Central Europe
Emma Jane Riddle, 2011
Overview
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Statistics: population and GDP
The Communist period
After Communism, What?
Business culture in Poland and the Czech
Republic
Population (Millions) – 2011 Estimates
Slovenia
2.0
Slovakia
5.5
Poland
38.4
Hungary
9.8
Czech Republic
10.2
0
5
10
15
20
25
30
35
Population (millions) - 2011 Estimate
U. S. Population = 313.2 Million
40
Gross Domestic Product
2010 Estimates
Slovenia
47.9
Slovakia
87.5
Poland
468.5
Hungary
129.0
Czech Republic
192.2
0
100
200
300
400
500
GDP (Billion U. S. $) - 2010 Estimate
U. S. GDP = $14.7 Trillion = $14,700 Billion
GDP Per Capita
2010 Estimates
Slovenia
28.2
Slovakia
22.0
Poland
18.8
Hungary
18.8
Czech Republic
25.6
0
5
10
15
20
25
GDP Per Capita (Thousand $), PPP
2010 Estimate
U. S. GDP Per Capita = $47,200
30
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:
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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
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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
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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
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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
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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