Created: 4/13/1967

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The Yugoslav Experiment


Conconed in by (he UNITED STATES INTELLIGENCE BOARD A* indicated overleaf7


Ifie fof'ow'na. inteMigeDce orgonizotions corircvpcfed J'i fi'ieof (hi; estimate;

Iho Cenrro) I'liclltgerice Agency ond Ihc intelligence otgo'i'i^'iomonli ol Stoic- ond Defense, ond ihc NSA

Con cueing'

Vic* Adm. Rw'w* I. Taylor. Oepuly Director ol Cerlral Inv^sirc* Mr. Thomas s. Hughes, the Director ol Intelligence and Research. Oepartment ol Stale

Moj. Gen. Rooiirl R.or ihe Oiredor. Delense Inktlligc-ncc Agency li Gen. Marshall S. Carter, ihc Direclor, Noiionol Soc-nt, Agency


Dr. Charles H. Rcichordt, lor lhe Assistant Genera!Alomit Energy Cam. mission ond rWr. William O. Cregnr, lor ihc Avv'uqpi Dnec'Or, Fud^rol Bureau cf trrveiKgorion. the subject being< theirl>ori.













mis document has been approved for release through the HISTORICAL REVIEW PROGRAM of the central Intelligence Agency.







ommunist slate in name and in theory,practice itully independent .state which has rejected most"socialist" experience' of other Communist states, includingIl has deliberatelyarge portion of ilsdirect centralized controls, and despite its retention of apolitical system, it has largely freed its people from

Yugoslav experiment appears to be progressingSince the break with Stalin nearlyears ago, thcmanaged toiable and independent economy, to godistanoe down thc road to decentralization and thcof public institutions, and toosition in worldmore significant than their power and resourcesto warrant. Although the trend toward furtherprobably irreversible, progress willmooth, and changewill continue to be accompanied by dissension overand role of party and government, over theand over the speed with which market forces will beinto the economy.

greatest problem thc Yugoslav Communist Party isface Is arranging an orderly succession to theear-oldthe succession problem ariseeriod of severestress and before current reforms have becomeserious struggle might ensue. Thereemote chance thatstruggle could threaten the cohesiveness of the Federation,believe it far more likely that the state would surviveonce Tito's changes in party and state structurewidely accepted, wcelatively unitedavoid serious crisis andeplacement or. moreon some form of collective leadership.





ugoslavia under Tito is an unusual laboratory of stain craft. It is aof six constituenthose people, after centuries of foreignand repeated upheaval, are divided by differences In religion, nationality, language, poliiical experience, and economic development.ommunist state in name and in theory, but In practice itully independent country wliich lias rejected most of the "socialist" experience of other states, including thc USSR, and which is deliberately removing its economy from centralized conlrols and freeing ils people from arbitrary authority. Moreover, despite pretensionsrand design,tate whose political, pconotnic, and foreign policies have for nearlyean reflected mainly improvisation and compromise.

So fnr, despite anomaly and weakness, the Yugoslav experiment has been relatively successful There have been occasional disruptions, such as thelast summer of Tito's heir apparent. Afeksandar Rankovic. but oser the years internal divisive forces have been balanced againsi each Other. Thewith massive aid from the West, has shed some of the more cumbersome bits of Marxist theory, weathered recurrent crises, and expanded at an impressive rate And the state, despite the threats and blandishments of opposing power blocs, has retained Us sovereignty and achieved an influence in world affairs out of proportion to its power and prosperity.

Tho Yugoslav Federation was established as World War II drewlose, and the new stale was ruled absolutely by Tito as the headisciplined Communist Party.owever. Tito's defiance led lo the expulsion of Yugoslavia from the Soviet Bloc. Bereft of the stability provided by Soviet backing and hostile to most forms of Stalinist-Soviet experience, Yugoslavia's Communists began to seek new ways to win popular acceptance and to stimulate economic growth. They announced lhat Yugoslavia would embark on aroad tone which would relax the harsher aspects ofrule and eventually assure Ihe withering away of the state through the gradual diffusion of central power to local and regional governments and thc constructionaguely-defined "socialist market economy."

A. This separate road to socialism hasocky one. Despite Tito's many and clever Improvisations, serious internal discords persbt, and Yugoslavia'sIn the international arena remains equivocal. lie gave reinroad range of political and economic forces, hoping thus to engage tbc support of thc population and confident that Ihe ultimate powerervasive Communist Party could unite disparate interests or, in lime of need, trim pose totalitarian directum But he did not reckon with the erosive effect of decentralization or

' Croatia. Slovenia. Serbia.onleiscpjxi. and Maeedooii.


tlic paily itself Now, nearlyean after lhe Yugoslav experiment began, thc party is In disarray, its members displayics divided lielweon lederal and local Interests, and its effectiveness as an Insliument of central power and unity is in question.

interna] dissensions can be grouped into several categories.conflict between those who favor greater political liberalism and thosethat the dncentrahzation of political institutioris has already gonethere is dispute between exponentseotrally-cootrolled economywould foster localnitiative and the profit rnotive; thereover the role the Yugoslav (Communist Party (LCY) sliouldpolitical and economic decision-making, there is tension between olderall veterans of Yugoslavia^ partisan campaign against the Axis,men unburdened by theies of comradeship andideology; and underlying all, there is thc clash of national andand thc division of opinion on whether Yugoslavia isentralized federation ol intenlependent republicsooserwhich gives preeminence to the demands of the Republics


It It an immutable fact of Yugoslav political life that most Serbs and Croats and Slovenes and Macedonian* think of themselves first as Serbs or Croats or Slovenes ot Macedonians and second, if at all, as Yugoslavs. National and ethnic rivables are endemic; they have longentrifugal force which no liaisons for thc solution of economic or political tasks can long overcome. Fearsctum to "greater Serb" hegemony haunt all Yugoslavs except Serbs; some Croats and Slovenes speak earnestlyomplete secession which nogovernment could tolerate, and less drastic attacks on tbe federal concept come from all regions.

The Communis! regime wai relatistly successful in submerging partleularist agitation in the years following World War II. It not only held tight rein on all forms of activity, and could exercise its tonsidcrablc police powers without restraint, but it could also counl on fresh memories of war and the Cerman occupation to helpeeling of national unity.8 and thc break wllh the USSR, thc regime could rely on common concern over the Soviet threat to perpetuate this unity. In recent years, however, arbitrary iiollce authority lias been curbed, thc memory of war and wartime atrocity has faded, and the spectre of Soviet intervention has all but disappeared. At the same time, thc progressive devolution of economic and political responsibility from federal to local and Republic bodies has encouraged those who would replace the federal systemoose confederation of more or less autonomous Republics. Even Yugoslavia's growing foreign trade and the great disparities of wealth between various regions have lent weight to thc arguments of Croatian and Slovenian particular 1sti; both Republics, for example, have asked authority from Belgrade to establish quaslofllcial missions iu Western Euiope, and both have long de-


cried llie notion that ihey mint subsidise die economic uplift ol the more back-ward Republics.

ilo hat met the problems of recrnerging particulariration In typical fashion. Iry limited concession and compromise. Much recent sound and fury on Iheroblem stemmed from non-Serb fears lhat Ilankovic, given as he was to packing party organs and the police with his fellow Serbs, might someday bringeturn of Serb hegemony. His purge probably did much to allay such feaii. and Tito, in his post-Ilankovic reorganisation of the parly, was careful to afford tbeore balanced representation in lop parly organs. Inhe Federal Assembly'sol Nationalities met for the first time in manyindication, perhaps, of tlse grossing seriousness of the iialtonalitiesheard proposabonstitutional amendment which would grant it equal lights with Ihe Federal Council, now the most powerful parliamentary body. Tilo may consider tliat by upgrading the Cliambcr of Nationalities he canafe and controllable foium for the expression of parlicularist sentiment.

9 Tilo has abo introduced Urge numbers of younger men into lhc party and governmental organs of the individual Republics, lie may thus hope to contributeeakening of the particularist idea- Though the sentiments on which (hey feed are widespread and of longstanding, the extremist segments of themovement remain relatively smalltheir veryYounger men of the establishment, bred in an independent Yugoslavia, ate likely to believe that the economic and poliiical valuesnified federation outweigh the emotional appeal of secession. So far, this stratagem appears to be working. Many of thc newer men, even some of those who were once outspoken in their advocacy of greater regional autonomy, have developed vested interests in the status quo and have become defenders of tbe federal concept now that they bear heavier administrative responsibility in the upper councils of party andorganisations. Many will continue to exploit the emotional appeal of particularism in dealing with their public supporters, but most are likely tothe issue in trieii approach to the solution of national problems.

e do not believe that Tito anticipates any real solution to lhe problem posed by particularism. On the basis of his past periorrnance. he can be expected to seek measures which will permit these pressures to ventontrollable manner. He may well allow individual Republics increased autonomy in the conduct of their economic affairs, but he will pioliahly employ his full strength in putting down acts which lendeighten regional political, cultural, and linguistic disputes The Issue of ethnic animosity, hoss'es'cr, will continue to plague Tito, and it couldignificant hazardess certain, less prestigious successor. The enaotranal content of this question almost certainly means thai it willotentially explosive issue for some years to come, one susceptible to exploitation by ambitious politicians. Or the peopleif dissatisfied and frustrated, could come to see in the federal structure the cause of their own disoontants. On balance, however, wclow


'miation of pniiicularivl .sticugih and 'lie gradual invlgoi.ilion of lhcidea, particularly iimung ihnse whose livelihoods and sensibilities would suffer from thc collapse of thc uniGcd state.


Local governments in Yugoslavia have been granted relatively heavy responsibility foi supervising economic and cultural activities within their own territories, and popular participation in local decisions on tbe implementation of policy has been actively encouraged- Only the broadest policy direction normally comes Irom the central government, and Tito has clearly relied on widespread application of thc principle of interlocking directorates to provide the central government, or at least Ihe party, with pervasive control.

The devolution o( power to local authorities has led to widespread and vociferous debate on such significant public issues as Ihe proper structure ol the Federal Government, Federal-Republic relations, and the role and structure of the party. Over the years. Titoesponded to this debate wiih revisions and reforms designed to satisfy at least some of the people some of the time. Since its adoptionor example, the Yugoslav constitution has twice beenThc most recent) instituted changes designed to check executive power: itourt lo review the constitutionaliry of Federal and Republic legislation; il gianted Republic and local governments enhanced powers and broadened responsibilities; and it established the primacy of Federal and Republic assemblies over their respective executives. Legislators have been slow to exercise their new powers, but in Slovenia, the Assembly's unwillingness to go alongovernment-sponsored bill brought about the temporary resignation of thc Cabinetnd thc Federal Assembly demonstrated its independence the same year by sending lhe federal economic plan back to thc executive for revisionimes.

Another consequence ol the diffusion of governmental power from Del-grade to the Republics and to local governmental units hasatalle! diffusion of power within tbe Communist Party, from central organs to regional ones. Local parly leaders have not always followed central party directives; they have frequently found themselves torn between Ihe demands of party discipline and the imperatives of local policy decisions. The result has more often than not been detrimental to the party: factionalism has grown and has often reflected particularist divisions; unions, workers' councils, local party groups, enterprise manageis' associations, and the like have become new loci of power, and contention and debate have become chronic All this has been particularly troublesomeystem which was designed to depend so heavilynified and disciplinedpersonnel and organizational lines into all other groups andprovide the centralized authority afforded by no other means.

Tito recognizes that the glue has been melting out of Yugoslav society, nnd it is clearly his hope that the party can be revitalized and remade into tho


pervasive tool of national policy it was intended to lie. But Tito has long felt that (lie party should not function simplyoercive instrument which blindly obeys orders from Belgrade and crudely enforces the central will. He wishes the party somehow toodel social force, inspiring andational consensus, and thc confusions and uncertainties attending the party's statements and actions can probably in large measure be attributed to Tito's dream.

The reform of the parlyase inng overdue,to Tito himself, the new measures represent compromise, go only pait svayeal restructuring and restafling of (he party, and do not seem to have any certain and tangible objective. Nevertheless, they doeal effort to cope with major problems andetermined response to thc situation precipitated by tlie fall of Rankovic. As the most influential conservativeRankovic had marshalled forces to obstruct Yugoslavia's movement toward decentralization and political liberalism, and in doing so had played upon Serbian nationalism and had accumulated state power (including control of thc secret police)angerous degree.

Tito's subsequent reaction was not so much against conservatism per se as against particularism, factionalism, and extremism of any variety. In Order to restore political balance and restrain thc conservatives without giving undue power to their liberal opponents, Tiloeries of measures designed to dilute conservative power with newer, younger men; to lessen the powers of individuals in leading party organs by expanding membership; to minimize factionalism by separatingnd policy functions in the party leadership; and to broaden the number of party members participating in the government by requiring that elected officials be limitedingle term. As yet, these changes have been only partially implemented; the completion of the party and government reforms awaits new elections in7 and the convocationarty Congress sometime

In the meantime, however. Tito has successfullyumber of party organs to achieve his aims. He has reduced the influenceumber of the most powerful conservatives by assigning themman Presidium which is limited to policy guidance. He has specified that the revived Centralmust deliberate in public view, eliminating the secrecy which had aided Rankovic in his accumulation of power. He has reconstituted the formerly all-powerful Executive Committee with younger, less prominent men charged with implementing the Presidium's decisions. Finally, he has packed party leadership organs on both Federal and Republic levels with new faces: new men in the party leadership now outnumber tlie oldond (hc average age has dropped by some six years.

umber of these changes appear to be aimed primarily at curbing conservative power, Tito has been careful not to destroy it. Almost all (he old partisans have been retained in important party positions. Very few of Ran-kovic's followers were purged, and Rankovic himself was not subjected toprosecution, although the evidence againstmisuse of thc secret



police to eavesdrop In tlic office* of prominent leaders, allegedly including Titocertainly sufficiently damning. At about thc same time, liberal leader Milovan Djilas was released from prison, perhapsounter to Ran-kovic's escape from prosecution.

Tito's admittedly provisional overhaul of the party has encourageddebate on the proper role of the party within Yugoslav government and society. Is the party to exercise command and control or merely ideological guidance? Tito's position is ambivalent. He exhorts the patty to lead byrather than command, but makes it unmistakably clear that the party's role "is growing and will increaseonge has reduced the power of the secret police by greatly restricting ils activities and cutting back itsand lie has expanded the rosters of leadership organs so that II willittle more difficult for an individual to stand outt the same time, he has insisted that thc "party will not witherhat it Lsevolutionary parry" and that it has "the right lo apply all means necessary to protect the society, to protect the correct lineocialist development."

If Tito has achieved no settlement of the several controversies his party reform addresses, he nonetheless seems to be on the way to constructing an uneasy consensus on tlic side of continuing thc movement toward "democratization" and decentralization. The regime will seek lo nominate and elect only supporters of the present course and leadership during thc forthcoming elections toand Federal Assemblies, and from these it will try to select reliable and moderate men lor Republic and Federal Cabinet positions. Executive decisions will probably more and more fall to men capable of focusing on issues rather than personalities. Over the next year or so,ajor upheaval andodicum of policy success, these newer men will probably take bold, and neither an ultraliberal Djilas nor an archconseivative Rankovic will then be likely toallying point for dissident forces.


ugoslavia began its lonely journey down the path of economicsomeears ago. Since then, government economic policy has been to allow some considerable play ol market lorces, though government controls have never been luily relinquished and have been tightened in time of stress. The net result hasespectable growth rate of about seven percent annually in gross national product, excessive and frequently unwise investment in industrial expansion, some growth in consumption,hronic deficit in the nation's balance ofver the years, Western lenders have been forthcoming, and Yugoslav indebtedness to the West now amounts to2 billion, Thc recent devaluation of thc dinar and moves to facilitate the influx of foreign capital are likely to impress potential foreign investors favorably. At the same time. Yugoslavia has managed to keep her economy

or example. VurosUvH's hiUivv of payments deficitC million.5ew contrail cut thr annual deficit toillion.



free from reliance on llie Bloc, and although die USSH is Yugoslavia's single largest trade partner, two-thirds ol her foreign trade Is with Western or non-aligned nations.

Thc most recent swing of Yugoslav economic policy begannd like its predecessors, it has not been implemented without opposition. Political conservatives arc undoubtedly concerned at any further decentralization, any lessening of Ihc party's role in the decision-making process. Managers of less efficient enterprises are unhappy at thc prospect of forgoing state protectionism and facing the harsh winds of foreign competition. Trade unions anduch enterprises have similar fears, and cannot relish thc prospect ofshould their inefficient organizations fail and go out of business,umber already have. Consumers, who may some day benefit the most from movemeniarket economy, in Ihe meantime suffer from shortages of goods and rising prices, ln point of fact, the Yugoslav economy is unstable and probably will remain so unless the market forces now being brought into play come toegulatory mechanism reliable enough to replace the centralized direction which in the past characterized Yugoslav' economic control.

In thc face of such problems, Tito hasypical scries of policy compromises. He has strengthened the financial resourcesumber of enterprises by cutting tbeirby permitting them toajor portion of their profits for investment, and by largely localizing the control of credit. Al lhe same time, he has threatened the lash of foreign competition byimport controls on fully lialf the goods Yugoslavia imports and by bringing Yugoslavia into full membership in GAIT. He has not obstructed freerof capital investment and labor to needy sectors of the economy, but hc is maintaining Federal controlajor portion of the price structure andoercent of investment capital. He has permitted labor to organizethe direct control of the party, toignificant role in enterprise management, and to gain inflationary svagc increases. (Theretrikes, mostly on wage issues,5c has tried to meet thc challenge of growing unemployment by encouraging the exportation oflabor, and he has maintained extensive although indirect centrol on consumer consumption.

Despite the ambiguities of Yugoslav economic policy, Ihe trend istoward Increased decentralization and industrialhe process is now probably irreversible. Major control of investment capital,n the hands of the Federal Government, is now vested in local and regional banks; individual enteqmse managers nowegree ofin the disposal of profits (up tond local governments, down to the level of the OpMrntJave demonstrated great skill in ignoring economic directives from on high In order to pursue local goals.

Nevertheless, continuing danger of inflation and fear of instability will probably persuade Tito to retain remaining central economic levers for some

i '


linn; after their purely economic justificationn addition,and inconsistent employment of these leveis, the ineilia and resistance o( bureaucrats charged with implementing the reform, and continuingon thc local level svill probably delay achievement of the 'socialist market economy'* which appears to be the long-range goal ol the Yugoslav economic experiment.


2G. Simply slated. Tito's main foreign policy goals have been to retain Yugo-slave independence at any cost, to standodel of nonaligned socialist enterprise in the eyes of the world, and to achieve access to economicin both East and West. His methods for achieving dicsc goab, marked by clever improvisation and shrewd compromise, have been largely successful, lie has rejected alliance with either East or West and gotten substantial aid from both. He has denied Soviet hegemony in the Socialist movement and lived to sec that denial become somethingouchstone of Socialist policy. He has accepted Financial aid from the West in wholesale quantities, but has politely bid the West goodnight on thc doorstep. He has failed in his efforts to establish the "third world" grouping he once sought, but he has redirected Yugoslav diplomatic energies to Europe, and this has brought him newwithout destroying his close relationships with thc UAR and India.

Tito made his peace with the Soviet Union soon after Stalin's death. Trade is large, the Soviets haveair amount of aid (including sales of militarynd attitudes toward many international problems are similar, though usually not identical. Nevertheless, party relations are often strained and marked by ideological bickering. Tito has never ceased to see himselfrotestant perhaps, but still defender of the faith. In his view, it was Soviet recusancy, not Yugoslav, which split thc Socialist movement, and Tito must feci some considerable sense of vindication in the fact that other Eastern European nations are now applying lessons learned from the Yugoslav economic experiment and are choosing national roads to socialism. So long as thc Yugoslav experiment continues to stimulate emulation within the socialist camp, the Soviet Union will carp and nag; so long as Soviet attacks continue to arouse Yugoslav fears for their independence from foreign meddling, Soviet-Yugoslav relations svill be muchatter ol mutual convenience than affection.

Yugoslav relations with the US, while generally friendly, have been markedeasure of restraint and wariness on both sides. Thewhich led Tito to seek US aid after the break with the USSR8

' In addition to price controls and oontroleclining share of Yugoslavia's investment capital, the Federal Government can maneuver the economy through limitations on enterprise wage bills and command ol foreign trade, as well at through more indirect fiscal and monetary policies.


remains llw touchstone of (lie Yugoslav attitude The hostility whicli Yugoslav exile* in Hmi US lx*ai toward thc Belgrade government ivotential source of friction, especially when it is periodically lefteeted in US legislation. But ihe Yugoslavs ircognizc the useful orisoniinumg measure of US political and economic support, and they do not allow themselves to be easily provoked Nevertheless, on most of those issues which clearly polarize the world, live Yugoslavs will not forget their Communist antecedents and will pay ai least lip-service to Communist position*.

Yugoslavia has been more actively seeking improvements in relations with its immediate neighbors in both East and West Europe Partly this is because of tlse opportunity presented by relaxed tensions in Europe; partly it is designed asdefensive hedge against any future Soviet attempts al domination.with Hungary and Bulgaria (despite friction svlth the latter over Macedonia) have significantly improved as Budapest and Sofia have begun to display signs of Independence within the Bloc. Even more improvement has occurred in relations with Rumania; Belgrade and Bucharest have foundground in their resistance to Soviet pressures and are nowe facto alliance inl.ndnd to strengthen and preserve their independence. Notwith China, partly out of lear ofits hostility toward Tito, but is taking steps toward some economic cooperation. Yugoslav relations with Crccce. though complicated by longstanding miriorlties problems, are not likely lo be trouWesome

Yugoslavia enjoys good relations with all major Western Powers except West Cermany. and even here, action by the Kiesinger government to restrain Yugoslav expatriates could bringapid improvement. Belgrade has already expressed interest in resuming normal diplomatic relations. Yugoslavia acceded last year to full membership inove svhich will permit Tilo to commit an even greater share of Yugoslav foreign trade to the lucrative Western market. Yugoslavia will continue to depend heavily on Western machinery and equipment in her drive toward fuller industrialization, and as Western economics move toward greater interdependence, tlie Yugoslav economy will probahly become enmeshed in thc same process.

Over thc long tun, the nonaligned and less developed nations willafford tbeucrative and growinghough itself underdeveloped liy Wostcin European standards, Yugoslavia is an advanced nation in "third world" terms, and its competitive position has been enhanced by its success in navigating between blocs and inocialirt semi-market economy. It is probable that Tito will expend the diplomatic energy and exlend the financial credits necessary to solidify hu relations as broadly as possible with tlie nonaligned

' Dxclnf tbe tinmouu of3 percent oforeign Dade wai wilt Communis) countiWi.ercent waa witb Western0 percent was wtth the US. endierrefU wai withnlbom



national pj'n.i.avior, aod political entrepreneur. Tilo isForuarterentury, he has stoodymbolunity and as Yugoslavia's supreme arbiter. Arranging an orderlyto his office- is tho greatest problem the YugoslavTitoThough Tito is not blind to Ihe problem his departure willis one area of potential dissension in which hu genius forimprovisation cannot be brought fully to bear. It is possible for aarrange for his own funeral, but it is difficult for him toeryin K.

number of factors favor an orderly succession: though stillYugoslav systemhole has withstood the attacks of partystresses of economic crisis, and thc importunities of separatists. Thcto provide support for national unity, and fear of Soviet piracylo inhibit the adventuresome who might be tempted to steer afollowing the dropping of thc pilot. While Tito cannot lay outuccessor regime to follow, he may haveatterna reliance on rise empiric and the eiprrimenial.uccessorwant to imitate and which, in any case, he svould find difficultMuch will depend, however. on when tho succession takesit occur before Tito has accomplished the pending reorganizationstate and party structures,ime of severe economic regression, ortime when dissension among thc Republics is high, serious struggleThe outcome oftruggle is difficult to foresee. Itoncatenation of such unfavorable events could endangerof the Federation. But we believe it far mote likely that tliesurvive intact On the other hand, should the succession issue arisereforms have become institutionalelatively united leadershipserious crisis,eplacement or. more likely, agree on somecollective leadership

e bebeve that, over thc long term, the principal accomplishments of the Yugoslav system are fairly secure, that Yugoslavia, oven without Tito, will survive essentially intact and will persistybrid system We also think, however, that change and disarray will continue to confront theespecially the post-Titoa variety of serious problems. The destination of thc Yugoslav regime, said toew and superior kind ofs vague and uncertain, and the route toward il uncharted. None of the forces released by the Titolst reformation is likely to prevailtruggle, changes of this nature generate formidable opposition. Separatist sentiments are likely to weaken the federation; both pragmatic and ideological considerations will probably operate lo diminish thc power of the party; aod economic forces, increasingly decentralized, wiU almost certainly encourage nonparty Institutions toarger role in shaping national policy.




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