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Systemic Changes and Unemployment Growth in Yugoslavia, 1965–1984

Published online by Cambridge University Press:  19 May 2017

Emil Primorac  and
Mate Babić
Emil Primorac
Affiliation:
University of Windsor
Mate Babić
Affiliation:
University of Zagreb
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Extract

The Yugoslavs are infected by what calls the disease of “historical optimism.” Shocks, emanating from the international economy over the last decade or so, were seen as a developmental problem or, at worst, a transitory difficulty. This argument seems to follow these lines: Contemporary capitalism, of course, is doomed to collapse sooner or later; contemporary etatism is also in a state of crisis and will evolve toward Yugoslav self-management socialism. The socialism of self-management, however, could not itself be in crisis, because, if it is in crisis, what is left?

In fact the word crisis was not used to describe the state of the Yugoslav economy until September 1982 when it was discovered that foreign debt could not be serviced and required rescheduling. By then the Yugoslav foreign debt was $20 billion, the unemployment rate stood at 10 percent to 16 percent (depending how you measure it), and inflation was at 40 percent. Only then did the policymakers realize that these problems were a consequence of prolonged economic mismanagement, excessive borrowing abroad, arbitrary decision making, and an autarchic economic policy in general.

Type
Articles
Information
Slavic Review , Volume 48 , Issue 2 , Summer 1989 , pp. 195 - 213
Copyright
Copyright © Association for Slavic, East European, and Eurasian Studies. 1989

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References

1. See, Županov, J., Marginalije samoupravne krize (Zagreb: Globus, 1983)Google Scholar. This article is based on a very different version delivered by Emil Primorac at the annual meeting of the AAASS in New Orleans, November 1986.

2. The dinar was denominated in the ratio of I to 100, 1 dn = 100 old dinars, and devalued from 750/$1.00 to 1,250/$l .00. Convertibility of the dinar was debated, but the costs associated with it were thought to be prohibitive.

3. Flaherty, D., “Economic Reform and Foreign Trade in Yugoslavia,” Cambridge Journal of Economics 6 (1983): 122 Google Scholar.

4. Private employment in agriculture in 1980 was 91 percent of total agricultural employment.

5. Standard indicators, however, should be treated with care. For instance, production costs in the private sector are much lower, and so are their prices.

6. See Primorac, E. and Delia Valle, P. A., “Unemployment in Yugoslavia: Some Structural and Regional Considerations,” Jahrbuch der Wirtschaft Osteuropas, Band 5 (1974), 455–488 Google Scholar.

7. The benefits of social sector employment are numerous: superior social status, the “social security” that means guaranteed salary, health insurance, pension funds, “self-management rights,” the chance to get an apartment.

8. Jože Mencinger, “Otvorena nezaposlenost i zaposleni bez posla,” Privredna Kretanja Jugoslavije, April 1983.

9. See Schrenk, Martin, Arclalan, Cyrus, and El Tatawi, Nawal A., Yugoslavia: Self-management Socialism—Challenges of Development, A World Bank Country Economic Report (Baltimore. Md.: Johns Hopkins University Press, 1979). 247 Google Scholar.

10. As mentioned earlier, higher productivity in the social sector is the result of higher capital-to-labor ratio in this sector. In distributing income, a fair share should go to capital. When decisions on distribution are made by workers, however, they often appropriate for themselves a part of the capital's share: the high rate of write-offs (otpisanost) of the existing capital stock in the Yugoslav economy illustrates this tendency.

11. At the microlevel the low productivity of a marginal worker may, through demonstration effect, adversely influence the productivity of other workers.

12. The available analyses of the employment problem are invariably concerned with the performance of the social sector—and all is well there. It is the overall picture to which we address ourselves here.

13. Mate Babić and Emil Primorac, “Some Causes of the Growth of the Yugoslav External Debt,” Soviet Studies, January 1986. 77.

14. The number of Yugoslavs temporarily employed abroad before 1965 was negligible.

15. If the enterprise had wealth maximization as an objective, it would select the point where marginal input contribution to revenue equals marginal labor cost.

16. The algebra for this is available in Wiles, P. J. D., Economic Institutions Compared (Oxford: Basi Blackwell, 1977), 85–86 Google Scholar.

17. See Babić and Primorac, “Growth of the Yugoslav External Debt,” 80.

18. See A. Sapir, “Economic Growth and Factor Substitution: What Happened to the Yugoslav Miracle?” The Economic Journal, June 1980.

19. Vinski's data include total fixed assets in use in the economy (privreda); Statistički Godisnjak Jugoslavije gives information for the manufacturing sector.

20. Puljić, Ante, osvrt, Kritički na Sapira, članak A., “Ekonomski rast i supstitucija faktora: Što se dogodilo jugoslavenskom čudu?” Economic analysis 16 (1982): 369–376 Google Scholar.

21. Privrcdni biltinsi-Jugoslavije, 1984.

22. The workers temporarily employed abroad are included here. The figure does not include the numerous workers who decided to take up permanent residence abroad.

23. The following may clarify the point:

If, over a given period SMA/Sp behaves precisely like Sp, actual labor supply depends on demographic factors, it not the participation rate requires explanation.

24. Mladenović, D., “Economically Active Population,” Yugoslav Survey 16 (August 1975): 10 Google Scholar.

25. The country really has an average birthrate with a stupendously high rate, at one extreme, in Kosovo and an alarmingly low one in Croatia. The other republics fall in between these two.

26.

similarly for the change in weights. Table 11 contains the crossweighted unemployment and participation rate changes. See Primorac, E. and Charette, M. F., “Regional Aspects of Youth Unemployment in Yugoslavia,” Economic Analysis 21 (1987)Google Scholar.

27. This turn forced us to adjust the unemployment data to fit the same age group. We took two-fifteenths of the unemployed from the age group 25 to 39 and added it to the youth group (15–24). This, we feel is a conservative estimate and the error, if it is an error, goes in favor of the young workers (omladina).

28. Croatia does not fit the pattern when the total unemployment rate is used. Croatians emigrate more than others, but that is a matter worth another paper.

29. Quoted in Schrenk, Ardalan, and El Tatawi, Yugoslavia; Self-Management Socialism, 250.

30. See M. Babić and E. Primorac. “Benelits and Costs of Migration.” Department of Economics. University of Windsor. Discussion Paper no. 27 and Ekonomsla pregled, no. 11–12 (1975).