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Facts about the Czech Republic


The History of the Czech Economy

photo:  (fotolia.com)

After an independent Czechoslovak state was established in autumn 1918, there were significant differences between the regions. Slovakia lagged far behind the developed industry in Bohemia and Moravia and Sub-Carpathian Ruthenia lagged even further behind Slovakia.

The First Republic
Industry started to develop rapidly after the First World War. Manual work was replaced by machine production and new technologies. Probably the most important representative of this time was X1 Tomáš Baťa X1, who managed to provide employment for tens of thousands of labourers. The Czechoslovak Republic’s economy underwent several waves of expansion and subsequent attenuation during the nineteen-twenties. In spite of this, industrial production achieved the same status in 1924 as before the war. The textile, glass and shoe industries were among the most advanced in the world. The Czechoslovak armaments industry had no competition in Europe. The electricity and power industries began to develop along with the completion of electrification of the Czechoslovak Republic. In 1928 there were only 38,000 unemployed in the Czechoslovak Republic, which was not even 1% of the employable inhabitants. The data from 1929 provide evidence: 35% people worked in agriculture, 34% in industry and nearly 31% in services. That same year the Czechoslovak Republic’s participation in worldwide industrial production was 1.4% and was approximately tenth on a worldwide scale.

The crash of the New York Stock Exchange (24 October 1929) was the beginning of a worldwide crisis, linked to a fall in industrial production. During the period from 1932 – 1933, when the crisis culminated, the Czechoslovak Republic had more than one million unemployed people. Industrial production fell by 40%. In 1934 the crown devalued and industry virtually stopped exporting abroad.

From the onset of fascism, particularly the establishment of the Protectorate of Bohemia and Moravia, until the end of the Second World War, Czech industry was used chiefly to supply war materials. This is also why several important factories became a target for Allied bombers. The most important of these factories was the X2 Škoda plant in Pilsen X2. Arms production was based on cannons of various calibres. Škoda also manufactured aircraft and submarine components and an extensive range of artillery ammunition. The manufacture of fighter planes, tanks and artillery tractors, as well as repairs to the aforementioned armaments, was also significant. In spring 1945 supplies from the Škoda plant in Pilsen represented practically 30% of all arms supplies for the German army.

Post-war Orientation
After the Second World War the Czechoslovak economy was in excellent condition. Apart from several air strikes on the Pilsen Škoda factory it remained practically unaffected by the war. We had the capacity, technology and experts. Unfortunately, in 1946, at the direct orders of Moscow, Czechoslovakia was forced to refuse the Marshall Plan, which put the whole of Western Europe on its feet and led it out of the post-war martyrdom. Czechoslovak industry started to focus on the East and the era of socialist planning and five-year plans began. In spite of this, the term Bohemia Crystal was well-known throughout the world. The glass industry and the textile and chemicals industries remained first-class throughout the communist regime.

The forced collectivisation of agriculture began after the revolution in 1948. Uniform agricultural cooperatives (JZD) were established, which in practice meant that farmers were forced to “voluntarily“ relinquish all animals, land and machines. Collectivisation involved everyone, even smallholders had to hand in their farm animals. Boundaries were ploughed up and enormous tracts of fields were created

In 1949 the Czechoslovak Republic was one of the founding members of the CMEA (Council for Mutual Economic Assistance). It was a Soviet instrument of power for controlling the economy of socialist countries and the Soviet counterpart to the Marshall Plan.

Velvet Revolution
The “Velvet Revolution“ took place in Czechoslovakia in November 1989. The leadership of the Communist party came to an end and Czechoslovakia set out in the direction of democracy and capitalism. Coupon privatisation took place at the beginning of the nineteen-nineties. This basically meant that every citizen in Czechoslovakia had the opportunity to purchase shares in any existing state company. 77% of all citizens of the Czechoslovak Republic took part in the first wave in 1992 and the privatised assets amounted to 679 billion crowns. This meant that practically the whole of industry fell into the hands of either minor shareholders or various funds. Many companies did not survive the subsequent 20 years and, for instance, the textile industry ceased completely to exist in the Czech Republic, with several exceptions.

Present Day
During the establishment of the Czechoslovak Republic in 1918 approximately the same numbers of people were employed in all three spheres, approximately 30%, but the current distribution in employment is diametrically different. A little over 3% of the inhabitants work in agriculture, in absolute numbers this means nearly 160,000. 38% or 1,870,000 people work in industry. Most people are employed in services, approximately 59%, or 2,890,000 people (data at the end of the 3rd quarter of 2009). Apart from the power industry no other important company has remained in Czech hands. In spite of this the automotive industry here, for example, is among the most developed in Europe. Several renowned international automotive manufacturers have established factories here. In addition to Škoda Auto these are TPCA Kolín, which manufactures Toyota, Citroën and Peugeot, and the Hyundai automotive manufacturer, which produces vehicles in Nošovice. An enormous number of sub-suppliers is linked to these manufacturing lines. Whole industrial zones have been established surrounding these automotive factories, and together they employ many more people than the automotive factories themselves.

The Czech Republic is investing more and more into the development of technologies. The world patent for the manufacture of nano-fibres, acquired by the Technical University in Liberec, is one example of this investment.
To a marked degree European Union quotas determine agricultural production. These quotas exist for practically everything.

Author: Aleš Martínek
Added: 25.01.2010

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