Forum; Rita Klimova: Czech Ambassador to the U.S.

Jesus is one of the best relationships I've ever mentioned. From the Longhorn Radio Network, the University of Texas at Austin, this is Forum. And policy, which was implemented by the government, was the threat that their children would not receive a good education. Any student accepted to a university had to have a recommendation from his parents, employers, stating the political attitudes of parents. Rita Klamova, Czechoslovakian ambassador to the United States.

These demonstrations really lasted only 10 days, every day. And at the end of those 10 days, the communist government stepped down very rapidly. We legislated changes in our constitution about the leading role of the Communist Party. All this was taken out of our legislative system. And with it a period of 10 days, really the old government stepped down. This is Olive Graham. Today, Forum features the remarks of Czechoslovakian ambassador to the United States, Rita Klamova, and a presentation inaugurating the establishment of the Texas Chair in Czech Studies at the University of Texas at Austin. Ambassador Klamova's lecture at the LPJ School of Public Affairs was sponsored by the University's

Center for Soviet and East European Studies. The title is, The Transition to Democracy and the Market in Czechoslovakia, and the lecture draws on Ambassador Klamova's training as an economist. Her doctoral thesis was on the United States economy, and she is taught at the Charles University in Prague. Ambassador Klamova describes the reform of Czechoslovakian economics and politics and gives a prognosis for the inclusion of the Czechoslovakian economy into the world economy. Ambassador Klamova. The euphoria has passed. We are now aware of the fact that there are very many problems, and that the problems are much more serious than seemed at the end of 1989 and the beginning of 1990, where everything seemed possible. The problems are many-fold, and I will try to address these problems now. President Havel and his new year's speech on January 1991 said that when he became president

a year ago when he was speaking, he thought that he was inheriting a very dilapidated house which had many problems and needed a great deal of repair and attention to reconstruction. He did not realize, but realize now he said in January 1991 that what he, in fact, inherited was a house in ruins, that almost any problem which was addressed proved to be much more serious than we had presumed. Things like public health. We have, as you know, a free public health system and everybody thought, well, there are many things wrong with our system, but public health is not a major problem. It is, at present, the material resources available to public health are so meager that it is proving to be a major problem.

Things like the environment. We had all known that the environment was in a very bad state because everybody, and he visited to Prague unless it was a beautiful sunny day like today. Only visited to Prague was aware of the environmental problem and not alone when you went out into the into Norse Bohemia or other places. But how critical it was, we were not certainly aware of because data had not been published. It was something which a great deal of secrecy was always attached to. But the environmental situation and the health problems which are clearly environmentally related are really enormous. We had been aware of the fact that the quality of life was deteriorating but also not the extent to which it had deteriorated. There was such an indicator as many of you will know as life expectancy was deteriorating very markedly and the life expectancy of our men had decreased by several years in

recent years. But the consensus which came out of the changes was a very clear one. The consensus was that we wanted to return to a market economy that we wanted to introduce a parliamentary democracy and that we wanted a return to Europe. A return to Europe includes many things which I can mention and which many of you will know a great deal about. This consensus was I think very clear at the time and still this consensus exists. I think that in contrast to some of the other East European countries this is a very clear consensus and except with the exception of some fringe groups, there has nobody has contested these aims.

So we came to the close of what was really a grand experiment in human engineering when Czechoslovakia in 1948 started its socialist development. I think a experiment in human engineering which in the Soviet Union has been going on even longer and where it is not overhead and probably may not be for some time. But I think in Czechoslovakia the consensus is that anybody who knows our situation will agree with us or agree with what I am saying that the experiment which included millions of human guinea pigs and experiment in trying to tamper or completely alter such institutions of human civilization as the market, the certain democratic institutions, freedom of speech,

freedom of expression, freedom of association and so on. This experiment has completely failed and it surprises me very much to meet economists and others who know very much about the area and who are not willing to comprehend this basic fact that the experiment in human engineering has completely failed and that whatever happens in the future there can be no return of public opinion and no return of a national consensus of Czechoslovakia to a socialist system which does not have, which is not based on a parliamentary system and which is based on a command economy. In the summer of 1991 we had a democratic election, an election which went very well and

which elected a new parliament. The problem with that election was that it was not so much an election for a new political platform as it was an election against what we had before. It was an election where all the parties participating with the exception of the Communist Party voted against the Communist system, only the Communist Party gained 14% of the vote in the Czech part of the country and approximately that also in Slovakia. If anybody had told me and we had endless discussions about this a year before that in a free election we would always assume that the Communists would get at least 25% because there were so many walks of life where people had their jobs directly derived from Communist Party favor. The whole military or the bureaucrats, the police, the managers, the nomenclatura, our estimates

were always at least 25% in a free election and the fact that they got only 14% I think is remarkable and indicates that these people were not afraid to vote for the Communists, that it was a truly democratic election and that this 14% were people who were convinced that they were going in for, they were harsh times would follow for them and that is true. Their easy life was coming gradually to an end and for the easy life of many of them, not all of them, some of them were qualified and skilled workers. Let me now mention some of the young problems we are encountering especially in the economy and then I will come back to politics for a few minutes. Maybe a program of economic reform has been created.

All of 1990 was taken up essentially with preparing that program, preparing some of the important legislation for economic reform and reaching a consensus about the economic reform. Political consensus was not easy to do for the simple reason that the project of reform communism which we had in the 1960s, which was a project of introducing a market mechanism if I simplify it somewhat, introducing a market mechanism without changing property rights and while maintaining government ownership of the means of production. This project had never been allowed to run its course. The Soviet invasion of August 21, 1968 aborted that project and a lot of illusions remained about it.

Many people in Czechoslovakia are still convinced that if they had that project had been allowed to continue and if reform communism had run its course, it might have proven to be successful. We will never know but my conviction is that that project would have run into grave difficulties of its own regardless of the Soviet invasion. But that is difficult, very difficult to prove and there are many people as I say who considered the change of government and the things that had happened to be the start of going back to where we left off in 1968. But of course the great majority of people clearly made their ideas known in that this was not our objective, that we had come a long way since 1968 and that what we wanted now was a socialist market but what we wanted was a return to a normally functioning market system including of course private ownership of the means of production and a parliamentary

democracy. So this project was prepared during 1990, it was legislated and I think one of the reasons it was legislated more or less unanimously finally was because there was no alternative project because there was a lot of criticism of the project we are now implementing but nobody was able to come up with a coherent and mutually logically intertwined project of economic reform than the one we have and which I think is very good and which has received the approval of such institutions as the World Bank and the International Monetary Fund which employ a lot of very good economists. The main we took a long time legislating all this and the crucial date was January 1, 1991 when the three parts of the economic reform started, we talked about it as the big bang

and on January 1, 1991 the big bang went into effect. There are three basic parts to the project of the economic reform which are now being implemented. I was thought with the easiest one and that is introducing a convertibility of the monetary unit. The Corona is now convertible for everybody except Czechoslovak citizens wanting to go on holiday. Those are the only ones who cannot exchange their crowns for dollars but all Czechoslovak businesses and all foreign businesses can. If a foreign business acquires profits in crowns, these crowns are readily and easily exchangeable for heart currency. The exchange rate has now been stabilized at 30 crowns to the dollar which used to be the black market rate and we are intervening on markets with money which we borrowed from

the International Monetary Fund to maintain that exchange rate. The International Monetary Fund has given us a very good loan and we were able to receive that loan because we did not have a large debt. As a matter of fact we are net creditors, we have a lot of outstanding credits in countries like Syria which owes us 1 billion dollars and countries like Iraq which owes us 800 million dollars and other Middle Eastern countries which we are not getting. So what debt we have was covered by these loans and we are not large debtors to the international community as Poland and Hungary have been or still are. So we were able to borrow money to maintain this convertibility. The second part of the reform, the second important leg upon which the reform stands is deregulation. And this deregulation has taken on two forms.

One is the deregulation of prices and all prices have essentially been deregulated for the first time since 1953. Many consumer prices were frozen since 1953. A package of butter cost 10 crowns in 1989 as it did in 1953 throughout. It had the same price. And beginning with January 1st 1991 all prices were freed. During the turn of the year there was a bit of panic and so certain price ceilings were introduced for 15% of items, essentially potatoes, meat and essential food stuffs. This is also part of the economic reform which is going well. The other part of the second leg of deregulation is deregulation of all our business firms from their central agencies, before the central agency would issue commands to the firm regarding

everything. What it should produce, whom it should deliver to, where the firm should buy, at what prices, what wages to pay, what to invest, all this was part of the command economy. And these commands were issued by central agencies, by ministries. These ministries have been abolished and the firms have been cut off. Nobody tells them anything anymore. Which is producing a very, very serious situation for many of them, because they are having a great deal of many problems in coping with the new situation, where they are not told what to do and where they have to find a place for themselves on the market, where they have to find the correct way before and so on. So this is a continuing process and the factories continue to be the property of the government, because they are changing into joint stock companies, where, for the time being, all the stock belongs to the government, because nobody has been willing to buy it yet, it hasn't

even been put on sale yet, but they are no longer receiving all these detailed commands. So this is deregulation. And the third part of the economic reform, which is the most difficult, that is the introduction of private property, of privatization, of the reintroduction of property rights. Now there, theoretically, the project was to divide privatization into small scale and large scale privatization. The original idea was that small scale enterprises, that means shops, restaurants, places where you have things repaired, and small firms in general, will be privatized by putting them on auction. And that has indeed started in January auctions, was started very successfully at the beginning. Calling out price was much lower than the price to which these places were bit up to.

And it went fairly successfully. And the large scale privatization, as a part of the original scheme, was to create a stock exchange, which we will have in place by the end of 1991. And to start offering stock to any buyers, be they Czechoslovak or foreign. And because Czechoslovak's don't have the kind of money needed to buy these stocks, the idea is that they will, at some point, be an issue of vouchers, of a special kind of money, like monopoly money or something like that, which people, any citizen over 18 years of age will be able to buy for a nominal sum, for a very, they will not be free, but only to cover the cost of printing and distributing the vouchers. And these vouchers will then be used to bid for stocks. So that the stocks end up in private hands.

And people who are not willing or capable of deciding where to put their vouchers. And a number of the details have not yet been worked out about how many vouchers each individual can buy, and whether they can be transferred within a family or whether they can be sold to somebody who wants to play the stock market. These details have not been worked out in detail yet. For a reason I will come back to in a minute. But the idea is to make these large stock companies private as soon as possible. Now the reason this voucher scheme is being delayed and the whole of privatization is being delayed is the fact that our parliament, which was freely elected and where many of the deputies are looking first of all to the next election and their re-election. This parliament has enacted another law about restitution, about former owners coming forth to make a claim on their property which was confiscated under the communists.

Now this is a very brave law which has made nobody really happy because it has many problems attached to it. First of all, the date where you can make a claim on property that was confiscated, the date of the confiscation must be after February 25, 1948, which was the date of the communist coup. Although there was a great deal of confiscation going on before February 25, 1948. There's notably in 1945 when it was mostly German property but not only. And it was 1939 and it was Jewish property was confiscated. And then in 1918 we had confiscations. They have been confiscations were prominent in 1620 when all Protestant property was confiscated by the Catholics.

So our part of the world has a long history of confiscations and February 25, 1948 was chosen as the date line. So we are here talking about 43 years so mostly it is the ears of the former owners and very complicated legal problems arise in establishing a claim. Secondly, we are excluding quite unjustly but there is no other way. We are excluding ex-patriots, people who had left Czechoslovakia mostly for very good reasons and who had even fought against the Nazis for instance within foreign armies like our units in Britain and so on and people who stayed on in Britain afterwards. But anybody who is not a Czechoslovak citizen and who is not a Czechoslovak resident is excluded from making a claim and also only really the owners of small scale property because nobody who owned paper assets, bonds, stocks is not eligible for getting his property back.

Anybody who owned money accounts is not eligible for getting his property back. Only owners of real estate really. Also agriculture and agricultural land and forests that would be the subject matter of another law which has not been legislated yet. There were three drafts before our parliament and last week and they rejected all three of them and sent them back to committee and so it is a lengthy process in a parliamentary democracy. This is this restitution law is slowing down the privatization of assets because who will buy something if it is not clear who it belongs to. So so much for the economic reform but in summing up the problems concerning the economic reform I would only like to say that an absolutely integral even if only implicit part of the

economic reform is the integration of the Czechoslovak economy into the world economy. That is the basic prerequisite and precondition for success without that without becoming a part of the world economy the reform can never be successful not not practically and not as an intellectual exercise it cannot be successful. We have to the world economy has to accept us foreign capital has to come in multinational companies have to come in and only in that way can we be successful. Now I have only a very brief comment to make about the drawbacks in implementing the economic reform are very formidable because we are doing so in an exceptionally negative international situation. And that is always said the international situation is usually negative for any endeavor. But I think we are really luck has been against this reform in several very important ways.

First it was the Gulf War which increased the price of oil and then it came down again but not as far down as it was before. And we are now paying hard currency for our oil at world prices and that is a big drain on us. Secondly and probably more importantly than the oil and the situation in the Gulf area is the total collapse of our most important foreign trading partners that is for all practical purposes from our point of view the GDR which is no longer there as a soft market. And more importantly in terms of quantity that is the Soviet market when the Soviet market was our most important buyer of all the things we export. And the Soviet market is not buying it is not clear home to do business with and this is a very very worrisome and very very deeply felt problem.

We expect within weeks to have a radical increases in unemployment because of the downbreak of the Soviet market. And this radical increase in unemployment will be very important politically because unemployment will be much larger but larger in Slovakia as opposed to the Czech part of the country. And this will heighten tensions between the Czechs and the Slovaks which you have probably read about in your newspapers and one of the underlying causes of this of these tensions are the economic reform and the lesser preparedness of the Slovak economy to embrace market conditions. Forum today featured and addressed by the Czechoslovakian ambassador to the United States

Rita Klamová. Ambassador Klamová spoke at the inauguration of the Texas chair in Czech studies at UT Austin. Her lecture was sponsored by the Center for Soviet and East European Studies at the University. The views expressed on this program do not necessarily reflect the views of the University of Texas at Austin or this station. Professor for Forum, Cliff Hargrove, Production Assistance, Elliott George Garcia and Todd Morris. I'm your producer and host, Olive Graham. Cassette copies of this program are available and may be purchased by writing, Forum Cassettes, Longhorn Radio Network, Communication Building B, UT Austin, Austin Texas 78712. That's Forum Cassettes, Longhorn Radio Network, Communication Building B, UT Austin, Austin Texas 78712.

From the Center for Telecommunication Services, the University of Texas at Austin, this is the Longhorn Radio Network. This week on Forum, Czech ambassador to the United States Rita Klamová. The euphoria has passed. We are now aware of the fact that there are very many problems and that the problems are much more serious than seemed at the end of 1989 in the beginning of 1990. To Forum and Czechoslovakia, this week on Forum.