Economic Crisis, Wave of Strikes Test Tito Heir

Thirty years ago, a prominent Yugoslav writer met young Branko Mikulic and called him one of the most reasonable politicians of his generation. Now, as the country faces an economic and political crisis brought on by years of spending beyond its means, Mikulic, at 60 the nation’s premier, is having his talents tested as never before.

If he fails, continued economic decline could aggravate the country’s ethnic rivalries and disrupt the balance that has held Yugoslavia together since the death six years ago of the postwar republic’s founder, Josip Broz Tito, according to Eastern European and Western diplomats.

“I suspect they’re going to muddle through,” one Western diplomat said, “because they’re resilient, because the Balkans have never been rich and because it’s in no one’s interests to pull the plug on their debts.”

Mikulic, a former personal aide of Tito, has headed Yugoslavia’s government since last May and has acted to control the highest inflation rate in Europe. He imposed a set of emergency measures that slashed the take-home pay of thousands of workers in factories deemed to have productivity problems. The measures have sparked a wave of strikes.

He also warned opposition groups that Tito’s heirs have no intention of loosening their grip, even though no comparably strong leader has taken the place of the Communist warlord who created modern Yugoslavia.

Tito, whose photograph still adorns every shop and government office in the country, had the political and moral authority to “knock heads together,” as one Western diplomat put it, despite marked differences among the six republics and two autonomous provinces that make up the Yugoslav federation.

Since Tito’s death, Yugoslavs have watched apprehensively as his successors have tried to reduce a foreign debt of nearly $20 billion, 15% of it owed to the United States, and dampen an inflation rate of more than 100% a year.

The problem is complicated by the cumbersome political system Tito created to try to keep Yugoslavia from flying apart and at the same time let no single republic assume a dominating role.

Based on a dizzying scheme of rotating political officeholders, the system has worked so far, but no one forecasts immediate solutions to the country’s problems.

Still, associates here in Mikulic’s snow-capped home republic of Bosnia-Herzegovia say he has as good a chance as anyone of getting the country on the road to recovery.

Former subordinates remember Mikulic, who joined Tito’s partisans at age 15, as a careful but decisive executive whose major triumph was the successful staging of the 1984 Winter Olympics in Sarajevo.

But they do not minimize the difficulties he faces, which are similar to the problems that Soviet leader Mikhail S. Gorbachev has complained about in his campaign to reform the Soviet economy--an entrenched bureaucracy that has little to gain from major change.

“We have no Stalin,” one Yugoslav said. “We have 3,000 little Stalins.”

Although some see him as a hard-liner, Mikulic is hardly a Stalinist, and his powers are anything but dictatorial. Yet he seems to have gotten his anti-inflationary message across.

A recent cartoon in the Belgrade newspaper Politika showed Mikulic wearing a physician’s smock, holding a prescription reading, “Roll back prices and wages to December, 1986.” An old lady taps him on the shoulder and says, “Doctor, if possible, could you roll me back to December, 1952?”

“When he comes forward with these ideas (the emergency package) now, it seems that he’s strong-handed,” said Luko Popovic, who was Mikulic’s chief of staff when the premier headed the government in Bosnia-Herzegovina. “But probably he’s had these ideas for several years, and now it’s time to put them into action.”

According to the latest reports, Mikulic’s emergency measures provoked about 200 job actions across the country, most of which only lasted a few hours and amounted to little more than angry shouting sessions between workers and management.

At a furniture plant outside the Bosnian capital, workers whose pay was not cut said they support the emergency measures, which affected less than 1% of the work force.

“We think if things continued behaving as they did before, then there’d be no end to it (declining productivity),” one worker said. “There had to be a stop.”

Despite the recent crisis atmosphere, Sarajevo and other Yugoslav cities look prosperous compared to the dinginess of much of the rest of Eastern Europe.

In a country where office workers earn the equivalent of less than $300 a month, shop windows offer sweaters for $100, grocery stores carry imported oranges, lemons and bananas, and retirees on small pensions take regular winter holidays and spend two weeks by the seashore during the summer.

A young worker at the furniture plant said she gets by because she lives with her parents, eats her midday meal at the factory and “I don’t think about $100 sweaters.”

“People are always grumbling, but when you go out, you see that the restaurants and cafes are full,” a Belgrade housewife said. “And not only that, the most expensive things in the store windows always get snapped up. There isn’t much saving any more, but people don’t feel all that insecure.”

Much of that good feeling comes from people having relatives working in other countries who send money home.

In addition, many Yugoslavs work at second jobs, and virtually every family has relatives on farms who can provide them with milk, eggs, poultry and other food.

Even today, 40 years after Tito’s postwar industrial drive transformed the country, nearly 20% of the population makes its living from agriculture.

Economists cite the long way Yugoslavia has come when they try to explain its current problems.

“Nowhere in the world has there been such a speedy population transfer recorded in only 40 years,” said Desimir Guzina, director of the Central Planning Institute in Belgrade.

He said that more than two-thirds of the population made its living off the land when Yugoslavia emerged from the bloody civil strife and partisan fighting that racked the country during World War II, leaving 35% of its industry destroyed and 15% of its population dead. Since then, employment has risen from 1 million to 6.6 million, and the country manufactures as much in a month today as it did in all of the year 1946. Its economic growth rate until the late 1970s was one of the highest in the world, ranging from 5% to 8% a year.

The last decade of Tito’s reign was financed by large-scale borrowing from the West. Yugoslavia’s debt went from $2 billion in 1970 to 10 times that in 1980.

Since then, Yugoslavia has managed to keep up with interest payments--but just barely. Talks are now under way for still another rescheduling of the debt.

Internally, Yugoslavia’s socialist system, employing what it calls worker self-management, has functioned as if it were producing much more than it it actually does, Guzina said.

This was the result of unrealistically low interest rates, underestimated depreciation and other factors, including a local phenomenon called “gray emissions.” These are quasi-legal procedures that, in effect, create money outside the control of banks or the government. They include late repayment of loans, failure of enterprises to pay each other for transactions and other forms of almost invisible credit.

“In short, we used much more than we manufactured,” Guzina said. The economic growth rate sank below 1% a year between 1981 and 1985, and Yugoslavs experienced an estimated drop in buying power of about 35% between 1979 and 1985.

Belt-tightening, imposed in an effort to reduce the foreign debt, went as far as it could politically last year, when wages were increased by an average of 10%, helping to fuel the latest spurt of inflation. By motivating producers to concentrate on the domestic market, that burst of income also hurt exports, which are vital for paying off the foreign debt.

Talk of Market Economy

Now, Yugoslav planners talk about shifting toward a market-run economy, one where money-losing enterprises are forced to close and where workers not productively employed can shift more easily to successful enterprises.

That will not be easy, given the number of vested interests satisfied with things as they are, according to Bozo Marendic, a senior planning official for the industrialized northern republic of Croatia.

“Yugoslavia is like a car without a reverse gear,” Marendic said. “If you look at the lack of increase in production, the logical follow-up would be to decrease the number of people working.”

But since jobs are virtually guaranteed, employment has tended to remain static while production costs rise, he added.

All this came to a head in the recent strikes, which are expected to resume when reduced pay packets are handed out at other factories later in April.

Although concerned about the unprecedented number of strikes, officials scoffed at reports that interpreted recent comments by Mikulic as being a threat to call out the army against the workers.

Zdravko Grebo, a law professor who was Mikulic’s aide when the premier headed the Yugoslav League of Communists, said, “If we can hypothetically speak of calling out the army to bring order, it would be more against political forces that may have a political program to destabilize (Yugoslavia), rather than against workers who go on strike because of specific problems.”

Such “enemy forces,” who are frequently denounced as such by the country’s leaders, are generally said to be intent on promoting the interests of one nationality or another over those of the country at large in this nation made up of 19 ethnic groups, with different languages, alphabets, regions and individual histories dating back for centuries.

So far, there is no sign that Mikulic might back away from his controversial anti-inflation laws.

But in a gesture to consumers, some prices are to be rolled back, including that of bread--”the symbol of social peace,” as it was called by the newspaper Politika.