FDI and Ownership in Czech Firms: Pre- and Post-crisis Efficiency

  • Jan Hanousek
  • Evžen Kočenda
Chapter

Abstract

Chapter 6 elaborates on the increasing economic intervention of the state in the post-crisis CEE region. Designs of the transition process relied heavily on neoliberal concepts to produce an efficient institutional framework for multinational business—the “competition state.” The 2008/9 economic crisis undermined trust in the general applicability of these concepts in economic policy. Local elites started querying the usefulness of some policies, and they also found support in the practice of crisis management in many developed market economies. Some governments began openly criticizing valid EU regulations, making massive efforts to distort the effects of policies from the rules of the competition state and favor local entrepreneurs. Preference for local firms over international competitors is not a new idea, and many developed market economies also apply such policies within the framework of the competition state. In the literature, this is called economic patriotism. However, these covert protectionist policies do not deny the beneficial effects of competition; rather, they aim to strengthen local firms to create more competition in the future. Moreover, they are agnostic and based on territorial principles. What we see in CEE is the application of selective advantage and disadvantage measures, the main aim of which is to provide a competition-free environment for the businesses of political clients. This is made possible whenever polity has a strong position and does not have much need for the support of business (it is strong enough to capture sufficient moral and material support on its own). Another condition is a relatively weak business interest representation that makes selective bargaining possible. The Polish and Hungarian governments introduced a large number of selective advantage and disadvantage measures to reinforce business capture. This cannot be regarded as economic patriotism, but rather as a shift from a competition state to patronage.

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Copyright information

© The Author(s) 2017

Authors and Affiliations

  • Jan Hanousek
    • 1
  • Evžen Kočenda
    • 2
  1. 1.CERGE-EIPragueCzech Republic
  2. 2.Institute of Economic StudiesCharles UniversityPragueCzech Republic

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