The Politics of Eastern Europe



Jonas Daniliauskas


Terence P McNeill

16 May 1995


The aim of this essay is to show how Josip Broz Tito created and maintained the socialist system in Yugoslavia, which was some kind of way between the Soviet socialism and Western capitalism. The main attention will be focused on the reasons of the Tito’s break with Stalin, on the origins of the separate way, and the developments of this way.

The Situation in 1945-1948

Early in November 1944, Tito, who was supreme commander of the National Liberation Army and Secretary-General of the Communist Party of Yugoslavia (CPY) and Subasic, who was a representative of the Royal Yugoslav Government concluded a draft political agreement that elections should be held to a Constituent Assembly which would decide on the future form of the government in Yugoslavia.1A new Yugoslav Provisional Government was created on 7 March 1945. Tito became the last Royal Yugoslav Prime Minister and Minister of Defense.2 The new government was immediately recognised by the British, American and Soviet governments.

In August 1945 the People’s Front was formed. It was an ‘umbrella organisation’ in which those non-communist parties that still existed would collaborate with the CPY.3 It organised a single list of candidates for the elections held on 11 November 1945 for a Constituent Assembly. About 90% of the electorate voted for the official candidates.

The first act of the Constituent Assembly was to abolish the monarchy and declare Yugoslavia a Federal People’s Republic.4

Even before that the centre of political power already was the Politburo of the CPY. From April 1945 currency reform, confiscation of the property of former collaborators, the nationalisation of most existing industry, and the strict control of rents were put into force.5

The new Constitution of 31 January 1946 was based largely on the 1936 constitution of the SU. It had nationalised all industrial, commercial and financial enterprises, limited individual landholdings to 60 acres and organised the surplus agricultural land into collective farms.6 About 1.6 million hectares of land were expropriated.

So, in the first years of Tito’s government Yugoslavia was a highly centralised one-party state. The centre of political power was the Politburo of the CPY. The first Five Year Plan for 1947-1952 was published and put into effect early in 1947. With the reorganisation of federal, republican and local government to cope with the first Five Year Plan, the Yugoslav political-economic system came even closer to its Soviet model and became a single, giant, countrywide and monopolistic trust.7

The Origins of the Separate Way

A few important factors and differences could be named as the origins of the Tito’s break with Stalin and of the evolution of Tito’s separate way.

The biggest difference between Yugoslavia and the other East European countries was that in Yugoslavia - and only in Yugoslavia - had the Communists established themselves in power without important assistance from the SU.8Secondly, Stalin did not want to help Yugoslavia to build up a balanced economy. It suited for him better to conclude long-term agreements under which Yugoslavia bound itself to sell raw materials at low prices, and ceased to process them.9 Thirdly, Stalin failed to give Yugoslavia full support in its demands for the cession of Trieste from Italy.10Finally, Stalin’s aim was to create a monolithic socialist bloc under firmer Soviet control.11Stalin wished to secure in Yugoslavia a regime as obedient as any other in East Europe.12

The basic issue was very simple: whether Tito or Stalin would be dictator of Yugoslavia. What stood in Stalin’s way was Tito’s and hence the Yugoslav regime’s autonomous strength.13

The first sign the Yugoslavs had that their relations with the SU were moving towards a serious crisis came in February 1948, when Stalin abruptly summoned high-level Yugoslav and Bulgarian delegations to Moscow. Tito sent Kardelj and Bakaric to join Djilas, who was already there for talks about Albania and Soviet military aid to Yugoslavia. But the only treaty signed was a Soviet text binding the Yugoslav government to consult with the Soviet government on all foreign policy issues.14Soon after that Stalin postponed negotiations for a renewal of the Soviet-Yugoslav trade agreement which was the keystone of Yugoslav economical policy. It became clear to the Yugoslav leaders that there was no prospect of healing their rift with the SU except by accepting total subordination.15 At this point Tito took the conflict before the Central Committee of the CPY, on 1 March 1948. There the Politburo received a vote of confidence for their rejection of Soviet demands.16

The Soviet responded after a few weeks. On 18 March they informed that Soviet military advisers and instructors in Yugoslavia were ‘surrounded by hostility’ and would therefore all be withdrawn immediately. On the next day, a similar announcement was made in respect of Soviet civilian advisers.17

In April Yugoslavia refused to attend the Cominform meeting. The Cominform met without the Yugoslav delegation on 28 June 1948. The CPY was condemned and it was declared that by refusing to attend the meeting the Yugoslav Communists had placed themselves ‘outside the family of fraternal Communist Parties, outside the united Communist front, and outside the ranks of the Cominform.’18

Stalin took further economical and political steps to place Yugoslavia outside the Soviet Bloc. By summer 1949 deliveries to Yugoslavia had been slowed down or stopped, and by the end of the year, all trade between Yugoslavia and the Soviet Bloc has ceased.19 From August 1949 all countries of the Soviet Bloc denounced their treaties of friendship and mutual aid with Yugoslavia. The CPY as well as Tito had been finally excommunicated and outlawed.20

The Separate Way

After the break with the Soviet Bloc there was a need to find an ideological basis for the unique Yugoslav position as a Communist nation outside the Soviet community.21The Yugoslavs contended that the SU had deviated from ‘true Marxism-Leninism’ as a result of an independent Communist bureaucracy created by Stalin which transformed the dictatorship of the proletariat into a dictatorship over the proletariat.22

The essence of the new doctrine was that the state must ‘wither away’. The key to this development was decentralisation of the government, of the economy, and, later, of the CPY.23

The essence of the decentralisation in the economy was the introduction of self-management system. First real step towards self-management was the Basic Law on the Management of State Economic Enterprises and Higher Economic Associations by the Work Collectives which came into force in June 1950. In fact, this law remained purely declaratory, until the initial operational provisions were passed in 1952-1953. Then followed an endless zigzag of constitutional, legislative, and other changes and reversals.24 In April 1951 the Federal Planning Commission was abolished. At the end of 1951 a new Law on the Planned Management of the National economy took force. The Soviet system of planning was abandoned. In its place the Yugoslavs introduced annual (and later medium-term) ‘Social Plans’, which at the enterprise level were no longer directive and compulsory, but indicative.25

In 1951-1952 there were several efforts to free prices, and several devaluations of dinar.26

The economical reforms were followed by the crucial turn in agricultural policy in early 1953, when the movement toward collectivisation was reversed and the peasants were permitted to leave the collective farms. Ever since that turn the Yugoslav agriculture has been predominantly based on individual farming.27

The law of May 1949 on People’s Committees had given greater political and economical powers to the district, as opposed to republican or federal, levels of government. An administrative reorganisation of local government units was designed to strengthen them through enlargement. The existing 7,104 local people’s committees were replaced by 3,834 communes grouped in 327 counties, plus 24 cities without county affiliations.28

Administrative decentralisation was carried further. Many of the Federal Ministries responsible for the direct management of the economy were abolished. In general, the number of ministries was reduced to 19 from 34.29

The role of the CPY was also reformed. The 6th Congress of the CPY met in November 1952. The redefinition of the CPY was symbolised by a change of name. The CPY became the LCY, the League of Communists of Yugoslavia. The Resolution and the Statute adopted by the Congress redefined the role of the Party. The ‘basic duty and role of Communists’ was ‘political and ideological work in educating the masses.’ The LCY ‘is not and cannot be the direct operative manager and commander in economic, State, or social life.’30

The conclusions of the Law on People’s Committees and the 6th Congress of the LCY were formally embodied in the new Constitutional Law in January 1953. Article 3 pronounced the People’s Committees of municipalities and districts to be ‘the basic organs of state authority’ and limited the powers of federal and republican governments to the rights (admittedly still considerable) specified by the Federal and Republican Constitutions.31So, the devolution of economic power to the enterprises was matched by a devolution of political power to the communes.32

But as the reforms begun, the economic situation was becoming more and more complicated. After the beginning of the economic blockade, Yugoslavia found itself in dangerous economic situation. Tito felt bound to turn to the West for economic aid. In late summer 1949 Yugoslavia had applied to the World Bank and the US Export-Import Bank for credits of $250 million. The first formal request by the Yugoslav government for American foodstuffs was made in October 1950.

On 18 November 1950 President Truman recommended the Congress a large-scale scheme of aid to Yugoslavia, and on 29 November, an American-Yugoslav Aid Agreement was concluded. By the end of January 1951, the sum of American aid had reached $17 million, with a further $35 million promised, and a further Ј2 million from the British.33In summer 1952 the US administration made a further $30 million credit available, and by the end of the year Yugoslav foreign trade had again reached its total level of 1948, with the main Western powers taking the place of the Soviet Bloc.34

The other result of American aid was the beginning of a pro-Western Yugoslav foreign policy.35 On 14 November 1950, the US-Yugoslav agreement on the re-equipment of the Yugoslav Army was signed.36

The American aid led to the boom of the Yugoslav economy which had been achieved in party by means of a high rate of investment expenditure.37But by the end of 1961 the boom had turned into recession. The growth rate for industrial production, which had been 15% in 1960, declined to only 7% in 1961 and an annual rate of 4% in the first half of 1962.38

In January 1961 a number of economical reforms were introduced. Banks were made more independent, dinar was devalued. But this mini-reform was unsuccessful.39Yugoslav economy needed greater reforms. Yugoslavia already was living beyond its means. In 1964 and the first half of 1965 the country was incurring a balance-of-payments deficit at a rate of more than $200 million annually.40

All these problems led to the introduction of the Economic Reform in 1965, which had two principle aims: to make Yugoslav goods competitive in international markets, and to modernise the economy by eliminating uneconomic investment and production and by compelling enterprises to respond to the forces of supply and demand.41The Reform had five major components:

1. Lower taxes;

2. the role of the state in investment allocations was henceforward to be limited;

3. very large adjustments in product prices designed to bring relative domestic prices designed to bring relative domestic prices closer to world parities;

4. the dinar was devalued from 750 to 1,250 to the dollar; customs duties, export subsidies and the range of quantative restrictions were reduced; and Yugoslavia become a full member of GATT;

5. private peasants were given the right to buy farm machinery, and the opportunity to obtain bank credits for this purpose.42

But the immediate economic results of the Reform were minor. In the first years of the Reform Yugoslavia was facing rapid inflation, a serious recession and growing unemployment.43The major effects of the Reform were in the sphere of banking and trade. The foreign trade was expanded.44

The economic problems led to a rise of nationalism in Croatia and Slovenia. The most productive enterprises were located in Croatia and Slovenia, and it was in the interests of Croats and Slovenes to have a less centralised country. In Croatia agitation for more autonomy went to the length of demands for sovereign independence (but in Yugoslav confederation) and a separate seat in the UN.45Tito’s response to the ‘national excesses’ was to force the resignation and replacement of the highest-level Croatian leaders in December 1971. During 1972, the LCY leadership structure throughout the country underwent a major reshuffling.46

In general, the 1970s were marked by the two major developments - the reconciliation with the SU, and the introduction of the ‘delegate’ system by the Constitution of 1974.

Brezhnev’s visit to Belgrade in August 1971 symbolised the end of the period of acute suspicion. Tito returned Brezhnev’s visit in June 1972, and negotiations were duly begun in September for the huge new Soviet credit ($1,300 million) for the construction of new industries.47 In October 1973, during a visit to Yugoslavia, Soviet Prime Minister Aleksei Kosygin and Yugoslav Prime Minister Djemal Bijedic agree to non-interference in internal affairs, industrial co-operation, and better understanding.48

The major development in the domestic politics was the promulgation of the new Constitution in 21 February 1974. There were three principal aims of this Constitution:

1. to break down larger enterprises into smaller components;

2. to eliminate direct elections;

3. to introduce a new system of ‘voluntary social planning’.49

Since 1974 Yugoslavia was ruled by ‘delegates’, who were given mandates by ‘delegations’, who in turn were mandated by the voters.50


Tito has proved to be a remarkable statesman, whose deliberate policies, pragmatic leadership have enabled his country to survive great dangers and to build a system which had no analogue.51When Tito died in 1980 Yugoslavia was unique. It was the only communist neutral in the world.52

The Yugoslav system differed from both the capitalist system and the Soviet-type socialist system. On the one side there was very little private ownership of productive assets except in agriculture; on the other there was no complete system of central planning. Yugoslavia shared with capitalism a market economy; and it shared with the SU a monopoly Marxist Party.53


1. G.K.Bertch, ‘The Revival of Nationalisms’, in Problems of Communism, 1973, vol. 22, no. 6, pp. 1-15

2. P.Calvocoressi, World Politics Since 1945 (6th ed., London and New York: Longman, 1991)

3. K.Dawisha, Eastern Europe, Gorbachev, and Reform: The Great Challenge (2nd ed., Cambridge: Cambridge University Press, 1990)

4. R.Lowenthall, ‘Development vs.Utopia in Communist Policy’, in Ch.Johnson (ed.), Change in Communist Systems (Stanford: Stanford University Press, 1970), pp. 33-116

5. H.Lydall, Yugoslav Socialism: Theory and Practice (Oxford: Clarendon Press, 1984)

6. Fr.W.Neal, Titoism in Action: The Reforms in Yugoslavia after 1948 (Berkeley and Los Angeles: University of California Press, 1958)

7. Fr.W.Neal and W.M.Fisk, ‘Yugoslavia: Towards a Markat Socialism’, in Problems of Communism, 1966, vol. 15, no. 6, pp. 28-37

8. A.Z.Rubinstein, ‘Reforms, Nonalignment and Pluralism’, in Problems of Communism, 1968, vol. 17, no. 2, pp. 31-41

9. D.Rusinow, The Yugoslav Experiment 1948-1974 (London: C.Hurst & Company, 1977)

10. C.A.Zebot, ‘Yugoslavia’s “Self-Management” on Trial’, in Problems of Communism, 1982, vol. 31, no. 2, pp. 42-49

11. D.Wilson, Tito’s Yugoslavia (Cambridge, London, New York, Melbourne:Cambridge University Press, 1979)

1D.Wilson, Tito’s Yugoslavia (Cambridge, London, New York, Melbourne: Cambridge University Press, 1979), p. 33