Prague: imperialism's jewel in Eastern Europe

FRFI 157 October / November 2000

Prague was the first ex-socialist Eastern European capital city to host a major meeting of the IMF and World Bank. The Czech Republic is a key target for imperialist domination, being strategically at the heart of Europe. It is well placed, particularly for US imperialism, to limit the eastward extension of German capital and to act as a spring-board for further expansion into the eastern bloc and Russia. 

Czechoslovakia had the second most developed economy in the eastern bloc and the Czech Republic has since managed to ditch its poorer federal partner, Slovakia, so it has plenty of ripe economic cherries for the multinationals to pick. 

The Czech Republic has been a loyal servant of imperialism over the past few years. Last year it joined NATO and now it is queuing to join the EU. Its reactionary President, Vaclav Havel, was probably the second most honoured ideologue of anti-communism after the Pope. Havel is now a very rich man. Earlier this year the Czechs proposed the vote on human rights at the UN against Cuba, shamelessly doing the dirty work of the United States. 

Consequently, the Czech Republic has received more foreign direct investment (FDI) per head of population than any other country in the region. After a short decline in 1996/97 the amounts of FDI more than doubled over the past two years, helped by a new range of tax incentives. The total will stand at around $5 billion for this year. The list of multinationals with offices in Prague includes most of the world's major players, from Nestle to Nomura and from Deutsche Bank to Dupont. 

Then Prime Minister Vaclav Klaus began the sell-off of Czech state assets immediately after the counter-revolution of 1989. A staunch Thatcherite, Klaus was nicknamed `Santa Klaus' because of the cheap way he sold off Czech industry. However, Klaus's generosity was so riddled with corruption and jobs for the boys that FDI was hampered and declined. It has taken a so-called `Third Way', social-democratic minority government led by Milos Zeman to create the conditions for the recent further expansion of foreign capital in the Czech Republic. 

By the end of next year, all three Czech national banks will have been privatized. This summer, the government spent $3 billion to rescue a fourth bank, IPB, which collapsed when its dominant shareholder, Nomura Securities of Japan, refused to support it. IPB was then handed over to one of the other private banks. 

The government plans to sell off the telecommunications monopoly Cesky Telecom next year. Dutch, German and Italian companies are among those lining up bids. The sale of gas and electric companies is planned over the next two or three years, with UK company National Power, which already owns the second largest Czech electricity company, among those interested. Meanwhile, foreign multinationals are buying up Czech plants, closing them down and building on green-field sites. Philips, the Dutch group, has announced plans for a TV tube factory costing $200 million, which could rise to $600 million, and Volkswagen are building a new Skoda engine plant at a cost of $562 million. 

After several years of decline the country's GDP has begun to grow again, improving conditions for the multinationals and Czech capitalists at the expense of the Czech working class. Unemployment has risen from 3% in 1993 to 9% now. It is set to rise again as the newly privatised companies sack workers. By the end of the year, the privatised bank Ceska Sporiteina will have cut 1,300 jobs, about 8% of its total workforce. The old Czech industry will have to be restructured to be attractive to foreign investors. This will mean more massive job losses and attacks on working conditions. Huge job cuts have already taken place at the Vilkovice and Tatra steel plants. Skoda Plzen, the engineering combine, is cutting its work force from 30,000 to 10,000. With the rising fiscal deficit, not even revenues from privatisation will enable the government to cushion Czech workers from the consequences of restructuring. State benefits, health and education budgets have already been cut. Most Czech workers at present retire early on an index-linked state pension, but there are plans to privatise pensions. Overall, workers' real incomes have fallen by an average of 13% since 1990. 

The streets of Prague display the signs of rampant capitalism in an underdeveloped economy. Inequalities between rich and poor are stark and growing. Fascism and racism are on the rise. 

For the most part, the Czech people did not join the protests against capitalism. Perhaps they were cowed into not taking part, perhaps at present they are too tired to care, perhaps they still hope capitalism will deliver a better life. For a few it undoubtedly will, but large sections of Czech working class face increasing poverty and misery. Next time the IMF comes to Prague things may be very different.


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