Economy of communist Czechoslovakia

History Politics Economy Industry Agriculture Foreign trade Transport Education Demographics Government structure Health and social welfare Mass media Resource base Religion Society In the mid-1980s, Communist Czechoslovakia was prosperous by the standards of the Eastern Bloc, and did well in comparison to many richer western countries.

Consumption of some goods like meat, eggs and bread products was even higher than the average countries in Western Europe, and the population enjoyed high macroeconomic stability and low social friction.

Czechoslovakia, by contrast, was a small country that had already reached a high level of industrialization and was rather heavily dependent on foreign trade when the Soviet system was first imposed after World War II.

[3] Because Czechoslovakia was more industrialized than the Soviet Union, it was in a position to furnish most of the equipment and fertilizer inputs needed to ease the transition to collectivized agriculture.

In a centrally planned system, authorities can distribute resources and production targets as they choose, balancing the needs of consumption and investment on the basis of long-term goals.

To ensure plan fulfillment, managers tend to exaggerate their material and labor requirements and then to hoard these inputs, especially if there is a reason to worry about punctual delivery of supplies.

[4][5] Because periodic shortages of birth control pills and intrauterine devices made these systems unreliable in Czechoslovakia, abortion became the most common form of contraception .

Then they wonder why the economy is going downhill like a ten-ton lorry with the brakes off.Like the rest of the Eastern Bloc, Czechoslovakia effectively missed the information and electronics revolution of the 1970s and 1980s.

[12] The party-state planned system ended up collapsing under the weight of accumulated economic inefficiencies, with various attempts at reform merely contributing to the acceleration of crisis-generating tendencies.

[16] While most western European economies essentially began to approach the per capita Gross Domestic Product levels of the United States, Eastern Bloc countries such as Czechoslovakia did not.

Immediately after the war, the Soviet Union began to transfer large amounts of industrial and other assets from Eastern Bloc countries, including Czechoslovakia.

[19][20] Using that control vehicle, several enterprises were required to sell products at below Western market prices to the Soviets, such as uranium mined in Czechoslovakia.

When the KSČ assumed complete political and economic control in February 1948, it began immediately to transform the Czechoslovak economy into a miniature version of that of the Soviet Union.

"[21] By the end of the plan period, serious inflationary pressures and other imbalances had developed, requiring a currency conversion in 1953 that wiped out many people's savings and provoked outbreaks of civil disorder.

During that period, investment continued at a high rate, although real wages and the supply of consumer goods also increased substantially, and national income grew by 6.9%.

In 1958 and 1959, in response to this troubling situation, the government made several relatively minor adjustments in the functioning of organizations and prices—the first of the country's economic reforms.

Many factors contributed to the economy's poor performance, including adverse weather for agriculture, cancellation of orders by China resulting from the Sino-Soviet dispute, and unrealistic plan goals.

The branch directorates had overall responsibility for the performance of enterprises under their jurisdiction, but the division of authority between the larger unit or trust and its subordinate members was not clearly defined.

In part, the rise in the investment rate in the 1970s reflected large capital expenditures for increased mining of coal and other fuels and for the development of engineering branches to produce equipment for nuclear power plants.

Increasingly in the 1970s, a substantial portion of the country's production of consumer goods and machinery was diverted to export markets to meet the rising import bill.

The country had perhaps the oldest stock of plant and equipment in Eastern Europe, a stagnant resource base, and growing dependence on energy and material imports.

During the final three years, however, an economic recovery made up for the earlier poor performances; according to official calculations, the country succeeded in either meeting or surpassing domestic goals during the plan period as a whole.

The relatively favorable outcome of the Seventh Five-Year Plan was noteworthy, particularly because several international trends had had negative effects on the Czechoslovak economy during the period.

In 1982 the decision of Western banks to restrict credit to Eastern Europe as a result of Poland's serious payment problems and the sizable debts of other East European countries impeded Czechoslovakia's foreign trade with the West.

The main function of the banking system was to act as the government's agent in implementing the financial plan, an important part of which consisted of expanding and contracting credit to meet the economy's needs.

Planning authorities were in a position to use the centralized banking system to carry out major corrective measures, as occurred in 1953 when inflationary pressures became serious and the population's accumulated savings were largely wiped out by a conversion of the currency.

But in the late 1970s, and particularly in the early 1980s, the worsening terms of trade, bottlenecks in the economy, and the need for large investments in energy and industry combined to limit the allocations for consumption.

In addition to the banking system, another major financial tool for implementing economic policies and the annual plan was the central and republic government budgets.

The turnover tax, another major source of budget revenue, was originally employed in the Soviet Union as a simple and effective method of collecting most of the funds needed by the government without requiring extensive bookkeeping and estimating.

Retail prices of manufactured consumer goods, such as clothing and particularly tobacco products, alcoholic beverages, and sugar, were substantially higher than those of such basic necessities as potatoes, milk, and eggs.