Introduction
Following the liberation of Yugoslavia, communist fighters led by Josip Broz Tito created a new Yugoslav state; one that would grow to be very different from any other Marxist nation that existed before it. It had a democratic economy under the policy of radničko samoupravljanje, translated in English as ‘Workers’ Self Management’. This policy allowed for a democratization of the economy, creating a form of real socialism that offers lessons for us today.
Historical Background
As the Second World War came to a close, Yugoslav Partisans – arguably the most effective resistance movement of the time – liberated their land from fascists with help from the Red Army. The war terribly ravaged much of Yugoslavia, often in urban centers, resulting in undeveloped infrastructure and an almost non-existent industry. In the following post-war years the Yugoslav government decided to implement their own five- year plan based on previous ones in the USSR.
In 1948-1949, the Tito-Stalin split occurred and the party completely branched off from Moscow. A year later, they implemented something that changed the economy completely, workers’ self management. Almost every worker (except for small businesses, that were allowed to exist as long as they had no more than a couple workers per firm) had a say in their workplace, electing Workers’ Councils that in turn elected managers of their companies. This change was largely influenced by Edvard Kardelj, the Deputy Prime Minister, who pioneered the theories that shaped the country’s system for decades.
In the early 1960s, Yugoslavia’s economy looked further West. For the past decade since, they had received billions of dollars of aid from the United States. In 1961, Yugoslavia founded the non-aligned movement and increased global trade, boosting their economy and allowing improvements in workers’ lives such as the workweek being shortened to just 42 hours. Their trade in the Eastern markets and other non-aligned countries was just under 40%, owing to their flexible foreign policy and good relations.
From then on, however, Yugoslavia continued reforming their economy and allowed private investors in their companies with a large 49% cap. In the 1970s, reforms continued, and Edvard Kardelj’s theories resulted in new developments. For example, all industrial companies were transformed into organizations of ‘associated labor’. The smallest units within this new system of ‘associated labor’ were the Basic Organizations of Associated Labor, which functioned as small departments within larger enterprises. Multiple basic organizations could form a Labor Organization, which in turn could be grouped into Composite Organizations of Associated labor, large enterprises or entire branches of industry within a specific region. This structure was extended beyond industry into public services, including healthcare. To further assist the working class in pursuing their class interest, workers became members of nationwide unions and were granted the right to strike. Strikes were often effective, however the Party would still suppress some strikes in the latter days.
In 1973, OAPEC – a large organization that coordinated energy prices among Arab states – were very angry at the countries that stood with Israel during the Yom Kippur War, taking place during the same year. They issued an embargo on those Israel-supporting nations, resulting in a large oil crisis. Although the embargo was directed towards mostly Western nations, it terribly hurt the global economy.
Foreign debt quickly rose to a colossal yearly percentage, which amounted to over $20 Billion dollars by the early 1980s. By now, Tito was dead, so the new leaders renegotiated the debt with the West. What did they have to do? Undertake the infamous economic shock therapy! Because of this, Yugoslavia’s economy began to sink. The government introduced fuel rationing, limited car usage for the populace, and restricted imports. Citizens had to pay a deposit to travel abroad, and shortages of basic goods like coffee, chocolate, and detergent became commonplace. Power cuts were imposed during dry summers due to an inability to import electricity. In 1982, the IMF placed Yugoslavia under enhanced surveillance, signaling growing international concern over its economy.
Here is where the Yugoslav economy really began to collapse. The Yugoslav currency fell from 15 to 1,370 per U.S. dollar, net personal income fell almost 20%, and unemployment soared to over a million. Half of export revenue went toward servicing foreign debt, which reached $18.9 billion by 1981, with total internal debt estimated at $40 billion.
By 1980, the debt to GDP ratio was 13.8%. As the crisis deepened, unemployment hit harder, with much of the youth struggling to find jobs. In the late 1980s, Yugoslavia faced severe economic difficulties and owed over $21 billion to the West. Yugoslavia foolishly continued to load up on loans. Before the collapse of communism around the world, Ante Marković got a new financial aid package in exchange for economic reforms that demanded the elimination of worker-managed companies.
By the end of 1989, inflation reached 1,000%, and currency reforms replaced the old dinar with a New Dinar, fixed to the German currency. Ante Marković introduced privatization laws in the following year, allowing company management boards to privatize state-owned businesses, which began the fall of Socialism in Yugoslavia and showed its imminent collapse.
The Success
The history of the Yugoslav economy shows that socialism is possible, but it must not bend the knee to Western capitalism. There existed a plethora of successes in this economy that prove just this. Firstly, the socialist democracy that existed in Yugoslavia was the closest thing to a truly socialist economy and should be an inspiration for any future Democratic Socialist state. It was a bold move to empower the workers in the face of communist dictatorships like the USSR, and this significant achievement should not be forgotten. Secondly, each republic had a good amount of control over its own economy, resulting in a broader system that aligned with democracy and decentralization. Thirdly, the economy allowed for a true commitment to human welfare over profits.
The Failures
From a Democratic Socialist perspective, the Yugoslav economy, especially in the later years preceding the nation’s collapse, failed to save itself and folded to capitalist free-market reforms. The failure to prevent capitalist infiltration was most likely the biggest failure. Allowing private investment and later free-market reforms completely undermined the socialist principles that Yugoslavia was supposed to follow. The abominable privatization efforts – which dismantled workers’ self management – were a critical failure! Other such ‘critical failures’ were the dependence on foreign capital, for example the IMF loans that shackled the economy. One last failure was the suppression of strikes, especially during the hardship of the 1980s. As the government continued austerity (a word I loathe), many workers took to the streets only to be suppressed.
Conclusion
The Yugoslav economy was an inspiration for socialist capability, showing that workers’ self management was effective and could work well in the larger economy. This system was both democratic and gave workers a stake in their workplace. Unfortunately, the government’s efforts to reform the economy and bring in privatization was a terrible betrayal for the working class. Yugoslavia’s system is, ultimately, a reminder to any socialist of what happens when socialism compromises with capitalism.
The Rose Outlook 
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