The government of the Czech Republic faced a political and financial crises in
1997 shattered their image as one of the most stable and prosperous post-Communist
states. This somewhat new republic, despite the financial tribulation, has been able to
reduce their inflation to 10 percent, formed a balanced budget, and hold unemployment
down to only 3 percent, since their break away from the former Czechoslovak federation
on January 1, 1993. The country's gross domestic product (GDP) expanded in 1994 after
losses of nearly 20% during the first few years of the 1990's. The Czech Republic's GDP
is currently about $120.8 billion according to a 1999 estimate, and the GDP per capita is
The lands of the Czech Republic have always been a part of the most economically
modern areas within the European continent. The Communists, when they obtained
Czechoslovakia in 1948, created an economic system that was greatly centralized on the
government. Nearly all aspects of the Czech economy was controlled by the national
government. This government regulated economy also removed almost all external
influence by non-Communistic countries. Though the Czech economy held strong by
Eastern European standards, the policies produced from the Communist government led
to an eventual economic decline in Czechoslovakia. Once the final remains of Communism
was scraped out in 1989, a collapse of Czechoslovakia was inevitable because the legacy
left behind would be incredibly hard to deal with for the new leaders of this new state.
In the early 1990s the post-Communist government quickly converted the
economy to a system based on free enterprise. The new governments also adopted several
reform policies, including a voucher privatization plan. Under this plan, citizens were
given, for a small government fee, coupons which could later be converted into stock in
companies. The voucher plan successfully privatize...