Equality, Participation, Transition: Essays in Honour of Branko Horvat

128 Market Socialism in Yugoslavia
introduced after 1976 were in fact explicitly or implicitly abolished
soon after their appearance and replaced by new statutes or administrative
measures. Other statutes, for example the planning act or the act
on compulsory pooling of labour and resources of commercial and
manufacturing enterprises, remained irrelevant for the actual functioning
of the economy.
Explanations of the wide gap between the blueprints and the reality
differed. Two groups, nevertheless, can be distinguished, one blaming
the inappropriate behaviour of economic units, the other, the blueprints
themselves. However, it may be argued that economic units
behave rationally, given the system. If such rational behaviour produces
undesirable results, or if economic units do not behave in accordance
with the premises of the system, the problem is most likely within the
system itself. The system appeared to have at least three important deficiencies.
First, it was based on ideologically-inspired self-serving perceptions
of the reality, which led to unrealistic performance expectations.
Secondly, the principles of economic theory were simply overlooked or
ignored. Thirdly, the system was overloaded with institutions.
Scepticism about the functioning of the system was rejected by
appealing to the peculiarities of the socialist self-managed economy.
The problems that should have been dealt with were, instead,
‘resolved’ by ideological statements. For example, the problem of the
wage vs. accumulation dilemma could and should have been discussed in
the framework of wealth maximization behaviour (Furobotn and
Pejovich, 1972). It was instead pushed aside by proclaiming that it was
the responsibility of associated labour to reproduce capital in an
expanded way. The consequences of a monopolistic economic structure
promoted by the pooling of labour and resources, were overlooked.
The institutions of free exchange of labour produced additional
administration at enormous costs to those who were wasting time in
‘decision making’ to run its course. The planning system, which to
some economists was highly appealing as a theoretically promising
way to obtain an ex ante general equilibrium solution (Ardalan, 1980),
could not work in practice due to massive information barriers.
Inoperative blueprints, together with undesirable results of the system,
required government intervention. Suspended or irrelevant rules
of the game were replaced daily by an enormous number of administrative
measures and incessant changes in legislation. As a consequence,
the system gradually acquired many characteristics of the
administrative system, such as, inflexibility, slowness, inconsistency of
administrative measures, distrust of economic units by administrators,