Transition
 

Jan Klacek's comments

on the economic therapy

in Czechoslovakia


from The Financial Times,

April 5, 1991.

by Andreas Marathovouniotis

 

The director of the Economic Research Institude of the Czechoslovak Academy of Science, Jan Klacek, argued that the economic therapy imposed in Czechoslovakia delayed full marketization due to the failure to allow competition between small firms (The Financial Times, April 5, 1991). Mr. Klacek agreed with Vaclav Klaus' decision off adopting a "shock therapy" similar to that of Poland, which consisted of rapid adaptation to the market. According to Mr.Klacek, Czechoslovakia "could simply not afford to loose more time in the race"( The Finncial Times, April 5, 1991). The task of the Polish stabilization programme of 1989-90, was to wipe out hyperinflation. It was successful in substantially reducing inflation in the beginning of the "shock therapy" from the rate of 77.3 in January 1990 to 15.8 in February 1990. On the other hand, Mr Klacek argued that inflation was cut down in Poland from 78.6 percent to 23.9 percent in February 1990. Mr Klacek emphasized that inflation in Czechoslovakia and in Poland were heading in opposite directions.

In my opinion, Mr. Klacek just did not give Czechoslovakia's big bang inflation rate enough time to readjust. The later rates of increase in prices show that by March 1991 inflation of producer prices returned to the rates they had prior to the big bang of January 1991. Consumer prices returned to their normal rates by July 1991.

Mr. Klacek further pointed out that it was difficult to break up monopoly producers. He added that " there are more than 50 breweries, yet the reformers in the Czech and federal governments have neglected to remove the regional monopoly enjoyed by each brewery" (The Financial Times, April 5, 1991). Mr. Klacek may have been correct at the time, however, by June 1991, as small and large privatization took place in Czechoslovakia, 713,000 companies were privately registered in the Czech Republic alone. Large scale privatization took place with the use of "voucher schemes" which prooved to be effective for the privatization of such major scale and in a short period of time.

Bibliography:

  • Jan Klacek on Czechoslovakia, The Financial Times, April 5, 1991.

  • Earle John S., Frydman Roman, Rapaczynski Andrzej, Privatization in the Transition to a Market Economy, St. Martin's Press, New York.

  • Batt Judy, Economic Reform and Political Change in Eastern Europe, St. Martin's Press, New York.

  • IMF Working Paper, Stabilization and Structural Reform in Czechoslovakia: An Assessment of the First Stage, January 1992.

 

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