Yugoslavia: A Utopia Lost or False Nostalgia?

The twentieth century was marked by rapid technological advancements and population growth, never seen before in the history of humans. It was also a century where creativity reached new heights, especially ideologically speaking. One of these political experiments was the creation of Yugoslavia. It is a country that no longer exists; however, nostalgia for it remains high amongst its former people and on the Internet.

Yugoslavia was founded after the collapse of Austria-Hungary and the victory of Serbia at the end of WW1 in 1918. Originally named the Kingdom of Serbs, Croats, and Slovenes, it was eventually renamed to Yugoslavia, meaning South Slavic land. In 1941, it was invaded by the Axis Powers. By 1945, it had practically liberated itself for the most part rather than being liberated by an Allied power. However, it didn’t return to monarchy and instead, went under communist rule. WW2 had devastated the country. Around 1 million people had died, and the economy was in ruin. The leader of the newly founded Socialist Federal Republic of Yugoslavia, Josip Broz Tito, aimed to completely reorganise the economy. At first glance, he was just another communist dictator in Eastern Europe. Soviet-style five-year plans were introduced in an attempt to industrialise the still mostly rural country, the economy went under a planned socialist system, much of the land was collectivised, and factories were all nationalised. However, Tito differed greatly from Stalin, and the two very quickly found themselves at odds. Tito believed in something called market socialism. Market socialism is a system where, in smaller companies, workers manage themselves, but within the framework of a market economy. A key part of this ideology is that each worker can vote in the workplace, for example, on who their manager gets to be. So whilst it was still a socialist country, many workers were in control of their enterprises and they would all compete in a market.

In a broader sense, Tito sought to establish Yugoslavia as a neutral non-aligned country. Despite being a Marxist-Leninist, he moved away from the USSR and closer to the west. As a result, Yugoslavia had access to both western and eastern markets during the Cold War. In the 1970s, the economy was reorganised based on the beliefs of Edvard Kardelj, a high-ranking Slovenian communist. Decisions were now decentralised and the republics of Yugoslavia had more freedom to make their own decisions. Worker’s self-government was also further pushed and further decentralised. Trade unions were organised with immense power, strikes could be called by any worker, or any group of workers, and they were common in some periods.

Yugoslavia’s unique economic system got the attention of Muammar Gaddafi, who was the leader of Libya from 1979 to 2011 when he was overthrown and killed. The style in which he ruled Libya is dubbed the Third International Theory, a nationalist islamic left-wing ideology. He took heavy inspiration from Yugoslavia’s socialist self-management system. Under Gaddafi, Libya’s living standards went up significantly. A quote from an article written by Garikai Chengu on Countercurrents.org in 2013 titled “Gaddafi’s Libya Was Africa’s Most Prosperous Democracy” shows just how much Libya improved under Gaddafi:

Muammar Gaddafi inherited one of the poorest nations in Africa. However, by the time he was assassinated, Libya was unquestionably Africa’s most prosperous nation. Libya had the highest GDP per capita and life expectancy in Africa and less people lived below the poverty line than in the Netherlands. Libyans did not only enjoy free health care and free education, they also enjoyed free electricity and interest free loans. The price of petrol was around $0.14 per liter and 40 loaves of bread cost just $0.15. Consequently, the UN designated Libya the 53rd highest in the world in human development.

For more information about Gaddafi’s ideology and its flaws, see Center for a Stateless Society » Muammar Gaddafi’s Green Book: The Good, The Bad, and The Weird.

In neighbouring Algeria, President Ahmed Ben Bella, the first President of Algeria, was also heavily inspired by Tito and socialist self-management. On the other side of Libya, in Egypt, Gamal Abdel Nasser, the second President of Egypt known for his Pan-Arabism, held Tito in high regard. In Norman Cigar’s 1983 article, “Arab Socialism Revisited: The Yugoslav Roots of Its Ideology,” Cigar claims that Nasser was inspired by Tito’s Yugoslavia. It is clear that the international community held Tito’s unique form of socialism in high regard. Even the CIA, in a Weekly Summary Special Report in 1969 titled “Yugoslavia: Twenty Years of Self-Management,” admitted that self-management has been proved successful in small factories. This raises the question, if workers’ self-management was so good, why did it fail? Market socialism is supposed to combine the best of both worlds, so why did Yugoslavia’s economy end up so terrible? The answer is the League of Communists of Yugoslavia, the political party of SFR Yugoslavia, the very people who introduced self-management.

The failure of Yugoslavia’s economic model can be traced back to the centralised control exerted by the communist party, which had complete control of the state. The centralised nature of the state made worker’s self-management impossible. Workers’ self-management and workers’ democracy were eventually eroded and bureaucrats who were members of the League of Communists controlled everything and told everyone how to vote. The key issue was that, in practice, the worker self-management system was undermined by the party’s overarching authoritarian control, which still had complete control over the economy and political decision-making. While self-management was successful in small, localised factories, as the economy scaled up, this model failed to provide the necessary coordination and coherence on a larger scale. The League of Communists failed to create the environment of true decentralisation and competition that would have allowed for market forces to operate effectively.

Instead, the political elite kept control over key economic decisions, which led to inefficiencies and a lack of innovation, as seen in the rest of Eastern Europe. A book published in 2023 by Matthew D. Mitchell, Peter J. Boettke & Konstantin Zhukov titled “The Road to Freedom: Estonia’s Rise from Soviet Vassal State to One of the Freest Nations on Earth” outlines why centralism fails:

Because central planners set prices by diktat and because their plans do not countenance the chaos of market experimentation, they are unable to make use of this local knowledge. They are blind, guessing at the marginal value that consumers place on goods as well as the marginal opportunity cost of producers.

Workers’ self-management in Yugoslavia was merely symbolic; in reality, the party dictated everything, and party members who put their own interests first were the decision makers. As a result, inefficiency, corruption, and nepotism became an issue.

Workers’ ‘democracy’ also was merely symbolic. Decision-making power was concentrated in the hands of the political party, not the workers or the market. Even after the constitutional changes in the 1970s, centralisation was still common, only now decisions were concentrated in the individual republic bureaucrats rather than just the federal bureaucrats. Workplace democracy was only on paper, the workers were literally told who to vote for. Voting in the workplace lost its meaning as time went on, it became an obligation for the workers more so than a right. In Iskra’s 2013 piece, “Yugoslav self-management: Capitalism under the red banner – Juraj Katalenac,” they interview someone who worked in a self-managed metalwork factory in socialist Yugoslavia about the power relations between the director and the workers’ council. He explains: “In terms of managing, there was a workers’ council. Members of the workers’ council were elected from the list, and everything was according to the dictates of the party and every work unit had its branch. The League came with suggestions, which meant that nobody was allowed to protest against them.” Iskra then quotes American political scientist Susan Woodward, an expert on the balkans:

A primary goal of the introduction of workers councils was to deprive the unions of their bargaining power (…) Elected representatives of skilled production workers were to be consulted by managers on how to cut labour costs. The aim was to have workers accept limits on wages and benefits within enterprise net revenue, approve capital investment even if they cut into incomes and sanction dismissal of workers when required by budgets or modernisation programs. The essence of self-management (…) was this attempt to enforce income policies and financial discipline without state involvement or central regulation. Yugoslavia’s economic system was top down in nature despite it at first glance appearing otherwise. Workers’ self management and democracy was an illusion. The state was not the servant of the workers, rather it was the other way around. This relationship between the state and the individual is inevitable and cannot be avoided.

A 2009 study done by Adam D. Galinsky, Joe C. Magee, M. Ena Inesi, and Deborah Gruenfeld for the Kellogg School of Management at Northwestern University titled “Losing Touch: Power diminishes perception and perspective” found that people in power are prone to dismiss or, at the very least, misunderstand the viewpoints of those who lack authority. Power can decrease empathy to those one has power over. Essentially, when one holds power, their ability to empathise with or relate to the experiences of those beneath them can diminish. In socialist Yugoslavia, those in power lost touch with the workers, just like in other socialist countries, and ended up becoming more concerned with going up the party ladder rather than representing the workers. Just as people become obsessed with climbing the corporate ladder. Just as people elected democratically in positions of power can be enchanted by power and forget about the will of the people, focusing instead on maintaining power, even if it means doing the bidding of lobby groups for money and support in elections. This is not just true for individuals, but for entities as well. Businesses can become obsessed with expanding and becoming better than other businesses. So much so, that they decrease the quality of whatever they are selling for quantity and cut their employees’ salaries to increase their profits slightly as the business grows. A business will often put itself first; the workers are just numbers to them. If the workers want to be treated better, they will adopt a similar mindset and grind on the hamster wheel, neglecting the very reason they are working, their family.

A solution often brought up is socialism however, that doesn’t solve the problem. The state is an entity as well, an entity that, like a business, puts itself first. It only wants to grow and the power corrupts it to grow even more. Even if the state is much larger and much more powerful than a business, and in democracies accountable to the people, the top figures of a state very often lose touch with the people, just like in a business. Taxpayers are just numbers or votes to them. The more centralised and hierarchical a system is, the more susceptible it is to this. One also has to factor in people who do not become corrupted as a result of power, rather, they were already corrupted. Some just want to rule over others and focus on self-gain. These types of people are naturally attracted to getting power in centralised entities, which is why we see so many of them in positions of power. The more power is given to an entity, the more it desires more.

As states grow and expand their influence, they tend to create large bureaucracies, which can be inefficient and slow to respond to the needs of the people. The larger the state, the harder it is to ensure that decisions made by those in power are in tune with the needs of the public. As a result, there is a lack of accountability, even in a democracy. This all leads to alienation from the people, something that is true for every state and every big business. Whether in a business or a socialist country or any other form of government, rulers often lose touch with the people they govern. The idea from the study referenced previously— that power diminishes empathy & the ability to perceive the experiences of those beneath you — shows us that individuals in positions of authority become more absorbed in maintaining their power and climbing the political, bureaucratic, or corporate ladder, rather than focusing on the well-being of the general populace. However, note that not everyone is corrupted by power; some genuinely do want to help those underneath them, but more often than not, this doesn’t happen.

In the case of socialist Yugoslavia, hunger for power resulted in the ‘self-management’ model becoming an illusion. Workers were supposed to have control but, in reality, their interests were subordinated to the state’s need for growth and efficiency. As Yugoslavia grew economically, so did its control. People who wanted to go up the party ladder just for power were the ones who often did rise up the ranks. Workers’ self-management in Yugoslavia could never have been successful, as the state was ultimately the dictatorial one in control. During the rule of the League of Communists of Yugoslavia, joining them was the only chance one had to be able to work for the government and be elected in worker councils. Despite this, Yugoslavia’s system was much better than those in other socialist countries. A 2005 journal article by Todor Kuljic titled “Yugoslavia’s Workers Self-Management” notes:

At the worker level, workers couldn’t lose their jobs without the workers’ council being activated. The director couldn’t make the decision alone. The workers’ council, in which the common workers were present, decided whether or not a worker was good. Today, only decrees are valid. Also, in other social issues, such as apartments, vacations, and distribution of income, the workers’ councils were sovereign.

This is because, on the smaller level, there was less state intervention and those in charge could not be as corrupted by power as they didn’t have that much of it in the first place. The already mentioned CIA report from 1969 titled “Yugoslavia: Twenty Years of Self-Management,” which admitted that self-management had proved successful in small factories, does not contradict this. It does not mention larger factories. Additionally, later on in the report, it is said that it wasn’t clear how Yugoslavia’s self-management would work out in the long term. As we know, it failed in the long term.

One could even make the argument that it never succeeded. The real reasons for Yugoslavia’s initial economic success were significant loans from the IMF, which would later become an issue for Yugoslavia when it was time to pay them back. Yugoslavia’s good economic relations with both capitalist and socialist countries also played a part; however, most importantly, there was a post-WW2 population and economic boom in the whole of Europe, which contributed to the whole continent getting wealthier. So Yugoslavia’s initial success had more to do with factors outside of its control. Then, when the global oil crisis in 1973 occurred, as well as the start of the 1973-75 recession, Yugoslavia got hit hard. Yugoslavia took out even more loans, which caused more problems. The foreign debt grew at an annual rate of 20%, and by the early 1980s it reached more than US$20 billion. This began the slow but painful collapse of the Yugoslav economy. Tito’s death in 1980 led to a power vacuum forming; however, no one ever replaced the cult of personality he had, no one filled his shoes to become the strongman which had united all the ethnicities of Yugoslavia. This, combined with significant autonomy for the republics, relaxation of anti-nationalist rules leading to a slow resurgence in nationalism, as well as economic downturn, slowly eroded national unity. In 1989, just before the fall of the Berlin Wall, Yugoslav federal Prime Minister Ante Marković went to Washington to meet with US President George H. W. Bush to negotiate a new financial aid package. However, in return for the US giving Yugoslavia money, Yugoslavia agreed to economic reforms more in line with the west: A new devalued currency, a wage freeze, significant cuts in government spending, and the elimination of workers’ self-management. Soon, the country would head for civil war and, by 1992, it would cease to exist. Economic stagnation was one of the reasons why the country collapsed.

According to a Gallup poll from 2017, 81% of people from Serbia think that the breakup of Yugoslavia harmed their country, 77% of people from Bosnia and Hercegovina, 65% of people from Montenegro, and  61% of people from Macedonia agree. In Croatia, 55% of respondents saw the break-up as beneficial and 23% as harmful. In Slovenia, 41% see the break-up as beneficial while 45% think it was harmful. Nostalgia for Yugoslavia remains high, however, this does not mean Yugoslavia was good. Many people from all over Eastern Europe claim in polls that they lived better under (attempted) communism, but this is only due to the aftermath of communism being worse than communism itself for them. There is also the fact that the collapse of Yugoslavia was violent in Croatia and Bosnia, so people could perhaps be saying that they simply don’t like the way Yugoslavia broke up. An additional reason is that the borders that exist today in the former Yugoslavia were actually developed by the communists after WW2 (the only exception being the Serbian entity in Bosnia called Republika Srpska), down to the last metre and each was their own republic, however the borders did not accurately represent the ethnic distribution of the peoples. Someone from Serbia could view Yugoslavia positively simply because it meant that, back then, they could travel to relatives in Montenegro or Bosnia without a passport. Serbians in Bosnia or Croatia, or Croatians in Bosnia as well, could prefer Yugoslavia as it meant they were in the same country as Serbia or Croatia. Therefore, nostalgia for Yugoslavia, dubbed ‘Yugo-nostalgia’ online, does not mean that former Yugoslavs think Yugoslavia was some sort of paradise.

Further proof is the formerly named Communist Party of Serbia, now called Serbian Left, which has 0 seats in the 250 seat Serbian National Assembly. Its honorary President, Joška Broz, the grandson of Tito, was a member of the National Assembly, the only Serbian Left member ever making it into the National Assembly of Serbia, but only from 2016 – 2022. In the Croatian Sabor (Parliament), the only non moderate leftist party was the democratic socialist Workers’ Front, which supports cooperation with former Yugoslav countries & has stated that the League of Communists had positive elements however considers that they only represented an “enlightened elite” as opposed to the mass of party members as a whole in a “democratic” way. It currently has 0 seats however, they won one out of 151 seats in 2020. They cooperate closely with The Left political party in Slovenia, which currently has 5/90 seats in the Slovenian National Assembly. In the 2018 elections, they won 9 seats. These two parties cooperate with another party called The Left in Macedonia, which views itself as a radical left party and as a party that nurtures the traditions of Yugoslav socialism. They have 6/120 seats in the Assembly of North Macedonia. In Montenegro, there is a party called New Left however, they have never won a seat. In Bosnia & Herzegovina, there is the Workers’ Communist Party of Bosnia and Herzegovina however, they have never won a seat in any of the assemblies (the Bosnian political system is complex and they have several Parliaments but this is another topic). So, while there definitely are people who support the return of the former Yugoslav economic system, most people do not. Sure, many do look at those times fondly, but this is only because what followed was war and division, not to mention the power of nostalgia.

Yugoslavia was NOT a prosperous paradise where workers could manage themselves everywhere and properly participate in democracy in their workplace. The League of Communists had complete control over the economy and political decisions, which stifled the very market competition and decentralisation that were supposed to drive the economy forward. Instead, Yugoslavia relied on international help for growth. On the smaller scale, the Yugoslav system was successful, self-management and democracy worked, workers couldn’t lose their jobs without the workers’ council being activated, strikes were usually quickly won by the workers and productivity increased. However on larger scales which became more prevalent as the Yugoslav economy grew, workers’ democracy became as free as North Korea’s elections. Party members were the only ones who got higher positions, and workers voted on issues & ballots made by higher ups. Tito’s Yugoslavia was always a centralised state. As a result, bureaucracy, corruption and nepotism all became issues. The political elite kept control over key economic decisions, which led to inefficiencies and a lack of innovation. With Tito’s death, economic stagnation, pressure from the US, internal division, and  the gradual abandonment of leftist ideas, workers’ self management was eventually abandoned and soon so was the idea of Yugoslavia. Nostalgia for Yugoslavia remains prevalent, but this does not equate to an endorsement of its political and economic system. Yugoslavia was a failed state. Market socialism in Yugoslavia failed to balance the two. North African leaders that were inspired by Yugoslavia’s workers’ self management all quickly became authoritarian. However this was inevitable given the nature of the entity of the state to put its own interest first and its inevitable goal of serving itself rather than the people. The state eventually becomes detached from the people and seeks to grow, with no end in sight.

So what lesson can we learn from Yugoslavia? Just like all the other failed systems attempted in the 20th century, Yugoslavia teaches us a lesson to not do what they did. In this case specifically, we are taught that the state cannot restrict itself properly, no matter how hard it tries to.

The Center for a Stateless Society (www.c4ss.org) is a media center working to build awareness of the market anarchist alternative