IV.The Anti-reform

The political situation had substantially changed after August 21,1968, but it seemed for a while that the economic reform would continue in the same direction as before. There were severe attacks on Sik's theory from the Soviet Union, but a critique of his economic theory could be considered as nothing more than a pretext for condemnation of his political behavior.

There were not many reasons to believe that Soviet leaders strongly opposed any basic aspect of the economic reform--except possibly the idea of workers councils and the loosening of the direct control of the Communist Party over the economy. The Soviet arguments concerning foreign trade were not convincing. It was clear to anybody who knew the basic facts that for Czechoslovakia, due to strong competition and the low quality of Czechoslovak goods, it would be very difficult to increase exports to the capitalist market. There were no indications that the steps towards liberalization of foreign trade which had already taken place would lead to any considerable shifts in foreign trade. Furthermore, the economic reform in Hungary, very similar to the Czechoslovak reform, has continued without attracting the attention of the Soviet Union.

Thus there existed a hope that the end of Dubcek's political system need not necessarily mean the end of the economic reform. It is true that the situation in the economy was not favorable to further decentralization. But in spite of shortages, disequilibria, and inflationary pressures (created or strengthened by the presence of large army and military operations on Czechoslovak territory), binding annual planning was not restored, the share of free prices was expected to increase, more and more workers councils were established, and a legal guarantee for the autonomy of firms was still in preparation.

As late as May, 1969, a group of economists from the Economic Institute of the Czechoslovak Academy of Sciences and from the secretariat of the government submitted "An Outline of the Conception of the Further Development of the Economic Reform." This outline took into account the very difficult situation in the economy and was therefore aware of the necessity of adopting some temporary control measures, but it did not make any substantial concessions as far as basic principles of the reform were concerned. This proposal was rejected. From that time, voices criticizing Sik's reform began to appear.

On May 23, Jaroslav Jirasek published in Hospodarske noviny, "An Outline of the Ideology of the Economic Reform in CSSR," in which he criticized the "extremism" and "revisionism" of 1968 and stated that it is impossible to continue the economic reform in its original form. According to his opinion, the economic reform neglected the importance of professional management and central control, overestimated the role of market self-regulation, and falsely put the dilemma of "the plan versus the market" as the central problem of reform:


"This dilemma is in fact no dilemma, because the centralist administrative model is so discredited that to choose this model would mean to reverse the course of history there is no other way than the market character of the economy. . . ."

He proposed the reorientation of the reformist movement towards the increase in the skill and authority of economic management. He suggested that the reform should proceed in three stages: (1) In the first stage--approximately 1970--he suggested the reintroduction of the administrative control of prices and wages, cutting investments in order to reduce overemployment, and finally the restoring of "the chain of power." (2) In the second stage--approximately l97l-74--to use the authority of the state and the management elite to achieve economic growth. (3) In the third stage--l974-80--"full deployment of the advanced economic system, based both on planning and the market mechanism."


In the meantime the economic situation has considerably deteriorated. In the middle of 1969 industrial and agricultural production stagnated, while money incomes continued to climb at an unprecedented rate of growth in Czechoslovakia, followed closely by retail prices. Shortages of almost all kinds of consumer goods, with resulting long queues-not seen for several years-began to be common in the market. In this situation several practical measures were adopted:

1. Planning. First steps were taken to restore the binding character of the central plan. For the current year the system of "agreements" between government and general directories was established. These agreements were used as a device which would force enterprises to conform with central directives, particularly to produce more and to slow down the growth of wages. For 1970 restoration of annual planning is being prepared.

2. Prices. From July 1,1969, most of the free prices were transferred into controlled prices, and maximum limits for these prices were established. Introduction of price ceilings was supposed to be only a temporary measure. The idea of central regulation of prices through a system of "price agreements" was not rejected.


3. The Autonomy of Firms. The adoption of the "enterprise bill" was postponed and the role of workers councils was curbed.

"It is necessary to strengthen the position and authority of directors in enterprises. . . . We suggest screening of all existing workers councils . . . we can approve only those workers councils which had been established before April 1, 1969... under no conditions can councils created after May 15 of this year be approved." (3) 

4. Taxes. The tax reform changing the taxation of "gross income" into separate taxation of profit and wages was in preparation already in 1968, so it cannot be conceived of as an anti-reformist act. 

In the second part of the year the critique of Sik's reform was amplified, and the necessity of reinforcing the role of central planning more frequently postulated. For example, the federal Minister of Planning, F. Vlasak, wrote together with L. Riha at the beginning of September:

"We must increase the authority of planning. ... We shall have to take into account the fact that Czechoslovakia is an integral part of the socialist commonwealth. . . . It is unrealistic to assume that some basic aspects of systems of economic control could substantially deviate from the principles applied in the other countries. . . . It will he necessary to return to some of the rational principles of the economic system that were developed in the years 195658." (4)


But even this kind of flexibility did not save him from being purged, together with some other economic ministers who were too closely associated with the economic reform. The new federal Minister of Planning, Vaclav Hula, took the new and more austere standpoint. He argues that the original proposal of reform accepted by the Communist Party Central Committee in 1965 was correct because it unambiguously accented the improvement of planning.

"Already at that time . . revisionist tendencies, opinions, and attitudes began to appear in the field of theoretical economics. They were hiding under the slogan of deepening and speeding of reform. Because they were not identified as revisionist and they were not overcome, they finally created a consistent rightist revisionist platform. . . After January, 1968, the open antisocialist interests of reaction entered into the play. . The only way out is "to restore the leading role of the party in the economy." (5)

At this moment a commission is still working on the new conception of economic reform. What will come from it is not really clear. Much of Sik's reform has already been scrapped, but not everything. The new leaders at least still insist that they do not want to restore the administrative system of planning.



OK Economics was designed and it is maintained by Oldrich Kyn.
To send me a message, please use one of the following addresses: ---

This website contains the following sections:

General  Economics:

Economic Systems:

Money and Banking:

Past students:

Czech Republic

Kyn’s Publications

 American education

free hit counters
Nutrisystem Diet Coupons