Vladimir Unkovski-Korica locates the roots of Yugoslavia’s bloody collapse in the ‘market socialism’ of the Tito years

Ever since the 1990s when Yugoslavia, the multinational state that straddled the Balkans for the better part of the last century, fractured so violently into its various parts, it has become well-nigh impossible to write its history without writing about why it no longer exists.                                                           

The key question for historians is simple enough to state: how did the Yugoslavia of 1945, liberated by a multinational anti-fascist resistance movement led by Tito’s Communist Party and federated to give voice to its many nations,[1] become the Yugoslavia of the 1990s, consumed by conflict between those nations?

Yugoslavia through liberal lenses

The most prominent answers to this question have come from the liberals, who have attributed Yugoslavia’s collapse to an array of now familiar causes: the repressive legacy of ‘communism’; the post-Cold War resurgence of nationalism; the lack of a democratic civil society and the rule of law; and the failure to modernise – that is, to liberalise – the economy.

In other words, it was the local lack of the liberal values deemed necessary for ‘good governance’ that was to blame. And since, for the foreseeable future, the locals could not be counted upon to supply these values consistently enough themselves, an external agency (the US-led West) would have to lead them into the promised land through liberal conditions of membership (the EU) or force (Nato).

Here, in a nutshell, is the liberal intelligentsia’s ideological case for Tony Blair’s very first illegal war in 1999 – against Serbia (once part of Yugoslavia) – and for the double expansion of Nato and the EU eastwards to the borders of the ultimate liberal bugbear of the moment, Vladimir Putin’s Russia.

Yugoslavia in context

However, the problem with this liberal view is precisely its focus on local deficiencies and its corresponding failure to situate Yugoslavia in its proper context; specifically, the context of a capitalist system driven by relentless economic, political and military competition. This Hobbesian system, a ‘war of all against all’, structurally weighted in favour of the imperialist powers with the means to ensure and enforce their competitive advantage, is also a system whose global reach has become so pervasive in the course of modern history that no state can expect to escape its remorseless logic with ease.

Indeed, there is a dialectic of ‘state’ and ‘system’ operating here which means that the question of how this global system was mediated by a local state like Yugoslavia and what the domestic consequences then were, has to be addressed and assessed. In The Economic Struggle for Power in Tito’s Yugoslavia, Vladimir Unkovski-Korica situates Yugoslavia ‘in a global framework’ (p.231) precisely in order to analyse this dialectic of state and system. His focus is the country’s economic policy during the period of its formation from the 1940s to the 1960s, a period to which he also brings a keen anticipatory eye for insights into Yugoslavia’s eventual collapse.

Relying on extensive primary materials sourced from the archives of several former Yugoslav states, Unkovski-Korica builds his core argument that, despite the socialist rhetoric, Yugoslav economic policy was not ‘driven primarily by ideological commitment to equality, full employment or the withering away of the state’ let alone by any idea of Yugoslavia as ‘a challenger to the world market’ (p.9). On the contrary, he argues, policy was driven by the goal of constructing ‘an efficient competition-state’ (p.67) capable of holding its own economically, politically and militarily in a world of other such competing states, including imperialist ones. Indeed, from the outset, the system’s competitive logic found expression in the determination of the Yugoslavs to ‘accumulate and catch up with the advanced industrialised states’ (p.221).

Two points worth noting follow from this. The first is the way this competitive logic went hand in hand with its ideological counterpart, the competitive ideology of nationalism. Tito and his co-leaders were proud Yugoslav nationalists dedicated, above all else, to securing and advancing Yugoslavia’s standing as an independent state. The second point is that if your primary goal is, indeed, the nationalist one of building a ‘competition-state’, then the method you choose to reach that goal, whether state-led or market-based, becomes potentially open to the pragmatic assessment of what appears to bring your goal closer. As the former Chinese leader and pro-market reformer, Deng Xiaoping, once remarked, ‘it doesn’t matter whether a cat is white or black, as long as it catches mice.’

And here, Yugoslavia was an important ‘forerunner’ (p.8).

The Tito-Stalin split

To begin with, however, Yugoslavia was a loyal ally of Stalin’s Russia, pursuing an essentially Russian model of catch-up with the West based on state ownership of enterprises plus centralised planning to force the pace of industrialisation. Only when it became clear that Stalin expected Yugoslavia to compromise its economic development and political autonomy for Russia’s, did a dramatic split follow in 1948.

The Yugoslavs now found themselves in desperate straits, cut off from Russia and its satellites in Eastern Europe. With no immediate prospect of international assistance, they had little option but to fall back on their own capacities and resources. And given their limited ideological horizons, this initially meant more of the same, redoubling Stalinist economic efforts to squeeze the working population and raise the rate of exploitation.

In 1949, the Yugoslavs embarked on the collectivisation of the country’s farms (having delayed doing so for fear of alienating the peasantry, the class basis of their rise to power) and on a mass-mobilisation drive, exhorting workers to meet the targets of the Five-Year Plan. Typical were the alleged record breaking feats of the Yugoslav hero ‘shock-worker’, Alija Sirotanović, who was said to have mined more coal in a single shift than his Russian Stalinist original, Alexei Stakhanov (p.91).

However, it soon became clear that there was only so much that repeated exhortation and mobilisation of labour from above could achieve, especially when it came to raising productivity, prompting the Yugoslavs to think afresh and, as Unkovski-Korica emphasises, in ‘pragmatic’ ways (p.71). Their thinking led them in two apparently contradictory directions. On the one hand, they began introducing market mechanisms; on the other, they claimed to be handing state enterprises to ‘workers’ councils’ for workers to ‘self-manage’ them.

Market reform: a ‘strategic choice’

The market reform the Yugoslavs now embarked upon was, as Unkovski-Korica stresses, a ‘strategic choice’ (p.100) made as the country’s fraught international situation showed signs of abating. The West, eager to capitalise on a break in Stalin’s ranks, decided to accommodate its enemy’s enemy and the Yugoslavs met them halfway by tilting westwards. In 1949, Washington helped speed up loans the Yugoslavs had requested from Western financial institutions (p.74). And in 1950, Yugoslavia began receiving US economic and military aid – a total of $1.5 billion over 5 years (p.75) – helping to ‘keep Tito afloat’ by alleviating immediate economic pressures.

Nineteen-fifty also marked the start of an eighteen-month period that saw the introduction of a raft of decentralising, or ‘liberalising’, economic measures, freeing up some prices, contracts, consumer choice and foreign trade from direct state control. Collectivisation too was abandoned (pp.98-9). With state-owned enterprises becoming increasingly ‘free’ to make their own decisions, a market emerged with decisions made more and more in accordance with competitive economic criteria.

A familiar picture therefore emerges from Unkovski-Korica’s narrative. As relations with the West improved, and as opportunities in a global economy dominated by western states began to beckon invitingly, Yugoslav policy makers chose to give greater play to market forces in order to encourage ‘rationalisation’, increase productivity and so enhance competitiveness abroad. As one Yugoslav leader put it, ‘the question of the struggle for a higher productivity’ was linked to ‘our standing in the international market’ (p.149).

At the same time, Yugoslavia’s non-aligned foreign policy was important. By balancing between East and West, Yugoslavia played on Washington’s fear that the country might, after Stalin’s death in 1953, take a pro-Russian turn. Simultaneously, Tito played on Moscow’s fear of losing Yugoslavia definitively to the West. In time, the country was to receive sizeable loans from both Washington and Moscow.

Workers’ self-management: fact or fiction?

But where did this leave the regime’s flagship policy of ‘workers’ self-management’, also introduced in 1950? And how would workers be able to ‘self-manage’ state enterprises if they were to be at the mercy of the market forces now increasingly operating in the economy?

To answer this question, Unkovski-Korica first traces the origins of self-management to a speech by the leading Communist Party ideologue, Edvard Kardelj. In it, Kardelj proposed giving ‘permanent form’ to the spontaneous practice of state-enterprise directors whose ‘initiative and intelligence’ had led them to hold ‘consultations’ with ‘groups of the best workers’ on how to improve production (p.84). A countrywide call promptly went out ‘to form work councils’ (p.85) followed by a draft ‘Law of the Workers’ Councils in State Enterprises’ (p.87), all within three months of Kardelj’s speech.

The top-down ruling-class character of all this could scarcely be clearer. From the beginning, these ‘workers’ councils’ were circumscribed by the issue of productive efficiency that prompted their establishment. Here Unkovski-Korica cites a valuable study of the minutes of council meetings held between 1950 and 1960 at seven industrial state enterprises. The study revealed that:

‘the issues workers’ councils devoted the most time to were by and large those connected with “rationalising production”: determining product mixes, setting plan targets, modernizing both the technology and the organisation of work and so on’ (p.139).

Rather than being impediments to the functioning of market forces, these ‘workers’ councils’ in fact served as adjuncts to them. They operated as institutionalised shop-floor sources of ideas for enhancing competitive efficiency and as forums where workers were systematically induced into discussing the terms and conditions of their own exploitation.

Moreover, because ‘rationalising production’ is never an isolated process, but one always to be measured against the rationalisations of others, workers were also drawn into the self-defeating game of competing with other workers. As Unkovski-Korica points out, ‘workers’ councils’:

‘ironically, further legitimat[ed] the turning of one workplace against another in market competition, in order to raise overall productivity. Setting workers against workers complemented the Yugoslav Communists’ ambition of playing catch-up in the world economy’ (p.164).

This state of affairs was scarcely conducive to the undoing of conventional workplace hierarchies. The state-enterprise director (usually a Communist Party member, of course) continued to wield de facto control. Unkovski-Korica notes that ‘workers’ councils’:

‘did not stop directors dominating most processes in the firm on the basis of having exclusive power over immediate financial transactions like signing cheques or using technical expertise and alliances with management to ram through unpopular measures because of their supposed necessity’ (p.129).

The introduction of ‘workers’ self-management’ in 1950 did not then pull in different, let alone contradictory, directions from the market reforms also introduced that year. In practice, they complemented one another, for these were ‘workers’ councils’ established not by insurgent workers for their own liberation as in Russia in 1917, or Spain in 1936, or Hungary in 1956, but by the bureaucratic decree of a ‘competition-state’ seeking to harness its workforce to the market.[2]

The national question returns

Throughout the market-reform process, one theme, that of decentralisation versus centralisation, was a consistent source of ruling-class disagreements, given its implications for Yugoslavia’s national question. Indeed, disagreements over the extent and scope of market-based decentralisation would become so intertwined with disagreements of a distinctly national character, argues Unkovski-Korica, that ‘no comprehensive treatment of the national question is complete without an assessment of its basis in the market …’ (p.229).

In general terms, the key division was between the more and less developed republics, with opposing national interests often expressed in the coded language of economics. Leaders of the more developed republics, Slovenia and Croatia, where productivity was higher and the capacity to earn foreign currency correspondingly greater, pressed for further market reform, decentralisation and openness to the world economy. They were keen to retain profits in order to reinvest them for enhanced competitiveness. By contrast, leaders from the less developed republics such as Bosnia, Macedonia and, in particular, Serbia tended to defend a more centralised federal state so that profits made in the more developed north could be redistributed for their own investment ‘catch-up’ purposes.

One event that brought this disagreement to the surface was the 1958 miners’ strike in Slovenia, the most developed republic. As Unkovski-Korica records, the Bosnian party leader openly accused the Slovenians of having ‘tolerated’ the strike or ‘viewed [it] as benevolent’ (p.171) in order to shift economic policy – they had opposed the latest Five-Year Plan – to their advantage. Another was the recession of 1961-2, prompting the Slovenian party leader to argue that a state enterprise should be ‘forced into liquidation if it is not profitable’ otherwise ‘we will not … be able to go for international competition’ (p.1). By contrast, his opponents tended to stress the need to reaffirm the unifying role of the Communist Party.

Tito agreed about the unifying role of the Party, but he was also a market reformer, if a cautious and hesitant one, who viewed the decentralisation it entailed as a counterweight to the dangers of a Serbian-led centralism. When push came to shove, and the leading centralist, the Serbian security chief, Aleksandar Ranković,overplayed his hand, Tito removed him from power.

Nevertheless, Unkovski-Korica’s analysis enables us to appreciate that state administrative measures like this – Tito would soon also remove a Croatian leadership seeking greater autonomy – could not resolve a deeper systemic problem. This was that of national leaderships, with their competing perspectives on the virtues of market decentralisation, pulling persistently in different directions. Indeed, the competitive logic of the market, with its differential economic consequences, was making it more and more difficult to achieve the kind of balanced and sustained development a multinational state like Yugoslavia with its multiple national questions so desperately needed.

The road to disaster

The strategic wager the Yugoslavs placed on the market in 1950 had appeared to offer a successful way of developing the economy. At first, growth rates were impressive (as elsewhere, during the greatest boom capitalism has ever known). However, they were soon confronted by the problem of managing the increasingly unmanageable effects of integrating the country into the global economy; above all, persistent and growing trade deficits and indebtedness. What had initially seemed to offer the means of securing both independence and unity was now beginning to threaten dependence and disunity instead.

In 1964, Yugoslavia turned for loans to the IMF, which ‘made aid conditional on Yugoslavia liberalising its trade regime … its officials publicly prais[ing] the market orientation of the Yugoslav government at the time’ (p.215). Despite the warning signs, the regime’s response in 1965 was ‘even more radical market reform’ (p.218) and still greater integration into the global economy, in the hope that increased exposure to market forces, both domestic and foreign, would spur productivity and growth.

However, by the 1980s, indebtedness had grown exponentially, delivering the country into the IMF’s lap. The twin policies mandated by the IMF of economic shock therapy, which destroyed the country’s social-welfare fabric, and political centralisation, were more than the country could bear. Political centralisation destroyed the already precarious federal balance by assuming Serbian nationalist form in the shape of Slobodan Milošević, Simultaneously, the Cold War ended, and a new geopolitical environment emerged in which Yugoslavia, as a unified state, rapidly lost the special significance it had once held.

By this point, it was no longer possible to speak of a federal Yugoslav ruling class but of multiple national ruling classes desperately seeking to secure their power bases in the republics. The openly nationalist guise they now adopted for that purpose was but a logical continuation of the disagreements they had expressed in economic code during the Tito years.

The working class would soon fracture along national lines too. But not before a mass strike wave – tellingly bypassing the nominally working-class institutions of ‘workers’ councils’ and trade unions[3] – had peaked in 1987. Indeed, the absence of properly independent institutions and organisations of the working class meant that the strike wave was a howl of anger, but one without any sense of political direction it could properly call its own. This was another baleful legacy of Titoism, whose ‘systematic attempt’ to prevent workers ‘attaining an independent political perspective’ (p.231) was, as Unkovski-Korica notes, only too successful. As a result, the lack of an organised left capable of giving political expression to this raw discontent was as much part of the story as the rise of the nationalists and the drive to war.

In summary

The evidence Unkovski-Korica amasses in this study builds strong and compelling arguments for a distinctive and radical view of Tito’s Yugoslavia, and makes for a work that repays careful re-reading. This is not the kind of history that can be properly appreciated at first glance, and there is much here that a review like this must overlook.

That said, this is a work very much centred on the corrosive dialectic of ‘state’ and ‘system’, of a local ‘competition-state’ and a global system which together, in their different but convergent ways, brought about catastrophe and disaster. The Tito regime was both the author of its own misfortune and the victim of a merciless system. In Unkovski-Korica’s concluding words, the country’s collapse was ‘a testament to the failure not only of the “Yugoslav Road to Socialism” but also of the global system as such’ (p.232).