Date: Thu, 7 Nov 1996 15:16:53 -0500 (EST)
From: louisgodena-AT-ids.net (Louis R Godena)
Subject: Re: M-I: Re; Socialist Unemployment in Yugoslavia



Jerry Levy writes:
        
>[Yugoslav state] enterprises had to pay the following out of revenues: a)
interest on
>loans from banks; b) depreciation allowances; c) interest to the central
>government on the initial capital investment; d) sales tax; e) income tax
>on profits; f) other misc. taxes and fees to the government. *After* the
>firm has paid these expenses, it was free to choose between increased
>wages and increased investment. *But*, workers had to pay a social
>insurance tax on wages and firms were required to give (as of the early
>1980's) at least 24% of revenues for the housing fund and communal
>investment projects, such as recreation centers. About 1/3 of Yugoslavian
>GNP came from taxes. About 50% was spent on defense, 35% on social welfare
>projects, and 15% on investment.

I quarrel with your figures.    Even as late as 1987 the contributions of
state enterprises for housing and "communal investment projects" accounted
for less than 15% of their end of year revenues --and this at a time of
triple-digit inflation (Vinod Dubey, et al. *Yugoslavia: Development with
decentralization* 2nd ed. [Baltimore,  1989: Johns Hopkins University Press
for the World Bank].    See also Robin Remington,  "Yugoslavia," in Richard
F. Starr,  ed.  *Yearbook on International Communist Affairs* [Stanford,
Calif., 1988: Hoover Institution Press]).   

Too, your figures for defense spending are grossly inflated.    The "defense
budget" frequently included capital projects and infrastructure as well as
military expenditures.     In the late 1970s,  for example,  such projects
as Feni nickel plant in Macedonia,  the Obrovac aluminum factory and the
Knin railroad line in Croatia,  were all figured into the "defense budgets"
for the respective years 1977-79.    The huge Smederevo steel plant in
Serbia similarly accounted for nearly 7% of the Yugoslav "defense budget" in
1980.    The capital intensive production of strategic raw materials was a
high priority throughout most of the history of socialist Yugoslavia.    (It
continues today,  albeit of course in somewhat different form).    This
reflects the dominant role the Yugoslav military played during the Tito era.
So be careful when extrapolating from defense budget figures.     The real
"defense budget" was closer to 22% until the late 1980s (James H Gapinski,
Borslav Skegro and Thomas W Zuelke,  *Modeling the Economic Performance of
Yugoslavia* [New York,  1989: Praeger]) 

Jerry continues:

>Certainly, there were extraordinarily high rates of inflation and
>unemployment in the former "socialist Yugoslavia, *but* these rates can
>not be traced back to the workers' councils voting their members wage
>increases.

Decentralization and workers' control were also not what they are claimed to
have been.    One of the purposes of workers' control (and its concomitant
of decentralization) was in fact to strengthen centralism by developing its
democratism.    Another purpose was to reduce the power over wages that
tight labor markets and then the production brigade system had given to
workers.     The dynamic of most of this period in Yugoslav history (50s
through the 80s) was not between central and local power --or even between
"workers" and "managers"-- but between the different *kinds* of authority
possessed by the three levels --federation,  republic,  and commune (as
localities were called)--with each change of authority.    The difference in
the role of bureaucracy in each of the models tried was more of a matter
*where* than in *how much*.    The system of workers' councils actually
transferred authority from workers themselves back to staff --managers,
engineers,  and unions..    "Economic" and "market" methods,  praised by
reformers elsewhere in eastern Europe and the West,  led to the
concentration of plant and a *reduction* of workers actually in production
(to reduce overall costs).

This was especially true in the general farmers' cooperatives (the original
model for the workers' councils).   In 1955,  of 51, 393 permanent
"workers",  only 8,471 worked exclusively in agriculture;  4,593 worked in
shops connected with agriculture,  while 38,329 were employed in
nonproduction tasks.    The workers councils were part of an overall plan
--together with employment "contracts",  "socialist work communities,  and
the like-- to actually *immobilize* the workforce,  and to create a much
diminished federal government,  reducing its bureaucratic offices and moving
its ministries to the republics,  while cutting the size of public sector
employment and reducing the cash wage bill.    The workers' council,  in
sum,  were an integral part of this overall strategy of decentralization.
One of its unforseen results was,  of course,  the highest unemployment ever
seen in the socialist bloc (Howard Wachtell,  *Workers' Management and Wages
in Yugoslavia* 2nd. edition.  [Ithaca,  NY,  1979: Cornell University
Press]).    

This,  as I pointed out in my original post,  was also due to an
uncontrollable international environment that remained decisively
detrimental to government policy.      

Louis Godena



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