Economy of Communist Czechoslovakia - Functioning of The Economy

Functioning of The Economy

The Czechoslovak economy, like most economies in communist countries, differed markedly from market or mixed economies. The main difference is that while in market economies, decisions by individual consumers and producers tend automatically to regulate supply and demand, consumption and investment, and other economic variables, in most communist economies, these variables are decided by a national plan that has the force of law.

In Czechoslovakia, like in most Communist countries, the centralized economic structure paralleled that of the government and the Communist Party of Czechoslovakia (Komunistická strana Československa—KSČ). This structure gave the party firm control over the government and the economy. It is generally referred to as the Soviet model and was first applied in the Soviet Union, which was initially an agrarian nation with extensive natural resources, a large internal market, and relatively little dependence on foreign trade; the goal was to quickly develop heavy industry and defense production. Czechoslovakia, by contrast, was a small country that had already reached a high level of industrialization and was rather heavily dependent on foreign trade when the Soviet system was first imposed after World War II.

In the mid-1980s, Czechoslovakia had a highly industrialized economy, a fact reflected in the 1985 official statistics concerning production of the net material product of the country (the official measure of aggregate production). The industrial sector accounted for 59.7 percent of the value of the net material product; construction, 11.2 percent; agriculture and forestry, 7.5 percent; and various other productive services (including transport, catering, and retailing, among other activities), 21.6 percent. As of 1980 the socialist sector (state enterprises or cooperatives) generated 97.4 percent of the national income. Of the total work force, almost 99.8 percent was employed in the socialist sector.