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Restauration of Capitalism in Slovenia

This article outlines the processes of reintegration of former Yugoslavia into the world capitalist system and reestablishment of capitalism in its former federal republics, particularly in Slovenia.

Year one?

We are told that it was thirty years before when our era has started and that we have never escaped the questions posed by that year. The Conventional liberal moral of these thirty years is mobilized against „old-new“ threats and views which essentialize the whole region (often by pointing to the deviations from the „right way“ of transformation and integration to the „sin“ or „temptation“ of illiberalism). To open the debate, which could counter this conformism and these simplifications, this series of essays brings together various critical voices from different countries of the region, to propose various experiences, analyses, topics and temporalities missing from the standard liberal narrative of the transition.

In the next two weeks, we at LeftEast will be publishing a series of nine essays on the effects of 1989 on post-state-socialist Europe and beyond. The pieces were developed around the workshop “Eastern Europe after 30 years of transition: New emancipatory perspectives from the region,” held in Prague on 25-26 October 2019, organised by the Transnational Institute (Amsterdam) and the Rosa Luxemburg Foundation (Prague), coordinated by Agnes Gagyi and Ondrej Slacalek. In addition to their commentary on the present, these articles also give a virtual tour of the collapsing state-socialist world at the moment of its demise, through the memory of those who lived through it, and implore us to reconsider what critical memory might look like, that is, memory that helps us work toward a substantially different future.

The second post in this series is Marko Kržan’s long-read on the reintegration of Slovenia (and other parts of the former Yugoslavia) into the world capitalist system as part of a post-1989 process which Kržan shows,had roots in the 1960s.

This article outlines the processes of reintegration of former Yugoslavia into the world capitalist system and reestablishment of capitalism in its former federal republics, particularly in Slovenia. The first part describes how modernisation in Yugoslavia became tied to capitalist tendencies already in the early 1960’s in what it describes as ‘the long restoration of capitalism’. The second part deals with restauration of capitalism in the narrow sense, which started with the formal liquidation of both socialist order and the Yugoslav state.

I hope this analysis will also clarify the conditions for the development of socialist movements. I deal with this question in the last part of the article.

Because of the limited space, the processes and actions of the social groups might appear much more rational and conscious than they actually were. However, I find this format useful, because it forces one to outline the essential tendencies, rather than just list the events. Finally, I have to point out that my analysis is based on research and ideas of many scholars, but I used them in a way that corresponds to my own approach.

Part I: The ‘Long’ Restauration of Capitalism in Yugoslavia

To understand restauration of capitalism in Eastern Europe, one has to consider three interconnected, but still diverse processes:

 First: the tendency of the ruling classes to form independent states. This tendency materialized in the creation of nation-states after the collapse of German, Austrian and Russian empires in WW1. One of those states was Yugoslavia.

Second:  the tendency of the bourgeoisie and petty bourgeoisie towards modernization, i.e. development of industrial mode of production and ‘civil society’. In Yugoslavia, the transition from agrarian to industrial society was only achieved after WW2, but very quickly: the process that took more than 100 years in the first capitalist countries was achieved in less than 15 years.

However, this was not capitalist modernisation, which would mean the creation of an autonomous capitalist mode of production plus a bourgeois civil society. [1] Modernization was part of a wider struggle of the working people for socialism, i.e. abolition of class exploitation and other structural forms of oppression (the third process).

Although Yugoslav masses did not achieve socialism, they did accomplish basic conditions for it: they expropriated the propertied classes, nationalized large enterprises and infrastructure and liquidated bourgeois political institutions, plus achieved true national independence. Since this was achieved by a genuine revolution rather than by Soviet intervention, Yugoslavia came quite close to establishing a socialist mode of production instead of only a form of state capitalism. After Tito’s split with Stalin, a process of establishing social property and workers’ self-management started that gave workers much power in enterprises, whereas allocation of capital (investment) was decided by planning. Although planning mechanisms were still controlled by bureaucracy, they were quite effective as witnessed by the fact that economic growth before 1965 was much faster, and the economy much more stable than in all subsequent periods.

However, during 1960’s, workers’ self-management became increasingly connected with expansion of market relations.  Workers’ autonomy was conceived as autonomy of their firms, and the autonomy of the firms was achieved through re-establishing market relations. Here begins the prehistory of restauration in Yugoslavia: 1965 market reform established not only market relations among the firms and between firms and consumers, but also market control of credit (investment) and labour. One of the immediate consequences was reduction of employment, which marked the beginning of ‘socialist unemployment’, uncharacteristic of other post-capitalist societies.

Internal capitalist tendencies were strengthened by the opening of the economy to the world market. Instead of previous strategy of de-linking, there was a tendency to abolish tariffs and adopt world prices. In the late 1960’s, first trade agreements were signed with EEC (the predecessor of the EU).

Unsurprisingly, civil society was emerging as well. This was witnessed by ‘liberalization’ of ideological apparatuses, such as ‘culture’ and academia on the one hand, and the spread of consumerism, on the other. So, modernisation got tied to capitalist tendencies. This process was so thorough that, like in the West at the time, first anti-systemic movements emerged, especially the student movement. Unsurprisingly, nationalism emerged as well, based on diverging economic interests of managerial and bureaucratic groups in different federal republics. Nationalist tendencies of the ruling groups that gained ground in mass movements, like in Croatia, seriously threatened the unity of the country.

In the early 1970’s, party and state bureaucracies, both on the federal and, to a lesser extent, republican levels, blocked the capitalist tendencies, and regained control. However, unlike before, the ruling groups had to rely on political, rather than economic mechanisms. Their rule no longer facilitated modernisation, nor did it enable the working people to pursue the course of socialism. Like Soviet stabilisation under Brezhnev, it was soon jeopardized. Neoliberal counterrevolution in the centre – i.e. the policies of the capitalist class in the centre for restoring the profitability of capital – precluded coexistence of post-capitalist societies with the world capitalist system. Faced with serious trade deficit and debt crisis, ruling groups used their power to establish another basis for their reproduction: capitalism.

Part 2: National and Comprador Tendencies in the Restauration of Capitalism in Slovenia

Restoration of capitalism was everywhere dependant on the initial conditions of the ruling groups. In case of Yugoslavia, they differed even within the same country. Northern republics, particularly Slovenia, enjoyed full employment and, almost up to the terminal crisis of late 1980’s, rising living standards, whereas southern republics suffered from high unemployment, mass emigration and stalled modernisation. Although the ruling groups in all federal republics adopted liberalism – because it is the spontaneous ideology of capitalism – this same ideology produced differing political strategies.

In Slovenia, where modernization has advanced the most and a strong exporting sector was relatively competitive, immediate integration into the EU seemed a natural choice. Since other Yugoslav republics were seen as unfit for that, Slovene liberalism was separatist. Serbian ruling groups, however, depended on basic and arms industries so that direct alignment with the capitalist class in the centre was neither possible nor desirable. Contrarily to other post-socialist states, Serbian ruling groups reasserted national independence and sought support of the masses by what would now be called populism. In combination with restauration of capitalism, reassertion of national independence in defiance to NATO, the EU etc. precluded modernization, not to mention the cost of wars.

This – along with foreign intervention – finally made the regime collapse. It was replaced with a highly dependent peripheral capitalism. Still, it seems that most of the ruling class want to retain some space of manoeuvre by relying on populist mobilization of the mases. This seems to be the case in Hungary and Poland as well, though from a very different starting point. These regimes could be called ‘emerging national capitalisms’ from the right.

However, a sort of national capitalism was also possible without compromising modernization. In Slovenia, neo-corporatist capitalism emerged in contrast to more or less neoliberal models in other post-socialist countries. [3] It was based on four pillars:

(1) The type of privatization that favoured managers, workers and the state as opposed to foreign capital like in most of the other post-socialist countries. This regime was based on internal accumulation (retained profits), but also enabled intensification of labour needed for retaining cost competitiveness.

(2) The monetary policy of slightly depreciated currency as opposed to fixed-exchange rate in most of the other post-socialist states. It enabled the exporting sector to remain competitive despite relatively high wages and forced the management to rely on internal accumulation rather than foreign investment or foreign loans.   

(3) The system of collective bargaining with collective agreements covering the whole labour in both private and public sectors (thus the name neo-corporatist regime) rather than fragmented unionisation in most of the other post-socialist countries. Centralized labour struggles secured relatively high wages and gave trade unions influence on the legislature and government policies.

(4) The expanding, rather than shrinking welfare state. It secured relatively high living standard of the working people beyond what they would buy with their wages, which was especially important for the retired persons and the unemployed. It also contributed to high internal consumption that was important for this regime of accumulation.

In short, Slovenia behaved like central European capitalist countries behaved before the ordoliberal counterrevolution. It was not only the consequence of the emerging capitalist class’ self-interest (as effective owners who wanted the economy to develop). It was also an outcome of two other processes: the process of state secession from Yugoslavia and class struggle of the working people.

It is not irrelevant that the IMF’s stabilization programme of privatization and deregulation was enforced by the Yugoslav federal authorities, whereas the focus of the separatist Slovene bureaucracy was to obtain monetary and fiscal sovereignty.

Secondly, trade unions quickly transformed from organizations for pacifying labour into militant working class organizations opposing the managerial groups. This process began in the late 80’s with the wave of wild strikes and culminated with the general strike in 1992, which forced the government to abandon anti-inflation wage policy and increase welfare benefits. This in turn helped to end the transition depression already in 1993, much sooner than in other post-socialist countries.

One should not idealise this regime. It transformed lworkers from at least formal owners of social capital into a ‘capitalist’ working class with small, diminishing shares of ownership of the economy. It replaced workers’ self-management with the right of co-determination (Mitbestimmung). It brought down entire branches, especially heavy industries, and created a massive industrial reserve army of unemployed or early retired population after 35 years of full employment. It restored land ownership of the Catholic Church and pre-war propertied classes and enabled managerial and bureaucratic groups to transform into a capitalist class and petty-bourgeoisie. In short, it was still restoration of capitalism on the ruins of the society that came far in abolishing it. But it was nevertheless characterised by potential of modernisation and level of autonomy from the capitalist centre that is hard to imagine now, only 15 years after the beginning of its demise.

By the early 2000’s,  external competition eroded the power of trade unions and solidarity of the working class by destroying uncompetitive sectors, fragmenting the economy and labour. The share of employment in small enterprises, where the level of unionisation is low, kept rising. Unprofitable activities became separated from profitable ones (outsourcing) creating a large low-technology service sector where profits are achieved by means of overexploitation, reflected in a much lower level of wages than in exporting or even public sectors. This, in turn, differentiated the interests of various segments of labour and weakened their solidarity.

However, the decisive blow to ‘emerging national capitalism’ was institutional: Accession to the EU and Eurozone after 2004 brought down two pillars of the neo-corporatist regime, ‘Keynesian’ monetary and fiscal policies. It is self-evident, that Euro means fixed-exchange rate and ever more appreciated currency, plus a central bank that cannot support government spending. EU fiscal rules that were later (in 2013) made part of the Slovene constitution preclude fiscal intervention and developmental measures, whereas the European common market precludes economic autonomy, especially the control of capital flows.

Centre-right governments and the crisis of Eurozone have done away with the state ownership of the banking sector and much of the domestic (private) ownership in other sectors. This process was quite abrupt and was due to a combination of inflow of cheap credit after the alignment with Eurozone in 2004 and new wave of privatization of the remaining state shares, mostly attempted in a form of management buyouts (MBOs). Severe drop in the economic activity in 2009 (- 7.8%) coupled with a protracted recession in 2012/ 2013, produced by both internal austerity policies and Eurozone debt crisis, was reflected in a large sum of non-performing loans. The government recapitalized and then privatized all state-owned or nationalised banks. Many attempts of MBOs failed leading to bankruptcies, especially in the construction sector, or foreign takeovers.

This has considerably reduced the basis of the ‘emerging national bourgeoisie’ in the manufacturing sector and further endangered the corporatist regime, because capitalist organisations became dominated by the fractions of capital, whose profits rely predominantly on low labour costs. Parallel to integration into the EU, the governments have deregulated not only labour (by legalising agency work and other atypical forms of employment), but also capitalist organisations, which further reduced the scope of collective bargaining. So, the crisis did not mark a new period of Slovene capitalism, it only strengthened the comprador tendency that became dominant with the accession to the EU.  

Although Slovenian labour still enjoys the highest living standards and level of workers and participatory rights in the region [2], the country is converging with other post-socialist countries in the direction of pronounced comprador capitalism and severely stalled modernisation.

Part 3: Peripheral Capitalism and Left-Wing Politics

If my analysis is correct, the emerging national capitalism in Slovenia turned into comprador capitalism, not because it was economically unsustainable, but because of ideological deliberation. Not only the ruling groups, but also trade unions renounced national independence for the sake of formally joining the ‘imperialist clubs’ (EU, NATO etc.). Moreover, even trade unions renounced socialist perspective. In the absence of socialist perspective, workers’ struggles have been reduced to economism and defence of important, but still bureaucratic welfare state.

This, of course, is a general tendency, not only in Eastern Europe, but in the capitalist world centre as well. It seems we regressed in what resembles situation before the emergence of modern nations in 1848. As ideological formations, modern nations were composed of liberal, conservative and socialist components, which reflected the interests of capitalist, pre-capitalist and the working classes. But contemporary national ideologies have been reduced to dichotomy of liberalism and conservativism. Division of left and right-wing politics is modelled upon French revolutionary parliamentarism, in which workers’ movement (for socialism) was not yet distinguished from petty-bourgeois or even bourgeois movements.

The remnants of left-wing movements or the left-movements that emerged anew are, at least for now, entrapped in this dichotomy. They are perceived by the ruling ideology not as a qualitatively different worldviews, but quantitatively most radical form of liberalism. In other words, the perspective of socialism is no longer distinguishable from the perspective of modernisation.

This, I think, is a generalized situation, at least in the ‘First’ and the ‘Second’ World. It is everywhere reflected in the conflation, by the left-wing movements themselves, of socialist perspective with the perspective of modernisation. Much like pre-Marxist socialists, they rely on petty-bourgeois ideologies that stem from the struggle for modernisation, rather than forming specifically socialist worldview in order to organize the working classes in the struggle against capitalism. Everywhere, the lack of socialist political economical goals and measures is compensated by identity politics, such as struggle for feminine and LGBT rights, or environmentalism in the widest sense, including currents like veganism etc.

Although I do not oppose the struggle of women, LGBT community and various minorities for equal rights, it has to be clear that including those minorities in the universal sphere of bourgeois civil society does not contradict the reproduction of capitalism nor prepare grounds for socialism. I also contend that the strive for preservation of the environment is a reaction to effects of modernisation, not automatically struggle for the abolition of capitalism. After all, protection of the environment has progressed the most in most modernised capitalist countries, and that both major environmentalist NGO’s (such as Greenpeace) and ecological parties (such as German Greens) are parts of the capitalist system, not an anti-systemic force.

Slovenian socialist movement is no exception. The proclaimed anti-capitalist party of The Left (Levica) is – like Portuguese Left Block and Communists – forced to support minority centre-left government. Although such parties do protect some of the achievements of modernisation, including workers’ and social rights, they cannot prevent those governments from enforcing ‘comprador’ measures that undermine modernisation. Although it would be wrong to make direct analogies with historical fascisms beyond the mere fact that new forms of nationalism (‘populism’) are reactions to the crisis of capitalist system, it is still worth remembering the basic lesson of the policy of ‘popular fronts’: (1) conservativism cannot be repelled by reproduction of capitalist relations that are the cause of the crisis; (2) the true alternative is possible, only if socialists achieve hegemony over the left-liberals, only if they manage to articulate the goals of modernisation in terms of socialist perspective.

In order to achieve that hegemony, socialists should first achieve what I call triple autonomy:

Autonomy of worldview – Capitalist system cannot be seriously challenged from the position of petty-bourgeois ideologies of modernisation, but only through socialist worldview, which can integrate modernist aims.

Autonomy of organisation Socialist movements should not remain organised (exclusively) in the forms of NGO’s or petty-bourgeois political parties. Those forms foster opportunism on the outside and block the development of socialist democracy on the inside.

Autonomy of action – Socialist must not remain entrapped in the mechanisms of parliamentarism (on all levels from the European parliament to the municipal councils) and bureaucratic structures.


[1] Capitalist modernisation should create predominantly capitalist economy capable of reproducing independently of other capitalist countries. In reality, most capitalist countries do not meet this criterion, because their reproduction is dependent on capital accumulation in the imperialist centre. That is why truly ‘modern’ or ‘developed’ societies develop only in the capitalist centre (i.e. as imperialist states) and very rarely on the periphery, like in South Correa or Taiwan. I define modernization widely and in terms of its social basis (bourgeois and petty-bourgeois), so that it includes phenomenon described as ‘post-industrial’ or ‘postmodern’ society.

[2] This is subject to some local controversies. Some neoliberal media in Slovenia, still unhappy with the degree of ‘liberalization’, are trying to make their case by pointing out that Czechia has surpassed Slovenia in terms of GDP per capita (PPP) and claiming that this is a consequence of stronger ‘entrepreneurship’ (reflected e. g. in the existence of quite a few billionaires in Czechia and none in Slovenia). I stick to my thesis, though, because nominal GDP per capita is higher in Slovenia, as are the employees’ share in the GDP, median equalised net average income, average wage and minimum wage (both nominally and in terms of PPP). Furthermore, historical data show that, in 1995, GDP per capita in Slovenia was slightly lower than in Czechia (both nominally and in PPP’s), but then quickly surpassed it in the period 1997–2008. Slovenia started to ‘lag behind’ after the break-up of the neo-corporatist regime, which confirms my thesis that relinquishing independence (Czechia is not part of the Eurozone!) jeopardized modernisation.

[3] National capitalism is a combination of the drive of the ruling classes for political independence and of the bourgeoisie and petty bourgeoisie for economic independence, i.e. modernisation. Comprador capitalism, on the other hand, is peripheral capitalism, in which ruling classes politically align themselves with the ruling classes in the centre, and the propertied classes are economically dependent on capitalism in the centre. This is the situation of Latin America in relation to USA and of European post-socialist states in relation to Western Europe and USA. The case of Slovenia shows that relative economic autonomy (modernisation) was possible – at least temporary – in the ‘backyard’ of the EU, i.e. on the condition of relative political independence.