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Shane Mage

Democracy and Planned Economy in Yugoslavia

A Correspondence

(Winter 1960)

From International Socialist Review, Vol.21 No.1, Winter 1960, pp.21-23.
Transcribed &marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

An extensive correspondence between “T,” a young American living in Belgrade, and Shane Mage, one of the editors of Young Socialist, took place in the winter and spring of 1959 while the latter was visiting Morocco. Published here are excerpts from two of these letters dealing primarily with role of Workers Councils in the Yugoslav “system.”

Belgrade, Feb. 4, 1959

I LEFT off two weeks ago on a political note with which I would like to continue, that is, I’d like to try to formulate some of the ideas H. and I are currently considering ... It seems that H. has made a lot of discoveries which have changed his mind quite a bit about Yugoslavia ... And it appears that some of the accusations made by the Soviet bloc against the Tito regime are indeed well-founded.

The point is this: although everyone knew, including the Yugoslavs, that this system of Workers Councils would mean a definite slow-up in the industrialization process, it is much more; a terrific compromise in the class struggle in many more ways. For although the means of production have been “socialized,” they are administered now by small groups of artisans and technicians, and the few industrial workers that are around in such a way that there is nothing “social” about the whole economic system.

The question of whether the Workers Councils are truly democratic; i.e., whether it isn’t only the general directors who have the main say in the factory, is an open one; but whatever the case may be (and we are under the impression that some factories are very democratic while others are not at all) it still is a subsidiary question. The important thing to ask is: what are these administrative groups doing? And the answer is what H. wrote in his thesis, that they work entirely on the profit principle, and that the market is the most important determinant in the whole system.

At that time he thought this was good, as he probably told you: the important thing, he thought, was that the industries were owned by the State and that a growing industrial proletariat was being given the chance to learn industrial techniques by participating in administration. But as he has been finding out, partly from statistics and information which the Yugoslavs themselves are willing to give, and partly from our own experiences merely living here, not only does the system really hinder industrial development, but it is developing the very opposite ethos which the Communists perhaps were trying to nurture.

In the first place, there are countless examples of how irrational production here is: Yugoslavia imports eggs, coal, sugar, etc., all sorts of agricultural goods the demand for which the country could itself cover. The reason for this in all cases is that the particular enterprises concerned don’t find it profitable to produce, store, or put on the market, as the case may be.

For instance: eggs (which were very expensive this year) have had to be imported because various storage and refrigeration plants found it unprofitable to store them over the summer. There has been a shortage of coal this winter; not because there wasn’t any at home, on the contrary there are piles and piles of unsold coal in the main coal-producing sections of the country – but because the market price was for many months too low for the mine companies, so they held off, stopped digging (workers were put on “unpaid vacations” or half-time, or partially paid vacations) and along came the winter and now there isn’t enough to go around without importing, with expensive currency from other countries.

THERE are an endless number of examples. This is the big problem they call “Factory and Commune Egoism”: when companies hold out in some respect or other for the sake of making more money. In the city of Rijeka for example, there are a number of communes (one of the smaller political-administrational units) and they are constantly competing with each other. A commune with many important industries in it is of course richer than another, because the factories work closely in the investment policies with the communes. One Rijeka commune will not grant apartments to the personnel of a factory which is under the jurisdiction of another commune. And because each commune decides the rate of turnover tax for its section, the same car or truck can cost 80,000 dinars more in one than another.

Of course some of these examples which appear in the press quite frequently are criticized, and there are now strong tendencies to regulate some of this chaos on the commune level. But the essence of the whole matter is this: each company, each commune, is looking out for the highest profit, and the total result is production of expensive consumer goods, and some expensive light industry. The result is also that all the credits, without which Yugoslavia cannot live, are more or less going down a bottomless barrel ...

And aside from the fact that they are not industrializing (relatively; one has to admit that they have done a lot, especially in Macedonia) and that they are building a petty-bourgeois morality by leaving these Councils so much to decide (for they inevitably decide how to advance the company and themselves above all else) it is also contributing all the more to the material differentiation among the population.

... The most glaring reality about Yugoslavia today is that these reforms which make up the “Titoist Experiment” have benefitted very few other than those who have been benefitted in all the years prior to World War II: the professional petty bourgeoisie from pre-war days who are today the technicians of the economy, a few skilled workers from before the war, the property owners, the artisans. These are the people who have the money (and of course they are very few) to buy all those consumer goods in the shop windows which the regime boasts about, including imported and domestic Hula-Hoops. These are the people who have the capital with which to make black-market arrangements with foreigners to whom they rent rooms at outrageous prices; these are the people who collect millions of dinars somehow every year, buy expensive foreign currencies with them, and then buy cars, radios, electric mixers, etc., in the other countries once they get the easily obtained passports.

And the rest of the people – the majority? They live pretty damn terribly. And Yugoslavia is the one Communist country today where you can speak of unemployment – the Councils don’t want to share the spoils. The whole situation, as well as it being disgusting to see these characters run around with so much, is also very depressing – for this government is not winning any sympathy from the petty bourgeois to whom it has made so many concession-“reforms.”

... I really don’t want to knock what has been going on here too much, because it’s not as if no progress has been made, and in general workers have a better life than they used to, there’s a lot of building going on, etc., etc. And of course it’s rather pleasant to know that intellectuals have more freedom here – although they don’t do very much with it – than in the other Communist countries; one isn’t watched and all that. But when we see our Albanians every morning and our landlady, and the Hula-Hoops we get pretty depressed. We are planning to take a few trips to Bulgaria and Rumania to do a little comparing before we write off the Yugoslavs completely ...


Casablanca, Feb. 17, 1959

... I found your description of Yugoslav reality extremely interesting. The favorable prejudice with which we tend to approach Yugoslavia is perfectly natural – because of the kind of attacks against Tito and his courage in standing up to Stalin, because of the importance of working class revolution in a country as backward and oppressed as prewar Yugoslavia, and because this revolution was made by the Yugoslavs themselves, not imposed from without.

I would even say that this pro-Yugoslav leaning is entirely justified by the role of ferment within the Stalinist world that Titoism plays by virtue of its existence; by the effect of the existence of Workers Councils on the workers of the other Soviet-bloc countries (like Poland and Hungary); by the fact that in their polemics with the Russian Stalinists the Titoists often try to base themselves theoretically on an authentically Communist approach (I remember a remarkable pamphlet by Kardelj on the causes and nature of the rise of Stalinism, and, at the time of the Hungarian revolution a speech also by Kardelj pointing out that the really socialist solution for Hungary would be based on the assumption of political power by the Hungarian workers’ councils.)

OF COURSE for the Trotskyists this favorable leaning was always counter-balanced by certain theoretical and political criticisms of Titoism, but the problem has been that in the absence of an immediate contact with the internal life of Yugoslavia, both sympathies and criticisms have been too much of an abstract sort, so that for instance the Militant’s attitude toward Yugoslavia seems to reverse itself completely depending on whether or not it agrees with the aspect of Titoist policy that it is discussing. Nevertheless I think our theoretical analysis of Titoism is basically correct, capable of giving an all-sided view, and is particularly in harmony with what you have observed and described in your letter.

Briefly, this theory considers the Communist party of Yugoslavia as a centrist party which broke effectively from Stalinism when it decided to take the leadership of a workers’ revolution in the very midst of “the Great United Anti-Fascist Struggle,” and which deepened this break in and after the 1948 split, but which, because it is dominated by an elite which holds unto itself the monopoly of political power and the privileges which flow therefrom, retains many essential aspects of Stalinist ideology.

The Tito regime, in order to retain power (and to the extent to which holding on to power is its sole raison d’etre) is condemned to maneuver between the Yugoslav workers who put it in power and are its basic supports, but who are evidently too small and weak a class to contend for power against their own regime, on the one side, and all those who would like to get rid of Tito, but only to their own profit: the Kremlin, US imperialism, the peasants, your petty-bourgeois friends.

The essential is to interpret the Titoist statements and actions not as expressions of any variety of socialist philosophy, but as the expression of the need to retain the power of the bureaucratic elite created by a proletarian revolution in the most backward country of Europe (except Portugal and possibly Greece). A similar statement would have been true of the Stalinist bureaucracy in Russia in their 1920s and early 1930s. Nevertheless I absolutely refuse to go along with Labor Action’s [defunct paper of Shachtman’s now-dissolved group] phrases about Yugostalinists and the like. The essential difference is twofold: first of all the Russian Stalinists took power in a “political counter-revolution” in reaction against the October revolution, while the Yugoslav bureaucracy formed itself in the very course of the Yugoslav revolution which it mainly led; and secondly, ever since the mid nineteen thirties the Russian Stalinist bureaucracy has acted consistently and consciously as a counter-revolutionary force in world politics (and, as you know, was the real savior of European capitalism after the war) whereas the Yugoslavs, despite the reactionary effect of many of their international maneuvers (Balkan alliance, condemnation of North Korea and China in the Korean War) have also had a left-wing influence on members of the CPs of both Western and Eastern countries.

Well then, with this approach I was not surprised by the capitalist atmosphere you have found in Yugoslavia, even though it seems much worse than I would expect. Evidently, as you said, many of the Chinese and Russian criticisms are justified and this is very unfortunate because the actual goal of these criticisms is scarcely to help the Yugoslavs to a healthier socialism, but precisely to discredit what is worthwhile in the Yugoslav experiment, and most notably to show that Workers Councils can lead only to economic disorganization and tendencies toward the restoration of capitalism.

In Labor Action Hal Draper wrote quite a few articles trying to show that the Workers Councils were a huge bluff in the purest Stalinist tradition ... In fact, the Yugoslav Workers Councils have a vast contradictory significance. For the workers, the very fact of their existence and attributions was a concession of greatest importance, a highly progressive act opening the door to workers’ control of the entire economy, and eventually, political life.

From the point of view of capitalism, though, it was a concession of a very different sort – by disorganizing the centralized and planned economy, and fragmenting the working class among different and competing factories it opened the doors to capitalist restoration. (You may remember a section in The Revolution Betrayed where Trotsky describes a possible method of capitalist restoration almost identical with the Yugoslav system: that is to say, the effective abandonment of planning and the transformation of factories into “producers cooperatives of the capitalist type” with the workers of each plant sharing the profits and control.)

Obviously capitalism has not been restored in Yugoslavia for the industries remain the property of a workers state, and a sort of plan continues to exist. But what is the real nature of planning in Yugoslavia? And what effect does the plan have on economic development? Your letter suggests a picture of nearly complete anarchy, but is this really fair? A close study of this question would give you plenty of material for a really important article.

In any case the obvious question which poses itself is why did the Workers Council system result in a development toward capitalism? It is altogether too easy and superficial to simply blame the immaturity and weakness of the Yugoslav working class lor this. Immaturity could be overcome by an experience of over ten years, and for all its numerical weakness the Yugoslav workers were, socially, strong enough to lead a revolution and defend it against the Kremlin. The real cause, I think, lies in the partial character of the council system – the Workers Councils have been given real authority over the operations of the factories, but only on the local level. Not only are they rigorously shut off from political power, but they are not allowed to centralize themselves into an effective organization directing the entire economy. These, of course, are really two aspects of the same thing: without political power, real direction of the economy is unthinkable, and conversely any democratically elected body with real power over the economy would, by that very fact, be a contender for political power.

What is more, if the workers are to be represented on anything above the purely local level they must be able to choose their own representatives, which requires at least a real democratization of the Yugoslav Communist party – all things very menacing for the power of the present leadership.

Since the workers have no real chance to defend their interests nationally, they naturally seize the chance to do so locally, even at the expense of other factories or communes.

And, of course, the existence of Workers Councils on the local level is incompatible with a bureaucratically centralized economic direction. This (in addition to the fact that the Yugoslav bureaucracy is too weak socially and economically to afford the enormous “overhead” cost of Stalinist centralization) left Tito with no choice but decentralization; any other policy open to the bureaucracy would have been disastrous. The real alternatives would be between the present system and a democratic centralization that could get the people to accept real sacrifices in their own interest.

CONCRETELY, you might ask why a democratically centralized planning system would be better than the present setup for a country as poor as Yugoslavia. I don’t pretend to know enough about Yugoslavia even to suggest the main lines of a plan – and the basic theoretical proposition is that the working class as a whole, if given the chance to inform itself, discuss and decide, knows much more the needs and possibilities of its economy than even the best “expert.” But of this much I’m certain: things like the import of eggs because it was unprofitable to store them, or the shortage of coal when there was plenty of unsold coal, would not exist if there was a plan determined by the actual needs of the people.

In any case, I don’t see how the weaknesses of Yugoslavia can lead to conclusions favorable to the Stalinist economic system as it exists in Russia and the other countries of Eastern Europe. Not only is it plain that in Yugoslavia itself a Stalinist policy could have been imposed only by Russian bayonets, but in general the Stalinist economy is even less efficient than the Yugoslav, with all its faults. For instance, what in Yugoslavia is remotely comparable to the waste represented by the millions of workers, farmers and intellectuals driven out of East Germany by the regime’s stupidity and tyranny?

The things revealed in Poland in 1956 were practically unbelievably idiotic, like the cold storage plant built 200 miles from the fishing port so that the fish all spoiled before it could get there. The entire industrialization program of Hungary was a fantastic waste from any rational economic point of view, and led to a sharp decline in the standard of living, not to mention the economic effects of the explosion that followed. The history of Russia is studded with examples of enormous wastes, and not only in the disaster of Stalinist agricultural policies. No one can ignore the great accomplishments in the Soviet Union, but they are I would say in spite of Stalinism, not because of it.

After all, isn’t the expansive power inherent in nationalized and planned economy sufficient to assure much more rapid and much better balanced progress than has been achieved?



New York, Nov. 19, 1959

The New York Times of Nov. 19 contained an article giving the latest claimed performance figures for the Yugoslav economy. According to this article a CP spokesman “reported that during the last three years the per capita gross national product, or output of goods and services, had increased an average of 11.9 per cent a year and personal consumption 10.1 per cent ... In the last seven years, he said, national income more than doubled, industrial production rose almost two and a half times and farm output rose 51 per cent.”

These figures indicate that Yugoslav industrial development, has been roughly comparable to the best performance in the Eastern bloc, and much better on the whole than in Poland, Rumania or Hungary.


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