Economy of the Socialist Federal Republic of Yugoslavia

The Yugoslav economy was characterized by a combination of market mechanisms and state planning, with a focus on worker self-management and a decentralized approach to decision-making.

Despite facing numerous challenges, including political instability and external pressures, the Yugoslav economy achieved significant growth and modernization during its existence, with a particularly strong emphasis on education, health care, and social welfare.

John Roemer, an advocate of market socialism, had a very negative view of the Yugoslav experiment, claiming that Yugoslav companies weren't run on true market principles of competition and profit, and that they instead relied on soft budget constraints and were subjected to political control, which created a deeply inefficient system that ultimately collapsed.

[26] Despite several trade agreements, it never managed to become significant because of its geographic distance and the fact that both sides were exporters of commodities and simple products, interested mostly in imports of Western technological goods.

Many of these projects were carried out by Energoprojekt, a Yugoslav engineering and construction firm founded in 1951 to rebuild the country's war devastated infrastructure.

[29] Many infrastructure projects in Africa and Asia were political deals, done for prestige reasons and included elements of foreign aid rather than being the result of economic calculation and competition.

[31] In 1967, legislation enabled foreign private investors to become partners with Yugoslav enterprises in joint ventures with up to 49% of capital, despite the fact that such arrangement would be classified as exploitation in Marxist theory.

[26] However, many foreign companies were disappointed by the poor efficiency and organization of Yugoslav enterprises; in one case, Japanese representatives concluded that they would consider investment only if half of the workers were fired.

The appointment of managers and strategic policy of composite organisations were, depending on their size and importance, in practice often subject to political and personal influence-peddling.

[citation needed] In order to give all employees the same access to decision making, the basic organisations of associated labour were also introduced into public services, including health and education.

[citation needed] Strikes for clear genuine grievances with no political motivation usually resulted in prompt replacement of the management and increase in pay or benefits.

Strikes with real or implied political motivation were often dealt with in the same manner (individuals were prosecuted or persecuted separately), but occasionally also met stubborn refusal to deal or in some cases brutal force.

[citation needed] Strikes occurred in all times of political upheaval or economic hardships, but they became increasingly common in the 1980s, when consecutive governments tried to salvage the slumping economy with a programme of austerity under the auspices of the International Monetary Fund.

[39] The government introduced extensive subsidies for public health care, temporary disability and illness, old age pensions and assistance to mothers.

There were, in particular, a great number of social security benefits intended to take the pressure of child raising off women, making it easier for them to focus on studying and gaining employment.

Women received 90 days of paid maternity leave after having a baby, a range of other subsidies to help pay for food, clothing and other necessities.

[40] The oil crisis of the 1970s magnified the economic problems, the foreign debt grew at an annual rate of 20%, and by the early 1980s it reached more than US$20 billion.

[41] Governments of Milka Planinc and Branko Mikulić renegotiated the foreign debt at the price of introducing the policy of stabilisation which in practice consisted of severe austerity measures—the so-called shock treatment.

Increased competition from countries like South Korea offering less expensive labor, also contributed to a decline in Yugoslavia's booming engineering and construction export trade.

[62] The collapse of the Yugoslav economy was partially caused by its non-aligned stance that had resulted in access to loans from both superpower blocs on different terms.

In 1989, before the fall of the Berlin Wall, Yugoslav federal Prime Minister Ante Marković went to Washington to meet with President George H. W. Bush, to negotiate a new financial aid package.

In return for assistance, Yugoslavia agreed to even more sweeping economic reforms, which included a new devalued currency, another wage freeze, sharp cuts in government spending, and the elimination of socially owned, worker-managed companies.

[64] The Belgrade nomenclature, with the assistance of western advisers, had laid the groundwork for Marković's mission by implementing beforehand many of the required reforms, including a major liberalization of foreign investment legislation.

The basic measures envisaged by this program were restrictive monetary policy and real positive interest rates, independence of the National Bank of Yugoslavia, denomination of the dinar by "deleting" four zeros, proclaiming the convertibility of the dinar and fixing the dinar exchange rate against the German mark at a ratio of 7:1, freezing of nominal wages for a period of 4 months, freezing of the prices of some inputs (energy products and infrastructure) for a period of 4 months, further foreign trade and fiscal account liberalization, rehabilitation of banks and companies through a special fund that would be formed with foreign financial support, negotiations with the Paris Club of Creditors about debt restructuring, and the International Monetary Fund and the World Bank for a loan to help stabilize the economy.

However, from the very beginning, there was a decline in industrial production and employment, and somewhat later, the initial positive results also started lacking (as a result of the rebound in prices and wages and the appearance of the "black" exchange rate, the foreign exchange reserves began to decrease rapidly, negative tendencies appeared in the foreign trade and budget sphere, etc.)

SR Serbia introduced customs duties on imports from Croatia and Slovenia and took $1.5 billion from the central bank to fund wage rises, pensions, bonuses to government employees and subsidize enterprises that faced losses.

[5] Although the Yugoslav economy did include elements of workplace democracy and gave workers more democratic control over the economic management of enterprises, it also caused high regional inequality.

Such a sizeable regional disparity gave rise to separatism and eventually led to increased intrastate tensions in the Yugoslav republics.

However, the economic transition of Slovenia was rather successful, and it retained many institutional elements of the Former Yugoslav economy, such as self-management and partial worker-controlled enterprises.

[72] The following stats are based on the CIA World Factbook published in 1990:[73] The Yugoslav wars, consequent loss of market, as well as mismanagement and/or non-transparent privatization brought further economic trouble for all former republics of Yugoslavia in the 1990s.