Central Europe

Emma Jane Riddle, 2009

Population

10.2

9.9

38.5

5.5

2.0

0 10 20 30 40

Czech Republic

Hungary

Poland

Slovakia

Slovenia

Population (millions)

Gross Domestic Product

217.2

205.7

567.4

100.6

59.0

0 100 200 300 400 500 600

Czech Republic

Hungary

Poland

Slovakia

Slovenia

The Soviet Bloc: 1945-1989

Eastern Europe• The Soviet Union• Bulgaria• Romania

Central Europe• Czechoslovakia• Hungary• Poland• East Germany

Other Communist Countries in Europe

• Albania – allied with China• Yugoslavia, including present-day:

– Bosnia

– Croatia

– Kosovo

– Macedonia

– Montenegro

– Serbia

– Slovenia

Communism in a Nutshell

• Command economy: the government owns and manages the means of production and distribution– The Soviet Union planned production and allocated

resources for the entire Soviet bloc, except Romania.

• Basic goods, including food, were scarce.– Black market and barter economy

• People were taught that capitalists exploited workers and private business was evil.

Communism in a Nutshell (2)

• Totalitarian governments– The government controlled every aspect of life.– Almost every organization was dominated by

the Communist party.– Police state– Writers, artists, filmmakers, musicians, and

media were supposed to promote "socialist realism" – Communist interpretation of events.

– Religious groups were limited or prohibited.

Percentage of Self-Identified Christians - 2008

0% 20% 40% 60% 80% 100%

Czech

Hungary

Poland

Slovakia

SloveniaRoman Catholic

Protestant

Other Christians

61%

84%

92%

75%

29%

Cultural Impact of Communism

• Work ethic– More employees than needed.– No reward for good work.– Those who protested against Communism lost

their jobs or had to do menial jobs.• Culture of dependency

– Rent and food were subsidized.– Workplaces arranged vacations, camps for kids,

and access to scarce goods.

Central European Culture

• Culture is a mixture of local and western European ideas– Architecture, art, music, literature– Understanding of democracy– History of political dissent and resistance to

foreign occupation• There was serious resistance to Communism in

Poland, Hungary, and Czechoslovakia• The end of Communism began in those countries.

After Communism, What?

• Democracy• Prosperity

– Market economy– EU membership– WTO membership– Euro currency (still in the future for some)

• Security: NATO membership• These goals promoted political, economic,

and cultural change.

Requirements to Join the EU

• Be a stable democracy, respecting human rights, the rule of law, and the protection of minorities.

• Have a functioning market economy that can compete in the EU.– State enterprises were privatized.

• Adopt EU laws, product standards, and regulations.

• The five central European countries joined the EU on January 1, 2004.

The Challenge of Free Markets

• Foreign investment was often needed to replace obsolete equipment and facilities.

• Privatized firms employed fewer people.• Enterprises devoted to military production often

could not be made profitable and had to close.• The distribution network in the Soviet bloc

collapsed. • The education system had to be overhauled.

Benefits of EU Membership

• Ability to export to markets in western Europe

• In 2011, citizens of countries that joined the EU in 2004 will be able to live and work in any EU country.

• Economic development aid from the EU

Requirements to Use the Euro Currency

• Stable consumer prices – low inflation

• Government budget deficit <= 3% of GDP

• National debt <= 60% of GDP

• Stable long-term interest rate

• Value of the national currency must be stable relative to the euro

• Slovenia and Slovakia use the euro

Requirements to Join NATO

• A democratic political system, based on a market economy

• Fair treatment of minority populations• Commitment to resolving conflicts peacefully• Ability and willingness to contribute to NATO

military operations• Commitment to democratic civil-military relations• The five central European countries are NATO

members.

Business Culture in Poland

• Design products for Poland.• Do your homework. Poles are often shrewd

negotiators.• Be prepared to provide data. People are not

impressed by "sales talk".• Be prepared to make a long-term commitment.• Take time to build relationships and gain trust.• Be willing to "give something back" to the

community.

Business Culture in Poland (2)

• Don't be afraid to ask questions about things that you don't understand.

• It's okay to ask sensitive questions, but be polite.• If a question is important, keep asking until you

get an answer.– You may have to ask the question differently.

• Local governments have a large role in business regulation. Some areas are more conducive to business than others.

Business Culture in Poland (3)

• Professional titles are used in Poland.

Example: engineer• Do not call people by their first names until you

are invited to do so.• Business entertainment should be reciprocated.• Be patient. Establishing a business will take

longer than it would in the U. S.• Work with a local advertising agency.