Czech and Slovak economic relations

Abstract

UNDER THE PREVIOUS COMMUNIST GOVERNMENTS of Eastern and Central Europe the myth was perpetrated that working class solidarity had overcome ethnic and regional conflicts. At the same time these governments had a strong commitment to economic equality among all social groups and all regions, and this led to substantial development programmes for their economically less well developed regions.' Deep-seated regional and ethnic differences have come into the open in the wake of Central and Eastern Europe's democratisation process. They are now influencing the process of economic reform. This article is a case study of the importance of ethnic-regional differences for economic reforms in the previously communist countries. Specifically, we examine the economics of the political separation between the Czech and Slovak Federated Republics in January 1993. Differences in the economic history of the Czech and Slovak republics have encouraged different attitudes towards the role of the state in the economic reform process. Also, differences in the present structure of their economies will result in different costs of a more free market orientated reform process. Finally, owing to various 'economic facts' taken as conventional wisdom by the Czechs, they seem to be casual about the cost of separation to them. On the other hand, for the Slovaks it seems that the cultural, social and psychological pulls are so strong that they are not carefully looking at the economic consequences of a split. The focus of much of the previous literature, in both East and West, which analysed the regional development programmes of Eastern and Central Europe was on the theory and policy of central government action.2 In the context of its time this literature tended to ignore the importance of the many political and cultural differences among the regions. Our methodological approach is a political economic one which incorporates these differences into our analysis. It is similar to that of Pleskovic & Dolens, Ramet and Wagner.3 Examples of a mathematical modeling approach include Anastasopoulos & Sims' model for Quebec and Granberg's discussion of regional models for the Soviet Union.4 Meadwell uses public choice theory.5 Lack of data precluded use of the latter approaches in our case.