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CZECH REPUBLIC'S ECONOMY.   Term Paper ID:23655 Click to get this paper

Essay Subject: Analyzes nation's transition from planned to market economy, theories, history, regional & global issues, politics.... More...

7 Pages / 1575 Words 13 sources, 28 Citations, APA Format $28.00 Return to List of Papers

Paper Abstract: Analyzes nation's transition from planned to market economy, theories, history, regional & global issues, politics. Paper Introduction: TRANSITIONAL ECONOMIES: MOVING FROM A PLANNED TO A MARKET ECONOMY IN THE CZECH REPUBLIC Introduction Five-to-six years after the collapse of state socialism in Central and Eastern Europe, democracy and free enterprise are spreading sporadically throughout the region (Brown, 1995, p. 25). By 1995, more than a third of economic output was being produced by the private sector, shortages had virtually disappeared, and financial fortunes were being accumulated by a new class of entrepreneurs in the former socialist economies of Eastern Europe. Brown (1995, p. 25) stated that: “The casual outside observer may be forgiven for assuming that it will be only a matter of time before these initially disadvantaged countries achieve sustained rates of economic growth and acquire the poli Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. 29).It was, however, the Czech Republic that had strong capitalist roots, andSlovakia was none too keen on the Czech ideas of reform (Schares, 1991, p.55). 86-88). Thus, the Czech experience provides a valuablelesson for other countries in structural transition from a planned to amarket economy. (1996, Spring). (1995, 18 November). 61-62). Small enterprises were privatized through publicauctions. The Czech Republic is the more industrialized ofthe two economies, and the Czech Republic was more open to capitalistreform than is Slovakia. 59). The experience of the Czech Republic in thatcountry's transition from socialism to capitalism is the focus in thisreport in the investigation of the thesis position. 69). By the end of 1992, approximately 26, small enterprises hadbeen privatized, and the government realized approximately US$81 millionfrom the auctions (Industry,, 1994, p. The Czech transformation process isnow focused on the consolidation of the gains of stabilization and therestructuring of large enterprises. Initially, the growth inCzech exports was confined mainly to intermediate manufactured products,but from 1993 on machinery and transport equipment and miscellaneousmanufactured articles have led the growth in exports. Economist, 334, 61-62. Financial Times, FTS3. (1991, 15 April). (1994). As a consequence, it soon became apparent that the future was theCzech Republic and Slovakia, and not Czechoslovakia (Rudnick, 1993, pp. (1989, 9 October). Critics of this approach chargethat it creates "an illusion of private ownership in place of the realthing. In relation to large industrial enterprises, the governmentauthorized the sale of a 27 percent equity interest in the Czechtelecommunications concern SPT Telecom (Denton, 1994b, p. 4 ). Most are convinced that theeconomic situation in their countries is deteriorating. Sunley, J. By 1995, more than a third ofeconomic output was being produced by the private sector, shortages hadvirtually disappeared, and financial fortunes were being accumulated by anew class of entrepreneurs in the former socialist economies of EasternEurope. A budget surpluswas achieved in both 1993 and 1994. In the West,these initial signs of life in Czech reform were hailed as a movement ofCzechoslovakia back to the country's capitalist roots (Farr, 199 , p. (199 , April). 27). Perestroika's next domino just mightbe Czechoslovakia. (1996, Summer). Substantial international reserveshave been built up, international debt is low, and the country's creditrating in the international capital market is higher than that of any othertransition economy. The system which isemerging supreme in the Czech Republic is democratic pluralism. PrivatizationInternational, 11. Relevance of the Czech Transition to the International Economy The system being displaced in the Czech Republic is a system ofinstitutionalized one-party rule. 19). Issues Associated With Economic Transition in the Czech Republic Czechoslovakia, under Alexander Dubcek, experimented with majoreconomic reform in 1968, only to see the reform crushed by Warsaw Pacttroops (Shawcross, 197 , p. 57). 5). The seriousness of the country'ssocioeconomic problems has increased since the break-up of Czechoslovakia(Szulc, 1996, p. 26).Inflation has been reduced sharply and continues to fall. The $1bn draw. This method involved the distribution of sharevouchers among the country's population. E. (1992, 13 June). Mass demonstrations demanding political and economic reform began inCzechoslovakia in November 1989. Under the privatization environment claimed by the Czech government,"the stable, market-minded Czech Republic might be expected to proveirresistibly attractive to foreign investors. Economically, the Czech Republic andSlovakia retained a common currency until 8 February 1993, when the Slovakkoruna was introduced. The globalcompetitiveness of the Czech economy is evidenced by the improvement of theterms of trade. While the Czech Republic did not escape the initial declines ineconomic activity common to transition economies, they were more limited inscope and duration than in other transition economies (Brown, 1995, p. Business Week, 69. The one party in this case is theCommunist Party; however, the probability is that similar dissatisfactionand resentment would be expressed against any political party that hadinstitutionalized its power for more than 4 years. 26). Schares, G. The Czech Republic has had the most successful transition experienceof the formerly centrally planned economies (Brown, 1995, p. The Czech Republic chose not to implement a stabilizing price-and-wage control policy, and "a serious economic crisis may now be around thecorner" (Szulc, 1996, p. Economist, 337, 17-19. A majority of the value of the private holdings, however, are heldby private investment companies, which in turn are owned largely by Czechbanks, which in turn are owned primarily by the state. Rudnick, D. Denton, N. In Czechoslovakia, a so-called "velvet divorce" negotiated between thetwo major ethnic groups-the Czechs and the Slovaks-occurred (Velvet, 1992,p. Szulc, T. Economist, 323, 53-54. Central Europe and the Former Soviet Union: Asurvey. FTS3). Responsibility for 'privatised' factories isoften simply shifted from the state to local authorities" (Prague, 1995, p.19). Prague transformed. 111). Back to the capitalist roots. The government's claim that 8 % of Czech GDP already comes from theprivate sector is debatable. In 1994 GDP increased 2.5 percent and this growth is continued in 1995.The decline in employment was far less pronounced than that in economicactivity and unemployment and has remained quite low since 1993,fluctuating between 2.5 and 3.5 percent. (197 ). 19). Due to its low initial level of public debt, the Czech Republic,unlike other transition economies, has not had to face the pressure of debtservice payments (Brown, 1995, p. New York: Simon and Schuster. Farr, M. Dubcek. Yet total foreign investmentsince 199 , at under Dollars 4 billion, has been relatively disappointing.... 53). Business Week, 55. The remarkably low unemployment rate, below 5%, suggests that sofar it has failed to undertake much of the essential industrialrestructuring the country needs" (Prague, 1995, p. The Czech Republic appears to be astrong candidate for European Community membership by 2 . (1994a, 19 December). The Czech government estimated that 8 percent of the country'seconomy would be privately held by the end of 1995 (Denton, 1994a, p.FTS3). Czechs calculate a division that willadd up. "Among the population at large in the transition countries,enthusiasm for change has greatly diminished. 42). In the case of the largeindustrial enterprises, the equities in the enterprise were transferred tojoint stock companies in which the state holds all or most of the capital(Industry,1994, p. At the end of the 198 s, state-owned enterprises accounted for 97percent of the net material product in what is today to Czech Republic(Industry, 1994, p. Twodistinct processes of transition are under way: one from dictatorship todemocracy, another from socialism to capitalism. The thesis position underlying the research performed for this reportis that a prior history with a market economy (prior to the reign ofsocialism in Eastern Europe) facilitates a successful transition from aplanned to a market economy. Business Economics, 3 (3), 25-31. On 3 November 1989, the Federal Assembly abolishedthe authority of the Communist Party as the sole political party allowed toform a government, and a new government was formed on 3 December 1989. Tired of capitalism so soon. On the positive side, great progress has been made in re-orientingexports to western markets (Brown, 1995, p. The current privatization roundinvolving the sale of 861 additional small enterprises is widely expectedto be the end of the privatization program in the Czech Republic (End,1994, p. Euromoney, 86-88. These differences inevitably affecttheir performance and how they are perceived by outside observers assuitable targets for investment and trade. Industry in the Czech and Slovak Republics. History has shown that it is possible to havecapitalism without democracy; whether one can have democracy withoutcapitalism has yet to be demonstrated" (Brown, 1995, p. Velvet divorce. TRANSITIONAL ECONOMIES: MOVING FROM A PLANNED TO A MARKET ECONOMY IN THE CZECH REPUBLIC Introduction Five-to-six years after the collapse of state socialism in Central andEastern Europe, democracy and free enterprise are spreading sporadicallythroughout the region (Brown, 1995, p. The divorce was not so smooth, however, once the parties got downto dividing the country's assets. With respect to economic reform, the Czech Republic "lacked thecourage to apply the "big bang" approach and now must pay an even highersocial and political price" for a policy of gradualism (Szulc, 1996, p.57). 41). Thenew government was not to last, however, and neither was the Czechoslovaknation, because in the 1992 federal election campaign, the Slovak partiespressed for an independent Slovakia. (1994, December). (1995, July). By mid-1995, privatization in the Czech Republic was losing publicsupport rapidly (Tired, 1995, pp. InternationalManagement, 45, 29, 31. 25). Thus, while industrial structure changed for largeindustrial enterprises through the privatization efforts, ultimateownership of the enterprises did not change. E. Shawcross, W. While all transition economies face common problems, considerabledifferences exist in their initial starting points and in the policies theyhave adopted (Brown, 1995, p. They do not necessarilyproceed in tandem. In one way or another, the government still controls much of basicindustry. 11). Theprivatization effort was split into two parts-small enterprises and largeindustrial enterprises. Reluctant reform. Czech sell-off broader than it isdeep. 25). Following governmental use of violence tobreak-up one such demonstration, the Communist Party leader of thegovernment resigned. (1994b, 19 December). Further, the Czech Republic is the only country among the formersocialist states of Eastern Europe where the former Communist Party,regardless of new name or ideology, does not constitute a significantpolitical force (Sunley, 1996, p. References Brown, B. 25) stated that: "The casual outside observer maybe forgiven for assuming that it will be only a matter of time before theseinitially disadvantaged countries achieve sustained rates of economicgrowth and acquire the political and economic characteristics of the richerEuropean nations." A closer look at the East European region, however, reveals problemsand disquiet. The legal framework for privatization of state-owned enterprises in the Czech Republic was enacted in 199 and 1991. Denton, N. 27). Financial Times, FTS3. End is nigh for Czech voucher waves. 27). People are angryabout rising unemployment, falling living standards, growing poverty andinequality, the erosion of social services, and soaring crime rates.Ominously, once disgraced communist leaders have been recalled to power.The transition process is more complicated than initially presumed. Conclusion The achievements of the Czech Republic are, in one respect,surprising, because the economy of the former Czechoslovakia was more state-dominated than many of the other socialist economies in Eastern Europe.The Czechs, however, had a prior history as a market economy (prior to theadvent of socialism in Eastern Europe) that has facilitated the transitionof the country from a planned to a market economy. Unpleasant truths about Eastern Europe.Foreign Policy, 1 2, 52-65. Post-communism: An infantile disorder.National Interest, 44, 3-15. (1995, 21 January). (1993, February). Brown (1995, p. Economic and political reform inCzechoslovakia, however, stagnated in the post-Dubcek era (subsequent to1968), and did not come back to life until the socialist collapse began tosweep across Eastern Europe in 1989 (Schares, 1989, p. A "quick privatization" method was implemented in the Czech Republic(Prague, 1995, p. None of these funds wereapplied to the country's external debt. Paris:Organization for Economic Co-Operation and Development. Schares, G. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.