The Presidential Years 325
There was also substantial opposition to the initiative having to do with small
private enterprises, which were no longer encumbered by high taxation, as they
had been in the past. In the West, the reform was greeted with favor, given that
Yugoslavia accepted the laws of the market and was the only socialist state to
allow foreign investments.^314 In order to sustain Tito’s regime, in November
1965 the Americans signed an agreement with the Belgrade government to
deliver seven hundred thousand tons of wheat, worth $46 million, with the
promise not to claim any payment for the next two years.^315 At that moment,
nobody considered the negative aspects of the reform, including the fact that
the two more developed northern republics, Slovenia and Croatia, would bene-
fit from it (since they had advanced economies as compared to the other repub-
lics and were therefore keen to enter Western markets), whereas the rest of the
country would stand by and watch.
The reform started at the end of July 1965 in the hope of stabilizing the
economy and improving the living standards of the population. The result,
however, was an increase in the price of consumer goods. Inflation, already
present, began to spike. And since the subventions for rent, electricity, gas,
and public transport were abolished, these services saw a considerable increase
in price.^316 What happened in practice once again demonstrated that imple-
menting the reform was more difficult than first thought: there were limited
means for the modernization of production, and the administrative cadres were
not flexible enough to adopt the new rules of the market.^317 The authorities
resorted to severe restrictions on loans, but this provoked the collapse of eco-
nomic growth and an upward spiral of unemployment. Tito, Kardelj, Bakarić,
and other leaders tried to convince the people that these were just temporary
difficulties and that reform was essential for the advancement of society, but
without much success, especially in Serbia and in other less developed areas.^318
What worried them most—and this was not the first time Tito had lamented
about this—was the fact that opposition to the reform did not come primarily
from the masses but from the most prominent politicians. Many reacted with
passive resistance to this radical change in the way of thinking, hoping that the
“capitalist experiment” would fail. Stane Kavčič, the secretary of the Slovenian
League, highlighted the differences of opinion among prominent communists in
an article published by Borba on 2 November 1965 entitled “Wrong Observations
by Some Communists.” He argued with those who wanted to give state author-
ity to the party and were unable to understand it was necessary to reshape the
role of politics in the economy in order to assert the laws of the market.^319
Dissatisfaction with the new line was especially manifest in Serbia and Mon-
tenegro, where passive resistance was joined by an open boycott. The protests