After the dissolution of the Austro-Hungarian Empire following World War I, Czechoslovakia was created from two historical nationalities&##151;the Czechs and the Slovaks&##151;and several national minorities. Between World Wars I and II, Czechoslovakia was among the ten most developed countries in the world. A skilled labor force and an enterprising industrial sector fostered a well-developed legal and economic system characterized by wide-ranging international contacts, especially in the Czech Lands. In 1937, shortly before World War II, the population of Slovakia represented 23.2 percent of the population of Czechoslovakia; however, the share of Slovak domestic production in the economy was only 11.7 percent.

Paradoxically, the most successful recent period for Slovakia from an economic point of view was the forty years under socialism. These years witnessed intensive industrialization and urbanization. By the mid-60s industrial output was greater in Slovakia than it had been in the whole of Czechoslovakia in 1937. Between 1948 and 1975 industrial production in Slovakia increased 18.7 times.

Likewise, due to extensive growth in 1948-89, the per capita industrial potential of the Czechoslovak economy was the strongest in the world. In 1988 the unemployment rate was one of the lowest in the world.

On the other hand, industrialization had a negative impact on the environment and forced jobs in many districts to be dependent on a single manufacturer. Rapid urbanization destroyed traditional social ties without fostering new ones. Forty years of central planning substantially restricted the structure, quality, and efficiency of both the Czech and Slovak economies. Thus, the demand economy could not exploit the positive trend in capital accumulation effectively. After 40 years of socialism, the economy was characterized by an enormous number of unfinished construction projects, the unsuitable allocation of expenditure, the inefficient use of resources, deteriorating infrastructure, an obsolete telephone network, and so forth. By the end of the 1980s Czechoslovakia was politically fettered, socially unjust, and economically inefficient. It was becoming more and more obvious that any cure had to be drastic.

The collapse of Communism in November 1989 through the "Velvet Revolution" led to the transition to political democracy and the more painful transition to a market economy. Initial economic reforms attempted in 1991 had a heavier impact on the Slovak economy than they did on the Czech economy. They were met with opposition by Slovaks accustomed to a paternalistic state. A wave of nationalism emerged in response to the difficulties of the economic transition. A portion of the public believed that economic reform was an instrument of exploitation and impoverishment in Slovakia. However, until January 1, 1993, when the independent Slovak Republic was established, the idea of separation from the Czech Lands did not attract more than 25 percent of the Slovak population. The division occurred without a referendum. It was the result of a political agreement between new governments in both countries.

The agreement was motivated by incompatible economic programs and contradictory views concerning the constitutional framework of the political representation of Czechs and Slovaks following the general elections in June 1992.

Since January 1, 1993, the inhabitants of Slovakia have faced two paradoxical tasks: they must create a new state which most of them do not desire; and they must undergo profound economic changes despite the prevailing wish for milder, more gradual reform. There is relatively little willingness to endure the transition and a considerable amount of discontent, frustration, irritation, aggressivity, and apathy. There is a general lack of consensus, and serious divisions are emerging in society. The atmosphere is confrontational, and respected leaders have not stepped forward to clear the air.