Central Europe

Emma Jane Riddle, 2011

Overview

• Statistics: population and GDP• The Communist period• After Communism, What?• Business culture in Poland and the Czech

Republic

Population (Millions) – 2011 Estimates

U. S. Population = 313.2 Million

Czech Republic

Hungary

Poland

Slovakia

Slovenia

0 5 10 15 20 25 30 35 40

10.2

9.8

38.4

5.5

2.0

Population (millions) - 2011 Estimate

Gross Domestic Product2010 Estimates

U. S. GDP = $14.7 Trillion = $14,700 Billion

Czech Republic

Hungary

Poland

Slovakia

Slovenia

0 50 100 150 200 250 300 350 400 450 500

192.2

129.0

468.5

87.5

47.9

GDP (Billion U. S. $) - 2010 Estimate

GDP Per Capita2010 Estimates

U. S. GDP Per Capita = $47,200

Czech Republic

Hungary

Poland

Slovakia

Slovenia

0 5 10 15 20 25 30

25.6

18.8

18.8

22.0

28.2

GDP Per Capita (Thousand $), PPP 2010 Estimate

The Soviet Bloc: 1945-1989

Eastern Europe• The Soviet Union (now 15 countries)• Bulgaria• Romania

Central Europe• Czechoslovakia

(now Slovakia and the Czech Republic)• 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.

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 influences– 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

• Hungary and Poland left the Soviet bloc first.

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.

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.

Economic Growth in Central Europe

• Automobiles and parts• Financial services• Information technology• Internet services

• Biotechnology• Tourism• Transportation, distribution

Higher Education

• Mixture of public and private universities• Higher education in the European Union

– Five-year Master’s degree program– Three-year Bachelor’s degree program– Two-year Master’s degree program– After completion of a Master’s degree, a doctorate can

be completed in three years.

• European Credit Transfer System (ECTS)

Requirements to Join the EU

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

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

• Adopt EU laws, product standards, and regulations.

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

European Union (EU) Before 2004 Enlargement

European Union Today

• 27 member countries• Croatia is scheduled to

join in 2013• Candidate countries

• Turkey• Macedonia• Montenegro• Iceland

Benefits of EU Membership

• Ability to export to markets in western Europe

• Citizens of an EU country can 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

Recent Economic News

• In 2009, Poland was the only country in the EU to have growth in real GDP.

• Hungary had a financial crisis.– Real estate bubble, financed by loans that had to be

paid back in euros– The Hungarian forint lost value, relative to the euro– Many people could not pay off their loans.

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.• 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 older people by their first names until

you are invited to do so.• Business entertainment should be reciprocated.• People may be less willing to share personal

information than Americans are.

Managing Czech Employees

• Establish a good rapport with employees.• Managers must be trustworthy and credible• Younger Czech employees

– Are eager to learn and often creative– Want work that is meaningful and appreciated– Want opportunities for professional development

• Some older Czechs lack motivation and are not accustomed to taking initiative

Managing Czech Employees (2)

• Czechs may be reluctant to tackle new responsibilities because– They tend to be perfectionists.– They don’t want to lose the respect of colleagues by

making a mistake.

• Many Czechs do not like to take risks.– Responsibilities and work procedures should be clear.

Source: Karin Genton-L’Epee, Prague Post, Jan. 6, 2005