EXTERNAL AND INTERNAL UNBALANCE IN EAST EUROPEAN TRANSITIONAL ECONOMIES

The paper starts from the fact that external and internal unbalance ar e features which are mutually interconnected by numerous quantitative and causal links. From the purely numerical point of view external unb alance is quantitatively equal to the aggregate internal unbalance. Th at is to say, if one consumes more than is produced at home, missing r esources can arrive only from abroad. Much more Important and complica ted than quantitative connections are causal links. Identification of focal points where primary impulses of unbalance start, recognizing wh ether they primarily start at home or abroad, unwinding the complicate d tangle of related causal links represents the first precondition of successful economic and political measures that should correct the unb alance. As for the unbalance factors which originate autonomously ar h ome, the paper is not limited to global views of the economy alone, bu t analyzes also the development of household and public administration consumption as well as the development of gross fixed capital formati on and tries to identify where in the CEFTA countries and in which of these spheres primary unbalance impulses acted in the years 1995-1997. In the household sphere in Hungary before the year 1995 and in the Cz ech Republic before the year 1997, consumption grew faster than the re sources produced at home (GDP); anti-crisis programmes are thus aimed also at household consumption restriction, which one considers as corr ect. There has been a considerable household consumption growth in Slo venia, and in the years 1996-1997 also in Poland. Household consumptio n in Slovakia, on the other hand, cannot be considered a factor of unb alance. However, such an important problem of whether households repre sent a primary focal point of unbalance cannot be answered on the basi s of consumption development alone. One should consider also further f actors, among them relations of the growth of productivity and real wa ges. These relations too developed unfavourably in Hungary and in the Czech Republic before the adoption of anti-crisis programmes. On the o ther hand, from this point of view, one can describe the development i n Slovakia on the whole as acceptable. As for public administration co nsumption, this can be denoted as an unbalance factor in Slovakia: its share in the GDP is high and in the year 1996 extreme increases took place. This share was high in Hungary too, but has decreased considera bly as a result of anti-crisis measures. One cannot indicate public ad ministration consumption as a primary focal point of unbalance in othe r countries analyzed. As for the gross fixed capital formation, its ex cess cannot be identified solely on the evaluation of GDP share or on the basis of its growth rate comparison with the GDP growth rate; the urgent need for technical reconstruction in transition economies subst antiates the adequately higher investment growth rate in comparison wi th the GDP growth rate. In spite of this, however, it is obvious that the scope of investments in Slovakia and the Czech Republic is excessi ve and represents a primary focal point of the internal unbalance. The paper states that many factors acting autonomously in the sphere of f oreign economy and influencing external, and indirectly, also internal unbalance, have been sufficiently analyzed in literature. The paper t herefore deals in detail only with selected aspects: ''subject'' weakn ess of domestic enterprises, some difficulties in penetration into wes tern markets. After privatization many domestic enterprises (with the exception of those with prevailing foreign participation) appeared low experienced, weal;ly equipped with capital, and entrepreneuringly les s capable. A considerable part of privatized enterprises (usually in t he form of limited companies - Ltd.) as well as companies related to t hem prefer the improvement of ''their own'' property over the privatiz ed enterprises; privatized enterprise is for them somehow second class property. ''Tunnelling'' occurs frequently. In general, the function of the owner is overestimated, other components of modem ''corporate g overnance'' are underestimated - management function is particularly u nderestimated. Pressure from public authority (Courts of Commerce, ban kruptcy proceedings) to contribute to the improvement of entrepreneuri ng subjects is inadequate. Enterprises with prevailing foreign capital participation are usually characterized by a high level of,,corporate govemance''. As for some difficulties connected with penetration into western markets and thus difficulties in providing external balance b y normal means, the paper points out that today's level of protection by customs tariffs does not represent the main problem. The main probl em is the phenomenon indicated as western protectionism. Mainly due to this protectionism the share of imports from CEFTR countries in the i mports of EU nonmember states is very low. Multinational corporations exert a complicated influence on the balance of payment current accoun t. The paper points out mainly the phenomenon of transaction prices, w here the transfer of commodities inside multinational corporations is accounted. Tn numerous cases these prices are artificially decreased - thus enabling profit centralization in the headquarters of multinatio nal corporations. Tn essence these prices are a sort of subsidized pri ces. They decrease export prices as a tax basis in the country where t he filial company of the multinational corporation has its seat. The p aper deals further with the experience of Hungary and the Czech Republ ic in overcoming the unbalance. The Hungarian concept was based on the drastic restriction of domestic aggregate demand - mainly household c onsumption. The paper points out considerable economic and social cost s connected with this solution. One call appreciate as a positive aspe ct the fact that Hungary thus achieved considerable decrease of its ex ternal as well as internal unbalance. It is significant that two years after the start of corrective measures the growth of the Hungarian ec onomy has been restored. The Czech ''packet'' of measures to overcome unbalance is also aimed at the restriction of aggregate domestic deman d, but unlike the Hungarian concept it contains measures (at least on the analytical level) for the increase of microsphere performance. It is too soon to evaluate whether the Czech way succeeds more in overcom ing the unbalance with lower economic and social costs, comp