Faced with economic stagnation, a Soviet-bloc trade embargo, dwindling popularity, and a dysfunctional Soviet-style economic system, Yugoslav leaders returned to the core of their philosophy, the writings of Marx. Their aim was to reassess their ideology and lay the groundwork for a new economic mechanism called Socialist (or workers') self-management. Enterprises formed prototype workers' councils in 1949, and the Federal Assembly passed laws in 1950 and 1951 to implement the system fully. These laws replaced state ownership of the means of production with social ownership, entrusting management responsibilities to the workers of each enterprise. The laws empowered enterprise workers' councils to set broad production goals and supervise finances, but government-appointed directors retained veto power over council decisions. The government also reformed economic planning and freed some prices to fluctuate according to supply and demand, but foreign trade remained under central control (see Socialist Self-Management , ch. 3).

The replacement of a command economy with a self-management system required the Communist Party to loosen its hold on decision making. At its Sixth Congress, in November 1952, the party renamed itself the League of Communists of Yugoslavia ( LCY--see Glossary) to signal a break with its Stalinist past and a revision of its leading role in the country's political life. The Congress declared that the party would separate itself structurally from the state. Instead of directing government and economic activity, the party was to influence democratic decision making through education, propaganda, and the participation of individual communists in political institutions, workers' councils, and other organizations. Free intraparty debate would determine party policy, but once the party had made a final decision, the principle of democratic centralism would bind all members to support it. By rejecting multiparty pluralism, the party retained a monopoly on political organization. Three months after the Congress, the People's Front became the Socialist Alliance of Working People of Yugoslavia (SAWPY), an umbrella organization through which the party would maintain this monopoly. In addition, individual communists continued to occupy key government and enterprise-management posts.

In 1953 the Federal Assembly amended virtually the entire 1946 constitution to conform with the new laws on workers' self-management. On the federal level, the amendments created an administrative Federal Executive Council and reorganized the Federal Assembly. The amendments also reduced the already minimal autonomy of the individual republics, while local government retained power in economic and social matters.

In March 1953, the government began dissolving collective and state farms. Two-thirds of the peasants abandoned the collectives within nine months, and the socialist share of land ownership sank from 25 percent to 9 percent within three years. In an attempt to mitigate the problem of peasant landlessness, the government reduced the legal limit on individual holdings from 25 to 35 hectares of cultivable land to 10 hectares; this restriction would remain on the books for over three decades and would prevent the development of economically efficient family farms. The government also eliminated the system of compulsory deliveries, fixed taxes in advance, encouraged peasants to join purchasing and marketing cooperatives, and increased investment in the agricultural sector. As a result, Yugoslav agricultural output grew steadily through the 1950s, and its farms had record harvests in 1958 and 1959. Yugoslavia maintained its focus on industrial development through the 1950s, despite the government's new approach to economic planning and enterprise management. The industrial sector boomed after 1953; manufacturing exports more than doubled between 1954 and 1960; and the country showed the world's second highest economic growth rate between 1957 and 1960.

Living conditions, health care, education, and cultural life improved in the wake of the economic and political reforms. In the mid-1950s, the government redirected investment toward production of consumer goods, and foreign products became widely available. The regime also relaxed its religious restrictions, allowed for a degree of public criticism, curbed abuse of privileges by party officials, and reduced the powers of the secret police. Travel restrictions eased; Yugoslavs gained greater access to Western literature and ideas; artists abandoned "socialist realism" to experiment with abstraction and other styles; and film makers and writers, including Nobel Prize-winner Ivo Andric, produced first-rate works. But already in 1953 liberalization was an uneven, changeable phenomenon in Yugoslavia. A meeting of party leaders at the north Adriatic island of Brioni that year resolved to strengthen party discipline, amid growing concern that apathy had infected the rank and file since the Sixth Congress. Over the next several years, the party tightened democratic centralism; established basic party organizations in factories, universities, and other institutions; purged its rolls of inactive members; and took other measures to enhance discipline.

Milovan Djilas, one of Tito's closest confidants, disagreed with the Brioni decisions. In a number of articles in the foreign press, he criticized the party leadership for stifling democratic intraparty debate. He also exposed elitism in the private lives of leaders and suggested that the League of Communists dissolve itself as a rigid political party. This criticism exceeded Tito's tolerance, and his former comrades dismissed Djilas from his posts and imprisoned him. In 1957 Djilas published The New Class, in which he described the emergence of a new communist ruling elite that enjoyed all the privileges of the old bourgeoisie. The book won him international notoriety and prolonged his jail term. Publication of Conversations with Stalin in 1962 earned him more fame and a second prison term (see Djilas, Praxis, and Intellectual Repression , ch. 4).

Data as of December 1990