Small Business Development in the Czech Republic

By Defillippi, Robert | Review of Business, Spring 1995 | Go to article overview

Small Business Development in the Czech Republic


Defillippi, Robert, Review of Business


Western observers have collectively heralded the economic "miracle" within the Czech Republic, which currently boasts a balanced national budget, the lowest inflation and unemployment rates in post-communist Central and Eastern Europe, and a Standard and Poor's credit rating higher than that of Greece and much higher than any other post-communist economy (Economist, 22 October, 1994). A large majority of World Bank representatives surveyed in early 1994 identified the Czech Republic as the most promising post-communist country for foreign investment, and the European Bank for Reconstruction and Development (EBRD) rated the Czech Republic in 1993 and 1994 as satisfying more economic criteria for membership in the European Economic community than several of its current members (Economist, 22 October, 1994).

Indeed, the Czech lands during the late 19th century produced 70% of the Austro-Hungarian empire's industrial output and, as recently as 1937, Czechoslovakia achieved a per capita income on par with France and higher than Italy or Austria. The Czechoslovak economy of the 1930s included more than 330,000 small firms employing between one and five people. However, no European country suffered a more thorough loss of small business enterprise than the Czech lands during the postwar years. What few vestiges of private enterprise still survived after the communist electoral victories in 1948 were eradicated after the Warsaw Pact's 1968 overthrow of the Dubcek government's "socialism with a human face." By the early 1970s the post Dubcek communist government had eliminated all forms of private enterprise and consolidated small firms into approximately 1500 state-owned enterprises and 750 state-owned commercial enterprises, the latter with an average firm size exceeding 2500 employees (Rondinelli, 1993). One measure of the economic cost of Communist rule was the relative decline in Czechoslovak income per capita, which by 1990 had fallen to only one-fifth that of Austria (Dyba and Svejnar, 1994).

The Czech Republic's economic transformation since 1990 has been nothing short of remarkable and the following sections discuss the macro and micro economic government policies and market forces fueling this economic transformation, the impact of these factors on the resurgence of the Czech small business sector, and some of the post-communist challenges facing small business development, as revealed in interviews with thirty Czech small business entrepreneurs in August 1993, supplemented by November 1994 interviews with two Czech consulting clients and business and economics faculty of the Czech Management Center. The Czech Republic is comprised of Bohemia in the western and Moravia in the eastern halves of the country. Prior to January 1993, the Czech Republic was federated with Slovakia and the totality is referred to as Czechoslovakia.

Macroeconomic and Microeconomic Government Policies

After the Velvet Revolution of November 1989, the Czechoslovak government of Prime Minister Vaclav Havel enacted a macro economic strategy engineered by Finance Minister (and next Prime Minister) Vaclav Klaus that included the following policies and objectives:

* An austere fiscal policy to substantially reduce state subsidies to state-owned enterprises and to maintain a balanced federal budget.

* A tight monetary policy to restrain inflationary pressures.

* A currency policy to stabilize the Czechoslovak koruna (crown) by pegging its value to a basket of five western currencies (primarily the German mark and the dollar) and making the crown internally convertible so that business operators could exchange limited mounts of crowns for hard currencies.

These macroeconomic policies were accompanied by government microeconomic policies that focused on price liberalization and privatization of government-owned enterprises. In 1991 the government liberalized 85 percent of producer and consumer prices while simultaneously imposing wage controls. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Small Business Development in the Czech Republic
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.