Socialist Unemployment - The Political Economy of Yugoslavia

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

of Congress

Cataloging-in-Publication

Data

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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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

CHAPTER 2

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.

38

CHAPTER 2

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 .

40

CHAPTER 2

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).

42

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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,

44

CHAPTER 2

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 thl 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,

VI I I . I TA li Y S K L K H K U A N C K

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

153

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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CHAPTER 4

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)

156

CHAPTER 4

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 .

158

CHAPTER 4

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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173

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 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