Chris Harman, Simon Terry & Andy Zebrowski

Crisis in Eastern Europe

The Belgrade road

From Socialist Worker Review, No.111, July/August 1988, pp.15-16.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

WHEN MIKHAIL Gorbachev visited Yugoslavia in January he must have felt like a man watching a horror film which all his friends had assured him was a jolly Disney family movie.

For the prolonged economic and political crisis affecting that country shows no sign of abating. The foreign debt remains around the $20 billion mark, the inflation rate is 150 percent with 15 percent unemployment (on top of that figure some 10 percent of the workforce are “guest workers” in other parts of Europe).

There have been student protests, a renewal of regional and ethnic rivalries, fraud and corruption scandals and deep rifts have begun to emerge within the ruling bureaucracy. In May the prime minister, Branko Mikulic, became the first Yugoslav premier to face a vote of confidence in the federal parliament, with two of the six constituent republics (Slovenia and Croatia) opposing him.

But most important has been the massive increase in class struggle as the government has tried to make the workers pay for the crisis.

On 17 June this year Belgrade saw one of the biggest workers’ demonstrations since the war. Four thousand workers from the Zmaj farm machinery plant marched seven miles to parliament to protest against the latest IMF-inspired austerity programme. Reuters reported that several thousand sympathisers joined the march. The latest wave of protests is another sign of the growing confidence and combativity of the Yugoslav working class. Yugoslavia had 1,570 strikes involving 365,000 workers in 1987 compared with 851 (88,000 workers) in 1986 and 699 in 1985. The 1985 figure was itself an eightfold increase on 1983. All this is happening in the most economically “liberal” of the East European states, the pioneer of “self-management” and “market socialism”. The struggle in Yugoslavia not only threatens the Yugoslav ruling class but exposes the limitations and dangers of perestroika.

The Yugoslavian CP had a genuine mass base following the years of struggle against the German and Italian invaders. And it was unique in taking power without the patronage of a Russian army of occupation.

The bulk of its support came from peasants and intellectuals recruited to fight a war of national liberation. Radical factions, including a small Trotskyist wing, were dealt with ruthlessly.

When Tito split with Stalin in 1948 the Yugoslav regime was not a Russian-installed puppet but a replica of the Stalinist bureaucracy capable of rallying support, particularly in the countryside, for its nationalist opposition to Stalin.

The split centred on the needs of the Yugoslav economy. Around 77 to 80 percent of the population was on the land. But with only 45 percent of land farmable and production per hectare very low, the main problem was “surplus” agricultural population.

The Russian experience plus the rural nature of Tito’s support ruled out collectivisation. The only solution was industrialisation, the aim of the five year plan of April 1948. The method, nationalisation, was unavoidable.

Prior to the war most essential sectors had been in the hands of the state (ports, telegraph, railways, power plants steel mills). Thus, although no nationalisation law was passed until December 1946, in March of that year the government was already in possession of 82 percent of all industry.

The industrialisation plans clashed with Stalin’s plans for south eastern Europe. At the time of the Nazi occupation Edward Kardelj (Tito’s second in command) had said,

“The ‘reorganisation’ of the small nations in accordance with the economy of the larger nations ... meant preventing the independent development of industry ... and transforming the existing industries ... into mere appendages of the industry of fascist Germany.”

But the plan of Russian imperialism for the area was no different.

In rejecting Russian “aid” the Yugoslavs argued that any new industry would have belonged to Russia, been built and planned to conform to Russian needs and would have been of a nature (consumer or heavy industry) to suit it. The Yugoslavs had already experienced such “aid”. In March 1949 the government revealed that a ton of molybdenum (an essential ingredient of steel), that cost Yugoslavia 500,000 dinars to produce, was sold to Russia for 45,000 dinars.

Similarly two “mixed” transport companies, Juspad and Justa, had been formed in 1947. By May 1948 the Russians had paid only 9.83 percent of its participation in Juspad, while Yugoslavia had paid up 76.25 percent. Whereas Juspad charged Russia only 0.19 dinars per kilometre-ton, Yugoslavia itself was charged 0.40 dinars.

The Yugoslavs condemned (after the split) the exploitative structure of trade, prices and mixed companies which had been imposed across Eastern Europe in the name of “socialist solidarity”. They characterised the relationship as that between an imperialist power and a colony.

The combination of the break with Moscow and the collapse of the five year plan led to the search for an alternative. In 1950 “self-management”, through “workers’ councils”, was introduced. The idea was to create a decentralised system in which the economy would not be treated like a single firm. Individual firms were given a degree of independence (such as deciding the level of prices and output) and monetary incentives were introduced. A bonus system ensured an increase in productivity since workers had an incentive for keeping their numbers as low as possible.

But this was all done within a general framework laid down by the centre and the economy remained essentially autarchic through strict protectionist controls. This combination succeeded in surpassing growth targets but produced other problems – inflation, low labour productivity, unemployment. Growth rates began to decline to the point where the 1961-5 plan had to be abandoned.

The big break came in 1965 with the elevation of the profit motive to number one priority and the opening up of the economy to foreign investment and competition. “Market socialism” was born.

A number of “political firms” which had been created just after the war, usually to help underdeveloped regions, were abolished. Prices which corresponded as closely as possible to those on the international market were introduced. The exchange rate was changed and foreign trade liberalised. A consumer tax was introduced and the production tax reduced. In this way the share of profits which a firm retained became similar to its Western counterpart.

The “workers’ councils” were, and are, nothing more than the corporate integration of workers into the system. Sackings, for example, are decided by management, as are the sections where they are to take place. Local party officials can replace managers over the heads of the workforce and, of course, strikes remain illegal.

Trade unions were thoroughly incorporated into the state.

Such was the regimentation of labour that up to 1958 not one strike was reported.

Workers had to show the Karakteristika – a sealed record of their political reliability – when applying for jobs.

The tendency towards decentralisation weakened the central bureaucracy to a certain extent and did not go uncontested. In 1961 an attempt to extend the process was blocked. Between the summer of 1965 and the summer of 1966 the 1965 reform was totally boycotted.

The attempt to increase efficiency and competitiveness was bound to dilute the centre’s control but it involved the spreading of a little power to the local bureaucracy only. The struggle was within and between different levels of the bureaucracy.

But “market socialism” could not solve the basic structural weaknesses of the economy. The 1976-80 plan for 8 percent growth in gross fixed investment was exceeded in both 1977 and 1978 and financed by a 30 percent increase in the money supply. The result was even worse inflation and the writing was really on the wall when the trade deficit reached £6,000 million. Between 1960 and 1964 70.2 percent of imports were paid for by exports. By 1975-9 the figure was down to only 55.5 percent.

The IMF was called in in 1983, a year when the government was forced to introduce food rationing, to help deal with the massive foreign debt. It has been the measures demanded by the IMF which have led to the accelerating workers’ fightback.

Last March Mikulic rolled back wages and froze them at the level they were in the last quarter of 1986. This was quickly followed by price increases – meat, sugar and bread went up by between 25 and 60 percent. The subsequent strike wave saw some 11,000 workers out on strike in two weeks.

Then in November Mikulic introduced further price rises followed by a placatory price freeze. Again wage strikes broke out and there were demonstrations involving thousands of workers.

This spring has seen the crisis worsen with the government forced to negotiate another breathing space with its Western creditors.

The crisis has split the bureaucracy. As well as the no confidence attempt, the party conference also heard a warning from the hardline Serbian CP boss, Slobodan Milosevic, that the government must either reform the economy or face dismissal at an extraordinary conference in the autumn.

Some republics, such as Slovenia, also demanded even less state regulation and a strengthening of market forces. They also called for a repeal of the law which allows foreign companies to own no more than 51 percent of shares in joint ventures.

Slovenia is the wealthiest of the republics, generating nearly one-fifth of Yugoslavia’s GNP with a mere 8 percent of the population. Wages are higher and workers have to be brought in from other republics to help work its factories. Its demands for greater autonomy are countered by Serbian hardliners’ calls for a tightening up of the federation and less tolerance of national and provincial independence, especially in Kosov, scene of a near uprising in 1981.

Neither has the army baulked from voicing its concern. Last September defence minister Admiral Branko Mamula warned that,

“The crisis is approaching the point at which the integrity of the country and the existing social system is endangered.”

Mamula was forced to stand down after the Slovene paper, Mladina, published details of a villa on the Adriatic coast that had been built for him by conscripts.

The corruption allegations were repeated at the party conference and followed hot on the heels of the country’s greatest financial scandal since the Second World War. Managers at Agrokomerc, an agro-industrial concern in Bosnia, were accused of swindling $500 million from Yugoslav banks by issuing promissory notes which they knew could not be repaid. Forty two CP members were expelled and Yugoslavia’s vice-president, Hamdija Pozderac, was implicated and resigned.

The other big headache, and the one which must ring the loudest bells for Gorbachev is ethnic unrest. The fragile and artificial federation of six republics and two autonomous provinces was largely held in check during the early post-war years. Even post-1965 Tito’s personal authority prevented nationalist and separatist sentiment from getting out of hand.

But the tensions of the Tito years were exacerbated by growing regional economic disparities.

For example in 1977 the average income in Slovenia was twice that of Serbia and over six times that of Kosovo. Whilst Kosovo and the other southern areas have sunk deeper into poverty and claim neglect by the federal government, the affluent western republics like Croatia and Slovenia have complained that too much of their profits get diverted into useless projects in Kosovo and Macedonia by the centre.

Beneath the corruption, scandal, ruling class splits and ethnic unrest lies an increasingly confident and combative working class. Whilst sitting precariously at the top is “market socialism”. Gorbachev must have looked long and hard.

Last updated on 15 April 2010