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Transformation in central europe. Tereza VorlovÁ Jan Hauser Monash European and EU Centre / Charles university, Prague. Central Europe. Europe b efore 1989. Europe t oday. CEE countries before 1989. Not all part of Soviet Union - communist regimes more or less aligned with USSR.

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transformation in central europe

Transformation in central europe


Jan Hauser

Monash European and EU Centre / Charles university, Prague

central europe
Central Europe

Europe before 1989

Europe today

cee countries before 1989
CEE countries before 1989

Not all part of Soviet Union - communist regimesmore or less aligned with USSR

communism in cee
“Communism” in cee
  • Politics:
  • - One party rule
  • - No division of power
  • - No independent courts
  • - No pluralism
  • - No basic freedoms
  • - No free media


- No civil society

- No real trade unions

- No prof. organisations

- Disinformation


- Centrally planned

- No private property

- Collective ownership




40 years of communism results
40 years of communism: results

Economic underperformance

Political repressions

Social unrest

Numerous uprisings:

  • 1956, 1968, 1970, 1981, 1989

Prague 1968

wind of change 1980s
Wind of change: 1980s

glasnost – openness

perestroika– restructuringdemokratizatsiia – democratisation

what change after 1989
What change after 1989?

The Promise of 1989:

- Political transition

- Economic transition

- Legal

- Societal

- Change of mindsets (“minds and hearts”)

what change after 19891
What change after 1989?


Democratically elected governments, institutions & decision-making, power-sharing, rule of law: human rights (freedom of speech, religion, media freedoms) government non-interference


Private ownership allowed, free trade (fewer restrictions) no more economic dependence on authorities: dependence on consumers (demand – supply rule), dualism: public & private sectors


Pluralistic society with rights & freedoms, values & rules – most difficult, taking a long time

“There is no transformation without rehabilitation, lustration and restitution.” VojtěchCepl, 1995

economic transformation mass privatization
Economic transformation: Mass privatization
  • Example: Coupon privatization in Czech Republic
  • “Shock Therapy”
    • Over 1800 state companies privatized over 4 years
    • Poor institutional and legal environment
  • Results: decreasing GDP, bankruptcy, corruption, tunneling
    • Asset-stripping instead of investment
  • Mass delusion vs. Economic growth and attracting large amounts of FDI
  • “It turns out that the rule of law is probably more basic than privatization. Privatization is meaningless if you don’t have the rule of law.” Milton Friedman, 2002
initial challenges
Initial challenges
  • Economic recession
  • Corporate governance system that had to develop simultaneously
  • Corruption
  • Immature banking system
  • Capital flight
  • Strong reliance on foreign aid and foreign direct investment (FDI) to provide missing capital, which means conditionality and fragility
initial challenges1
Initial Challenges
  • Rising unemployment

(especially significant considering the “absence” of unemployment

during communism)

  • Living standards plummet
  • Poverty and mortality rates increased, fertility rates dropped

(lack of funding and history of such welfare problems)

  • Inequality increased

(amongst the rich and the poor, but also based on age, education, and region)

  • Mass emigration due to poverty and internal conflicts
  • Populism in politics

(playing up to the fears of people without providing strong policy proposals)

what happened to the communists
What happened to the communists?
  • Renamed (Hungary, East Germany)
  • Dissolved/Disappeared (Poland)
  • Continued (Czech Rep.)

Czech Rep. regional elections 2012 – overall results

mid term goals
mid-term goals

Membership in the European Union:

  • Democratic
  • Free market-economy
  • Stable institutions
  • Not involved in conflicts
  • Capacity to implement EU body of law

Membership in International Organisations

(thus legal changes):

  • Council of Europe
  • WTO
  • OECD
  • NATO

Václav Havel in U.S. Congress

return to europe
“Return to europe”

Alignment with the EU:

Requirements consistent with CEE’s chosen path

External pressure consolidates changes

All CEE states complied with EU laws by 2004

Central Europe as a power block within EU

return to europe1
Return to Europe

Transition in Central and Eastern Europe has been difficult

CEE as testing ground for simultaneous introduction of democracy and a neo-liberal market economy

Exact circumstances and outcomes differ widely from country to country

Stabilityhas proven to be a very important factor for a successful economy

The role of democracy is uncertain, though there is a moral commitment to it because of the role of CEE countries in international organisations

It is uncertain how the countries of CEE will fare in the short-term, and what their role will be in an enlarged Europe