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ISBN 0-b51,-0e551-?

Socialist UnemploymentTHE POLITICAL ECONOMY OF YUGOSLAVIA, 1945-1990

Susan L. Woodward

PRINCETON UNIVERSITY PRESS PRINCETON, NEW JERSEY

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

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

To Peter Vincent WoodwardIn Memoriam

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

CONTENTS

List of Figures and Tables PrefaceCHAPTER 1

xi xiii

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

3 31 64

98 164 191 222 260 310 345 371 375 393 427

FIGURES AND TABLES

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

xii

LIST OF FIGURES AND TABLES TABLES

Table 1-1. Table 1-2. Table 6-1.

International Comparison of the Sectoral Distribution of Employment

25

Level of Employment in Socialist and Market 27 Capitalist Countries, 1974 Rate of Employment by Republic or Province 205

PREFACE

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.

xiv

PREFACE

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