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Yugoslavia Overhaul in the 1960s
A movement toward greater market freedom in Yugoslavia
spurred economic reforms in the 1960s. The Third Five-Year Plan,
begun in 1961, was abandoned the next year because of a growing
economic crisis and failure to meet any plan targets at the end
of the first year. The basic goals of that plan were to increase
personal consumption, production growth, and labor productivity
through loosened government controls on wages and higher
investment in the production of energy, steel, non-ferrous
metals, chemicals, and capital equipment. Particular attention
went to investment in the less developed republics and to
mechanization of agriculture.
Economic planning in the 1960s strove to make Yugoslavia more
competitive on the world market and to expose the economy to the
beneficial influence of free international trade. A more liberal
trade policy eliminated multiple exchange rates, devalued the
dinar (for value of the
dinar--see Glossary), and reduced tariffs
and import restrictions. In addition, the Yugoslav tourist
industry received government support, and Yugoslavs were allowed
to work as guest workers abroad
(see Guest Workers
, ch. 2). Hard
currency remittances from tourism and guest workers became
important sources of relief for Yugoslavia's weak balance of
payments. Unfortunately, these changes were poorly prepared and
badly implemented. Not long after the Third Five-Year Plan was
abandoned in 1962, industrial production fell to half its 1960
level, imports spiraled, exports stagnated, and inflation
increased because wages increased faster than productivity.
After the Third Five-Year Plan failed, the government
reverted to a system of ad hoc annual plans similar to those
implemented between 1952 and 1957. Beginning in December 1962,
Yugoslavia's leading economists and politicians launched a twoyear series of debates to identify and correct economic flaws,
adjusting the roles of the federal government, enterprises,
planning, and the market in economic growth and development
policy. The conservative minority feared that decentralized
control over investment and overemphasis on market forces would
lead to the loss of socialist values. Liberals, on the other
hand, saw decentralized decision making and a greater role for
market forces as the only way out of Yugoslavia's economic
stagnation.
The new constitution of 1963 introduced
market socialism (see Glossary), a system that basically
reflected the views of the
liberals in the debates of 1962 and 1963. Decision making was
decentralized, the federal government further loosened its
control over investment, prices, and incomes, and market forces
were allowed greater play. The federal government was only to
intervene with emergency measures in times of crisis. The selfmanagement system thereby received more power and responsibility
in the economic development of the country.
Data as of December 1990
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