The Czech Republic's Privatization Experience
THOMAS D. HOPKINS
The privatization process now under way in the Czech Republic is only one part of a larger transition taking place in that newly reconstituted country, one having important economic, political, legal, and social dimensions that are too recent and complex to permit easy generalizations or prognostications. The situation is still fluid, and the state of affairs likely to prevail in another five years is difficult to surmise. This chapter focuses on privatization itself, while recognizing that its success will depend more on skill and luck than the Czech Republic experiences on other economic and political fronts--especially macrostabilization, international trade, infrastructure, and the societal safety net.
Perhaps no other country has undertaken a privatization process on as vast a basis as has the Czech Republic, so it is not surprising that both in concept and in administration it has attracted criticism as well as praise. One trenchant critical appraisal appears in Myant ( 1993). This chapter draws on Myant's work, although reaching more optimistic conclusions, reflecting a 1993 survey of a group of Prague graduate students as well as a review of available literature.
The privatization campaign initiated in the aftermath of the November 1989 "velvet revolution" marks the restoration of free markets that had been absent from Czechoslovakia for four decades. Fewer than 20,000 worked in the legal private sector in the early 1980s ( Myant, 1993). As recently as 1990, less than 0.5 percent of business output was produced by private firms, compared to 80 percent or more in most Western economies ( Organization for Economic Cooperation and Development [OECD], 1991). In 1989 there were only 588 industrial enterprises, each averaging just over 3,000 employees ( Myant, 1993). The typical firm was huge and state run and faced no competition. The government set virtually all prices, and domestic producers were taxed and subsidized in ways that eliminated incentives to export goods to nonsocialist countries. It