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Central Europe Emma Jane Riddle, 2010 Population – 2009 Estimates Slovenia 2.0 Slovakia 5.5 Poland 38.5 Hungary 9.9 Czech Republic 10.2 0 10 20 30 Population (millions) U. S. Population = 307.2 Million 40 Gross Domestic Product 2009 Estimates U. S. GDP = $14.26 Trillion = $14,260 Billion GDP Per Capita 2009 Estimates U. S. GDP Per Capita = $46,000 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 Roman Catholic 61% Slovenia Protestant 84% Slovakia 92% Poland 75% Hungary 29% Czech 0% 20% 40% 60% 80% 100% Other Christians 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. 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 – hardware and software Biotechnology Tourism Transportation and distribution 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. – Most state enterprises were privatized. • Adopt EU laws, product standards, and regulations. • The five central European countries joined the EU on January 1, 2004. Benefits of EU Membership • Ability to export to markets in western Europe • In 2011, citizens of these countries 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 older people by their first names until you are invited to do so. • Business entertainment should be reciprocated.