Economic History of Croatia Study Guide

Table of Contents (clickable):

Period One: 1820 to 1870 1
Period Two: 1870 to the First World War 6
Period Three: 1918 to 1941: Interwar 9
Period Five: 1945 - 1991: Socialist Yugoslavia 13
Period Six: 1991 - present: Independent Croatia 17

Preface:
This document (organized by time period) contains all presentations in an
easy to read and organized format. Despite my best effort to fix the weird wording
and style issues, some content still might read a little strange or out of place (also
some topics repeat themselves). The last period (1991-present) is not available on
Merlin but if it's tested I bet you won't have a problem making educated
guesses/background knowledge to successfully answer any questions.
The written exam will take place on Wednesday May 24th, at 12pm.
According to professor Dujmic, the exam will cover all material covered this
semester. You will have to answer around 15 questions. The question types are:
multiple choice, fill in the blank and short answer.

Example Short Answer Question:

What city was the industrial center of Croatia in the 19th century? Why?

To best prepare, read through this guide.

Despite the hilariously elementary nature of this course, PLEASE STUDY!

If there are any glaring issues in this guide, please contact me.
 1

Period One: 1820 to 1870

Illiteracy and Education in Croatia:
● 1820 illiteracy rate: 84.1%
● Education became compulsory in 1874.
● 1920 illiteracy rate: 48.8%
The Agrarian People (people whose livelihoods depend on farming):
● In 1820, 89% of the Croatian population was agrarian.
● In 1870, 87.4% of the Croatian population was agrarian.
● In 1914, 75.8% of the Croatian population was agrarian.
● High population growth resulted in a large agrarian population.
○ Agrarian overpopulation was a big problem for the Croatian economy until
WWII.
● The non-agrarian population increased by 440% between 1820 and 1914.
Croatian Territories in the 19th Century:
● Croatia:
○ Central-European model of feudal system, dominated by low/mid level
aristocracy, Austrian administration.
● Slavonia:
○ Feudal system - small number of wealthy landowners with a lot of serfs,
Hungarian administration.
● Military Frontier (Militargrenze):
○ Province under direct military administration (Austrian), feudal system adapted
for military purposes.
● Istria and Dalmatia:
○ Mediterranean communes system, dominated by colonizers.
● Bosnia and Herzegovina:
○ Ottoman feudal system.
● Illyrian Provinces (Les Provinces Illyriennes):
○ Experienced a short term of prosperity under French imperial rule (1809-1813).
● Habsburg imperial rule was restored after the Congress of Vienna (1815).
● The vast differences between social, administrative and economic systems in the various
Croatian territories were major obstacles for the coordinated prosperity and development
of the Croatian economy.
○ The Industrial Revolution was significantly delayed in Croatia.
● Industrial plants were scarce. Industrialization occurred in the late 1870’s. Rijeka (Fiume)
was an exception.
● No large scale investments or any kind of government support.
● Croatia was isolated (administrative and transport wise) and was generally backward.
● 90% of the population was in urban areas.
○ Croatians were serfs, colons and peasants).
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○ Foreigners were craftsmen, clerks and merchants.

● Ports were in disrepair, there was a maritime crisis, the world was transitioning to
steamships and there was a crisis in wine production.
● Trade was focused in Trieste and Rijeka (Fiume) due to prevailing foreign interests.
● The abolition of the feudal system in 1848 was seen as the potential start of a modern
economy – in reality it was very slow and a long-term process (regarding Croatian lands).
● Instead of creating economic prosperity, the abolition of feudalism caused major setbacks
for the development of the Croatian economy.
● Wealthy feudal landlords who owned the majority of agricultural land were deprived of
their workforce causing setbacks in production. On the other hand, the peasants in the
workforce were too poor to buy plots of land and tools in order to start their own farms.
● The single market and the transition to liberal capitalism began in 1873 (monopoly
capitalism).
● Administrative transformation of Habsburg Monarchy (Austro-Hungarian Compromise
of 1867.) Austro-Hungarian Monarchy established which caused additional problems for
development of the Croatian economy
● Croatian-Hungarian Settlement in 1868. and Rijeka as Corpus Separatum caused
additional problems for development of the Croatian economy.
The Equilibrium of Poverty:
● Low income (living standard barely enough for survival) = No savings,
● No savings = No investments,
● No investments = No improvements in production (output),
● No improvements in production (output) = No increase of income (improving living
standard to enable savings - investments).
Agriculture (1820-1870):
● Agriculture and forestry were the most important economic activities during this period.
● Agricultural methods were obsolete and primitive. Estates/farms were very small and
fragmented = low output.
● Croatian rural areas still using natural economy system (barter trade - virtually no use for
money).
● Rural economy based on autarky – self sufficiency. All goods produced and consumed
domestically. Only small quantities of surplus products are available for trade on the free
market.
● Abolition of feudalism enabled peasants to own the land for agricultural productions but
peasants were lacking the capital for investments in production (this was a major setback
for modern economy).
● Agrarian overpopulation was a constant problem – industry (as a potential employer) was
virtually nonexistent, the only solution was emigration.
Forestry (1820-1870):
● Forests were a significant natural resource – over 50% of Croatia was covered in forest.
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● Wood was used locally – in the rural economy (fuel and construction). Industrial
exploitation of forests was virtually nonexistent.
● There are rare examples of French companies using Croatian timber for production of
wine barrels.
● Charcoal and wood ash (for soaps and fertilizers) produced by burning wood.
● Massive deforestation occurred due to inadequate exploitation
● First steam powered sawmills appeared in 1849.
Transport (1820-1870):
● Transport was the second most important economic activity (right behind Agriculture and
forestry).
● Transport activities were mainly performed by peasants in order to improve personal
income from agriculture. (in statistics incomes from transport were recorded as
agricultural income).
● Foreigners invested in road, railroad and port infrastructure since Croatia was lacking
sufficient capital. As a result, transport infrastructure was developed according to foreign
needs and interests.
● Roads built from continental parts of Croatia to the Adriatic coast for the purpose of
transporting goods (import, export and transit). Karolina, Jozefina, Lujzijana (no idea
what this means).
● Dalmatia was isolated from this development during Austro Hungarian rule.
Railroads (1820-1870):
● By the end of the 1820-1870 period, Croatia had less than 300 kilometers of railroads.
(compared to 209,789 kilometers of railroads in the world)
● Development of railroads in Austrian and Hungarian parts of the Monarchy started during
1840’s. First railroad in Croatia was built in 1860.
● Railroad infrastructure in Croatia was developed by Austrian and Hungarian railroad
companies according to their commercial interests (Dalmatia not included in the railway
network).
● Austrian railroad companies were connecting the mainland to Trieste (Austrian
commercial port).
● Hungarian railroad companies were connecting the mainland to Rijeka (Hungarian
commercial port).
● Croatian owned local railways started to develop during 1880’s.
Shipbuilding Industry (1820-1870):
● Croatia had significantly developed the shipbuilding industry of wooden sail ships.
● Main shipyards were located in North Adriatic - Croatia (Rijeka, Bakar, Kraljevica,
Lošinj) and in South Adriatic – Dalmatia (Korčula, Dubrovnik).
● Due to availability and abundance of construction materials (wood), combined with
skilled workforce, Croatian shipyards were able to offer competitive prices for ships even
on international market.
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● Production oscillated – following significant changes in demand. Demand drastically

decreased with the introduction of steamships.
● Shipping industry's transition from sail ships to steamships marked the end of the
Croatian shipbuilding industry.
● Modern shipbuilding industry (steamships) demanded major capital investments,
advanced industrial facilities, railroad connections, highly skilled technicians and
workforce. Croatian shipbuilders couldn’t fulfill those demands and the majority of small
shipyards were closed.
Industry and Crafts (1820-1870):
● Majority of the Croatian population living in rural households joined cooperatives.
● Natural economy and autarky – self sufficiency. Barter trade with virtually no use for
money. Almost all goods were produced and consumed locally.
● Slow development of local village crafts which were essential for local communities.
People specializing in craftsmanship – differentiation from common division of labor.
● Legal framework for establishing Trades and Crafts Chambers in 1850.
● Due to administrative division of Croatian lands there was no coordinated effort between
various local Chambers in order to support and develop Croatian crafts and industry on a
national level.
● City of Rijeka was the starting point of Croatian Industrialization - sugar refinery was the
first industrial plant in Croatian lands (later followed by paper factory, tobacco factory
etc.).
● First industrial steam engine in Croatia was installed in a paper factory in Rijeka – 1835.
● Development of the glassmaking industry began near Zagreb (Croatia).
● Sugar refineries built in Slavonija
● Majority of industrial plants were small business ventures – almost at the level of crafts.
Croatian industrialization was very slow in comparison with the other parts of the
Austro-Hungarian Monarchy (industrialization demands capital investments).
Mining (1820-1870):
● Total mining output of Croatian lands equals 1% of total mining output of Austria
(Austria as part of Austro-Hungarian Monarchy).
● Very small quantities of mineral resources in Croatian lands. Exploitation of iron ore
(Gorski kotar – continental Croatia) and copper (near Samobor – west of Zagreb).
● Coal mining in Dalmatia - Siverić and Tepljuh mines (near Šibenik). Started during
1830’s - coal was transported to Šibenik (fuel for steamships). Output: 750-1.000 T/year,
in 1860. 6.000 T/year).
● In 1855. beginning of oil exploitation (Croatia) - (approximate production until 1870. was
100 T).
● Quarries (stone production) as an example of mining industry in Croatian lands –
Dalmatia (Hvar, Brač Korčula). Stone was one of the export commodities.
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● Mining statistics include salt production - even if it was mostly produced from sea. (Ston,
Nin, Pag, Rab…). Salt production in Dalmatia has been an important economic activity
since ancient times. Significant oscillations in produced quantities (from enormous
surpluses and enough salt for export to insufficient production and need for import).
Banking (1820-1870):
● Monetary institutions in Croatian lands were predominantly foreign owned (Austrian,
Hungarian Bohemian).
● Significant development of Croatian banking started at the very end of 1820.-1870
period.
● Prva Hrvatska Štedionica (First Croatian Savings Bank) as the first Croatian owned bank
was founded in 1846. (as jointstock company) Founded by Croatian people it was based
on principle of acquiring enough capital by amassing many small saving deposits. Main
intention was to support the development of the Croatian economy by giving loans to
Croatian entrepreneurs.
● 2 credit banks and 8 savings banks in Croatia in 1870.
● Croatian banking institutions were a key element in supporting the development of the
Croatian economy by enabling investments in capital intensive economic activities
(industry).
Summary (1820-1870):
● Transformation of social relations, administration and government system
● Delay of industrial revolution(s) - slow advance in technology. Lack of modern industrial
plants.
● The Croatian population is still predominantly living in rural areas. Degree of
urbanization is very low (main cities - Pula, Zadar, Zagreb had about 20.000 inhabitants
each).
● Agriculture was the predominant economic activity in Croatia.
● Modest advancement of the Croatian economy had no significant impact on living
standard of the overall Croatian population.
● Croatian lands were the most underdeveloped and poorest parts of Austro-Hungarian
Monarchy (especially Dalmatia and Military Frontier Region).
● Average yearly increase of GDP (per Capita) in Croatian Lands 0,50% (1820.-1850.)
0,59% (1850.-1870.).
● Total GDP increased by 75,8% (1820.-1870.).
● Increase of GDP during the period from 1820 to 1870 was significantly higher than in the
120 years period (1700.-1820.).
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Period Two: 1870 to the First World War

Croatian GDP (1820-1870):
● Average yearly increase of GDP (per Capita) in Croatian Lands
○ 0,50% (1820.-1850.)
○ 0,59% (1850.-1870.)
● Croatian GDP increased by 75,8% (1820.-1870.)
● Increase of GDP during the period from 1820 to 1870) significantly higher than in the
120 year period (1700.-1820.).
Croatian GDP (1870-1914):
● Average yearly increase of GDP (per Capita) in Croatian Lands
○ 1,47% (1870.-1890.)
○ 1,98% (1890.-1913.)
● Average yearly increase of Croatian GDP by 2,58%
● Average yearly increase of population in Croatia by 0,92%
The Agrarian People (people whose livelihoods depend on farming):
● In 1820, 89% of the Croatian population was agrarian.
● In 1870, 87.4% of the Croatian population was agrarian.
● In 1914, 75.8% of the Croatian population was agrarian.
● High population growth resulted in a large agrarian population.
○ Agrarian overpopulation was a big problem for the Croatian economy until
WWII.
● The non-agrarian population increased by 440% between 1820 and 1914.
Croatian Territories in late 19th Century:
● Administrative transformation of Habsburg Monarchy (AustroHungarian Compromise of
1867.) Austro-Hungarian Monarchy was established which caused additional problems
for the development of the Croatian economy.
● Croatian-Hungarian Settlement in 1868. and Rijeka as Corpus Separatum caused
additional problems for development of the Croatian economy.
● Croatia and Slavonia under Hungarian administration.
● Dalmatia, Istria and Military Frontier region under Austrian administration.
● In 1881. status of the Military Frontier region was finally resolved – incorporating it to
regions under civilian administration.
● The Croatian economy was still developing according to foreign interests (Austrian and
Hungarian).
● (First) industrial revolution is finally starting to be introduced in Croatian lands.
● General economic conditions in Europe are favorable (same on global scale –
imperialism as a form of globalization).
● Liberal capitalism – developed due to the formation of the single market (1873 –
monopoly capitalism).
● Croatian economy focusing on “domestic” market.
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Agriculture (1870-1914):
● Agriculture and forestry – still the most important economic activities during 1870.-1914.
period.
● Total agricultural land area virtually unchanged.
● Usage of agricultural lands changed by decrease in total vineyards area by ¼
● Decrease of fallow land area led to overall increase in agricultural output.
● Total agricultural production output is rising faster than the number of inhabitants which
benefits the overall economic development of Croatia.
● After the so-called “golden period” for viticulture there was a massive decline of
viticulture (and olive growing) as main agricultural activities in Dalmatia.
● Decline in viticulture caused by phylloxera epidemics (same as in other European
countries during this period).
● Economic problems were the main cause for the significant increase of emigration from
Dalmatia.
Shipbuilding Industry (1870-1914):
● Final downfall of sail ships (and related shipbuilding industry).
● Only few modern shipyards exist (shipyard Danubius in Rijeka as an example of Croatian
industrialization process).
● Modern naval technologies developed in Rijeka (Torpedo factory).
● Naval Arsenal in Pula (Austro-Hungarian main naval base) with 2.400 employees in
1880. as one of the biggest industrial facilities in the Monarchy.
Railroads (1870-1914):
● Austrian and Hungarian railroad companies continue promoting their own interests which
don’t often match with Croatian economic interests.
● First railroad in Dalmatia built in 1877. - connecting Siverić (coal mine) with Split (port).
● Investments of Croatian capital in local railroads to serve the needs of the Croatian
economy (approximately 1.400 km built until WW1).
● Railroad connection of Zagreb with Slavonia in 1891.
● Narrow-gauge railroads as solution to integrate Bosnia and Herzegovina in the Monarchy
railroad system (after occupation in 1878). Dubrovnik connected in 1901.
Industry and Crafts (1870-1914):
● Mostly small crafts enterprises – lack of Croatian capital for major investments in
industrial development.
● Large industrial plants are still very scarce (except in Rijeka).
● In 1883, the 25 biggest industrial plants employed 3807 workers.
● Improved industrial growth during 1890’s.
● Major share of foreign owned capital in Croatian industry.
Mining (1870-1914):
● Croatian mining output still represented an insignificant share in total mining output of
Austro-Hungarian Monarchy.
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● Coal mining was the basis of the mining industry. Dalmatian coal mines (Tepljuh and
Siverić) with Raša coal mine (in Istria) with total annual output of approximately
130.000t
● Continuation of oil production (less than 7.000 t in 1870.-1914. period).
● 1882. – construction of oil refinery in Rijeka.

Banking (1870-1914):
● First Croatian Savings Bank (founded in 1846.) was a leading Croatian banking
institution.
● Prva Pučka Dalmatinska Banka (First Dalmatian’s People’s Bank) Established in 1870 as
the first bank in Dalmatia funded by the capital of local people.
● Increase in number of financial institutions – in 1875, 6 banks and in 1913, 61 banks.
● Financial institutions (credit banks, savings banks etc.) collecting savings from people
and using them as loans were the main providers of Croatian investments in the economy.
Tourism (1870-1914):
● Development of modern tourism in Croatia begins in 1870’s.
● Opatija (Istria) was the first modern developed tourist destination. Proximity to railroad
infrastructure was one of factors for touristic development.
● Significant rise of tourism in Opatija. 1885 - 2.700 tourists/year, and in 1914 - 46.700
tourists/year. Opatija was top tourist destination in Croatia in pre-WW1 period.
● Tourist infrastructure (hotels) were mainly build as foreign investments (Hotel Kvarner –
Opatija, Hotel Elisabeth – Hvar, Hotel Imperial - Dubrovnik.
Summary (1870-1914):
● Development of public administration in Croatian lands (officials were mainly
“foreigners”).
● Development of railroad and maritime infrastructure.
● “New” agricultural techniques contributing to increased agricultural output
● Increased “foreign” trade in goods.
● Foreign investments in industry are the main solution for industrial development (influx
of foreign investment in agriculture).
● Slow but constant urban growth (Zagreb, Pula, Rijeka, Osijek).
● Improvement of life quality due to electrification, waterworks, better education (decrease
of illiteracy), newspapers.
● Very high share of agricultural population (agricultural production as main economic
activity).
● Vast differences in GDP levels between various Croatian lands (provinces).
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Period Three: 1918 to 1941: Interwar

Croatian Economy During Interwar Period:
● Croatia as part of the new state - Kingdom of SHS / after 1929. Kingdom of Yugoslavia.
● Territorial losses – Italian occupation after WW1 (Istria, Rijeka/Fiume, Zadar, islands).
● Territorial losses include most developed and industrialized parts of Croatia (Rijeka).
● Croatia as the most underdeveloped part of AustriaHungary becomes the most developed
and most advanced part of the new state (Kingdom SHS/Yugoslavia).
● Market size drastically reduced (Austria-Hungary vs. Kingdom SHS/Yugoslavia).
● Despite the reduction of market size, new market(s) presented a good opportunity for
Croatian (industrial) products due to lack of industrialization in eastern parts of the new
state.
● Croatian economy (agriculture, industry, banking etc.) as the basis of the economy of the
newly formed state (monarchist Yugoslavia).
● New state was governed from Belgrade (capital and center of political power). State
affairs were subjected to Serbian national interests and needs because the state was ruled
by Serbian politicians and industrialists closely associated with the ruling (Serbian)
dynasty.
● Foreign (non-Croatian) interests are prevailing over Croatian interests. Belgrade as the
center of political and economic power is enabling ruling (Serbian) politics and business
elite to incorporate personal interests in government economic policy.
● Everpresent corruption and bribery significantly slowing down economic development.
● Dependency on foreign investments – foreign shareholders owned more than 50% of total
shares in all joint stock companies combined.
● Massive bureaucracy (350.000 administrative personnel employed in government
administration) combined with enormous police and military spendings were
significantly draining government budgetary resources.
● Unequal level of economic development and GDP distribution in various regions.
● Unfavorable exchange rate for Austro-Hungarian currency imposed on Croatian
population (from 1:1 to 2:1 and finally 4:1).
● The Croatian economy was in decline compared to other parts of the state – due to
inadequate economic policy.
● Advanced parts of the country (Croatia and Slovenia) are stagnating on account of
undeveloped (eastern) regions.
● Great expectations of Croatian people from the newly formed state of all southern Slavic
nations united on the proclaimed basis of freedom and equality were never fulfilled.
● After the assassination of King Alexander, political and economical connections of
Yugoslavia and Germany became closer. Yugoslavia slightly distanced itself from
previous allies Great Britain and France.
● German investments in Yugoslav economy are rapidly increasing.
 10

● German experts visiting Yugoslavia evaluated economic potential (mining output,

production levels, manpower levels etc.) Yugoslavia was foreseen to be a part of German
Grosswirtschaftsraum as a supplier of agricultural products and raw materials for German
industry (especially bauxite).
● Croatian economists were educated in Germany.
● Trade between Yugoslavia and Germany was increasing.
● Yugoslavia joined the Tripartite Pact 25th of March 1941.

Croatian Economy During Interwar Period - Agriculture:

● Agriculture was the most important economic activity and basis of the national economy.
Obsolete agricultural production methods and technology impacting overall output.
● Most prosperous economic sector until 1926. The majority of products were exported
(until the Great Depression).
● Good market opportunities for export of agrarian products due to general food shortages
caused by WW1.
● Agrarian overpopulation as persistent problem - 2,601.406 people employed in
agriculture (excess of 886.389 - 34,1%).
● So-called “Price scissors” had a negative impact on agriculture (decrease in prices but on
different rates for industrial and agricultural products).
● Agrarian reform as continuation of a process that had started in 1848. (abolition of
feudalism) had a negative impact on agricultural production. Expropriation of wealthy
landowners – Germans Austrians, Hungarians as enemy citizens.
Croatian Economy During Interwar Period - Industry:
● Majority of the industry was small companies (up to 10 employees).
● Importance of Croatian wood industry – 1/3 of total wood resources in the newly formed
state were in Croatia. Wood was an export commodity.
● Importance of textile industry - developing due to customs protection and tariffs imposed
on imported textiles.
● Traditional crafts are declining due to the development of industry (although industrial
development is slow).
● Rate of industrialization cannot compete with agrarian overpopulation (unable to generate
enough jobs) - Emigration as a solution for economic problems.
● Urbanization process – increase of town population causing increase in building
construction (increased demand for building materials) Cement production as an
important industry activity - cement was an export commodity.
Croatian Economy During Interwar Period - Banking:
● The Croatian banking sector was the basis of Yugoslavian banking sector.
● According to the overall political situation, the monetary policy of Yugoslav government
was in favor of Serbian banks, undermining the business of Croatian banks.
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● Despite business difficulties there was a relatively large number of people employed in
the Croatian banking sector.
● Croatian banks as leaders in saving deposits of all Yugoslavian banks.
● The Great Depression and government stabilization measures were decisive factors in
attempts of Serbian banks to control Yugoslav financial market. Great deal of state
control in the banking sector was beneficial to Serbian banks.

Period Four: 1941 - 1945: The Second World War

Croatian Economy: 1941-1945:
● Capitulation of Yugoslavia after the Axis attack in the so -called “April War” of 1941
(6.-18. April 1941.).
● Forming of the Independent State of Croatia (ISC) or NDH as a puppet state of the
German Reich (10th April 1941).
● The Independent State of Croatia territory was divided into German and Italian zones of
influence (for resource exploitation purposes).
● Territorial increase despite territorial losses to Italy and Hungary. Territory of Bosnia and
Herzegovina which had solid economic potential was a major gain for Croatia.
● Start of armed uprising/civil war on Independent State of Croatia territory during 1941.
● Croatian independence was only in theory. Nominal ruler was a member of the Italian
royal family - Prince Aimone, 4th Duke of Aosta as “king” of the Independent State of
Croatia.
● Ante Pavelić (leader of Ustasha movement – anti Yugoslavian organization operating
from exile in Italy) as Head of the State or de-facto ruler.
● The Independent State of Croatia was projected to be part of German
Grosswirtschaftsraum (supplying Germany with cheap agricultural products and raw
materials traded for German industrial products/war material).
● Close cooperation with Axis powers as main trade partners (good trade and political
relations with Germany since 1934).
● The economic model of the Independent State of Croatia was in the form of a planned
economy structured as an imitation of the 3rd Reich economy (eventually transcending
into a war economy due to a permanent state of war).
● Forming of government organizations for: price control, rationing, distribution of goods
and raw materials etc. Production output oriented for war purposes.
● Confiscation of companies and estates owned by Jews and Serbs (they were declared as
“Enemies of the State”).
● Main German interests were in forms of ore exploitation. Most important was bauxite ore
(important for aircraft production). Croatian bauxite (deposits near Mostar and Šibenik)
supplied around ¾ of 3rd Reich bauxite needs during WW2.
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● Italian economic interests were mainly in exploiting wood resources - forests located in
“Italian Zone” of the Independent State of Croatia.
● Growing needs for manpower in 3rd Reich caused considerable manpower requests to the
Croatian government. Croatia had to send able workers for work in Germany (initially
100.000 workers per year, later increased to 150.000).
● As of 1943. there were 300.000 Croatian workers in 3rd Reich. Croatian workers in 3rd
Reich were voluntarily (motivated by payment in order to support their families, or to
avoid being drafted in Croatian armed forces) and in form of forced labor (prisoners of
war).
● Constant German requests for manpower and mobilization in Croatian armed forces,
combined with armed uprising and civil war caused massive shortages of workforce in
Croatian economy.
● Pre-war agrarian overpopulation was eliminated and replaced with shortages of
workforce. Agrarian production (as a main economic activity) was drastically reduced
despite all government efforts.
● Requisitioning of food and cattle from the population in order to help war efforts had a
negative impact on agricultural production, causing further reductions in agricultural
production.
● Instead of supplying the 3rd Reich with agricultural products, Croatia had to import food
to be able to feed its own population.
● Forestry exploitation (one of the main pre-war economic activities in Croatia) was also
drastically reduced causing massive disruptions in the Croatian economy. Forests were
the main zones of war operations and served as bases for armed insurgents, therefore
forest exploitation was very dangerous.
● Main industrial plants were under government control and their production output was
oriented into supporting war efforts. Due to strategic importance they were protected by
significant military forces (Croatian, German, Italian).
● German commissioners were installed in all major industrial plants and ore mines of
strategic importance.
● Industrial output under German management reached highest levels in history (achieved
results were predicted by German pre-war projections).
● Due to strategic importance for Axis war effort, Croatian industry and transport
infrastructure were military targets of Allied bombings
● Massive destruction of industrial and transport infrastructure until the end of Second
World War.
● Massive decrease of production and GDP levels. Croatian GDP level in 1943. was equal
to about 60% of pre-war (1940) GDP level (despite significant territorial, population and
resource increase).
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● Croatian government had to pay very high (and rapidly increasing) expenses for upkeep
of German and Italian military units in Croatia. (such expenses were unaffordable by
Croatian economy level).
● Hyperinflation due to the weak economy and uncontrolled printing of money until the
end of the Second World War.
● Difficulties in providing food for the civilian population – malnutrition and famine in
post-war years.
● Massive casualties and total destruction of economy and infrastructure until the end of
war. Croatia suffered 39% of total war damage in Yugoslavia.
● Military operations had a negative impact on the overall economy. Croatian GDP Per
capita level attained pre-war level in 1953.

Period Five: 1945 - 1991: Socialist Yugoslavia

Eastern Bloc:
● Military defeat of Germany and Japan in WW2/
● Yalta conference introduced division of post WW2 world according to “Spheres of
influence” between East and West (USSR and USA).
● Allied cooperation in WW2 transformed into “Cold War” between two world’s
superpowers (USA and USSR).
● Bipolar division of the world - Western Bloc vs Eastern Bloc.
● Pro-Soviet regimes in Eastern European countries - ruled by local communist parties
(obeying the orders from Moscow). Adoption of Soviet modeled economy.
Croatia After WW2:
● Downfall of Independent State of Croatia (NDH) in May of 1945.
● End of WW2 - restoration of Yugoslavia in the form of “new” (socialist) Yugoslavia
(Democratic Federal Yugoslavia).
● Croatia became part of Democratic Federal Yugoslavia as one of the federal states named
Federal State of Croatia.
● Shortly after (1945./1946.) Croatia became the People’s Republic of Croatia as part of
FNRJ (Federal People’s Republic of Yugoslavia).
● In 1963. final change of name into Socialist Republic of Croatia as part of SFRJ Socialist
Federative Republic of Yugoslavia.
● Although it was nominally a federation (with guaranteed autonomy of federal units),
socialist Yugoslavia was a Centralistic one-party state under control of the Yugoslav
Communist Party. Head of the state was Josip Broz – Tito (leader of communist
resistance – partisans in Yugoslavia during WW2).
● Soviet Union as a political, social, economic, cultural… role model for socialist
Yugoslavia/Croatia. Cordial relations with the Soviet Union until 1948 (Tito-Stalin Split).
 14

● Parts of Croatia under Italian occupation at the end of WW1 were returned to Croatia
after WW2 (Croatian territory in socialist Yugoslavia was the same as today’s Republic
of Croatia).
● Yugoslavian/Croatian border disputes with Italy related to the Free Territory of Trieste –
resolved in 1954.
● Post-WW2 cordial relations with USSR based on common ideology (communist parties)
● Tito-Stalin split in 1948. Broke good relations with the Soviet Union and Eastern Bloc.
Relations with the USSR were again established after Stalin’s death.
● Although nominally socialist country (ruled by communist party), Yugoslavia maintained
good relations with both Blocs - “East” and “West” (receiving aid and loans from both
sides).
● Yugoslavia was one of the founders of the Non-aligned movement with the aim of uniting
third world countries (former colonies) in “Third Bloc”. Independent from either Eastern
or Western Bloc.
● Severe casualties and total destruction of economy and infrastructure during WW2.
Croatia suffered 39% of total war damage in Yugoslavia.
● Need for massive efforts in rebuilding and modernization of the newly formed country
(Soviet Union as a role model).
● The 1st phase of reconstruction was focused on rebuilding war damaged transport
infrastructure and building of new roads and railroads.
● The 2nd phase of reconstruction was focused on industrialization and electrification
(reconstruction of devastated and building of new industrial and electric plants).
Croatian Economy After WW2 - Agriculture:
● Due to WW2 Croatian agricultural production was drastically reduced. Once main
economic activity of the whole country, agricultural production wasn’t able to provide
enough food for the population (reduced due to war casualties).
● Inadequate agricultural production caused food shortages, malnutrition and famine in
post-WW2 years.
● During the post-WW2 years the UN relief agency - UNRRA (United Nations Relief and
Rehabilitation Administration) provided aid in food for people of Yugoslavia.
● After WW2 in Yugoslavia/Croatia adopted Soviet model of planned economy and
established collective farming - (agricultural cooperative) model of agricultural
production.
● Nationalization and centralization of the economy (confiscation of private property by the
State).
● Continuation of agrarian reform (distributing of land to peasants).
● Collective farming model caused further reductions in agricultural production (already
disrupted during WW2).
● Low level of agricultural production was a major obstacle for further agricultural
development and had a negative impact on overall economic development.
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● Embargo imposed by the Soviet Union and other Eastern bloc countries after the
Tito-Stalin Split prevented Yugoslavia from importing fertilizers and agricultural
machinery needed for further agricultural development.
● Abandoning the collective farming system after 1953 led to an increased agricultural
production.
● Agricultural population was in constant decline due to forced industrialization promoted
by the State. Decline in agricultural population had no impact in overall production due
to modernization of agricultural production.
● Situation regarding procurement of modern agricultural mechanization and fertilizers was
improved after Stalin’s death (normalization of relations with the Soviet Union), and by
establishing machinery and fertilizer production plants in Yugoslavia.
● Increased use of agricultural machinery and fertilizers led to constant increase of
agricultural production despite (minimal) reduction of arable land.

Croatian Economy After WW2 - Industry:

● Post-WW2 nationalization and centralization of the economy. Government confiscation
of private property (including private owned companies). Eventually all companies were
State owned and operated according to the government central planning system.
● Transition of pre-WW2 predominantly agricultural based economy to industrial based
economy - according to communist vision of progress and modernization.
● Forced development of heavy industry and mining caused shortages of consumer and
“luxury” goods – same as in other communist countries.
● Share of industry in total GDP of Yugoslavia/Croatia was constantly increasing.
● Despite overall industrial development, the share of Croatian industrial production in
total industrial production of Yugoslavia was decreasing (from 29,6% in 1952. to 24,5%
in 1975).
● Government investments in extensive electrification projects to ensure increasing power
needs for industry.
● Crafts were in decline due to strong industrial competition. Industry (state owned) was
favored by the government. Crafts as private owned enterprises were allowed in
Yugoslavia. Although expansion and development of crafts was perceived as “politically
undesirable” by communist government.
Croatian Economy After WW2 – 1960’s:
● After initial post-WW2 reconstruction (Soviet modeled) during 1950’s, Yugoslavia
attempted to develop liberal planned economy system with plans for eventual transition
to a market economy.
● Main obstacle for significant economic development was overall work productivity
which was at low level compared to Western European market economies (same as it was
in all Eastern bloc countries). Low productivity caused uncompetitiveness of Yugoslavian
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companies on the global market (governed by market economy rules - totally opposite
from planned economy).
● In the 1960's government economic reforms adopted market economy pricing but
companies were still state-owned. Those reforms caused an economic slowdown which
led to rising unemployment.
● Unemployment was resolved by (state-supported) emigration – mainly to Western Europe
(mostly to West Germany). By 1971, 5.1% of the total Croatian population was on so-
called “temporary work abroad” (224.722 workers).
● Worker remittances from abroad represented a major influx of foreign currency in
Yugoslavian (Croatian) economy (another major influx of foreign currency in the
Croatian economy was tourism).
Croatian Economy After WW2 – 1970’s:
● 1950.-1973 was the period of fastest economic growth in Croatian history.
● In the 1970's economic growth rate was significantly decreased (lower than in the 1950's)
and the government recognized the need for economic reforms.
● “Radical” economic reforms in the form of so-called “workers self-management” as
significant differentiation from the Soviet model. Restructuring of companies into a new
model in which employees (workers) were managing the companies (instead of
government management) led to stagnation of production.
● Failed economic reforms in 1970’s had a negative impact on the overall economy.
Working productivity was still at low levels, significantly lagging behind developed
countries.
● Deals with both Blocs (East and West) in the form of aid and loans were of major help in
stabilization of the economy.
● New reforms enabled the formation of a powerful high management elite. General
Managers/Directors of banks and companies gained significant power and influence
based on the contribution of “their” companies to the state economy. This was perceived
as “dangerous to the system” by communist government.
Croatian Economy After WW2 - 1980’s:
● Majority of companies were operating at a loss for a long period due to low productivity
and ineffective management. Decrease of living standard and increased unemployment.
● Government (as owner) was covering losses with national budgetary resources. The
Budget deficit was then covered with foreign loans. Yugoslavia became a highly indebted
country (slightly over 20 Bn US$ of foreign debt).
● Inability to repay foreign debt lead to shortages of foreign currency, (imported) fuel,
(imported) consumer and luxury goods. High inflation rate (80% in 1985.).
● Short term successful attempt of stabilization and transition to market economy (just
before breakup of Yugoslavia) was failure in long run due to everpresent low
productivity.
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● Escalation of the political and economic crisis in Yugoslavia ultimately led to the breakup
of Yugoslavia and wars. After wars former Yugoslavian Republics became independent
states in transition to democracy and market economy.

Period Six: 1991 - present: Independent Croatia

● Not posted on Merlin but you can probably make educated guesses/use background
knowledge if this is tested.