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.[1]A 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
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.[8]Secondly, 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.[10]Finally, Stalin’s aim was to create a monolithic socialist bloc
under firmer Soviet control.[11]Stalin 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.[14]Soon 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.[21]The 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
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.[31]So, 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 (2 million from the British.[33]In 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.[37]But 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
In January 1961 a number of economical reforms were introduced. Banks
were made more independent, dinar was devalued. But this mini-reform was
unsuccessful.[39]Yugoslav 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.[41]The Reform had five major
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.[43]The 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.[45]Tito’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
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.[51]When Tito died in
1980 Yugoslavia was unique. It was the only communist neutral in the
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


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,
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)

[1]D.Wilson, Tito’s Yugoslavia (Cambridge, London, New York, Melbourne:
Cambridge University Press, 1979), p. 33
[2]D.Rusinow, The Yugoslav Experiment 1948-1974 (London: C.Hurst & Company,
1977), p. 12
[3]D.Wilson, op. cit., p. 38
[4]D.Rusinow, op. cit., p.12
[5]D.Wilson, op. cit., p.38
[6]P.Calvocoressi, World Politics Since 1945 (6th ed., London and New York:
Longman, 1991), p.266
[7]D.Rusinow, op. cit., p.22
[8]F.W.Neal, Titoism in Action: The Reforms in Yugoslavia after 1948
(Berkeley and Los Angeles: University of California Press, 1958), p. 2
[9]D.Wilson, op. cit., p. 47
[10]H.Lydall, Yugoslav Socialism: Theory and Practice (Oxford: Clarendon
Press, 1984), p. 60
[11]D.Rusinow, op. cit., p. 23
[12]P.Calvocoressi, op. cit., p. 237
[13]D.Rusinow, op. cit., p. 25
[14]Ibid., pp. 26-27
[15]H.Lydall, op. cit., pp. 61-63
[16]D.Rusinow, op. cit., p. 27
[17]D.Wilson, op. cit., p.54
[18]D.Rusinow, op. cit., p. 29
[19]H.Lydall, op. cit., p. 63
[20]D.Wilson, op. cit., pp. 63-64
[21]F.W.Neal, op. cit., p. 7
[23]Ibid., p. 8
[24]C.A.Zebot, ‘Yugoslavia’s “Self-Management” on Trial’, in Problems of
Communism, 1082, vol. 3, no.2, p. 43
[25]D.Rusinow, op. cit., p. 63
[26]H.Lydall, op. cit., p. 71
[27]R.Lowenthall, ‘Development vs. Utopia in Communist Policy’, in
Ch.Johnson (ed.), Change in Communist Systems (Stanford: Stanford
University Press, 1970), pp. 102-103
[28]D.Rusinow, op. cit., p.69
[29]K.Dawisha, Eastern Europe, Gorbachev, and Reform: The Great Challenge
(2nd ed. Cambridge: Cambridge University Press, 1990), p. 256
[30]D.Rusinow, op. cit., pp. 74-75
[31]D.Wilson, op. cit., p.81
[32]H.Lydall, op. cit., p. 73
[33]D.Wilson, op. cit., pp. 74-75
[34]Ibid., p. 84
[35]F.W.Neal, op. cit., p.7
[36]D.Wilson, op. cit., p. 75
[37]D.Rusinow, op. cit., p. 108
[38]Ibid., p. 111
[39]H.Lydall, op. cit., p. 79
[40]A.Z.Rubinstein, ‘Reforms, Nonalignment and Pluralism’, in Problems of
Communism, 1968, vol. 17, no. 2, p. 32
[41]Fr.W.Neal and W.M.Fisk, ‘Yugoslavia: Towards a Market Socialism’, in
Problems of Communism, 1966, vol. 15, no. 6, p. 29
[42]H.Lydall, op. cit., pp. 81-82
[43]Ibid., p. 89
[44]Ibid., p. 90
[45]P.Calvocoressi, op. cit., p. 267
[46]G.K.Bertsch, ‘The Revival of Nationalisms’, in Problems of Communism,
1973, vol. 22, no. 6, p. 4
[47]D.Wilson, op. cit., p. 209
[48]K.Dawisha, op. cit., p. 271
[49]H.Lydall, op. cit., p. 91
[50]Ibid., p. 103
[51]D.Wilson, op. cit., p. 262
[52]P.Calvocoressi, op. cit., p. 269
[53]H.Lydall, op. cit., p. 150

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