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Issue 42, October 1999

Velvet Revolution wears thin

Until a few years ago, the Czechoslovak Republic - which split into two states, the Czech Republic and Slovakia, in January 1993 - was used by West European politicians as an example of successful capitalist restoration. Voucher privatisation created millions of small shareholders. Unemployment was low. While right-wing governments in other Central and Eastern European countries collapsed, the Czech Republic had the same government from 1990 to 1997. Why was that the case? And what happened after that? VASEK VOTRUBA reports.

THE FORMER CZECH prime minister, Petr Pithart, has described to journalists a recent discussion he had with a politician from the European Union (EU). The EU dignitary told him: 'For a long time, we in the West didn't believe there was any way out of your situation, that transformation after so many decades could be successful. To convince us and Western European public opinion that it was possible we needed at least one successful case. We just needed a 'success story'. So we used you. We didn't see, or it's more correct to say that we didn't want to see, that not everything was all right. But you have to understand, we hardly needed to believe that it was. So we used you. We squeezed you like a lemon and threw you out. Now we favour the Poles, sorry'.

At the beginning of capitalist restoration, the Czechoslovak economy was near the level of Portugal or Greece. But the collapse of its former markets, rising prices (so-called 'liberalisation'), and increasing social insecurity, led to a 30% fall in production. The economy still has not reached the level of 1989. Industrial production is 16% lower, the building industry is down by 14%, and agriculture by 30%. Average real wages caught up with the 1989 level in 1997, but 63% of all employees receive less than this.


The conservative government that was in power up to 1997, led by Václav Klaus's ODS (Obcanská Demokratická Strana - Civic Democratic Party), was looking for a way of changing property relations, following the collapse of the Stalinist regime in 1989. Klaus wanted to build support for market 'reforms', and implemented the so-called 'voucher privatisation'. Everybody had the opportunity of buying vouchers which they could exchange for shares. This created eight million shareholders. (The population of Czechoslovakia was 15 million - ten million in the Czech Republic, five million in Slovakia.)

State ownership was abolished in this way, but the shares were very widely dispersed. New capitalist ownership was not established as most of the shares were managed by the state-owned banks' investment funds. Widespread fraud ensued. Factories without new owners were created, many lacking the capital needed for new technology. The state was afraid of the consequences of restructuring - ie growing unemployment and social instability - and tried to survive as long as possible without making the changes demanded by the profit system.

When it became clear that the Czech Republic faced a big economic crisis, Klaus's government prepared a cuts package, attempting to close hospitals, schools and local railways. For two years state employees (teachers, nurses, doctors and others) had their wages frozen, although inflation was around 10% a year.

The ensuing social unrest and massive pressure from below forced CMKOS (Ceskomoravská Konfederace Odborových Svazu - the main trade union confederation) to organise a large demonstration in November 1997. Budoucnost (the Czech section of the Committee for a Workers' International) - as well as some miners, steelworkers and rail workers - called for a one-day general strike.


Four weeks later, the government collapsed. A caretaker government was brought in until new elections were held in June 1998. A minority government led by ÈSSD (Ceská Strana Sociálne Demokratická - Czech Party of Social Democracy, led by Miloš Zeman) was elected.

The new CSSD government reached an agreement with ODS: Klaus's party would not bring the government down, and CSSD would discuss every proposed law with them first. It was clear that it would not be a stable government, but the agreement contributed to big illusions amongst workers that CSSD would govern differently from the right-wing parties.

One year later it is clear that this government is the same as before. Unemployment has risen from 5% to 9% in the last two years and the economic recession continues. The only factor which is getting better is inflation, which is expected to end the year around 3%. But this is due to the collapsed state of the economy.

Social unrest has led to few strikes as yet. Because of the very confused consciousness, some workers have called for 're-privatisation'. On the other hand, there is increased support for KSCM (Komunistická Strana Cech a Moravy - the Communist Party of Bohemia and Moravia) as a protest party. This has not resulted in a significant increase in membership, but their support has grown from 11% in the 1998 elections to 16-18% today.

Capitalism has not solved any of the problems that Stalinism created for the Czech Republic. If socialists campaign effectively, the experience of an unsuccessful CSSD government, economic recession, growing unemployment, and the limitations of KSCM, will draw workers and youth closer to the idea that only socialism offers a viable way to change society. The first examples of this process can be seen in the tens of thousands of youth at 'street parties'. These are more and more clearly anti-capitalist demonstrations. The last one stopped in front of the US embassy where some school students threw empty bottles and stones at the windows. For two weeks in one city, youth blocked the building of a new supermarket which destroyed an old park.


top     EU expansion - lifeline or hangman's noose?

THE CZECH GOVERNMENT, like other Central and Eastern European (CEE) governments, is now pushing to join the European Union. Who is talking about EU expansion and why?

At the beginning of the 1990s the talk was of a 'return to Europe', meaning that with the EU's help, Central and Eastern Europe could overcome all its problems. A more sober assessment came at the EU meeting in Vienna in November last year, where the EU started formal accession negotiations with five countries - Poland, Hungary, the Czech Republic, Estonia and Slovenia - by presenting 80,000 pages of proposals and questions! After 1989, all CEE governments relied on promises of big investment and new technology. The Institute for International Economy in Washington wrote that to raise the six most developed CEE countries to just 50% of the level of the EU would require $420 billion investment, but they have access to a fraction of that.

Rapid and stable economic development has not come to any of these countries. The unstable bourgeois regimes needed something new to show that they could develop society. They came up with the idea of EU expansion.

The discussions with the EU have started but even the most optimistic supporters of EU expansion do not think it will be possible before 2003. Pessimists say ten to 15 years. Le Monde Diplomatique pointed out in February 1999: 'Having already concluded agreements with the American majors, both countries (Slovenia and the Czech Republic) are asking for transitional periods. And the really big issues have still to be tackled. The restructuring of heavy industry (where Hungary has already requested a waiver for coal and steel) and national agricultural arrangements are bound to give rise to difficult discussions'.


Rules governing agriculture, coal and steel, environmental protection, the social security system, judicial reforms, the right for European citizens to purchase land, and freedom of movement and employment, have all to be changed. It is estimated that environmental protection measures alone will cost the Czech Republic $17 billion. It is impossible to imagine EU expansion on the basis of the low level of the CEE economies of today.

Le Monde Diplomatique (February 1999) warned that clear agreement must be reached: 'Otherwise, as happened with the five Länder of former East Germany, the new EU will be a patchwork of rich regions exploiting and controlling concentrated areas of poverty and underdevelopment. A division of this kind, and the consequent growth of inequality, would seriously endanger the whole enterprise'. For the EU, expansion is connected to problems with its own budget. There is also a problem with opening the borders to cheap labour from Central and East Europe which could reduce the labour price and generally increase social instability.

The disintegration of the Warsaw Pact initally fuelled illusions that Nato would be dissolved and replaced by a 'European security system'. That idea disappeared rapidly. Instead, Hungary, Poland and the Czech Republic became Nato members at the beginning of this year. After a relentless propaganda campaign, and the experiences of the Soviet invasion of Hungary (1956), Czechoslovakia (1968), and of the Jaruzelski coup in Poland (1981), the majority of people went along with arguments about the dangers posed by Russia and Islamic terrorism, and supported joining Nato. Only in the Czech Republic was there no big support for this move and, after the bombing campaign against Serbia, the mood has changed to one of complete opposition.


Nato expansion has increased the possibility of firmer control by the Western European powers and serves the interests of military industry - the re-militarisation of the Czech Republic will cost $7 billion. It is also a question of power. Tigrid, a former CIA agent and advisor to president Vaclav Havel, has said: 'Nato will guarantee the new regime and will prevent re-nationalisation'.

The process of EU enlargement will be pushed as far as possible. CEE governments will use this as an excuse for further cuts, while promising more investment. But as the cost of EU expansion, and the lack of real results in investment, new technology and jobs becomes clearer, anti-EU forces will grow. There is a danger that this will help strengthen the nationalist parties. We have to do everything we can to explain to the workers' movement that their future is linked with that of West European workers and their struggles, not with the EU.

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