Abstract
This paper utilizes a particular conceptual framework, called the “impact model,”1 to analyze the effects of the worldwide price increases in fuel and raw material on Yugoslavia between 1973 and 1975. We begin by providing a very brief description of this framework and of the data required for its application to a specific economy.
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Notes
A. A. Brown et al., “The Impact of International Stagflation on Systemic and Policy Changes in Eastern Europe: Theoretical Reflections,” in Simon McInnes, ed., The Soviet Union and East Europe into the 80’s: Multidisciplinary Perspectives ( Oakville, Ont.: Mosaic Press, 1978 ).
This and other comparisons with East European countries are based, in part, on Z. Fallenbuchl, E. Neuberger, and L. Tyson, “East European Reactions to International Commodity Inflation,” Joint Economic Committee of Congress Compendium, 1977.
An example best illustrates how the administrative link between domestic and world market prices operates: in a 1973 social agreement on prices of nonferrous metals and products, it was decided that domestic prices would be set equal to average world futures prices quoted during the past six months, evaluated at the official exchange rate, and increased by 3 percent because of tariff protection. See No Karli, “Neki aktuelni problemi sistema i politike cijena,” Ekonomski pregled 8–9 (1974):603–32.
The role of devaluation, as well as other more technical questions connected with the impact of world inflation on Yugoslavia, are discussed in our paper, “Can a Rise in Import Prices Be Inflationary and Deflationary: The Case of Yugoslavia,” Stony Brook Working Paper No. 175, April 1977.
Federal price control agencies have jurisdiction over major agricultural product prices, most industrial prices, and rail freight rates; republics control electricity rates, rail and bus rates, and construction materials; communes control rents, community utilities, and retail food prices. Thus, it is the federal and republican control agencies that determine the effectiveness of the propagation mechanism and the impact of increases in wholesale prices of imports on prices of all other goods.
This argument is summarized in Marcus Miller, “Can a Rise in Import Prices Be Inflationary and Deflationary? Economists and U.K. Inflation, 1973–74,” American Economic Review (September 1976): 507–08.
See Neuberger and Tyson, “Rise in Import Prices.”
Although the enterprise members’ freedom to decide on enterprise income distribution is a key feature of the Yugoslav doctrine of self-management, this freedom has been circumscribed in various ways all along. Since 1971 a type of incomes’ policy has been developed. It consists of social agreements that constrain the distribution of income between personal incomes and enterprise savings. These agreements are not primarily aimed at controlling the absolute level of wages but at setting limits to acceptable interenterprise wage differentials. However, because the overall rate of wage inflation is partly dependent on the efforts of workers in low-wage enterprises to catch up with labor earnings in high-wage enterprises, these agreements have probably moderated aggregate wage inflation as well.
J. R. Hicks, “What is Wrong With Monetarism,” Lloyds Bank Review (October 1975): 1–13.
This does not mean that we should expect all members of the enterprise to have the same objectives and that no conflict may arise between different groups of workers or between the blue-collar workers and the manager and his staff. See E. Neuberger and E. James, “The Yugoslav Self-Managed Enterprise: A Systemic Approach,” in Morris Bornstein, ed., Plan and Market: Economic Reform in Eastern Europe ( New Haven, Conn.: Yale University Press, 1973 ).
M. Sekulic and M. Babic, “Uvozna zavisnost Jugoslavenske privrede i efekti povencanja uvoznih cena,” Ekonomski pregled 5–6 (1975): 347–65.
Ibid., p. 363.
In fact, to the extent necessary, the Yugoslays made special efforts to counteract the contradictionary effects on the money supply of the loss of foreign exchange reserves caused by the balance of payments deficit. As argued in our paper and as cited in note 4, they also had to try to offset the real income loss due to the deterioration in the terms of trade.
Turnover taxes are a relatively small component of retail prices in Yugoslavia as compared to other East European economies — about 12.5 percent on average. Their small magnitude and the policy goal of reducing the use of taxes and subsidies to influence relative price precluded the use of reductions of turnover taxes as a major containment policy, as was the case in other East European economies.
A net inflow of 50,000 workers is reported in the Yugoslav Federal Planning Office document, “Analytical Basis for the Documents of the Social Plan of Yugoslavia for the Period of 1976–1980.” A. Antic cites a figure of 100,000 workers in “Yugoslavia on the Way to Economic Recovery,” Radio Free Europe Background Report, no. 229, (November 9, 1976 ): 5.
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Neuberger, E., Tyson, L. (1980). The Impact of International Inflation on Yugoslavia. In: Rosefielde, S. (eds) World Communism at the Crossroads. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-7631-4_8
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