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

140 Market Socialism in Yugoslavia
separation of political and economic power. To put it bluntly, the leading
subjective force, the nomenklatura, and the determined ways of
development, were all superfluous in a market-based economy. The
commitment of Yugoslav politicians and of the LCY to the concept of
market economy could therefore be considered insincere or shortsighted.
In 1988, Yugoslavia reached the point at which any economic
reforms, if unaccompanied by political reforms, could only increase the
inconsistency between the economic and the political system. It could
sustain the stalemate indefinitely or transform the economic system
back to an administrative system. The ability to reread and to reinterpret
Marx, which had characterized the past so profoundly, did not
suffice any more. New changes of the economic system that would
remain within the bounds of Marxist ideology were no longer feasible.
The situation required that the ideology be abandoned. The rather
peculiar economic system came to its end after continuous economic
crisis, ideological disintegration, dysfunctional institutions, growing
ethnic and social tensions, and political stalemate.
The latest and the last Yugoslav economic reform launched in 1988
before introducing political changes, was based on the idea of creating
an ‘integral market’ consisting of product, labour, and capital markets.
However, it very soon became clear that it required transition rather
than reform. The constitutional preconditions for the transition were
created by a set of amendments to the Constitution and by the
document containing a general outline of the reform The Principles of
the Economic System Reform, elaborated by the federal government’s
commission. The two systemic laws – The Foreign Investment Law and
The Enterprise Law – passed in late December 1988, in fact reintroduced
capitalism. At that time, Yugoslavia had, despite rather peculiar systemic
features, many advantages compared to other East European
countries, and therefore had chances for a successful transition into a
market economy. Most of the so-called essential features of economic
transition – decentralization of decision making, price reform, openness
to the outside world, and diversification of ownership – were at
least partly met before political and ideological change.
There was no need for decentralization and reorganization of central
institutions. Directive planning was dismantled in the fifties, and financial
autonomy was given to the enterprises in the sixties when diversification
of the banking system was also introduced. The enterprises were
autonomous, planning did not exist, and government used standard
fiscal and monetary policy tools. Basic market institutions existed,
although the notion of the so-called ‘integral market’ encompassing
product, capital, and labour markets was not inaugurated until 1988.