Workers' Management in Yugoslavia

Workers' Management in YugoslaviaAuthor(s): Benjamin WardSource: Journal of Political Economy, Vol. 65, No. 5 (Oct., 1957), pp. 373-386Published by: The University of Chicago PressStable URL: http://www.jstor.org/stable/1827393 .

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THE JOURNAL OF

POLITICAL ECONOMY

Volume LXV OCTOBER 1957 Number 5

WORKERS' MANAGEMENT IN YUGOSLAVIA'

BENJAMIN WARD

University of California, Berkeley

IN RECENT months eastern Europe has experienced a flurry of suggestions, proposals, and promises about the

establishment of some degree of worker control over the operation of industry. In East Germany, it seems, only the sug- gestion stage was reached; in Poland some serious discussion of formal organi- zational revision has taken place; in Hungary workers' councils had a brief legal existence.2 Though a certain amount of industrial decentralization seems to be contemplated and in progress in the Soviet Union, the use of "organs of workers' management" for this purpose does not seem to be under consideration.'

Suggestions for worker-operated factories are at least as old as the ateliers of

the Paris Commune, where, as in eastern Europe today, the idea was more or less stillborn.4 And, of course, there are the German Betriebsrdte of the twenties and their current counterparts under the Mitbestimmungsrecht.5 But it seems evi- dent that none of these ancient or social- democratic devices provides the model for present-day revisionism. Rather it is Marshall Tito and his seven-year-old system of workers' management in industry that has been the inspiration.

I I should like to express my appreciation to Pro- fessors Gregory Grossman and Reinhard Bendix and to Mr. W. P. Keasbey, Jr., for critical comments and suggestions, and to the Ford Foundation for a grant covering the period of research and preparation of this article.

2 See, e.g., reports in the New York Times of No- vember 11 and December 12, 1956, on Hungary and East Germany, respectively; for Poland: Oscar Lange, "For a New Economic Program," Zycie gospodarcze ("Economic Life") (Warsaw), July 16, 1956, abridged and translated in News from behind the Iron Curtain (November, 1956).

3 The opinion of N. G. Aleksandrov, Sovetskoe trudovoe pravo ("Soviet Labor Law") (Moscow, 1954), pp. 200 f., that such a scheme is un-Marxian, since it involves the mixing of basis and superstruc- ture of society, would seem to be still current. It has at least become possible recently for a fairly detailed description of the Yugoslav system of workers' management to appear in the Soviet literature, however (see S. Rostovskii, "V gostiakh iugoslavskikh druzei ["Guests of Our Yugoslav Friends"], Sovetskie profsoiuzy ["Soviet Trade Unions"], IV [1956], 69- 73, 86-91).

4 F. Jellinek, The Paris Commune of 1871 (Lon- don, 1937), pp. 392-409; for a Yugoslav discussion of the doctrinal significance of the Commune see J. Sirotkovic, Novi privredni sistem FNRJ ("Yugo- slavia's New Economic System") (Zagreb, 1954), pp. 30-37.

6 See, e.g., H. J. Spiro, "Co-determination in Ger- many," American Political Science Review, XVIII (1954), 1114-27.

373



374 BENJAMIN WARD

Descriptions of the laws that formal- ized this system in Yugoslavia and some material on its operation have appeared in Western journals in recent years.' The purpose of this article is to expand this body of information by offering some rather tentative answers to three questions: (1) In what sense, if any, do the workers make the decisions that are made at the level of the firm in Yugo- slavia? (2) Who, other than the workers, participates in this decision-making? (3) What sorts of decisions can be made at this level? These are difficult questions under any circumstances but particular- ly when the information available is meager and the system of organization has been in operation for only a short period and has been subject to frequent revision. An attempt has been made to answer them in the hope that some basis for further research can be laid and some hypotheses can be developed for evaluation in the light of future events.

The extent to which workers' management could become effective depend- ed in large measure upon the scope for decision-making that was permitted the firm, a scope that varied widely over the period under consideration (1950-55). Before the modifications of 1952, the firm was almost exclusively an administrative unit, concerned only with the carrying-out of directives issued from above. The industrial hierarchy was very nearly a replica of that in the Soviet Un- ion. But, with the introduction of the "decentralized" social plan of 1952, the abolition of the distribution plan, the decentralization of price policy to the

level of the firm, and the elimination of detailed output norms, considerably more initiative became possible. This was increased further by the abolition of the chief directorates, the intermediate bodies between the firm and their respective ministries (counterparts of the So- viet chief administrations) in the summer of 1952. Provision was also made for limited control of the differential wage structure within the firm. At the same time the state reserved the right of direct intervention, a right that was not allowed to wither unused.7 And it was not long before the local governments began to exert considerable pressure on the policies of the firms within their respective districts.8 Finally, the failure of the new system to bring about the expected increase in productivity led to the reintroduction of labor norms, together with the re-establishment of a price-control board and a certain amount of cen- tralized price-setting. It was in this context that workers' management was in- troduced and developed.

Brieflly, the 1950 law9 provided for two new bodies within the firm in addition to the director: a workers council (radnieki save) and a management board (upravni odbor). The former was to be elected by the entire staff of the firm and was given such rights and duties as the following: approving the basic plan and the annual report (zavrsyni raeun),

6For example, F. W. Neal, "The Reforms in Yugoslavia," American Slavic and East European Review, XIII (1954), 227-44; D. Tochitch, "Les Conseils ouvriers en Yugoslavie," Revue d'histoire 6conomique et social, XXXIII (1955), 405-44; and A. Dragnich, Tito's Promised Land (New Bruns- wick, N.J., 1954).

7 For example, the prices of most textile products were drastically lowered by state decree in 1953 (Sluzbeni list FNRJ ["Official Gazette of the Federal People's Republic of Yugoslavia"], No. 45 [1953]).

8 These bodies pressured the firms to raise their prices because local governments derived a significant portion of their tax revenue from taxation of the firms' profits and other revenues (see E. Kardelj, "O nekim nedostacima u radu komunista" ["Some Shortcomings in the Work of the Communists"], Komunist, VII, No. 4 [1955], 154-70).

9 Sluzbeni list FNRJ, No. 43 (1950); reprinted in Komunist, Vol. II (1950).



WORKERS' MANAGEMENT IN YUGOSLAVIA 375

issuing resolutions about management of the firm and the execution of the plan, selecting and removing members of the management board, generally supervising the work of the management board, and making decisions about the distribution of funds that were freely disposable by the firm. The management board was to be chosen by the workers' council from among its members and was to perform such tasks as making up the basic plan, issuing monthly operating plans, making final decisions on appointments to senior positions within the firm, and deciding questions of labor norms. In general, the board was responsible for carrying out the plan and for the "correct" operation of the firm. Its small size-three to eleven members- presumably made it a more effective executive committee than the workers' council, which could have as many as a hundred and twenty members in the largest firms.

The director was appointed by the competent ministry until 1953, when the local people's committee (narodni odbor, the local territorial government), in con- sultation with the workers' council, made the appointments In general, the director was responsible for the day-to-day operational control of the firm's activi- ties. He was personally responsible for the carrying-out by his firm of the laws and decrees of governmental organs. He had the right to contract with other legal persons in the name of the firm (the management board did not have this right) and to hire, fire, and transfer workers." If the director thought that an order from the management board was in conflict with the body of govern-

mental administrative law, he had the right to veto the resolution temporarily until higher authorities rendered a final verdict. Such a verdict was to be issued within ten days of the protest. The director had the right to issue instructions about the operation of the firm but was required to submit them to the management board for confirmation at the board's next session.

In terms of the legal assignment of the various aspects of policy control, it seems clear that the intent was to allow the workers, through their elected representatives on the workers' councils, to de- cide the more basic matters under the control of the firm. The director and the management board are the instruments for giving the will of the workers an ex- plicit form and for supervising the carrying-out of that will. However, there is one important precondition for the im- plementation of this general policy within the firm: the elections must be such as to insure the selection of workers' council members who are in some sense representative of the desires of the workers.

It would seem that, under the procedures of the original election law, conditions were not such as to provide any real choice at the election. A secret bal- lot was provided, but the election was simply a matter of voting for or against a single list of candidates. This list was nominated either by the trade union or by petition of one-tenth of the workers.12 Later the election law was modified to permit several lists of candidates and voting by candidate rather than by

10 Sluzbeni list FNRJ, No. 51 (1953). A competi- tion (konkurs) is now held, with a joint committee of members of workers' council and people's committee (the latter in majority) serving as judges.

11 The final decision on hiring and firing rested with the management board in case of conflict. After 1952 the trade union was also involved in this decision (see Sluibeni list, No. 26 [1952], for the relevant statute).

12 Procedures were outlined in the basic law on workers' management.



376 BENJAMIN WARD

list.'3 Since data have been published on the elections of 1952, 1953, and 1954, I shall limit my discussion to these three elections on the assumption that the conditions of 1950-51 were not more favor- able to the democratic process.

The data on these elections are presented in Table 1. The writing-in of candidates was prohibited as a voting procedure,14 so that the number of lists presented is a good index of the range of choice actually available to the voter. Thus in at most 11 per cent of the elections there was some choice of candi-

viding, in all probability, a somewhat biased machinery for selecting potential representatives of the workers.'5

The extent to which the workers' councils were weighted with members of the League of Communists might suggest the extent to which broader political considerations entered into the selection of candidates. Unfortunately, membership breakdowns for Yugoslavia as a whole are not available. There are, however, figures for the Republic of Croatia, one of the three most important industrial republics, which show that 13.7 per

TABLE 1 *

ELECTIONS FOR THE WORKERS' COUNCILS, 1952-54

1952 1953 1954

1. No. of employed persons in firms employing more than 29 (thousands) t ........................................ 965 1019 1222

2. No. of workers' council members elected (thousands) .... . 105.0 105.5 115.5 3. No. of workers' council members elected from candidate

lists proposed by trade unions (thousands) .............. 102.6 102.6 112.2 4. No. of firms holding elections ......................... 4646 4758 5324 5. No. of candidate lists . . . 5913 6. No. of candidate lists sponsored by trade unions. . ....... .. ...... 5762

* Sources: Yugoslavia, Savezni savod za statistiku i evidenciju ("Federal Statistical Agency"), "Radnikki saveti i upravni odbori privredna preduze6a" ("Workers' Councils and Management Boards of Economic Enterprises"), Statistieki bilten, VI, No. 35, 8-12 and No. 38, pp. 5-6.

t In firms employing f rom seven to twenty-nine persons, the entire staff comprises the workers council. No workers' management is provided for firms employing fewer than seven persons.

dates, while in at most 6 per cent there was a choice involving a candidate not sponsored by the trade union. It would seem, then, that the election itself is of relatively little significance and that the basic decision as to the composition of the workers' councils is made through the nomination procedure. This is over- whelmingly in the hands of the trade unions. As in the Soviet Union, the trade unions are expected to function as one of the watchdog agencies of the state, pro-

cent of the workers and 23.3 per cent of the employees in the republic were mem-

13 J. Djordjevi6, Ustavno pravo ("Constitutional Law") (Belgrad, 1954), pp. 422-25; see T. Ham- mond, "The Jugoslav Elections: Democracy in Small Doses," Political Science Quarterly, LXX (1955), 57-74, for an illuminating eyewitness ac- count of procedures for political elections in Yugo- slavia.

14 Djordjevic, loc. cit.

15 In his speech on workers' management made to the Skupktina (Parliament) in 1950, Marshal Tito emphasized the educational functions of the unions (Komunist, IV, Nos. 4-5 [1950], 225). They were also the primary agency used in reintroducing labor norms after early 1955. These norms had been dropped by most workers' councils, so that the fact that the unions played a major role in their reintroduction is suggestive of the direction of their primary loyalties. See the discussion of trade unions in Dragnich, op. cit., pp. 188-90, and F. W. Neal, "The Communist Party in Yugoslavia," American Politi- cal Science Review, LI (1957), 101-2.

The workers' councils then may be considered as agencies designed to perform, more or less, the functions which trade unions have traditionally per- formed in the West, functions which are not permitted the state-oriented unions of Communist countries. Of course, there are sharp differences in the scope of action of Yugoslav workers' councils, on the one hand, and American unions, on the other. But in such a context perhaps a "fairer" evaluation




bers of the League. At the same time 35 per cent of members of workers' councils in Croatia were League members.16 Thus, for Croatia at least, the proportion of members of the League of Com- munists among persons who were members of workers' councils was roughly twice that for employed persons in industry and mining as a whole.17

The nature of the system of nomination and the relatively high proportion of Communists on the workers' councils suggests that the workers as a whole do not really play a very great role, even in- directly, in the management of the Yugo- slav firm. On the other hand, the force of worker opinion may have been strength- ened by certain aspects of the elections. For instance, in most plants the number of workers who are members of the workers' councils is a significant fraction of the total body of workers. About 15 per cent of eligible employed persons were serving on workers' councils at any given time.'8 By keeping the "representa- tion ratio" high, the leaders have made it more difficult for the trade unions to control the entire workers' council, though at the same time they have probably made it less difficult for the management board to dominate the council. In

addition, the turnover of workers' council members is reported to have been high. In 1952 only 20 per cent of the in- cumbent members of the workers' councils were re-elected; in 1953 the figure was 42 per cent. This rather broad base for workers' management combined with the fairly frequent change in the council membership may have made it more difficult to insure that the workers' councils came to the decisions desired by the leadership.19 At the same time, however, it must have made the elimination of any workers who began to show too much in- interest in defending "egoistic" or "par- ticularistic" positions a fairly easy matter.

The general picture of the workers as a whole under the new system does not seem to be that of a group that was really in control of its management organiza- tions. There are signs of a considerable amount of worker apathy. This has been admitted to be the case for the period of operation of the workers' councils before the introduction of the new planning system, that is, before the spring of 1952.20 Workers have not shown much interest in improving their knowledge of the problems of the technical and commer- cial operation of the firm.2' More recent-

of the significance of this nomination procedure can be made. The most notable feature is that the nomi- nations, while often leading to non-representative leadership in both countries, tend to turn back toward the management hierarchy in Yugoslavia but toward an institution that is independent of the firm in this country.

16 Kommunist, VII, No. 4 (1955), 200-206. 17 Salaried employees comprised less than 20 per

cent of the total number of employed persons in the economy during 1950 and 1951 (Ekonomska politika, I [1952], 119).

18 Rad ("Labor"), IX, Nos. 13-16 (1954), 64. The apparent discrepancy between this figure and that which can be inferred from Table 1 (10 per cent) stems from the fact that firms having from seven to twenty-nine employees do not hold elections and so are not included in the figures in the table.

9 See n. 64 for evidence that members of the League of Communists have had a declining influence, qua Communists, on decision-making within the firm.

20 Ekonomska politika ("Economic Policy") (Bel- grad), I (1952), 523-25; Tochitch, op. cit., esp. pp. 442-44.

21 "Rad ekonomskom obrazovanju u preduzecima" ("The Work of Economic Education in the Firms"), Ekonomska politika, II (1953), 251-52; R. Stojanovic, "Ekonomsko obrazovanje radnika" ("Economic Education of the Workers"), Ekonom- ska Politika, V (1955), 87. This work is under the control of the trade unions. Lack of interest in education sponsored by this organization may exist in part because the workers may often feel that in the operation of the firm the unions are more concerned with the desires of the state than with those of the workers. The unions at one point during the "accumula-



378 BENJAMIN WARD

ly, a writer has stated that "there has been a tendency for the workers' councils to become dissociated from the workers themselves."22 a point that suggests apathy as its consequence.

Steps have recently been taken in Croatia to improve this situation. These steps do not involve the reform of the electoral system but instead, in keeping with the persistent tendency toward pro- liferation of the Yugoslav administration, involve the creation of a new "organ of workers' management": the general assembly (skupstina kolektiva).23 This organ, which consists of a general meeting of all workers and employees, as yet has no legal status but has been created on the proposal of the trade unions in a number of Croatian factories. Its purpose was to review and pass judgment on the work of the workers' council. Its rights were limited to discussion and rec- ommendation, but the workers' council was required to provide any information on its work that the assembly might de- mand.

It may be questioned whether a body of this type will be of much use in extend- ing genuine worker control over the firm. At any rate, this is not the service that Cazi expects it to render. He reports that it has been possible in a number of instances for the League of Communists, acting in concert with the trade unions and through the agency of the general assemblies, to force changes in the decisions of the workers' councils. In order to

make this use of the pressure of "public opinion" permanently successful, Cazi recommended that the trade union be given the right to call meetings of the assembly, should the assemblies be given formal legal status.

It seems, then, that the workers as a whole are not likely to be successful in electing members to the workers' councils who are representative of their own interests except to the extent that those interests correspond to the wishes of the trade unions and the League of Commu- nists. We shall examine later the range of this possible harmony of interests. The next point to be considered is the extent to which the workers' councils themselves are able to assert the prerogatives assigned them by the basic law of 1950. There are, in fact, a number of indications that the workers' councils do not operate in the prescribed manner.

In the larger firms some special problems emerged with respect to the workers' councils. These were quite large bodies, often having more than eighty members.24 At a meeting of a group of this size, procedures would have to be forma- lized for a real polling of the opinions of the members to take place. However, this does not seem to have occurred in some instances.25 In addition, the larger firm often consisted of a number of plants, some of which might be at some distance from the home office.26 At first,

tions" period (1952-53) intervened to "persuade" the workers to place their net profits in the improve- ments fund rather than paying them out as wage bonuses (H. Tennyson, "Marx in Illyria," New Statesman and Nation, XLVI [1953], 666 f.; adden- dum, p. 719).

22 J. Cazi, "Komunisti u radni~kom upravljanju industrijom" ("Communists in Workers' Manage- ment in Industry"), Komunist, VII (1955), 413.

23 Ibid., pp. 413-19.

24 As noted previously, the legal upper limit to the size of the workers council was set at 120 members, and that of the management boards at 11.

26 Dragnich, op. cit., p. 187, reports that at meetings he was permitted to attend there was no sign of a vote being taken on any of the issues raised.

26 This was especially true in the construction industry, in which a number of the larger firms had their main offices in Belgrad and were engaged in projects throughout Yugoslavia. A special solution was eventually worked out for this situation (Sluz- beni list FNRJ, No. 4 [1954]), by which each building site was given the right to elect a workers' council




such firms were given the right to grant worker management to their plants on one of two bases. If the plant operated under conditions permitting a separate bookkeeping system, the plant could be allowed to elect both a workers' council and a management board, and prepare its own annual plan. However, if the work of several plants was closely inter- connected, these plants might elect only workers' councils, and the firm's management board was to be chosen by members of the workers' councils of all plants sitting jointly. This was actually done in a number of firms. But in 1952, without any change in the law, most plant workers' councils were abolished, and each firm was provided with a single workers' council in their place.27 By 1954, Yugo- slav industry had returned to the system of several workers' councils in mul- tiplant firms.28 The course of experimen- tation suggests that neither system was wholly satisfactory.

A more serious problem was presented by the tendency of workers' councils to be dominated by the director or the management board or both. That the director should dominate during 1950-51 was to be expected. During that period there

was very little of importance for the workers' councils to do, since all major tasks were assigned to each firm in the form of a plan. This led in many cases to a failure of the councils to assert their prerogatives, and this failure, having become a habit, was carried over into the new planning system. That this was a quite general occurrence is demonstrated by the frequency with which it is men- tioned in the Yugoslav press and by Yu- goslav leaders. Kardelj devoted a portion of a speech to the problem under the heading, "Bureaucracy in the Workers' Councils."29 Cazi mentions that the director often usurps the duties of the workers' council in such matters as the distribution of profits and investment decisions.80 Citations of specific examples that have appeared in the Yugoslav press of failure of the workers' council to act as the general policy directing agency within the firm could be multiplied almost at will.31

The evidence that has been cited points to the conclusion that, in general, Yugoslav industrial workers are not in a position to control the policies of their firms either through the election procedures or through the agency of the workers' councils. The "democracy in small doses" of the political elections is carried over into industry. To extend the meta- phor, the proper dosage has been sought by giving a large measure of democracy in the form of an ultimate aim and then restricting the measure by the creation

and a management board and to work out problems connected with the particular project. However, these organs were disbanded upon completion of the project, and the main office and its workers' management organs preserved the right to transfer equipment to and away from each site.

27 J. Jovanovi6, "Radnicki saveti" ("Workers Councils"), Ekonomska politika, I (1952), 88. This was true of even the largest firms, such as the Trepca lead mines and smelters.

28 Ekonomska politika, III (1954), 872. In 1954 the big ironworks "Zelezar" (four thousand workers) set up eight workers' councils in its plants. Each plant council issued a monthly operating plan for its own plant in conformity with the firm's annual plan, distributed its share of the wage fund among its workers, and had the right to protest the division of the surplus wage among plants to the council of pro- ducers of the city people's committee.

29 Delivered April 7, 1953, and reprinted in E. Kardelj, Problemi nase socialisticke izgradnje ("Problems of Our Socialist Development") (Bel- grade, 1954), II, 355.

30 Cazi, op. cit. 31 For example, in Borba (Zagreb ed.), January 4,

1953, p. 3; January 6, 1953, p. 1; January 17, 1953, p. 6; in B. J., "Radni~ki saveti," Ekonomska politika, I (1952), 523-25, 749-50; II (1953), 142-43. The content of several of these examples will be described later in this article.



380 BENJAMIN WARD

or reinforcement of the rights of a numn- ber of institutions to watch over the dol- ing-out process. Kardelj has put the general problem of individual rights in a socialist state as follows:

The general advance of a socialist economy is possible only as a result of the free movement of socialist economic forces as they are developed on the basis of social ownership over the means of production, and of the conscious general administration of that development with the aid of a social plan. In this sense a socialist plan can be no more than a plan of the over-all balance [proporcije] of economic development, by which society consciously resolves the in- evitable internal contradictions of that development and assures, under the given conditions, the correct socialist distribution of the surplus product. Within this framework our working people must have freedom for the widest individual and collective initiative which social ownership over the means of production really makes possible for them. It goes without saying, of course, that such a system does not ex- clude, but actually presupposes, the possibility of all kinds of state intervention-rather of all kinds of intervention by the organs of power of the working people-which is necessary for the proper defense of the general social interest in the period of the struggle for the establishment of socialism.32

Kardelj seems to be saying that democ- cracy is to be permitted to the extent that it does not interfere with the goals laid down by the desire for the "advance of the socialist economy"; that is, it has the status of a residual. The preservation of the over-all competence of the state, and the retention and in some cases the strengthening of the authority of control organs, such as the trade unions, the League of Communists, the local government, the director, and the inspector- ates, have left full power in the hands of the leaders of state and party. But, despite this rather impressive array of constraints, the aims of the leaders were not

fully realized. Either through deficiencies inherent in the system itself or through the failure of the control organs to intervene effectively, some unwanted results were obtained.

The unwanted financial result of "democracy in small doses" was an increase in wages in industry and trade (especially as a result of wage bonuses arising out of the profits-sharing scheme), accompa- nied by a weakening of the production in- centives of the individual workers.3 This was largely a consequence of the decentralization of planning that occurred in 1952. The firm achieved practical control of its rate of output and acquired the right to set the prices of its products and to sell to whom and buy from whom it pleased. Of course, there were a number of practical restrictions placed in the way of this official autonomy, but nonethe- less there was a considerable increase in the scope for decision-making.84

The first measure that in many instances roused both workers' councils and the body of workers from the apathy of the previous years of the operation of workers' management was the turning-over of a portion of wage planning to the workers' councils in 1952. The procedure was to be as follows: the management board was to draw up a list of differential wage rates for each position in the firm and to submit the schedule to the workers' council for discussion and approval. In some plants this procedure was car--

32 E. Kardelj, answers to questions submitted by the editor of the newspaper Politika, October, 1951, reprinted in Kardelj, Problemi Na-se . . ., II, 133.

33 The assignment of labor norms practically dis- appeared during 1952-54, and productivity per worker in industry, after an initial rise, declined in 1953-54 despite the introduction of new plant and equipment (see my "From Marx to Barone" unpub- lished Ph.D. dissertation [University of California, 1956], chaps. vi and vii).

34 See Sluzbeni list FNRJ, No. 58 (1951), for the new planning law. Numbers 17 and 32 (1952) con- tain statutes abolishing the compulsory distribution plan and permitting firms to set their own prices for most industrial products.




ried out without any serious intervention by the workers or workers' councils. In other plants, however, the workers' councils held a series of meetings on the question, often with participation of non- council members, and succeeded in ob- taining a large number of modifications of the schedules.5

A second field in which workers' councils have demonstrated some authority seems to have been that of profits distribution. During 1952 and 1953 the wage bonus in a very large portion of industrial and trade firms amounted to about 25 per cent of the regular wage.36 Though there is no direct evidence that this distribution was carried out by the workers' council rather than by the director or management board, there is evidence that disputes arose over this question. The members of the workers' council also had the most unequivocal interest in higher wages.

Third, the workers' councils have occasionally shown themselves capable of securing the dismissal of directors of firms. The function of the workers' council in these cases has been to initiate the proposal for dismissal.7 But on occasion it has also played, at least formally, a role in the dismissal proceedings. In 1952, for instance, the dismissal proceedings for a director were conducted as a session of the workers' council, though the nec-

essary representatives of the trade unions, the League of Communists, and the government were also present.A8 This is not to assert, however, that the workers' council played a significant role in the process of judgment. In the example cited, the director was dismissed from the League of Communists the day before the dismissal proceedings were concluded in the workers' council. And in most cases the dismissal proceedings themselves were conducted by the local people's committees.39 The chief function of the meeting of the workers' council seems to have been to publicize the decision. Nev- ertheless, the mere fact that workers' councils have been successful in the past in securing the dismissal of directors would probably give them some bargain- ing power against the current incum- bents.

The preceding evidence of independent action taken by the workers'councils is not strong enough to permit the as- sertion that these bodies have acquired a large degree of initiative within the firm. To some extent actions reportedly taken by the workers' councils may simply represent the sort of rubber-stamp function exercised by parliamentary bodies in most Communist countries. On the basis of the first three years of operation of the system of workers' management, a member of the League of Communists proposed the abolition of the management boards as a measure necessary to put real life into the workers' councils40 This

35 B. J., "Radnitki saveti," op. cit.; N. Vujanovic, "Tarifni pravilnici i sindikati" ("Wage Schedules and the Trade Unions"), Ekonomska politika, II (1953), 142-43; Borba (Zagreb ed.), January 8, 1953, 1). 1.

36 The wage bonus was a profits share which, upon decision of the workers' council, could be distributed as a supplement to workers in proportion to their regular wages (see my dissertation, pp. 208-9; "Fond plata" ["The Wage Fund"], Ekonomska politika, II [19531, 461-62, and III [1954], 126).

37 Dj. Miljevic et al., Razvoj privrednog sistema FNRJ ("Development of the Economic System of the FPRY") (Belgrade, 1954), pp. 69-70.

38 Borba (Zagreb ed.), January 8, 1953, p. 1. 39 See, e.g., Ekonomska politika, II (1953), 830,

where the dismissal of eleven directors at Nis (a city in eastern Yugoslavia) at a joint session of the two houses of the people's committee is reported.

40 B. Kamcevski, in a letter to the editors of Borba (Belgrad ed.), November 25, 1952, p. 2. One of several replies appeared in Ekonomska politika, I (1952), 709, "Da li treba ukinuti upravne odbore u nagem preduzecima" ("Should We Abolish the Man- agement Boards of Our Firms?").



382 BENJAMIN WARD

proposal was rejected, but there is no evidence that the problem itself has been re- solved.

If the workers directly are unable to control the firm's policy and if the workers' councils do not seem in general to be the dominant group, only two other cen- ters of power within the firm remain: the management board and the director. The bulk of discussions of problems of management in the Yugoslav press indicate that the real center of decision-making in firms typically lies in one or the other of these places or jointly in both. The management board was small-three to eleven members-was closely concerned with problems of day-to-day operation, and usually prepared draft proposals for the major decisions made formally by the workers' council.4' The conditions seemed ripe for a "managerial revolution."

But the existence of two power cen- ters within the managerial hierarchy created a problem of dominance from the beginning-at least from the beginning of the new planning system. The problem was complicated by the absence of a careful delineation of the tasks of director and board.42 As a supervisory organ of the workers' council, the management board was expected to watch the activi- ties of the director, and it had the final decision in such matters as disputes over hiring and firing and problems arising out of labor norms. On the other hand, most of its members were bench workers with relatively little education43 and cer- tainly at a serious disadvantage with respect to the director and his staff in tech-

nical and financial matters. The provision that three-fourths of its members had to be production workers probably drove the majority of the technical and administrative staff onto the director's side for protection. In addition, the fact that the director's authority had previously been undisputed within the con- fines of the firm44 must have given him at least an initial advantage in bargain- ing with the board.

Instances of director domination take a variety of forms. One of the most persistent stems from the director's immediate control over finances-only he may sign checks and contracts in the name of the firm. This could lead on occasion to such things as the transfer by a director of three million dinars to the local people's committee for a construction project without his informing the workers' committees.45 In another case the director spent most of his time traveling, os- tensibly on business, spent over three million dinars for "luxury automobiles" for the firm, and dipped into the firm's working capital to cover a series of com- mercial ventures of his own.46 These are extreme examples of what is reported to be a daily occurrence: the violation of either the spirit or the letter of economic decrees for personal gain. As one writer put it:

41 This was true of the annual plan, the wage schedule, and the annual report-the three major documents on which approval of the workers council had to be obtained and probably the three most important documents regularly prepared by Yugo- slav firms.

42 See Neal, op. cit., and Tochitch, op. cit., for discussion of this point.

In recent times we have often encountered such phenomena as violation of economic decrees, unethical [nelojalni] relations between firms, speculation, and improper relations be-

43 According to Stojanovic (op. cit.), of the 107,000 workers in the Belgrade area, nearly two- thirds had at most an elementary school (osnovna) education.

44With some exceptions. Instances of party-cell leaders dominating the director (or of both offices being held by the same person) are reported during the administrative period (see Tochitch, op. cit., pp. 434-39).

45Borba (Zagreb ed.), January 6, 1953, p. 1. 46 Ekonomska politika, II (1953), 830.




tween the firm and society. There have even been cases of abuse [zloupotreba] and exploita- tion of the workers.47

The terms applied to these phenomena by the Yugoslavs are egoizam, partiku- larizam, and primitivizam.

A second method of dominance stems from the director's greater technical knowledge and the support that he presumably gets from the staff of the firm. Aside from its plausibility in terms of as- sociation and the relative disfranchise- ment of the salaried employees from the organs of workers' management, the best evidence of collaboration of salaried employees and directors comes from the wage schedules developed in 1952. A survey conducted by Borba showed that, according to these schedules, the salaried employees typically received a much higher wage than production workers of comparable skill and experience.48 It is unlikely that such wages would have been set by a free vote of either the management boards or the workers' councils. The alliance between director and staff has resulted in plans and wage schedules being prepared by the administrative staff of the firm on the grounds that they "have the know-how" and being forced through the workers' committees on the same grounds.49 But the director and his staff have not had things entirely their own way. A large number of directors have been removed on proposal of workers' councils. Reports on the removal of a total of twenty-seven directors from firms in Zagreb and Nis list as the two major causes of dismissal lack of qualifi- cation for the job and coercive administration or "failure to understand the es- sence of workers' management."50 The

new system of selection of directors has given the workers' council some voice, though by no means a decisive one, in the decision."

The workers' council or management board has one important weapon against the director of the firm-the right to set his salary."2 This has resulted in a number of directors being underpaid. The director of one coal mine was reported to receive wages some 20 per cent below those of the diggers. A common rate for directors during the period 1952-54 was in the neighborhood of 20,000 dinars a month, or a little more than twice the official "average" wage in industry and mining.53

In an effort to remove the aura of skill and knowledge surrounding the director, the Yugoslav press is reported to have launched something of a campaign against his "omnipotence."54

Davico, a leading economist, came to the director's defense, claiming that there was a tendency to blame him when- ever anything went wrong, though official responsibility should rest with the organs of workers' management. A considerable amount of dissatisfaction among directors has also been reported. Many of them felt that the conditions under which they were forced to work in the new system made it preferable to seek positions in the state administration or lower technical positions within the firm. There is reDorted to be a consider-

47 "Nedopustivo" ("Impermissible"), ibid., pp. 501-2.

48 Borba (Zagreb ed.), January 7, 1953, p. 4.

49 See, e.g., Vujanovi6, op. cit., pp. 142-43.

50 Cazi, op. cit., p. 420; Ekonomska politika, II (1953), 830.

11 See n. 7.

52 Ekonomska politika, I (1952), 163. The require- ment of trade-union approval applied here too, however.

53 Ibid., p. 305. Reports of overpayment are also common, presumably reflecting situations in which the director dominates.

54J. Davito, "Direktor," Ekonomska politika, III (1954), 41-42.



384 BENJAMIN WARD

able amount of "persecution of the director under certain circumstances," especially when he opposes "irresponsible distribution of the surplus wage fund."55

In addition to the tendency to "perse- cute" directors, there have been instances of the firing of his staff. There have been complaints by salaried employees to the effect that they are relatively inse- cure in industrial firms as compared with their counterparts in the state administration, since the management board, with production workers firmly in control, holds the power of life or death over them. These problems would seem to stem from situations in which the management board (occasionally the workers' council) is dominant in the firm, a situation that is reported to be fairly common.56 Some boards fail to report to the workers' councils or only report after the fact, and issue directives in the workers' council's name.57 The proposal, noted previously, to abolish the management boards was based on this usurpation of the powers of the workers' council and the director.

There is no basis in the literature cited here for establishing the relative frequency with which each of the many possible relationships among the four potential power groups in the Yugoslav firm oc- curs. Nor is there any evidence about the stability of a dominance relation, once established. The indications are that real control by the workers as a whole is likely to be rare. Some apparent cases of their asserting themselves are simply a matter of the general assembly being used to force outside opinions on the

dominant group within the firm. The role of the workers' council has been difficult to assess, since in cases of dominance by the management board, the board will often act in the council's name. The size of the workers' council and its greater distance from immediate problems suggests that its members would have some difficulty in establishing a stable dominance relation.58

An attempt was made in 1953 to pre- scribe the respective roles of director and workers' council a little more clearly.59 The duty of the director to veto proposals of workers' organs that he considered to be illegal was repeated, and the director was held personally liable for the carrying-out of any illegal instructions issued by these organs. The conditions under which a proposal to replace the director could be made were also stated: (1) if he fails to carry out decrees; (2) if the firm cannot fulfil its obligations to the state; (3) if it is shown that the firm does not realize the total receipts "of which it is objectively capable." The workers' council in such cases has the right to petition the people's committee for the director's dismissal. But if the complaint is determined to be unfound- ed, the people's committee can dismiss the workers' council. It can also dismiss the workers' council if its opposition to the director becomes a "hindrance to further operation." If a new workers' council continues to oppose the director, then the people's committee must either replace the director or appoint a "compulsory management." Rights of appeal are to republican or federal executive coun-

"5 "T. M.," "Izbor ili naimenovanje direktora" ("Election or Appointment of the Director"), Ekonomska politika, II (1953), 468-69.

56Ekonomska polilika, I (1952), 749-50.

67 Vujanovi6, op. cit.; "B. J.," op. cit.

58 It may also be noted that the management board is composed, aside from the director, of members of the workers' council. This is probably an advantage from the point of view of controlling the actions of the council.

59 Sluzbeni list FNRJ, No. 51 (1953).




cils, depending on the importance of the firm.60

Most of the criticisms of the current operation of workers' management cited previously referred to dominance by either the director or the management board. The chief innovation of the 1953 law with regard to this conflict is the provision for the dismissal of the worker's council by the local people's committee. Since management-board members are chosen from the workers' council, dismissal of the latter automatically entails dissolution of the former. No evidence is available to me on the effects of this law. At least until mid-1956 there had been no further legal clarification of the roles of the various groups.6' However, the trend since 1954 has been to put some further constraints on the role of the firm in determining the size of the surplus wage fund and in setting the differential wage schedules. Since these are the two decisions that so far have aroused most interest among the workers and workers' councils, it would seem that the tendency will be toward increasing dominance by either the management board or the director, where it does not already exist.62

What light does all this throw on our initial questions? We may take them up in order.

1. There is little evidence that the workers exercise control over the firm directly, through the formal mechanisms of "industrial democracy.'" However,

there are some indications that certain at least of the workers' interests are con- sonant with those of the members of the two workers' committees. In the first place, the fact that Communists are overrepresented on the workers' councils may be misleading. The party in Yugo- slavia seems to have been going through something of a crisis in recent years, which has manifested itself in declining membership and relaxing party disci- pline.63 Many party members have been supporting policies that are officially frowned on. Second, there is the fact that the material interests of management board members and workers are often quite similar. Higher wage bonuses paid out of profits, better working conditions, and the elimination of domination by the director and the salaried staff will often be in the interests of both groups, which probably accounts for the large wage supplements paid out, especially in 1952-54.64 Since production workers dominate the committees, the

60 Two months after the passage of this law, a statute appeared (Sluzbeni list FNRJ, No. 6 [1954]) that had the effect of reducing the independence of subsidiary workers' councils in mining. It provided that the firm was to make all relevant calculations, handle allocations from the depreciation fund, and transfer capital at will to or from existing plants.

61 D. Lazarevic, "O pravnom polozaju direktora preduzeca u novom privrednom sistemu" ("The Legal Status of the Director in the New Economic System"), Ekonomski pregled ("Economic Survey"), VII (1956), 401-5.

62 At a recent session of the Central Chamber of the Council of Trade Unions of Yugoslavia (reported in Rad, XII, No. 5 [1957], 1) it was concluded that there was widespread lack of participation of the "wider masses of workers" in the determination of differential wages. As a result, relative increases in wages tended in many cases to be much larger for management and non-production staff than for the bench workers. At the same time, "in a smaller number of firms" the increases were distributed equally, which was "also a mistaken tendency." In the latter firms the voice of the workers' council (or at least of the management board) is apparently still making itself heard.

63 E. Kardelj, "O nekim nedostacima u radu komunista," op. cit., pp. 154-70; S. Gligorijevic, "Zapanzanja iz rada komunista u industriskim pre- duzedima" ("Observations on the work of the Communists in Industrial Firms"), Komunist, VII (1955), 243-47.

64 This harmony of interests may apply equally to such matters as planning. For instance, the very con- servative nature of the plans of 1954, which resulted in large overfulfilments and large profits, was to the advantage of both groups. "Dj.," "Zavr~ni raun i budzet" ("The Annual Report and the Budget"), Ekonomska politika, III (1954), 303-4 and 808.



386 BENJAMIN WARD

views of the committees and of workers in general on the wage structure of the firm may also be quite similar. These in- direct reflections of the workers' interests in the new Yugoslav system have conse- quences that are for the most part con- trary to the desires of Yugoslav leaders, and the system has therefore been sub- jected to increasing regulation.

2. Policy-making within the firm seems to be carried out generally either by the director or by the management board. Either locus of power may, of course, act in conformity with policies laid down from above, but, as we have seen, complaints in the press and speech- es of Yugoslav leaders indicate that this is far too infrequently the case. Both groups (management board and director with his technical and office staff) have certain similar interests in the success of the firm from the point of view of power and of income. Differences may emerge, however, typically on matters of the distribution of profits and worker productivity. The reintroduction of labor norms by governmental commissions and the sharp reduction in the potential size of the wage supplements out of profits would seem to represent a further move in the direction of eliminating groups other than these two from the management scene. With these sources of disa- greement reduced, coalition might be the best prognosis for the future.

3. The amount of initiative that could be exercised within the firm rose from its Stalinist low to reach considerable pro- portions during 1952-54. Decisions on prices and output, wage differentials, and product mix were all very often left to the firm, although the state preserved

the right to intervene directly in the firms' affairs and sometimes did so. And even if intervention-by-decree was not practiced, it was often possible to influence decisions through pressure exerted by local governmental groups, party members, or trade-union representatives. In addition, some of these groups, having themselves acquired greater power, were attempting on their own responsibility to influence the decisions of firms. The most serious attempts of this kind were the pressure the people's committees put on firms to raise their prices in order to provide greater income to the local government treasury.

As a result of these pressures, both old and new, and such disappointing con- comitants of the new system as monopo- ly and stagnant labor productivity, during 1954 and 1955 the central government reinstated some old controls. Pric- es of some industrial raw materials and semifinished goods were set by a newly created price-control board, and a system of wage norms was imposed on the firms by governmental commissions. There has thus been a reduction in the policy-making competence of the individual firm since early 1954. But this by no means amounts to a return to the centrally planned economic system of the past. There are no centrally set output norms for these firms, and price policy in many lines is still under the firm's control. Financial control by the state bank is still less stringent than in Stalinist days. It would seem that important decisions in Yugoslav industry continue to be made at the level of the firm, though the vast majority of workers play little or no role in the process.



Workers' Management in Yugoslavia

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