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

Jozae Mencinger 131
as impressive before 1965, and the declines after 1965 were attributed
to changing external conditions and to relative weights given to various
economic objectives, and only partly to the system which weakened
macroeconomic policy making (World Bank, 1979). Performance
indicators for the Yugoslav economy under the four systems are summarized
in Table 8.1. Simultaneous movements over time of the
capital/output and labour/output ratios indicate that the dynamic efficiency
of the economy is related to systemic changes (Mencinger, 1986).
In the period of administrative socialism (1946–52), economic growth
was achieved by enormous increases in inputs, with both ratios increasing
rapidly. When rigid planning was abolished, and the dominance of
planners was replaced by that of consumers and independent producers,
(1953–62), the two ratios decreased rapidly. In the third period
(1963–73), the capital/output ratio started to grow again, while the
labour/output ratio decreased slowly. The changes that made relatively
abundant labour expensive, as the majority of taxes and contributions
were levied on wages, and scarce capital a virtually free good, with real
interest rates negative, appear to be important causes of this deterioration.
The situation worsened further in the period of contractual socialism
when the capital/output ratio started to increase rapidly and the
labour/output ratio first stagnated but after 1980, began to increase.
Growth rates in Table 8.1 appear satisfactory when compared to
those of developed market economies. A comparison with countries at
a similar level of development, however, suggests that growth performance
was fairly normal, except for the excellent agricultural results in
the period 1953–62, following the abandonment of the forced collectivization
policy. Faster growth of industrial production in the second
period is partly the fruit of huge investment in the first period in
projects with long lead times.
Large shares of investment in GNP suggest that the cost of growth in
Yugoslavia was high and, indirectly, that despite reforms, the country
retained the Soviet pattern of development. The increase of GNP per
unit of investment during 1960–80 period was only 70 per cent of the
corresponding increase in comparable market economies of Southern
Europe (Bajt, 1987).
What was the impact of economic reforms on the economic structure?
This could be established, to some extent, by comparing patterns
of structural change in Yugoslavia with other countries, both marketbased
and centrally-planned. To avoid problems created by differences
in relative prices among the countries, employment structures are
more appropriate. 1