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Remarks on the Czech and Serbian Transformations

English Pages, 20. 1. 2011

Mr. Chairman, Ladies and Gentlemen,

It is a real pleasure and honor for me to be here. It gives me an excellent and much needed opportunity to express my sincere thanks and gratitude to you for having elected me a foreign member of the Serbian Academy of Sciences and Arts.

It is not a formal, courtesy statement. I have received quite a number of both domestic and international awards and prices but this particular distinction is very special for me. Partly, because it is in your country, which I – together with many of my fellow citizens – have always respected very highly, partly because I started my professional carrier as a researcher in the Czechoslovak Academy of Sciences (not Arts – that would be beyond my capabilities) and due to my lasting nostalgy I take the Academy as an institution very seriously.

To my great regret, the communist regime did not give me a chance to work there long enough. At the end of the 1960s – after the tragic events of August 1968 which, I remember well, your country, Yugoslavia, strongly and loudly criticized and we were grateful for it – I was fired from the Institute of Economics of the Czechoslovak Academy of Sciences after being labeled the “leading non-marxist economist.” It was in some respect a flattering title but it made the subsequent twenty years of my life – till the fall of communism in November 1989 – rather difficult.

Being an economist and, I take the risk of immodestly claiming, consistently thinking as an economist, I always considered the Yugoslav political, social and economic system a case worth studying. I say this, even though I have never been a friend of all kinds of third ways (and my statement at the World Economic Forum in Davos in January 1990 that “the Third Way is the fastest way to the Third World” became quite famous and I still find it being quoted). I always wanted to do it “the first way”[1], which means to introduce a normal capitalist system with parliamentary democracy based on ideologically well-defined political parties and with market economy, as I always argued, “without any adjectives”. When some of the Czech reformers in the 1960s toyed with the idea of workers’ councils, I wrote articles opposing it.

In spite of that, I considered the doctrine of workers’ councils (in the economic literature discussed also under the term “labor-managed economy”) an interesting concept. Its original and quite unique implementation in your country probably helped to establish a much higher degree of decentralization, efficiency and democracy in the economy (and society) in Yugoslavia than in any other standard Soviet-type communist country. On the other hand, the mainstream economists were always convinced that a labor-managed firm is less efficient than a profit maximizing firm. The early theoretical works by Benjamin Ward The Firm in Illyria”[2] and Evsej Domar The Soviet Collective Farm as a Producer Co-operative”[3] brought persuasive arguments in this respect. These studies were very extensively discussed in Prague in the second half of the 1960s.

After the fall of communism, at least speaking about the Czech Republic, the ambition was to build a standard parliamentary democracy and market economy without experimenting with the utopian fantasies of “brave new worlds” propagated by some of our own, as well as foreign advisors (or would-be advisors). I was – I dare claim – an influential driving force in this respect, whereas the opposition to such an approach was rallied around my predecessor in the presidential office, Václav Havel. It seems that we both kept our positions up until today.

I had neither time nor motivation to follow the academic and political discourse in Yugoslavia at the beginning of the 1990s. It was made difficult by the very unfriendly split of your country (no “velvet divorce” like in Czechoslovakia but it is fair to say that it was much easier for us to do it) and by the subsequent tragic war which I’ve always considered misinterpreted both in the international politics and media. As I said, I am not acquainted with your internal debates at that time about, to use our terminology,

- where to go and
- how to get there,

something which was very explicitly debated in the Czech Republic. I only wondered whether the kind of political, social and economic system you had in the past helped in the subsequent transformation task or whether it was a burden (or at least an inconvenience). I do not want to pretend that I have an authoritative answer to that question but I am inclined to think that it was not a help. There were several reasons for that.

In the Czech Republic, there was practically no one, or at least no one politically relevant, who would be defending the old system and, as a consequence, a radical departure from it was considered a prerequisite for any successful future of the country. With all my ignorance, I am not sure the same resoluteness existed in your country. It is, of course, a very daring statement but it has to be formulated and, eventually, rejected.

In my country, we speak about a revolution, albeit a velvet one. The Czechs took it and take it as a revolution, as a radical and fundamental systemic change. I may not be listening attentively enough, but I have not heard the term “Yugoslav” or “Serbian” revolution in a similar meaning. This difference may be relevant. I assume that the people’s perception of a revolutionary systemic change, or the non-perception of it, substantially influenced the following course of history in both countries.

The problem of transition (or transformation) from communism has its external dimension as well. The communist system had been perceived in Czechoslovakia as imposed on us by the Soviet Union. We considered ourselves a Soviet satellite, artificially isolated from the free world. We wanted to radically change it. We have never wanted to become a bridge between the West and the East.

Your situation was probably different. Communism was not imposed upon your country from the outside. In a world dominated by two competing blocks, your country was – in some respect – an example of independent development. Yugoslavia was a country with high international authority, a founding member and an important representative of the Non-Aligned Movement. For a long time this was your advantage but when the Cold War ended and the communist block dissolved, it turned out to be a mixed blessing. Even the subsequent foreign policy orientation was not made easier.

An important aspect of the process of transition was privatization. It is, at least conceptually, easy to privatize state-owned firms. Our experience tells us that it was much more difficult to deal with our agricultural cooperatives which represented a variant of a labor-managed type of firms. We succeeded in rapidly privatizing the state-owned firms but we had difficulties finding what to do with cooperatives because it was not possible to privatize them. Their transformation into the form of so called “cooperatives of owners” was not very successful. I wonder how the same problem affected the transition of your country. Again, without knowing details, I consider it interesting and highly relevant in an era when all kinds of external constraints are imposed upon a privately owned, profit maximizing firm, upon a firm which is more and more pushed to the world of stakeholding (instead of stockholding).

It seems to me, therefore, that your transformation task was not easier than ours.

The fate of both our countries is currently significantly influenced by European developments. I fully understand the Serbian ambitions to become – as soon as possible – a normal European country which nowadays means to be a member of the European Union. I want to stress that my country officially supports it.

I, however, very strictly differentiate Europe and the European Union. We can – and I do it very often – argue that it is possible to imagine a different, more fair definition of normalcy but to my great regret we are not „majitelé klíčů“ (the owners of the keys) – to quote the title of Milan Kundera’s well-known play – to the definition of “European normalcy”. We already were and sooner or later you will also be accepted into that club. Our experience forces me to tell you that both the requirements of the European Union on its future members and the political, social and economic system of the EU itself went against the vision of society we wanted – at the beginning of the 1990s – to aim at. I don’t know how you feel about it.

Speaking about us, we wanted democracy and are getting growing democratic deficit and lack of accountability instead. After years and decades of proletarian internationalism and governance from Moscow, we wanted national sovereignty, but are getting governance from Brussels. We wanted free markets, but are getting “die soziale Marktwirtschaft”. We wanted markets without adjectives, but ended up with the “socially and environmentally shaped and ‘weakened’ market economy”.

Due to this, we moved ahead in one direction in the first post-communist decade but have been moving in the opposite direction in the second one. For some of us, it is a deep disillusion. Not only for us. All the post-communist countries which entered the EU have a similar experience. This problem has been underestimated and put aside by all these countries as a less important one but it was and is a mistake. The undergoing radical shifts in the EU should be of utmost concern to all of us. It is probably felt more from the inside than from the outside but I am sure it can be understood from both sides. The social scientists have an irreplaceable role in conceptualizing it.

It brings me to my final topic. Few weeks ago, I was asked to write a short essay for The Economist’s 2011 Yearbook under the title “The Future of Europe”. The point why I mention it is that I added a question mark to it: “The Future of Europe?”. Several years ago, it would not have come to my mind to do it, but it becomes quite normal now. It does, however, bother me.

I am afraid Europe forgets what lay behind its centuries lasting exceptionality. The people who live there now do not notice that they – partly deliberately, partly due to carelessness – destroy this exceptionality.

Europe was based on freedom and democracy, on the profound respect to its diversity (also in the systemic sense), on the Christian way of looking at human life and human behavior, on the understanding that it must have more decision-making centres (not one imperial metropolis), on the realization that there must be a strong link between performance and rewards, etc. These and many other “European” characteristics have been evolving for centuries. They were not the result of an authoritative project, to quote Hayek, they were the result of “human action”, not of “human design”. They were the outcome of a spontaneous evolution of the complex system called Europe.

This evolution has been broken. It started with the French Revolution when human rights, more claims than rights, were born. It was reinforced by the “October Revolution” which abolished freedom, democracy and market economy and by – in many respects similar – “revolution” of Hitler’s Nazism. In the shadow of these “great” revolutions the gradual, not easily visible “crumbling” of Europe has proceeded, today with the help of new fashionable “isms”.

I see it as a serious problem to which we have to pay attention both in the Czech Republic and in Serbia, both by academicians and common people, both by politicians and their voters. I hope Serbia will become an important player in the European searching for a way out. Personally, I would prefer returning to the first way, not reviving any of the old, non-functioning third ways.

Thank you for your attention.

Václav Klaus, Academy of Sciences and Arts, Beograd, Republic of Serbia, 20th January, 2011.

[1] “The Third Way and Its Fatal Conceits”, Speech at The Mont-Pelerin Society Regional Meeting, Vancouver, Canada, August 30, 1999. Published in Vordenker einer neuen Wirtschaftspolitik. Friedrich A. von Hayek Institut, Frankfurter Allgemeine Zeitung, Frankfurt am Main, 2000. Available also at www.klaus.cz.

[2] Ward, Benjamin. “The Firm in Illyria: Market Syndicalism”. The American Economic Review, 1958, vol. 48.

[3] Domar, Evsey. “The Soviet Collective Farm as a Producer Co-operative”. The American Economic Review, 1966, vol. 57.


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