Slovenias transition from labor managed economy to privately owned capitalism :: essays research papers

  Ã‚  Ã‚  Ã‚  Ã‚  In 1991 following a ten day military resistance to the Yugoslav National Army, Slovenia achieved its independence. Since then the country has established itself through economic prosperity and stability that is not always the case for countries transforming from a communist dominated system. During the period that Slovenia was a part of Yugoslavia the government consisted of a socialist system dominated by the communist party with most aspects of political power centered at regional levels. As a part of Yugoslavia Slovenia made up one fifth of its GDP and since its independence it has maintained a consistent GDP growth rate of 4% and has been successful in its transformation to a market dominated system by taking a policy of diversification of trade and an advocate of bilateral and regional free trade agreements.   Ã‚  Ã‚  Ã‚  Ã‚  Slovenia is a small country in central Europe. It borders the Adriatic Sea and lies between Austria and Croatia. Slovenia is slightly smaller than New Jersey and has a population of just over two million people. Its strong historical ties to Western Europe along with many other factors such as a literacy rate of 99.7% have resulted in Slovenia enjoying a much higher per capita GDP than other transitioning economies in Central Europe.   Ã‚  Ã‚  Ã‚  Ã‚  The policy change that Slovenia experienced upon its independence involved a change from labor managed enterprises to a privately owned capitalist system. This task involves the privatization of the entire market from a socially owned and planned system. The changes to the labor market that took place were the transformation from wage controls to a competitive labor market. This was not as big of an issue in Slovenia due to the negative influence that labor-managed enterprises had on wage and price controls. The attempts to distance itself from central planning and the ideal of a functioning labor market is one of the primary reasons that Slovenia has made the transition to a capitalist economy with relative ease.   Ã‚  Ã‚  Ã‚  Ã‚  Towards the late 1980s the Yugoslav government recognized the need for economic change in order to prevent stagflation from occurring and to spur production. Actions taken included â€Å"liberalizing prices, wages, imports, and personal foreign currency accounts, which together would bring about equilibrium of relative prices.† These stabilization policies allowed corporations to act more autonomously and set the stage for the eventual transition to a capitalist economy by Slovenia after its independence.   Ã‚  Ã‚  Ã‚  Ã‚  Prior to the Slovene independence in 1991, the Yugoslav economy was based on labor-managed enterprises and basic price and wage controls.