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Nigel Harris

The Notebook

[Czech Economy]

(Winter 1966/67)

From International Socialism (1st series), No.27, Winter 1966/67, pp.7-8.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Nigel Harris writes: All the most obvious relics of Stalinism have disappeared in Czechoslovakia today, and the outsider finds it difficult to remember that this is still a State that is supposed to be dedicated to ‘Marxism-Leninism.’ To escape the implications of the short-term crisis in the Czech economy, the Party leadership has made substantial concessions to the intelligentsia so that direct controls no longer operate comprehensively over the mass media and cultural activity, with the result that, given its head, the intelligentsia is busily copying whatever is the latest fashion or fad in the West. All this has relatively little impact outside the intelligentsia, but it will begin to do so if the Party permits continued freedom. Cultural freedom may be a short-term expedient by the Party leadership to escape criticism, but it does represent also a response by Czechoslovakia’s rulers to come to grips with the long-term problem: how to adjust the crude imperatives of a command economy, administrative economics through all pervading bureaucracy, to the needs of an advanced economy where technical quality of output is the key consideration. Czech ‘revisionist’ economists argue that there is no alternative but to create a ‘market economy’ in Czechoslovakia.

The Czech economy was consciously reshaped to become the main machine-building supplier in the Eastern Bloc after 1948. War reconstruction, followed by the Korean boom, over-extended capacity but did create some Bloc division of labour: by 1953, the Czechs supplied half Roumania’s imports of machinery and equipment, nearly a third of Hungary’s and a quarter of Poland’s. However, after the Korean War, other Eastern Bloc countries began increasingly to develop their own machine-building sectors or, latterly, import technologically superior capital equipment from the West or, in some cases, from a new competitor, East Germany. Problems came to a head in the middle fifties, but were partly postponed by Soviet willingness to take an increasing proportion of Czech exports in return for Russian raw materials and foodstuffs – 1958-60 saw relatively rapid Czech economic growth accompanied by a stagnant agriculture, intense labour shortages (exacerbated by a virtual ban on migration of labour), apparent maldistribution of very scarce skilled labour, and a tight balance of payments (or rather, rouble surpluses but hard currency scarcity). An economy top heavy with a technologically backward but over extended heavy industry reached crisis in the early sixties when a Russian recession cut back Soviet purchases of Czech equipment (and Russian orders were also diverted to superior Western goods – e.g. ICI chemical and Fiat motor plants) and supply of foodstuffs. Between 1961 and 1963, the economy went into dramatic recession, forcing the abandonment of the third five year plan. A Western computation [1] from the relevant Czech indices reads:







National income





Material personal consumption  










By permitting consumption to continue to rise at the expense of accumulation President Novotny purchased a breathing space in which, he hoped, external factors would improve the economy. The situation is said to have improved since 1964, and gross industrial output to be increasing by 4-5 per cent per annum.

Both Novotny’s faction and its opponents in the Party (led by the economist Otakar Šik) argue that the economy must be radically changed to raise labour productivity and technical advance, redistributing capital and labour to advancing sectors of the economy. Novotny argues these changes can be achieved only with tight Party control over the economy, but the ‘revisionist’ economists argue for the full creation of a capital and labour market with managerial independence, guided solely by realistic economic costs and the need to make a profit. A number of reforms along the Šik lines have been introduced. In 1958-9, decentralisation measures permitted enterprises to plan, initiate and finance more than half total investment with only marginal central supervision, and a price reform tried to relate industrial prices more closely to branch wide production costs. However, the ambitious Plan for 1961-5, the weakness of the entire Eastern Bloc, and the collapse of the China trade, precipitated a crisis in which the State had to intervene to cut investment and change enterprise programmes. By 1963, the pre-reform system was effectively reinstated, at a time of economic weakness, exacerbated by a harsh winter, producing a decline in national income, in gross industrial output and in labour productivity. Šik argued that the disaster was the direct result of trying to reintroduce bureaucratic control, and the Party leadership could offer no alternative perspective. A new series of reforms were announced in early 1965. These promise, by 1968, a price reform – fixed prices for one group of commodities (raw materials, semi-fabricated goods, essential foodstuffs), prices bargained within limits set by the State (most final goods) and free prices for minor goods (covering 7 per cent of consumption); prices are to include an element for interest on capital invested (6 per cent on fixed capital, 3 per cent on investment in services).

These are modest reforms, and do not create ‘economic prices,’ although they may make managers more independent. Other changes include attempts by the State to concentrate enterprises, attempts by the managers to obtain control of the right to promote, hire or fire managers, and Party attempts to raise unemployment as the first step to ‘redeploy’ (to use the fashionable word). 500 workers in the coal industry, traditionally the worst industry in terms of conditions, were sacked early this year. There is strong pressure also to increase differentials as an additional incentive to ‘redeploy.’ How far the Party will go in copying Mr Wilson without endangering its own control depends essentially on the perspective for the Eastern Bloc as a whole. How far the attempt to imitate a Western credit squeeze will create a Czech shop stewards’ movement or begin to activate a few local trade-union branches (as some Spanish syndicat branches were activated, despite State control, during the Asturian miners’ strike) remains to be seen.



1. Michal, The New Economic Model, Survey, April 1966, p.63.

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