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Centralization vs. Decentralization: The Case of Yugoslav Banking

Published online by Cambridge University Press:  25 March 2019

Egon Neuberger
Egon Neuberger*
Affiliation:
Amherst College
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Extract

Does a centralized system of direct controls necessarily provide the most effective method of control? A case study of the postwar Yugoslav banking system raises serious doubts on this score. The Yugoslav National Bank has not lost any control and may even have established a firmer control over the country's monetary system since 1954. At that time, it moved closer to the traditional central bank role of exercising indirect control over independent banks instead of performing all its functions through its own branches, over which it had direct control.

Type
Research Article
Information
American Slavic and East European Review , Volume 18 , Issue 3 , October 1959 , pp. 361 - 373
Copyright
Copyright © Association for Slavic, East European, and Eurasian Studies 1959

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References

1 A somewhat more detailed description and source references can be found in the author's unpublished dissertation, “Central Banking in Semi-Planned Economies— Yugoslav Case” (Harvard University, 1957), Chs. VII & VIII, particularly pp. 69-73.

2 For a discussion of this system, see E. Neuberger, “General Survey of the Yugoslav Economy,” Chapter 10 in Yugoslavia: East-Central Europe under the Communists (New York: Frederick A. Praeger, 1957), pp. 201-206.

3 A. Puljević, “Povodom Diskusije o Predlogu za Reorganizaciju Bankovnog Sistema,” Finansije, X, No. 9-10 (September-October, 1955), 447 and M. Ugrićić, “Banke u Novom Privrednom Sistemu,” Glasnik Narodne Banke FNRJ, VIII, No. 1-2 (January-February, 1954), 4. Cf. Sayers, R. S., Modern Banking, 3rd ed. (Oxford: Clarendon Press, 1951) p. 292 Google Scholar.

4 “Nov Kreditno—Monetarni Sistem,” Ekonomska Politika, IV. No. 171 (July 7, 1955), 544.

5 N. T., “Približiti Banke Privredi,” Ekonomska Politika, IV. No. 152 (February 24, 1955), 163 and interviews with D. Lazarevic, Chief, Organizational Sector, National Bank, Head Office, and his assistants, R. Jankovic and M. Ugrićić, Belgrade, February 23 and March 18, 1957.

6 D. Konstantinović, “Štedionica ili Banka,” Ekonomska Politika, IV. No. 165 (May 26, 1955), 429.

7 N. T. “Približiti Banke Privredi,” op. cit., p. 163.

8 Interview with B. Benic, Director, Communal Bank of Karlovac, and S. Rogoz, Assistant Director, Karlovac, March 11, 1957.

9 N. T., “Približiti Banke Privredi,” loc. cit. This argument is included in this category as it bears upon the problem of inflation.

10 Puljević, op. cit., p. 443 and Ćetković, D., “Savezne ili Lokalne Banke,” Finansije, XI, No. 1-2 (January-February, 1956), 68 Google Scholar.

11 Cf. B. Injac and others, Zbirka Propisa o Kreditima i Bankama (Zagreb: Informator, 1954), p. 6.

12 Ćetković, loc. cit.

13 J. Pokorn, “Razvoj Našeg Finansiskog Sistema,” Finansije, XI, No. 1-2 (January- February, 1956), 7. It is beyond the scope of this paper to discuss in detail the actual forms of bank control, the so-called “control by dinar” and “društvena evidencija.“

14 Interview with N. Popović, former Vice-Governor of the National Bank, and now Assistant Secretary in the Committee for Foreign Trade, Belgrade, March 1, 1957. Mr. Popovid was in favor of decentralization despite this worry.

15 I. Gretić, “Kratkoročno Kreditiranje: II. Organizacija Bankarskog Aparata,” Ekonomska Politika, III, No. 126 (August 26, 1954), 684.

16 Interview with A. Bogoev, Chief, Short Term Credit Sector, National Bank, Head Office, Belgrade, March 1, 1957.

17 Lazarević—Janković—Ugrićić Interviews, op. cit. and interview with Professor S. S. Ćuković, Belgrade, March 1, 1957.

18 Gretić, loc. cit. He mentions this argument only to try to demolish it.

19 O. Spaček, “Povodom Osnivanja Jugoslavenske Investicione Banke,” Sveopči Privredni List, XXV, No. 11-12 (December, 1956), 2.

20 K. Vasiljević, “Kreditni Sistem u Nacritima Propisa o Privrednom Sistemu,” Ekonomist, VI, No. 4 (1953), 5.

21 N. T., “Približiti Banke Privredi,” op. cit., p. 163.

22 Benic—Rogoz Interview, op. cit.

23 Interview with D. Supanc, Financial Director of Zagrebacka Mljekara (Zagreb Milk Plant), Zagreb, March 9, 1957.

24 Ćuković Interview, op. cit.

25 Ćetković, op. cit., p. 69.

26 Puljević, op. cit., pp. 440-41.

27 M. Vučkovid, “Naš Kreditni Sistem pred Novim Zadacima,” Ekonomist, IV, No. 5-6 (1951), 57-58.

28 In order to keep down the length of the article, the discussion will be kept brief. For more details, see pp. 133-148 in the author's dissertation, already cited.

29 Lazerević—Janković—Ugrićić Interview, op. cit.

30 Bogoev Interview, op. cit.

31 Interview with B. Herljević, Assistant Director, National Bank, Branch 470, Karlovac, March 11, 1957.

32 For a detailed discussion of the auction system for investment funds, which is similar to the auctions for short term credit, see the author's article “The Yugoslav Investment Auctions,” The Quarterly Journal of Economics LXXIII (February, 1959), 88-115.

33 See the section on the control over the total money supply.

34 These diseconomies would be of two types: internal diseconomies which could be represented by the upward sloping section of the envelope curve [we happen to agree with Professor Chamberlin's argument on the question of proportionality, see Appendix B, The Theory of Monopolistic Competition, 6th ed. (Cambridge: Harvard University Press, 1950)], and a special type of external diseconomies (special in the sense that the diseconomies would not appear in the cost curves of the industry in question, but rather in the cost curves of other industries, served by this industry; this type of diseconomy would be particularly important when the industry considered is the banking system in the country). We will not enter into the voluminous economic literature on this subject.

35 The term decentralization as used here is purposely ambiguous. It can refer to the splitting up of the Yugoslav banking system into many separate banks or it can mean simply the granting of considerable autonomy to the branches of the National Bank. A review of the arguments for decentralization will show that all of them would be satisfied by the setting up of separate banks, while some of them would also be satisfied by the decentralization of the National Bank itself.

36 Ernest Dale, Planning and Developing the Company Organization Structure (Research Report No. 20, American Management Association, New York, 1952), p. 22.

37 Brown, Alvin, Organization, A Formulation of Principle (New York: Hibbert Publishing Co., 1945), p. 12.Google Scholar

38 Ibid., p. 208.

39 Dale, op. cit., pp. 111-12 and Davis, R. G., The Fundamentals of Top Management (New York: Harper and Brothers, 1951), p. 305 Google Scholar.

40 Studenski, Paul and Mort, P. R., Centralized versus Decentralized Government in Relation to Democracy (New York: Columbia University, Teachers College Bureau of Publications, 1941), pp. 3, 19, 55, 63Google Scholar.

41 Dale, op. cit., pp. 112-13 and Davis, op. cit., p. 305.

42 Studenski and Mort, op. cit., p. 38.

43 Newman, W. H., Administrative Action (New York: Prentice Hall, Inc., 1951), pp. 212-14Google Scholar.