The Inverse Economic Miracle: Sources of Growth and Retrogression in Postwar Czechoslovakia

Abstract

Czechoslovakia, together with East Germany, was the most industrialized country among those who adopted a Soviet-type mode of economic development and planning after World War II. In the interwar period, constrained by a narrow domestic raw materials and fuels base and by a limited domestic market, Czechoslovak industry depended heavily on intensive and aggressive worldwide trade. The bulk of trade was conducted with other European countries, and Germany was the principal trading partner. Czechoslovak industry was relatively less devastated by World War I than that of Germany and much of Western Europe. For a number of years Czechoslovak industry thrived on the high demand for manufactured goods in these countries. Later a vigorous effort was made to redirect the pattern and direction of trade, chiefly in response to the industrialization drive in southeast Europe, the powerful and effective German economic offensive, and the rising tide of protectionism. The high technical standards, sophistication, and superior quality of Czechoslovak products earned them respect on the world market. Among Czechoslovakia's chief exports were china, glassware, furniture, sugar, machinery, and textiles.1 Czechoslovakia relied heavily on imported raw materials (cotton, wool, iron ore, nonferrous metals, and chemicals), fuels (coal and crude oil), semifabricates (chiefly for the textile and leather industries), foodstuffs, and agricultural products.2 * I am particularly indebted to Prof. Abram Bergson for his constant encouragement and good advice. He kindly invited me to present the preliminary results of this research to his Seminar on Comparative Economics at Harvard University where I benefited from comments of the participants, particularly Profs. Abram Bergson, Joseph S. Berliner, and Leon Smolinski. Also to my benefit, I have discussed some of the aspects with Profs. Alexander Erlich, John Michael Montias, and Alec Nove. All those mentioned are hereby absolved of all errors and heresies committed, for which I alone shoulder the blame.