Money and Banking in Yugoslavia: A Socialist Dilemma

Abstract

This paper examines both the macroeconomic and microeconomic implications for self-management of a current proposal for restructuring the Yugoslav monetary and banking system. Specifically, it examines the monetary theory of Ivo Perisin, former head of the Yugoslav National Bank, and Asim Stranjak, economist and banker. At the heart of the proposal is an assertion that the fractional reserve system of banking is incompatible with the goals of self-management and that a banking system which is based on Marxian monetary theory should be instituted in its place. This paper demonstrates that the proposal is not rooted in Marxian value theory but rather reflects the tenets of the real bills doctrine. The major finding of this paper is that under current institutional arrangements and with current pricing and investment policies pursued in Yugoslavia today, this theory of finance is inappropriate.