Asklemmy

Why did the economy start stagnating?

In the late 1960s and early 1970s, FRY leaders, not unlike Communist leaders in other Eastern European countries, com- mitted a disastrous error. They decided to borrow heavily from the West in order to simultaneously expand the country's industrial base, its export production, and its output of domestic consumer goods. But when Western economies entered a reces- sion and blocked Yugoslav exports, thereby diminishing its export earnings, this created a huge debt for Belgrade. And the massive debt began to develop its own interest-fed momentum. In short order, as in so many other debtor nations, the creditors, including the World Bank and the International Monetary Fund (IMF), demanded a "restructuring."' Restructuring consists of a draconian austerity program of neoliberal "reforms": wage freezes, the abolition of state subsidized prices, increased unemployment, the elimination of most worker-managed enterprises, and massive cuts in social spending. The Yugoslavs were to consume less and produce more, so that a larger portion of the national wealth might be redirected toward meeting debt payments.

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