Skip to main content
SpringerLink
Log in

From Illyria towards Capitalism: Did Labour-Management Theory Teach Us Anything about Yugoslavia and Transition in Its Successor States?

  • 50th Anniversary Essay
  • Published:
Comparative Economic Studies Aims and scope Submit manuscript

Abstract

This paper explores whether labour-management theory provides significant insights into the operation of the Yugoslav economy and into the process of transition in the Yugoslav successor states. It concludes that the literature offered only modest insights into the operation of the Yugoslav economy, primarily because Yugoslavia did not satisfy many of the basic assumptions of the model. The socialist features of the Yugoslav economy remained dominant, suppressing many of the elements of economic democracy. The most significant contributions of the labour-management literature were theoretical, concerning supply responses of worker-controlled firms in a decentralised source allocation mechanism and the incentive, organisational and efficiency aspects of labour-management.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. In fact, they have a remarkably contemporary feel: price liberalisation, freedom for the firm to determine its output on the basis of prices, market-based costing of labour and capital, and rules for bankruptcy.

  2. Social compacts were agreements concluded between representatives of the political authorities, trade unions, enterprises and other organisations, on policies in specific fields, such as prices, income distribution, employment and foreign trade. Self-management agreements regulated relations between enterprises and other organisations in areas of mutual interest, such as terms for the foundation of firms and banks, or joint investment projects (see Uvalic, 1992, p. 7).

  3. Gross Social Product, or Social Product in Yugoslav terminology, corresponds to Gross Material Product: it is the value added of the ‘productive’ sectors of the economy, thus excluding most ‘non-productive’ sectors such as education, health, defense, banking and other services. In this sense it is similar to the concept of Net Material Product that was used in other socialist countries, but it is gross of depreciation.

  4. It could be argued that Yugoslavia became an irrelevant testing ground for any kind of labour-management in the 1970s because of political problems – the Croatian ‘spring’ and near civil war, the purges in Serbia in 1971, the energy-sapping disputes, the extreme decentralisation of the economy and republican self-sufficiency in many areas. However, we note above that political decentralisation occurred simultaneously with attempts to improve the self-management system. The 1976 Associated Labour Act was considered the ‘Workers' Bible’ because of the self-management rights supposedly guaranteed to workers.

  5. The theory of the labour-managed firm developed in the West was first presented in the works of Horvat (1967, 1972) and Suvakovic (1977), but was for a long time ignored by some of the leading Yugoslav economists, also because of its ‘bourgeois’ and neoclassical foundations.

  6. It is notable that the agent meant to act as entrepreneur was never fully developed in labour-management models; probably the only exception is Prasnikar et al. (1994), where a framework is employed which reflects all the three main decision-makers in Yugoslavia: workers, managers and government authorities, as well as their strategic interaction (bargaining).

  7. This did not preclude the possibility that one party could remain dominant on the political scene, as happened in Croatia (HDZ – Croatian Democratic Alliance) and Serbia (SPS – Socialist Party of Serbia).

  8. The contribution of the social property sector to GSP was close to the Yugoslav average in most cases, ranging from 84% in Bosnia and Herzegovina to 89.9% in Slovenia; the only real exception was Kosovo where it was exceptionally low, only 77%. The private sector was much more important in Kosovo than elsewhere because of the large share of agriculture and small-scale crafts, both predominantly in private hands. These shares have been calculated on the basis of data on GSP in constant 1972 prices reported in the Statistical Yearbook of Yugoslavia 1991 (Federal Office of Statistics, 1991, p. 475) (Uvalic, 2008).

  9. Still, the laws adopted by all the successor states were more restrictive than the previous Federal privatisation law regarding discounts, repayment periods, etc.

  10. This provision was included in the 1990 Serbian Constitution that guaranteed the equal treatment of four forms of property – social, private, state and cooperative (see Sluzbeni Glasnik Republike Srbije, 1990, Article 56). It was changed only in 2006, with the adoption of the new Serbian Constitution, which states that ‘Private, cooperative and public property is guaranteed’, whereas ‘Existing social property is to be transformed into private property under conditions, methods and deadlines envisaged by law’ (see Sluzbeni Glasnik Republike Srbije, 2006, Article 86).

  11. By 2007, even Bosnia and Herzegovina had a private sector contributing 60% to GDP.

References

  • Bajt, A . 1988: Samoupravni oblik drustvene svojine (The self-managed form of social property). Globus: Zagreb.

    Google Scholar 

  • Barkai, H . 1977: Growth patterns of the kibbutz economy. North Holland: New York.

    Google Scholar 

  • Bartlett, W and Uvalic, M . 1986: Labour-managed firms, employee participation and profit-sharing: Theoretical perspectives and European experience. Special Issue of Management Bibliographies and Reviews 12 (4): 3–66.

    Google Scholar 

  • Ben-Ner, A and Estrin, S . 1991: What happens when unions run firms? Unions as employee representatives and as employers. Journal of Comparative Economics 15 (1): 65–87.

    Article  Google Scholar 

  • Bergson, A . 1967: Market socialism revisited. The Journal of Political Economy 75 (5): 655–673.

    Article  Google Scholar 

  • Blinder, A . 1988: Paying for productivity. Brookings: Washington, DC.

    Google Scholar 

  • Bonin, JP, Jones, DC and Putterman, L . 1993: Theoretical and empirical studies of producer cooperatives: Will ever the twain meet? Journal of Economic Literature 31: 1290–1320.

    Google Scholar 

  • Cable, J . 1984: Employee participation and firm performance: A prisoners' dilemma framework. EUI Working Paper No. 84/126.

  • Cable, J and Fitzroy, FR . 1980: Cooperation and productivity: Some evidence from West German experience. In: Clayre, A (ed). The Political Economy of Cooperation and Participation: A Third Sector. Oxford University Press: Oxford, pp. 141–160.

    Google Scholar 

  • Cole, GDH . 1944: A century of co-operation. George Allen and Unwin: London.

    Google Scholar 

  • Commisso, ET . 1979: Workers' control under plan and market. Yale University Press: New Haven and London.

    Google Scholar 

  • Domar, ED . 1966: The soviet collective farm as a producer co-operative. American Economic Review 56 (4): 734–757.

    Google Scholar 

  • Dow, GK . 1986: Control rights, competitive markets, and the labor management debate. Journal of Comparative Economics 10 (1): 48–61.

    Article  Google Scholar 

  • Dreze, J . 1976: Some theory of labor management and participation. Econometrica 44 (6): 1125–1139.

    Article  Google Scholar 

  • Dumas, A (ed) 1981: L'Autogestion, un systeme economique? Dunod: Paris.

    Google Scholar 

  • Estrin, S . 1982: Long-run responses under self-management. Journal of Comparative Economics 6 (4): 363–378.

    Article  Google Scholar 

  • Estrin, S . 1983: Self-management: Economic theory and Yugoslav practice. Cambridge University Press: Cambridge.

    Google Scholar 

  • Estrin, S . 1991: Yugoslavia: The case of self-managing market socialism. Journal of Economic Perspectives 5 (4): 187–194.

    Article  Google Scholar 

  • Estrin, S . 2002: Competition and corporate governance in transition. Journal of Economic Perspectives 16 (1): 101–124.

    Article  Google Scholar 

  • Estrin, S, Grout, P and Wadhwani, S . 1987: Profit-sharing and employee share ownership. Economic Policy 2 (1): 14–62.

    Google Scholar 

  • European Bank for Reconstruction and Development (EBRD). 2002: Transition Report. London, various issues.

  • European Bank for Reconstruction and Development (EBRD). 2007: Transition report 2007. London.

  • Furubotn, EG and Pejovich, S . 1970: Property rights and the behaviour of the firm in a socialist state – The example of Yugoslavia. Zeitschrift fur Nationalokonomie 30: 431–454.

    Article  Google Scholar 

  • Horvat, B . 1967: A contribution to the theory of the Yugoslav firm. Economic Analysis 1 (1–2): 288–293.

    Google Scholar 

  • Horvat, B . 1972: Critical notes on the theory of the labour-managed firm and some macroeconomic implications. Economic Analysis 6: 3–4.

    Google Scholar 

  • Horvat, B . 1982: The political economy of socialism. M.E. Sharpe: Armonk, NY.

    Google Scholar 

  • Ireland, NJ and Law, PJ . 1981: Efficiency, incentives, and individual labor supply in the labor-managed firm. Journal of Comparative Economics 5 (1): 1–23.

    Article  Google Scholar 

  • Jensen, MC and Meckling, WH . 1979: Rights and production functions: An application to labor-managed firms and codetermination. Journal of Business 52 (4): 469–506.

    Article  Google Scholar 

  • Jurin, S (ed) 1976: Politicka ekonomija (Political economy). Naucna knjiga: Belgrade.

    Google Scholar 

  • Kardelj, E . 1955: ‘O nekim nedostacima u radu komunista.’ (‘Certain shortcomings in the work of communists’). Komunist 7 (4): 154–170.

    Google Scholar 

  • Kekic, L . 1996: Assessing and measuring progress in the transition In: Economist Intelligence Unit Country Forecast – Economies in Transition – Eastern Europe and the Former Soviet Union – Regional Overview, 2nd quarter 1996, Economist Intelligence Unit: London, pp. 5–22.

    Google Scholar 

  • Korac, M . 1961: Teze za teoriju socijalisticke robne proizvodnje. (‘Theses for a theory of socialist commodity production’). Socijalizam (1): 31–51.

  • Korac, M and Vlaskalic, T . 1975: Politicka ekonomija (Political economy). Rad: Belgrade.

    Google Scholar 

  • Kornai, J . 1980: Economics of shortage. North Holland: Amsterdam.

    Google Scholar 

  • Kornai, J . 1992: The socialist system. The political economy of communism. Clarendon Press: Oxford.

    Book  Google Scholar 

  • Lange, O . 1936: On the economic theory of socialism. Review of Economic Studies 4 (1): 53–71.

    Article  Google Scholar 

  • Lavigne, M . 1999: The economics of transition. From socialist economy to market economy, 2nd Edition. Macmillan: Basingstoke.

    Google Scholar 

  • Lydall, H . 1984: Yugoslav socialism: Theory and practice. Clarendon Press: Oxford.

    Google Scholar 

  • Madzar, L . 1999: Corporate governance in an ex-labour managed economy. In: Ostojic, N and Norman, S (eds). Recent Lessons from Transition and Privatisation – Problems of Institutions and Corporate Governance. European Centre for Peace and Development of the UN University for Peace: Belgrade, pp. 257–266.

    Google Scholar 

  • Marschak, T . 1968: Centralised versus decentralised resource allocation: The Yugoslav laboratory. Quarterly Journal of Economics 82: 561–587.

    Article  Google Scholar 

  • Meade, JE . 1972: The theory of labour-managed firms and of profit sharing. Economic Journal 82 (325): 402–428.

    Article  Google Scholar 

  • Meade, JE . 1982: Labour co-operatives, labour-capital partnerships, and profit-sharing schemes. In: Meade, JE (ed). Stagflation – Volume 1 – Wage Fixing. George Allan and Unwin: London, Boston and Sydney, pp. 119–137.

    Google Scholar 

  • Milenkovitch, DD . 1977: The case of Yugoslavia. American Economic Review 67 (1): 55–60.

    Google Scholar 

  • Miovic, P . 1975: Determinants of income differentials in Yugoslav self-managed enterprises. PhD Thesis, University of Pennsylvania.

  • Montias, JM . 1986: On the labour-managed firm in a competitive environment. Journal of Comparative Economics 10 (1): 2–8.

    Article  Google Scholar 

  • Nuti, DM . 1992: On traditional cooperatives and James Meade's labor-capital discriminating partnerships. Advances in the Economic Analysis of Participatory and Labor-Managed Firms 4: 1–26.

    Google Scholar 

  • Oakeshott, R . 1978: The case for workers' co-ops. Routledge & Kegan Paul: London.

    Google Scholar 

  • Pejovich, S . 1992: Why has the labor-managed firm failed. Cato Journal 12 (2): 461–473.

    Google Scholar 

  • Pjanic, Z, Rakic, V, Maksimovic, I, Jurin, S, Jovasevic, V, Konvalinka, V and Petrovic, N. 1968: Koncepcija i verifikacija specificne cene proizvodnje u jugoslovenskoj privredi (Concept and verification of the specific price of production in the Yugoslav economy). Institut drustvenih nauka: Belgrade.

    Google Scholar 

  • Prasnikar, J . 1983: Teorija i praksa organizacije udruzenog rada (Theory and practice of the organization of associated labor). Centar za kulturnu djelatnost: Zagreb.

    Google Scholar 

  • Prasnikar, J and Svejnar, J . 1988: Economic behavior of Yugoslav enterprises. Advances in the Economic Analysis of Participatory and Labor-Managed Firms 3: 237–312.

    Google Scholar 

  • Prasnikar, J and Svejnar, J . 1991: Workers participation in management vs. social government and ownership policies: Yugoslav lessons for transforming socialist economies. Comparative Economic Studies 33 (4): 27–46.

    Article  Google Scholar 

  • Prasnikar, J and Svejnar, J . 2007: Investment, wages and corporate governance during the transition: Evidence from Slovenian firms. In: Estrin, S, Kolodko, GW and Uvalic, M (eds). Transition and Beyond – Essays in Honor of Mario Nuti. Palgrave Macmillan: Basingstoke, pp. 149–173.

    Chapter  Google Scholar 

  • Prasnikar, J, Svejnar, J, Mihaljek, D and Prasnikar, V . 1994: Behavior of participatory firms in Yugoslavia: Lessons for transforming economies. The Review of Economics and Statistics 76 (4): 728–741.

    Article  Google Scholar 

  • Pryor, F . 1983: The economics of production cooperatives – A readers' guide. Annals of Public and Cooperative Economy 54 (2): 133–172.

    Article  Google Scholar 

  • Putterman, L . 1982: Some behavioural perspectives on the dominance of hierarchical over democratic forms of enterprise. Journal of Economic Behavior and Organization 3: 139–160.

    Article  Google Scholar 

  • Sacks, SR . 1983: Self management and efficiency: Large corporations in Yugoslavia. George Allen and Unwin: London.

    Google Scholar 

  • Savezni zavod za statistiku (Federal Office of Statistics). 1991: Statisticki godisnjak Jugoslavije 1991 (Statistical yearbook of Yugoslavia 1991). Belgrade.

  • Sen, AK . 1966: Labour allocation in a cooperative enterprise. Review of Economic Studies 33 (4): 361–371.

    Article  Google Scholar 

  • Sertel, MR . 1982: Workers and incentives. North-Holland: Amsterdam, Holland.

    Google Scholar 

  • Sirc, L . 1979: The Yugoslav economy under self-management. Macmillan: London.

    Book  Google Scholar 

  • Sluzbeni Glasnik Republike Srbije. 1990: The constitution of the republic of Serbia. Sluzbeni Glasnik Republike Srbije: Beograd.

  • Sluzbeni Glasnik Republike Srbije. 2006: The constitution of the republic of Serbia. Sluzbeni Glasnik Republike Srbije: Beograd.

  • Stephen, FH . 1976: Yugoslav self-management 1945–74. Industrial Relations Journal 7 (4): 56–65.

    Article  Google Scholar 

  • Suvakovic, D . 1977: Samoupravno i kapitalisticko preduzece (The self-managed and the capitalist enterprise). Savremena administracija: Belgrade.

    Google Scholar 

  • Svejnar, J . 1981: Relative wage effects of unions, dictatorship and co-determination: Econometric evidence from Germany. Review of Economics and Statistics 63 (2): 188–197.

    Article  Google Scholar 

  • Tyson, LD'A . 1977: A permanent income hypothesis for the Yugoslav firm. Economica 44 (November): 393–408.

    Article  Google Scholar 

  • Uvalic, M . 1992: Investment and property rights in Yugoslavia – The long transition to a market economy. Cambridge University Press: Cambridge.

    Book  Google Scholar 

  • Uvalic, M . 1995: Privatization in disintegrating East European states: The case of former Yugoslavia. In: Daviddi, R (ed). Property Rights and Privatization in the Transition to a Market Economy: A Comparative Review. European Institute of Public Administration: Maastricht, pp. 191–229.

    Google Scholar 

  • Uvalic, M . 1997: Privatisation in the Yugoslav successor states: Converting self-management into property rights. In: Uvalic, M and Vaughan-Whitehead, D (eds). Privatisation Surprises in Transition Economies: Employee-Ownership in Central and Eastern Europe. Edward Elgar: Cheltenham, Reprinted in 1999, pp. 266–300.

    Google Scholar 

  • Uvalic, M . 2007: How different is Serbia? In: Estrin, S, Kolodko, GW and Uvalic, M (eds). Transition and Beyond – Essays in Honor of Mario Nuti. Palgrave Macmillan: Basingstoke, pp. 174–190.

    Chapter  Google Scholar 

  • Uvalic, M . forthcoming, 2008: Serbia's transition. The thorny road to a better future. Palgrave Macmillan: Basingstoke.

    Google Scholar 

  • Uvalic, R . 1954: The management of undertakings by the workers in Yugoslavia. International Labour Review 69: 235–254.

    Google Scholar 

  • Vahcic, A and Petrin, T . 1989: Financial system for restructuring the Yugoslav economy. In: Kessides, C, King, T, Nuti, M and Catherine, S (eds). Financial Reform in Socialist Economies. Economic Development Institute of the World Bank, and Florence, the European University Institute: Washington DC, pp. 154–161.

    Google Scholar 

  • Vanek, J . 1970: The general theory of labor-managed market economies. Cornell University Press: Ithaca, NY.

    Google Scholar 

  • Vanek, J . 1971: The participatory economy: An evolutionary hypothesis and a strategy for development. Cornell University Press: Ithaca, NY.

    Google Scholar 

  • Vanek, J and Espinosa, JG . 1972: The subsistence income, effort and development potential of labour management and other economic systems. Economic Journal 82: 1000–1013.

    Article  Google Scholar 

  • Vanek, J and Jovicic, M . 1975: The capital market and income distribution in Yugoslavia: A theoretical and empirical analysis. Quarterly Journal of Economics 89 (3): 432–433.

    Article  Google Scholar 

  • Vodopivec, M . 1991: The persistence of job security in reforming socialist economies. Soviet Studies 43 (6): 1011–1025.

    Article  Google Scholar 

  • Vodopivec, M . 1993: Determination of earnings in Yugoslav firms: Can it be squared with labor management? Economic Development and Cultural Change 41 (3): 623–632.

    Article  Google Scholar 

  • Ward, B . 1958: The firm in Illyria: Market syndicalism. American Economic Review 48 (4): 566–589.

    Google Scholar 

Download references

Acknowledgements

The authors gratefully acknowledge research assistance from Kasia Komosa and Angela Lei, as well as conversation and suggestions from Avner Ben-Ner, Joe Brada, Bozidar Cerovic, Derek Jones, Laza Kekic, Smiljan Jurin, Mario Nuti, Louis Putterman and Milan Vodopivec. Any remaining errors are their own.

Author information

Authors and Affiliations

  1. Department of Management, London School of Economics and Political Science, London, WC2A2AE, UK

    Saul Estrin

  2. Department of Economics, Finance and Statistics, Faculty of Political Sciences, University of Perugia, Perugia, Italy

    Milica Uvalic

Authors
  1. Saul Estrin
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Milica Uvalic
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Estrin, S., Uvalic, M. From Illyria towards Capitalism: Did Labour-Management Theory Teach Us Anything about Yugoslavia and Transition in Its Successor States?. Comp Econ Stud 50, 663–696 (2008). https://doi.org/10.1057/ces.2008.41

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/ces.2008.41

Keywords

JEL Classifications

Search

Navigation