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Yugoslavia Economic Life and Foreign Policy in the 1920s
Yugoslavia inherited formidable economic problems after World
War I. The new kingdom had to repair war damage, repay debts,
eradicate feudalism by passing land reform, integrate differing
customs areas, currencies, rail networks, and banking systems,
and make up for shortages of capital and skilled labor.
The agricultural sector, which employed over 75 percent of
the Yugoslav population, underwent a radical reform that failed
to relieve nagging rural poverty. Before the war, German,
Austrian, and Hungarian families owned sprawling estates in
Slovenia, Croatia, and Vojvodina; Turkish feudalism remained in
Kosovo and Macedonia; Muslim landlords in Bosnia owned large
farms worked by Christian sharecroppers; some Dalmatians remained
tenant farmers in a system devised in Roman times; and Serbia was
a chaotic blend of independent small farms. The Yugoslav
government erased remnants of feudalism, but the peasants
received plots too small for efficient farming to support the
rural population. Yields fell and poverty and ignorance dominated
most of the peasantry. Industrialization and emigration did not
ease overpopulation.
In the industrial sector, Yugoslavia concentrated on
extracting raw materials, expanding light industry, and improving
its infrastructure. Insufficient domestic capital forced
Yugoslavia to seek foreign investment. The government sold mining
rights to foreign firms and borrowed heavily to build roads and
rail lines, power plants, and a merchant marine. Despite steady
economic growth based on the food industry, mining, and textiles,
Yugoslavia remained substantially undeveloped and fell far behind
the rest of Europe. Divergent economic interests and the widening
differences in development of Croatia and Slovenia with the lessdeveloped southern regions exacerbated Serbian-Croatian tensions.
The development disparity especially embittered many Serbs, who
believed that their sacrifices in the war had benefited former
enemies more than themselves.
Yugoslavia's foreign policy in the 1920s sought to counter
threats from Italy, Hungary, and Bulgaria, and to secure regional
peace through a series of Balkan alliances. The young kingdom was
a charter member of the League of Nations. In 1921 and 1922
Yugoslavia, Romania, and Czechoslovakia signed mutual defense and
political treaties aimed at blocking a Habsburg restoration and
blocking the ambitions of revisionist Hungary. This alignment,
later known as the Little Entente, won support from France, which
hoped to block Soviet expansion and contain Germany. In 1927
Yugoslavia and France signed a treaty of friendship. Though it
was the focus of Yugoslav foreign policy for the next decade,
this treaty included no military provisions and failed to relieve
the fear of fascist Italy.
Data as of December 1990
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