History of Czechoslovakia - Economic History

Economic History

At the time of the communist takeover, Czechoslovakia was devastated by WWII. Almost 1 million people, out of a prewar population of 15 million, had been killed. An additional 3 million Germans were expelled in 1946. In 1948, the government began to stress heavy industry over agricultural and consumer goods and services. Many basic industries and foreign trade, as well as domestic wholesale trade, had been nationalized before the communists took power. Nationalization of most of the retail trade was completed in 1950–1951.

Heavy industry received major economic support during the 1950s, but central planning resulted in waste and inefficient use of industrial resources. Although the labor force was traditionally skilled and efficient, inadequate incentives for labor and management contributed to high labor turnover, low productivity, and poor product quality. Economic failures reached a critical stage in the 1960s, after which various reform measures were sought with no satisfactory results.

Hope for wide-ranging economic reform came with Alexander Dubcek's rise in January 1968. Despite renewed efforts, however, Czechoslovakia could not come to grips with inflationary forces, much less begin the immense task of correcting the economy's basic problems.

The economy saw growth during the 1970s but then stagnated between 1978–1982. Attempts at revitalizing it in the 1980s with management and worker incentive programs were largely unsuccessful. The economy grew after 1982, achieving an annual average output growth of more than 3% between 1983–1985. Imports from the West were curtailed, exports boosted, and hard currency debt reduced substantially. New investment was made in the electronic, chemical, and pharmaceutical sectors, which were industry leaders in eastern Europe in the mid-1980s.