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20 Years After the Collapse of Communism

English Pages, 12. 11. 2009

Mr. Chairman, Distinguished Guests, Ladies and Gentlemen,

Thank you for the invitation to come once again to London and to the well-known Reform Club. I was here last time in June 2000 and remember speaking about Europe (“Europe – Integration or Unification?”). It is not surprising that this topic is still with us and that I am still in favour of integration and not unification. The number of letters and emails from Britain supporting my position is enormous, especially now.

It is a pleasure for me to address this distinguished audience at the moment, when we – and I hope you with us – celebrate the 20th anniversary of the fall of communism. I do believe the historic year 1989 deserves to be commemorated not only in the countries of Central and Eastern Europe and in Russia that were victims of the communist regime, but in the whole world. 

We should not, however, take it only as a commemoration of the past. New, not much less dangerous “isms” have been and will be emerging and we have to be prepared to face them. They may be called differently, they may look “friendlier”, softer and less brutal, but their structural characteristics are the same.

Although almost no one defends communism now, at least in our part of the world, the fall of communism remains to be a rather controversial topic. I repeat – the fall of communism, not communism itself. 

Communism is not controversial, but, unfortunately, largely forgotten and practically not discussed. What continues being discussed are the competing interpretations both of its fall in the year 1989 and of the radical restructuring of the former communist countries that followed. 

I am not happy with most of the interpretations I see around. They are based on a misleading and very biased “story-telling” which does not take into account the broader picture and does not use the available instruments, concepts and theories of well-established social sciences. It usually exaggerates the role of individuals – especially of those individuals who are presenting the story and who see themselves as the real heroes of that era. This is not my aim. I am in favour of a more academic approach.

I offered my own interpretation of those times in a book which was recently published in Czech language and officially launched in Prague two days ago. Its title is “Where Tomorrow Begins.”

I have been always advocating the rather unpopular concept that “communism was not defeated. That it collapsed or simply melted down.” Looking at it – with the benefit of hindsight – I don’t think I have to change this 20-year-old position of mine. At the end of the 1980’s, communism was already too weak, soft, old and emptied of all meaning to exist much longer. 

People in foreign countries want to hear how much they helped us to bring communism to an end. I usually disappoint them by saying that the role of the rest of the world in this process was only complementary. The real help was the tough position of Margaret Thatcher and Ronald Reagan vis-à-vis the Soviet Union. The soft and conciliatory “Helsinki process” was of no real help, but I’m afraid the Europeans were not aware of it at that time and aren’t aware of it now either.

The transformation from communism to a free society was, necessarily, a very fragile mixture of an inevitably imperfect and fragmentary constructivism of rules and institutions by us, the politicians, and of a spontaneous emergence of social arrangements (of markets in a broader sense) which was – luckily – an unorganized, unplanned, uncoordinated outcome of activities of millions of finally free people in our countries. To say – with a typical high-brow preponderance of an undetached outside observer – that it was far from perfect is missing the point.

Most of us are satisfied with what happened and also how it happened. We knew that it would have been a complete misunderstanding of the meaning and nature of free society to aim at constructing society as many of our “contemporaries” – both friends and adversaries – wanted. We knew that society – and markets – can’t be constructed. They must evolve. This is a crucial idea.

Some people still do not want to accept that the transformation process was not a laboratory exercise in applied economics. It was all very “real” and the citizens of our countries had to bear its non-zero costs (showing up in the fall of real income and employment). We were not able to dictate the details of the transformation process because we already lived in a highly democratic political setting. We were not Czars, kings or authoritative rulers of any kind. We could not avoid the costs. There are not only no free lunches but no free fundamental systemic changes either. Our task was to minimize these costs.

The politicians in our countries had a mixed mandate. They felt a relatively very strong support for rejecting, abandoning and dismantling the oppressive communist political regime as well as  its irrational and unproductive economic system, but there was no clear and generally accepted idea (or vision) where to go. After four decades of communism, people were afraid to say that they wanted capitalism and free markets. Together with many Westerners, at that time and now as well, they were dreaming about various kinds of utopian third ways. 

There were not many of us who were ready and/or had the courage to openly say that we wanted capitalism (and in my terminology “markets without adjectives”). The reluctance in this respect was enormous. Very much like now. It has become politically incorrect here, in this country, in Europe and also in America to defend capitalism these days.

Our second task was to decide how to get there. It was necessary – as soon and as quickly as possible – to open up markets (both internally and externally), to liberalize and deregulate them, to desubsidize the economy in order to reveal the true costs and prices of all kinds of economic activities, to denationalize and privatize the whole economy. 

Our quick and successful dismantling of the institutions of the old system led to an institutional vacuum which had to be filled with new institutions. We were aware of that. But we knew also that waiting for the existence of a perfectly prepared box of rules and institutions of a market economy before the starting of the whole liberalization and deregulation process would have been a tragic mistake. The scholastic dispute of what should come first – markets or market supporting institutions – reminds me of the old chicken–egg sequencing question.  As a result, we had to go ahead step by step and work on chickens and eggs simultaneously. The moralistic preaching coming from the West that there must be “the rule of law” first, was meaningless. The issue was how to do it, not whether we wanted it or not.

Where are we now? Countries such as the Czech Republic have become “normal” European countries. We face the same problems the “old” EU countries are facing, not specific problems of post-communism. This is a great achievement on one hand, but a mixed blessing on the other.

To my great regret, our development in the last 20 years was not linear, going in one direction only. The first post-communist decade can be characterized as an “uphill” movement – more freedom, more democracy, more market economy, less state intervention, less regulation. In the fundamental equation: citizen vs. state, we had been moving towards the free citizen, away from the state and its masterminding of society. Socialism (or social democratism) was in retreat, the role of new collectivistic “isms”, such as environmentalism, was not yet as dominant as it is now.

This has, however, dramatically changed. The now ending second post-communist decade has been quite different. We have been moving into the opposite direction: downhill. Now, we experience less freedom, more regulation, more manipulation of people in the name of all kinds of politically correct ambitions, post-democracy instead of democracy, growing disbelief in markets. Social democratism and environmentalism are on the winning side. “Market economy” practically disappeared, we got a “social and ecological market economy” instead. 

This shift has been made more profound by the current financial and economic crisis. As we all know, the crisis will sooner or later be over, but the real damage caused by the crisis will, I am afraid, stay with us for a long time. The adversaries of the market have again managed to spread a far-reaching distrust in the existing economic system, but this time it is not the mistrust in the free market capitalism, in the laissez-faire system, in the capitalism of Adam Smith, Friedrich von Hayek and Milton Friedman, as it was the case 70 – 80 years ago. It is now the mistrust in the highly regulated capitalism of the second half of the 20th century. We have an interpretation crisis. The adversaries of free markets claim that for the last decades we have had a laissez-faire market-place. If they were right, the problems of today are due to laissez-faire, but they are not.

We should consider it our duty to fight against the newly rediscovered belief in the state, against the “second-generation” Keynesianism we see around us these days. We must not allow the repetition of the 1930s and the decades that followed. We must limit, not expand government interventions into the market. That is our task for today and for tomorrow. Our communist experience gives us a sufficient justification to say that.

Václav Klaus, Reform Club, London, November 12, 2009


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