IN THE IMMEDIATE POSTWAR PERIOD, the Yugoslav political and administrative institutions were developed with the aim of fully centralized economic planning and control. The initial choice of centralized economic control was based on considerations that included but were not limited to ideological concepts. At the time, the economy faced great problems of reconstruction and structural change, and the available resources were scarce. Under similar circumstances, countries with widely differing political and economic systems have applied administrative controls and physical rationing of supplies. The period of centralized controls was short in Yugoslavia, and by the early 1950’s the fundamentals of a decentralized socialist economy specifically adapted to Yugoslav circumstances had been created.
In the period of centralized planning and control in the Yugoslav economy, complex problems were encountered and the experience generally was not encouraging. Subsequent development of the economic system, through various stages, has provided insight into the problems of economic policy in a system of decentralized socialism. The discussion below concentrates on the monetary aspects of the emerging Yugoslav economic system, but some connected aspects of general economic policy are described briefly for background.
Mr. Hauvonen, Senior Economist in the European Department, is a graduate of the Helsinki School of Economics.
Before World War II there were about 600 commercial banks in Yugoslavia, most of them small. In addition, there were numerous credit cooperatives, organized into central associations by branches. Of the 5 big commercial banks, 3 were controlled by foreign interests.
Banks, industry, transport, and wholesale trade, December 1946; retail trade, April 1948.
The Socialist Federal Republic of Yugoslavia comprises six republics and two autonomous regions. Locally, the administrative unit is the commune (opstina); previously, several communes together formed a district (srez), but districts were abolished in the mid-1960’s.
Recently, legal provisions have been approved for depositing the resources of the Postal Savings Bank with the commercial banks, but this change has not been implemented so far.
National loans with compulsory subscription were issued in 1948 and 1951. In 1963 a loan was issued for reconstruction in Skopje; sold to economic and social organizations, the seven-year, 6 per cent bonds provide limited transferability. In 1964 a bond issue was sold to economic and social organizations to finance infra-structural investments by the Federal Government.
For example, an economic organization, or a bank, cannot own equity in another economic organization. A bank can obtain a mortgage on an economic organization’s fixed assets and inventories as a security for credit; if the credit is not repaid, the bank can recover by liquidating such assets but it cannot “own” them.
Final expenditure under Marxism implies private and public consumption and investment in fixed assets.
See, e.g., Albrecht Forstmann, Geld und Kredit, Erster Teil (Göttingen, 1952), pp. 63-65 (in German). The Bank of England used the real-bills argument to defend policies it implemented in 1797-1821, and the subsequent criticism evolved into the controversy between the banking and currency schools of thought. In discussing money as tickets entitling factors of production to a corresponding share of output, Friedrich Bendixen (d. 1920) subscribed to the “needs of trade” approach of the banking school as the basic guideline in noninflationary commercial finance.
The official view was that meaningful interest policy was possible only after various institutional reforms, and, in any case, relative price stability had to be achieved first.
This tax was levied on profits that were considered to be exceptionally high under specified, rather complex criteria; it was gradually abolished in the early 1960’s.
The legal foundation of the reform is contained in the National Bank of Yugoslavia Law, 1965 and in the Banking and Credit Law, 1965; for an English translation of the laws, see Hans Aufricht, Central Banking Legislation, Vol. II (Washington, 1967), pp. 747-58 and 814-52.
In exceptional cases, short-term credit may be granted for a period of up to two years.
A control problem did exist with regard to shifts of funds (including short-term borrowing) between accounts within an economic organization.
Sight deposits of nonbank, nongovernmental entities, excluding blocked or potentially blockable accounts.
In exceptional cases, however, repayment terms of up to two years may be granted.
The minimum reserve ratio is subject to a legal maximum of 35 per cent; the central bank has, in recent years, made frequent but small changes in the actual ratio within the range of 25–35 per cent.
Under the new credit regulations, direct investment cooperation between economic organizations is provided for, although credits between them remain prohibited, in principle. Overdue commercial payments are not unusual, however, and it is difficult to determine to what extent such balances in fact represent credit arrangements.
See Dimitrije Dimitrijević, “The Use of Flow-of-Funds Accounts in Monetary Planning in Yugoslavia,” International Association for Research in Income and Wealth, The Review of Income and Wealth (New Haven, Connecticut), No. 1, March 1969, p. 101. (Dr. Dimitrijevic is Director of the Research Department of the National Bank of Yugoslavia.)