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

136 Market Socialism in Yugoslavia
1972 and in 1975–6, were followed by deterioration of the domestic
economy and quickly abandoned. Only when, after 1979, indebtedness
became excessive, did economic policy shift towards the restoration of
external balance. At this point, the price for achieving external equilibrium
was high. It consisted of stagnation coupled with decreased
efficiency, represented by the increase in the capital/output and
labour/output ratios, a rising level of unemployment, inflation, and
increased interregional disparities. Deterioration turned to stagflation
and, after 1983, to a kind of hyper-stagflation. The annual growth
of GNP decreased from 5.7 per cent in the period 1974–80 to stagnation
in the 1980s. The unemployment rate reached 16.4 per cent at the
end of 1988. The average inflation rate increased from 20 per cent in
the 1974–80 period to 200 per cent in 1988. Real wages dropped to two
thirds of those in 1979, and interregional differences increased. The
pressure of excess demand on the economy was softened in the 1970s
by persistent deficits in the current balance of payments. When the
supply of foreign credits became inadequate to cover the deficit in the
1980s, both the balance of payments crisis and the acceleration of
inflation became inevitable. The only alternative to inflation was the
Romanian policy of shortages and rationing. Both inflation and
administrative restrictions, the latter only in 1982 and 1983 when
Table 8.2 Performance of the Yugoslav economy in the 1980s
Internal External Efficiency
balance balance
I II III IV V VI
1974–80 5.7 20.1 13.3 55.6 2.64 1.86
1981 1.5 44.8 13.5 70.2 2.69 1.79
1982 0.5 31.0 14.1 77.8 2.82 1.84
1983 1.0 38.1 14.6 81.6 2.96 1.89
1984 2.0 56.3 15.3 84.5 2.95 1.89
1985 0.5 75.4 16.0 87.2 2.97 1.91
1986 3.5 88.1 16.2 84.1 2.95 1.91
1987 1.0 118.4 15.7 91.3 3.01 1.97
1988 2.0 198.8 16.4 96.5 3.13 2.01
1989 0.8 1255 17.9 90.3
1990 9.8 588 20.2 75.8
I – GNP growth, II – inflation rate, III – unemployment rate, IV – export/
import ratio, V – capital/output ratio, VI – labour/output ratio.
Source: Statistical Yearbook of Yugoslavia, various years.