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Yugoslavia Reforms of the 1960s
Initial steps toward
market socialism (see Glossary) and
freer foreign trade in 1961 produced unacceptable inflation and a
foreign-trade deficit, and emergency anti-inflation measures
plunged Yugoslavia into recession in 1962. The recession produced
an urgent debate on fundamental economic reforms, especially
decentralization of investment decision making. During the
debate, naturally conflicting interregional economic interests
rekindled ethnic rivalries, and emotional nationalist claims
reemerged to complicate economic discussions. Party leaders were
unable to solve the widening economic gap between the country's
more prosperous northern republics and the underdeveloped
southern regions. Resentment grew from suspicions that some
republics were receiving an unfair share of investment funds.
The government adopted stopgap recentralization measures to
end recession in 1962, but inflation and the foreign-trade
deficit again rose sharply, renewing debate on economic reforms.
Led by Eduard Kardelj and Vladimir Bakaric, party liberals
(mostly from Slovenia, Croatia, and the Belgrade area) promoted
decentralization measures and investment strategies that would
benefit the wealthier republics. Conservatives (mostly from
Serbia and Montenegro) supported maintaining or stiffening
central controls and continuing investment in the less developed
regions
(see Overhaul in the 1960s
, ch. 3).
In 1963 Yugoslavia established new constitutions at the
national and republican level, expanding the concept of
self-management beyond the economic sphere into social activity.
This was achieved by creating local councils on education and
culture, social welfare, public health, and political
administration. The composition of the Federal Assembly was
altered, simultaneous officeholding in the party and government
was outlawed (except for Tito), and government tenure was limited
and dispersed by the introduction of a regular rotation system
(see The 1963 Constitution
, ch. 4).
In the mid-1960s, the parliamentary institutions became more
active, as assembly members criticized ministers and amended
bills, and liberal reformers used the assembly to advance their
ideas. Between 1964 and 1967, the assembly reduced the role of
the state in economic management and created the legislative
foundation of market socialism. Reform also included external
trade measures: Yugoslavia devalued its currency, obtained
foreign loans, and joined the General Agreement on Tariffs and
Trade
(
GATT--see Glossary).
The period immediately following this set of reforms brought
stagnation, rising unemployment, unpopular price increases,
illiquidity, increases in income disparity, and calls for new
reforms. Leaders in Serbia, Montenegro, Macedonia, and elsewhere
scrambled to stave off efforts to close unprofitable enterprises
in their areas. Slovenes and Croats came to resent requirements
for heavy investment in less developed republics at the expense
of their own modernization. Yugoslav workers themselves eased
unemployment by finding guest worker jobs in Western Europe
(see Structure of the Economy
, ch. 3). Foreign tourists and workers
returning from abroad brought Yugoslavia much-needed foreign
currency. A 1967 law allowed foreigners to invest up to 49
percent in partnerships with Yugoslav firms and repatriate their
profits, and in 1970 Yugoslavia signed a long-sought commercial
agreement with the European Economic Community
(
EEC--see Glossary). The post-reform recession ended in 1969 as
unemployment dropped and incomes and living standards rose, but
inflation again gained momentum and many enterprises remained
unprofitable
(see The Economic Reform of 1965
, ch. 3).
Certain that the reforms would undermine party control and
threaten Yugoslavia's survival, pro-centralist party leaders and
mid-level bureaucrats attempted to obstruct their implementation.
Again the centers of this movement were Serbia and Montenegro.
The key opponent of reform was the hard-line Serbian vice
president of Yugoslavia, Aleksandar Rankovic, who also directed
party cadres and the secret police. In 1966 the army intelligence
unit, composed mostly of Croats, examined complaints that secret
police was mistreating Albanians in Kosovo. The investigation
uncovered a wide range of unethical practices, including
smuggling and surveillance of Tito himself. Tito purged the
secret police, and Rankovic was forced to resign
(see Internal Security
, ch. 5). But he remained the champion of Serbian
nationalist groups, particularly on the issue of Kosovo.
After the defeat of the conservatives and adoption of
additional party reforms, the party central organization lost its
predominant position. Republican and provincial party leaders
blocked action taken in Belgrade and gained control of party
appointments, thus shifting the focus of party loyalty away from
the center. New election laws brought direct multicandidate
elections, often won by candidates who lacked party approval.
Party discipline softened when the ascendant liberals
continued to argue that the League of Communists should influence
rather than direct self-management decision making. The press and
universities grew into centers of debate on an expanding list of
taboo issues. Beginning in 1968, a group of intellectuals in
Zagreb and Belgrade, known collectively as the Praxis circle,
circulated unorthodox interpretations of Marx, supported student
demonstrations, and criticized the rigidity of party positions.
Despite official efforts to suppress it, the Praxis circle
flourished and spoke out until 1975.
In 1968 attention moved back to foreign policy. Student
unrest subsided, and Yugoslav-Soviet relations again sagged after
Warsaw Pact nations invaded Czechoslovakia in August 1968. Tito,
who had traveled to Prague before the invasion to lend support to
Alexander Dubcek's program of "socialism with a human face,"
denounced the invasion, and Moscow and Belgrade exchanged bitter
criticism. The Yugoslavs warned that they would resist a Soviet
invasion of their country, and Tito established a civil defense
organization capable of mobilizing the entire country in such an
event
(see National Defense
, ch. 5).
The quiet that the invasion of Czechoslovakia brought to the
Yugoslav domestic scene was broken in November 1968 when ethnic
Albanians in Kosovo and western Macedonia staged violent
demonstrations to demand equality and republican status for
Kosovo. Demonstrations and violent incidents continued through
1969. Among broad government concessions to the ethnic Albanians,
a 1968 constitutional amendment allowed local economic and social
planning and financial control in Kosovo. Serbian and Montenegrin
intellectuals condemned the upgrading of Kosovo's status, and
accurately predicted that Albanian abuses would increase Serbian
emigration from Kosovo. The creation of a separate Macedonian
Orthodox Church and rising Muslim nationalism in Bosnia also
irritated Serbian churchmen and intellectuals during this period.
After tough political bargaining, the Skupstina adopted
constitutional amendments in 1971 that transformed Yugoslavia
into a loose federation. The amendments limited federal
government responsibilities to defense, foreign affairs,
maintenance of a unified Yugoslav market, common monetary and
foreign-trade policies, the self-management system, and ethnic
and civil rights. The republics and provinces gained primary
control over all other functions and a de facto veto power over
federal decisions.
Data as of December 1990
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