An American look at the Czech Republic.

• Author: Weidenbaum, Murray
• Position: Economics

"Traditionally, [we have] had a very special relationship with the Czech people. There is a substantial reservoir of goodwill towards Americans. [No wonder the] U.S. has been one of the top-five foreign investors in the Czech [nation] since the Velvet Revolution of 1989."

THE CZECH REPUBLIC is a stellar example of the success and challenges that are facing the Eastern European nations that have been moving from communism to democratic capitalism. We may recall that, in the aftermath of World War I, Czechoslovakia was created as a new country out of a portion of the former Austro-Hungarian Empire. It lost its independence to Nazi Germany in 1939. At the end of World War II, in 1945, it became an independent nation again and expelled 3,000,000 ethnic Germans from the border areas. Soon, the country became subject to the powerful influence of the USSR and, for the next 44 years, was a "puppet" of the Soviets.

In 1989, after the Berlin Wall fell, Czechoslovakia became independent once again. However, in January 1993, it split peacefully into two separate countries--the Czech Republic and Slovakia. The Czech Republic (consisting of the provinces of Bohemia and Moravia) is more economically and technologically advanced than Slovakia. Its capital, Prague, is one of the great cities of Europe. In terms of population and economic production, the Czech Republic is about the same size as Hungary.

Each of the Eastern European nations is comparable to a state in our union, somewhere between Rhode Island and California. For example, in 2005, the gross domestic product of the Czech Republic was $110,000,000,000, not quite one percent of the output of the U.S. In comparison, Germany's GDP for the same year was 2.8 trillion dollars--25 times as large as the Czech economy. Similarly, the Czech population of 10,000,000 is three percent of the U.S. total and 12% of Germany's. The Czech Republic has a fairly stable (or rather stagnant) population. The death rate is slightly higher than the birth rate plus a modest amount of immigration. The life expectancy of people born there now is a respectable 76 years. HIV-AIDS is a rarity (about 10 deaths a year). The land area is 79,000 square kilometers, around the size of Virginia. The country is bordered by Austria, Germany, Poland, and Slovakia.

Like every other Eastern European nation, the Czech Republic has a distinctive and interesting history and culture. Since their independence in 1918, the Czech people have created a strong democratic tradition that continues to this day. In 1999, the Czech Republic joined NATO. In 2004, the country became part of the European Union. Its leaders have included such luminaries as independence groundbreaker Jan Masaryk (its first president) and dramatist Vaclav Havel (the first post-Soviet president).

The Czechs have a parliamentary republic, with two national leaders. Since March 2003, the president (chief of state) has been Vaclav Klaus, an economist. He is serving his first five-year term and is expected to seek a second and final term in the 2008 election. The prime minister is the head of the government. The U.S. combines the two positions in one president. The parliament consists of an 81-member senate elected by popular vote to serve for six years and a chamber of deputies popularly elected for four-year terms.

The general election, held in June 2006, produced a virtual tie. Left- and right-wing political forces each won control of 100 seats in the 200-seat, lower house of parliament. The center-right Civic Democratic Party (ODS), which previously was in the opposition, received 35% of the popular vote and gained 81 seats. The President has appointed ODS leader Mirek Topolanek prime minister. The Czech Social Democratic Party (CSSD), previously in control, registered 32% of the vote and received 74 seats. The Communist Party (which is the successor to the official Communist Party of Czechoslovakia) is in...