Who needs the enterprise?
By the end of 1989, president of the Federal Executive Council (i.e. prime minister) Ante Marković declares “war on inflation“ and announces the “Federal Executive Council [federal government] initiative for changes to the Constitution in order to authorize federal authorities with regard to maintaining foreign relations, guaranteeing citizens' rights and the free flow of goods and capital across the country, and introducing a single tax system and the capital market”.
Shock therapy measures, popularly known as “the Marković reforms”, are most aggressively implemented as of early 1990. “Stabilization measures” partly include legislative changes, and a number of other laws passed in this period point to the fact that the questions of ownership and labour are central. All new laws that are passed influence the situation in Borovo directly, requiring a thorough reorganization of the enterprise.
It should be taken into account that the goal of the new Law on Enterprises, which was passed in late 1988, is to additionally liberalize Yugoslavia's socialist economy. In addition to the existing social ownership of enterprises, this law introduces mixed and private ownership as well, and allows foreign ownership of enterprises. It is one of four laws important for implementing the mentioned economic reform, together with the Law on planning and the social plan of Yugoslavia, Law on foreign investment and Law on the Yugoslav bank of international economic cooperation. According to a Tanjug article reprinted in the Factory paper in early 1989, “All of the laws are merely a systematic path towards an integrated market (the market of goods, services, labour, capital, knowledge, natural resources) and economic rules of the game” as a way out of crisis.
One of the pro-market laws is the new Law on Basic Employment Rights from 1989. Generally speaking, the law propagates increased efficiency, easier dismissal, easier mobility of workers within the enterprise, etc. The Factory paper singles out the “most interesting detail” of the new law: “that the social issues are excluded from the sphere of work, emphasizing the importance of capability, skill and market demand”.
The Law on Amendments to the Law on Enterprises (July 7, 1989) establishes conditions for abolishing self-management and strengthening the role of the enterprise’s executive management. Those in executive posts are to switch from “decidedly coordinating” functions to managing ones. Management positions are granted more autonomy and greater authority both in the work process and on the market: the managing director “does not need to be granted a series of approvals like before”, but has to present business results to the workers' council on a yearly basis.
Although the transition to market economy was made possible already in 1988 with the Law on enterprises, the 1990 amendments to the law guarantee the transition to the capitalist model. Namely, the 1990 Law on Amendments to the Law on Enterprises, along with other changes, removes Articles 4 and 5 from the old law, whereby the self-management rights of workers and the negotiations of the VSSJ over collective contracts of workers in private and mixed enterprises are removed from legislation. With the removal of Articles 20 and 24, the possibility of setting up a publicly owned enterprise is eliminated. Without self-management regulations and the possibility to set up new social enterprises, there is only one way forward. In the 1991 World Bank report on “industrial restructuring” in Yugoslavia – in line with which the federal government implements a stabilization program, with the aim of getting help from foreign creditors – the most relevant aspects of the restructuring program are the reform of ownership relations and the abolition of self-management, in other words, the privatization of publicly-owned enterprises and their transformation into stock companies with supervisory boards.
The Republican Law on Employment and the Law on Labour Relations were passed in the beginning of May 1990, alongside programs on the social protection of citizens' standards and the recently established Fund for the Stimulation of Employment. They were closely related to the plans for “economic restructuring”, i.e. with the expected bankruptcy and unemployment wave. By passing the Law on Employment, the workers who were dismissed due to bankruptcy were given priority over the rest of the unemployed. The trade union newspaper Sindikalna javnost sarcastically comments: “Workers’ dismissals by means of liquidation and bankruptcy may now begin”.
The Law on Financial Management was particularly important for the operationalization of this process. Its goal was to accelerate the transition to market relations in a way that enterprises which could not ensure liquidity, i.e. those insolvent for more than 60 days, automatically initiate bankruptcy proceedings. In this period, bankruptcies are primarily a way of dealing with redundancy, or surplus labor.
After the passing of the Federal Law on Social Capital, on October 24, 1990, Croatian government introduces regulation on “protecting the interests of the Republic of Croatia in the process of transforming social property into other forms of ownership”, according to which the Republican Agency for Restructuring and Development evaluates whether a certain form of property transformation is acceptable. Namely, based on the federal legal framework, the republics were to independently develop “implementation strategies for the restructuring of enterprises and privatization” (cf. World Bank, 23). Trade unions were quick to criticise the new Croatian government’s (HDZ) privatization strategy. Sindikalna javnost warns: “While the federal government, despite implementing unpopular measures, tries to safeguard our national treasure by ensuring that it stays in the hands of either the state or our workers, not excluding foreign capital, our Republican government opted for total privatisation.“
Even the World Bank, which closely monitored the development of the situation in Yugoslavia, is of the opinion that the Law on Privatization drafted by the Slovene and Croatian authorities contains significant alterations to the federal law. In Croatia, the new law sets a deadline for the transition process (June 30, 1992), after which the authority over the transition process will be transferred from individual enterprises to the Agency for Restructuring and Development. The Agency is authorized to take over management in case there is threat to economic interests of the Republic of Croatia (e.g. if the enterprise is in debt or insolvent, or when the republican government decides so; cf. World Bank, 23). Therefore, these sources suggest that the republican model, as opposed to the federal law, implies that the state would have an important role in the process of social property transformation. Commenting on the new version of the Republican Law on Transition from April 1991, Sindikalna javnost writes that, all modifications notwithstanding, “the excessive role of the state” is still quite noticeable.
Meier, Viktor. 1999. Yugoslavia: A History of its Demise. London & New York: Routledge.
World Bank. 1991. Yugoslavia – Industrial restructuring study: overview, issues and strategy for restructuring. World Bank Group, Washington, DC. http://documents.worldbank.org/curated/en/839571468304234506/Yugoslavia-Industrial-restructuring-study-overview-issues-and-strategy-for-restructuring
- “Objavljen rat inflaciji”, Borovo 3108, December 22, 1989, 1↲
- In other words: the questions of ownership and labour are central to the reforms whose goal is the financial consolidation of Yugoslav economy. The 1991 World Bank on Yugoslavia’s industrial restructuring report clearly states that although the “stabilization measures” lead to a drop in industrial production and, because of the low credit rating, force the solvent and insolvent enterprises into bankruptcy, any help from the banks or the state is undesirable. Although “in some cases, the only way of becoming solvent” (and avoiding bankruptcy) would be a bailout by a bank or the state, this would endanger “the reform of the financial sector, as well as the stabilization program”. The state can only help enterprises when certain conditions are met: “(a) if the enterprise prepares a long-term restructuring plan; (b) if the enterprise deals with redundant workers; (c) if the enterprise carries out ownership transformation, including privatization”. Borovo, which was included in the quoted World Bank report as a case study, is one of the enterprises that attempted to meet the demands.↲
- According to the Law on Enterprises, the deadline for reorganization is the end of 1991. For more details on the law, see D. Lazarević, “Povratak poduzeću”, Borovo 3064, January 20,1989).↲
- More details in: Borovo 3099, October 13, 1989. (“Zaoštrena disciplina i odgovornost”, 2) i Borovo 3089, August 4, 1989 (“Pripreme za popis stanovništva 1991”, “Za dobrog radnika nema zime”, 2).↲
- “Novi Zakon o radnim odnosima”, Borovo 3105, November 24, 1989, 1; “Zaoštrena disciplina i odgovornost”, Borovo 3099, October 13, 1989, 2↲
- There was an alternative after all. By accepting Harvard economist Jeremy Sachs’ ‘shock-therapy’ model, the prime minister Marković rejected “the less radical, but nevertheless all-encompassing” economic reform proposal drafted by domestic experts Aleksander Bajt, Dragomir Vojnić i Kiro Gligorov (Meier 105) in the summer of 1989. According to Meier, counsellor Sachs was “confused” with the concept of “socially owned property”. In the summer of 1990, in the midst of the reforms, Bajt said in an interview in Danas that “the so-called pluralization of property comes down to a shameless rip-off that would be civically and criminally prosecuted if it wasn’t a part of the so-called socialist legal system” and promotes “defining publicly owned property as the property of each individual enterprise” (see: “Kako iz socijalizma”, Danas 441, July 31, 1990, 29).↲
- Ljerka Milković, “Pazite na rokove”, Sindikalna javnost 1, May 7, 1990, 19↲
- See: “Sedam stečajnih prijava borovskih poduzeća”, Borovo 3125, April 20, 1990, 1, 4↲
- “Ako se država najednom povuče, doći će do grabeži imovine”, Borovo 3149, November 2, 1990, 2↲
- Karmelo Vlahov, “Sapunjanje daske”, Sindikalna javnost 11, July 16, 1990, 3↲
- Neven Andrilović, “Privatno s pečatom države”, Sindikalna javnost 16, April 8, 1991, 3↲