Hassan Charfo (Czech Republic) – Rightists and social democrats frittered away what Communists had built

At the beginning of the CP of Czechoslovakia regime the total assets of Czechoslovakia amounted to about 400 billion CZK (crowns). Obviously, without the value of the land, of our cultural and historical inheritance (monuments and their equipment) and military arsenal. By the end of 1989 this property or the national assets had increased to roughly 3 trillion CZK, that is, more than 7.5 times (the Czech Republic’s share was 5.8 times, and Slovakia’s 11.4 times), with at the same time a fivefold increase in the level of personal consumption of the population. To this should also be added modern military hardware valued at about 200 billion CZK. (We had, for example, more than 400 combat aircraft) This is all calculated in comparable 1989 prices and after deducting the depreciation of production funds. These values then mirror the actual physical growth and the state of the total national assets. All are real existing in-use structures – buildings, machinery and equipment, not fictitious stock-market bubbles. Of this, public (state and local government) property in 1947 accounted for approximately 55 to 58%, and in 1989 approximately 65 to 70%. The remainder was mostly cooperative and personal property (mostly comprising private homes).
These national assets were entirely in domestic ownership; consequently all of its growth was exclusively and entirely the result of the internal work of the country’s citizens. If, in that period, foreign owners sponsored by their governments made claims with respect to property nationalized post-war, all of these claims were fully settled on the basis of international treaties (including those by Germany, Austria and the USA).
At the end of 1989 not only was there no state debt, on the contrary the post-November regime took over net financial assets valued at around 85 billion CZK. And in addition about 107 tons of monetary gold. Concerning the gross foreign debt, it did not exceed US$500 per capita; on the contrary the total foreign exchange position of the state was a credit balance of about 23 billion CZK.
At the end of 1989 the Czechoslovak economy had only about 700 million CZK of loan payments in arrears (classified loans), which represented only about 0.13% of their total volume. That was quite insignificant. There was no indebtedness between enterprises (deadlines of payments for mutual claims not being met).
The Czechoslovak national economy in 1989 showed a profit of about 150 billion CZK, in other words an unprecedented average cost-effectiveness of 9.6% of the value of authorized capital (10.7% in the Czech Republic and 7.1% in Slovakia). The profit share of the banks and insurance companies was 24.3 billion CZK. Without these yields during this period the above-mentioned growth in the value of national assets would obviously not have been at all possible.
It follows that the damned and rejected social (state and municipal) ownership of the productive assets and central planning, despite all its errors and nonsensical aspects was highly successful economically in the former Czechoslovakia. And especially if we compare its results with those of lionized re-established capitalism in the Czech Republic since 1989.
After 20 years of capitalist economic management such growth in comparison with the CP of Czechoslovakia regime is certainly very small and insignificant, moving even in the range of possible statistical error. From the accessible data it is not possible to determine what proportion of this property now belongs to Czech citizens and institutions.
It is in any case an undeniable fact that the real national wealth of the Czech Republic has during this period not only not increased, but that in all likelihood it has fallen significantly, that it was during this period to a significant extent squandered.
And what has collapsed completely is public economic activity – of state and local authorities (regions, municipalities), or government institutions. The then value of such assets amounted in the Czech Republic to at least 1.4 trillion CZK (65% of the total), or about 7 trillion CZK at current values. Instead, they reputedly hold total assets (after deduction of debt) of only 4.8 trillion CZK. And included in this are previously not recorded and not included values of property, valuables, intangible assets and the like. The conclusion is that just by the end of 2006 the State and its authorities frittered away at least 2.2 trillion CZK worth of the original public property. This sum disregards further losses arising from the loss of a significant amount of equipment belonging to our national monuments and their continued devaluation, the sale or transfer of state and municipal land and the liquidation of our massive military arsenal. Because the foreign and domestic debts of “government institutions” still continue to grow rapidly, the situation has since unquestionably deteriorated further, and these losses have to date increased significantly.
From time immemorial the classic principle has held true, that a good economic manager is one who hands on more to the next generation than he took over at the beginning. It is obvious that, during a period equal to almost half the time of the CP of Czechoslovakia regime, the new capitalist regime, basing itself on private ownership and the free market, squandered what it could. Compared to the previous regime the private and foreign capitalists then, to everybody’s surprise, have been a universal disappointment. Not only have the acquired national assets been frittered away and misappropriated mostly in the process of restitution and especially privatization, but after the coup the Czech economy underwent and is still experiencing systematic disintegration. In particular, it demonstrates the fact that, the national economy has for a long time been controlled mainly by foreign owners. They own almost the entire banking and insurance sector, roughly two thirds of commercial activities and not less than 45 to 60 per cent of the whole manufacturing sector. They make the decisions for at least half of the work force, 75% of exports and up to 90% of imports as well as our domestic savings. In 2007 over 360 billion CZK went abroad as profits, dividends and remuneration for work carried out by non-residents. (Admittedly, part of this was reinvested in the Czech Republic, thus generating even more dividends).
It has led to an extraordinary increase in foreign debt. Just to the end of 2007 it rose to 1.3 trillion CZK, that is about US$6,600 per capita (compared to 1989 more than 13 times greater). To this must be added the amount of direct and portfolio foreign investment, which are nothing other than a specific external debt in the form of material assets (businesses, banks) on our territory belonging to foreign owners. This specific debt grew during the same period from nothing to nearly 2.4 trillion CZK. All together the total debt amounts to 3.7 trillion CZK, that is US$18,200 for each Czech citizen. Compared to the end of “communist economic recession” this represents an increase of approximately 35 times in US dollars (in crowns 47 times) and puts us in a fine economic mess, perhaps even in the very near future. The future commitment for each Czech citizen including infants therefore, is equal to at least 350 thousand CZK (that is a family of four owes 1.4 million CZK “abroad”.
One can realistically expect that by the end of 2009, the state debt will increase by some 1.2 trillion CZK, if not more. If we add the municipal debt, and the yet-to-be-settled losses of the Czech National Bank, which alone already exceed 200 billion crowns, the total debt is 1.6 trillion crowns. This means that in two decades almost 1.9 trillion CZK just in cash were frittered away, which is equivalent to almost 200 thousand crowns per capita (including infants). For this nominal price in the eighties it was possible to build a family house. In addition, we have also lost almost all our monetary gold. There is nothing to add to this dismal picture.
In particular, industrial and construction as well as agricultural production has declined, and entire previously advanced industries (such as leather, footwear, textiles, clothing, glass, sugar, heavy engineering and sections of agriculture etc.) have been liquidated. They are in debt to the banks. The banks are therefore showing a rapid growth of dubious (classified) loans to a now at-risk amount of 300 to 400 billion CZK, the bulk of which also belongs to production enterprises. Everywhere insolvency, inspection and bankruptcy prevail.
The citizens, taxpayers, voters, the “working people”. They find themselves in situations they have not known for more than 40 years. Unemployment is again fast approaching half a million. Thousands (only?) work without receiving pay. We have tens of thousands of homeless and millions of recipients of relief payments. Several hundred thousand children (officially) live in poverty. Previously quite unknown household debt will soon pass more than one trillion CZK. Already last year there were more than 400 thousand seizures of assets; this year it is estimated to reach about 500 thousand. Continuing inflation and skewed interest rates on deposits lead to a systematic devaluation of their savings. It is essentially a permanent, even if “hidden” capitalist monetary reform, which has actually robbed the population of the Czech Republic and Slovakia and only to the end of 1992 of roughly 200 billion dollars.
Our conservative and social democratic governments, with respect to the economy, have shown initiative only in their endavour to privatize the maximum number of enterprises, to get rid of profitable public assets and to get into debt. They tried to impose on the people the idea contained in the adage “blessed are they who do not have anything, as they need not worry where to hide it”. On the other hand we should note how the domestic “nouveaux riches”, foreign parasites, various often dubious restituents, the Catholic Church and the descendants of former aristocrats fought and are continually fighting over these assets. And so things have turned out as they have. This shows that this road was and is questionable and adverse, if not treasonable.

Sham on counter-revolution

Long live socialism

Prague, November 7, 2009

Assoc. Prof. H. Charfo, DrSc.
Head of the CC´s Department of International Relations
Communist Party of Bohemia and Moravia

Note: The factual analysis presented is based on published data and statistics