Woodward, Susan - Socialist Unemployment

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<p>ISBN 0-b51,-0e551-?</p> <p>Socialist UnemploymentTHE POLITICAL ECONOMY OF YUGOSLAVIA, 1945-1990</p> <p>Susan L. Woodward</p> <p>PRINCETON UNIVERSITY PRESS PRINCETON, NEW JERSEY</p> <p>Copyright 1995 by Princeton University Press Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press, Chichester, West Sussex All Rights Reserved Library of Congress Cataloging-in-Publication Data</p> <p>Woodward, Susan L., 1944Socialist unemployment : the political economy of Yugoslavia, 1945-1990 / Susan L. Woodward. p. cm. Includes bibliographical references and index. ISBN 0-691-08645-1 (alk. paper) 1. UnemploymentYugoslavia. 2. Full employment policiesYugoslavia. 3. YugoslaviaEconomic conditions1945-1992. 4. SocialismYugoslavia. I. Title. HD5811.6.A6W66 1995 331.13'79497dc20 94-46153 CIP This book has been composed in Caledonia Princeton University Press books are printed on acid-free paper and meet the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources Printed in the United States of America 1 3 5 7 9 10 8 6 4 2</p> <p>To Peter Vincent WoodwardIn Memoriam</p> <p>Child o f u n e m p l o y e d man: " W h y don't w e have h e a t ? " M o t h e r : " B e c a u s e t h e r e is no c o a l . " C h i l d : " W h y is t h e r e no coal?" M o t h e r : " B e c a u s e your father is out of work. " Child: " W h y is my father out of work?" M o t h e r : " B e c a u s e t h e r e is too m u c h c o a l . " D r . D i e t e r Steifel, Austria, 1931 O n e gets the impression that as a society we are q u i t e inert w h e n it c o m e s to solving the p r o b l e m of u n e m p l o y m e n t . We have difficulty a c c e p t i n g facts if they do not conform to our conceptions or plans. A progressive, and particularly a socialist society, cannot wait "optimistically" for so important and delicate a p r o b l e m to be resolved spontaneously and cannot e x p e c t its m e m b e r s not to be exposed to great social and e c o n o m i c risk as a result. Security of e m p l o y m e n t is o n e of the significant contributions of socialism, highly valued and popular, particularly in the ranks of the working classes of capitalist countries, s o m e t h i n g that we ought not allow ourselves to question. We are aware of the fact that it is difficult to harmonize e c o n o m i c n e c e s s i t y and political opportunity, but we should not allow those difficulties to d e m o b i l i z e us. T r i p o Mulina, Yugoslavia, 1968</p> <p>CONTENTS</p> <p>List of Figures and Tables PrefaceCHAPTER 1</p> <p>xi xiii</p> <p>Introduction: The Paradox of Socialist Unemployment CHAPTER 2 The Making of a Strategy for Change CHAPTER 3 Creating a State for Socialist Development CHAPTER 4 Military Self-Reliance, Foreign Trade, and the Origins of Self-Management CHAPTER 5 A Republic of Producers CHAPTER 6 Unemployment CHAPTER 7 The Faustian Bargain CHAPTER 8 Slovenia and Foa CHAPTER 9 Divisions of Labor CHAPTER 10 Breakdown EPILOGUE Appendix: Statistical Data Bibliography Index</p> <p>3 31 64</p> <p>98 164 191 222 260 310 345 371 375 393 427</p> <p>FIGURES AND TABLES</p> <p>FIGURES Figure 1-1. Map of Former Yugoslavia Figure 6-1. Employment Growth, 1962-1975 Figure 6-2. Unemployment, 1952-1988 Figure 6-3. Rate of Unemployment, 1959-1988 Figure 6-4. Unemployment: Gross and Net Rates Figure 6-5. Job Seekers and Yugoslavs Working Temporarily Abroad Figure 6-6. Length of Time Waiting to Be Employed Figure 6-7. Length of Time Waiting to Be Employed (proportions) Figure 6-8. Women among the Registered Unemployed Figure 6-9. Unemployment Rates by Republic: The North Figure 6-10. Unemployment Rates by Republic: The South Figure 6-11. Economically Active Population by Republic Figure 6-12. Unemployment by Age Category Figure 6-13. Unemployment by Age Category (proportions) Figure 6-14. Women, New Entrants, and the Educated Figure 6-15. Women, New Entrants, and the Educated (proportions) Figure 6-16. Youth Unemployment Rates: The North Figure 6-17. Youth Unemployment Rates: The South Figure 8-1. Employment in the Social Sector by Republic Figure 9-1. Rate of Unemployment: Kosovo, Slovenia, and Bosnia-Herzegovina Figure 9-2. Rate of Youth Unemployment: Kosovo, Slovenia, and Bosnia-Herzegovina Figure 9-3. Rate of Employment: Kosovo, Slovenia, and Bosnia-Herzegovina 2 192 193 193 199 200 202 202 203 204 204 205 206 206 207 208 209 209 292 340 340 341</p> <p>xii</p> <p>LIST OF FIGURES AND TABLES TABLES</p> <p>Table 1-1. Table 1-2. Table 6-1.</p> <p>International Comparison of the Sectoral Distribution of Employment</p> <p>25</p> <p>Level of Employment in Socialist and Market 27 Capitalist Countries, 1974 Rate of Employment by Republic or Province 205</p> <p>PREFACE</p> <p>BETWEEN THE Great Depression of the 1880s and the Great Depression of the 1930s, the political systems of modern states were created. Inseparable from that development was unemployment. Mass political parties, governmental activism in the economy, systems of public welfareall were a response to the phenomenon of mass, industrial unemployment and the efforts by working-class organizations to protect against it. By the 1980s, the solutions that had b e e n in use had failed. U n e m p l o y m e n t began to take on serious proportions even in the wealthiest, most technologically advanced nations of the world. Countries celebrated as models of full e m p l o y m e n t S w e d e n , Austria, even J a p a n w e r e dismantling the systems of political decision making in the economy that had managed their success. At the same time, the socialist alternative, which had once inspired political action and a r e m e d y against unemployment, was also under attack. The global defeat of both Keynesian and Marxian programs had its crowning glory in the political revolutions in central and eastern E u r o p e in 1 9 8 9 - 9 0 and their open declaration that the "natural price" for liberal democracy and the prosperity of market economies was large-scale unemployment. In eastern G e r m a n y , the seat of social d e m o c r a c y w h e r e the Yugoslav socialist story b e g i n s t h a t unemployment was conservatively estimated at 50 p e r c e n t on the first anniversary of German reunification. Guided by the older v e r i t y t h a t unemployment was the great, unresolved affliction of capitalism, and socialism was a movement to make it unnecessaryI began this book with what s e e m e d an obvious paradox: a socialist country with high and unremittingly rising unemployment. In the early 1980s, when my research began, socialist Yugoslavia had the highest rate of registered unemployment in Europe. T h e country was acclaimed for its maverick approach to socialismfor defying the ideological blocs of the cold war, helping to organize the nonalignment movement, and creating a domestic order of economic democracy and decentralized, market socialism. But those few who noticed its unemploymentpart of the paradox was the great silence toward this unemployment in the Yugoslav public as well as in scholarship on the countryidentified the cause as the system of "workers' control." According to this theory, e c o n o m i c democracy gave workers the right to manage their firms, and they chose to maximize their incomes at the expense of new investment. Yugoslavs had made the syndicalist dilemma into an organizing principle of society.</p> <p>xiv</p> <p>PREFACE</p> <p>Before the alternative explanation in this book could appear, the country died. To explain the paroxysm of killing and territorial war that followed, a new e x c e p t i o n a l i s m o f ancient ethnic hatreds and a Balkan culture of blood r e v e n g e r e p l a c e d the fame of Yugoslavia's "third way." Yugoslav socialism was ascribed a role in the tragedy for failing to allow political democracy and for repressing national identities and the historical aspirations of the country's peoples for national self-determination. But for the most part, its experiment was assigned to the overnight oblivion of the rest of European socialism. T h e branch of scholarship claiming that Yugoslav politics was always about the national question and ethnic conflict s e e m e d vindicated. In fact, neither the disintegration of Yugoslavia nor the character of its wars can be understood apart from the political-economic and social system created by the Yugoslav League of Communists or the effect of rising unemployment on that system. T h e leaders' approach to employment was a core e l e m e n t of the system. T h e dynamic of governmental policy alternated between two models, which I have labeled (after contrasting wartime administrations in 1 9 4 1 - 4 5 ) "Slovenia" and " F o a . " T h e first model r e p r e s e n t e d the approach to economic growthand the economic and political institutions to implement that a p p r o a c h o f the dominant ideology of liberal, or reform, communism. T h e second model represented the policies and institutions periodically required by the strategic considerations of national defense and of a foreign-trade strategy in contractual markets, or in market conditions where revenues depended on supply increases instead of price competition. A central e l e m e n t in both approaches was the country's foreign economic and strategic relations and its domestic adjustment to international conditions. In the breakup of Yugoslavia, an extreme version of this dynamic played out with the initial, almost surgical secession of Slovenia (to pursue the Slovene model independently in central Europe) and the prolonged, bloody agony of Bosnia-Herzegovina (where the F o a model had its earliest and most developed expression). T h e ability of Slovenia to exit was inseparable from the political consequences of the republic's nearly forty years of full employment. T h e characteristics of the war in BosniaHerzegovina were, likewise, inseparable from the political c o n s e q u e n c e s of nearly 25 percent unemployment in the 1980s, at the start of another liberalizing, "efficiency-oriented" economic reform for international adj u s t m e n t . Both were the product, as was the broader path of disintegration, of a political system based on the liberal, or reform-communist, model of socialism and on the leaders' system of social protection against u n e m p l o y m e n t a system that structured the labor force into highproductivity and subsistence sectors of the economy, with corresponding differences in property rights and political participation: one socialist (or public), the other independent (or private).</p> <p>PREFACE</p> <p>XV</p> <p>The understandable focus on the collapse of Yugoslavia and the human tragedy of its wars diverts attention, unfortunately, from the resemblance between its strategy and the one eventually followed in other socialist states. If not a prelude to war, the economic reform of socialist societies for the purposes of global economic integration and economic recovery in a period of worldwide stagflation and then recession has left in its wake a type of social organization and attitudesdescribed in this b o o k a b o u t social status, economic rights, and welfare that will shape the path of postcommunist regimes. T h e dismissal of a century of human experience in the case of the Soviet Union and nearly fifty years in the case of E u ropean socialist states also cannot erase the problems socialism arose to solve or its more generally shared dilemma of the declining relevance of the responses to agrarian and industrial unemployment in the 1920s and 1930s to conditions in the 1990s and beyond. Structural unemployment among urban youth, both unskilled and university-educated, and within the administrative and service sectors poses a different problem for economic policy. Nationalism is only a negative manifestation of the political problem it poses; it remains uncertain who will organize the unemployed (and those threatened with unemployment in these conditions) and therefore what economic ideologies and political systems will result. At the very time the Yugoslav socialist system was disintegrating, its key elements were the rage in Western theory: decentralization, rising labor productivity as the route to higher employment, the political and economic incentives of property rights, and social alternatives to budgetary expenditures on welfare. T h e underlying tension of the Austrian paradox in the epigraph to this b o o k t h e aggregate paradox of Keynes's ideological revolution, the dilemmas of secondary uncertainty and market failure, the relation b e t w e e n individual and social interests, the role of governmentwas the source of Yugoslavia's most highly contested and unsolved political, as well as ideological, predicament. Like the former Yugoslav state, I have accumulated a very heavy burden of debts in the course of writing this book that can never be fully repaid. Beginning with those who helped financially, I acknowledge with particular gratitude the International Research and Exchanges Hoard, for enabling my research sojourn at the Zagreb Institute of Economics (Ekonomski Institut) during 1982; the American Council of Learned Societies and Williams College, for making possible a research leave at the Russian Research C e n t e r at Harvard University in 1 9 8 1 - 8 2 , when I began to think about the project; Yale University, for a social science faculty research grant and a glorious leave in California in 1987, where I was able to do the archival work and write undisturbed in the true ivory tower of the Hoover Institution and its supporting fellowship from the U . S . D e partment of State's discretionary grant program under the S o v i e t -</p> <p>xvi</p> <p>PREFACE</p> <p>E a s t e r n E u r o p e a n Research and Training Act of 1983 ( P . L . 98-164), Title V I I I , 97 Stat. 1047-50; and, finally, the National Fellows program of the Hoover Institution, for the sanctuary in 1 9 8 9 - 9 0 that gave me the additional quiet n e e d e d to c o m p l e t e the manuscript. E v e n then, without the supportive work environment of the Brookings Institution, the editing necessary to turn a book on a topic I considered of burning i n t e r e s t i n the face of troubles far more seriousinto a work of history might never have been completed. Raghbendra Jha first suggested the topic and reignited an earlier interest in economic developm e n t discovered under the remarkable professional nurturance of Robert T. Holt. No one who studied Yugoslavia escaped its spell of hospitality and endless complexity; no one can escape the painful sense of loss over its tragic death. Among my many hosts, I note especially Olga Supek, Silva Menari, Branko Horvat, Josip upanov, Zagorka Golubovi, Radmila Nakarada, the librarians at the Zagreb Institute of Economics, Nikola Uzunov, Boro kegro, Tripo Mulina, and the late Kiril Miljovski. My gratitude also goes to the many, many expertseconomists, soci...</p>