Czech Republic
At the heart of Europe
Der Übergang von der Plan- zur Marktwirtschaft und von der Diktatur zur Demokratie ist dem Land offensichtlich gelungen. PAUL WHEATLEY beschreibt hier den politischen, wirtschaftlichen und gesellschaftlichen Weg von einem der beiden Teilstaaten der einstigen Tschechoslowakei zum heutigen Tschechien.
“Czechoslovakia,” wrote British historian Timothy Garton Ash in 1990, “had a real chance of making the larger transition from dictatorship to democracy, and from a planned to market economy, with relatively less economic pain than its neighbours.”
Garton Ash had good reason to be confident about the country’s imminent transition. “Czechoslovakia,” he noted, “was much the most democratic state in the region before the [Second World] War.” And as a simple look at a map tells us about its capital: “Geographically,” he wrote in his book We the People, “Prague lies west of Vienna. Culturally, it is the Central European city.”
Written just months after the country had overturned four decades of communism, this assessment has stood the test of time. Nevertheless, with populism on the rise and its economy in need of rapid modernization, will tomorrow’s Czech Republic still be the model post-communist country that it once appeared to be?
Economic competence
Since its transition from communism, the Czech Republic has gained a reputation for economic competence. Bernard Bauer is head of the German–czech Chamber of Industry and Commerce (DTIHK), which has around 700 members, including companies such as Siemens, Bosch and Volkswagen-owned Škoda Auto. Bauer sees such German investment as a sign of confidence in the skills available in the Czech Republic and its healthy economy. He also points to the number of German SMES (small and medium-sized enterprises) firmly established in the Czech Republic: “The German Mittelstand are very active in producing here, and they are a real success story.”
According to World Bank figures, research and development (R&D) in the Czech Republic rose from around 1.24 per cent of GDP in 2008 to 1.97 per cent of GDP in 2014. Similarly, in 2015, the OECD published a report stating that “within the last seven years the number of R&D staff in companies and universities has grown by 50 per cent and R&D funding has exceeded two per cent of GDP, with a growing share of that going to small and medium-sized domestic firms”. The conclusion, claimed the report, was that “the Czech Republic is an ideal environment for launching a new industrial revolution”.
Strong industrial heritage
Part of the multinational and multi-ethnic Habsburg and Austrian empires for centuries, the “Czech lands” industrialized sooner and more rapidly than many other countries in Central and Eastern Europe. From the turn of the 19th century, engineers from Britain headed there to help modern industry get off the ground, with the textile industry being particularly important. The country had a railway-building boom and rapid growth in brewing, mining, the food industry, glass manufacturing, the chemical industry and banking. Brno was the destination of the first Czech steam train, in 1838, followed in 1839 by the first steam train from Vienna to Brno. The city was known as the “Moravian Manchester” thanks to its rapid industrialization (the UK’S Manchester was a major centre of Britain’s Industrial Revolution).
The industrial tradition of the Czech lands has fed into the modern Czech economy. Today, around one-third of all employment is in manufacturing, representing the largest proportion in the European Union. Investors like the fact that the Czech Republic has relatively low wages compared to the average across the EU.
The country excels in the auto industry: Volkswagen bought Škoda in 2000 and has invested heavily in plant, equipment and skills. Škoda announced in January 2019 that it had produced a
record 886,100 vehicles in the Czech Republic in 2018, up 3.3 per cent from 2017. Škoda says it is investing €2 billion in “electromobility and new mobility services”. The automotive sector makes up to nine per cent of Czech GDP and around 25 per cent of exports. “Roughly 400,000 people work in this branch,” says Bauer.
The importance of the European Union
Central to the success of the Czech economy has been its membership of the European Union. Created in the aftermath of the First World War, Czechoslovakia was a construct principally between Czechs and Slovaks, with a significant ethnic German population (plus some Ruthenians, Poles and Hungarians). Czechoslovakia had a well-educated bourgeoisie and skilled civil service. Until the German occupation of Bohemia and Moravia in March 1939, Czechoslovakia had been the only democracy to survive from the states created out of the Austro-hungarian Empire.
The memory of German occupation, followed by four decades of communist rule, looms large in Czech history. But from 1989
“THE CZECH REPUBLIC IS AN IDEAL ENVIRONMENT FOR A NEW INDUSTRIAL REVOLUTION”
onwards, freedom, democracy and capitalism became a reality, and in 2004, the country joined the EU. Today, German and other investment partners, and access to European markets, are central to Czech prosperity: intra-eu trade makes up 84 per cent of Czech trade, with Germany as its most important export partner (32 per cent), followed by Slovakia (eight per cent) and Poland (six per cent). Germany, Poland and Slovakia are also its main source of imports.
Czech-style populism
Despite a healthy economy, a recent survey by the non-profit think tank EUROPEUM Institute for European Policy shows that support for the EU is much lower in the Czech Republic (54 per cent wish to remain) than in Hungary (84 per cent), Slovenia (79 per cent) and Slovakia (69 per cent). The young and the old seem to support the EU to a high degree, but 36- to 50-year-olds much less so. And there is also a major division between Prague and a few other cities, with their high percentage of EU supporters, and more rural areas, where anti-eu feelings are stronger.
Czech president Miloš Zeman frequently attacks the EU. He’s also the best-known anti-immigrant, anti-islam voice in the country, and he regularly speaks in support of both Russia’s Vladimir Putin and China’s Xi Jinping. Although Zeman is a pop - ulist, it would be a mistake to class the Czech Republic in the same bracket as Poland and Hungary, explains Martin Mejstřík, a political scientist at Charles University in Prague. Zeman’s populism comes with a high level of cynicism and a distrust of the political system. “But he’s basically a populist in rhetoric, not in what he actually does,” says Mejstřík. Zeman’s position as president means his powers are quite limited, he adds.
Mejstřík points to the real power in the Czech Republic: Prime Minister Andrej Babiš, the billionaire businessman and former finance minister, who is mired in corruption allegations. Like Zeman, Babiš is happy to attack the EU and praise Putin.
Mejstřík says Czech society is typically materialistic, atheist and non-ideological. He compares it to the more “values-based Poland, where the view of the Church is still important, even in politics”. In contrast to the ideological populism in Poland, Mejstřík points to Czech-style “entrepreneurial populism”. It’s “very non-ideological”, he says. “It’s very technocratic, and it’s more about having and keeping power.” If Babiš “supports one particular law today”, Mejstřík explains, “and there were a poll tomorrow showing a majority of the people were against this very same law, he would change [his position] to be against it”.
Michael L. Smith, a researcher at the Economics Institute of the Czech Academy of Sciences, is of a similar opinion. An expert on corruption in Czech politics, Smith also stresses, however,
that the major accusations against Babiš are not a sign of a “systematic wider problem”. He says that “there is a growing recognition in society, despite the fact that Babiš is popular, that [his alleged corruption] is wrong and things need to be done about it”.
Liberal and international Prague
Bordered by Poland, Slovakia, Austria and Germany, the Czech Republic attracts huge numbers of international visitors — in 2018, more than 21 million people. The highest number come from Germany at more than two million and Slovakia at 735,000.
With its beautiful cityscape, historic Charles Bridge across the Vltava and long, eventful history, Prague attracts the most international tourists. In rural areas, Zeman’s populist rhetoric wins votes; in Prague, it is fairly comprehensively rejected. “Most people in the capital are embarrassed by the president,” says Leslie Francis Ryan, a Canadian teacher of English who has lived in the city since 1999.“[The Czech Republic] is a robust democracy,” says Smith. But he warns that “a lot of that has to do with its strong economy”. Which leads to the obvious question: what would happen if that were to change and the economy failed? What kind of populism might then emerge?
Transforming the Czech economy
Maybe there is little to worry about. In its annual business survey for 2018, the DTIHK reported that the mood of German investors in the Czech Republic was at its most optimistic since the annual survey began, in 1992. However, for the third year in a row, investors also mentioned the “availability of skilled workers” and “full employment in the country” as major challenges.
Attracting skilled labour from abroad is a possible solution. But the Czech Republic is in hot competition with many other countries. And might not the workers themselves think twice, considering the current hostile anti-immigration rhetoric? It is perhaps also telling that respondents in the DTIHK survey cited political instability as a major concern. And three out of four expected “the political situation to become even more unstable and unpredictable”.
Producing home-grown, highly skilled Czechs is key to continued economic success. But the education system appears to
TODAY, ACCESS TO EUROPEAN MARKETS IS CENTRAL TO CZECH PROSPERITY
be failing the economy. Bernard Bauer praises current skills in Czech manufacturing and industry. But “vocational schools are not up to the demands of industry,” he says. They simply don’t produce enough people to work in today’s manufacturing-focused economy. Mike L. Smith agrees. “The Czech
Republic is trying to transform itself into a service-based, knowledge economy. In order to transform the economy, however, you need to transform the education system,” says Smith. “And this simply isn’t happening.”
The Czech education system, therefore, is in a double bind: it’s not only failing to produce enough people to perform today’s skilled manufacturing jobs; it is also failing to produce enough young people with the skills to transform the economy for the future.
Even the R&D figures don’t look so impressive when one considers that they dropped from 1.97 per cent in 2014 to 1.68 per cent in 2016, according to the World Bank, well below the world average of 2.3 per cent. An inadequate education system, not enough skilled workers and insufficient R&D spending suggest that the Czech Republic is far from the OECD’S description of it as “an ideal environment for launching a new industrial revolution”.
A hundred years in the making
A century ago, the Paris Peace Conference confirmed the creation of a Czechoslovak nation. It survived as a democracy until the German occupation of the Czech lands in 1939. It took a devastating war, followed by four decades of communism, for its democratic traditions to flourish once again.
Membership of the EU has helped transform its economy and society, and it is today a robust democracy, supported by a strong industrial and manufacturing base. Unlike in Poland and Hungary, populist leaders don’t appear to be fundamentally threatening this — at least not yet. Three decades after Czechs demanded and got democracy, what now? An open and honest discussion about how to modernize the Czech education system and how to create a modern economy would be a good start.
As Timothy Garton Ash predicted, the transformation of the Czech Republic from communism to a capitalist democracy has been successful. The country has fared well since, and Garton Ash would probably not be surprised. Back in those heady days of 1990, he wrote: “The most Western of all the so-called East European countries was resuming its proper history.”