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International Socialist Review, Summer 1962


Theo Schulze

Yugoslavia’s Way:
The Workers’ Council System


From International Socialist Review, Vol.23 No.3, Summer 1962, pp.84-86, 90.
Transcribed & marked up by Einde O’Callaghan for ETOL.


Tito tries formal democratic concessions at home while turning his back on the movement of world revolution: A contradictory policy leading to contradictory results

* * *

THE “Yugoslav way” toward industrialization has earned Yugoslavia such epithets as “hybrid” and “renegade,” but has nevertheless endured and stirred interest. To determine the acceptability of the Yugoslav example, those interested will study carefully the system of Workers’ Self-Management.

The origin of this system is well known. It sprang from the first fissure in the Soviet monolith known to the world, the 1948 Cominform conflict. At that time, Tito and the Yugoslav Communists defied the Kremlin, survived expulsion and went on to stabilize the country and thereby their own power. In that process, they revised their ideology, concluding that “deformations of socialism” had occurred in the Soviet Union, where a privileged bureaucracy had grown out of the overly centralized economic and state apparatus. Their alternative was therefore, decentralization – granting more and more economic and administrative power to broader sections of the population.

To better understand this development, however, one must note that this answer was reached empirically and tardily. The “experiment,” as the Yugoslavs themselves long referred to it, did not begin until one year after the split. The same leaders who had tried, in that year, to seem holier than Pope Stalin by pushing through the previous mammoth plan for heavy industrialization, decided to place economic decision-making power in the hands of elected bodies in the factories. This fact alone explains the limited nature of the reforms which do not touch on questions of political power. The hegemony of the League of Yugoslav Communists was and remains insured in this system.

The primary ideological justification for the reforms was the argument that only through decentralization can the State begin to “wither away” as it should in a socialist society and as it had not in the Soviet Union. Two other goals were stressed by the Yugoslav Party theoreticians in ushering in the new system: one based on Marxist social-psychology, the other directly on the needs of Yugoslavia.

The condition of the alienated individual, as Marx envisaged him in capitalist society, cannot be ameliorated simply by nationalizing the means of production. The worker’s conception of himself as powerless and insignificant does not change if the private corporation is replaced by an equally remote State. The Yugoslavs claimed, therefore, that only by giving the workers control over their factory, making them the main decision-makers, could this condition be changed. The Workers’ Councils system was, then, to serve as an important innovation in communist ideology.

It was also to serve as a means of education. Transforming a predominantly rural population into an industrial labor force is the classic problem of nearly all underdeveloped countries. Although a large part of this problem is preparing the peasant for urban society by training him in industrial techniques, teaching trades is half the struggle. The hands on the production line must be skilled, as they can really only be when directed by a conscientious worker. The Yugoslavs hold that when the worker must solve, together with his colleagues, the basic problems of production, investment, wage and price policy, he develops not only a keen awareness of the processes of business and industry but also a more profound social consciousness. The knowledge that his decisions will affect the factory and ultimately his own work and life, affords him the greatest impetus for interest, application and higher productivity. The structure through which these lofty ideals were to materialize was formed with the “Law on Administration of Economic Organizations Through Workers’ Collectives” in June 1950. Examination merely of the mechanics of this structure cannot produce a definitive statement as to how it measures up to its own ideals, nevertheless a few generalizations can be made. The first observation is that the burdensome, Soviet-type, economic bureaucracy has indeed disappeared from the scene. No longer are there massive ministries, planning or misplanning the economy; decentralization has achieved for Yugoslav enterprises, which compete with one another, an independence from the State heretofore unknown under any Communist Party regime and has made the laws of the market the main determinants of the economy. A second observation is that although extensive decision-making is exercised by the individual enterprises, this does not necessarily mean that it is always the workers in each plant who make these decisions. Bureaucracy at all levels of society has not been eliminated and small, local bureaucratic cliques are a danger within the system. This can be seen in the factory structure which reflects a discrepancy between ideals and the harsh realities of a country which was once among the most backward in Europe. The attempt to change the condition of the worker in the modern factory is meant to coincide with the building of those very factories. Both are worthy goals and their fulfillment urgent, but the trial-and-error learning process of a new, crude and groping working class can conflict with the need for higher productivity. Within the factory, therefore, the necessity for a continuous, efficient administration is juxtaposed to the aim for direct workers’ control. Certain factors weaken the workers’ controlling position: some stem from the weakness and immaturity of the Yugoslav working class; others from the pressures of hard, day-to-day living; still others arise in a political situation where one party has a power monopoly.

Closer scrutiny of the system’s main features bears out these remarks.

The Law

In Yugoslavia, the means of production belong to society: the 1950 law delegated to the workers of each manufacturing, mining, commercial, trade and agricultural enterprise the right to manage that concern in the name of society. It further designated the form of such management: in concerns employing over thirty, all employees, or the collective as it is called, must vote for a Workers’ Council every two years. This Council in turn votes for an Administrative Board. The third component of management is the directorship, which is not a true organ of worker self-administration. The General Director is not a member of the collective, nor is he elected. He is appointed by the governmental organs of the locality in which the enterprise operates.

The Workers’ Council is directly responsible to the collective and is elected on the basis of lists of candidates set up by the trade union local or by any other group of workers above a certain number. This minimum number of collective members required to set up a list of candidates apart from that of the trade union local, the number of seats the Council is to have, as well as other procedures are set down in the company constitution when the concern is first organized. This constitution is voted on by the entire collective. Each candidates list must be endorsed by the signatures of 10% of the collective in concerns employing less than five hundred; by as many workers as there are seats on the Council in concerns where there are more than that number. The average factory of a thousand-odd employees has a Council of fifteen to thirty members.

The law makes certain stipulations designed specifically to prevent the growth of a bureaucratic clique. The most important among these are entitling every employee except the General Director and his assistants to a vote, and prohibiting consecutive terms to Council members. Yet the actual instruments of control over the Council at the disposal of the collective are very limited. If the collective is dissatisfied with the decisions of the Council, its sole recourse is a drastic one – recall. The idea being that the work of the administration should not be unduly interrupted, thus impeding production, the law is not clear on how the recall is to be brought about. The official interpretation calls for an involved process – the same number of workers who endorse the candidates list must appeal for a new election.

THE function of the Council is to decide the general line of financial and administrative policy at open meetings. These are fairly far-reaching and autonomous decisions, for the Yugoslav enterprise is no longer required to fulfill any sort of plan. Its guiding principle is to make the highest profit in competition with other enterprises. The State has ceased to be the complete planner of economy, instead merely maintains certain instruments through which it can influence economic processes toward the desired goals contained in yearly or five-year “plans.” These instruments are investment policy and the determining of rates of interest and turnover tax. The Council has no other duties to the Federal State but to give it one half of the factory’s net profits. A smaller part must plso be turned over to the Commune or District. The portion of profit left at the disposal of the Council, once these obligations have been achieved, has tended to increase over the years. The Council alone decides how, when and where to spend this remainder. It sets its own prices, decides with whom to do business, and formulates the conditions of wage contracts and social benefits. One additional obligation is that it vote for an Administrative Board at its first session.

This Board is elected from and by the members of the Workers’ Council every year. Its number may not be less than three nor more than eleven and no member may serve more than two consecutive years. This organ must report its activities to the Council at every meeting, but other than this periodic review of what sometimes amounts to accomplished facts, the larger organ has no controlling mechanism but recall. This can, however, be obtained by a simple majority vote in the Council. The function of the Board is to execute the general line set by the Workers’ Council and to refine this general policy into basic monthly and operational plans. It investigates any phase of production where the policy is not working and makes recommendations accordingly. There is one automatic member of this Board: the General Director.

This man is appointed for an indefinite term by a committee established for this purpose by the People’s Assembly of the particular Commune or District where the concern is located. One third of this selection committee is chosen by the Council, which also determines the necessary qualifications. Once selected from a host of applicants, he is responsible to the Commune and District People’s Assemblies as well as to the Administrative Board. His function is very generally defined by law, hence very encompassing. As director of production and administration, he may intervene into any phase of the plant’s operation. He hires and fires personnel with the approval of the Board, and he designates jobs. Although his decisions must be in keeping with those reached in the self-administrative organs, he may reject them if he considers them to be illegal. No equivalent right to reject the Director’s decisions is extended to the self-administrative organs. He makes and signs contracts, and in general, represents the firm to the community and all governmental bodies.

How It Works

It is upon examination of the role of the General Director that the discrepancy between the ideal of maximum workers’ power and the necessity for maximum production becomes obvious. The Director embodies the aim for continuous, efficient administration. His term is indefinite, his autonomy extensive. As in the case of the other organs, recall is the only control mechanism over the Director that the collective or Council has, but the process is longer, more complicated, hence more discouraging. Whereas the reason for recall of the Council and the Board on the part of the collective can simply be lack of confidence because of disagreement on basic policies, proof must be submitted to the local People’s Assembly that the Director has acted illegally or contrary to the policies set forth in the Council. The application for recall must originate in the Council and be submitted by the Board, thus requiring complete agreement between the two organs. Another reason for recall, one difficult to prove, is that the concern has not operated optimally due to the Director’s negligence or incapability. If the commission set up by the People’s Assembly to investigate the evidence finds it to be inadequate, the Assembly will not only refuse to oust the Director but may dissolve the Council and call for new elections, as well. A simplified model built of these many facts might look like this: a significant portion of the collective harbors a chronic gripe against the Director, but can only oust him by convincing the Council of the merit of its request. The Council must in turn convince the Administrative Board which, if not agreeable, must then be removed in toto by the Council. If the Council itself balks, that section of the collective must start the long process of getting a more amenable Council elected. Assuming it succeeeds at long last in this venture, the Director may still find himself on the side of grace after the People’s Assembly decides.

Once in, the good man is hard to get out. Yet the reason is expressed succinctly in one of the conditions on which he can be recalled: he answers to the community for the optimal operation of the plant. If he succeeds in joining forces with the few men on the Administrative Board, and if personnel policy is used subsequently as a weapon against opposition, a hierarchy resembling the traditional employer can develop. How far the balance of power can tip in favor of the Director and his cohorts in the hierarchy, is attested to by the not infrequent and astounding cases of white-collar criminal activity organized by such high-level managers. Cases of embezzlement, theft, and illegal sale to the tune of millions of dinars have sometimes not been discovered for years. Scandalized outcries abound in the press on the occasions of such discoveries: who and where were the self-managing workers during all this time?

AN ATTEMPT to answer this question is not complete by simply pointing out the weak control-mechanisms in the factory structure. A Director is still easier to overcome than some remote State ministry, if the workers of the collective and Council are alert, concerned, and determined enough to assert themselves. The reason that none of these qualities is particularly developed among Yugoslav workers lies among the immensely more serious ramifications of a nonindustrialized society.

In order to be able to raise his hand in dissent at the right moment, a worker must keep a watchful eye on the administrative proceedings as well as all other processes in the factory. For this, he must understand them. The mass of production line workers in Yugoslavia are, however, unskilled, fresh from the land and in many cases still bound to their rural origins. The intricate workings of business and industry are for them remote concepts. The Yugoslavs hasten to point out that the worker will learn these things by experience, if he really wants to, but there are numerous factors working against even the best of intentions.

One factor is time, which in Yugoslavia, as everywhere else, can mean money. Early in the development of the system the sessions of the Workers’ Council were held during company time and the workers were paid for work-time lost. The negative effect on the plant’s productivity was immediately evident, and, as a rule, meetings are now held after hours. This means the worker must first give up his free time and then go home to study the problems raised at meetings. One could, perhaps, with appeals to conscience, convince the average worker to lose leisure time and even sleep, but one cannot convince him to give up the very necessary supplement to his regular low income. This he acquires, legally or illegally, through after-hour, part-time work at another concern or with a private employer. The Yugoslavs give no statistics on this type of “moonlighter,” but one has only to compare the rising cost of living with the average wage to know that other incomes would have to be obtained in order for the worker’s family to break even at the end of the month. A worker will be less concerned with what he may regard as “factory politics” the more energy he has to expend to make ends meet. Further, such concern can only be trifling in the case of Yugoslavia’s many peasant-workers, almost one quarter of the labor force, who regard their main task to be tending their small farms to which they return after daily or seasonal work in the factory. It is for these reasons, then, that the participation of unqualified or semi-qualified workers in factory self-administration has remained more or less at about 10%. The trend is toward more participation on the part of skilled and professional personnel, who have the advantage of more knowledge and background as well as a somewhat easier financial situation.

The Trade Unions

The main factor in the election of this more qualified group of workers and professionals is the trade union. Although there are always more candidates on the lists than there are seats to be filled and election irregularities can be taken to the local court, it is highly improbable that anyone not nominated by the trade union local can get elected to the Workers’ Council. A specified number of the collective may set up its own list of candidates, but the frequency of such independent lists rarely exceeds 5 or 6%, and only about 2 or 3% of such candidates get elected. This situation need not be construed as contrary. to the philosophy of the reforms: the Yugoslav Trade Union Federation embraces about 85% of the labor force. Membership is theoretically voluntary, and the locals are now much more independent of the central committee than they once were. One might expect that more interested and responsible worker-candidates will come from the trade union lists. On the other hand, the preponderance of qualified and professional employees in the administration belies a tendency on the part of the union to be more concerned with plant-effectivity than with the education of unskilled workers. Apart from this, the trade union, subordinate as it is to the League of Yugoslav Communists, whose cells operate throughout the organization, cannot be regarded as an entirely independent voice of the Yugoslav workers. It is prohibited from being a completely separate, hence potentially competitive entity, and consequently can present the worker with only limited alternatives.

The net effect of these various limitations is to deepen the doubts of the industrial worker in his own power, which in turn weakens his concern and vigilance over the factory. A sign of this lack of confidence seems to be the fact that since the inception of the system, the number of Councils to be recalled by collectives in any one year has not been over 8% of the total.

Nevertheless, there is still much identification with the system. The number voting in factory elections increases from year to year and exceeds the membership of the Trade Union Federation. This, along with the steady advances Yugoslavia has made, might lead interested observers from underdeveloped areas to regard the discrepancy between ideals and practice as merely formal failings. For ultimately, the criterion of over-all economic effectivity is the decisive one. Such general advance in Yugoslavia has been obvious: in 1959, a United Nations economic commission found it to have the highest rate of expansion in Europe. This point, however, warrants a few additional remarks, for within the system itself, certain hinderances to steady progress are noticeable.

IT IS true that after complete State planning was abandoned, the decentralization of investment funds into the hands of the Communes and Districts accelerated rational investment to a great extent. Broader sections of the population were now voicing their needs through the market and long-existent gaps were thereby filled. But the consequences of dispersing already small capital reserves are that investment flows primarily into short-term projects, as there are fewer entities capable of making and sustaining heavy investment. This means much investment into consumer-goods industries which promise rapid success on the market, and a potential neglect of heavy industry as well as of those areas in the country where there is no industry at all. This disequilibrium has been more or less warded off in Yugoslavia by extensive foreign aid and credits, coming primarily from the West. The Yugoslavs have thus not as yet proven that their economic success is inherent in the system alone, which fact will doubtlessly invoke consideration among the new, ex-colonial nations.

The pressures of the market on the enterprises have brought still another problem to light, that of the much-discussed “factory egotism.” This term covers all practices of Yugoslav concerns in their quest for higher profits which are to the disadvantage of the consumer, the community and finally the national economy. Cut-throat competition, deliberate reduction in the quality of products, and rampant price-hiking are some of the frequent maneuvers. The most severe examples of such “egotism” are caused by the monopolistic behavior of businesses in those less developed branches of the economy where there is little or no competition. Aware that it is the sole supplier to the community, such a concern will often abuse its position through poor service and high prices. Whether it is the workers themselves, eager to increase meager incomes, who decide to conduct business in this way, or it is an administrative clique of smart operators, the management of some concerns seem more imbued with the spirit of 19th century capitalism than with the socialist consciousness so often appealed to by the Communist regime.

Since factory and local “egotism” seems in part to stem from the dearth of competition, the government has strengthened its appeals to conscience with a concrete measure. The recent liberalization of foreign trade has forced Yugoslav enterprises into more competition with foreign companies and the government, by putting more foreign currency at their disposal, has granted them more leeway to compete on the world market. The immediate future will show how much of a solution this latest measure is.

Further innovations will be judged by the Yugoslav people according to how successfully they combine economic effectivity with worker self-administration. In any case the “Yugoslav Way” already constitutes one of the significant experiences to be studied by those concerned with the problem of workers democracy.

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