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Yugoslavia THE REFORMS OF 1990
In December 1989, the Markovic government presented an
economic reform package. The program was actually a continuation
of a 1989 reform that attempted to introduce a "united market
economy" compatible with the current self-management system. Of
the twenty-four laws included, the Federal Assembly passed
seventeen outright and six remained provisional. At the heart of
the program's monetary reform was a new "heavy" dinar, worth
10,000 standard dinars, pegged to the deutsche mark, and
convertible with all Western currencies.
Wages were frozen and income pegged to rates 18 to 32 percent
higher than wage rates of December 15, 1989. Price controls were
removed on 85 percent of commodities. The only exceptions were
essential categories such as electricity, fuels, medicine, raw
metals and minerals, and rail, postal, and telephone services,
which remained under government control.
The program strengthened existing bankruptcy and liquidation
laws forbidding state subsidy of enterprises and banks operating
at a loss, and bankrupt enterprises no longer received bank
loans. At the time of the 1990 reform, one-quarter to one-third
of Yugoslavia's 27,600 enterprises were showing losses, and the
debts of 100 Yugoslav banks totaled US$2 to US$3 billion. To
mitigate the inevitable effects of massive layoffs from
enterprise closings, the program allotted US$150 million in aid
to the poorest regions, primarily in the south, and US$100
million for social security and unemployment compensation. An
anticipated foreign loan of US$500 million was to pay for those
allotments. The West contributed US$1 billion in 1989 to cancel
the deficit in the banking system and implement the new reforms,
and as much as US$4 billion more was promised if the program took
effect.
Although Markovic's entire package was not accepted by the
Federal Assembly, the new program had immediate effects and
received mostly positive reactions in Yugoslav society. By April
1990, the monthly inflation rate had dropped to zero, from its
December 1989 monthly rate of 64.3 percent. The revaluation of
the dinar was credited with an export increase of 21 percent and
an import increase of 32 percent in the first four months of
1990, as well as an increase of US$3 billion in foreign currency
reserves in the first six months of 1990. By mid-1990, the
government was claiming 1,200 new joint investment deals with
foreign firms, worth an estimated one billion DM, and a total of
10,200 new enterprises formed. On the other hand, industrial
productivity fell by 8.7 percent, because of the extreme monetary
controls used to decrease the money supply and stop inflation,
and because of the large number of unprofitable enterprises
closed by the reform. Domestic investment slowed drastically, but
the reforms brought much less civil unrest than anticipated. Some
industries continued paying wages unrelated to productivity,
nullifying the incentive effect of federal wage restrictions.
The initial phase of the Markovic reform package was a sixmonth preliminary step. When phase two began in mid-1990, policy
makers began seeking nonmonetary controls for inflation,
encouraging banks to keep interest rates down, funding an agency
for development of small and medium-sized enterprises, and
reshaping investment incentives. The overall goal of these steps
was to mitigate the initial shock effect of the austerity program
and gradually allow market forces to stimulate a new round of
investment geared to private enterprise. The next round of
constitutional amendments, introduced in 1990, included
provisions to facilitate large-scale changes of public to private
ownership, reform tax policy to encourage private investment, and
create a new credit distribution role for the Yugoslav National
Bank. After the first stage of reform, progress was uneven; in
1990 many industries remained under obstructionist political
appointees with no stake in overall economic progress. Resistance
was especially strong in Serbia, where one in three enterprises
was unprofitable at the end of 1990. Even the optimistic Ante
Markovic cautioned that future steps in economic reform would
cause additional social discomfort, but in 1990 Yugoslav economic
planning finally had made a discernible break with its
ineffectual past.
* * *
Several useful books and essays on the Yugoslav economy are
available in English. The Economy of Yugoslavia by Fred
Singleton and Bernard Carter, though dated, provides a
comprehensive historical and structural view of the Yugoslav
economy. Harold Lydall's Yugoslavia in Crisis fully
analyzes the economic situation of Yugoslavia at the end of the
1980s and the systemic problems that created that situation.
Several chapters of Yugoslavia in the 1980s, edited by
Pedro Ramet, analyze the economic crisis of the early 1980s,
forecast future developments, and provide abundant statistics.
Yugoslavia: A Fractured Federalism contains two chapters
that describe the causes and results of Yugoslav politicaleconomic policymaking in the 1980s. The Statistical Yearbook
of Yugoslavia (Statisticki godisnjak Jugoslavije),
published in Serbo-Croatian with an English key, lists exhaustive
statistics on all sectors of the economy, as well as economic
indicators for the past twenty years. (For further information
and complete citations,
see
Bibliography.)
Data as of December 1990
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