Jan Macháček


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Czech Business Weekly

Fifteen years after the fall of communism

29. 11. 2004
Fifteen years after the fall of communism it seems time to consider: What have been the successes and failures of the post-1989 era?

Undeniable successes are clear. Society managed to change the system. What used to be a totalitarian society is now governed by a parliamentary democracy and a constitution. Where there was once central planning, we now have a market economy. We are now fully integrated into the structures of the West as members of NATO and the European Union.

These are not small achievements. Now, perhaps for the first time in history, we are fully integrated with the free world.

But as journalists, let us focus on the failures, mistakes and the pain. Good news is no news.

Let’s begin with privatization. Property restitution proved to be the quickest and most effective privatization method. But all the other methods of privatization were much less successful. The government of Prime Minister Václav Klaus promoted a "Czech way" of privatization, and foreign investors were not welcome. This approach was combined with an experimental voucher scheme and privatization was financed by banks that were partially state-owned.

It is now clear that we should have begun with a full privatization of the banks by experienced foreign owners. It would also have been better to privatize many companies as Škoda Auto was, in being sold to Volkswagen.

One fascinating failure of the government’s economic policy is the fact that we still do not have a properly functioning bankruptcy code or business register.

Soon after the revolution, the newly emerged political parties were hijacked by special-interest groups. Without the European Union as a disciplinary tool, the legislative process would have been chaos. Inside the political parties it has been almost impossible to get anything done. Whatever is painful in the short term is refused. What the country needs most is to invest in education, but the government is unable to introduce new systems like tuition. Lawmakers are also unable to dismantle rent regulation, which is strangling the housing market and hampering labor mobility.

Sociology teaches us that in order to prosper, a society needs an efficient distribution of its elites. In other words, the best, the most educated and most competent people should hold the most high-level positions. But the opposite is happening here. The top-level politicians in this country seem not to be elites, but actually below-average members of society. Voters are less and less interested in voting. Clearly, society has become more cynical.

Everyone knows of the necessity of having financial capital, but for a society to flourish there needs to be something even more important — social capital. People need to believe each other and to trust the words of politicians.

But society today seems just the opposite. There are low levels of trust in courts, judges, police, attorneys and the whole "chain of justice."

Most of the crimes of communism went unpunished, but most of the white-collar crimes of the 1990s also went unpunished. People believe the big fish always get away — and that is the social capital we are lacking most. This is the single biggest disappointment in post-1989 development.

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