When Serbia gained independence in 1878 after over 400 years of Ottoman rule, the chances of industrialisation were poor. Investment capital was unavailable, as farmers cultivated small, fragmented plots and production for the market was virtually unknown. The extended-family structures typical of the Balkans produced what they needed themselves – whether ploughs or barrels. Consequently, urban crafts played a subordinate role, and the infrastructure of this impoverished country was in a pitiful state.
The few exceptions included the mine in Senjski Rudnik on the southern slopes of the Carpathian mountains where Serbian mining traditions extended far back into prehistory, and where lignite coal had been mined since 1853. In Belgrade at least, a “higher school” was established, which developed into the university.
The government retained the Ottomans’ rigid control of trade but, bowing to the pressure of Europe’s great powers, participated in the construction of the Orient Line from Vienna to Constantinople. Serbia thus received its first railway in 1884, linking Belgrade and Niš, the two most important cities. Soon, trains were also steaming to the Turkish and Bulgarian borders. The opening of the Serbian National Bank in 1884 generated further momentum, but the lack of capital remained dramatic and business know-how was lacking. It was not until the turn of the century that the first phase of industrialisation arrived, when the government liberalised trade regulations while simultaneously shielding domestic production from international competition through protective tariffs. New companies – such as the first sugar refinery in Belgrade – mainly processed agricultural products or exploited mineral resources. For instance, an influx of French capital enabled exploitation of the important copper deposits in Bor, in the eastern part of Serbia. An ironworks was established in the Danube port of Smederovo, also with foreign capital, which later grew to become a “pillar of the Yugoslavian economy”. The setting up of numerous companies helped Belgrade to grow into a European metropolis – in stark contrast to the rest of the country.
The dissolution of Austria-Hungary after World War I led to the founding of the “Kingdom of Serbs, Croatians and Slovenes”, which also included the former Habsburg Voyvodina, the “bread basket” north of the Danube. However, the war’s devastation was enormous, and the subsequent two decades brought only modest growth. The narrow-gauge railway from Belgrade to Sarajevo in Bosnia through the rugged Sargan Mountains, begun before the War, was finally completed, and copper mining in Bor and cotton processing flourished. However, industry was unable to absorb the thousands of unemployed workers and agricultural yields remained poor. Many farmers thus travelled back and forth between farmyard and factory: a special class of worker-peasants emerged.
Following World War II, the massive efforts of the “Socialist Federal Republic of Yugoslavia” delivered rapid successes in reconstruction. In 1947, the first five-year plan called for a dramatic increase in industrial production, particularly in the energy sector, chemicals, transportation and arms production. Although the Eastern Bloc broke off trade with Yugoslavia in 1948 following Tito’s break with Stalin, Yugoslavia’s economy grew dramatically in subsequent years. In 1953 the industrial group Crvena Zastava (“Red Flag”) was founded in Kragujevac, the heart of Yugoslavia’s automotive industry, and soon began producing the Fiat 600 under license. The enormous chemical complex in Pančevo near Belgrade opened its doors in 1959 as a fertiliser factory, with the addition of a petroleum refinery in 1968. The tradition of cotton processing was successfully carried forward by the Belgrade company Kluž.
Unlike the other socialist nations of the Eastern Bloc, Yugoslavia’s government began developing its consumer goods industry in 1955. Additionally, the state replaced central control of the economy with a more flexible, decentralised model containing capitalist elements. But very few businesses were able to compete in the western markets, while at the same time both foreign debt and unemployment increased alarmingly. So, growth ground to a standstill in the 1970s and the now fully industrialised country slid into an economic crisis.
Belgrade. Georg Weifert Brewery