From From Peoples into Nations: A History of Eastern Europe, by John Connelly (Princeton University Press, 2020), Kindle pp. 563-565:
In 1953, the question of what socialism would be after Stalin was not purely theoretical because Yugoslavia’s Communists had been experimenting with new models since Stalin’s break with them in 1948. The rupture was not about ideology (that is, about how to build socialism or to structure the party): it was about obedience to Stalin personally. Tito and his comrades had enraged the Soviet leader by failing to seek permission, for example, for their policies toward the other Balkan states. For the time being, references to Tito were anathema in the Soviet Bloc; as recently as December 1952, top Czech Communist leaders had gone to the gallows for association with Titoist heresies. But now Stalin’s successors sought peace with Yugoslavia, leading to full restoration of relations by the summer of 1955. When the Soviet leader Nikita Khrushchev denounced Stalin the following winter in a secret speech, many Hungarian and Polish Communists, as well as workers, thought the Yugoslav way might become their way.
The best-known component of this Yugoslav path to socialism was worker self-management, enshrined in law in 1951. It grew out of a struggle of leading Yugoslav Communists for orientation after their expulsion from the Cominform. Tito had been so tightly bound to the Soviet party that he later recalled the first days of estrangement as a “nightmare.” Yet Yugoslav Communists had no doubt that they were in the right; their victory in the Partisan struggle, with little Soviet help, showed that history was on their side. The question was where the Soviets had gone wrong.
Yugoslav Communists located the causes of the Soviet deviation in the Communist Party itself and its untrammeled power. Tito’s lieutenants Milovan Djilas and Edvard Kardelj reasoned that power in the Soviet Union lay not with workers and peasants but with bureaucrats. For example, managers and not workers controlled Soviet factories. Like capitalists, they determined what men and women on the factory floor produced, and like capitalists, they had the privileges of higher salaries. In effect, exploitation of the working class continued. This was a vital recognition and critique for a political order that claimed to embody emancipation of all human beings. Soviet reality was not socialism but “state capitalism.”
Somehow Soviet leaders had failed to heed Marx’s warnings about “usurpers” who might derail the revolution. Indeed, the very idea of a strong state, as the Soviet one undoubtedly was, had seemed anathema to Marx.
…
Djilas and Kardelj, along with the Slovene Boris Kidrič, reread these lines from Marx’s and Engels’s Communist Manifesto, and during a chat in a limousine outside their villas in 1949, decided that this vision of workers’ power held a solution to Yugoslavia’s predicament of being a socialist state cut off from the socialist motherland. They suggested it to Tito, and he quickly recognized the promise, exclaiming: “Factories belonging to the workers, something that has never been achieved!”
…
The party elite now took central planning out of its straight jacket and introduced some flexibility, for instance, giving firms tax breaks for better production. Though Yugoslavia was far from being a market economy, it became possible for managers to seek marketplace advantages and make higher profits. At the same time, firms were not required to act according to market rules, and bank credits became available to cushion them against budget shortfalls (that is, noncompetitive performance). After 1953, partly aided by Western credits, the Yugoslav economy—and living standards—improved markedly. One sign of this was growth in personal consumption, which went up by 45.8 percent between 1957 and 1961.
A transformation took place from a “distributive model” of the early postwar years, whose aim had been to remedy deprivation, to one in which the needs and preferences of consumers guided the production of the country’s enterprises. From the late 1950s, Yugoslavia thus embarked on the path to a “consumer society,” and the Yugoslav economic reforms of 1965 would be the most ambitious market-oriented changes seen anywhere in the Communist world before 1989.
Yet for all the heady experimentation in the economic realm, the Yugoslav way soon gave evidence of its limitations, and oddly, that involved its founding thinker, Milovan Djilas. Marx had been radical in his belief that the state must die under socialism, and so was Djilas. From October 1953 to January 1954, Djilas published articles in the party daily Borba attacking the power of the Yugoslav Communist bureaucracy. His views had evolved…. The more the party succeeded in building socialism, the less it was needed. Yet in reality, the party-state in Yugoslavia was becoming ever more entrenched.
In one of the last articles he was able to publish in socialist Yugoslavia, Djilas doubted whether that country was still in the throes of a “class struggle.” The bourgeoisie had been destroyed. What then was the need for a Communist organization of any kind, no matter what it called itself? Already alarmed, Tito moved to silence his former lieutenant, proclaiming that, yes, there would be a withering of the League, but the process would be protracted, because there were still many class enemies afoot. Djilas himself was evidence of this fact.
Djilas was now removed from the Central Committee and denied permission to publish. But he continued to give interviews with Western journalists, and in 1956, he published a book arguing that the party had become a new class. For the crime of “conducting propaganda hostile to Yugoslavia,” Djilas was sent to prison.
Far Outliers 