Czechmania
The world economy is not doing so hot. Recently a major Wall Street investing firm had to be bailed out by the Federal Reserve and JP Morgan Chase sending American stocks southward. (The Economist) Even in Europe where things seemed to be looking calm, the mortgage crisis finally reared its ugly head followed by a tax scandal in Germany involving the small country of Liechtenstein (The Economist; here and here.) However, while everyone seems to be underwater struggling to put their skis back on the surface, there seems to be at least one country who is skiing quite easily behind an economic boom. The Czech Republic.
Getting off the train you are already met with a crowd of people moving briskly from track to track in order to make their connections on time, prominently revealing the mobility of their workforce, which is representative by their low (in European standards) 6.6% unemployment rate. (Source: CIA World Factbook) As you delve deeper into the city center near the Astronomical Clock, you find that on the way you notice one of the many exchange booths waiting to trade any of the currencies that you may currently possess into Czech Crowns at a 0% commission rate. What is going on here? The rest of the world seems to be in agony and stress anticipating the next financial crises to occur, or waiting for the current one to settle down, while people here seem to be actually smiling. And a lot of people there is, demonstrating first hand the Czech Republic’s booming tourist industry.
Walking along the streets you are met with lines and offerings of restaurants, souvenir shops, boutiques, and quaint little pubs, almost comparable to that of New York. Prices vary quite considerably from a “cheap” 6 Euros a dish to the much more friendly 3 Euros (including one pint of Czech Beer). In fact, they have efficiently segmented their European/American tourists, as even McDonalds could be considered expensive compared to some fine Chinese dining you can experience, just a few blocks outside of the city center. Without a doubt the city is booming, shaking, and thriving. One notices immediately the energy and the friendliness of some of the shopkeepers, as they look curiously outside their door with a small smirk on their face. Prosperity is here, and it’s about time.
It is no secret that the communist regime really devastated the Czech economy with their yearly targets and programs, mainly forcing the country to produce an abundance of one product, such as shoes, specifically for the Soviet Union, while completely ignoring their comparative advantage in leather goods, motor vehicles, high-tech arms and luxury goods . (See Judt, Tony. Postwar. Penguin Press. 2005. p. 171.) According to Tony Judt, before World War 2, France had a lower per capita income than the Czech Regions of Bohemia and Moravia. Furthermore pre-1938 Czechoslovakia “was comparable to Belgium and well ahead of Austria and Italy,” and as of 1957, Austria, Belgium, and all of Western Europe had raced ahead Communist Czechoslovakia. (Judt, 2005, p. 171.) It is then no surprise, according to Timothy Garton Ash in his descriptive book The Magic Lantern, that one of the earliest decisions to make during the occurrences of the “Velvet Revolution” was the implementation of a capitalistic market economy.
Czech exports are reaching an all time high with EU partners (in particular Germany), and a lot of car manufactures and heavy industry, such as glass, are relocating their plants in the Czech Republic. However if you venture into a local supermarket (big, sprawling supermarkets are still a rarity, though there are a few exception. A lot of the stores seem to be restricted to small local shops) you will find an overabundance of Czech beer, with a Belgium offering of Stella Artois, and naturally Guinness. This closely resembles the situation in Germany, as it’s very hard to find good Belgium or even English offerings in German supermarkets. There is a noticeable bias toward German beer, mainly due to the notorious protectionist “Reinheitsgebot,” and I wonder if these protectionist policies are evident here as well. I brought this issue to a friend of mine, and she mentioned however that this could be a simple case of supply and demand. German beer drinkers prefer German beer and that’s all there is to it. This could be the situation in Prague, but unfortunately I find it hard to believe with the so many different varieties of beer in the world today, a portion of the population (whether in Germany or the Czech Republic) would still not venture outside of their local brewers and try something else. It would be interesting to research the specific products that are being heavily imported, and comparing that to most of the European Economic Area.
Granted, the Czech Republic will shortly have to deal with the same factor a lot of the current developed countries are currently dealing with. One thing that struck me was the abundance of youth walking the streets. No doubt as they will age and find retirement, there will be a greater demand on governmental/public resources. With the current problems regarding the ever increasing budget deficit, as well as a negative population rate, I can see this has being one of the major obstacles they will need to face in the future.
Notwithstanding, it seems first hand that capitalism is serving the Czechs well. Granted, compared to most of the old “Eastern Bloc” Czechs have had more experience dealing with a market style economy, as well as having in the past a more established economical and political elite, not to mention a strong intelligentsia. Perhaps it was just a matter of dusting off the old boots and seeing if they stay still fit.
Just like a glove.
