The Czech Republic grapples with a market economy
A small group of us stood huddled against the cold and rain on a street corner on Pariska, the elegant boulevard that slices through Prague's old town. Olga, our guide, directed our attention away from the airline offices and glitzy boutiques at street level to the buildings above, a riot of turn-of-the-century sculpture, spikes and turrets. Even on that gray morning they sparkled. Some were swathed in scaffolding. Olga told us about the program of painstaking restoration that was under way. 'These are now some of the most expensive apartments in the city,' she told us.
'How much?' asked an American accent from the back of the group. 'From $1,000 a month,' was the reply. 'That's not expensive,' said the voice. Olga explained the difference between average earnings in the Czech Republic and the US, calmly adding that 'expensive' was a relative term. I found out later that Olga was studying international law and economics at Charles University.
Our tour ended outside Lufthansa's office, opposite the Intercontinental. It was past noon and, after a two-hour walk through the old town, I felt a distinct need of sustenance. I asked Olga if she knew of a good place for lunch and she pointed out a restaurant down the street. I inquired if she would care to join me. 'Do you mind if I come too?' said the owner of the New York twang. She introduced herself as Marcia and joined Olga and me on our quest for food.
A cheerful, multilingual waitress helped us off with our coats, showed us to a table and produced menus. After asking what we wanted to drink she scuttled off to fetch two beers and a mineral water. I remarked how the service industries had changed since I was last in Prague, before the Velvet Revolution. Back then shop assistants and restaurant staff had made it clear that they were doing you a favor by even talking to you, let alone supplying you with anything.
'A market economy has some advantages,' said Olga enigmatically. The drinks duly arrived. We left the choice of food to Olga and, after a brief consultation with the smiling waitress, she ordered something called cevapcici.
Marcia had picked up on the implied criticism of markets, to which she was firmly committed. She was, after all, an investor relations consultant from New York who had come to Prague to see what pickings were available. Like me, she had half a day free between meetings and so had taken the tour. 'But surely a free market has brought huge benefits. Look at the investment that's going on. Look at the range of goods in the stores.' 'For those who can afford them,' said Olga quietly.
The waitress plonked plates in front of us, piled with spicy meat balls and three kinds of dumplings. Despite the presence of McDonalds, Prague remains dumpling city. Marcia thought briefly of her low fat, low salt diet but then tucked in.
'Of course there are problems with the market,' said Marcia, who had clearly done her homework, 'but they're mainly due to a lack of regulation. Look at the scandals in the banking sector.'
'We have created a system in which, if you are a speculator and only concerned with the short term, you can get very rich very quickly,' Olga replied. 'But getting rich depends on perpetuating and cementing the flaws in the system.'
I was about to say that banking scandals were not unknown in the most regulated of markets and that short termism was not peculiar to eastern Europe, but Olga got in first.
'When we started privatizing the state-owned industries, we needed a loose system,' she said. 'It meant that assets could float around until they found someone who wanted to own or control them. So most of the assets ended up with the banks. Companies which are owned by banks cannot borrow competitively, nor can they go to the equity markets to raise the capital they so desperately need.'
'The trouble with eastern Europe is....,' Marcia began. But she was quickly interrupted by Olga, keen to point out that the country may have been part of the Soviet bloc but it was very much part of western, not eastern, Europe. It had a long and proud industrial history and high educational standards. Given the size of its population, its contribution to the world in science, engineering, literature, music and sport was outstanding. I reflected on the truth of this. It is much easier to name ten famous Czechs than ten famous Belgians, although the two countries have roughly the same population.
We had eaten all we could. Olga sat back while Marcia and I fought over who should pay the check. Marcia won. She took her calculator out to see what it cost in real money before proffering her gold card. 'That's incredibly cheap,' she said in amazement. Olga treated her to a final despairing look.