True to some extent. However, while suspecting the party lies, they absolutely had no idea how deep and vast the lies were and that exactly was the truth. I've once heard an anecdote about North Korean woman who fled to South Korea and was asked how she thinks the life in the West is, how she thinks people in countries like USA live. She said she thinks it's a very good life, everybody is rich - everybody can get no less than 800g of rice every day!
The point is that when you live in the environment of a totalitarian state with little to no access to outside sources of information, you can easily deduct you are probably not being told the truth. It is much harder to know what the truth is, especially if you most basic assumptions might be based on the same propaganda you seemingly reject - because you've had nothing else to base them on.
And if you look at Russia now, it is surprising how many people who were alive at Soviet regime feel nostalgic about it and even about figures like Stalin. They experienced all the lies themselves, they knew those are the lies - and ask them now, they'd repeat them anyway.
I don't think it's only nostalgia.
Hence regime fell. Aided greatly by the overarching global political climate of the late 80's.
My generation is pretty sure modern capitalism is the savior and the only way to prosperity.
The cycle continues.
What will our kids believe? Who knows. But it's definitely going to involve the idea that overpriced organic artisanal foods are the only thing worth putting in your body.
Yeah, but note that your grandparents also had life before socialism to compare, and, whatever troubles the regime had, regimes and lives before it weren't that nice in most of the Balkan either. So it might not be that propaganda worked better on them, but that they legitimately thought their conditions had been improved.
It's not like they went from cushy capitalist life to soviet style misery -- it was lots of war, national tensions, conscription, hard village life, culminating of course to the horror that was WWII.
And Tito was a bug war hero (for them, but legitimately too), and did held the country together (way better than his successors did post-socialism, so there's that).
I think it's the opposite, at least for the old soviet regimes -- and I've read several accounts that match that. People didn't believe what the party said, and knew perfectly well what was going on, they just pretended to agree (for obvious reasons). They also made jokes (very popular ones) that clearly show a good understanding of the politics and propaganda mechanisms.
Propaganda of that kind only worked at the early years (when it wasn't pure propaganda, but people also legitimately thought, some of the leadership included) that things are going forward in the right direction.
So, when we ask "how could they be so dumb?" the answer is simple: they weren't.