Czech Transformation which started in 1989

One of the key issues after 1989 was how to kick- start the Czech economy. The 1980’s were not hungry years, but the production was narrow and the technology lagged behind the West considerably. As the regime collapsed and, symbolically, Václav Havel took over the presidency from Gustáv Husák, the father of “real socialism”, the West was open and friendly towards the newcomer. George Bush Sr., Rolling Stones and other celebrities rushed in to congratulate the new- born democracy.

But a warm welcome and a wish of good luck didn’t mean a fierce competition won’t start. The market economy is not built on sentiments and everyone knew the republic has to get on its feet as fast as possible. The question was how.

One option was to privatize and set up competitive environment as quickly as possible. The other was that rules must be set first. Václav Klaus finally pushed through the first concept, after disputes with, for example Waltr Komárek, who advocated the second way. That is interesting also because Komárek was his former boss at the Institute for Prognosis, which was regarded as the sole base of centre or sometimes even centre- right economists towards the end of the regime.

The transformation was difficult and accompanied by large losses. Quite a number of entrepreneurs abused the chaotic system and “tunneled out” (a Czech term for a specific form of embezzlement) billions of state money. This is what the opponents of Klaus charge him of: he allowed the system to be built while working, not in advance. He started the free enterprise without setting proper rules, without strengthening mechanisms of control and so those who wanted to steal had a user- friendly environment. He shares responsibility for the losses.

What the defenders of “Klausformation” would reply is: if rules were to be set, if mechanisms were to be built before the free enterprise was allowed, it would have been worse. It would take years and nobody would wait for the Czechs to recover, we would end up like a poor Eastern state with clean, but weak economy.

There is no easy answer and the question is still there. Last time it was re-stated was during the presidential election, where Klaus and Svejnar disputed about it, among other things.

At this moment the Czech economy is doing well. There is a lot of foreign investment, job growth, the crown is strong. The largest former embezzlers are hiding abroad and most people seem to have forgotten about them. Everyone knows the “wild nineties” are gone.

© 2008 |