The Republic of Croatia and the Republic of Slovenia have shared a common political and economic history for centuries. Slovenia was more developed but was relatively closely trailed by Croatia in basic economic and social indicators as recently as the late 1980s. In the intervening three decades, the economic and social inequalities between Croatia and Slovenia have significantly increased and these two countries are in many ways at opposite ends of the spectrum among the members of the EU. This text acknowledges the traditional explanations of this result—i.e. the negative effect of the Homeland War in Croatia between 1991 and 1995 its human and economic sacrifices which were enormous compared to the very brief and limited conflict in Slovenia; and that Slovenia became a full member of the EU in 2004, whereas Croatia could reap the benefits of EU membership since only 2013. However, this text moves beyond these two arguments and proposes that there are additional explanatory variables for divergent tendencies in economic and social development. It analyses the institutional positions in Croatia and Slovenia (comparing them to the Visegrád countries), the growth models in Slovenia and Croatia, and the way in which social policy was delivered since the transition in Slovenia and Croatia in order to show that a significant part of the explanation for these downward divergent trends in Croatia lies within the way these two main policies were prepared and implemented in those two countries.