The Czech Republic's transition from industrial manufacturing to knowledge-based services

Economy of Czech Republic

In the past two decades, the Czech Republic has transformed its economy from a Communist command economy to a free-market economy integrated into the global market. Formerly a member of the Communist Soviet Union, the Czech Republic is now part of a supranational political entity composed of Western-style democracies called the European Union. (CIA World Factbook) Because of its location and its legacy of heavy industrialization, the Czech Republic has been able to achieve impressive economic development during its transformation into a Western-style Democracy. (IMF) However, the country's focus on labor-intensive industrial manufacturing makes it vulnerable to cheaper foreign labor. Thus, Czechoslovakia must prepare for economic shifts by developing its capabilities in knowledge-based service industries.

The Strengths of the Czech Republic Economy

The Czech Republic is a traditional industrial power because it was a central part of the prosperous Austro-Hungarian Empire before World War I. (CIA) the Economy of the Czech Republic is largely built on heavy industrial manufacturing, primarily steel, machinery, transportation equipment, and chemicals. (CIA) it is also engaged in light industrial manufacturing, primarily textiles, glass, beer, ceramics, and pharmaceuticals. (CIA)

Because of its late integration into the global economy, Czechoslovakia has been able to achieve leapfrog development of its infrastructure. Countries which lack certain types of infrastructure, and which have to adopt new infrastructure, end up receiving the most recent and advanced technology because of their late development. For the Czech Republic, this phenomenon has occurred in its telecommunications infrastructure, with the Czech Republic boasting some of the highest rates of wi-fi access in Europe. (http://www.budde.com.au)

Basics of Economic Development Plan

Considering Czechoslovakia has a well-educated population and great wi-fi infrastructure, it has an opportunity to develop its knowledge-based service sector. With its well-educated population and various cultural exchanges with Western Europe, Czechoslovakia has a chance to develop its competence and activity in traditional knowledge-based fields such as financial and legal services. Also, Czechoslovakia's impressive wi-fi infrastructure will make it possible for the country to be a leader in high-tech services.

Consequences of Economic Development Plan

Switching to a more services-oriented, knowledge-based economy will increase economic prospects for the highly educated but may leave out people who have not received the advanced education required for their fields. For the less educated, the employment opportunities would be remain in heavy industrial manufacturing, which may diminish as Czechoslovakian manufacturing becomes less competitive. The Government should make efforts to ease this transition by retraining older or less-educated workers for knowledge-based work.

Conclusion

Through its economic transformation after the fall of the Soviet Union, the Czech Republic has become a model for many developing countries. However, it has also become a target of economic competition from the cheaper labor forces of developing countries in Eastern Europe and Asia. By adopting a high-tech, knowledge-based approach to economic development, Czechoslovakia can open new avenues to prosperity for itself and re-invent itself as model for developing countries.