Date: Mon, 20 Jan 1997 12:11:10 -0500 (EST)
From: Louis N Proyect <lnp3-AT-columbia.edu>
Subject: M-I: Susan Woodward on Socialist Yugoslavia


Today I want to turn my attention to the 1991 Socialist Register article
"Soviet Rehearsal in Yugoslavia? Contradictions of the Socialist Liberal
Strategy" by Susan Woodward. She was a visiting scholar at the liberal
Brookings Institute when she wrote this article, a bit of a surprise since
the article presents a trenchantly Marxist critique of the Yugoslav
economic model.

She differs from most analysts of the Yugoslav model in that she
attributes its peculiarity to the *liberalism* of the dominant faction in
the CP rather than as a reaction to Stalin. She uses liberalism in the
correct sense that I used it yesterday, as an economic term rather than in
the mushy way that Justin Schwartz uses it as a catch-all term for
ameliorative governments.

The liberal "reform" program that Tito instituted, according to Woodward,
originated before WWII among Communists from the regions of Slovenia and
Croatia, where there was an industrial working-class employed in
processing and light manufacturing. There also was significant external
trade, communications, and cultural links with Western Europe. In the
countryside, there were neopopulist agrarian parties that had created
successful peasant cooperatives.

These material conditions helped to foster a Bukharinist development model
that stressed modern manufacturing and commercialized agriculture. She
concludes that "material self-interest and cultural preference have
reinforced this coalition over time with a shared orientation to the west
and resentment at large expenditures on developing capital goods and
primary commodities at home."

Since these were the prevailing sentiments based on class self-interest
prior to the ascendancy of Tito, the political and economic decisions of
the new Communist regime must be seen in this light. Yugoslavia faced a
series of economic problems following WWII that had to do with its place
in the world order. Primarily these had to do with serious balance of
payments deficit and unfilled trade agreements.

Military and financial aid from the West relieved these pressures and
tended to reinforce the power of the Slovenian and Croatian liberal
faction in its desire to expand manufacturing for export. What better way
to create a market for the goods of these regions than to cement relations
with a friendly Western Europe.

The development model of the Yugoslav liberals was radically different
>from the Soviet model in the way that labor was viewed. They sought to
reduce socially necessary labor time in order to make manufacturing more
competitive on the world market. Woodward describes this approach in the
following terms:

"The source of accumulation at the level of the firm and of society is
higher marginal productivity of labour and lowered costs of labour in
production. Relative labour cost can be reduced within production by
increasing mechanization and technological modernization, labour's skills
('human capital), the efficiency of the productive process, and work
effort."

In tandem with this economic model, there was an associated political
vision:

"Although the blueprint of constitutional reform actually looked very much
like this ideal, the structure of society it imagined could also have been
designed to satisfy the members of a coalition of the political forces put
together for revolution in Yugoslavia. The core was to be a socialized
public sector of firms producing final goods for domestic consumption and
export with the most advanced machinery available, managed by a staff of
engineers and economists kept in check by representatives of skilled
industrial workers. The core is surrounded by efficient private farmers
and craftsmen organized into local cooperatives, producing for the market
and for socialized sector firms on long term contract. Movement of people
and goods across borders is free with few regulations."

What would be the best way to realize these economic and political goals?
The Yugoslav liberals agreed with the Hayekian perspective that the
solution lies in individual and material self-interest. "Decisions on the
use of economic resources should be made by those who have a direct
economic stake in how they are used. Those who actually produce value,
therefore, should be given the autonomy to make economic decisions.
Workers will produce more per unit of labour if they expect a
proportionately higher wage, and they will contribute to reducing costs if
they are given a voice in production decisions."

While this logic would work for individual firms, the coordination of the
entire economy required a somewhat different method. What would be the
carrot and the stick that would make sure that the *entire* economy was
efficient basically involved the use of financial instruments. The
liberals adopted a monetarist policy that was almost something that Milton
Friedman and the Chicago School could have worked up. They resolved that
the money in circulation never be greater than that supported by real
value produced by Yugoslav firms and that the total wage fund be kept in
balance with the fund of commodities available for purchase.

Sounds pretty good, doesn't it. It's not my cup of tea, I have to admit.
The whole thing seems kind of bloodless and pecuniary to me, but I am an
old fashioned sort of socialist. I identify with people like William
Morris, but that's just me.

Yet if I focus my brain real hard, I can sort of understand why Barkley
Rosser is proud to call himself a Titoist. I mean if you have dozens of
SDSers running around in your dormitory rapping down the glories of
Castro, Ho chi-Minh or Mao tse-Tung, what better way to one-up them by
talking about how cool Yugoslavia was. Nothing romantic or idealistic
about Yugoslavia, just hard-nosed self-interest and a balanced budget.
Was that the way it was, Barkley? You must have driven those student
radicals nuts.

Yugoslavia is also the country that David Schweickart says that comes
closest to his market socialist ideal. Since Justin Schwartz proposes that
nothing short of world market socialism is good enough for him, I won't
even try to blame him for his hero's poor judgement. (By the way, I picked
up Hayek's "Road to Serfdom" last night at the neighborhood Barnes and
Noble right after seeing the monster movie "The Relic" and took a quick
look at it. Are you aware that Hayek describes fascist Italy and Germany
as "socialist"? Don=92t you find this analysis laughably stupid? Should I
skip around these chapters? Are there any other imbecile passages in this
tract that are worth passing over?)

Hell, I only have two distinct memories of Yugoslavia. When I was working
at the First National Bank of Boston in 1970, my boss had made plans to
take a vacation in Yugoslavia. Was she a communist and making a pilgrimage
of the kind that people made to Managua in the 1980s? No, it was just a
good, cheap place for a vacation. This was around the same time that
students at the University of Belgrade launched a big anti-government
protest and called for a Red University. They flew banners of Che Guevara
and denounced Tito. Unlike Barkley, they thought he was a creep who was a
socialist in name only. Were you there then, Barkley? Did you try to break
the strike?

So what happened to this socialist Nirvana? Barkley tends to look at the
Yugoslav civil war as some kind of natural catastrophe that has little to
do with the economic model that was in place there. Everything was going
great until this typhoon rolled on shore and caused the Tito's sand-castle
to collapse. If it only weren't for the damned weather...

Actually, the Yugoslav model had contradictions from the very beginning.
What made the liberal model successful at the outset was the investment in
mining, agriculture, and producers' goods in order to build military
self-sufficiency right after WWII. This dovetailed with American foreign
policy aims which targeted development aid to poorer countries and
especially military and economic aid to countries with anti-Soviet agendas
like Yugoslavia. Thus American investment flowed to nascent Yugoslav
industry and promoted rapid growth.

By the late 1950s, the terms of foreign financing had started to change.
Loans came with shorter maturities and higher interest rates.  The Common
Market and Yugoslav membership in GATT did not mitigate against this
tighter financial environment.

Even though the West proved less generous as the 1960s wore on, the
liberals of the Yugoslav Communist Party did not swerve from their
international orientation. Instead of making an adjustment by orienting to
COMECON, they decided to cut labour costs in order to keep their national
books in balance. This meant that Yugoslav workers emigrated in record
numbers in this period. They took meager jobs in Western Europe. This
proved beneficial for the Yugoslav economy in the short run because the
wages they sent home provided desperately needed foreign currency. Also,
by depleting the ranks of the unemployed within Yugoslavia, they reduced
political pressure on the employers: the socialist state.

The pain of these measures caused resentment to grow. Popular anger was
directed against the liberals in Yugoslavia yet this did not result in the
growth of an authentic socialist movement at the top. Instead what
developed was an increasing reliance on microeconomic fixes that boiled
down to more and more belt-tightening and search for efficiencies.

Some sectors of the Yugoslav economy made the adjustment more easily than
others. Slovenian firms which had an historical orientation to western
markets did the best at technological modernization. The Slovenian
political leaders, still part of the ruling coalition of the united
Yugoslavia, pushed for expanded exports in order to reduce the national
deficit. They also called for more austerity to stabilize the economy. At
this point Yugoslav socialism began to appear more and more as a chimera
as Slovenia and Croatia sought tighter integration with the West and
Serbia desperately tried to work through solutions in the context of a
weaker industrial base.

The centrifugal forces keep eating away at the Yugoslav republic until
the whole thing collapsed and a civil war ensued. Yugoslavia's success was
very much a product of class relationships on an international scale after
WWII and its failure are tied to the same relationships. It would be as
ridiculous to point to the happy days of Yugoslavia as a model for
socialism as it would be to point to Eisenhower's United States of 1956 as
a model for capitalism, the way that Ronald Reagan used to.

The Tito regime was very much a creature of history, a history that can
not be repeated. There will not be a repeat of WWII with an aftermath that
favored pro-Western socialist states. There will not be a period of
economic expansion that favors Yugoslav manufacturing. The success of
Slovenia, relative to Serbia, has nothing to do with compliance with some
sort of flawless economic model. It has more to do with its positioning
within the European economy prior to the formation of the Yugoslav
republic and after.

It is a sterile exercise to compare economic figures from one country to
another. Unless you factor in the sum total of qualifying social and
political factors, you are just deluding yourself if you think you are
proving anything. Nicaragua's economy was a basket-case during the
Sandinista era. Does this disqualify it as a development model? Sadly
there were any number of "democratic socialists" who jumped to this
conclusion, especially in the pages of publications like In These Times
and the Village Voice. Sandinista failure has much more to do with
imperialist success than anything else.

The next time we hear panegyrics to Slovenia on this list from Barkley
Rosser, the least that we should ask for him is to place its "success"
within the *total* framework of international and national class
relationships. I know that this can be a big bother and involve research
he's never done before, but it might turn out to be kind of interesting
for the rest of us.

Louis Proyect



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