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A Property-Rights Analysis of the Yugoslav Miracle
Svetozar Pejovich
The Annals of the American Academy of Political and Social Science
Vol. 507, Privatizing and Marketizing Socialism (Jan., 1990), pp. 123-132
Published by: Sage Publications, Inc. in association with the American Academy of Political and Social Science
Stable URL: http://www.jstor.org/stable/1047532
Page Count: 10
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Abstract
The Yugoslav experiment with labor participation in the management of business firms captured worldwide attention. The critics of capitalism seemed confident that the labor-managed economy would provide a long-sought alternative to the accomplishments of capitalism. Instead, the labor-managed economy has produced a crisis of enormous proportion in Yugoslavia. The article argues that the economic crisis in Yugoslavia is a predictable consequence of the system of labor participation in the management of business firms. It demonstrates that inherent in the structure of property rights of the labormanaged economy are some positive transaction costs and negative incentives that are specific to its institutional structure. Those transaction costs and disincentives are responsible for inflation, unemployment, declining income, and other economic problems in Yugoslavia. The conclusion is that the labormanaged economy is not a viable institutional arrangement.
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The Annals of the American Academy of Political and Social Science © 1990 American Academy of Political and Social Science