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Yugoslavia Capital Ownership and the Market
By 1990 the Yugoslav system had developed into a unique,
highly decentralized, socially owned market economy. When the
system functioned as designed, worker-managed firms competed with
each other in a market system, recycling earned profits for their
own needs and paying taxes that went into collective funds for
social consumption.
In 1990 most enterprises, government institutions, social
services, and banks operated under the system of socialist selfmanagement . All institutions employing this system were
considered to be owned by society and not by the state, which is
the owner in most centrally planned economies. In spite of their
nominal control, however, workers had no rights of ownership of
the assets they used.
Agriculture also was decentralized in the 1950s. Forced
collectivization was officially abandoned in 1952, and most
agricultural land was returned to small peasant farmers. Smallfarmer agriculture dominated Yugoslavia's socialist market
economy through the 1980s. In 1984 private farmers accounted for
83 percent of tilled land, 84 percent of all livestock, and 72
percent of net agricultural output in Yugoslavia.
Throughout the postwar period, official Yugoslav policy was
hostile to private enterprise, or the "small economy." In theory,
only small entities such as peasant farms, urban artisans and
tradesmen, retail businesses, restaurants, and tourist facilities
were permitted independent ownership and operation. In the late
1980s, many prominent Yugoslav economists recommended that
private enterprise be given full recognition and incentive and
that maximum private ownership of land be increased from ten to
thirty hectares. These proposals were based on the belief that
the entrepreneurial spirit would encourage greater efficiency and
higher productivity in an economy long hampered by the political
constraints of government control.
In spite of Tito's retrenchment in the mid-1960s, Yugoslavia
moved slowly for three decades toward toleration of market forces
in a system that originally attempted to operate in total
isolation from the world economy. This trend toward market
liberalization, however, gradually slowed in the 1970s because of
the movement toward federalism and the introduction of the social
compact system in the 1974 Constitution. Consensual by
definition, social compacts restricted independent decision
making, which in turn limited competition among basic
organizations of labor in communes and republics.
Decentralization of economic decision making power to the
republic level prevented enterprises from expanding markets
beyond their own region; by the late 1980s, this tendency had
weakened the market system significantly.
In January 1990, Yugoslavia began a new stage in the
incorporation of a Western-style market economy into the system
of workers' self-management. According to the 1990 reform,
enterprises were to operate on the basis of profitability, and
unprofitable firms previously protected by the state now risked
bankruptcy. Enterprises critical to national welfare, such as
steel, energy, and defense-related industries, were excepted in
the first stage of the reform. Although most enterprises remained
in the social sector, the 1990 program allowed workers to become
shareholders in their firms and legalized worker strikes. Strikes
had been tolerated in the late 1980s, but their legality had
never been established. Some economic experts predicted that by
the time all the 1990 reforms were in place, the Yugoslav economy
would differ from Western capitalism only in the larger
proportion of state-owned enterprises in Yugoslavia.
Data as of December 1990
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