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

Howard M. Wachtel 13
applications. It also permits us to examine Horvat’s contribution to
twentieth century economic and social thought. The problem with
self-managed economies is not the supposed economic irrationalities
thrown at it by western economists. It was something quite different.
Yugoslavia’s problem with its experience as a worker-managed system
invites this question: is the system of workers management a onegenerational
institutional construct? Does it have a serious dilemma
in reproducing itself inter-generationally? An answer to this question is
found in a capitalist-managed system. Here the brilliant insight of
Joseph Schumpeter provides the answer. The creative destruction of the
downside of the business cycle cleans out dead wood, allows for a new
foundation for growth, and organically restores profitability – that
engine of activity that fixes broken economies. Schumpeter turns what
Marx and other socialists saw as the Achilles heel of capitalism – the
business cycle – into its most forceful argument. Without state intervention,
capitalist economies not only right themselves but do so from
an enhanced position of strength. With the unproductive firms passing
from the scene, only the most productive survive. They, along with
new entrants, set the stage for growth through new investment with
nascent enhanced technologies pulled off the shelf. This explains how
in the midst of the Great Depression in the United States during the
1930s, massive innovations were put in place – the new forces of sustained
growth implanted simultaneously with the picture of economic
despair. By 1939, all of this could be displayed at the New York World’s
Fair – television, the city of the future, washing machines, data processors,
and so on. If this process is aborted, suppressed by systems and
ideologies that do not permit creative destruction to take place, then
the day of reckoning is only postponed.
I contend this is precisely what happened after 1975 – a critical juncture
for both capitalist and non-capitalist forms of organization. The
former went through a wrenching adjustment process, the latter did
not. The collapse of non-capitalist economies in the mid-1980s both
brought on the great transformation in the former Soviet Union and
east-central Europe and unleashed the furies of nationalism that
engulfed the former Yugoslavia.
This is a lesson that needs to be learned and absorbed, lest future
experiments founder as well. A worker-managed system, and any noncapitalist
system, must figure out how to reproduce Schumpeter’s
organic form of creative destruction in order to reproduce itself intergenerationally.
This is necessary in order for economies to cleanse
themselves of accumulated staleness, much like the human body has