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Vol 2, No 29
4 September 2000
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Jan Čulík on the Czech Republic Privitisation or Theft?

Jan Čulík

A middle-brow newspaper, Mladá fronta Dnes (The Youth Front Today) is one of the most widely read papers in the Czech Republic. In the first half of the 1990s, it uncritically supported the "free-market capitalism" of then Czech Prime Minister, the pseudo "thatcherite," Václav Klaus.

After Klaus fell from grace in late autumn 1997, Mladá fronta Dnes assumed a more independent political stance, even though many of its editorial commentaries are still rather biased and superficial, certainly when compared to serious Western newspapers.

On 1 September 2000, Mladá fronta Dnes published a special supplement containing comments from various public individuals in the Czech Republic, on the occasion of its tenth anniversary. Mladá fronta Dnes's editor-in -chief Petr Šabata also asked me to write a few lines. I wrote the following:

What comes into my mind when I hear Mladá fronta Dnes? Unfortunately, I think first of all of the irregular way in which the daily was privatised. Many could accuse this privatisation of utilising the now fashionable Czech expression of "tunelling" (ie asset-stripping).

Easy money

The former Communist daily newspaper Mladá fronta, was once the property of the Socialist Union of Youth, that is, it was state owned property, but it was not included in the government-organised voucher privatisation scheme: no indivdual Czech citizens could invest their privatisation vouchers in this newspaper. This particular piece of state property was to be taken over by its own editorial team.

The daily newspaper Mladá fronta (The Youth Front) was formally closed down, and a new company was founded with a slightly modified name: Mladá fronta Dnes, The Youth Front Today. The purpose of this ambiguous title was to create the impression of continuity.

The owners of the new company were thus able to take over both Mladá fronta's trademark and its readership. The newspaper's trademark and its position in the market had considerable financial value. The persons who appropriated Mladá fronta, later sold the newpaper to foreign owners for a healthy profit.

Whilst it is true that during the ten years of its existence, the owners of Mladá fronta Dnes invested in it and worked hard in order to strengthen its position in the Czech market. Its reputation and credibility are still paralysed by the controversial manner of its privatisation.

It is no excuse that some other Czech newspapers have used similarly dubious privatisation methods. As the London-based economist František Nepil (see ...jak Češi myslí, Milenium Publishing, 1999, the first volume of selections from Britské listy, pp 174-174) wrote in 1997:

When the daily USA Today was founded in the United States, it was 16 years before it went into profit, and it only survived for such a length of time because it was supported by huge injections of capital, sums which are not available in the Czech media market.

Yes, a market position is extremely valuable in financial terms. It costs hundreds of millions of Czech crowns to build it. And this value, which was probably around several hundred million crowns, judging how many copies of Mladá fronta were sold daily in 1990, was taken out of the ownership of the state and became the property of a small group of individuals.

Would it be possible for us to be shown the purchasing contract that removed Mladá fronta from state ownership? Is it possible to prove that the present owners of Mladá fronta have paid hundreds of millions of crowns to the Czech state?

If it is true that the original newspaper Mladá fronta was de jure closed down, does a document exist, confirming that the Czech state had deliberately and voluntarily decided to liquidate legally Mladá fronta, which had a value of several hundred million crowns?

If the owners of Mladá fronta Dnes cannot show documents proving that they have paid the state for Mladá fronta's market value, then the privatisation of this paper does not differ in any way from the privatisation of all the other capital in the Czech Republic formerly owned by the state.

It is an expropriation of the taxpayers' property, property once owned by the majority, now by a small minority.

How absurd it is to call the method whereby Mladá fronta was privatised "legal" can be seen from the following example.

Imagine that a leading group of journalists on the staff of Mladá fronta Dnesfounded a new company, called Mladá fronta Znovu (The Youth Front Again), concluded an agreement with a different printing press, prevented the printing of the old Mladá fronta Dnes and took over its ditribution network and its market. I wonder how the present owner of Mladá fronta Dnes might react?

I asked Ivan Kytka, now of the BBC's Czech Service, what came to mind when one mentioned Mladá fronta Dnes. He aswered:

I think of those people who became rich as a result of the theft of Mladá fronta, as as result of the takeover of its dominant position on the market with a hundred thousand or several hundred thousand subscribers.

I would like to ask all those nouveaux riches who benefitted to set up a fund for the examination of their consciences and for the economic education of Czech society. The nouveaux riches should set an example by enrolling on such a course so that they would finally learn why their appropriation of Mladá fronta was out-right theft.

It would considerably enhance the current credibility of Mladá fronta Dnes if, on the occasion of its tenth anniversary of privatisation, the paper commissioned an independent economic study to find out what the value of the paper was in 1990, when owned by the former state. Thereafter, Mladá fronta Dnes should pay this sum back to the state.

To give it some credit, Mladá fronta Dnes published my piece in its special supplement on 1 September 2000, marking the tenth anniversary of the newspaper's founding. It was, however, practically the only critical piece included in this section, most of the others were full of praise for Mladá fronta Dnes.

In response to my criticism, in a highlighted frame, Mladá fronta Dnes published the following text from a noted scholar:

Without cutting the ties there would have been no political independence

Zbyněk Zeman, Emeritus Professor of Modern History at Oxford University in England has been commissioned by Mladá fronta Dnes to analyse in detail the origins of this paper in 1990, from the historical, as well as legal perspectives.

At the time of the fall of the Communist regime towards the end of 1989, the editorial staff of Mladá fronta were ready for change. Although it did not have close connections to the new political elite, which was then emerging from among the dissidents, neither did it belong to the front line of party-political newspapers, such as (the Communist Party daily) Rudé právo.

Mladá fronta's readers came from all strata of Czech society, and, a strong group of gifted, young journalists gathered together in the editorial offices of Mladá fronta. None of them yet knew what an enormous task lay in front of them. It was obvious that the old order was falling, but nobody knew what the new order might be like.

A careful historian will undoubtedly notice a shift in the vocabulary of the editors, and in their attitudes to the quickly changing political reality. In November and December, flashes of the 1968 reform movement appeared on the pages of Mladá fronta as well as articles written according to the rules of Communist grammar.

But the Mladá fronta journalists quickly realised that it was necessary to transform the old "Communist youth organisation" periodical into a modern newspaper and that it was necessary to become independent.

Mladá fronta was being published by the Socialist Union of Youth at that time, which was later renamed as The Youth Union. Paradoxically, this Union made it easier for the editorial staff of Mladá fronta to emancipate themselves, because it continued playing the role of a Communist ruler.

Shortly after Czech students asserted their will in the events of November 1989 and were not interested in being members of a bankrupt organisations any longer, the professional leaders of youth concentrated their eforts on retaining the property of the former Socialist Union of Youth.

It was exactly the (editors') defence against the demands made by the Youth Union in early 1990 which became the instrument of political emancipation of the editorial staff of Mladá fronta.

The Youth Union demanded space in the paper for the publication of resolutions from the endless meetings of these faithful Communists, and it also wanted to use the profit from the paper to finance these metings and other events. However, the Youth Union was no longer capable of asserting these rights.

In the summer of 1990, the editorial staff of Mladá fronta finally cut off all links with the Youth Union. The editors set up a (new) company, called MaF, which obtained registration from the Culture Ministry, entitling them to publish a daily.

It was this step which has provoked the strongest criticism of the privatisation of Mladá fronta. From the legal point of view, in the then prevailing circumstances, it was undoubtedly a justified step. Without cutting the links organisationally, the political independence of the paper would have been impossible.

The arguments about "property" and especially about "copyright," which were raised by the critics of Mladá fronta's privatisation, were unconvincing in a society in which the legal concept of private property had been shattered and in which even experienced lawyers could not say unambiguously whether the publisher was also the owner of the paper.

In the long run, the emancipation of Mladá fronta has shown that privatisation can take place in a relatively decent manner and not at the expense of the state and its citizens or as a result of a ruthless depletion of a bank's reserves.

After its emancipation in the summer of 1990, the MaF editors continued to use the facilities of the Mladá fronta publishing house in order to publish the paper. It hired all its equipment from this publishing house: the obsolete buildings and printing offices and the slow distribution network.

That was all based on contracts, concluded according to the customs of the 1950s. The list of all subscribers to all newspapers was the property of the state (distribution) company Poštovní novinová služba (the Postal News Service, PNS), and it was purely PNS's decision whether it would deliver the new daily newspaper Mladá fronta Dnes to the subscribers of Mladá fronta.

Then, the next stage of Mladá fronta Dnes's emancipation followed, the technical stage, and that was the longest. Mladá fronta Dnes needed to acquire its own printing offices, its own buildings, its own marketing department and better technical equipment for the editorial office. All that required the arrival of foreign capital.

The management of the new joint stock company was courageous enough to approach foreign investors at a time when "Czech privatisation methods" were fashionable.

These days, Mladá fronta Dnes easily equals the best newspapers in other post-Communist countries, both in the sophistication of its editorial staff and its technological equipment. Even in comparison to Central European newspapers such as Die Presse or Der Standard in Vienna, Mladá fronta Dnes holds its own.

So, Mladá fronta Dnes is a highly successful daily, but its success should not overshadow the political role which it has been playing.

The editorial staff and the management of Mladá fronta Dnes do not serve any local political party or any individual politicians. Neither do they play a role in any globalisation conspiracy. The editorial staff and the management of Mladá fronta Dnes have, in my view, understood both their readers' expectations and the necessities of the current times very well.

You see, it is still very clear—and nobody thought that this would still be the case, ten years after the fall of Communism—that Czech society has made itself extremely comfortable in its Eastern, Communist enclosure.

The Czech economy is still trying to rid itself of the habits of the past, and the civil service, as well as, for instance, the health service, still needs a certain amount of humanisation. The Czech conservative education system has proved incredibly successful in resisting the new era.

The Czech quality newspapers, including Mladá fronta Dnes, play an unusually refreshing role, fighting (Czech society's) tiresome retreat (from the principles of a Western democratic society). If politicians dislike the risks (that Mladá fronta Dnes is taking), that is the measure of the indepedence of this paper.

A credible stance?

Zbyněk Zeman seems to be arguing that the editorial staff of Mladá fronta needed to appropriate the paper's trademark and its position in the market in order to gain political independence. With regard to appropriating the subscribers, that is not really the fault of the owners of the newspaper.

It was, in this view, the state distribution company, PNS, which decided to start delivering the new paper Mladá fronta Dnes to the old Mladá fronta subscribers. This obviously had nothing to do with the fact that the owners of the new paper had taken over the Mladá fronta trademark...

Zeman argues that the privatisation of Mladá fronta was not really asset-stripping, because, at the time, nobody in Czechoslovakia really understood the concept. It is strange, however, that although the original privatisers, the Mladá fronta editorial team, may not have understood the concept of asset-stripping at the time, they certainly did not refuse their share of the profits when they sold the formerly state-owned paper to a foreign owner. Why is it that nobody wondered where all this money had suddenly appeared from?

The "Olovo" scandal

The Czech political scene is periodically paralysed by petty political scandals, which produce a feeding frenzy by the media and that deflect the public's attention from the more serious issues of the day. One such scandal has been simmering for several months and has now burst out into the open.

A file of allegedly slanderous material, mostly disinformation, whose purpose was to discredit Petra Buzková, a leading member of the ruling Czech Social Democratic Party, was found to be circulating in the offices of the Czech Government.

Recently, Mladá fronta Dnes used its internal police contacts to reveal that one of the aides of Premier Miloš Zeman is being investigated for allegedly having compiled this disinformation.

Over the past few days, the Premier has hit back. The government has decided to sue the "unknown perpetrator" of this action.

Tellingly, the government admits in its submisssion to the investigating authorities that an atmosphere of chaos ruled in the Government Office and that officials were in the habit of leaving their computers on without logging off from the secret government computer network so that anyone could have gained access to secret government files and could have placed the anti-Buzková material in folders held by the Premier's aides.

Miloš Zeman has accused two Mladá fronta Dnes journalists of having helped organise the placing of this anti-Buzková material on the Government Office computer network. Needless to say, Zeman has failed to produce any evidence to this effect.

Mladá fronta Dnes has energetically come to the defence of its two members of staff. But is Mladá fronta Dnes really as objective and impartial, a beacon of objectivity in the post-Communist world, as Zbyněk Zeman seems to make out and as Petr Šabata, Mladá fronta Dnes's Editor-in-Chief, seems to argue in connection with this scandal? Here are a few lines from from the respected commentator Václav Žák, published in Hospodářské noviny (The Economic Daily) on Friday:

It's the Czech Press's Own Fault that it is paralysed

A nasty, slanderous text was circulating among the Premier's aides. The Premier has confirmed that he was aware of the fact, adding that this was a disinformation campaign aimed against his party and that it was co-organised by journalists.

In a normal coutry this would probably mean his political death. I am willing to bet that in the Czech Republic, this will not happen...

In the Czech Republic, journalists do not have the sort pf authority that is acquired by many years of effort, by aiming for objectivity and impartiality. Mladá fronta Dnes is a good example: its editorials, "expressing the standpoint of the paper," literally helped build "absolute laissez-faire capitalism."

Although it became the most widely read paper in the country, what it wrote had little influence on the political views of the voters. Between 1996 and 1998, Mladá fronta Dnes made a u-turn and started criticising Václav Klaus, who, until that time, had been uncriticisable.

Maybe Mladá fronta Dnes's criticism of Klaus was sometimes too harsh and unfair. This however did not influence the voters' support for Klaus's Civic Democratic Party.

Biased commentaries appeared in all the media. The Czech "Spitting Image" television caricature of Zeman on Nova Television before the 1996 election was dressed in a Russian fur hat with a red star and a machine-gun on his back.

Most commentaries in the right of centre newspapers were biased against the Social Democrats, but the Social Democrats won the election regardless of the press.

After the Social Democrats assumed power, the press campaigns directed against them became even more hysterical. (As a result of a special coalition agreement between Klaus's Civic Democrats and Zeman's Social Democrats) the right wing journalists sharply attacked both these parties.

But the chiefs of both parties noticed (with some surprise?) that newspaper content had little influence on the voters' political preferences. And Miloš Zeman has apparently decided to become politically successful in spite of the fact that he insults journalists almost daily.

And he has managed to do this.

Václav Žák concludes that Czech politicians are currently not subjected to any accountability because the press—including the widely read Mladá fronta Dnes—is untrustworthy and without authority.

Perhaps their dubious dealings ten years ago mean that Czech newspapers will always struggle to gain authority and respectability.

Jan Čulík, 2 September 2000

Jan Čulík is the publisher of the Czech Internet daily Britské listy.

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