčo, 123, 153 Austria, 9, 342, 357 Austrian unemployment theory, 2 1 4 -15 Austromarxism, 35, 4 8 -4 9 , 52, 155

autonomy: budgetary, 73, 167; competition to retain, 23; conflict over provincial, 365; farmers’ cooperatives, 8 9 -9 1 , 172; firms, 72; peasants, 9 1 -9 2 ; producers and production brigades, 1 4 2 -4 4 , 151, 185; republic governments, 3 3 6 -3 7 ; Slov­ ene model, 59, 265; Yugoslavian territo­ ries, 52 -5 3 . See also decentralization; self-management concept AVNOJ. See Antifascist Council for the L ib­ eration of Yugoslavia (AVNOJ) Bakaric, Vladimir, 137, 138, 150, 301, 312 balance of payments: commodity-trade ac­ count (1948), 129; current account liquid­ ity, 223; deficits, 95, 129, 223, 226, 244, 247, 287; effect of U .S. loans on, 145; for­ eign aid supports for, 228; with remit­ tances, 228, 246, 254, 269, 293; subdivided among republics, 235, 253. See also economic shocks; exchange-rate system; foreign policy; trade, foreign; trade deficit Balkan Pact (1954), 241 Banac, Ivo, 32, 33n, 34n, 49n, 56n, 62n banking system, 185; Austrian banks (1985), 357; autonomous producers linked through, 172; borrowing abroad, 235, 253; branches of National Bank, 123; co­ operative principle, 185; crisis, 3 5 1 -5 2 ; crisis (1987), 351; in liquidity crisis, 229­ 30; recentralization (1980s), 355; in re­ publics, 290, 292—93; with socialization of investment, 245; territorial organiza­ tion of, 230 bargaining, wage See collective bargaining barter system, 125 Bartlett, William, 212 basic organizations of associated labor (BOALs), 277 benefits: under constitution, 4 1 -4 2 ; worker acceptance of limits on, 261 Bicanic, Rudolf, 44n, 47n Blazevic, Jakov, 109, 112, 113, 115 Bolcic, Silvano, 337, 336n, 337n

428

INDEX

borrowing. See loans Bosnia-Herzegovina: abolition of district government, 270; Agrokomerc affair (1987), 295; capitalist development, 38; deindustrialization, 291; employment bu­ reaus, 178; large-scale agricultural pro­ duction, 285; low level o f development, 283; mines in, 94; as nation, 39; national­ ism, 366; relocation of defense-related industries in, 139, 284; separate party or­ ganization, 40; unemployment rates, 201, 2 0 4 -5 , 298, 3 3 9 -4 4 . See also Foca model Bretton Woods, 251 brigades. See labor brigades; Partisans; Popular Front; production brigades Broz, Josip. See Tito, Josip Broz budget deficits, 108, 131 Bukharin, Nikolai, 75, 90, 171 bureaucracy: critique, 30; differences be­ tween Slovene and Foca models, 161; re­ duction plan, 132; transfer to republics of federal, 250- See also employment bureaus cameralism, 18, 28 Cameron, David, lOn Cannon, Cavendish, 122, 129 capital: demand for foreign, 249; effect of scarce, 1 64 -65 ; focus on need for, 66; foreign aid to supplement, 77, 79 -8 0 ; formation, 225; government role in redis­ tribution, 186; industrialization require­ ments, 79, 2 2 4 -2 5 ; Marxist idea of formation, 1 8 -2 0 ; plan for accumulation of, 6 8 -6 9 , 7 5 -7 7 , 110; producers’ control of, 183—85, 229—30; redistribution through General Investment Fund, 186­ 87; strategy for access to foreign, 224. See also aid, foreign; credit, foreign; trade, foreign capital flows: within autonomous republics, 290; to more developed areas, 284; Slov­ enia and Croatia (1985), 357; territorialization, 282, 290 capitalist theory: as applied in Yugoslavia, 76; Marxist analysis, 3 capitalist unemployment, 27; elimination of, 311; rejection of, 322 capital markets: direct borrowing by banks and firms, 253; independent institutional

entrance into, 249; obstacles to, 219; separate from labor markets, 312; in separate republics, 296; unemployment without, 214 central bank (National Bank): control of en­ terprise finances, 152; credit policy, 123; foreign loan guarantees, 185, 225; re­ newed authority of, 351; socialization of debt under, 2 2 9 -3 0 . See also banking system centralization: combined with decentraliza­ tion, 1 3 0-4 4; of economic policy making, 119; under self-reliance policy, 130-33; in Slovene economic methods, 161-62 Chayanov, A. V., 313 class struggle, Yugoslav style, 114, 118 -1 9 Cobeljic, Nikola, 210 Cocom Accords (1947), 95 collective bargaining, 8 8 -8 9 , 1 53 -55, 261, 326 collective consumption goods, 271 collectives. See farm collectives; producers; work collectives Comisso, Ellen, 15n, 33n, 326, 334n commodity shortages: response to, 124-26, 145-4 6; U.S. food donations, 150-51. See also aid, foreign; rationing; trade, foreign Communist Party o f Yugoslavia (CPY): adoption of Slovene coalition principles, 5 9 -6 0 ; alliance with Croat Peasant party, 5 5 -5 6 ; authority shifted to, 133 -34 ; be­ comes League o f Communists, 64, 182; consolidation of power (1948), 126-27; fusion of party with military functions, 5 1 -5 3 ; heterogeneous ideologies in, 35­ 38; interwar alliances, 32; nationalism of, 56; purge (1948), 11 9 -20; strategy to en­ compass heterogeneity, 4 1 -4 9 . See also League of Communists of Yugoslavia (LCY) community farms, 1 0 4 -6 comparative advantage: conflict over impor­ tance of, 240; of regions, 292; source of, 224 competition: with declining resources, 354; labor market, 112-13, 175, 3 2 5 -2 6 , 337­ 38; in labor market and political system, 3 5 3 -5 4 ; among party leaders, 335; among property owners, 355; socialist, 78, 96

IN D E X Connor, Walker, 35, 41 conscription, military, 147 constitutions: amendments, 250, 274; Basic Law (1953), 164, 184; commission (1983), 255; constitution and related workers' constitution (1974), 164—65, 237, 250— 51; economic policy (1963), 270; of 1921, 4 1 - 4 2 ; principles of representation (post-1963), 184; provisional adoption (1943), 36; regulation o f employment by, 317; revised, 1 8 0-8 1. See also legislation consumption, domestic: comm mod ity scar­ city, 124—26, 145—46; plans for, 6 8 -6 9 ; rationing, 104; regulated by incomes and employment, 263; socially necessary, 69 cooperatives: capitalist focus of, 76; charac­ terization o f farmers in movement for, 8 9 -9 0 ; legal mechanism for, 90; local level, 74; requisitioning of agricultural products, 90; revised basic law (1948), 136; subdivision of, 277; trade by linked prices, 1 1 3 -1 5 ; tradition in Croatia and Slovenia, 43; village, 44, 92. See also farmers (marketing) cooperatives; labor cooperatives Council for Mutual Economic Assistance (CMEA), 29, 241, 349 Cox, Terry, 21n.42 credit: as alternative to revenues from pro­ duction, 302; IM F , 187, 228, 229, 245, 347; obstacle to access, 219; for public sector agriculture, 285; in regional and republican banks, 292; with socialization of investment, 2 4 5 -4 6 . See also debt, ex­ ternal; loans, foreign credit, foreign: dependence on, 163, 257; direct borrowing of firms and banks, 235; economic policy related to, 2 4 1 -4 2 , 265­ 66; Joint Export-Import Agency, Allied occupation, 144, 150; relation to current account deficit, 226; relation to domestic taxation, 232; from Soviet Union, 243; suspension of lending, 254 See also debt, external; International Monetary Fund (IM F); World Bank Croatia: decline in economy and employ­ ment, 359; demand for territorial con­ trol, 256; employment bureaus, 178-79; foreign currency flows to, 235; industrial­

429

ization in, 94; investment in, 291; juris­ dictions granted (1939), 69; mines in, 94; nationalism, 5 5 -5 6 , 3 6 6 -6 7 ; national se­ curity issue, 255; organized unions and working class, 41; plans for development* 297, regional differences within, 2 8 9 -9 0 ; surplus labor emigration, 3 3 8 -3 9 ; unem­ ployment rates, 201, 2 0 4 -5 , 208; unrest (after 1967), 275 Croatian Communist party, 36, 43, 5 5 - 5 6 Croatian Liberation Front (ZAVNOH), 50, 55 Croatian school of rural sociology, 210 Croat Peasant party (CPP), 4 3 -4 4 ; alliance with Communist Party of Yugoslavia, 55­ 56; influence of economists from, 210; withdrawal of Communist party support (1947), 107 currency: devaluation, 159, 2 3 2 -3 3 , 251; reform goals (1945), 70 Cvetkovic-Macek Agreement (1939), 69 Czechoslovakia, 14, 28, 82 Dalmatia, 43, 44, 2 8 3 -8 4 , 290, 325 data, employment and unemployment, 194-208, 240, 264, 3 3 8 -4 4 , 3 7 5 -9 4 Davies, R. W., 28, 73n, 153n debt, external: federal government guaran­ tee for, 235; postponement, 250; recyc­ ling, rescheduling, and refinancing, 225, 249, 2 5 2 -5 4 , 275, 3 4 8 -4 9 ; refunding by European governments, 249; repayment, 227, 372; republics' responsibility, 295; service of, 253. See also credit, foreign; loans, foreign decentralization: combined with centraliza­ tion, 130—44; cost at local level, 3 0 0 -3 0 1 ; effect on labor markets, 264; effect on size of public sector, 2 7 4 -7 5 , 289; fail­ ure, 165, 350; in Foca model, 265; IM F campaign for, 236; with openness to for­ eign trade, 2 3 3 -3 6 ; in perceived wither­ ing away of the state, 171, 250; rationale for, 69, 331; to regional party headquar­ ters, 52. See also government, local; lo­ calization; villages defense policy: changes, 274; conscription and military training, 276; effect of, 248; effect of political strategy on, 9 8 - 9 9 ; fac­ tors in arms race, 3 4 8 -4 9 ; firm and local government responsibility for, 250, 276;

430

INDEX

defense policy (cont.) localization of government tasks as, 119; mobilization, 268; redrawing of military districts, 360; relation to access to foreign capital, 224-25; relation to foreign pol­ icy, 146-47, 241; in response to foreign trade problems, 116-17; of security zones, 139, 284; with socialization, 187-88 deficits, domestic, 108, 131 democracy: economic, 5, 322; local level, 74; with party decentralization, 135-36; technocratic, 118 developmentalist school; approach to economic policy, 245; approach to unem­ ployment, 210-12, 216-17; over­ shadowed by liberal school, 272 developmentalist state, 17-18 development theory: contradictions in, 165; developmentalists' school, 210; liberal school, 210 discrimination: against employment of women, 104; by national origin, 338, 347, 366-67; against new labor force en­ trants, 336; with rising unemployment, 360-61; against surplus labor, 153; against training of professionals, 302. See also ethnic criteria Djilas, Milovan, 40n, 73n, 75 Dolomite Agreement (1943), 51 Dreze, F., 221 dualism: economic/political, 127, 183, 189; of socialist/capitalist strategy, 76; of un­ employment/employment concept, 8 economic coercion concept, 146, 150, 151, 168, 174-75 Economic Council, Yugoslavia, 73, 122, 125 economic growth: based on foreign loans and credits, 244; Foča model, 265; gov­ ernment priority to promote, 222-23; Marxist ideology, 18-20; Ricardian growth path, 224-25, 233; strategy with openness to foreign trade, 224-37; Todaro and Harris-Todaro models, 212 economic interest concept, 321 economic performance: effect, 263; factors in rise and fall of, 225, 230-31 economic planning: five-year plan, 73-76, 95-96; focus of, 84; as policy goal, 170; republican government level, 282

economic policy: adjustment to strategy for, 96-97; conflict over development strategy, 74-83; correlation with unem­ ployment patterns, 240, 264; for develop­ ment, 287; differences in approach, 336­ 38; factors changing (1973), 251; with focus on global economy, 244-53; to in­ crease growth, 268-69; influence of for­ eign credit availability, 236, 241; to meet Tito s self-reliance policy, 108-9, 121-28; party role in coordination and control, 134; political conflict over, 237-56; re­ forms, 247-48, 347; reforms, response of republics, 355-59; with renewed auton­ omy of republics, 148. See also aid, for­ eign; economic planning; export promotion; investment; monetary policy; Reform (1965); self-reliance policy; trade, foreign economic shocks: external, 130, 230-33, 253-54, 257-58; oil-price shocks effect (1973, 1979), 251, 253-54; from response to international conditions, 240 economy: nonplanned socialist, 170-73; or­ ganized around labor-managed firms, 12, 15, 166, 208, 212-13, 215, 220, 263, 266n, 267n; post-World War II local, 60­ 61 economy, global: effect of Yugoslav re­ sponse to, 227-40, 244-53; national in­ dependence in, 28, 33-34, 38, 98, 146, 164, 165, 256 education: economic status with, 318; as investment, 317; reform, 276-77, 289, 362; republic policy and jurisdiction, 271, 290, 336, 338; secondary and uni­ versity, 289, 338; vocational, 273, 276­ 77 Eichengreen, Barry, 23-24 electoral laws, 184n.51 employment: adjustment by moving workers, 263; as bundle of rights, 317; demand for increased, 99; differentia­ tion between private and public sectors, 347; with economic reform (1980s), 347; effect of trade deficits on, 263; fac­ tors affecting domestic, 226-27; hid­ den surplus, 197; incentive proposals (1980s), 281-82; of labor surplus, 66— 67, 74, 102; lack of federal jurisdiction over, 259; narrowed definition of, 196-

IN D E X 97; national identity as criterion for pub­ lic, 347; private sector in villages, 334; productivity for expansion of, 174; pro­ jected public sector (1947), 96; ration­ ing criteria related to, 15 2-53; regula­ tion by allocation of provisions, 152-53; relation to political action, 3 3 9 -4 4 ; so­ cialist concept of full, 3 - 1 1 ; socialization through public sector, 262. See also over­ employment; socialism; unemployment; workers; workers, private sector; workers, skilled employment bureaus: functions and success of, 86, 195; registration rates, 191; re­ training programs, 300; self-management by, 178 -79 employment contracts: defining legally reg­ ulated jo b classification, 166, 174; effect of, 162; growth (1957-82), 191; legal en­ forcement provisions, 151-53 employment rates, 192, 3 7 5 -9 4 ; compari­ son of sectoral, 2 5 -2 6 ; levels in socialist and capitalist countries, 27 Estrin, Saul, 2 1 3 -1 4 , 216, 220 ethnic criteria: in jo b rationing, 301; in stu­ dent and employee selection, 301, 338 Europe: integration, 349; postwar relations with, 82; provision of coal for, 144 European Community (EC): monetary uni­ fication, 349; negotiations with (1980s), 3 4 9 -5 0 ; trade agreements with (1970, 1976), 29, 251, 253 European F ree Trade Association (EFTA), 253, 350 exchange-rate system, 159, 169; with open­ ness to foreign trade, 2 3 2 -3 5 ; recentral­ ization (1980s), 3 5 5 -56 . See also foreign exchange export production: earnings from, 146; dur­ ing economic crisis (1948), 122 -25 ; effect on balance of payments, 129; increased, 96—97, 9 9 -1 0 0 , 102; producer control of, 235 export promotion, 229, 246, 25 0-5 1 factors o f production: allocation in socialist societies, 2 2 -2 3 ; price regulation, 169­ 70; shortages, 130-31 Farkaš, Vladimir, 2 1 6-1 8, 220 farm collectives, 125 farmers, private sector: cooperative move­

431

ment, 8 9 -9 0 ; policy to undercut market power, 112 -1 3 ; requirements of, 244 farmers’ (marketing) cooperatives, 4 3 - 4 4 , 8 9 -9 1 ; conceived as autonomous social­ ist communities, 8 9 -9 1 , 172; employ­ ment in, 162; monopoly position (1953, 1957), 242, 2 4 3 -4 4 ; organization of, 61; relation to standard of living, 7 3 -7 4 , 84; renewed favoritism for, 150; replace­ ment of free markets, 113; speculators in, 106 Federal Bureau of Employment, 269 federalism: confirmation (1924), 36, 63; eco­ nomic, 72; effect on states economic pol­ icy, 76; provisional government (1943), 3 9 -4 0 , 52 Feiwel, George, 12 -1 3 financial system: liquidity crisis, 229; pro­ ducer control, 1 8 3-8 5, 2 2 9 -3 0 ; Yugoslav argument for control of, 219, 2 2 2-2 4. See also banking system firms: autonomy of, 7 2 -7 3 ; borrowing abroad, 235, 253; conflicts within and b e­ tween, 3 3 0-3 2; defense and security sys­ tems as responsibility of, 250; development of private sector, 303; effect of legislation on employment policies, 2 7 8 -8 0 ; financing of social services, 262; foreign exchange retention by, 2 3 4 -3 5 ; freedom to access foreign credit, 235; privatization policy for, 280; relation to workers councils, 267; role in Slovene model, 183; subdivision of, 277; unions’ authority in, 3 2 6 -2 7 . See also produ­ cers; production; productivity; self­ management concept; state-owned en­ terprises; work collectives; workers’ councils firms, labor-managed, 4, 12, 15, 166, 208, 2 1 2 -1 3 , 215, 220, 263, 266n, 267n fiscal policy: federal level, 231; federal-level revenues with decentralized, 76; local government, 267. See also spending, gov­ ernment; tax policy Foca model, 34, 58, 60, 90; contradiction of Slovene model, 22; with country’s dis­ solution, 3 7 1 -7 2 ; economic methods, 1 61 -62; interference o f Slovene model with, 96; mix with Slovene model, 265— 68, 349; production, investment and la­ bor policies, 224, 275; property rights,

432

INDEX

Foča model (cont.) 60; reality of, 165; survival of, 163. See also developmental ist school Foča Regulations (1942), 60 food policy. See farmers’ (marketing) coop­ eratives; private sector; rationing; subsistence foreign exchange: control policy, 9 6 -9 7 ; firms’ retention of, 2 3 4 -3 5 foreign policy: federal government role, 2 2 3 -2 4 ; with international recognition, 146; strategy, 100-101. See also aid, for­ eign; foreign policy; trade, foreign free markets: postponement of, 146; re­ placement of, 113; under socialist com­ modity production concept, 169 Fund for Reconstruction of War-Dam aged Regions, 83 Gapinski, James, 2 2 5 -2 6 , 228, 231, 232, 303 Gazi, Josip, 107 Gedeon, Shirley, 185n, 229n, 339n General Agreement on Tariffs and Trade (GATT): effect on trade policy, 169, 290­ 91; membership, 29; trade liberalization conditions for membership, 228, 2 4 5-4 7, 2 6 8 -6 9 General Investment Fund (GIF), 186-87, 242, 245 Germany, 14; Partisan against, 80; war in­ demnities, 82; wartime occupation of Yugoslavia, 93 Gligorov, Kiro, 168, 232 Gomulka, Wladyslaw, 101 Gorbachev, Mikhail, 28, 245, 349 government, federal: centralization o f con­ trol, 1 30 -32; changing role with unem­ ployment, 3 5 5 -5 8 ; conditions for reduction of scope, 234; conflict with re­ public and local, 7 4 -7 6 ; coordination with republics, 73; economic adjustment with labor, 259; foreign policy, 223; juris­ diction of, 69; lack of control over em­ ployment, 259; loss of confidence in, 3 5 4 -5 5 ; loss o f control o f economic pol­ icy, 2 3 3 -3 6 ; new instruments o f coor­ dination and control (1950), 148; recentralization policy, 3 5 5 -6 7 ; reve­ nues, 185; role in revised labor policy, 110- 1 1 ; role in socialization o f the state,

187-88; sharing jurisdiction with repub­ lics, 248 government, local: control over coopera­ tives, 91; defense and security systems as responsibility of, 250; economic and po­ litical planning of, 7 3 -7 4 ; employmentrelated problems and policy, 282, 300­ 303; excise taxes of, 78; jurisdiction, 69; protection o f public-sector wages and jobs, 325; regulation and tax authority, 176; responsibility for unemployment prevention, 176; role of employment bu­ reaus, 300; tradition of, 52. See also lo­ calization; villages government, republics: administrative role with socialization, 186-8 7; autonomy over labor policy, 282, 290; coordination with federal government, 73; credit con­ trol by, 292; as enforcers o f self-reliance policy, 130; financial self-sufficiency, 148, 168; jurisdiction, 69, 336; management of General Investment Fund, 1 86 -87; new role in foreign affairs and defense (1966), 248; property rights’, 147-48, 355, 357; protection of commerce, 2 9 5 -9 6 ; protec­ tion of public-sector wages and jobs, »325, responsibility for foreign debt, 295; re­ turn of financial autonomy, 148; with ris­ ing unemployment, 3 5 5 -6 0 , 3 6 3 -6 5 ; role in revised labor policy, 111 government policy, federal level: to adjust to international environment, 263; de­ centralized responsibility for implemen­ tation of, 282; defense-oriented food policy, 285; differential effect on firms and republics, 293; labor policy, 298­ 303 Great Britain, 5 3 -5 4 , 80 Greece: aid to civil war rebels, 121; rela­ tions with guerrillas in, 82, 144 G reen Plan (1973), 236, 279 Gregoric, Pavle, 182 Gulick, Charles, 35n, 49n, 183 I larris-Todaro migration model, 212 Hatton, T. J., 2 3 -2 4 health care, 271 health insurance, 177, 195 Hebrang, Andrija, 56, 70, 7 1 -7 2 , 102, 119, 226; on increased collectivization and productivity, 75; opposition to union au-

INDEX thority, 8 3 -8 5 ; peoples government con­ cept, 74 Herzegovina. See Bosnia-Herzegovina Horvat, Branko, 155n, 173n, 221n, 231n, 269n housing shortage, 3 0 1 -2 human capital: formation, 282, 317, 320; status for acquisition of, 318; as substi­ tute for machines, 111 Hungary, 1 2 -1 3 , 14, 28, 60, 243, 330 hyperinflation (1985), 228

433

institutions: conflict among economic, 237­ 56; factors in definition o f Yugoslav, 65­ 66; factors in development, 7 4 -7 5 ; in Slovene model, 95, 165; social service, 177-80 interest groups: areas of inattention by, 3 2 9 -3 0 ; firm managers as, 3 2 1 -2 2 ; party as, 322; private sector workers as, 342­ 43; of students, 3 3 8 -3 9 ; veterans, 302; of workers, 327, 3 2 9 -3 0 , 341. See also po­ litical opposition International Monetary Fund (IM F): ambi­ ideology; Communist Party of Yugoslavia guity toward program of, 256; decentral­ (CPY), 4 3 -4 5 ; economic, 6, 1 6 -2 0 ; Marx­ ization advice, 171; effect o f terms of ist, 16-2 3. See also capitalist theory; agreement with (1984), 281; GATT mem­ Foča model; Leninism; Marxism; Slovene bership to obtain credits from, 245; as lender of last resort, 2 2 7 -2 8 ; loans from, model; socialism 228, 229, 347; membership, 82, 1 44 -45; ideology of smallness, 37 imports: capital equipment and technology, negotiations with, 122, 254; policies of, 2 2 5 -2 6 ; with decline in export income, 259; relations with, 82, 345, 348; re­ 1 46 -47; dependence of production on, quirements for new loans (1987), 350; 226, 249; effect of cutting, 229; payment stabilization program (1979), 280; stand­ for, 130—31; price effect, 228 by facilities to developing countries, 254, 347 incentives: in choosing higher wages, 260­ 61; to direct raising of labor productivity, investment, domestic: bias in, 295; in capi­ 2 2 2 -2 3 , 2 6 1 -6 2 ; in Foča model, 265; to tal projects, 291; effect o f decentraliza­ improve trade performance, 253; to join tion, 288; incentives against new employment, 2 6 0 -6 1 ; in less-developed public sector, 133; for joint ventures, 249; for lower taxes, 302; for property areas, 2 8 1 -8 3 ; in more-developed areas, owner, 166; in public-sector labor policy, 284; related to kinds of workers needing 2 6 1 -6 2 ; to reduce labor force mobility, jobs, 302; reliance on foreign capital, 2 2 6 -2 7 , republics’ control of, 290; for 88, 1 0 3 -4 , 14 1-43; for republics to self-reliance, 108—9; shift in priorities, invest, 234; in Slovene model, 264; 2 5 0 -5 3 ; in Slovenia, Croatia, and Serbia, to work, 102 -3. See also producers; production 297, 357; social control over, 174; social­ income relations system, 200 ization of, 2 4 5 -4 6 , 249; uneven distribu­ incomes: effect of trade deficits on, 263; en­ tion o f capital for, 2 9 0 -9 1 ; World Bank loans for, 236, 249 forcement policy, 2 6 1 -6 2 ; in socialized investment, foreign, 249, 251, 351 sector, 267- See also wages indexation of salaries, 277, 331 Istria, 57 Italy, 57, 357 industrialization: capital requirements for, 79, 2 2 4 -2 5 ; industrial labor force growth Itoh, Makoto, 27n.51 with, 67; postwar problems of, 66; re­ form o f union role with, 85—87; workers’ job security, 223, 262, 2 7 7 -7 8 , 310 and union roles, 84 Johnson, A. Ross, 118n inflation, 228, 2 7 5 -7 6 , 349; antijoint ventures, 2 5 2 -5 3 , 295 Jovanovic, Dragoljub, 49, 9 1 - 9 2 , 107 inflationary policy, 223; conditions for and response to, 331; early 1970s, 228. See also hyperinflation Kardelj, Edvard, 32, 36, 39; on agricultural informal markets: commodities, 125; labor, policy, 138; conception of new state, 117-18; concept o f farmers’ coopera315

434

INDEX

Kardelj, Edvard (cont .) tives, 172; draft constitution, 180; em ­ ployment concept, 196; on industrializa­ tion, 67; model o f socialization and decentralization, 322; on national inde­ pendence, 146; nationalism of, 32, 36, 39, 48; on new foreign policy (1949), 146; purpose of cooperatives, 90, 92; re­ form of local peoples committees, 107; requirement for new liberalization (1956), 244; on role of unions, 48; Slov­ ene model, 1 61 -62 , 317, 3 6 7 -6 8 ; so­ cialist communities model, 313; on so­ cialist employment, 166; on trade, 116; on wages and productivity under so­ cialism, 141 Katz, Arnold, 212 Katzenstein, Peter J ., lOn, 238, 3 4 1 -4 2 Keynesianism, 6, 170, 217, 257, 3 2 7 -2 8 Kidrič, Boris, 68, 71, 7 6 -7 7 , 83; on agri­ cultural quotas, 122; anti-farmer/kulak statements, 125; class-based arguments, 115; dictatorship of the proletariat, 184; economic coercion concept, 146, 150, 168; on economic planning, 120; excess public sector employment concept, 149; fiuctuators, 149, 315; “law of value,” 76­ 77, 132, 158, 171, 264; peoples power, 167; Slovene model, 161-6 2, 244, 317; on social tansformation, 137 Knights of Labor, 155 Kornai, Janos, l l n , 13n, 216 Kosanovie, Sava, 144 Kosovo: demographic explosion (1962-64), 211; development o f society in, 342; in­ dustrial investment, 285; martial law in, 255; surplus labor, 338; unemployment rates, 201, 2 0 3 -5 , 208, 298, 3 3 9 -4 4 ; un­ rest (after 1967), 275, 338. See also Albanians Kraigher, Sergei, 255 Krajer, Boris, 240 Krstulovič, Vicko, 87, 103-4 Kržišnik, Anton, 72 Kucan, Milan, 3 4 3 -4 4 kulaks. See farmers, private sector; farmers (marketing) cooperatives; landholdings, agrarian labor brigades: as economic measures, 177; reallocation o f voluntary, 149-50; recruit­

ment campaign (1949), 151; in reform of production, 142-44; as supplement to public-sector labor force, 7 7 -7 8 , 140; volunteer, 97, 1 11 -12, 121, 125, 243, 268, 333 labor cooperatives: local level, 115; peas­ ant, 90, 138-41, 242; public sector, 150 labor force: agricultural policy to gain la­ bor, 117; assignment of redundant, 262, 3 0 6 -9 ; distribution according to work, 273; employment of peasant-industrial workers, 192; government control of lo­ cal, 114; incentives for return of overseas nationals, 93, 301; with industrialization (1921-38), 67; layoffs, 201, 203; mech­ anisms to prevent market allocation, 2 6 1 -6 2 ; in mines, 93; mobility and lack o f mobility, 88, 1 0 3 -4 , 141 -43 , 162­ 63, 175, 3 0 1 -2 ; mobilization, 9 9 -1 0 0 , 1 22 -28, 139-4 1, 268; modernization of public sector, 268; nonproductive seg­ ment, 262, 3 6 2 -6 3 ; participation in de­ centralized economy, 208; politics of labor supply, 102; public sector labor books, 8 8 -8 9 ; recruitment, 104, 118­ 19; redistribution with rising unemploy­ ment, 3 6 1 -6 2 ; reduction on state farms and labor cooperatives, 266; relocation to Bosnia, 139; return of overseas na­ tionals, 304; role of labor brigades, 77­ 78; shortages, 9 2 -9 3 , 110-11, 136-37; supply scarcity, 9 3 -9 4 , 103-5; women’s participation rates, 287. See also employ­ ment; labor brigades; labor markets; un­ employment; workers; workers, private sector; workers’ councils labor force surplus: absorption of, 210; em­ ployment of, 6 6 -6 7 , 102; government employees as, 300; location of labor­ intensive industries to capture, 285; mo­ bilization of, 74; release to public sector, 174; right to fire, 174; rise in public sec­ tor, 274; Slovenia, 2 6 3 -6 4 labor inspectors, 88 labor legislation: Law on Associated Labor (1976), 278; Law on Employment (1974), 276; Law on Labor Relations (1965), 272; in 1 97 4 -7 6 period, 277­ 78; in 19 79-82 period, 280; revised (1968), 274 labor markets: control of employment

INDEX levels, 152; with decentralization and so­ cialization, 264, 2 9 5 -9 6 ; demand for production workers, 319; demand in do­ mestic, 287; demand in foreign (1980s), 348; differences among republics, 282­ 83; effect of decentralization and social­ ization, 264; effect of nationalization, 93; effect of separate decentralized, 3 6 4 -65 ; government intervention in local, 114; incentives as instruments to allocate, 94­ 95; lack of demand for new entrants, 288—89; levels of demand in domestic, 201; local supply and demand, 315; pol­ icy with self-reliance strategy, 110; as po­ litical problem, 102; preoccupation with supply, 2 1 0 -1 1 ; proposed changes, 337; quota reductions (1950), 156-60; reforms (1970s), 2 7 8 -8 0 ; relation of unemploy­ ment to supply, 19 4-200; with rising un­ employment, 3 5 2 -5 8 ; separate from capital markets, 312. See also decentral­ ization; employment; labor brigades; lo­ calization; overemployment; unemployment labor markets, informal, 315 labor offices, district, 153 labor policy: with adjustment to interna­ tional conditions, 9 9 -1 0 0 ; effect of politi­ cal strategy on, 99; federal level guidelines, 2 9 8 -9 9 ; of full employment, 261, 263; intervention in local labor mar­ ket, 114; as political problem, 102; within public sector, 2 6 1 -6 2 ; reforms and revisions, 182, 2 7 5 -8 0 ; response to shortages, 110—15; to structure labor market, 1 0 2 -7 landholdings, agrarian: under agrarian re­ form (1953), 242; with loss of tariff pro­ tection under GATT, 248; parcelized, 102; by peasants, 242; prohibited sale of, 114 law of value, 7 5 -7 7 , 132, 158, 171, 264 Law on Associated Labor (1976), 164, 278 Law on Employment (1974), 276 Law on Enterprises (1989), 280 Law on Labor Relations (1955, 1965), 267, 272 Law on Workers’ Social Insurance (1921), 4 1 -4 2 League of Communists of Yugoslavia (LCY), 64, 182; effect of growing unemployment

435 on, 3 2 4 -2 5 ; effect of rising unemploy­ ment on, 368; effect of socialization on, 334; effect of unemployment on disci­ pline, 3 5 2 -5 3 ; membership limitations, 189, 3 2 2 -2 3 ; fifth party congress, 126— 27, 181, 323; sixth party congress, 150, 181-82, 242; seventh party congress, 268; eighth party congress, 247, 248, 272; tenth party congress, 252. See also party leadership; party policy; Popular Front

League of Communist Youth of Yugoslavia (SKOJ), 78, 126 League of Youth, 333 legislation: abortion and contraception, 274; credit and banking (1977), 279; to encourage return of nationals overseas, 301; ending property rights, 345; free­ dom for managers, 351; for privatization (1988), 351; on property rights, 279; re­ lated to education, 2 7 6 -7 7 ; related to state-owned enterprises; 73, 85; for reor­ ganization oflocalities, 74; unemploymentrelated, 274; wage rates, 71, 87. See also labor legislation Lehmbruch, Gerhard, 10 n .l5 lender of last resort: IM F as, 228; National Bank as, 229 Leninism: economic growth and political radicalism, 7 4 -7 5 ; international aspects, 28; of LCY five-year plan, 65; nationalism of, 69; regimes concept, 1 5 -1 6 , 161; slo­ gans, 106; stages of cooperative develop­ ment, 90; vanguard party idea, 44 liberal school: applications of concepts of, 2 7 0 -7 2 ; approach to economic growth, 2 44 -45 ; labor, capital, and institutionalist approaches to unemployment, 210, 212­

20 List, Friedrich, 38 loans, foreign, 144 -4 5, 1 50 -51 ; to banks and enterprises, 253; effect on domestic economic policy with, 2 2 4 -2 5 , 2 2 7 -2 8 ; from IM F, 249, 251, 254; to meet trade deficit, 229; from multilateral lending in­ stitutions, 145; World Bank loans, 232, 249, 252. See also credit, foreign localization: consequences of, 9 1 -9 4 ; of de­ fense, 30 0 -3 0 1 ; of financial management, 227; of government, 118-1 9; importance

436

INDEX

localization (conl.) of, 78; labor cooperatives, 90-91, 115, 150, 242; of labor recruitment, 176; of party organization, 135; self-sufficiency, 106-7; of unemployment issue, 189. See also decentralization; employment bu­ reaus; government, local Lowenthal, Richard, 21n,44 Macedonia: abolition of district govern­ ment, 270; capitalist development, 38­ 39; class divisions in, 39-40; demo­ graphic explosion (1962-64), 211; differ­ ences within, 289—90; employment bureaus, 178; employment in, 287; in­ vestment in, 291; large-scale agricultural production, 285; nationalism of, 39— 40; opposition to recentralization, 357; separate party organization, 40; SerbMacedonian disagreements, 39-40; un­ employment rates, 201, 203-5, 208, 298 macroeconomic policy: effect with interna­ tional openness, 29-30, 223, 226-37, 287; employment cuts to stabilize, 100, 146; enterprise responsibility for stabiliz­ ation, 235-36; federal government stabi­ lization plan (1985), 350; IMF and World Bank roles in, 350-51; macrosystems approach to full employment, 10; to re­ duce unemployment, 212; for stabi­ lization, 228-32, 254-56, 270, 299; state role, 222-23, 227; undermining of, 226—27* See also fiscal policy; monetary policy Maier, Charles, 98, 335 managers, firm: alliances to influence pol­ icy, 321-22; conflicts with unions and workers, 273, 327; election and job secu­ rity of, 323-24; potential conflict with workers, 167-68; protection for partyapproved, 323-24; responsibilities of, 176; wages of, 266, See also self­ management Marinko, Miha, 133 markets: effect of multiple unlinked, 329­ 30; local level, 73-74; segmentation, 233; various interpretations, 170-71 market socialism: economy under, 169-71; failure, 165; misuse of term, 169 Markovic, Ante, 5, 256, 280 Marshall Plan (1947), 98, 101, 102, 121

Marxism: focus of Communist party in Yu­ goslavia, 41-42; unemployment, 3, 322 mass participation concept, 118-19, 127 Meade, James, 213 Mencinger, Joze, 199 Menger, Carl, 167 Meznaric, Silva, 36, 37 migration: to foreign jobs, 198-99, 241; as labor-market competition, 325-26; as re­ sponse to unemployment, 303-4; un­ skilled labor, 191-92 Mihailovic, Draza, 50 Mihailovic, Kosta, 210 Mikulic, Branko, 360 Milanovic, Branko, 214-15 military sector: conscription, 147; defense policy related to, 276, 360; effect of World War II, 51-53; equipment and supplies, 188; foreign aid to, 79, 159; purges, 248; during wartime, 49-55. See also national independence Miljovski, Kiril, 223, 294n Milosevic, Slobodan, 344, 364 Mine, Hilary, 101 mines: before and after nationalization, 92­ 93; labor shortages and employment, 92­ 94, 192; nationalization, 57; shortages, 105; strikes, 268, 332—33, 343; voluntary labor in, 140-44 Mitrany, David, 2In.42 monetary policy: currency, 349; debt mon­ etizing, 223; following Slovene model, 227-37; through price regulation, 169­ 70; recentralization, 355; relation to pro­ duction requirements, 73; of Slovene Na­ tional Liberation Front, 59; system reform, 70-71 money supply: expansion with inflow of for­ eign credits, 227-28; methods to reduce circulation, 104; relation to unemploy­ ment, 231 Montenegro: employment bureaus in, 178; low level of development, 283; separate party organization, 40; unemployment rates, 201, 204-5, 208. See also Foca model Mutual Defense Assistance agreement, Yugoslavia/United States, 159 national communism principle, 33-34, 224, 240

INDEX

national independence, 28, 33—34, 38, 57, 65, 98, 146, 164, 165, 256 nationalism: Albanians, 342-44, 358, 365-66; Croat, 43; exclusionary, 365; focus on, 32-41, 43; party ideology, 181; republics and regions, 275, 343­ 44, 365-67; Serbian, 346; sources of, 346-47 nationalization: of mines, 93; during 1944­ 45, 57-58, 69-70; of retail trade and lo­ cal enterprises, 114, 117; second phase (1948), 71 nation concept, 38-40 Neuberger, Egon, 226 nonalignment movement, 241, 243, 246, 257, 350 nonproductive labor, 262, 362-63 North Atlantic Treaty Organization (NATO), 243, 349 Nuclear Test Ban Treaty (1964), 247 Offe, Claus, 23, 304, 329 Organization for Economic Cooperation and Development (OECD), 241 organizations of associated labor, 4, 22, 166, 172 overemployment, 289, 347 overpopulation, 67, 216-17 parliamentary organization, 184n.51 Partisans: brigades, 52-53, 77; campaigns to replace and retire, 288, 318; interest group pressure, 302; movement, 51-54; relocation, 88 party leadership: competition over declin­ ing resources, 354; in factory workplaces, 268, 354; primary policy role, 126-44; shift in dominance (1924), 36 party policy: education, 362; effect of World War II, 49-51; enforcement, 130, 334­ 35 peoples committees, 153 people s power concept, 76-77, 167, 224 Perišin, Ivo, 187 Pet rovic-Sane, Dušan, 333 Phillips curve, 7, 219 physiocrats, 19, 22 Pijade, MoSa, 60, 180 Planine, Milka, 254, 347, 360 Poland, 9, 12 -13 , 14, 28, 82, 243, 328,

329

437

political opposition: to localization, 92; over policy, 237-56; to policy on cooperatives and agriculture, 91-94; of villages, 107. See also interest groups political system: in achievement of eco­ nomic objectives, 165; based on pro­ ducers, 166-73; constitutional changes in representation, 184; criteria for exclusion from, 320-27; factors preventing con­ sumer influence, 329-30; local level par­ ticipation, 74; people’s power concept, 76-77, 167, 224; power consolidation, 99; representation, 74, 300-301; re­ sponse to economic reform (1980s), 361­ 63; with rising unemployment, 352-55; strategy for transformation to socialist state, 31-63; village level, 334; of Yugoslavia, 22-23 Popular Front: social transformation role, 78; succeeded by Socialist Alliance of Working people, 189; volunteer labor brigades, 77-78, 97, 111-12, 121, 125, 149-51, 177, 243, 268, 333 population: explosion, 211, 263; levels of rural, 43; policy (I960), 211; by republic or province, 387; surplus agricultural, 67; unemployment as overpopulation, 216— 17 Prasnikar, James, 215 Pravda, Alex, 12-13 prices: central setting of, 329; effect of im­ port costs on, 228; factors of production, 169-70; under Foca model, 61; food pol­ icy setting of, 285; mechanism under commodity production concept, 169; reg­ ulation of factors of production prices, 169-70; trade by linked or interdepen­ dent, 113-15, 133. See also rationing; regulation Primorac, Emil, 199-200 private sector: with agrarian and currency reforms, 70; capitalism of, 174; coordina­ tion with local level public sector, 74, 89-92, 127, 166-67, 172; differentiation of employment from public, 347; eco­ nomic performance, 279; effect of gov­ ernment control of cooperatives, 91; employment in villages, 334; interest group development in, 342-44; as labor supply pool, 174; limitations on private sales, 114; local level coordination with

438

IN D EX

private sector (cont.) public sector, 73—74; political represen­ tation of employed in, 74, 321; require­ ments of farmers in (1957), 244; as safe haven for surplus labor, 2 6 2 -6 3 , 279, 325; subsistence for unemployed in, 261, 312, 347; surplus labor, 303; tourist ser­ vices, 269, See also farmers’ (marketing) cooperatives; landholdings, agrarian; workers, private sector privatization: legislation, 351; policy for public-sector firms, 279, 280 producers: adjustment to price shifts, 233; control over export policy, 235; control over finance and capital, 1 83 -84, 222­ 23, 2 2 9 -3 0 ; cooperative, 190; public sec­ tor political rights, 166, 320 -21 production: agricultural sector policy to gain labor for, 117; changes required by changed objectives, 165; commodity pro­ duction concept, 169; dependence on imported materials, 249; differences in Slovene and Foca approaches, 163; focus of economic policy, 137—38; incentives for farms, 113; of new products, 109; re­ organization under democratization, 14 2 -43; as source of income, 110 production brigades, autonomous, 142-44, 151 productive labor concept, 18 19 productivity: divisionalization to increase, 277; incentives in labor policy for, 8 6 -8 7 , 100, 166, 2 6 1 -6 2 ; as key to employment expansion, 174; Marxist definition, 174; priority over employment, 261; produc­ tion brigade concept, 142-4 4; projected targets for growth, 188-89; strategy to increase, 68, 8 6 -8 7 ; wages as measure of contribution to, 175 profit sharing, 175-76 proletarian brigades. See Partisans property rights: division between public and private sectors, 312, 322; Foca model, 60; for foreign investors, 5, 351; guaranteeing subsistence, 173; legislation ending, 345; opposition to reform, 357; during and post-World War II, 5 6 -5 7 , 6 9 -7 0 ; o f republican governments, 355; restoration o f republics’, 14 7 -48; under Slovene model, 59; socialist, 355; worker as owner, 166

protectionism: republics and towns, 172­ 73, 2 9 5 -9 6 , 325; strategy of, 2 3 2 -3 3 ; Western European, 251, 348 Przeworski, Adam, 328 Public Law 480, United States, 249 public sector: coordination with local-level private sector, 74, 8 9 -9 2 , 127, 166-67, 172; differentiation o f employment from private sector, 347; employment by re­ public and region in, 2 9 1 -9 2 ; factory management in, 85; growth with self­ reliance strategy, 111, 2 7 4 -7 5 ; guaran­ teed minimum wage in, 262; labor books, 8 8 -8 9 ; labor policy within, 261; local-level coordination with private sec­ tor, 7 3 -7 4 ; modernization of labor force in, 268; payment of guaranteed wage, 173-74; in restructuring of society (post-1944), 68; socialization through em ­ ployment in, 262; supplements to capac­ ity, 77; threat of unemployment, 321; unemployment (1952), 160. See also em ­ ployment; firms; state-owned enter­ prises; unemployment; workers Pucar, Djuro, 158 purges: of Albanian leaders, 343; Com­ intern (1928), 36; o f Communist Party of Yugoslavia, 119—20; of developmental economists, 210; party (1950-51), 180; of party members, 127; political and mili­ tary (1964-66), 248; Rankovic, 274, 324; related to managers’ market orientation, 324 radicalism, Yugoslav, 80 Radosavljevic, Dobrivoje, 139 Rajk, Laszlo, 145 Rankovic, Aleksandar, 4 6 -4 9 , 147, 248, 274, 324 rationing, 125, 14 5-46; with centralization of supplies, 132; control over employ­ ment level through, 152-53 ; of jobs ac­ cording to ethnic criteria, 301; for wage and salary earners, 104-5. See also com­ modity shortages Reform (1965), 237, 247 regions. See Kosovo; Slavonia; Vojvodina regulation: local government, 176; to pre­ vent unemployment, 240; prices of fac­ tors of production, 16 9 -70; of privatesector subsistence wage, 174; of public-

IN D EX sector wage rates, 1 75 -76, 271; o f terms of trade, 9 0 -9 1 Regulation on Settling Labor (1950), 151­ 52 remittances, 246, 254, 269, 293 republics: capital flows and investment within, 2 9 0 -9 8 ; differences within, 2 8 9 -9 0 ; effect o f economic autonomy, 2 9 0 -9 1 , 3 3 8-3 9. See also Bosnia; Croatia; Macedonia; Montenegro; Ser­ bia; Slovenia revenues, federal government, 185, 231 rights: as basis for Slovenia’s opposition (1980s), 3 6 3 -6 4 ; o f citizenship, 172, 186, 3 6 6 -6 7 ; in concept of jo b security, 262; constitutional right to work, 173; of eco­ nomic and political decision making, 166; to guaranteed minimum wage, 262; of private sector workers, 166; to self­ management o f work collectives, 261; of unemployed individuals, 4, 30 See also property rights rights, political: o f associations of produ­ cers (workers), 166, 320—21; of private sector, 186; o f public and private sec­ tor worker-producers, 166, 173, 320­

21 Rivers, Douglas, 9 n .l3 Roemer, J., 19n, 19n.38 Romania, 14, 101 Rucciardi, Joseph, 20n.40 rule of law, 1 3 6 -37 Sabel, Charles, 12 Sacks, Stephen, 214 Salaj, Djuro, 154 Sarlo, Metodija Sator, 3 9 -4 0 security system: firm and local government responsibility for, 250; republics’ opin­ ions on issue of, 255 security zones, 139, 284 segmentation: of the economy, 350; o f mar­ kets, 233; obstacles to overcoming, 361; of society, 312 self-determination: o f nations within Yugoslavia, 41; strategy for, 38. See also government, local; government, repub­ lics; localization; villages self-management concept, 16 7 -69, 175, 1 79 -80 ; basic organizations of associ­ ated labor under, 277; conditions for ex­

439

tension of, 2 3 3 -3 5 , 271, 277; declared end of, 5; effect of, 3 3 0 -3 4 ; for employ­ ment bureaus, 302; legislation ending system for, 256; by manufacturing and foreign-trade firms, 253; political conse­ quences of, 329; in publie-sector work­ places, 261; rights to, 196; in Slovene model, 2 6 4 -6 5 ; with withering away of the state, 186; for Yugoslav workers, 12, 15. See also production brigades; work collectives; workers’ councils self-managing communities of interest, 234, 302 self-reliance policy: enforcement, 130; im­ plementation (1948), 1 2 1 -2 8 ; of Tito, 108-11 Serbia: abolition of district government, 270; developmentalists in, 210; economic development policy and outcome, 291, 2 9 6 -9 7 ; employment bureaus, 178—79; immigration of Serbs and expulsion of non-Serbs, 365; mines in, 94; national­ ism, 3 4 3-4 4; plans for development, 297—98; political rebellion, 365; response to recentralization, 358; separate party organization, 40; surplus labor, 38; un­ employment rates, 201, 2 0 4 -5 , 298; un­ rest, 338 serfdom, 89 Shoup, Paul, 35 Sicherl, Pavle, 240n, 2 8 7 -8 8 Sirotanović, Alija, 143, 151 Škegro, Borislav, 226, 228, 231, 232, 303 SKOJ. See League of Communist Youth of Yugoslavia (SKOJ) Slavonia: emigration from, 283; large-scale agricultural production, 57, 285; peasant resettlement in, 93 Slovene model, 34, 58; challenge to, 83; confronts Foča conditions, 99; contradic­ tion of Foča model, 22; with country’s dissolution, 3 7 1 -7 2 ; economic methods, 1 61 -62; of economic role of government, 5 8 -5 9 , 2 2 2 -2 3 , 2 6 4 -6 5 , 298; full em­ ployment concept, 3 6 7 -6 8 ; implementa­ tion in Slovenia, 283; institutions of, 96, 165; investment and labor policies, 224; mix with Foča model, 2 6 5 -6 8 , 349; na­ tionalism, 56; populist, or agrarian social­ ist elements, 89; production focus, 163; requirement for closed economic system,

440

INDEX

Slovene model (cont.) 227; return to pure version (1980s), 146, 345-46, 349; vision of the state in, 182— 83, 317-18 Slovene National Liberation Front, 49, 51, 55-56, 58-59 Slovene Peoples party, 43 Slovenia: capitalist development, 38; con­ tested land areas, 57; demands for pro­ ductivity and growth standards, 283, 296-97; economic performance under government policy, 263-64; foreign cur­ rency flows to, 235; full employment re­ cord, 296, 339-41; industrialization in, 94; labor shortages and immigration, 263-64, 283, 303, 325, 339-41; national­ ism, 365—66; national security issue, 255; organized unions and working class, 41; population flows into, 283, 303; protec­ tionist labor policies, 342; response to re­ centralization and economic reform, 355-60, 363; secession, 371; skilled workers and professionals, 94, 296, 303; strikes, 296; unemployment rates, 201, 203-5, 208, 339-44; unrest (after 1967), 275; vote for independence, 256; wage rates, 293 Slovenian Communist party, 36 social democracy, 327-28 social insurance: centralization of funds for, 71-72; for certain unemployed, 177; de­ terminants of benefits, 152—53; Law on Social Insurance (1921), 41-42; self­ management, 169, 183; state regulation of, 86, See also benefits; health insurance socialism: commodity production concept, 169; conflict on transition methods, 158­ 59; differences in Yugoslavian form, 24­ 28; distinct from state capitalism, 167; economy without planning, 170; employ­ ment method of payment, 166; full em­ ployment concept, 3—11; at local level, 90—91; of public sector, 74-79; transfor­ mation to (1948), 121-44; unemployment under, 4; workplace under, 4. See also la­ bor brigades; market socialism Socialist Alliance of Working People, 33, 189 socialization: of agriculture, 110-15; of debt, 229-30; of defense, 300-301; effect on Communist party, 334; effect on labor

markets, 264; through employment in public sector, 262; to extend self­ management concept, 271; of invest­ ment, 245-46, 249, 271; rationalization for, 331; in Slovene and Foca models, 265; of the state, 186-89. See also public sector social policy: open unemployment as, 176— 78; unification and centralization, 71^-72 social sector. See public sector social services: financing by firms, 262; in­ stitutions, 180; se If-management concept in, 271; self-management for bureaus of, 274; self-management of tocal, 266 social status: of public-sector employee, 23, 317; relation of education to, 317; of un­ employed individuals, 3-4, 23, 30, 321; upward mobility, 317-19 social transformation: goals of, 70, 74; post-1944, 68-69; role of youth groups, 78 social unrest, 216, 255, 275, 338-39. See also strikes; work stoppages society: divided into public and private sec­ tors, 191, 311-12; effect of recentraliza­ tion policy, 360-61; with Marxist ideology basis, 21-22; perception of un­ employment in, 23, 311; periodic reorga­ nization, 262; public-sector employment as status in, 317; redistribution of assets, 68-70; regains role of the state (Slovene model), 183; response to unemployment invisibility, 312-20; segmentation, 312; structure of socialist, 312-13; with un­ employment in Kosovo, 342 Soviet Union: campaign against Tito, 145; economic reform, 28, 349; postwar trade agreements with, 81; post—World War II policy toward Yugoslavia, 80-81, 108; Yugoslavian conflict over Balkans policy, 107-8 spending, government: announced in­ creases (1947), 109; for defense (1949), 146; effect on local governments of re­ duced, 287; increases in local, 266-67; by self-managing communities of inter­ est, 234 Stalin, Joseph: postwar perceptions of Yugoslavia, 80-81; quarrels with, 100­ 101; wartime relations with Tito, 53 Stark, David, 12

INDEX state, the: anticentralist concept (1924), 36; disappearance of (Slovene model), 182­ 83; implication of socialization or wither­ ing away, 186; Marxist ideology, 20; new role (1948), 1 1 7 -1 8 ; Yugoslav interpreta­ tion of role, 219, 222, 3 3 5 -3 6 . See also government, federal; government, local; government, republics state-owned enterprises: economic link to farmers’ cooperatives, 172; expansion of United Union organization to, 87; pro­ tection from private sector labor de­ mands, 91; restructuring (1949), 151; role of, 73, 85 strikes, 86, 268, 273, 275, 296, 315, 343, 353 subsistence: in conception of economic growth, 6 6 -6 7 ; as criterion for firing workers, 3 1 2-1 6, 347; education at local level against concept of, 74; employment as, 328; guaranteed, 68, 89, 313 Suvar, Stipe, 3 1 9 -2 0 Sweden, 31, 329 Switzerland, 342 Tanic, Zivan, 301 tax policy: credits as incentives, 234, 302; to encourage employment, 281; o f in­ come (1980s), 281; local government, 78, 176; for private sector, 352; reform (1947), 78; relation to foreign borrowing, 232; by self-managing communities o f in­ terest, 234 territorial principle. See banking system; decentralization; government, local; gov­ ernment, republics; localization Therborn, Goran, 6n, 24, 260n Tito, Josip Broz, 32, 39; on Bosnia, 39; on distribution of labor, 174; on extension of socialism, 1 3 7 -38 ; increased personal power, 109; independence from Stalin, 3 3 -3 4 ; leadership, 33, 51, 5 3 -5 6 , 145; nonalignment policy (1958-61), 246; po­ sition on domestic industrialization strat­ egy, 96; prediction of socialism, 134; on productivity, 84; relations with Stalin, 53, 65; relations with United States, 101; on rule of law, 13 6-37; self-reliance pol­ icy, 108-1 1, 130-31 Todaro paradox, 212 Todorovic, Marija, 319

441

Tomasevič, Jožo, 44n, 90n, 146n, 151n, 338n trade, foreign: centralized policy manage­ ment, 187; Cocom export-control re­ gime, 9 5 -9 6 ; economic growth strategy with openness to, 2 2 4 -3 7 ; federal gov­ ernment policy, 2 2 3 -2 4 ; industrialization strategy based on, 79; influence on eco­ nomic policy, 3 4 7 -4 9 ; openness of Yugoslavian economy to, 2 8 -2 9 ; as path to increased productivity, 225; policy for­ mation, 116—17; searching for, 121, 129; as source of income, 9 5 -9 6 trade agreements: Joint Export-Import Agency, Allied occupation, 144, 150; with Poland and Czechoslovakia, 82; in shift to foreign trade strategy, 95; with Soviet Union, 81, 241, 243; with Western Europe, 122, 129; with Western E u ­ ropean countries (1984), 122 trade deficit: conditions for, 231; effect of external shocks, 251, 2 5 3 -5 4 ; effect on incomes and employment, 263; financed through borrowing, 252; post-1952 pe­ riod, 2 2 8 -2 9 ; stabilization to reduce, 147. See also balance of payments trade policy: with change in terms o f trade, 247—48; GATT membership, 2 4 5 -4 6 ; im­ plementation of self-management princi­ ple for, 253; liberalization, 187, 2 4 5 -4 6 ; reorientation to Western trade, 159; with Western trade reorientation, 159 trade unions: functions under Regulation on Settling Labor, 1 54 -55 ; leagues in state-owned enterprises, 87; organization of socialist competition, 78; planned ef­ fect of workers’ councils on, 261; repre­ sentation on workers councils, 85; responsibility for unemployment preven­ tion, 176; role under socialism, 8 5 -8 8 ; unification (1944), 71 treaty of friendship, Soviet-Yugoslav, 83 Treaty of Rome (1958), 244 Trieste, 84 Trotsky, Lev, 68 Truman, Harry S, 151 Tudjman, Franjo, 367 Tyson, Laura, 213, 216, 220, 226 unemployment: analysis of postwar socialist period (Farkas), 2 1 6 -1 8 ; capitalist, 3;

442

INDEX

unemployment (cont.) consequences o f rising, 3 5 2 -6 7 ; dual face of, 8; with economic growth policy, 269; elï'ect of growing, 3 2 4 -2 5 ; effect on eth­ nic composition, 366; (actors causing, 165, 2 6 3 -6 4 , 2 7 8 -7 9 , 2 8 6 -8 7 ; frictional and open, 17 6-77, 195; guarantee against, 173; hidden, 6, 191-94, 198, 216—17, 271, 314, 321; immunity from, 3 2 3 -2 4 ; Marxist theory, 3 - 4 , 322; migra­ tion as response to, 3 0 3 -4 ; official con­ cept of and solution to, 3 1 2 -1 4 ; as overproduction of intellectuals, 317; po­ litical conséquences (1980s), 352—67; po­ litical exclusion with, 3 2 0 -2 7 ; prevention, 176, 240; protection against, 262, 278; relation to money supply, 231; social stigma of, 4, 23, 3 1 2 -2 0 ; societal response to invisibility of, 3 1 2 -2 0 ; stan­ dard explanation of Yugoslav, 218—20; structural, 194, 201, 310, 347; threat of, 3 - 4 , 321; Ward model, 165, 208, 210; Yugoslavian brand, 12. See also capitalist unemployment unemployment compensation: eligibility, 177-78, 195; funding of, 302; increase in amounts for (1980s), 281 unemployment rates: by age, 203, 2 0 6 -7 , 209, 3 8 8 -8 9 ; with cuts in labor force, 269; increase (1952-88), 191, 193 -9 4 ; in­ terpretation of data, 194-208, 240, 264; in Kosovo, Slovenia, and BosniaHerzegovina, 3 3 9 -4 4 ; levels and demo­ graphics of (1980s), 3 4 7 -4 8 ; ofpublicsector workers, 160; regional differences, 201, 2 0 3 -5 ; Todaro paradox to explain rising, 212; among women and youth, 287, 316, 333, 383 unemployment theory: Austrian school, 2 1 4 -1 5 ; capital school, 214; developmen­ tal is t school, 210; liberal school, 210, 2 1 2 -1 3 union leagues, 87 United Kingdom, 81 United Nations, 82 United States, 31; economic assistance (1950), 1 5 0-51; effect of containment pol­ icy (1947), 95, 99, loans from, 144-45, 150, 249; policy shift (1949), 121-22, 1 44 -45; postwar relations with Yugoslavia, 81, 101; relations with, 121,

144-45, 2 4 6 -4 7 , 349; revised Yugosla­ vian policy, 144-4 5 United Unions of Yugoslavia, 45, 71, 88­ 87; membership in, 18 9-90; political re­ sources, 325; relation to workers’ coun­ cils, 154, role in public-sector firms, 3 2 6 -2 7 urbanization, 348 Verba, Sidney, 9 n .l3 Verdery, Katherine, 22n.45 Veselinov, Jovan, 158 veterans' organization (SUBNOR), 51, 302 villages: agricultural labor surplus, 67, co­ existence with labor cooperatives, 9 0 -9 1 ; cooperatives, 44, 92; government inter­ vention into autonomy of, 114; guaran­ teed subsistence at level of, 89; labor recruitment in, 128; political system of, 107, 135-36, 334; private-sector employ­ ment in, 334 Vojvodina: agricultural estates, 43, 57; em­ igration from, 283; large-scale agri­ cultural production, 285; opposition to recentralization, 3 5 7 -5 8 ; peasant reset­ tlement in, 88, 93; unemployment rates, 201, 2 0 4 -5 voluntary labor. See labor brigades Vukmanovic-Tempo, Svetozar, 55, 124, 141-42, 273, 327, 333 wage rates: central setting of, 173 -76 , 329; differences across republics, 2 9 3 -9 4 ; across public-sector firms, 293—94; re­ placement oflegislated, 112; setting of, 87, 91, 103, 176 wages: components of, 176; factors reduc­ ing competition for, 88; as incentive to increase productivity, 8 6 -8 9 ; as measure o f contribution, 175; paid in cash and coupons, 104; public-sector guarantee of, 173-74, 312; redefined as income, 176; with rise in import prices, 228; withinfirm conflict over inequalities, 3 3 0 -3 1 ; as work defined by job classification, 166, 175; worker acceptance o f limits on, 261; worker cont ml, 267. See also collective bargaining Wagners law, 275 Ward, Benjamin, 12, 15, 208, 2 1 2 -1 3 , 215, 220, 263, 266n, 267n

IN D E X Warsaw Pact: choice against membership, 248; collapse (1989), 349; formation (1955), 243; troops invade Czechoslova­ kia, 250 women: discrimination in employment of, 104; employment of, 287, 316, 333; unemployment rates, 383; wages of, 123 work collectives, 111; as association of pro­ ducers, 166; in pnblic-sector workplaces, 261; self-management, 2 6 1 -6 2 ; under Slovene and Foca models, 265 workers: allocation in public and private sectors, 8 8 -8 9 , 157-58; conflicts among, 3 3 0 -3 2 ; effect of participation in central policy, 4—5, 321; exports of, 246; as inter­ est group, 327, 3 2 9 -3 0 , 341; interest of, 8 7 -8 8 ; jo b cuts and reallocation, 156-60; political rights, 166, 173, 3 2 0 -2 1 ; shift­ ing between public and private sectors, 263; surplus public sector, 30 0-3 01 ; un­ employment in public sector, 160 See also producers workers, private sector: political represen­ tation, 74, 321; rights, 187 workers, skilled: bargaining power, 84, 86; as brigade leaders, 14 2-43; competition for, 87; distribution of, 9 4 -9 5 ; emigra­ tion, 276; emphasis on, 2 6 8 -6 9 ; favored as party members, 3 2 2 -2 3 ; in informal labor market, 315; policy to increase number of, 268, 2 7 6 -7 7 ; scarcity, 102, 107, 110 -12 , 130, 141, 296; in Slovenia, 283; wages of, 266

443

workers, unskilled: day labor, 303; increase in, 368; in mines, 9 2 -9 3 ; not in public or private sectors, 191-92; problems of, 286; return from abroad, 199; wages of, 319; weak position of, 86; work stoppages and strikes by, 3 1 4 -1 5 , 319 workers’ constitution, 278 workers’ councils: in assignment of redun­ dant workers, 3 0 6 -9 ; effect of, 1 6 1-6 2; to end collective bargaining, 8 8 -8 9 , 153­ 55, 261, 326; function, 156—57, 175, 2 6 6 -6 7 ; introduction of, 64, 8 4 -8 5 , 261; rationale for, 28; relationship with unions, 155—56 work stoppages, 330, 331, 353 World Bank: development loans, 232, 236; effect of loans from, 279; loan for timber equipment (1948), 122; membership, 144; negotiations with, 122; require­ ments for new loans (1987), 350 Yugoslav Emergency Assistance Act (1950), United States, 151 Yugoslav People’s Army (YPA): defense pol­ icy, 2 5 0 -5 6 ; redundancy, 350; wages, pensions, and benefits, 188 ZAVNOH. See Croatian Liberation Front (ZAVNOH) Zimmerman, William, 200 Zuehlke, Thomas, 226, 228, 231, 232, 303 Zujovic, Sreten, 48, 76, 119 Zupanov, Josip, 320 Zuvela, Mladen, 320

About th e Author Susan L. Woodward is a Senior Fellow in th e Foreign Policy Studies Pro­ gram at the Brookings Institution.

Lightning Source UK Ltd Mi IIon Keynes UK 21 January 2010

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