uniuiit bruiidand governiilsuul Tito't. Abiding hand.menu and inevitable problem* unecthcrwly ;itid
slate mniv.ion much> fmKliuncd
Much of theueniion has focused on ilie troubled cconontv. Stabilization ntiMturc*0 reduced ill* lend, del'kil andlite growth ufdonteslic demand. Itulgr.idi; 1U0 xccurudincing front theand Western soverniiicnts.ind bjnV. despite tome iniii.il difficulty. The impruwiiicni in the balance of (my men it .md IMI' endorsement ol thep tne nun will iticreutc ihe confidence ol' foreign lender* and make it easier for Yugoslavia lon IVSI.^B
The eollccUvc leadership. noncihclcti. slill hatight liifli influiion. Other economic problems persist: low productivity, .lagr.tling livingnd uriempioymcnt. Weaknesses in unteonom* ba*cd on tclf-manaBcmcni and deccniraligation impede both cffiete-uy and policymaking. Failure to make prog rest on ihcsc problems could have potiitcjlThe leadership is stressing ihe accda itisg-tctm commitment to austerity and is jinj more capec digression of the cause, attd cure* for Yugotlaviariie i
heirs face ftotentiallyh>ril fwublem. tag well:
Contiruingin (hei cttttttilueni republic* and twoarticularly jntong the large Albanian minority in Ko*ovo Province.
Indication* lhai ihcSerb* may prcufof ditrxorwrlioeuiie ttuihixtly at the federal level and ihus upset ihe sensitive nationality balance in ihe parly jnd stale machinery.
Growing sign* ofasseniveness by the
These centrifugal forces and domestic rumblings ore endemic to the Yugoslav system, but the members of the collective leadership have been willing io compromise regional and personal interests (or the good of the federationhole. The compromises have weakened policy initiatives, however, especially in the economic area. And policies decided ai the federal level huvc been difficult io carry out in iheevertheless, tiny perceived external ihrcul to Yugoslav indcpcncjCjTCC would lendilence the ccnitifugnl impulses and untie the nation
Doubti About ihe
Tbe Sueceuion in (he Genet nr. and ibe
FVa-ic* in Subduing ike Ecoocmy "
Politic Eeonomka. aad Regional
Regional Intercut and the
Economic Policy in the Near
Conflict Within the
Fconormci of the TitoJ
'Diiparilla in'Pcr Capita GNP and GNP
Trend* in the Natittaal , hofSeleetedlndieatofi
Ituubf* About the lUturr
twd the cvwnuam viabilityofv iahiepended on hi*
Lirooted national-it* rival ric* prevented ihe development ulugo.Uv rtattu-alitdccd. Ibx >lruCgk ofagainst Serbiadomioaace. .hack Ual the heart u> lb* problemburet? cixnrealid. even under Tlio'idominari Icudcrship. The.trong rivulrie* among Yugwlav nationalities led Tilo locdv*teni madecomputing, sometime, antagonistic, rcgmmil iurtk*.Thc eolkgi ciccutiwintroduced In Ihe fall of-a* in large mcaaarc ur attempt lo bridge ihe gap xpa'aun. ibe**interet group* andat eachv-ve in federalbaiocfi'darn at
g the federal part* and tbe -laic
nd government.illurganl/.cd Intocoiititiiitvet whose executives held office for one ajjaat
In economic nuttcy. rapid tro-ih had hang beening goal nil cu-trcting regionalouragcd potkie* to reducein Ihe poorer region*ie eenrmry ohitc narrowing income differcmijU among theilo from time lo lime had to acceptgrowth to restrain inflation and dual with riling current account deficit* But pol-ej ahift* became incr euainglj difficult lu carry out. in Urge parif Ihe nature of (It* Yugoslav economv and became of the afe.ent.aliscd dcci.ionmaking Tito mi-educedhe IMTO* In the >ear beferc hi* death, the inflation rate wu again climbing and hard currency trace dcfletu wereThe centralbility to manage it. internal and eticrnul ceonuitueeUfftcullict without Tito wu al bet!
The Swcrctilon In ihe .internment and theleadership in the State Pre.idenc> provedhurnrkingl) resilient in it* firal year. WithinTaj* death,.n Hal led ViceLorarat Prcwdent.uualater.i'< tenure ended aathe ciabliahcd formula
of rotation, named Cviictinerbut the new President, and Sergea Slovene, at Vkv President. Theof the lulctuflaid
irtd eoaiinuil) and iwccceded ia Cvr.vu.
iil Hdt-al Rteuhli*arrwaiaiiw* uT it*ullr*<al hau..th*d.nire "S"
I)urine lbs-tr. however, wnik pio-poscd cunMitu-tiuilill amend men in to Icgullrc the cvllccti'c leadershipfor Mate bodies around The jnwnoWnts would:
MjL.'memkr of ihtetccaiiitor his cmnnd for tsflntns. decisions b; ihcbods.
Sci it fair-year tcrnt of office for mem ben of Ihebodies..
lisi.iblishne*tear term uf office for the Prs'iidcntv President of Ihe Is'deraland rotate thei of tht
finikelldenta ofmberi of Ihe Nuinsna!ne-year termar term is being discusacd ul>0)
Liittii Cm bind iiiiniiicit la four-year Uimi. and the Premier'* term locilher four years. iwoymrttvith op; itn of another two yean,inglc year.
lishe-year airujlc urm of office for Caaitnu-tiuaal Court judge*. _
_ lebute haa been heated in
cral Assembly's Commission for Constitutional (Juaniomi over ihe issue of the one-year term for etucutive no*liian* like Premier. Cabinet mcmbcri.
.tnd judges. Tho amendments hns'c only rcccruu
cleared the committee for Aucmbly action
The succvsnlun within the party hai proceeded leu smoothly than lhal in lite HOvernmcnt.'-yeur mandate for the President of the JJnscm-bcr Presidium of the League of Comniutiiu of Yugoslavia iLCYl- He alone, hervrevcr. cbuae ihe two persons ho rilled Ike yob daring bis lifci.ru The only tgabttM relating to candidates fur the pent it lhal no republic or province can be represented more thanntil all have hod their turn. Unlike the stalethere it no established order of rotation antottg the republics andommitteemakes the selection, and last October itraracedonian. Yugoslav press coverageam session tail June eondidty admitted that bees use of conflicting views within lhe leadershipodi fie at ion in the psriy rules could be wurhed out (J0
ProKieta In Siabtlirlnwanorns Tar Haul Year afTitoi Hutu,apid g'Osi iii. the ceoisunn situation dcis'rio'uis'd drusiiCtitli inito's last full year inulfhruricd st.ibitir-.it ion ttvaasurce failed lo s'urb domestic dtmund and the inflation rate climbedercent, the highestm four years, Substantially higher cal prices coupled asM buoyant intpcet demand and weak demandali' ctpori* helped boost ihe current - ll billion, almost tripleeign bankcti turned bearish, forcing Hclgradc tushon-tcrni burrowing und to draw down official roers'ts lo the CQuivtilcnl of only five weeks of Imports by the end of the year This compares mill rciervcsnjorc than three months of imports at the end of Iv'lfD
Upset b>9 results. Iklgradc entered the new )Cur determined to stabilize the economy, lieunonsic Plan*0 set lower growth targets undcertain restraints:
Fiscal policy was tightened with public opcnditurci slated to grow less rapidN ihan social product
Tighter credit was intended to force enterprise* to rel) on interna! tas-inst. thereby curtailingent gro-th.
ri.su-.ii liiMMUS Ij
A legally binding incomes pulleyimposed io
ibe rise in consumer sftcading. The government'* emphasis on ihe ceononiy VfM uniJi.-rii.urcd by ihe Presidency's unprecedentedemergency legislative powers loower ceiling nn ihe ivBQ balance jf-payments deficit than lhe republic.cp
I-'- octal badly, lofta-
i-iO rsrc.sarcs inherited5 were incrcaaed by tSc hfling of the temporary price frecre.eduction ia price subsiaVi on sorre andleep jump in the price ot .mnoried crude ol. DuringTilui illness, uncertainly aboul Yugo.iavis't stability alia prompted lomc capital flight. Consumer demand surged In cipcciution of higher prices, aad enterprises went ahead with new investment pro,iett before further restrictions could be implemented. With Tito still in the picture, the new leadership remained icnlaiive. It* only >ignificam action In the first few months0 was lo Impose additional restrictions onin the public and service sectors of the> (Mm
mcnt slackened. Qvei signs of decelerating, lessear carlii
rirogram embodied in ihu off byleadership's ability lo Ic activity slowed as the un and new fiaed invest-lailon rate showed some trade deficit was slightly
The new collective leadership pwsbed ahead wilhal tnadycar In early
a month after Tito'sgoverndevalued the dinar byercent,artial price freeze, and reduced planned growthThese measure* were lo have been supplemented ol the end of July with anotht including measures to rentalit was never Intro rekuic of the plans1 behind schedule, reflecting Ir ifliett over economic i
Belgrade had to alter its eeor.omic programear as severe shortages of hey cor.turner goods ar industrial materials developed. Some tteps were
a s -
Real Tiends In in* National Accounts
wilb reducing domes lie demand The gov-c i. for esought lo decrease demand (or goods ia ihori supply by increasing sonic paicca iM by lifting com roll or others,ide rang* or* important consumer and industrial products. Thisa partial victory (or advocates of greater reliance on market forcer To dampen tha inflationary impaet of the price nies and further restrain demand, the government alio raised down-payment requircmcnti on consumer goods bevght on credit At the same time. bowever. the lea den his offered conisimers kxtwthe eipcnic of improving the balance of pay.temporarily curtailing caporvs of lame foodituffi and by authorising aalci of seme iicrruommodity reierves<MM
0 rVurrarn. The tiabiliiation programsue-ecuful in redirecting production from domestic uiei lo capons. Th* growth ofdaencslic demand -as curbed as real CSPlgross socialrowth fell to 1than half the rale of growthV and the lowest since the.irsi-esiaricr surge. Invesiment growth slackened considerably by the end of the year, private consumption stagnated, and teal incomesereeni below9 level.
Bereatest achievement0 was toim-prcve its foreign economic position. Slower gro-th of
domestic eonsumriiion and investment and the June devaluation helped to reduce the trade deficit in IS SO byan i: billionaport) were ap more ibaa JOercent in real teemslh, irve eorrcspandmg period9 whist imports increased by test than IQ percentecline of more thanercent in teal tcrmil. Recovery in receipts from Yugoslav -criert abroad and increased receipts from teuiitm contributededuction in Ih* currentillion. aboutillion sower thanOtTkial reserves rose somewhat, el.nsbiisg toallon by the end of )eeember aftero- ofo in May.
But inflation continued lowereat an annual isle ofao percent by the end0 despitenctivity. Allbough par; of the nt* Caa be attributed to underlying infla-tio-ary forces, other special factors share much of the blame.
The JO-pcreeni devaluation of the dinar in June.
pciceniroduct pricescou ragecomervation.
Thcliiiingerfpriceccnirolsona broad range of industrial and coniumcr goods.
Tbe raisingces still coder fedeia^onlrol in order to balance supply and dema *ctMM
Consumers, unaccustomed to lengthy period, of .lusteriti.clcarli fell (he pinchSO. Several minor incidents of labor unrest were reported, possibly over wageurihermare, trade union officialscalling for an even more active role for worlds in economic decisionmaking. Though Belgrade remained committed io stabilization, ihe leadership bvenmcabout introducing measures that would impinge further on real incom
Moreover, despite the improvement in its externalugoslavia'* borrowing ability was induring much of the year. In the first half of the >car. Belgrade had difficulty celling medium- and long-term financial credits and was forced io usereserve! aad to borrow atiort term. Bankets were uncertain about Yugoslavia's stability duting Tito's illness and harbored lingering antagonism* over Belgrade's overbearing tactics inumber
was undenuascribed by0 ntli
Afie-eath, the new leadcrshipembarked on an aggressive campaign to raise funds, playing heavily on Western fearsack of support might destabilize post-Tito Yugoslavia. Sinceugoilavbor-rO"ing has been aided by the International Monetary Fund's endorsementO stabiliaailon program. Ihe June devaluation of Ihe dinar, and renewed party and government commitment toillion Eurocurrency loan signed in late December, coupled -uli several bilateral loans, helped Belgrade to get through the year.flA
Politics. Economies, and Regional Rivalries
In the main, regional rivalries have nol resulted in confrontations, with the execprion of(he recent (rouble in Kosovo Province. Externalct which Belgrade had nobly the impact on Yugoslavia ofthe Soviet invasion or Afghanistan and Ihe threatarsaw Pact intervention inprobablyarge cxlcnl account Tor the surprising degree of domestic cohesion in (he face of varying political and economic interests. Nonetheless, the basis for tntcrrcgional jealousies over economic development is as solid as ever: the relative differences among the republics tn terms of per capita GNPhavc hardly changed in ihe pastears. Nationalism remains a
seiitius problem as weII.umber ofvc surfaced over the pan year
The Albaniani. Vidcnt demonstrations in March and April by the country's large Albanian minority in Kosovu Province presented ihe post-Tito leudenhip with its most serious crisis. At first the prutcitson unemployment among school graduates out then ihey look on nationalistic overtones. The rccimc rcsnunded quickly asd strongly to clashes between students and theimited form of martial law was declared aroundltc provincial Capital: additional security forces were sent io the province: and foreign journalist! were banned front tbi. B
Thvte measures have rcitorcd calm for the moment, but the political coloration of the demonstrations may heighten the hostility between the Albanian and Serb communities in Kosovo.Theurther worried ihat events in Koiovo could touchhain reaction among Yugoslavia sot her highly volatile nationalities, eventually upsetting the dtiieaic balance in Ihe collective leadership sy*t
Tbe Serbi, Serbian nationalism, always strong,more pronounced than usual forear.the Serbi chafe over tlTe concessionsgovernment has forced them to make toin Kosovo Province, part of theclaim they have been forced tofrom the proince bccauie of theof the local Albanian IcadenhipKosovooice in ihe Serbianhas none in the Kosovo provincialdiscontent was particularly apparentoutbursts of Albanian nationalism innd has probably been rekindled by
Serbs also have been active in maneuvering behind the scenes at the federal level. For example.erb.apparently has gotten theto agree that high-level military appointments will be made only on hii recommendation. Early lost year,
'M -It- the sibeeux it tne ulcer the fin'. Sabiin fTil'niSn luirlirrtif ud tha iuj>Soto tnd TwtiI IS9ij)
in Pet Capita CSP and GNP
tlrvanrtedelTorisby the backets ol Vladimirhe most promirseat C'ssai member of ihe party Presidium, to make him either the new tic President or lhe aes: President of Ihe Presidium.
Slovenianleet Jockeying Totower -Ji well under way among ihe regions durini the monthi of Tito'a fina'. illness. The most notableof bit feenutr inner circle to be hart by this nuncu. vering is bianclovene and aparty Presidium member tfM.
Oolancentral political role in Yugoslavia throughout the 'Ot. and many observers viewed him as Tito'a heir anna rent, His prominence, more than any
other factor, mayled other members of the collective leadership to curb an power and relegate him to whatess prominent position in the collective leadership. For caampiCj Cvijciiaerb, charged Doian- some of lhe shortcomings in the collective leadership
Continuini Slovenianiij- with federalnomieo has oaatribaled la demands that limits be plated on Slovenia's finnans! coniribusion to Vuiosl.ivia's underdevelepeil regions. Sloveniaduring Tito's last days lhal Kosovo alone be defined as an underdeveloped region and that the
individual constituent republiCi negotiateat.rstJncc programs directly with Kosovo rather than wiih ihe federal government. The unfortunate liming ofolitical heir* wereIO maintain -nil.ccabt on ttw premise that the S'wvenej -okId put rcgiorial intcrcau aiiOc. al kail in theperiod.
Sloveniachallenge was alio significant becausead heretoforeeading role In the nation',Slovcnei ire among Yugoslavia's moilbusiness me* and bankers and. more than an, other navanal.t. bave helped make lb* complci nofcti. cil system work. Historically, the push for change aad movai- ike federal poljtieal and tfsscomk lytlcm Hai come from Sluvcma.^ll)
lielthough they continue iooteniiol *emrec ofdiiiupilon. Croatiaor nationalists haveo- prcfik since Tito'i death and are notssing theirecent etehaagc of polemics tet-eea the Croatian Republic kadcrstap and the Catholic Church, however, ii symptomatic of thenetvouiness over latent Croausn nationaliam. -htch the regime charges i) be.ng encouraged by the Church hierarchy. The decision early Ihis yearnijn author fraruo Tudjman and other national-isu is farther evidence of this apprcl
The .urge of terrorist activity by numerous Croatian emigre grour- throughout the world thai the Yucuila. leadershipuld occur aflrteath failed lo itiaterialiac.he rwentiulierrcaTit t
conomy.ue of ho. Yugoilavia ihould resolve Its economic prooknti hatio political maneuvering, and two rival
Ihruugh nvai.rcs giving greater play lo marketnd it suppu'U wronger macroeeunoniieon ma king power at the federal rather than the republic level The group hat met coumerprc.iurcociPresidium mcmbcri Drogotavae andresiiti esange and fean reliance onceoonvniehe conte-vativeshe support af regtonalkalow* of th*lf;lutonom>of -orkcri and manager! -hoheir position, at riskreelrmfj
Butr how the econom, I. run nan man been nearly as damaging aaialvtis ia nolic. implcmenutien ihat regionalorenioromplained lait month that ihe governaeeompl.ih anything, although compromise is uiually reached during meetings of (ha Presidency: -'When the members go home (to the republics' nothing hanpeni and everything remains thehe senior member added that deeaiori made at the federal level are itifl ineffective bceaasc no one can farce eatcrpriie* an tbe republics toederal polky.
Following Tllo'i death, the regime alto encountered growing renkimeu among the inieUeetuali:
Theeading dittident. Milovan DjiUi. continue* to (riMcirc the Yugoslav systemattle
Sixty Slovene intcilcauak have petitiened thefor greater art..tie freedom,umber of republic! have petitioned for legal guarantees of free speech.
Appro.imalclyroats have rcoucticd amnesty for all political prisoner*.
At lean two group* ofintellectual' hue pcni'onrd the iiuihuriini roc pcrmittion to publish new luertiy macu/ino not subjectcnsoislii,
Mile-van Djilas present* the collectivea special problem. Hb wrilinaaong attacked IWt.iicm Tho dcvclefwd. but moreas been debunking aspects of the partisan effortng World War Il-pariieularly In his booh, 7Hm The Story From Inside. Because members of the collective leadership owe their legitimacy to their tics with Tito and to Ihe system he devised, they cannot permit
attacks toga unann.cred.dJJJ
Although the regime hinted recently that Dillst toot Irvirag upol agrecmcal to refrain from pete.-cal activitj, it probably will try tohowCo-a. Last year, when Djila* ran into trouble because of in article he wrote for ihe undetground journal The Clock, he was tried and fined. When he refused lopty the fine, the court shied away from imprisoning km and took deduction! from hn pension unit! the fiae >as paid There arc hm.u. hew-ever, to her. fur Dj.tai csa go. and thectpcateseriouslyjtlaV* actions/
Twenty of the signatories of the Slovenian petitieafor greater artistic freedom arc party membeei in good standing, and most of the rest ore prominent artists. This almost certainty worries the republic kadert"tp. which remembers that neighboring CroatianU plaveda rtt^xrok in1 out burn of nationalism in Croatia. The Slovene petition it (be !aicstro-tng list of ttudent and intellectual protests which, in addition lo those already menuored. have includedica byelgrade intellectuals for amnesty for all persons convicted of "verbal" political abuse,all by Croatian ltudcnti for an end te federal economic aidnderdeveloped regions of Yugoslavia, aad <ci tyVoaliaa criticism of politicalstrictn literary and other cultural activityn Zagreb last May (fjjB
Since Tito's death, debate has intensified within lie leadership over the degree to which dissent it to be tolerated. The pragmatic reformers have urged camin-ucd "differentiation" between kgltimatc criticism ind
iintircgime dissent thai threateni the socialistanagement system. The reformers. Including party Presidium mcmbeis Ha lark and Uolane. appear lo have tuccccdcd in moving Yugoslavia to-aid more open criiicisni. debate. and deeitionmakingn eye cat its relations wiih tbe West. Belgra-waatt to allow aa open cValoguc but to keepontrol. It aopeiaUacee pol.cy of dra-iag clear but relatively wide limits to the criticism it can tolerate will preclude the need for atrongcr measures.
Despite having to work wiihie an inherently cian-bcrscenc collet use system, lie new Yugoslavhas atana|cd well wiltkoat Til* The cttatiauicg Sov!et pretence in Afghanistan and the possibilityarsaw Pact intervemion inpcrce.Ved by Belgrade as potential threats to Yugoilavia'icontinue to help unify the new leadership. Nonetheless, there are tignt that this tranquility may be shorilived TSe economy it far from control, debate over etonomic issaes it aider, and political dittidcriec is likely te be moreroblem in the IvaOi than itc-.JJM
Aatterityand LWinn Stmniaedi.0tep in the right direction. Yugoslavia nil) muitrolonged period of economic autterity coupled wiih improvement in the system of sclf-marvagemcniia
to correct current economic trior !ccmir.gi
The draft plan foe IMIJ hnpiiet that the ne- fcteeris unified on the goals of slowing inflation tad further reducing the Current account deficit. These goals arc to be achieved by continued efforts to Bold the growth of do met tic demand below thai ofegale output in order to free rctourcci for ciport. The annual gre-wih of real gross fiied investment is canceled to drop sharply. to only IJ percent. The planlight increase ia pee capiti real personal incomes for the nationiih the emphasis on improving hvina standarcsin the poorer republics. Private consumption it targeted to grow by Jperccniercenl growth rate of Ihe last five ycariJj^B
6 6 1
Hete'.iJc'iurlsIP noi be limited tsi demand le.uiilniCfmWC.TheIradglSttstp In also Mflkllimpru-rcmcnt*.
Ubor reactivity, capon pruauwo. import
lion. -a. uf "lore of Ike .wsaJoic. in
ure rcittia4.se i rate pwiivs.estructuring uf investTur t* inouts still hi monitored by Ihe (Ml Over theOctal >' aB
A reordering ofmiiiti Maeccniuaic cflu-cney >lk hart of IkeTo help user-
eldingt*<ior* or the economy toward *ucharea* a* agriculture. energy, and raw-ill rirpend heavily on crcdiltraditional tool uf monetary ruliey.uxuirt ;irc to receive prefcrcoisslHO percent ul*them for.
nveumcni piam. At the tameplans to use other instrument, ofthat hitva been largely neglected in theplans, for eaamplc. la rush interest ratesRMfC realistichestep In Ibisfar has keen to raise rate, paidIn
financial iaolituliuna. forcing I
- . Fl
product (GbPi. industrial production, and farm output are less ambitious ihan the0he pi in. tnorcoser. did runoal for the inflation rate or ceiling, for increases in ratinesas done inye-rs. Miggcsting th* prevailing anecrtainiy in ihcse areas. Instead prise* arc to rite -mure slowly" than inwnh the TO percent of prices still subject lo control of the self, managing falurcst group* lefte determinedhe income policy culls merely for neumc* iu increase -nil enterprise netntuoificd b> differed..ilpr.nluci.vii. growth and the nerd io fwrsteel the lixngdjrelio/lo-rviio"
measures are alio plained to helppuih invest-menl into ike right channels Impott taxes -ill be reduced and lit eavmptioai increased for enter prises in Ihe priority sector* Belgrade ulso hope* lhal the freeing of same pvces from federal wired and the raiting of Other administered price, -ill (aelp rtrtarnotc more efficient investment.
Cconomle Pulley In the lYea/ Term. Before the policies oflan can bceapccied to have substantial results, however.uccessors will have toirTieu'l transition marked by high Inflation, con-turner grumbling, and poiiuca' conieniion ewer
Bclgride'i short-term strategyreflected inttermposed0 and stresses Improve men la in lhe key agricultural und energy sectors.1 plan alsoore realistic vie- of YugoslaviaGoals for gross
The new leadership,tins been prompted to lake additional steps againsi inflotion in responseontinuously surgingcost-of-living index roser'Ccni in the firstmonths of thisaew sclf-osaoagcmeat agreemeni on fasces -as signed in earlyihree man:hi after the previous price contcol legislation had ctpired The new pricing measures establish ibe broad outline for pricing policy,O-tsercent target for 'he con-of-living increase this year.hort-term e- urgency measure, ihe new agreement reasserts fc'.-tal priear key it ens* such at Tood. energy, and some sendees. In additson. self-ntaaa JSt* (Wee bodies are so res^ew allea since it: beginmrg of the year and can authorise price tollesacaa forthat are inconsistent wlih the new agreement. The ami-inflationary drive was buttressed al lhe end of lhe month uiih new credit icstiictions. Belgrade hailed
rcdila -. rca-rd the mini mum- mocm
required ua jll other rt.rm not aubjcctthe bun -iih.esccptluiiol children >clothing andf-of aJ0
Despite the recent Hurry of aciiviiy. ihe spceifici of prlee policyio be hammered out over the nest few month, by federal and republic authorities jnd by theseU-managing price bodies,hec,o be rmnlcntemed Ihruagh wlf-man-agemcntH is Htbfcet to thepitfall* that confront -ehA major .ivmblmjalocfc inutbe. t. tnef federalollowing tne recentalien ofelgrade may be reluctant in the near future io rcccntraliic power over pricing
On the poiiilve .idc.oreign borruwing situation look* encouraging. Although it* officialplan* ,ii urujcciccd. il. need, should behis year because the correal account deficitprofccied to beBelgrade ha* alreadr eonriuded loanWot Get man, and an Arab consortium, and negotiations areoan fromore importantly. theecent award1 billion loan to Yugoslavia (covering threeill reduce Belgrade* borrowing requirement and increase the confidence of foreign lender*ther-I* nilght beo Yugotlai
Belgrade! borrowing cutback could itill go awry .Iiould tbe new -aderibip fait to Kold the line or. the trade defew Atirmpt* to bold down real import growth mayncompatible with Ibe protected growth in GSP. And another OPEC priceould alio uti.fl thii year's import target.dc oil bill ii currently running close toercent ofthe value of total imports. Belgrade tnuil alio worry about the effect of accelerating Inflationtaiu. Rising domcitlc prieet aid'bound to make the domesticmore attractive iuproducersand.nl the same lime, encourage imports. The benefit* resulting from the June dotation couldanish uuickly. nrornpti-ig Belgrade to devalue the dinar again this year. Real capons have already decreased by nearlyercera during Ihe rirtt two months of the year. In an effort to siimulaieeiporit. supplementary credit* foe exports have been grunted for the remainder of (fit. and
prupoial* have beeo introduced forimport*
Despite the improvement* made in the external sevtueO. Ur(grade still has much to do to restore some btilnnce to ihe internal economy. Curbing ihe growth of domestic demand -hile siimulailnglligh order ofion and compromise among leaders who reprcient differentcrcit. and who only recoail* endedwer the broad Oct line* ol* future policy. i" addition, the federal authorities maya rcceniraliae warrtc of the power needed tocicculc sou ad policy afier years of gradual erosion of Iheir power thraughdcecniraliaa-lion of decisionmaking to the republicsove i* likely to encounter stiff opnotitIan not only from rc-glonul authorities but alto from bureaucrats andwhoetted intcrctt In preserving Ihe present system. To date, the only significant change made in theconomyome dteonirolc-.gjlj
Belgrade must also -orry aboul how -orken -ill reactrolonged period of alow cvcaamie growth. Spot shortage* of consumer good*arther decline in real mcomci are distinct poiiibilitict again this sear.
the Yugoilav itucc'imp appear* continent mat it win
Poland Alihougb not legal, strikra have been tolerated foe )csrt. and most grievance! are scllled in favor of theAhstoughan impc'feei' doe* give theeone of Participation in dee .laumjt.ij. The leadership has shown illto potential worker diiconttnt bv enhancing the trade unions' tm-se as protector of workers'tepping up visits to factories, and co-opting the lop labor leader Into the Ceniral Committee. It has also assured the public that real incomei. which droppedercent last year, would nol be allowed to atopJP
Con/liei Within Ik*Arguments, within the leadership ever idcopolitkal aad economic it* act have been kept ta cheek although the opposing pon-
Economics of lhe Tiio Cm
tome of Yugosl avij's current economicresult from forces beyond Belgrade'siI tin riling world price) and sluggiih demand inlor Yugoslavof domestic or
- v.b'.urn dc.elppn Kill strait
Slow jnd often madccioatc acup.ai.on of policies la changing economic
Institutional r- largely aisue aleC with lhe unique features of the self-managed Yugoslavundj reform* introducedTito inMMt
The niujor gcul of economic policy In the Tho eraeconomic growth. Politicalvc impcluipolicies aimed at minimizingimproving living standards, narrowingcnuali. and promoting drvclctprncni of theof lhe country. During Tito's Wat decodeYugoslav i .
Crcai social prodiict rose byear writhi wing Interrupted only twice,nd againxcessdemand ariiing U'gcly frum buoyant investment fueled by expansionary monetary policy and rapid advances in wage and iht prices of goods that Yugoslavia must .mporl generated rapid inflation as consumer prices roic by-an average ofear during the scvcnttiigflp|
On tbe catena! side, poor export performancetd wilh surging imports to widen the forcim trade deficit. Some cnogersou) shocks contributed lo the growingMontenegro earthquake1 and the: various OPEC oil peiee boosts arcthough Yiigoslavsa'fared better than many nations afteril price jump Moreover, capott perfurmnnc* was hindered by sluggish economic growth in the West and increasing Western tradein theaffected commoditiesignificant portion af Yugoslav capons.
Belgrade'* rapid growth pottcy. hoi sever, mustmuch of lhe blame for the poor (iitclgn traden ihe taller half of Ihe decade. Strung domestic demand festered strong import demand, particularly (or rawnd semicd goods. Shainly rising densestic price* also provided YugsHlai enterprises wilh attractiveuelling gosisli from the etport market. Indeed,r the years Jui cuenliallydullcd ineen-urcs loajor etpurt scetor^HB
Rising receipts from tourism und from funds ient home by Yugoslav workers abroad provided some cushion againsi lhe worsening trade deficit, but substantial recourse tvui made to foreign borrowing io finance tupid growth. Increased liquidity in internationalmarkets meant thai Yugoslavia had reasonably easy access to fundi Asa result. Yugoslavia's convert.urrcnc) debt increased almost sevenfoldibe decade of (be IVfCs.6 billion at the end9J bilhon at tbe endj)
Slop-Co Adjastm.ar Policy
Oeipite chronic economic overevidenced by accelerating inflation in thewas slow to introduce stabillcation measures. Th*responded only when cxic.iial financial Imbal* anCes becamerc. slamming on lhe brakeshen foreign borrowingnot sufficient to cover current aeeouni deficits and when Yugoslavia's Internationalmi wereown to uncomfortably low levelsh prodding by Ihe party apparatu* and Tito. Belgrade tightened importimposed credit controls, and froie prWit. These restraints rcdus-cdrcal growth abruptly and alto slowed inf.nt.on Belgrade a'so devalued lhe dinarduring the decade,1 and lata 9la. in Older to help reduce trade deficits. At soon at the balance of payincBU improved, however. Belgraderapid growth policies. Inflation would thenroding the bencf is of tht devi
brief period, of restraint rcilurcd bunkers' faith in Yugealavm'.crcdilwurtliilteha.und lending uclitlli revised, llui reliance ontop-go approach did not permit resolution of ihe fundamental problem, lomnbuting kidurncttk ,ind external in that mice. Moreover, the siop-coisrupting production and causing (be boillcn.it. mat inevitably accompany sudden shifts in polk, ffgt
Inttliuilont Ireprde Adjust meM The decide oferiod of tioaail charge at *Hio continued kaa effort, tooliiieal ard economicat -ould survive him. He honed to lay the founds tlont for anwccci-.ior androvide solutions to economic and political rrobknn b> farther adaptaiiont of Yugot'a'ia's unique form of worker i tgemc ni and market socialism. In the economic sphere, thit led lo further decent rati ration andransfer of policy nial authority from the federation to the republics
Monetarymum instrument lei'tisuffer* front in.iitui.oit.ilftenaenceeveloped eaplial market and the problem of regional barrier, io capital mobility, the central bank ha.ajor role in the selective allosuiion of credit, to various sector* of the ccunueny. The central Uink establishes selective credit commitmeali on an annual basis for priori..
ICClC-^jndrwpeae. Uul once OKimilted. II ho.
proven diffieuli for the bank to cut back onathe larger coal of restricting aggregate deasaad Therefore, the central bank hat frequently found U. hand. lied,autar> rail; hashepr cm on prienfrom betand demand farces. Quarterly credit ceiliogt remain the main tool of monetary putky. Theabeen reluctant io an reservend there has been considerable opposition to raising interest rates, which are contidcrably below the inflation rate.
compounded longuunding tseakneuet in nucrocconomic polky loc"t. making it difficult for Yugoslav policymakers lo implement effective adjustment programs.OCK for fiscal Pstricy. few ciamptc. ha. been coauiderably reduced becaute moat fiscal power has beca ira inferred from the federation to the republics aad tone public sector bodie. at the fecal level. Federal budget capcrtdilures, for etampte. no- account for only tsne-fifih of total puWiC-sector speeding. The federation mutt obtain republic content to changes in ia.ime-consuming procets. Fiscal policy it therefore^ an effective countercyclical tool in Yugoi ffjt-
The capacity of ihe authoritici toeomrol and influence Itrieetand incomes is limited by certain featuret ofthe Yugoslav economic system.orker-managed economy the tendency oT worker* to direct firms* net income to-ard wages rather than retained earnings is reinforced by the wi'lingncU of banks- -ownedarge snare of investment (banks financedercent of fiacd .nvesi.nem% RHiaeeeon cost tnark-ap pricinglimaie of buoyant demand has led management ta rati* prices even fatter than the rapidly irstreasiag labor coats. The interplay of these factors hastrong wage-puth clement to inflationary force* fl^ftj
A no less-orriiorne problem lies in the area ofpolicy. The ciiahtiihmcntake balance-of.pay men Is projectionsrepublic hai further fragmented theaiong regional hnci and hindered thecapiutl for foreign cathanac. Tbe.eby attem.iti to force leidtvidoalwell as groups of eater or.seaiven sector,the value of |oodt that they import to the valueforeign ciehangelthough theretains important pov-eri os-er trad*exchange policy, the new system impedesof national polky. inhibitson foreign trade, and fostershard
Trylng Tooordinated Policy To cope withration, central authorities have relied on an array of Inilitwtionalamong republics (at well at among gc-ernment orgamxatons. entt'pritet. and trade unions! onpofy maucrt is aceomp.it bed ia "social eorn-Thcac arc used ia combination with
, toiaei-is iiaiuui-uiiul
iii.inuttciiicnthich legally bind ihe "cni'lofio (governmentnterprises, imiii:;ir'ii iu lake certain measures in order lo achieve economic policy ubjceiiv
ompntis require lengthy negotiationse kpceiric pulley measure* were often not parithe cunipucit. republict enjoydiscretion, resultlnj infolehwork of measure* differing from republic iumni decision* hevebeen rawly coordinated, ande (instilment hi* occurrednjgenieni agrecascnti ibcmccn entt-fia the unt branch) arc asedof efficiency criteria in allocating investment some iclf-niaiastnieni agreements ma> indeed have led to monopolisation of certainlone product lino and vntnin individual republic
the basic problems impeding rational investment dc< ciuont. however, continuee the luckeieloped cjpilul murhrl. the reliance cn bank cicdili ioigh proportion of investment, and itegaltve reil internscenbvoaiioet of central bank con:roll and agreement, among bank* and cntcrpriacs hat kept iaicrctt ralesiboac thai would reuli from the iaicr action of marketf tending taici are too low. worhcr-maaaied coterpeitea lend not lo taw and instead scramble for bank credits- low intcreii rates also discourage laving by workers, widening thebetween savings and investment in the economy. useocial compacts for setting prices has allowed
efforts to curb the inflationary wage-price spiral
tile unions (o* ihe iiuiimnim or ireotle patio objeiiivo. ifore partsu .'all la mtei Itr't
i abliinunxiheeihcrauniotv raeovtupniilOriginal document.