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Yugoslavia The Economy
YU030001.
Woman factory worker
AFTER WORLD WAR II, Yugoslavia established a one-party
communist
regime and an economic system modeled on that of the Soviet
Union. In 1948, however, the Soviet-led international communist
alliance Cominform ousted Yugoslavia and imposed an economic
blockade. At this time, the Yugoslav leadership reevaluated
Marxist doctrine and set out to develop a unique system of
economic administration, which it labeled socialist selfmanagement . This system was seen as a more accurate realization
of the Marxist theory that means of production should be owned
and operated by the people. By comparison, Yugoslavs considered
the Soviet system to be statist, because the Soviet state had
simply replaced the capitalists of the West in exploiting the
worker class.
Under the strong hand of Josef Broz Tito, most aspects of the
Yugoslav economy prospered from 1950 to 1979. The real national
product rose rapidly, millions of peasants were given jobs in the
social sector (see Glossary), industrial production expanded
rapidly, and export of manufactured products increased
substantially. Living standards also improved as personal incomes
increased, social services were extended and improved, and
supplies of consumer goods expanded. In the 1960s, Yugoslavia's
market-economy reforms positioned the country as an economic
leader of the Nonaligned Movement.
The 1980s, however, brought a grave economic crisis.
Beginning in 1979, the Yugoslav economy entered an extended
downturn because of increases in oil prices in 1973 and 1979, the
world recession that began in 1979, and careless investment and
borrowing policies pursued in Yugoslavia's rapid postwar
industrialization. Inflation soared out of control, reaching an
annual rate of 2,600 percent by the end of 1989. Personal income,
consumption, and labor productivity fell, and unemployment
exceeded 16 percent by the end of the 1980s. These problems were
especially serious in the poorer regions of Yugoslavia, such as
Macedonia and Kosovo. Foreign loans dried up at the same time, as
Yugoslavia was forced to reschedule its US$18 billion foreign
debt. Patchwork attempts to solve these problems generally
failed.
In January 1990, the government of Ante Markovic introduced a
reform package. This program included monetary reforms designed
to combat inflation and give the federal government more control
over macroeconomic policy. It drastically reformed currency,
wage, and price policy. Despite doubts by many domestic and
foreign economists and domestic opposition to painful austerity
measures, the Markovic program began to stabilize the economy in
the first six months of 1990. The new program was a significant
break with the decade of economic policy stagnation that had
crippled Yugoslavia's growth since 1979.
Data as of December 1990
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