Yugoslavia

Socialism, Development and Debt

David A Dyker

• Publisher: Taylor & Francis
• Year: 2013
• Print ISBN: 9780415615693
• eBook ISBN: 9781317829515
• Edition: 1
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

This book, first published in 1990, analyses contemporary Yugoslavian development strategy in its historical and political context, assessing how corruption, negligence, and an emphasis on industry to the detriment of agriculture and trade, have all played a part in bringing Yugoslavia close to financial and political chaos. The book concludes by considering the contemporary prospects for a more integrated policy approach in the midst of the country's political crisis.

Chapter one

A Young State and a Developing Economy

The dilemmas of Yugoslav statehood

The creation of Yugoslavia in 1918, in the aftermath of the Balkan Wars and the First World War, marked the final victory in a century-long struggle by the South Slavs to create a ‘Southslavia’ (the literal meaning of Yugoslavia) in the Balkans, following on the collapse of the Ottoman and Austro-Hungarian Empires. But while the other newly-independent states of Eastern Europe could all claim the status of nation-state, in the sense that each contained a single, dominant national and linguistic group, Yugoslavia was from the start a multi-national state, more of a microcosm of the ramshackle empires it succeeded than any tribute to the Wilson Doctrine. It did have a large measure of linguistic unity with around 70 per cent of the population speaking some form of Serbo-Croat as their first language (Hoffman and Neal 1962: 29), but Croatia, with its Habsburg past and Roman Catholic religion, was as self-consciously different from Serbia (Orthodox and still smarting from the memory of the Ottoman yoke) as is the Protestant, French-speaking part of Switzerland from France. The Serbo-Croat-speaking Muslims of Bosnia and Hercegovina and the people of Montenegro – Serbo-Croat-speaking and Serbian Orthodox in religion, but with a long history of independent statehood – further complicated the picture. Outside the Serbo-Croat-speaking heart of the new state lay a periphery populated by Slovenes and Macedonians – Slav nations, but with distinctive national languages – and substantial minorities of Albanians, Hungarians and, at that time, also Germans. The biggest single ethnic group – the Serbs – accounted for about 40 per cent of the total population of some 12 million people.

But Serbia, the self-styled ‘Piedmont of the South Slav area’ was politically quite dominant in the Kingdom of the Serbs, Croats and Slovenes, as it was known until 1929. It was Serbia which had managed to develop some kind of a modern state apparatus during the 19th century, having wrested a degree of autonomy from the Turks in 1815 and complete independence in 1878. It was Serbia which had set a pattern of territorial expansionism as it struggled to reclaim anciently Serbian lands from the Turkish Empire in a series of wars through the period 1815–1918. It was the assassination of the Habsburg Archduke Ferdinand in 1914 by a Serb, Gavrilo Princip, which started the First World War, and it was Serbia which, as an ally, battled through to victory in 1918, though at the cost of appalling loss of life. Finally, it was the Serbian royal family, in the person of King Alexander Karadjordjević, that was to rule the new kingdom, after 1929 through a royal dictatorship.

These circumstances created a complex of political problems which threatened to tear the Kingdom of the Serbs, Croats and Slovenes apart, and which do, indeed, still impinge in present-day Yugoslavia. The Serbs, naturally, felt that they had ‘earned’ the right to run the new show, and they were, though economically a good deal less advanced than the Slovenes and Croats of the North and West, the only group with an existing administrative elite. Thus ‘the new state amounted to a Serbian hegemony, with not only king and court, but also administration, army and police predominantly Serbian, and therefore tending to be anti-Croat. Under a government dominated by Serbs, Croats had less to say about their affairs than before the war…. Croat passions, not unnaturally, began to burn…. The Serbs handled the problem with a remarkable lack of finesse. By 1923–4 Croatia was virtually in a state of insurrection’ (Hoffman and Neal 1962: 59–60). When King Alexander proclaimed his royal dictatorship in 1929 he imposed a new system of administrative territorialization which was expressly designed to deprive Croatia of a territorial identity within Yugoslavia. Repression, needless to say, made things worse rather than better, and by the late 1930s, with the German menace looming, public opinion started to swing towards reconciliation. In 1939 a deal was struck which gave the Croatians their own banovina, or province, and a degree of autonomy. The new arrangement did not work particularly well, but in any case the old Yugoslavia was destroyed by German invasion in 1941. Germany imposed a brutal occupation on Serbia, but permitted the formation of a puppet fascist state in Croatia under the Ustaše.

The wartime period 1941–5 was characterized at once by the depths of atrocity and the heights of heroism. The Ustaše launched genocidal attacks on Serbian populations, and to a degree the Serbian Chetnik movement, originally formed in 1941 to resist the Axis occupation, replied in kind. But the Chetniks offered little immediate challenge to the Germans, preferring to keep their forces intact for the power struggle they expected after the end of the war. For the Chetniks, then, the ultimate restoration of the Karadjordjević monarchy remained a central priority. Meanwhile it was the communist-led Partisan movement – predominantly Serbian in personnel but led by a Croat, Josip Broz Tito – which soon came to dominate effective resistance to the occupiers, and indeed to fight a heroic guerilla campaign, holding down dozens of German battalions and contributing significantly to the allied cause. The Partisans were recognized by Winston Churchill as the ‘official’ resistance in Yugoslavia as early as 1943, and thenceforth received substantial support, material and moral, from the Western Allies. But the Partisans were just as interested as the Chetniks in taking power after the end of hostilities, and joined battle with the latter as trenchantly as with the Germans. Thus civil war was layered upon civil war, with little quarter offered by any of the protagonists. Partisan treatment of Chetnik personnel after the end of the war does them little credit. The Chetnik leader, Draža Mihailović, was executed in 1946 for alleged collaboration with the Germans.

There can be no doubt that the Partisans, with their appeal to traditional warrior-hero attitudes and their genuinely pan-Yugoslav and ultimately universal ideology, struck a deep chord amongst Yugoslavs for whom the Serb-Croat bickerings of the inter-war period had turned into the most horrific nightmare. But the Partisan leaders, at this time at least, were no democrats and no decentralizers. They had gained power by defeating and repressing their rivals, and aimed to extend that power through the imposition of a Stalinist police state. Willy-nilly, they would have to use as their instruments Partisan cadres, predominantly Serbian. It went without saying that Belgrade, the capital of Serbia, would continue to be the capital of Yugoslavia, and that meant that the main administrative centre of the country would continue to be in some sense alien to Croats and Slovenes at least.

For that reason, and perhaps also for more concrete financial and career reasons, the northern nationalities signally failed to take positive initiatives to roll back Serbian domination of the administration and the coercive forces through the post-war period. Serbs, together with their close cousins, the Montenegrins, continued to dominate the officer corps, and indeed the proportion of that corps made up by members of other nationalities seems to have fallen steadily up to the early 1970s (Paver 1973). In 1970 61 out or 100 ‘leading personnel’ of the Federal Ministry of Internal Affairs, i.e. the police, were Serbs, and another 9 were Montenegrins (Dyker 1977). Most striking of all are the following figures for national composition of membership of the federal bureaucracy in 1969 (Poen … 1969):

Serbs	4335
Croats	504
Macedonian	145
Montenegrins	424
Slovenes	187

We should certainly be very cautious about attributing these patterns to any policy of Serbian domination, such as had been followed by the royal regime before the war. Indeed the Belgrade government, as we shall see, has frequently taken steps to try to correct the imbalance. But the vicious circle of Serbian preponderance in the organs of the state, and ‘agin the government’ attitudes amongst the other nationalities, particularly the Croats and Slovenes, is a crucial factor affecting policy implementation in any area, but not least the economic area, and we shall return to it repeatedly.

The legacy of backwardness

On the eve of the Second World War Yugoslavia had a level of National Income per head of around 60 (1938) dollars (Gnjatović 1985: 43). The corresponding figure for the USA itself was $607 (Kuznets 1954: 153). The Yugoslav figure for 1938 represented but little progress over the inter-war period as a whole, with the average rate of growth of National Income only slightly above that of population. The period 1920–9 was a good one for Yugoslavia, as it was for other agricultural countries able to take advantage of the buoyant food markets of that decade. But the Wall Street Crash, and the ensuing Great Depression, changed all that. While Yugoslav GDP grew at a rate of 4.5 per cent during 1920–9, it could muster only 1.3 per cent during 1929–38 (Maddison 1976: 451). In 1939 agriculture accounted for around 80 per cent of the active population and 51 per cent of National Income. Industry and handicrafts employed 8.6 per cent of the active population and generated 29.7 per cent of National Income (Gnjatović 1985: 43). The distribution of income generated by this production profile showed a substantial but not overwhelming degree of inequality. Vinski found that in 1938 the ‘proletariat’, including the poor peasants, accounted for 34.6 per cent of the population, but only 18.2 per cent of National Income. For urban workers taken by themselves, however, the situation was much more favourable, with corresponding figures of 6.0 per cent and 5.3 per cent. The ‘middle classes’ – mainly the peasants – had 52.9 per cent of the population and 55.6 per cent of National Income. For the ‘bourgeoisie’ the corresponding figures were 5.3 per cent and 25.6 per cent (Vinski 1970).

What development there was was unevenly spread. Cobeljić quotes research which indicates that in 1918 less developed regions of Yugoslavia accounted for just 16 per cent of the work places outside peasant agriculture, 23 per cent of total invested capital, and 11 per cent of installed capacity (Cobeljić 1959: 79, quoting work by M.Jelić and R.Cvetković). It is not clear what the precise coverage of ‘less developed regions’ is in this research, but it must have accounted for around 50 per cent of the total population. Things got worse rather than better over the inter-war period, with industrial capital invested per head of population in Slovenia growing twice as fast as in Serbia, six times as fast as in Bosnia and Hercegovina, and nearly twenty times as fast as in Montenegro (Gnjatović 1985: 45).

Thus the Yugoslavia which the Communists inheritated in 1945 was in many ways a fairly typical developing country. Predominantly agricultural, it had discovered in the 1930s just how vulnerable agricultural exporters can be in times of international recession. To make matters worse, the pressure of rural overcrowding was increasing all the time, with total agricultural population increasing from 9 million in 1921 to 11.5 million in 1938 (Cobeljić 1959: 80) This kept agricultural labour productivity levels low and made it virtually impossible for the peasantry to generate enough money income to pay their heavy tax burden, purchase industrial inputs, etc.

The agrarian reform of 1918–31, a reform in the classic redistributional mould, ensured that the great majority of peasants had some land, but that few had enough. Almost 70 per cent of the number of farms in the 1930s were less than 5 hectares, and the dominant group of peasants, accounting for nearly 50 per cent of the total land stock, were those holding farms of 5–20 hectares (Mirković 1968: 209). After 1929 the peasant indebtedness problem grew rapidly, exacerbated by deflation and usurious rates of interest. The state tried to help by introducing various measures of partial moratorium, but the problem remained essentially unresolved on the eve of the Second World War.

Typical also of many contemporary developing countries were the ecological costs which the pressure of rural over-population started to impose on Yugoslavia. Large-scale destruction of forests, as land, often marginal land, was cleared for cultivation, was one of the major factors leading to the emergence of a serious erosion problem. It also led to increased aridity in an already rather dry area, and to increased volatility in the stock patterns of major rivers, with flooding after heavy rainfall an ever more common problem (Mihailović 1977: 105–7). Thus the pressures in favour of industrialization were as much of a general socio-environmental as of a specifically economic nature.

Development strategy between the wars

Yet the picture of an agrarian economy, rent by internal tensions and imbalances and buffeted by international trends over which it had no control, is a little misleading. The royal Yugoslav regime, and the Yugoslav public, perceived clearly the need to foster industrial development.

It was obvious, and with a few romantic exceptions generally recognized, that industrialization had become inevitable, that only through it would it be possible to develop the productive forces of the people, and indeed of agriculture itself, and that it was a necessary precondition if the Yugoslav peoples were to progress, or even just to survive.

(Mirković 1968: 350)

Mirković pin-points three key characteristics of inter-war industrial policy – a high degree of protectionism, free access for foreign capital, and substantial direct state support for domestic industry through subsidized rail tariffs, tolerance of tax evasion, defence contracts on very favourable terms for the private contractor, etc. However, he perceives no great master plan for development behind these specific measures.

Bićanić shares Mirković’s implicit cynicism, judging that

state policy was predominantly in the hands of people whose outlook had not developed beyond the mentality of what Marx called primitive accumulation and who considered the state apparatus and state economic policy not as instruments with which to build modern capitalism, but as means for private accumulation by extra-economic means, i.e. using the state machinery and the state budget instead of capitalist economic machinery.

(Bićanić 1973: 18)

But he does also identify ‘objectives of the policy of state monopoly capitalism’, in terms of overall economic growth, building up the defence industry, maximizing the degree of national self-sufficiency, and channelling resources into specified export activities (Bićanić 1973: 18–19). We need not read into this any very high defree of effective integration of policy. But Vladimir Pertot has perceived a clear continuity with the traditional Austro-Hungarian policy of import substitution, and pin-pointed this as a major obstacle to the expansion of exports (Pertot 1971: 2 and 3). Equally interesting is the way that Bićanić ties in this autarkic, state-capitalist approach with Serbian political domination.

Self-congratulation on the one side and disappointment on the other were to be at the root of many tensions in the future between those who considered it their sacred mission to consolidate their war gains and build up a self-contained (autarchic) National State, and those [i.e. the Slovenes and Croats] who felt more or less clearly that the development of the country’s economy required larger markets and a wider extension of economic forces than the Yugoslav frontiers permitted. The former developed a sense of economic xenophobia, originating in an inferiority complex about underdevelopment and an insecurity caused by fear of competition. The latter considered themselves able to meet foreign competition on an equal footing in specialized fields of production, as had been the case before 1914, and they favoured an open economy which would trade with foreign countries on a wide scale. This struggle between the two conceptions continued through the inter-war period and even after the socialist revolution. Not until the mid-sixties did it become clear to the majority of people that even if the area of Yugoslavia were ten times larger and her income per head four times bigger this would still not provide a basis for a successful autarchic policy.

(Bićanić 1973: 2–3)

The Balance of Trade and the Balance of Payments between the Wars

As we can see from Table 1.1, the overall Balance of Trade pattern for Yugoslavia 1922–39 was one of occasional large deficits being cancelled out by frequent small surpluses. Over the period 1926–39 the terms of trade moved strongly against Yugoslavia, with the index of prices of her principal exports falling by a total of 22 per cent, and that of her most important imports by only 7 per cent (Cobeljić 1959: 88), and in this ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Dedication
• Table of Contents
• List of Map and Tables
• Preface
• 1. A Young State and a Developing Economy
• 2. The Origins of Yugoslav Market Socialism
• 3. The Greap Leap Forward: Industrialization and Extensive Development 1953–65
• 4. Systemic Reform in the 1960s and 1970s: the Sovereignty of ‘Associated Labour’
• 5. Growth Strategy and Economic Structure: the Balance of Payments and the Failure of Adjustment Policies in the 1970s
• 6. The Debt-Service Crisis of 1982
• 7. Adjustment Policies in the 1980s: Plus ça Change ...
• 8. Yugoslavia and the World – an Awkward Customer?
• 9. Politics and the Price of Reform
• References
• Index