Mlýnec Restaurant, Novotný's footbridge, Prague, December 7th, 2012
Translation from klaus.cz
Time flies very fast. It seems to me that our previous meeting didn't take place one year ago but just several weeks ago. And not only that. I feel tempted to say that it may be possible to repeat my contribution from the last year because I am afraid that the basic characteristics – the situation in our country as well as the situation in Europe – haven't changed during that year. And if they have, it was a change to the worse. Because diverse unfavorable trends have continued, the situation – and its amplified reflection in the thinking of the Czech citizens as well as the citizens of other EU countries, i.e. inhabitants of Europe – has self-evidently deteriorated. This is another initial thesis of mine. That's not due to any aprioristic pessimism or hostile undermining of our coalition government by myself, as we sometimes hear. Instead, it is a neutral analytic appraisal.
The key political representatives of the European Union and its largest member states don't want to admit this deterioration to themselves. They still pretend to believe that nothing bad is going on. Maybe just a few grumblers are provoking them. I am reminded of their attitude day after day; the recent EU-Asia Summit in Laos that I had the honor to attend was another lesson of this type for me. The top-tier exponents of the EU don't understand – and I am quoting them – why people keep on talking about a crisis. Their lives continues in the straitjackets of their own illusions and they refuse to see the reality.
It reminds us way too clearly of the decades we have experienced in our country and the whole Eastern Europe. Even the rhetoric seems to be closely analogous. Of course that there also exist several important politicians in the EU countries who are saying that they have carefully read my book Europe: The Shattering of Illusions (which was published in Czech as well as in English, German, Italian, Spanish, and Bulgarian translations) and that they agree with the book in principle. One of them was even informing me that he has placed the book on a visible spot of his desk in his office, in order to provoke the visitors. When I have remarked that I had been listening to him just moments earlier and he hadn't said any of these things, he replied that I must surely understand the reasons. Let me admit that I don't understand them. (My speech on that summit is available at this server, klaus.cz.)
Off-topic but political: Auf Wiedersehen, Monti. ;-) The Italian prime minister is resigning. And they thought that Super Mario was the PC game associated with him...
Around us, both in our homeland and in the European environment, a crisis continues. It is an economic crisis, a political crisis, but also a crisis of the human perspectives, prospects, and hopes. To reduce this situation to a debt crisis of several countries or the crisis of the concept of the common European currency means to misunderstand the depth and breadth of the current European problem.
Wherever in the world I give talks, I am reminding the listeners that we're the country in which a great economist of the first half of the 20th century was born and educated at schools – Josef Alois Schumpeter (after all, I am the honorary president of the Schumpeter Society founded in his birthplace, Třešť in Moravia) whose famous quotes included the statement that the crisis is always and everywhere the process of creative destruction. Even if we wanted each crisis to be dominated by the constructive things, some destruction is inevitable. The part of the economy which was shown to be unsustainable by the crisis has to end; it's necessary to get rid of the flawed, unsustainable ideas as well as all incorrectly conceived institutions. That's what a crisis should be about. To attempt to preserve everything from the past means to wish to prolong the crisis indefinitely. Unfortunately, that's exactly what's going on in contemporary Europe – and even in our country – today.
We have refused to destruct and get rid of dysfunctional elements of the economy, flawed ideas, and unproductive institutions. That's why the crisis continues and even without a trace of pessimism, I am still forced to say that it will continue in the future, too.
Several years ago, we went through the crisis of the end of the first decade of the 21st century and – almost rightfully – we were saying that it was ignited by events outside our country and region. Even I am convinced about this assertion but this import of the initial crisis impulse changes nothing about the fact that the crisis has umasked all of our weaknesses, imbalances, and unsustainable projects that could only operate in a "good weather" (in the economic sense). Just like the United States and most of Europe, we chose methods to cure the crisis that were not leading to solutions. In the better case, they were pills to alleviate pain which were making it easier to go through the hard moments of the acute crisis but that had nothing to do with the genuine solution and overcoming of the crisis.
It was no accident that a crisis number II – and in this case, it was unfortunately stronger in our country than in some other European countries – began after the previous one. It's already worse than the first one and from the economy, it is pouring to politics and the people's elementary sentiments. It affects the mood, it creates the general frustration, it encourages radical populist moves that may only make the situation worse. The reason is still the same – it's the refusal to accept the crisis as such and to fairly describe its causes; it's the belief in the palliative cure and in the shamans' methods of exorcism. These are the dominant methods at the European Union summits.
As an economist, I was obviously primarily concerned and I am still concerned about the economic problems but I am no longer sufficiently motivated by the desire to enumerate them. I have been doing it for years or decades and many people simply don't want to hear about them because they are still controlled by the nearly communist belief that the laws of economics don't exist and that politics may dictate the economy. That's why I am afraid that the rational invitations to economic changes and reforms can't lead to anything.
For three hundreds years, the economists have been trying to understand the patterns and laws in the economy. For their efforts, they have been attacked by revolutionaries of all colors throughout the centuries but in the wake of the 2008-2009 crisis, they earned new enemies who – much like all of their famous and infamous predecessors – think that it is possible to command the wind and rain. The Keynesian methods have been accepted as trustworthy once again and the application of these methods has led us astray once again. This "failed crossing" is most clearly visible in the current European debt crisis. Even some of those who have been refusing to believe for a long time start to realize that there's no way out in the forward direction. They start to comprehend that there's only one way, namely the way back to the previous crossing. However, Europe as a whole, our Parliamentary as well as extra-Parliamentary opposition, our labor unions, our aggressive applicants for entitlements of all kinds (from the subsidies to cinematography to increases of the physicians' and judges' salaries), and even our weakened current government don't realize that or don't want to admit that.
I am no fan of cheap historical analogies but in the recent years, I am reading lots of economic papers that no longer debate just economic aspects of the ongoing crisis but that focus on the political context, too. The crisis of the late 1920s and the early 1930s is being interpreted as a direct preparation for the terrifying events that took place a decade later. Even today, their authors are seeing certain parallels. Even today, they are worried while they observe a completely new political situation. Even I am worried about our democracy.
Believe me, this fear doesn't arise purely from the incident in Chrastava, from Mr Landa's speech during the Czech Nightingale Ceremony, from Mr Janeček's trips to the regions of the Czech Republic. These are just individual events that are easy to see, that may be made to happen, and that are endorsed or at least tolerated by a non-negligible number of people because of the gradual arrival of the climate that is a favorable mycelium for their growth. We should be very watchful about these things. Even on the Titanic's deck, the champagne was being served for quite some time.
The current situation doesn't have any fast and easy solutions or ones that may be formulated by concise slogans. This not-too-optimistic statement is implicitly containing at least three components:
- Let's not get fooled by the offers of fast, easy, and radically sounding solutions and let's not take their apostles' bait.
- Let's accept that even in the case of a hypothetical, because in practice very hard to achieve, agreement about the needed changes, their subsequent implementation and the beginning of their actual influence will require a significant amount of time and that the problems we see today will persist at least for several years.
- Let's understand that the proposal of the desirable acts can't originate as a project of the anointed ones, as the output of our National Council of Economic Advisers or a similar institution or a document written by the ten most recent winners of the Nobel memorial prize for economics. The proposal for these changes must be shaping as a political process in the democratic system, it must be a result of the activity of the main political subjects in our country and it's only possible if and when its representatives understand that nothing less is expected from them today. And that they can't be substituted by anyone.