Page:NATIONAL INTELLIGENCE SURVEY 18; CZECHOSLOVAKIA; THE ECONOMY CIA-RDP01-00707R000200110014-8.pdf/7

APPROVED FOR RELEASE: 2009/06/16: _CIA-RDP01-00707R000200110014-8

A. Economic appraisal (C)

Czechoslovakia includes, in Bohemia and Moravia, one of the oldest and most highly developed industrial areas of Europe and, in Slovakia, one of the more backward areas. This contrast is reflected in the disproportionate share of Bohemia and Moravia—the Czech Lands in the country’s economic activity, an advantage that has persisted despite attempts since 1968 to upgrade Slovakia’s level of development. With about 62% of the area and 68% of the population, the Czech Lands account for three-fourths of industrial output and two-thirds of agricultural output.

Under the postwar Communist regime, the country embarked on an ambitious policy of extensive economic development, which concentrated on heavy industry at the expense of the traditional consumer-oriented industries and agriculture. The unbalanced economic development which followed led to a period of rapid growth in the late 1950’s but then contributed to a period of economic stagnation in the early 1960’s. This stagnation reflected serious economic difficulties. In 1965 the regime of Party General Secretary Antonin Novotny reluctantly adopted an economic reform program designed to deemphasize heavy industry and decentralize economie decision making. Progress in implementing reform, however, was only half hearted until January 1968, when the more liberal group of leaders headed by Alexander Dubcek took power. Dubcek, primarily concerned with political reform, enacted some of the economic measures promised by Novotny but in effect set the economy adrift. Gustav Husak, Dubcek’s successor, has scrapped the reform program, relying on tight domestic controls, moderate economic goals, and close relations with the U.S.S.R He has made some concessions to the consumer but the Fifth Five Year Plan (1971–75) focuses on heavy industrial development.

1. Size and level of economic activity

In both size and population Czechoslovakia is somewhat smaller than the average for the countries of Communist Eastern Europe. Its total output of goods and services (the gross national product or GNP), estimated at US$36.7 billion for 1972, yields a per capita figure of about $2,540, noticeably larger than that of the U.S.S.R. or the other Eastern European Communist countries except East Germany. The relatively large output per capita is directly related to the high level of industrialization. Industry employs 38% of the labor force and accounts for about one-half of GNP. These shares are close to the proportions for East Germany and well above those for other Communist countries.

Manufacturing is the largest branch of industry. For its size, Czechoslovakia has the most comprehensive machine building industry in the world, developed largely since World War II. Several branches of light industry are traditional, including those engaged in the production of textiles, shoes, glass, and ceramics, but these branches have been much neglected since World War II. Agricultural output covers a large share of domestic food consumption and provides for export of some specialty food products, such as malt, hops, and beet sugar.

Per capita output of heavy industrial products, such as steel, is one of the highest in the world, but the economy is grossly inefficient by Western standards. It was not always so. Czechoslovakia emerged virtually undamaged from World War II with an industrial capacity matching that of West Germany, on a per capita basis. In 1948, the year of the Communist takeover, Czechoslovakia undoubtedly was better off than West Germany. Per capita industrial production 25 years later, however, is less than three-fourths of the West German level.

Investment has received a larger share of GNP in Czechoslovakia than in West European countries, and personal consumption a smaller share. Investment has accounted for more than 40% of GNP in recent years, almost as large a share as personal consumption. Defense expenditures have been estimated at about 5% to 6% of GNP, and government administration and weltare, about 9% to 10%. Because the share of personal consumption is smaller than in Western Europe, Czechoslovakia compares even less favorably with Western Europe in consumption than in output. APPROVED FOR RELEASE: 2009/06/16: _CIA-RDP01-00707R000200110014-8