THE_CZECH_REPUBLIC_AND_ECONOMIC_TRANSITI.pdf

THE_CZECH_REPUBLIC_AND_ECONOMIC_TRANSITI.pdf - ECONOMICS...

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ECONOMICS THE CZECH REPUBLIC AND ECONOMIC TRANSITION MARWA MAMDOUH SALEM Introduction Since the fall of the Iron Curtain in 1989, countries of Central and Eastern Europe embarked on an unprecedented economic transition from a centrally planned (command) system to one based on decentralized decision-making and markets. Weitzman (1993) presents two different models of transition: the East European and the Chinese models. In
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describing the East European model of transformation, the essential idea was to make a transition to Western-style capitalism as rapidly and feasibly as possible. The main elements of the transformation process in the Central and Eastern Europe (CEE) was the central role of private property within a convenient monetary and fiscal structure. Reformers in these countries have also concentrated on developing the essential institutions of capitalism including readdressing the ownership rights through endorsing the appropriate legal system, commercial code, contract and bankruptcy laws … et cetera. Indeed, the outcomes of the transition have varied between the CEE countries, however, Svejnar (1995) argues that only few of them have managed to achieve notable success in macroeconomic stabilization and restructuring. Analysts and laymen view the Czech Republic (CR) as an important point of reference in the context of transition in the region. This can be attributed to the following facts: Firstly, the Czech Republic is one of the first countries who carried on rapid and radical measures to transform the command economy into a market economy. Secondly, it did this from an extreme position of virtually complete government ownership of assets, unlike Poland for example in which the private sector played a vibrant role in the era prior to transition (27 percent in GDP). Thirdly, the country’s success to reestablish its economy among the emerging ones in the region therefore restoring its advanced economic position in the 1930s before being captured by the communist regime. In this regard, this paper ascertains the analysis on the successful economic transformation of the Czech Republic to the Western-style capitalism and emphasizes the key elements endorsed by the reformers that made it possible. 1- How did the Geography, History, Politics and Culture played the Transition Symphony? In examining the Czech experience, one has to bear in mind the importance of the geographic, historical, political and cultural factors in terms of how they influenced the transformation process in the Czech Republic, according to Svejnar (1995). CR is located in the heart of Central Europe which enables it to be in the crossroad of Eastern and Western Europe. Sandwiched between Germany and Austria provides an advantageous beginning for a transition as it encouraged the flow of Western people, goods, capital and know-how to the Czech republic compared to other countries located further east. Suffice to say that Germany is viewed as the most relevant Western neighbor of the Czech Republic as well as its main gateway to Western Europe, in addition to being the biggest single investor in the 2
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Czech Economy since 1989. By the same token, CR is among the four countries of the
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  • Fall '19
  • Inflation, Slovakia, Privatization, Václav Klaus

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