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Assignment: After World War I

Assignment: After World War I

Assignment: After World War I


Czechoslovakia came into being after World War I as a full-fledged parliamentary democracy—the only instance of popular self-government in Eastern Europe prior to 1989. In the Czech Republic, Prime Minister (now President) Václav Klaus extolled the virtues of the marketplace and implemented an ambitious coupon-redemption scheme that theoretically gave all Czech citizens shares of newly privatized (formerly state) enterprises. But the distribution was done without adequate safeguards and thus failed to accomplish one of its primary aims—to give Czechs a stake in the new market economy. In fact, crooks and insiders (a distinction without a difference) grabbed up the high-quality stocks, most of which never became available to the public, and used connections to get operational control of the “hottest” properties.

Unsurprisingly, this bungled attempt at reform soured many ordinary Czechs toward democracy and capitalism rather than solidifying popular support as it was intended to do. Inflation, fear of job losses, corruption in high places, a growing gap between the nouveaux riche and the majority, and a heightened awareness of how far behind the West Eastern Europeans in general—and Czechs in particular—had fallen all contributed to a deepening disillusionment. In the eyes of the people, the shady entrepreneurs and self-aggrandizing politicians became synonymous with “the system.”

Despite popular dissatisfaction with politics, the Czech Republic is a free country with a popularly elected president and parliament and an independent judiciary. The Czech economy, having stumbled along for most of the 1990s, made a good recovery following the recession of 1997–1999. Structural reforms (for example, in the banking sector) helped achieve this result. Voters strongly endorsed the Czech Republic’s entry into the EU in 2004, a move that opened Europe’s huge Single Market to Czech-built automobiles, armaments, machinery, and other exports and could well make the Czech Republic a magnet for foreign investment.

In the five-year period from 2003 to 2008, the Czech economy grew at an annual rate of 5.2%, while inflation averaged just below 3%. The manufacturing-based economy was especially hard-hit by the global recession in 2008-2009—industrial output fell by over 17.4% in November 2008, the highest of any EU country. (Spain was close, but the overall drop in industrial activity for the EU as a whole was a less dramatic 7.7%.) Due to budget constraints at home and Europe’s painfully slow recovery from the global recession—exacerbated by the euro crisis after 2010—the Czech economy contracted in 2012 and 2013 but was on track to grow a mere 2% in 2014.