Prof. DUŠAN VUJOVIĆ PhD: ’68 – Protests Against Reforms

Five decades from the Student Protests of June of 1968 gives us enough of a historical distance to evaluate these, without any doubt, historical events. In the eyes of many analysts, the student protest was a surprising, spontaneous expression of the freedom of speech in the tightly monitored areas of economic, social, and political debate. While fully recognizing the essential importance of the freedom of speech (the famous First Amendment) as an indispensable prerequisite of market democracy, we must note that the objectives of the protest, the immediate resolution of the standoff, and the sequence of subsequent reforms and historical events all show that Yugoslavia
and its constituent republics have been steered (or pushed) on a wrong long-term path.

Opportunistic political leadership (led by, at that time, 76-year old Tito), predictably chose a response that was equidistant from both the non-democratic Soviet model and Western market democracy. Unfortunately, the proposed solution – “utopian self-management” system applied to all spheres of economics and public services, did not have a
practical solution in the real world, in a country with a modest level of economic and social development, and under prevailing “cold-war” international circumstances. Nevertheless, it triggered a sequence of events with a lasting impact on economic, political and social fabric of former Yugoslavia. On one side, it led to faster decentralization (more towards republics, much less towards enterprises) and the progressive weakening of the (federal) state, with booming national separatist and disintegration tendencies that ultimately led to the break-up of the country. On the other, it allowed a critical departure from true economic reforms and values necessary for an efficient market system.

In terms of governance, 1968 represents a tipping point (in Gladwell sense) as the economy started moving away from increased reliance on market forces, decentralized professional management, and observance of hard budget constraints at micro and macro level. Predictably, vanishing federal government mandate to manage twin (internal and external) deficits led to accumulation of foreign debt and frequent financial crises during the late 1970’s and throughout the 1980’s.

The first four attempts at resolving these crises in the post-Tito era (1983, 1990, 1994, and 2001) all started with successful macroeconomic stabilization and fiscal consolidation programs, but completely failed to implement structural reforms. The main reason was the lack of political will and the absence of broad social consensus to
accept key democratic values and clear rules of the game, as well as observe real resource and financial constraints, the same way these values and rules are consciously upheld in all developed countries. The latest (fifth) attempt at fiscal consolidation and comprehensive reform, launched in 2014 in Serbia, followed the same path. The first phase has been completed by successfully balancing the budget and restarting economic growth. The key challenges going forward, which all prior reform attempts failed to address, include the introduction of hard budget constraint at the micro level, especially in state owned enterprises, the reform of education, health
and the overall public sector, including the pension system and public administration. Continuous pressures from labor unions, pensioners, and public sector employees (to make long term expenditure commitments on wages and pensions without secured sources of revenue), with a silent consent of poorly informed general public, threaten to stop the normal course of structural reforms and again turn back the wheel of history.

Skewed value system and weak institutions, which underpin the present resistance to reform, are deeply rooted in the utopian concept of generalized self-management, the ultimate result of the sequence of political and institutional responses triggered by the protests of June 1968. The protests, albeit small in size, represent a tipping point in the evolution of the quality of governance in the post WWII era and the progress of reforms. The
leaders of student protests confirmed this as they triumphantly concluded that June 1968 events stopped the (unjust) 1965 market reforms. But they failed to observe that this opened a Pandora box of changes that ultimately led to the disintegration of the country. It promulgated an unsustainable system of “claims and rights without responsibilities,” and an outdated utopian view of work ethic, equality, wealth, and economic success. This value system, albeit partially justified by poor state performance, weak rule of law, corruption and massive violations of legal process, now represents a major obstacle to all reforms. Unless the resulting anachronous value system
soon evolves, it will continue to generate rent-seeking behaviour, undermine meritocracy, and allow corruption. In turn, this will stall social and economic progress, arrest future development, and undermine democracy.

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