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Yugoslavia: Capital Ownership and the Market
Country Study > Chapter 3 > The Economy > The Economic Management Mechanism > Capital Ownership and the Market

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




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 Factba.se.

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