The Outcomes of the Czech Economic Transformation

Abstract

The basic elements of the transformation of a centrally planned into a market economy are generally taken to centre on price liberalization, a predominance of private ownership and opening to the world economy. On these criteria, the Czech transformation has been successful, creating the ‘functioning market economy’ required for EU accession in 2004. However, market economies differ among themselves in many important characteristics and vary widely in terms of levels of development and potential for growth. A powerful Czech self-image sets the country among the advanced nations of the world and a fully successful transformation should imply reclaiming a place within, or not far behind, that family. Set in that context the Czech economic transformation up to 2006 appeared as a qualified success. Elements of the transformation strategy had created barriers to the development of an economy based on domestically owned firms and left the country heavily dependent on foreign-owned firms and on a continuing flow of inward investment. This created a basis for renewed economic growth after 1999, but left uncertainties about the future.

An earlier version of this chapter appeared as ‘Economic Transformation in the Czech Republic — a Qualified Success’, Europe-Asia Studies, 59 (3).