The ratio of investment to GNP is taken as a synthetic (and
simplified) representation of regional development costs. Over the
1952-1990 period the share of investment in GNP (the investment rate)
varied considerably both by subperiod and by region, ranging from 86.2%
in Montenegro in the 1952-1960 subperiod to 17.4% in Vojvodina in the
1983-1990 subperiod. The investment rate by year ranged from 117.0% in
Montenegro in 1954 to 16.6% in Vojvodina in 1990.
For the whole period the average rate of investment in Yugoslavia
amounted to 20.4%. In other words, an average one fifth of the GNP was
spent on investment throughout the period. Above-average investment
rates were achieved in Bosnia-Herzegovina, Montenegro, central Serbia
and Kosovo-Metohia. The highest was the 29.7% investment rate of
Kosovo-Metohia, and the lowest was the 18.0% investment rate of
Vojvodina. The average investment rate was calculated cumulatively on
the basis of GNP and investment in current prices. Although
theoretically this is the best method of calculating average investment
rates, in the case of Yugoslavia it considerably distorts the picture
of the actual situation. The reason for this are extremely high
inflation rates in the last decade of the observed period, which
resulted in disproportionately greater weights being assigned to GNP in
these years than in the previous ones. On the other hand, the last
years were also characterized by a sharp decline in investment. Given
all this, the average investment rate was low in proportion to the
rates achieved before 1979.
In some regions the investment rate exceeded the upper limit that
determines the so-called absorptive capacity of the economy. The
maximum absorptive capacity is 40% of the investment in GNP.
Particularly characteristic here are the cases of Montenegro and
Kosovo-Metohia. The rate of investment for Montenegro exceeded the
upper limit in all subperiods, except the last one, while that of
Kosovo-Metohia fell below the limit only in the first and the last
subperiods. In two years (1953 and 1954) investment in Montenegro even
exceeded the GNP, while in 30 out of 37 years, more than 40% of GNP was
spent on investment. The investment rate was above 40% in
Kosovo-Metohia in 26 years, in Macedonia in 12 years, and in
Bosnia-Herzegovina in 10 years. In central Serbia investment exceeded
this limit in one year (1961). In other regions (Croatia, Slovenia and
Vojvodina) in no year did the investment rate exceed 40% of the GNP.
The investment rate figures and trends by region clearly show the
method by which regional policy was to achieve the declared objective:
a rapid development of "the material base for productive forces"of all
regions, along with a faster development of that of underdeveloped
regions. Because of the inefficiency of investments, the investment
boom under "soft budget constraints"(and universal arbitrariness),
which peaked in the late 1970s, resulted first in the collapse of the
economy, and then of the state.