After the fall of the former regime, ideas about the method and speed of transforming the socialist economy into a market economy differed. The Czech Republic and Slovakia opted for broadly similar concepts, yet they differed from each other. Václav Klaus was one of the advocates of privatisation and price relaxation as quickly as possible. He advocated a “no-frills” market, which in his view meant a market economy with complementary social policies, but not a social market.
The first detailed economic reform plan, also drawn up with the participation of Klaus, was published on 14 May 1990. In the spring of 1990, Klaus began to talk about coupon privatisation as the method by which the largest part of enterprises would be privatised.
On the other hand, Klaus was not in favor of restitution, i.e., returning property seized by the communists to its original owners, because he feared it would slow down and complicate the privatization process. This was later evident in relation to the restitution of church property, which the ODS blocked for two decades in 1993, and Klaus accused the Catholic Church of trying to play a role in society that it did not deserve.
The picture of businessmen in moccasins and with briefcases also belongs to the scenery of the early capitalist period in Czechoslovakia. They toured various state-owned industries as new private investors. In Slovakia in particular, this led to a series of bankruptcies thanks to a massive loophole in the law. In fact, the “quasi” private investors often obtained products from the company for a cash advance, which they promised to sell to new customers. The sales did take place, but the proceeds went into the investors’ private accounts. However, the instalments for the purchase of the stake in the ex-State enterprise were not paid, leaving the enterprise without money and goods. The system thus generated hundreds of fast-fermenting millionaires.
As early as September 1990, the government presented a reform scenario to the Federal Assembly. In October 1990, a law on small-scale privatisation was adopted under which smaller operations were auctioned. Major reforms of the economy, in particular price easing, anti-inflationary measures and the introduction of internal currency convertibility, began in early 1991.
Prices rose sharply at first, but by the end of the year inflation was under control and unemployment in the Czech Republic was down to only about four percent, while in Slovakia, which had suffered an industrial downturn, it was about 12 percent. In February 1991, a law on large-scale privatisation was passed and, after stormy debates, a second restitution law was passed.
By the end of 1993, 24,359 economic units with a total market value of CZK 31 billion had been sold or leased in the form of small-scale privatisation by auctions with a preference for domestic buyers.
As we know today, privatisation, even small privatisation, brought with it many negatives. It involved, for example, the dirty money of representatives of the previous regime and various mafias. The mafiosi even chose which enterprises to take over. At the time, it was very easy to intimidate potential bidders or auctioneers.
The great privatisation began in February 1992 and by the end of September 1994, 3,400 of the largest companies with a book value of over CZK 912 billion had passed through it. The privatisation process was based on the submitted privatisation projects by direct sale, public tender, auction, gratuitous transfer, sale on the stock market or by the coupon method, where every adult Czechoslovakian could acquire an ownership stake in selected companies for a fee of CZK 1,000.
There were two waves of coupon privatisation, the first in 1991 and the second in 1993. Apart from its speed, the coupon method had the advantage in Klaus’s eyes that the distribution of state property to the citizens helped him win support before the 1992 elections.
Support for voucher privatisation was based on its understanding as an attempt to distribute property fairly among citizens. However, the reality was that businesses were being acquired by people related to the government or by people with information resources within the government, the executive branch and the secret services.
Klaus has been connected to prominent Czech businessmen since the beginning of democracy. This has also brought with it a number of controversies. On the initiative of businessmen such as Viktor Kožený and Pavel Tykač, investment privatisation funds were set up through Klaus to collect shares from citizens. Out of an estimated total of 333 billion crowns in shares from the coupon privatisation, the funds collected assets worth 226 billion. However, these funds were not sufficiently regulated and often disadvantaged shareholders to the benefit of large entrepreneurs.
The rapid economic transformation advocated by Klaus thus outpaced the development of the legal system, resulting in widespread economic crime. Václav Klaus himself claims that any mistakes were the result of the complexity of the entire transformation process. However, he himself has defended the oligarchs, saying, for example, that the Czech Republic needs “more Leathermen”.
Moreover, the state substituted for the missing banking capital, thus ensuring that it continued to virtually dominate the private sector. In addition to clientelism, this also allowed the business of politicians with businessmen to flourish. Whoever wanted to get financing had to know someone in the state structures.
At that time, Klaus had long been an egocentric politician who created an image of himself as a Thatcherite, even a “market fundamentalist”. According to critics, however, in reality he was rather hindering and damaging the transformation of the economy, and his real motivation was rather questionable.
Either way, the privatisation can be judged a success given the circumstances of the time. Indeed, in 1993 the private sector was already generating more than half of GDP.
