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

need to reconcile the principle of one-worker – one-vote, to the principle
one-share – one-vote.
Fourthly, while capital and labour markets existed in a rudimentary
form, they were not accepted on the ideological and theoretical level.
Their official introduction requires the recognition of the consequences;
the proclaimed premises of the system – social property and
self-management – cannot coexist with labour and capital markets.
A labour market with self-management can operate well when employment
in an enterprise is increasing, but not when there is a need to
reduce employment. In the first case, workers looking for jobs appear
as sellers of labour services and enterprises as buyers; there are no problems.
The labour market breaks down when enterprise employment is
to be reduced. Workers, who by definition become managers by entering
the firm, would in this case be forced to dismiss themselves or to
decrease wages voluntarily, which is not likely. If some workers are
dismissed by their fellow workers, this contradicts the notion of selfmanagement.
The second solution, that is, the voluntary decrease of
wages that emerges from the solidarity of workers and which should
soften the downward rigidity of wages, is rejected in practice – strikes
confirm that workers do not consider themselves managers.
These proposals, therefore, did not only indirectly question the
premises of the Yugoslav economic system: they reopened the old
dilemma – socialism or efficiency (Mencinger, 1988b). The Enterprise
Law, passed in January 1989, formally ended the period of contractual
socialism and set the stage for nothing else but a return to capitalism.
While political and social obstacles and ideological dilemmas appeared
important determinants of the limits to reforms, the state of the economy,
leaving aside the interdependence with systemic changes, should
not be overlooked.
8.5.2 The state of the economy in the 1980s
Jozae Mencinger 135
Macroeconomic performance in the period of contractual socialism is
characterized by the break in 1980 when acute difficulties started.
However, the fact that yearly inflows of foreign capital were greater
than increases of the gross domestic product indicates that the success
before 1980 was fictitious. The Yugoslav economy was doomed to stagnate
for a decade in the absence of net foreign capital inflows. When
the possibilities for development based on foreign financing ended,
and the servicing of accumulated debts, which amounted to 20 billion
US dollars, required an enormous outflow of capital, the fictitious success
dissolved. Two previous attempts to restore external balance, in