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Europe, Global Economy, and United States: The Notes for the Munich Speech

English Pages, 2. 5. 2003

I am pleased and honoured to be here today and to get the opportunity to address this distinguished audience. Before starting, I have to say that this is my first speech abroad in my new function - with the exception of speeches at presidential dinners during my first foreign trips. I intend to participate in conferences like this one which means I have to find an uneasy and risky position between official presentations short on ideas and strong views and careless or carefree academic talks full of thoughts-provoking ideas. I am not sure I will succeed in finding it but I will do my best.

This year’s Munich Economic Summit has in its title three words: Europe, global economy, and United States. I shall briefly touch all of them.

In Athens, two weeks ago, I signed - on behalf of the Czech Republic - the Accession Treaty to the European Union. I would like to add a few words to it. We all know that Europe had been for a long time a divided continent. We, who lived in its eastern part, know it even better.

The collapse of communism more than 13 years ago eliminated one of the European most important dividing lines, the Iron Curtain, and this helped to put into motion a dramatic process of opening-up and of liberalization and deregulation of Central and Eastern European societies. All of them underwent a radical transition from communism to the system of political democracy and market economy. Despite many difficulties, we have, by and large, year after year, seen progress. Now, I dare to say, in their basic political and economic structures and institutions the Central and Eastern European countries are already close to the countries which were lucky not fall into the communist trap.

Western Europe – finally and with a visible hesitation - recognized their progress by offering them membership in the European Union. The ex-communist countries accepted it because they wanted to be normal European countries which is, nowadays, impossible without EU membership. That was the main basis for their motivation to enter the EU as soon as possible. They asked for it even if they knew that the nominal, institutional convergence (the acceptance of acquis communitaire and of other “parameters” and policies connected with membership) in many respects blocks or postpones the needed real convergence.

The Czech Republic is ready to participate in the European integration process and to carry out all necessary requirements connected with the membership. We have, however, a feeling that there is a discrepancy between what we get and what we give. The economic effects of elimination of all kinds of barriers (of liberalization in a broad sense) have been – in my understanding – more advantageous for the current member countries than for us. We hope that the continuous evolutionary process of real convergence will finally bring about a balance between costs and benefits but it will take a longer time than is usually expected.

This is further complicated by the fact that Europe faces these days a big challenge. It has to guarantee genuine freedom and liberal democracy (in the classical sense) to the people of the continent as well as to create an efficient market economy. I am afraid that both freedom and efficiency have been reduced by the developments of the last years or decades. It makes me nervous that Europe is not sufficiently aware of these dangers and lives in a nirvana of relative affluency, of vacations spent in pleasant climates of the south, of non-existence of authoritarian or totalitarian regimes on its territory, of several decades of peace and positive economic growth. We should be aware of the fragility and vulnerability of all that. Instead of it, the European politicians are preoccupied with the building of a continental entity which aims at the formation of a postmodernist, postnational, postdemocratic, multi-cultural pan-European state and at the elimination of traditional European nation-states. I may be wrong in seeing our future this way but I am definitely not alone who sees it this way.

To be correctly understood, I do not criticize the more or less spontaneous European integration process (if it is only modestly institutionally supported)  but its current unionistic and heavily institutionalized character. The difference between those two ways of organizing the continent is not sufficiently exposed to the citizens of European countries and the “unionists” or “federalists” try to blur (not to “blair”) the obvious and substantial difference. They evidently aim at establishing a compact European superstate. They try to sell it, however, with a different title - as an opening of the European continent, as a method how to guarantee peace, as a way how to make possible the free movement of people, goods and services, money and capital, ideas and cultural patterns around Europe which is a project I will always defend and support – together with them.

I do not believe we can continue without reforming the current approach. Many of us believe that genuine democracy cannot be established (and maintained) in an entity bigger than a state. Or, to put it differently, we do not see any source of democratic legitimacy higher than the constitutional democratic state. Many Europeans speak about EU democratic deficit which is - in my understanding - a substitute for saying that the EU is run by unelected bureaucrats, by predominantly “internationally” motivated politicians and by the belief in the advantages of the majority voting schemes at a continental level. We have to ask ourselves whether it is possible to imagine the development of genuinely democratic international institutions at that level? For me only states give people a sense of identity and provide a framework for individual freedom.  The current Convention should face such issues straight-on, without escaping to less relevant ones. The Europeans deserve it and our good, old Europe as well.

The opening-up of societies all over the world goes on and the so called global economy becomes more and more a reality. It has some pleasant and some unpleasant consequences. The world-wide competition in an increasingly “borderless” world grows and will keep growing. Only efficient, flexible, forward-looking firms will survive. How will the European firms do?  There is no doubt that the people of Europe belong to the same category – sometimes caricatured as homo oeconomicus - as people of any other continent. They do not need being either reeducated or masterminded by the missionaries (or perhaps mercenaries) of globalization. They need something else. They need liberal economic and social policies. They need a new wave of deregulation and liberalization. They need the restructuring and stabilization of public finances, of pension systems, of health systems, of social security systems, of industrial and agricultural policies, of antimonopolistic and competition policies, etc.

Europe is characterized - not accidently - by high mandatory costs, imposed by government paternalism and regulation. The demand for them belongs to the category of luxury goods which means it grows faster than income. There exists, however, an unpleasant trade-off between costs and growth of income. At some level the high costs start to slow down the growth of incomes and a very unpleasant vicious circle begins. Various economic studies demonstrate that this is what happened to Europe and what goes on despite political promises to stop it. Europe has, I am afraid, no other way-out than to rapidly react. The efficient, low cost firms in the rest of the world are not waiting for us and there is no doubt that there will be more of them in the near future. The globalization, whatever the word means, will continue and eventually gain momentum. We have to accept it and to react.

The United States have a much more liberal economy and a less heavy social system than Europe. This country is consistently more antistatist, individualistic, laissez-faire (and because of its dynamics even egalitarian) than other democracies. This is what produces its wealth and strength. We need to maintain a functioning transatlantic relationship for many reasons but  for me the most important reason is its role in enabling transatlantic transfer of ideas and ideologies, of life-styles and cultural patterns, of work ethic and workoholism, of courage and decisiveness. The currently fashionable European antiamericanism, the caricaturing of American life and culture, the European inability of an open and therefore risky dialogue, are frustrating phenomena. I tried to oppose them for a long time but without success. Let’s talk. Civility requires a willingness to listen to others. We should start a serious dialogue because this is the only way how to increase understanding on both sides. Saying that does not imply that all of us must be happy with American handling of the Iraqi crises but even in this case we should start talking and listening one to another. The listening is the most scarce good these days. I am glad Munich Economic Summit makes talking and listening possible.

Václav Klaus, Speech at the Munich Economic Summit, Munich, Hotel Bayerischer Hof, May 2, 2003