Workers’ Councils in Yugoslavia: Successes and Failures

The Socialist Federal Republic of Yugoslavia was the only country in world history which experienced self-management throughout almost its whole existence. Self-management purported to be the essence of the Yugoslav social system, and workers’ councils lay at its core. The achievements and failures of this experience take on great practical importance today because of the revival of ideas of participatory democracy and self-management in some parts of the world and in some currents of the workers’ movement. If the Yugoslav experience had proved that self-management as such is impossible, then it would be useless to revive the idea because every version of it would eventually fail. But if the failure of Yugoslav self-management was not caused by man’s inherent imperfections, then other explanations must be sought. At the same time, the fact that workers’ councils lasted for forty years is in itself evidence that the project had some positive sides that should not be underestimated.

Historical background of the creation of workers’ councils

Workers’ self-management was not part of the original program of the Communist Party of Yugoslavia (which took power in 1945). According to the Party, the economy had to be under state control while nationalization had to lead to overall state ownership. The Communist Party Politburo was the decisive political body; trade unions were under party control and were treated as mere transmission belts. Workers’ councils were created for the first time in 1949. They were to serve only as consultative bodies while decision-making remained in the hands of CEOs imposed by the state. Workers’ councils became organs of workers’ management only after June 1950 when the Federal People’s Assembly adopted a law putting state enterprises and higher economic units under management by work collectives.

Workers’ councils were introduced not as the result of conscious struggle of the workers’ movement, but rather as a byproduct of the conflict between the Yugoslav CP leadership and Stalin. It is unlikely that workers’ councils would have been introduced if this conflict had never occurred. The conflict confronted the Yugoslav party leadership with two problems. First, it had to prove its own legitimacy and fidelity to Marxism in order to justify its challenge to the Soviet leadership. Second, the conflict itself prompted reconsideration of the then existing social order, which was a mere copy of the Soviet one. It would have been strange and impossible to explain why the two leaderships came into conflict if there was no difference in their social systems.

Of course, the Yugoslav leadership could have chosen another way to distance itself from Soviet Union. However, it is not perchance that it decided to introduce self-management as an alternative to the Soviet system.First, most of the top Yugoslav leaders were well educated Marxists. Therefore it is not surprising that they decided to “go back to Marx” and to accept ideas which, in one way or another, were present during the Paris Commune and the October Revolution.Second, the concept of workers’ self-management, already known in the workers’ movement and in Marxist theory, represented a natural and definitive contrast to the Stalinist practice of bureaucratic domination over society as a whole, particularly over the economy.Third, it was obvious that workers in a centrally controlled economy lacked sufficient economic motivation. This suggested the need for decentralized management. Although decentralization did not necessarily entail worker control, in the Yugoslav context it was the most appropriate solution. Fourth, during the National Liberation War of 1941-45, self-organized people’s liberation committees emerged all over Yugoslavia as new institutions of power. Principally, they were under the political leadership of the National Liberation Army and National Liberation Front, although they included many non-Communists and members of pre-war bourgeois parties. Although this phenomenon lasted only a few years, Yugoslav leaders saw it as a good starting point for the development of workers’ self-organization and self-management.  

The Yugoslav revolution was an authentic one, emerging from the fight against Nazi occupation. The Yugoslav leadership had at its disposal at the end of World War II an 800,000-strong army and a very well organized and experienced Communist party with 141,000 members.1 It received some support from the Soviet Red Army only at the end of war. Out of its independent struggle, the Yugoslav leadership wanted to pursue an independent policy. This led to an inevitable conflict with the Soviet leadership.

Because of the Stalinization of the Yugoslav CP in the 1930s, the concept of so-called state socialism was accepted and implemented during the first post-war years. It was also called revolutionary etatism by leading ideologists of the time and was proclaimed as a necessity in an underdeveloped society. However, the existence of so-called revolutionary etatism, even temporary, led to creation of a bureaucracy as a de facto new ruling class. It was a bureaucracy which in its own interest introduced self-management, with workers’ councils as its first organizational form. This was the basic contradiction of the Yugoslav system of self-management which eventually led to its failure.

There was no strong and autonomous workers’ movement in Yugoslavia at the moment of introduction of workers’ councils. Trade unions were under the control of the CP, which was strongly centralized. Pre-World War II trade unions had long been controlled by a tiny and regime-oriented social-democratic cadre, and when the Communists won decisive positions in many of the larger (100,000+-member) trade unions, they were banned by the government (1940). The political wing of the workers’ movement also was not strong. While the legal Socialist Party was firmly connected to the regime and ruling class yet without any real influence among the working class, the CP was strictly illegal although stronger among workers in the 1930s. So, at the end of 1940s, the workers’ movement lacked autonomy and there was no developed political culture among workers which would make them independent of state, party, and employers.

The economic and cultural backwardness of Yugoslav society had a great impact on the development of self-management. The small size of the working class at the end of World War II – with 75% of the population living on agriculture2 – also influenced the prospects of workers’ councils.3 Yugoslav workers were mostly of peasant origin. They lacked educational or professional skills, not to mention the culture of organization and struggle against authorities. Many of these newly mobilized workers were in fact half-workers, half-peasants, with some private property, and were not attuned to work discipline or to the functioning of workers’ councils. Their outlook remained petty bourgeois.

Moreover, Yugoslav society never developed the type of democratic political culture which is necessary for self-management. It has always had an authoritarian political culture, where strong leaders played the most important role in social life while the state was often seen as an organ for taking care of people. This is one of the reasons why Yugoslav workers did not resist the bureaucratic degeneration of self-management. At the same time, the party leadership was caught in a dilemma. On the one hand, it had to deepen the process of socialist transformation in order to mark Yugoslav society off from the Soviet system and legitimize itself in the eyes of Yugoslav workers. On the other hand, it could not overcome its own lack of democratic political culture which originated from its subordination to Stalinist ideology and its highly centralized internal relations. In practice this discrepancy could be resolved in one way only: by introducing a form of workers’ self-management in which bureaucracy and working class operated jointly – but with clear prevalence of the former.

This social situation caused doubts in the party leadership about workers’ readiness for self-management. According to Yugoslav leader Josip Broz Tito, workers’ self-management was introduced with some delay for this reason.4 It was one of the inevitable contradictions which marked the first stage of workers’ self-management: self-management requires certain levels of cultural development and professional and managerial skills; time and practice are needed to achieve them. According to one analysis of workers’ councils in the city of Užice, Serbia, most members of workers’ councils rarely took part in discussion, while CEOs played a decisive role. Decisions were made mostly by administrative and technical officials while workers tended to uncritically accept their proposals.5

Legal solutions

Workers’ councils were introduced in state enterprises by a December 1949 Directive. Councils were formed in 215 selected enterprises; half a year later, their number had grown to around 800. But they did not have managerial authority. They could only give advice and proposals to CEOs, while the latter were not obliged to accept them. For example, according to Article 3 of the Directive, workers’ councils could discuss economic plans of enterprises, draft rules of order at the workplace, propose measures for improvement of production or for better organization of work, discuss work norms, etc. The CEO had to consider the workers’ council’s conclusions. If he opposed them, he had to submit them to an administrative-operative chief for a final decision. Until this official resolved the case, the CEO could disregard the workers’ council’s input. However, if the workers’ council opposed the rulings of the administrative-operative chief or other state organs, the CEO nevertheless had to apply them. Thus, the powers of workers’ councils at the enterprise level were very modest while at the branch or national level they were nonexistent. The first workers’ councils, established between December 1949 and June 1950, were organs of workers’ participation and not of workers’ self-management.

The first appearance of workers’ councils was welcomed by the working class and by Yugoslav society as a whole, but it was clear from the outset that the limitations under which they operated were unacceptable. A new Basic Law, ratified by the federal parliament on June 27, 1950, provided the legal basis for workers’ self-management. It had to abolish excessive bureaucratization of the economic system, to introduce more democracy into it, and to “gradually establish management of state enterprises and higher economic associations by work collectives according to the socialist principle that producers themselves have to manage social production” (Preamble of the Basic Law).6 In Article 1 of the law it was stated that work collectives manage state enterprises, which are under people’s ownership, in the name of the community and in the framework of the state economic plan. Work collectives fulfill this duty through workers’ councils and Managerial boards. Workers’ councils were elected by all workers in the collectives for a one-year term (Articles 2 and 3). The workers’ council as a whole, as well as its individual members, could be recalled at any time (Article 3/2). This made council members – in contrast to parliamentary representatives, who could not be recalled – accountable to those who elected them.

The first weakness of this model of workers’ self-management was that management boards as executive organs had great influence on management. It is true that they were defined as organs elected by and responsible to workers’ councils, but they were also responsible for the management of enterprises and, together with the CEO, for their day-to-day running. For their decisions, management boards were accountable not only to workers’ councils but also to state organs. This severely limited self-management, despite certain restrictions (in Article 6) on the powers of the management boards. A further limitation in the Basic Law was the stipulation that the CEO of an enterprise would not be elected by workers but rather nominated by the state or by a management board of a higher state enterprise. A CEO was thus responsible not to the workers’ council but to a management board and higher CEOs.

Workers’ councils had between 15 and 120 members. The larger councils were more like workers’ assemblies or workers’ parliaments,7 and they did not have day-to-day contact with workers. Exacerbating this lack of contact was the fact that council members were not formally obligated to follow workers’ opinions on particular issues.It was a contradiction: workers could recall members of workers’ councils if they disagreed with their policy, but they could not oblige them to follow a particular policy during their mandate.

All workers in the enterprise, regardless of skill-level, could elect and be elected to the councils. Elections, held annually, were direct and by secret ballot. By law, workers’ councils had the following prerogatives: acceptance of basic economic plans of an enterprise, adoption of policy measures for the enterprise, election and dismissal of a management board, deliberation on particular decisions of a management board, allocating a portion of the enterprise’s surplus.

The relationship of workers’ councils to management boards was analogous to the relationship of parliaments to governments. This was particularly the case when workers’ councils were large. Their size often compromised their efficiency while small-size management boards, composed of more educated cadres, prevailed. And although workers’ councils could shape the general economic policy of enterprises, management boards had control over their day-to-day affairs.

Workers’ councils strengthened their legal position from 1950 on. They achieved their legal peak with the 1974 Constitution and the 1976 Associated Labor Act (in Serbo-Croatian Zakon o udruženom radu or ZUR), which strengthened their authority and introduced new organizational forms based on the principle of delegation. Large enterprises were subdivided into smaller units known as basic organizations of associated labor (BOAL), numbering 300-400 workers, which were in turn divided into still smaller units within which workers performed their jobs and elected delegates to workers’ councils.8 At the level of the BOAL, workers could decide all important matters. But, insofar as the BOALs were subordinated to larger regional and national organizations, their possibilities for independent decision-making remained limited.

The basic institutions of self-management were workers’ assemblies and workers’ councils. The assemblies, composed of all workers, met from time to time to set basic priorities, while the councils met more frequently and decided on the most important issues. Here it is important to distinguish two rights given to workers in their relationship to workers’ councils. First, workers had a right to recall council members. They had this right from the very beginning but they used it only occasionally. Another right which they obtained only in 1970s was to give council members obligatory instructions how to vote. If workers were not satisfied with council members’ behavior, they could recall them.

According to the 1974 Constitution (Article 100), workers’ councils had the right to elect executive organs and CEOs, draft statutes of their enterprises, enact economic policy, and define measures for its execution, etc. But they had to follow directions imposed on them by their electors, which meant that they could not follow their own policy.9 Workers’ councils had more discretion in deciding on surplus and accumulation. Council-members had to be in constant touch with their electoral base – workers themselves – and they could not, as in the first phase of workers’ self-management, act independently. This surely broadened self-management and further democratized it. Workers’ councils, by a two-thirds vote, elected CEOs or collective executive managing organs that were responsible to them. Nominations, however, were made by special commissions composed of workers’ delegates, members of trade unions, and representatives of socio-political communities (municipalities).

Workers’ councils and reforms of the system

Workers’ councils had to deal with many reforms of the Yugoslav system from 1950 to 1990. At the beginning, the system was characterized by bureaucratic control over the economy from a single center. Subsequently, there was a gradual broadening of workers’ councils’ autonomy. Between 1952 and 1956, workers’ councils could not direct allocation of resources and distribution of income.10 The state determined the system of salaries as well as use of funds. The decentralizing reforms of the 1950s did not at first significantly change the role of workers’ councils, for they depended on decisions of republican11 and local instead of federal institutions. After 1957, wages were no longer fixed by public authorities, and workers’ councils had the right to decide on allocation of resources remaining after taxation.

The fifteen years after introduction of workers’ councils could be described as a period of gradual decentralization of the economy, devolving power onto federal units and municipalities as well as broadening the autonomy of workers’ councils. The first elements of market economy were introduced in the early 1960s. This contributed to recruitment of managerial strata which tried to replace state officials at the head of enterprises. Formally, managers were under the control of workers’ councils, but in practice they imposed their power on workers’ councils who in most cases simply rubber-stamped their directives.

In the first half of 1960s the state maintained considerable control over prices and workers’ incomes. Workers’ councils could make decisions on production only in the framework of prices established by the state. In 1965 the political elite decided to start radical reform of the economic system, introducing more elements of a market economy and widening the autonomy of enterprises. The dominant faction of the political elite proclaimed that market and self-management were inseparable. Its argument was that the market was a precondition for limiting bureaucratic state intervention in the economy, which in turn was necessary for the greater autonomy of enterprises led by workers’ councils.12

The 1965 reform caused a radical reduction of economic planning especially at the macro level. Workers’ councils were not able to make adequate decisions, particularly in the area of investment. The overall impact of the reform wasmainly negative.By weakening economic planning, it strengthened the market and hence managers as the real decision-makers in enterprises. On the other hand, it caused strong social differentiation and a rise in unemployment. The federal government was no longer able to secure harmonious economic development of country. In terms of self-management, introduction of the market did not have the effect of strengthening workers’ councils and other self-managing institutions. The most important beneficiaries of the reforms were managers, who replaced state bureaucrats as the most important decision-makers in enterprises. Managers were seen, because of their competence and knowledge, as a guarantee of economic efficiency. They joined forces with republican political elites that wanted to weaken the federal center through market reform and also to repress self-managing workers and their institutions.

The early 1970s saw an attempt to reverse this course. The new goals were: to reaffirm economic planning, to reduce the scope of the market, and to facilitate workers’ self-management by subdividing enterprises and introducing the delegate system. The reaffirmation of planning did not mean centralized planning – not only because this was equated with Stalinism, but also because strengthened republican political elites could not accept such a reform. Therefore planning had to be reintroduced from below, from enterprises. Yugoslav planning had to be the sum of microeconomic plans. At the same time, the political elite decided to reinforce the leading party through particular parliamentary chambers composed entirely of party functionaries and through the party’s influence on election of CEOs, of whom 76% belonged to the League of Communists.

The results were disastrous. Although the number of workers in workers’ councils and other organs of self-management increased, this did not lead to any real strengthening of self-management because workers had little influence over decision-making in the framework of their BOALs. BOALs belonged to wider organizations of associated labor – working organizations (ROs) – and were not economically independent. Sometimes BOALs and ROs united into composite organizations of associated labor (SOURs) which operated in the framework of an entire republic and sometimes of two or more republics. The most important micro-level decisions were enacted in ROs or SOURs while BOALs could not significantly influence them.

In order to create BOALs after 1974 and 1976, existing enterprises had to be divided into smaller, relatively independent economic units. Each BOAL behaved as a separate entity with particular interests. The reforms of 1974 and 1976 did not establish either institutions or mechanisms which could promote integration of the Yugoslav working class. Economic planning was seen, as mentioned above, as a process of negotiation and accommodation of republics and autonomous provinces, while federal or republican institutions lacked efficient mechanisms to implement economic plans.

The new system led to bureaucratization and an overproduction of legal acts. Between 1.25 and 1.5 million different legal acts were adopted in the first years after the reform, while the number of administrative workers increased by 44.3% between 1972 and 1978.13 Decision-making was also very complicated14 and workers, who often took their right to self-management very seriously, were eventually disappointed, feeling that the system was less legitimate and efficient than before the reform.15

The Yugoslav political elite promoted the idea of republican or ethnic working classes (as opposed to the united Yugoslav working class advocated by President Tito). This idea went hand in hand with the process of confederalization of Yugoslavia. Republics and autonomous provinces built eight economic systems loosely connected to each other. They had their own economic plans, and republican political elites often tried to create a kind of social pact with the working class in their republics, by giving them inordinate wage-increases. This severely reduced the impact of workers’ councils. Thus, while decentralization was carried out at the federal level, republics and autonomous provinces were not decentralized in favor of working collectives. The Yugoslav political elite never accepted the concept of self-management mixed with democratically organized central planning.

Successes

The essence of workers’ self-management is to enable workers to become the dominant subject in the economy and society as whole. This was not achieved in Yugoslavia. But if we accepta more limited definition of self-management – as participation in decision-making at the micro level – then the Yugoslav experiment can be called a success.

In the first place, hundreds of thousands of workers were elected to workers’ councils,16 which was a very important experience for them. Being a member of a workers’ council was not just a formal function. Workers’ councils had some real power in enterprises although they were not the ultimate policy-makers. Workers themselves did not perceive the councils in such a way. However, workers’ councils succeeded in what was possible at that moment: they achieved a partial redistribution of power between the bureaucracy/technocracy and the working class. This was no small success considering the monopoly over social power in the hands of bureaucracy before 1950 and also the fact that, apart from workers’ councils, the working class had no autonomous organizations under its own control.

Second, workers’ councils broadened their prerogatives over time and thus became, at least legally, more powerful than they were during the first phase of their existence in 1950s. For example, while during that first phase CEOs were not responsible to them, later they were. Also, with the introduction of the delegate system in the 1970s, the authority of the councils was increased as their members became workers’ delegates who could not act independently of their electorate. There is evidence, however, that this did not greatly impress the workers, as the CEOs of self-managed enterprises still retained the authority to administer work, conclude contracts, hire and fire workers, secure work discipline, and suspend acts of the management board that they judged to be illegal.

Third, the material basis for workers’ council activity broadened. In the first phase of workers’ self-management, enterprises had at their disposal only 25-30% of overall accumulation.17 Self-management advanced steadily from 1953 to 1963, starting with the 1953 Constitutional Law and ending with the 1963 Constitution, often called “The Charter of Self-Management.”18 According to 1971 constitutional amendments, overall income belonged to BOALs. Workers had the right to determine distribution of income because it was from the products of their labor.

 Fourth, the introduction of workers’ councils fundamentally changed the role of the working class in society even if it didn’t become the dominant social subject. The official ideology of socialist self-management in Yugoslavia gave the worker greater legal rights and a much better social and working position than a worker in the East or the West. Yugoslav workers, as self-managers, had job security; they could not fire themselves. Bureaucracy and technocracy, although dominant in society, had to take into consideration workers’ opinions and moods. Otherwise, workers could try to impeach their management, organize a strike,19 or appeal to the party. Although a CEO could count on support from the local bureaucracy, it was not certain that he would survive a workers’ revolt. The bureaucracy had to adhere to the ideology that viewed workers as key players in decision-making, so it had to accept workers’ complaints and decisions whenever workers were strong enough and conscious enough to insist on them.

Fifth, workers’ councils were a kind of replacement for autonomous workers’ organizations, which were lacking in Yugoslavia. The only existing party was bureaucratically controlled, and workers formed only a relative majority of its membership. Trade unions were a transmission belt for the party, without real power in decision-making processes. Autonomous trade unions did not exist, nor did other political parties. The only chance for the working class to play an autonomous role in society was through the workers’ councils. They took advantage of this opportunity to some extent, displaying a generally positive attitude toward self-management despite their awareness of its subordinate position in the overall system.20

Workers’ self-management, with workers’ councils as its basic form, had wide legitimacy among Yugoslav workers for many reasons: it stood at the center of a social system which secured significant economic, social and cultural development;21 it provided some relief against bureaucratic domination; and it provided levels of job-security and workplace-participation unknown anywhere else in the world. Formally, workers could decide about all aspects of their enterprises’ functioning. Moreover, self-management was not limited to the micro level: through various layers of assemblies and through the delegate system, workers could participate in decision-making about economic, social, cultural and political issues at all levels of socio-political organization (municipalities, provinces, republics, and federation).

It is not easy to say to what extent workers’ self-management contributed to Yugoslavia’s dynamic economic development between 1950 and 1980. Workers’ councils, despite their powers, remained in the shadow of managerial structures and informal groups in enterprises (organizations of associated labor) and bureaucratic structures. Nonetheless, it can be said that self-management contributed to economic development in that it tapped workers’ initiative and motivation, thereby reducing the need for non-market bureaucratic intervention.

Yugoslav economic development rested on a combination of workers’ self-management, limited market, and limited state intervention. These three mechanisms of the economy corresponded to three basic social subjects – working class, technocracy and bureaucracy. In comparison to workers’ participation in Western Europe, workers’ self-management guaranteed to workers more power and rights.22 Therefore Yugoslav workers could be more motivated to contribute to the economic success of their enterprise, which belonged to society as a whole and not to state or to any individual or group. It could not be argued that workers saw enterprises as belonging to their own collectivity more than to society as a whole. This was because they clearly saw that the political elite and managerial strata had in many formal or informal ways influenced the economic policy of enterprises as well as the process of selection of executive organs and CEOs. Also, workers formally and to some extent in practice were the only decision-makers who could motivate them to work harder and better. The International Labor Organization confirmed that workers’ participation strengthened labor discipline and also strengthened work collectives relative to management.23

To be sure, workers sometimes followed their particularistic interest in allocating themselves wage-increases. But it would be one-sided to attribute this to any inherent deficiency in self-management. There were other causes for such behavior. First, the political elite retained for itself final say in case of an enterprise’s bankruptcy. For that reason the workers’ interest in self-management was often limited. Second, although the Yugoslav system had strong elements of market economy and self-management, the state continued to play a key role through price control and macroeconomic measures. Workers’ councils functioned on the micro level. Their competences and autonomy were limited by macroeconomic decisions made elsewhere. It is thus not surprising that they showed less initiative and responsibility.

The political elite understood this well and tried to institutionalize workers’ self-management at all levels of economic and political organization. In 1953 the Council of Producers was established as a chamber of the Yugoslav parliament (Federal People’s Assembly). It was elected by workers and had competence in making decisions on economic issues at the macro level. Similar councils, with different names and structure, were established in the 1963 and 1974 constitutions at the level of municipalities, republics, and the federal state. However, most members of these councils belonged to the League of Communists. This fact did not necessarily prevent council members from acting in accordance with workers’ wishes, but party discipline had always been an obstacle to their autonomy. On the other hand, the federal government drafted an economic policy which limited the autonomy of these specific councils of self-managers.

Although some authors thought that workers were not interested in the economic development of their enterprises, many examples proved the opposite.24 In certain cases when management ruined enterprises and caused much economic damage, workers acted quite unselfishly to try to make things better. There was some irony in the system’s functioning. Where self-management was not developed enough, workers played only a secondary role in decision-making. But if management was incompetent, workers could revolt and impose personnel changes. On occasion, workers voted reductions in their own wages in order to find enough resources for economic recovery.25

Failures

If one compares the level of democracy in Yugoslavia before and after 1950, or if one compares it with the level attained in the Soviet Union, then one has to rate workers’ self-management as relatively successful. Despite this measure of achievement, however, the project fell short in a decisive way, in that workers’ councils did not become basic institutions of Yugoslav society.

 Although workers participated relatively actively at meetings, less than half of them thought they influenced decisions.26 Their levels of education and information remained deficient.27 Some authors view such differences in informational levels as insurmountable.28 Lack of information and the role of experts and executive organs in preparing council meetings led in many cases to formal adoption of proposals prepared in advance by management. Very often workers were informed after the decision was made. Workers were not acquainted with alternative solutions, and workers’ councils often decided without presentation of the consequences of one or another decision. Workers were often unaware of the legal options offered by self-management, not to mention basic economic concepts relevant to enterprise policy.29 Seeing management as the real decision-maker in an enterprise led workers in conflict situations to bypass organs of self-management and to attempt negotiations directly with the CEO, his assistants, and even organs of socio-political communities, primarily municipalities, which had legal authority to intervene under certain conditions (for example, enterprises in financial troubles could count on budgetary injection). All that was left to the workers’ council would then be to monitor the implementation of any agreement.

Workers’ councils were obstructed in their work by informal groups that existed in enterprises, composed of those who had real power in the decision-making process. Many CEOs came from the political elite or had good connections with it. Therefore they could impose their authority over that of workers’ councils and other organs of self-management.30 Overall democratization would be needed in order to prevent this, but economic democracy at the micro level did not lead to political democracy. Although the political elite developed democratic structures in political institutions after 1953, the League of Communists leadership retained its monopoly. Informal groups could be allowed to function because self-management had an insufficiently strong material basis while one and the same group maintained control over society as a whole.31 The state continued to intervene in the economy, many CEOs had political ties, and the party had supreme power.

This did not mean that the party always controlled the process of decision-making. It depended very much on the concrete situation in each enterprise. For example, an informal group composed of a CEO, party activists, and experts could try to impose its proposals and to ensure their acceptance.32 What chances did unorganized workers – or even members of a workers’ council – have against such groups? Their ability to resist depended on their developing a self-managing consciousness. If a workers’ council was composed of independent individuals who were not under the control of informal groups, it could trace an independent policy.

But self-management failed to become the dominant social relationship. Workers’ councils had some impact on decisions at the micro level, but they were not able to essentially question the dominance of technocracy and bureaucracy.33 Yugoslav society between 1950 and 1990 was marked by constant class struggle between the bureaucracy and the working class and by tensions between etatism and self-management. Although the bureaucracy voluntarily gave up some of its prerogatives, it retained its overall dominance. Self-management was introduced from “above,” by decision of the political leadership and not by the action of an autonomous working class. This is the real reason why self-management developed only gradually and with constraints.

Conclusions

Despite its limitations, self-management was not a merely formal arrangement. It worked to some extent, and its positive results as well as the legal openings it offered encouraged workers to implement it. Two arguments should be taken into consideration. First, self-management was a constitutional principle; its realization was therefore a legal obligation of governance in Yugoslavia. Not only enterprises but also political institutions were meant to be run in accordance with its principles. The degree of power exercised by workers’ councils in practice, however, depended not only on legal precepts but more on the relationship of forces in each enterprise between managerial strata and party bureaucracy on one side and workers on the other. Second, workers’ self-management was solidly grounded in communist ideology. Its realization was thus essential for preserving the legitimacy of the party leadership. Thus, somewhat paradoxically, although the party might be threatened by self-management, it had an interest in assuring its basic viability.

Workers’ consciousness was a key factor. It was tested by issues such as surplus-allocation and regional inequalities. Conscious workers who acted as good managers would not spend most of an enterprise’s revenues on their own wages. They would probably think about improvement of their economic activities. Also, if workers did not think of enterprises as belonging just to their own group, they would be able to offer solidarity and material support to less developed regions or enterprises. Of course, the scope of their discretion remained limited. Workers’ councils acted on a micro level, where policy had to be executed and not created. More precisely, they had to make decisions within the general framework of economic policy decided on at the federal or republican level. Although councils of producers and later councils of associated labor existed as specific chambers in the framework of different parliamentary bodies, Yugoslavia could not be clearly defined as the “Republic of Workers’ Councils” because these “macro workers’ councils” had to share power with parliamentary chambers composed entirely or predominantly of members of the political elite. Economic policy, the politics of price control, and alleviation of regional inequalities were decided by the federal government and federal parliament. Workers had no influence on the federal government [ministries] but they could influence parliament’s decisions through their delegates in “macro workers’ councils,” i.e. councils or chambers of workers’ delegates in federal and other parliaments.

Studies from 1985 showed that consumption was a very important motive for workers to participate in decision-making.34 The Yugoslav political elite wanted to improve living standards. They saw this as a major means for preserving the system’s legitimacy. They also used it to offset workers’ disappointment at not being able to realize the full potential of self-management. Had the workers been entrusted with greater responsibility, it is more likely that they would have been able to look beyond their personal well-being and the success of their own enterprise. At the beginning of 1960s, workers’ councils applied their expanded autonomy to grant themselves intemperate wage-increases. A few years later the authority of the councils was reduced as a result of recession and inappropriate allocation of revenues. It is impossible to say whether workers’ councils would have continued to behave in this manner if they had continuously had authority over the whole budget, especially if the state had abandoned its policy of saving bankrupt enterprises.

The Yugoslav system of self-management with workers’ councils as its basic cells functioned as a mixture of market socialism, state socialism and self-managing socialism. This specific combination allowed two diverse results. On the one hand, the more developed republics developed faster taking advantage of the market economy, while on the other hand the federal government intervened through a special fund in order to promote development of the less developed republics. The results were contradictory. While underdeveloped republics grew rapidly, the gap between them and the developed republics in some cases widened.35 This result of market socialism caused dissatisfaction in the less developed republics, which thought that they were being exploited by the more developed republics. This problem arose especially after 1966 when the market economy became more important while the new system of self-management was introduced. The inability of the system to clear up the feeling of less developed republics that they were being exploited led to a weakening of the legitimacy of self-management and eventually to its replacement by nationalism as the dominant ideology. This occurred because self-management was presented by the political elite as a basis for socialism and socialism as a system was perceived as the main cause of regional inequalities.

Of course, regional inequalities are a consequence of many factors acting on the macro level. The negative impact of market mechanisms could be prevented only by state intervention. The role of self-management here becomes clear if one understands that it entails a self-managing state, i.e. a state which is going to wither away in the Marxist sense. In other words, elected delegates of workers’ councils in federal and other parliaments had to decide on the scope and content of state intervention in order to prevent regional inequalities and therefore dissatisfaction with self-management. This is precisely what failed to happen, however, because political elites of different republics tried, often unsuccessfully, to find a middle way between market and state intervention. The resulting society was perceived as unjust. As self-management was defined as its basis, people more and more accepted the idea of replacing self-management with some other system. Workers’ impotence in decision-making just reinforced this reaction, especially when economic crisis led to a deterioration of living standards.

Introducing elements of the market economy in 1965 helped the development of self-management because it enabled workers’ councils to act more independently from the state. Self-management could not succeed in practice if the state controlled economic activities, because workers’ councils would lack a material basis for their autonomous decisions.36 On the other hand, the functioning of the market economy contributed considerably to sharpening social inequalities and raising the level of unemployment. At the same time, the introduction of “market socialism” benefited managerial strata more than it did self-managing workers, because CEOs, executive organs and informal centers of power rather than workers’ councils regained some of the authority previously reserved for the state. In the more democratic legal framework, however, where workers’ councils had more formal authority, workers could try to improve their position in the decision-making process and in some cases they were able to do it. Workers’ councils were democratic institutions where workers could exercise more power than in any other institution at micro or macro level, and they often tried to take advantage of this opening.

We thus find a contradiction originating in the tension between market, state intervention, and self-management. Workers’ councils could not really act as organs of self-management – especially on matters of income – if state institutions had wide legal prerogative to intervene in the economy. Decentralization did not help because it meant only that republican rather than federal institutions influenced the economy. For workers’ councils it did not make a big difference whether federal, republican or local institutions intervened in the economy. The problem sharpened when republican political elites could not agree any more on allocation of investment. Therefore the market was introduced as a mechanism to relieve inter-republican tensions as well as to allow greater enterprise-autonomy. If state or local authorities decided on economic issues, workers’ councils could not be real organs of self-management.

The impact of the market economy on workers’ behavior depended on the extent of their real participation in decision-making. They had an economic interest in “their” enterprises being as successful in the market as possible in order to earn a bigger income. On the other hand, self-management is an inherently socialist concept, which led to another natural consequence: workers as self-managers in the socialist sense had also to concern themselves with the well-being of society as whole. This could be achieved only by limiting the economic selfishness of particular enterprises through “global” or “macro” workers’ councils in the form of local, republican and federal councils of producers or councils of associated labor. Unfortunately, this aim was not achieved because these councils did not really act as organs of self-management at the macro level although they were conceived as such.

It was often said in Yugoslavia that the gradual introduction of self-management was an expression of economic and cultural underdevelopment. Ostensibly, self-management would become more effective as the society advanced in other respects. But this did not occur. It is true that self-management developed in many ways – institutionally, legally and practically. Institutionally, it developed in the sense that many new self-managing institutions were created, both at micro and macro levels. Self-management existed not only in the economy but in the political system, social services, culture, education, sport, and other spheres of social life. Legislative bodies also were organized along self-managing lines, including a delegate system after 1974. Practically, self-management decreased the power of bureaucracy in comparison with the pre-1950s period of “revolutionary etatism” or “state socialism.” But these improvements did not change the nature of society. The ruling bureaucracy knew very well that legal and institutional changes could not challenge basic features of the system – one-party rule, state dominance over the economy, etc. These features contributed to the final failure of workers’ self-management.

The other contributing factor that has to be considered is the workers’ own performance as self-managers. For example, it has often been said that workers didn’t show enough economic rationality and conscience because they “ate the accumulation,” i.e. they tended to spend the surplus rather than use it for economic or technological improvements in their enterprises. Furthermore, workers’ councils were not able to raise workers’ motivation and secure work discipline, especially during 1980s. These arguments, however, are at best half true. Although in some cases workers made irresponsible decisions about distribution of surplus, it is hard to assess the generality of such behavior. On the other hand, however, workers had ample cause to be not much interested in the functioning of workers’ councils. First of all, they were well aware that the councils often functioned without regard to their wishes and attitudes. They could see in practice the existence and dominance of informal groups – bureaucracy and technocracy. Second, the very concept of social ownership in Yugoslav theory and in the legal system gave some authority to the state to intervene in economic affairs. One of the mechanisms of this intervention was so-called socialization of risk or socialization of losses. If an enterprise worked badly, its losses would be covered from a budget. This negative solidarity, where the community and successful enterprises had to pay for bad decisions of unsuccessful enterprises, led to lack of work discipline and economic efficiency of workers, and discouraged initiatives on the part of workers’ councils. For workers understood that their councils could not work independently and that the bureaucracy was interested in covering losses from bad economic performance. Therefore they had little incentive to struggle for more workers’ council powers, nor did they think it was possible to achieve them.

Although the official attitude was that Yugoslavia had a system of socialist self-management, in practice it was a mixed system which combined elements of self-management and etatism, with prevalence of the latter.37 This basic feature of the system determined all the others. Officially, Yugoslavia had a system of integral social self-management which was exercised in all spheres of society. The political system therefore was also organized along self-management lines with socio-political organizations (the League of Communists being the most important) as only one of its components. Thus social self-management, and workers’ self-management as its component, was a macro phenomenon. However, workers’ councils still were the organs of self-management where workers could exercise most of the power belonging to them.

As a general conclusion, it could be said that workers’ councils, to the extent that they really were allowed to manage the economy, were efficient, democratic and humane institutions, whose economic, political and ethical scope could not be denied. But their actual social powers were severely limited. Yet if political democracy had been introduced in Yugoslavia, with pluralism in the political and trade union spheres, then workers’ councils might have been able to evolve from organs of participation into organs of self-management.38

Notes
1. Istorija Saveza komunista Jugoslavije, Izdavački centar “Komunist” – Narodna knjiga – Rad, Beograd, 1985, 309.

2. Samoupravljanje u Jugoslaviji 1950-1980 (dokumenti razvoja), Privredni pregled, Beograd, 1980, 434.

3. This was also stressed in the “Theses” prepared for the First Congress of Workers’ Councils, which took place in 1957: “Yugoslavia’s working class is too young; it suffers from insufficient general, professional and economic education, as well as other knowledge necessary for the successful management of enterprises.”

4. “Maybe someone thinks that the law is premature, that workers will not be able to acquire complicated techniques of managing factories and other enterprises…. It [self-management], therefore, is not premature but has been introduced with certain delay…” (Tito, Speech in People’s Assembly on occasion of announcement of Basic Law on Management of State Enterprises and Higher Economic Associations by Work Collectives, in Samoupravljanje u Jugoslaviji 1950-1980, 68).

5. Branislav Gligorijević, “Uvođenje radničkih saveta (1950-1953), Užice nekad i sad”
www.graduzice.org/userfiles/files/uvodenjeradnickihsavetaod1950do1953.pdf

6. The text of the Basic Law can be found in Samoupravljanje u Jugoslaviji,1950-1980, 59-66. The reasons for creating workers’ councils were defined in “Theses” for the First Congress of Workers’ Councils in 1957: “to enable the working class to realize its historic right of practicing direct management of the economy; to enable the working class to realize its social role and extend its rights won during the socialist revolution; to remove dangers rooted in administrative management of the economy; to secure better conditions for the development and unimpeded operation of productive forces; to make the material and moral interests of the workers the essential moving factor of socialism under the conditions of the system of social ownership.…”

7. According to daily Borba, in 1956 there were 208,000 members of workers’ councils (The Impending First Workers’ Councils Congress in Yugoslavia, RFE News and Information Service 1957, Open Society Archives, www.osaarchivum.org/files/holdings/300/8/3/pdf/72-3-181.pdf)

8. See George A. Potts, The Development of the System of Representation in Yugoslavia with Special Reference to the Period Since 1974, Lanham, MD: University Press of America, 1996, 319-34.

9. “Delegates act according to guidelines of workers or a workers’ council of a BOAL which elected them and are responsible to them for their action” (Art. 101/4 of 1974 Constitution).

10.  Duško Sekulić, “Društveno-ekonomske reforme u jugoslovenskom društvu s osvrtom na društva ‘realnog socijalizma,’”in: Teorija i praksa “realnog socijalizma” (Theory and practice of “really existing socialism”), Beograd, 1987, 97.

11. [Ed. Note: “republican” refers throughout to the six constituent republics that formerly made up the Federal Republic of Yugoslavia.]

12. “In order to encourage creativityof self-managers and to introduce a more efficient system, it was necessary to liberate them from the state’s vise, for which introduction of the market was necessary” (Teorija i praksa “realnog socijalizma,” 99).

13. Teorija i praksa “realnog socijalizma,” 213.

14. In one extreme case, 7,000 workers voted in a referendum for a decision. In just one participating BOAL, the result was 31 to 29 against the decision. This 2-vote margin within a single BOAL blocked the verdict of 7,000 (ibid., 214).

15. “The feeling that the administration can manipulate decisions led to rapid disillusionment with the system. Revolutionary change, where workers would be real masters of labor and its results, was promised, but the administration remained the main decision-maker, at least in practice” (ibid., 212-13).

16. While in 1952 there were 105,018 members of workers’ councils, this number rose to 484,784 in 1983 (Potts, Development of the System of Representation in Yugoslavia, 341). In 1969 30% of workers participated in different organs of self-management in enterprises. 70.5% of members of workers’ councils and 55.5% of members of management boards were workers (Drago Gorupić, “Razvoj samoupravne organizacije preduzeća,” in Teorija i praksa samoupravljanja u Jugoslaviji, Radnièka ¹tampa, Beograd, 1972, 695).

17. Istorija Saveza komunista Jugoslavije,  395.

18. “The autonomy of an enterprise is determined by the right of its organs of management to independently enact its economic plan and dispose of its income after it pays its obligations to the state…” Gorupić, “Razvoj samoupravne organizacije preduzeća” (note 16), 682.

19. Workers’ strikes were rare in Yugoslavia until the 1980s. The first one was organized in the Slovenian mine center Trbovlje in 1958 when 4,000 workers struck. However, it was perceived that strike as a means of workers’ struggle was inappropriate in a society where workers had institutional possibilities for their predominance. The fact that workers organized strikes against management and that workers’ council members also took part in them showed that workers’ councils were not dominant decision-makers (see also: Josip Obradović, “Sociology of Organization in Yugoslavia,” Acta Sociologica, Vol. 19 No. 1/1976, 31).

20. According to Janja Beč’s research, between 77 and 80% of workers thought that self-management was the best and the fairest method of development for Yugoslav society; between 95 and 98% thought that workers have to control the results of their work, while at the same time around 60% (in some cases even 84%) thought that self-management did not mean much in practice (Potts, Development of the System of Representation in Yugoslavia, 356).

21. Overall social product in Yugoslavia grew faster than the world average in the period between 1950 and 1980 (indexes 636 and 396 respectively). Average annual growth rate globally was 4.7%, while in Yugoslavia it was 6.4%. Agricultural population decreased to 29% in 1981 (12. kongres Saveza komunista Jugoslavije, Izdavački centar Komunist, Beograd, 1982, 20-21).

22. Studies of the impact of workers’ participation in management on economic efficiency showed a positive correlation (see Aleksandra Kanjuo-Mrčela, Lastništvo in ekonomska demokracija, Fakulteta za društvene vede, Ljubljana, 1999, 182, 197).

23. “A mission of the International Labor Organization  to Yugoslavia in 1960 concluded that ‘while self-managerial machinery reduced the former power of superintendents, it seemed that it did not diminish their authority… It doubtless strengthened the position of the work collective in relation to management, but it did not undermine work discipline’” (Branko Horvat, Politička ekonomija socijalizma, Globus, Zagreb, 1984, 144). Horvat made the same point regarding self-management in Chile.

24. “Attempts to introduce workers’ management were met with three usual objections. It had been said that self-management would undermine discipline; workers’ councils would be incompetent to work as boards of CEOs and that workers would distribute all profits as personal income, thus depleting developmental potential of the economy. None of these prophecies were accurate” (ibid., 209).

25. According to a report at the Second Congress of Self-Managers (Sarajevo 1971), in the big Varteks textile factory in Varaždin (Croatia) an economic crisis occurred in 1966 as a result of bad economic policy of management and its disrespect for self-management. As a consequence, the enterprise was left without necessary resources. Workers’ assemblies and workers’ councils then decided to rehire the previous CEO, allow him to name a new management team, renounce one month’s wages, take a wage-cut of 20%, etc. (Stanislav Grozdanić, “Novije tendencije i pojaveu praksi radničkog samoupravljanja,” in Teorija i praksa samoupravljanja u Jugoslaviji [note 16], 726-27).

25. According to Ivan Grdešić, in 1977 81.6% of those questioned said that they always attended workers’ assemblies and other meetings in the BOAL although only 42% of them regarded themselves as having any influence (Potts, Development of the System of Representation in Yugoslavia, 358-59).

27. “Since CEOs are better educated than workers (at the present time) and better informed about business administration than anyone else, they will have more power than some other groups” (Horvat, Politička ekonomija socijalizma, 214).

28. Karen Wendling, “Unavoidable Inequalities: Some Implications for Participatory Democratic Theory,” Social Theory and Practice, Vol. 23, No. 2, Summer 1997, 165.

29. According to a 1971 analysis by Workers’ University in Mostar (Bosnia and Herzegovina), only 26% of workers knew what the productivity of labor was, 26% of them knew what indirect organs of self-management were, while none of them knew what direct organs of self-management were (Grozdanić, “Novije tendencije” [note 25], 731).

30. This was especially the case when a CEO had better connections with political centers of power and at the same time was less educated (Horvat, Politička ekonomija socijalizma, 214).

31. According to Anton Vratuša, enterprises by 1968 controlled only up to 6% of social production, “with a tendency toward a further decrease” (Anton Vratuša, “Yugoslavia, 1971,” Foreign Affairs, Vol. 50, No. 1, October 1971, 154).

32. Cliques in particular enterprises had a lot of experience in imposing their proposals without much open pressure. For example, their members could try to postpone discussion of an issue. If they didn’t succeed in this, they would purposely fail to provide necessary material and information. Another measure could be to raise an issue at the end of a meeting, so that exhausted self-managers would not have enough patience to discuss it carefully. These maneuvers of informal groups could be neutralized only by experienced and conscious self-managers.

33. According to Vladimir Arzenšek’s research, workers’ councils had less power than CEOs. It is interesting that officials of the League of Communists had less power than workers’ councils in 1969, 1970, 1971 and 1974, but more in 1981 (Potts, Development of the System of Representation in Yugoslavia, 354). This research showed two important conclusions: first, the influence of the ruling party at the enterprise level was not as big as one might surmise given the party’s role in society as a whole; second, workers lost the power struggle against managerial strataat the micro level.

34. Laslo Sekelj, Jugoslavija – struktura raspadanja,Rad, Beograd, 1990,57

35. For example, the difference between Kosovo and Slovenia grew from 1:3.9 in 1952 to 1:7.9 in 1989 (Dejan Jović, Jugoslavija – država koja je odumrla, Prometej, Zagreb, 2003, 218).

36. Before 1965 the state controlled 73% of gross income and 2/3 of accumulation (Sekelj, Jugoslavija, 18).

37. “Our system represents a mixture of self-management at the base and a pretty tough etatist structure above” (Svetozar Stojanović, “Diskusija o predavanju Predraga Vranickog,” Praxis, No. 5-6/1967)

38. Branko Horvat defined five factors which were necessary for successful development of workers’ self-management. These were: long industrial tradition (because skilled workers showed much more positive predisposition for self-management than unskilled ones), long tradition of political democracy, high personal incomes of workers, short working day, high level of education (Politička ekonomija socijalizma, 218). None of these existed at the time workers’ councils were introduced in Yugoslavia, while some of them did not exist there at any time.

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