CZECHOSLOVAKIA Capitalism without capital THE Czecho-Slovak government thinks it has found a way to introduce capitalism without capital — a sixth of state property will be distributed to citizens in exchange for coupons. Despite rhetoric about the creation of popular capitalism, most citizens will entrust their shares to "privatization funds" backed by bureaucratic, black market or foreign capital. ADAM NOVAK their clients' interests. Banks can use confidential knowledge about companies to gain ownership through their IPFs, or issue undeclared loans to enterprises where they own shares. Managers of state enterprises can use their enterprises' funds to build parallel empires for themselves and their friends. Among the mass of small unregulated IFs are some run by crooks who will defraud their coupon-investors in any one of the ways known to Western markets.
In any case, the simple transfer of ownership does nothing to change the nature of Czecho-Slovak industry — outdated, uncompetitive and short of custo mers since the government destroyed trade links with the USSR and Eastern Europe.
The restructuring of Czecho-Slovak industry would be a long and expensive process under any economic and political system. In the extreme free market monetarist conditions currently in force, the best estimates are for 20% of firms to go bankrupt this year, with only 35% of firms likely to survive five years. Federal government estimates for 1992 of 12% inflation and a 10% fall in Gross Domestic Product (GDP) should be doubled.
### Collapse of industry
In such conditions, the government's fast privatization will accelerate the collapse of industry, and may prove a political time bomb. The IPFs, as private owners, will close factories rather than lose money. They may prefer asset stripping and property speculation to the massive task of reconstruction.
Some ministerial advisors have warned that the fund-managed contraction of industry will be so sharp that the state will have to re-nationalize to prevent mass closures, electricity cuts and strikes. Western fund managers expect only 30 to 60 of the privatization funds themselves to survive two years. Bank failures and bail-outs happen in the West, but will pro-free market government leader Vaclav Klaus dare to renationalize the privatization funds? Citizen share holders who see their "share" of the national property disappear almost as soon as they receive it, and who have never been warned about the dangers of committing their savings to the IPF scheme, will be deeply disillusioned with the reform process, to say the least.
The government is aware of these risks, but accepts them in pursuit of their short term goal of winning the June 1992 elections. The last elections, in 1990, were effectively a referendum on the
Adam Novak is a journalist living in Prague and a member of Leva Alternativa (Left Alternative).