Introduction: The Pragmatic Pattern of Yugoslav-American Relations

____Yugoslav-American relations since the Tito-Stalin split have been pragmatic and positive for the most part, despite enduring ideological differences between the two governments. The emergence of a common adversary, the USSR, ended the initial postwar confrontation in 1948 but did not prevent subsequent episodes of misunderstanding and frustration for both sides. Yet specific disagreements have typically been resolved in a forthcoming fashion which left the closest participants with more respect for the other side. Economic issues, the focus of this volume, have consistently been at the center of these strains and successes. In easier times the experience of individual American businessmen and scholars, as well as government officials who worked comfortably with their Yugoslav counterparts, stored up understanding and good will, which have facilitated frank discussions when serious problems, political or economic, have arisen.

Political imperatives have sometimes obscured the importance of economic relations between the two countries, especially during the first twenty years after World War II. Both sides tended to see their immediate postwar confrontation in political terms. Until 1948 U.S. officials repeatedly categorized the new Communist regime as the Soviet Union's most faithful satellite. Yugoslav party leaders saw Anglo-American pressure as the principal threat to their consolidation of domestic political power. Tito and his followers assumed, with some justification, that the long wartime struggle of their Partisan forces against the occupation regimes had earned them the right to take power in postwar Yugoslavia.

The Tito-Stalin split of 1948 prompted both the Yugoslav and American governments to reappraise their political relations. Suddenly they shared a common adversary, perhaps the most compelling of reasons for diplomatic rapprochement. By the mid-1950s Yugoslavia had reestablished normal relations with the USSR, but on its own terms. In 1961 President Tito emerged as one of the three founding fathers, along with India's Nehru and Egypt's Nasser, of the new Nonaligned movement of mainly Third World countries. Both of these developments imposed new but tolerable strains on Yugoslav-American relations. So, from the Yugoslav side, did American assistance for Israel and military involvement in Vietnam.

Neither of the two countries—one the major power in the postwar Western world and the other a small Communist state on the edge of Eastern Europe—had really expected to be allies, even during the peak of Soviet pressure on Yugoslavia in the early 1950s. What emerged instead was a relationship based, when it worked best, on each side's recognition of the other's different political principles and foreign policy. Here was an approach fundamental to Yugoslav notions of independence and non-alignment, and it succeeded with a superpower. Here also was the first and most fruitful American accommodation with a ruling Communist regime. Some of the credit does indeed belong to personal diplomacy, in particular to negotiations between Josip Broz Tito and a series of able American ambassadors but also over the years to a long list of diplomatic and other representatives of the two countries.

The evolution of this relationship along increasingly pragmatic, even non-ideological lines would remain incomprehensible without its economic dimension. During the first postwar decade economic issues were crucial to the state of political relations, both bad and good. The 1945 decision by Tito's government to reaffirm the 1881 Treaty of Friendship, Commerce, and Navigation between the United States and Serbia was carried over to interwar Yugoslavia and now served as an existing, legitimate basis for post-1948 economic relations between the two countries. From the early 1950s forward, the slow but persistent Yugoslav turn away from centralized administration of the economy on the Soviet model and its search for "market socialism" made it easier for the U.S. to continue official aid until 1963, long after the Soviet and Eastern Europe boycott on Yugoslav trade had ended.

Decentralization and liberalization became important features of the Yugoslav economy during the 1960s. Whatever domestic potential for future inflation and unemployment these features created, they had two further, far-reaching effects on Yugoslav-American relations. First, they attracted private American business interests to deal with essentially independent Yugoslav enterprises and banks. Second, greater freedom for individuals as well as enterprises significantly enhanced the small, uncertain image of Yugoslavia in the eyes of the American public and policy makers. That same freedom allowed many Yugoslavs and Americans to study or to visit each other's countries without Soviet-style restrictions.

Even before connections between American companies or banks and their Yugoslav counterparts began to multiply, the relationship between the two economies began to take on a life of its own, beyond the political imperatives that had first thrust them together. That separate life and its own political repercussions are a principal concern of this volume. The next two chapters treat the largely official relations of the first two postwar decades. The fourth traces the overall role of foreign economic relations in the growth of the Yugoslav economy and the struggle toward market socialism since the 1960s. This chapter places the American contribution in an aggregate statistical perspective that suggests it was small. Chapter 5 uses a series of case studies to suggest a larger contribution. These private American trade ventures and investment projects, bolstered by several official programs, brought Western business practices and technology to pivotal parts of the Yugoslav economy. Chapter 6 turns to the more troublesome issue of financial relations since the 1970s, when indiscriminate international lending and some injudicious Yugoslav borrowing plunged the country into a debt crisis in the early 1980s. The U.S. government, private banks, and three major international financial organizations—the International Monetary Fund (IMF), the World Bank, and the Bank for International Settlements (BIS)—all played important roles in helping Yugoslavia avoid default on its international financial obligations. A concluding chapter addresses the Yugoslav economic crisis of the late 1980s and reform legislation aimed at completing the long-term efforts to create a market-oriented economy linked more closely to the world...