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Yugoslavia: Economic Life and Foreign Policy in the 1920s
Country Study > Chapter 1 > Historical Setting > The Balkan War, World War I, and the Formation of Yugoslavia (1912-1918) > 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

Last Updated: December 1990

Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Yugoslavia was first published in 1990. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on

Yugoslavia Main Page Country Studies Main Page

Section 19 of 208


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