ECONOMIC DEVELOPMENT AND THE ENVIRONMENT IN THE CZECH REPUBLIC

Dr. Jaroslav Stoklasa
Environmental Advisor
Czech Academy of Sciences

The Czech economy has traditionally placed a high demand on energy and raw materials. This is due, historically, to an industrial structure which is based on metals and heavy machinery industries. This, along with the lack of environmental care by the previous regime, has caused serious disturbances to the ecological balance of the landscape, increases in air and water pollution, and an enormous production of waste. Each of these has had its corresponding negative impact on the health of the population. The result has been great economic damage, which, in 1989, was assessed at 200 billion CSK ($8 billion).

The present poor structure of Czech industry has historic roots. The free migration of the population at the end of 18th century started the rapid establishment of manufacturing, the development of towns and of the First Industrial Revolution in Czech lands (Bohemia and Moravia). Initially, machines were imported, and, later, they were produced by domestic metallurgical and engineering enterprises. This development stimulated coal mining, so that by 1819 nearly one hundred thousand tons were being extracted annually. In 1836, the first blast furnace was built in Vtkovice. In 1841, as many as 156 steam engines were in operation in Czech countries. At the same time, only 11 steam engines were in operation in the Hungarian part of the Empire.1

The building of railways was also of great importance to the development of industry. From 1869 to 1874, 2.620 km of rail were laid down; 791 km alone, were laid in 1871.2 During this era, 64% of the industrial production of the Austrian part of the Monarchy was produced in the Czech countries, although the area constituted a mere 25% and its population 37%, of the region’s total.1 Thus, we can proudly claim that Czech countries kept abreast of industrial development in England, Belgium, Germany, France, and the USA, and constituted a significant part of the industrial potential of the Austro-Hungarian Empire.

In the Czechoslovak Republic, which emerged from the collapse of the Austro-Hungarian monarchy in 1918, 60% of the pre-war capacity of industrial production remained. In 1937, the production share of metals and metal products was 19% of the total production capacity of Czechoslovakia, and that of consumer industries was 45%. Czechoslovakia belonged to the ten most economically developed countries in the world and was also, unfortunately, among the most important manufacturers and exporters of weaponry.1

During the 1939 to 1945 occupation of Czech countries by Germany (renamed Protektorat Bôhmen-Mähren), heavy industry involved with the production of weaponry was further developed. In March 1945, 45% of those working in industry were employed in the metal producing branches and 12% in other branches of heavy industry. In Slovakia, also, industrial production was 63% higher in 1943 than in 1937, and by 1944, 30% of all industrial workers were employed by the metallurgical industry.1

In 1945, post World War II industrial production in Czechoslovakia as a whole was only half of what it was in 1937. By 1946, the proportion had risen to 71%. This corresponded to an annual rate of increase of approximately 40%, and made for a quick restoration of the national economy. In 1948, industrial production exceeded the pre-war level by 10% and all branches of heavy industry surpassed the level of 1937. The development of light industries, which had been kept down during the war, continued to lag.

In Czechoslovakia, conditions for economic development in the initial post- war years were extraordinarily favourable, as there had been very little war damage. The country, as a whole, was among the most industrially developed countries of that period. This development was stopped by the communist coup of February, 1948. The whole economy, even the smallest shops and properties, were nationalised and centralised under the unqualified management of the Communist Party hierarchy through the use of centralised planning. Steps were taken to make the country economically dependent on Eastern countries. It was envisaged that Czechoslovakia should become the “smithy and machine works for the socialistic countries”. That was why the rapid development of the metal and heavy industry was forced. The share held by Eastern countries in Czechoslovakian foreign trade increased from 20% in 1947 to 80% in 1953. As the “Cold War” began in the early 1950s, provision was made to escalate the production of weapons: from 1950 to 1952, there was a fourfold increase in weapons production. Due to the new industrial structure of this period, a pattern of high energy use and resource depletion was established.

In 1953, the centralisation process was completed and a new system of national economic management which conformed to the Soviet model was put into effect. At the same time, there appeared the first negative repercussions resulting from the bad management of nationalised firms, collectivised agriculture, the central planning of the economy and the totally deformed centralised pricing system. Different reforms were introduced during the 50’s and 60’s in order to increase the efficiency of the economy. However, these reforms were not successful, as the main concept of a “socialistic planned economy” could not be changed. After the Soviet occupation of 1968, the soviet system became more deeply ensconced. This had added harmful impacts on the economy, society, and the environment. In the late 1980s, adaptations were attempted in connection with Gorbachev’s “Perestroika” without any success.

The upshot of this industrial development was the economic structure of production inherited in 1989, with its high demands on energy and raw materials and its high production costs per GNP unit produced. Although the GNP in current prices increased more than twelve-fold from 1948 to 1983, production costs increased sixteen-fold. The development of energy production and of the metallurgical industry’s outputs in natural units is consistent with the economy’s general efficiency. The production of steel in 1986 (approximately fifteen million tons) corresponded to a per capita production of 973 kg. At this time, Czechoslovakia ranked third in the world, after Luxembourg and Belgium. However, Czechoslovakia had no iron ore deposits and was fully dependent on imports from the Soviet Union. This also increased political dependence on the Soviets.

Czechoslovakian energy production continued to rely predominantly on domestic brown coal, with its high sulphur and ash contents. Its extraction took place in constantly worsening conditions. In 1984 brown coal mining exceeded 100 million tons per year (6,6 tons per capita) and thereafter began to decrease very slowly. The share of energy produced by the nuclear power grid at the end of the 1980s increased to 25%, and another 2000 MW capacity reader is under construction in Temelin.

The high consumption of raw materials and the low efficiency of their processing resulted in an immense burden on the country through the generation of wastes of all kinds. In 1987, the total production of solid wastes amounted to 665,5 million tons, which represented about 44 tons per capita, of which 1 ton per capita was hazardous waste. Moreover, additional millions of tons of gaseous and liquid wastes were released into the air and water.

The development of the structure of the Czechoslovak economy was directly related to the poor state of the environment. This negative situation was worsened by the government undervaluing the role of environmental preservation. (table 1). It is necessary to keep in mind that in a centrally planned economy all earned financial resources are pooled and redistributed through central decision-making.

In November 1989, the new government inherited a deformed economic structure, whose problems included:

• the preponderant role of the metal and heavy machinery industry;
• old fashioned technologies;
• a devastated landscape and real estate;
• the inefficient management of the centrally-planned economy of state owned industries, trades and agriculture;
• over-employment and low productivity;
• low worker and citizen morale;
• an environment, which in all aspects was in a critical condition.

This negative situation was the background for the founding of the new Ministry for the Environment, in January 1990.

Table 1: Environmental Investment in the Former Czechoslovakia ³

a. When compared with data from other tables it is necessary to remember that this table gives data for the whole of Czechoslovakia, while the others only for the Czech Republic.

b. The methodology of the statistics for the 1971-1989 investments can not be compared with contemporary statistics of investment and financing. In the former Czechoslovakia, financial aid came from the State Budget and was redistributed to different branches of the economy according to political criteria. Furthermore, the terminology for “environmental investment” was different. This is why figures from the former Czechoslovakia and those of the current Czech Republic cannot be statistically compared.

c. All environmental statistics include redistributed investments, the special State Plan Environmental Investments for the period 1986-1990, as well as the Action Z programme for municipal activities.

d. GSP (Gross Social Product) is similar to GNP, but is calculated using a different methodology. The table depicts the share of the average yearly environmental investment of the GSP in five-year periods.

Because of the many demands for reparation of previous harm in all branches of the economy, investments to solve environmental problems have increased dramatically since 1989 (table 2). Financial support from the State Budget and from the State Fund for the Environment had increased relatively quickly and steadily prior to 1992. It remains at relatively the same level today (table 3). Since the share of the State Fund for the Environment that is financed by polluters’ payments has increased through the collection of fines, it is estimated that the need for subsidy from the State Budget will slowly decrease.

Table 2: The Share of Environmental Investment on GNP in the Czech Republic 4

Thanks to financial subsidies and radical changes in environmental, legal and management systems, as well as in economic elements, environmental quality has improved since 1989. It is necessary to remember, though, that during the same period the GNP decreased by 25% and industrial production by 35%. Energy and resource demanding industries such as coal mining and iron production decreased by 21% and steel production by 31%. All these decreases reduced air pollution by 25%. Thanks to many completed water purification stations, water pollution has decreased in different localities by indices ranging from 25% to 50%. In waste management, there are still big problems, particularly with hazardous wastes, even though there have been some good results in this area as well.

Table 3: Environmental Financing in the Czech Republic 5

Subsidies from international organisations and foreign countries are not included in this overview.

The key elements in the transition from a centrally planned to a market economy are:

• democracy, privatisation and private property rights;
• the pricing of natural resources and energy;
• the restructuring and modernising of industry;
• the elimination of state subsidies to inefficient industries.

As the unregulated market economy alone cannot protect the environment, the introduction of both administrative and economic elements, as well as regulations and their enforcement for environmental protection, are necessary. An integrated environmental management has to favour the prevention of pollution rather than “end of pipe” controls. Environmental laws and standards, as well as “command and control” policies of government have to be combined with economic instruments. The “polluter pays” and “user pays” principles, pollution charges, and environmental taxes and fines are, and should be, even more extensively introduced, in order to “internalise” environmental and social costs, and provide a method for influencing polluter behaviour. Environmental impact assessment, information systems for decision-making and for public participation, and environmental education systems for schools, as well as for adults, have to be expanded.

Table 4: Specified Environmental Investment in the Czech Republic 6

1. Increase 92/87 divided by two to approximate inflation
2. Index 93/92 multiplied by 0,8 to approximate inflation

One of the most important goals, needed as a foundation for the sustainable development of society and of the economy, is the change in the hierarchy of societal values. This could be a serious problem, as the example of the consumer societies of Western countries is very attractive to young and middle-aged people who had been cut off from all Western consumer habits for many years. They are now being bombarded with advertising from the rich, Western, consumer countries and want to follow their example. They are not familiar with the current changes in Western consumer behaviour which has produced an environmentally-conscious consumerism, compatible with a sustainable way of living.

Significant improvements in the former Czechoslovakia and the Czech Republic began in 1989. However, it will take a long time to rectify the negative impact of the deformed economy and society of the past. The transition of the economy to a market mechanism is very important and absolutely necessary, but it is not a sufficient condition for the amelioration of environmental problems. It is the responsibility of the government and parliament to erect legal and economic barriers against environmental destruction, and to fix legal regulations and to create economic stimulation for environmentally-friendly behaviour in industry, as well as of the general public. The “invisible hand of the market” will then also acquire an “invisible head” and will begin to work consciously for the environment, for the sustainable development of society and for the protection of all forms of life.

References

1. Prucha, V. et.al. (1974), Economic History of Czechoslovakia in the 19th and 20th Centuries, Svoboda Praha, 530pp (in Czech).
2. Stepan, M. (1958), Brief History of the Czechoslovak Railways, Dopravni nakladatelstvi Praha, 274 pp (in Slovak).
3. Stoklasa, J. (1994), The roots of the contemporary state of the environment, Planeta, (9/94) 40-42 (in Czech).
4. Sejak, J. (1994), On the efficiency of environmental financing in the Czech Republic, Planeta, (9/94) p.30 (in Czech).
5. Report on the State of the Environment in the Czech Republic, Ministry for Environment of the Czech Republic, April 1994 (in Czech).
6. Zeman, J. (1993), Decreases in greater environmental investment, Planeta, (9/93) p.32 (in Czech).

Dr. Jaroslav Stoklasa, member of the Czech Academy of Sciences, Honorary Advisor to the Czech Minister of Environment and member of the Steering Committee of the Society for Sustainable Living, has also held the post of Vice-Director for Economy and Management at the Czech Institute for Biology and Genetics and was involved in research at the Institute for Architecture, Human Environment and Landscape Ecology. During his tenure at the latter institute, he developed the principle of “anthropoecology” and later became head of the Department of Anthropoecology. Dr. Stoklasa has been very active in non-governmental environmental movements, prior to the velvet revolution, and published classified information on the state of the environment. A working member of the ECO Group at the Vienna Centre, he has also co-operated with the IIASA in Laxenberg, Austria, and served as Advisor to the Minister of Environment and Member of the Czech Commission for Co-operation with the IIASA. Author of over 150 papers and articles and guest lecturer of many European Universities, Dr. Stoklasa is currently retired and works as a private environmental consultant.