The Economy Of The Czech Republic Essays - Communist States

The Economy Of The Czech Republic The government of the Czech Republic faced a political and financial crises in 1997 shattered their image as one of the most stable and prosperous post-Communist states. This somewhat new republic, despite the financial tribulation, has been able to reduce their inflation to 10 percent, formed a balanced budget, and hold unemployment down to only 3 percent, since their break away from the former Czechoslovak federation on January 1, 1993. The country's gross domestic product (GDP) expanded in 1994 after losses of nearly 20% during the first few years of the 1990's. The Czech Republic's GDP is currently about $120.8 billion according to a 1999 estimate, and the GDP per capita is posted at around $11,700. The lands of the Czech Republic have always been a part of the most economically modern areas within the European continent. The Communists, when they obtained Czechoslovakia in 1948, created an economic system that was greatly centralized on the government. Nearly all aspects of the Czech economy was controlled by the national government. This government regulated economy also removed almost all external influence by non-Communistic countries. Though the Czech economy held strong by Eastern European standards, the policies produced from the Communist government led to an eventual economic decline in Czechoslovakia. Once the final remains of Communism was scraped out in 1989, a collapse of Czechoslovakia was inevitable because the legacy left behind would be incredibly hard to deal with for the new leaders of this new state. In the early 1990s the post-Communist government quickly converted the economy to a system based on free enterprise. The new governments also adopted several reform policies, including a voucher privatization plan. Under this plan, citizens were given, for a small government fee, coupons which could later be converted into stock in companies. The voucher plan successfully privatized the economy, through returning ownership of most of the assets to the private. As of December 1994 more than 80 percent of firms in the Czech Republic were privatized or had decided on a privatization strategy. Business boomed in the capital of Prague and other cities in the mid-1990s as new companies were established by venturing entrepreneurs. The government also succeeded in reestablishing their economic connections with Western Europe as well as gaining a substantial amount of foreign economic aid. The Czech Republic has gained membership the The International Bank for Reconstruction and Development (World Bank), the European Bank for Reconstruction and Development (EBRD), the Organization for Economic Cooperation and Development (OECD), International Monetary Fund (IMF), and the Central European Free Trade Association. In October 1993 the country became an associate member of the European Union (EU), and in December 1997 the EU invited the notion of them becoming a full member. As a part of the EU's primary expansion of membership, the Czech Republic is expected to gain full affiliation within five to ten years. The unemployment level in the Czech Republic is at 9.0 percent as of 1999. The employed are distributed with: 54 percent in the area of service, 40 percent in manufacturing and industry, and 6 percent in agriculture, forestry, and fishing. The country has many trade unions which are tied together through the Czech-Moravian Chamber of Trade Unions, which was founded in 1990 with headquarters in Prague. These unions are expected to help further decrease the unemployment and work stability in Czech. Some 40 percent of land in the Czech Republic is cultivated. Due largely to a decline in state subsidies, the number of agricultural workers has weakened dramatically. The principal crops grown in the Czech Republic are barley, wheat, corn, rye, sugar beets, potatoes, flax, and hops. Czech farmers also raise sizable numbers of livestock animals, including poultry, pigs, cattle, and sheep. Now, agriculture plays a relatively small role in the nation's export industry. Pre-Communist Czechoslovakia was mainly a producer of light industrial goods, including textiles, footwear, porcelain, and glass. Communism removed the importance of these industries and replaced them with heavy industry, including metallurgy and mining. The principal mineral extracted in the Czech Republic is coal. Czechoslovakia became a producer of steel, machinery, and weapons from this industrial change. The post-Communist Czech Republic, though heavy industry continues to be important, has allowed for the reemergal of traditional industries. The principal products of the Czech Republic today are woven fabrics, paper, crude steel, pig iron, and footwear; cheese and beer are important processed foods. Due to limited resources, the Czech Republic must import the bulk of its energy supply. Gas and oil are supplied mainly by pipelines through Slovakia. In