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Notes for Davos: EUROPE 2007

English Pages, 1. 2. 1997

The shape of Europe in the year 2007 will depend crucially on the following three mutually intertwined, interconnected developments:

1. how successfull will be the transformation process of the originally communist countries of Central and Eastern Europe;

2. how successfull will be the integration process in Europe, both as regards its deepening and widening?

3. how successfull will be the process of a formation of free, liberal societies in Europe; how successfull will be the deregulation, liberalization, privatization; how successfull will be the dismantling of over-regulated and over-paternalistic „welfare state“ in Western Europe.

These three developments have their own specifics. Nevertheless, they have many things in common, they reinforce each other.

Regarding the developments in the post-communist countries, I am rather optimistic. Many in the West are disappointed by the fact that those countries have not yet reached the level of development which they would have wished, but I do not consider this as my own interpretation of events. Their disappointment is usually, and I have to add inconsistently, connected with very harsh criticism of the communist regime. If such a criticism were justified, then logically the transformation from communism to free society would be a complicated process and would take an inevitable time. In most of these countries, the transformation of institutions and basic rules has been completed. The functioning of basic political, social and economic mechanisms has been improving, the markets are stronger and more efficient. However, the failures of unmature markets cannot be avoided and will exist for some time to come. Despite this fact, my „basic instincts“ tell me that the year 2007 will be characterized by more successful than unsuccessfull countries in Central and Eastern Europe, and that the Bosnian and Sarajevo tragedies, Chechenia war, the fights in front of the Russian Parliament, etc. will not be repeated.

European Union will enter the post-Maastricht period. By 2007, the conclusions of the 1996 inter-governmental conference will be implemented into the basic functioning of the Union, Euro will be there together with strong European Central Bank as well as with a higher degree of European fiscal centralization. As an economist, I expect periods of divergent economic developments in various European countries which will - without the mechanism of flexible exchange rates - lead to conflicting requirements on the centralized European budget. Those of us who lived in federation, and as federal ministers of finance had to solve repeated fights about redistribution of funds from a more successful part of federation to a less successfull one, know what they are talking about. In this respect, I envisage problems and conflicts.

It may be surprising to some of you but I consider my above-mentioned third question to be crucial because in this respect I am more pesimistic. I see two tendencies which disturb me.

First, there has been a widespread increase in attempts to „legislate“ - which means to control and regulate - almost everything in human life and in human activities. It is very often done, suggested and defended not on the basis of the pure „longing for power“ on the side of ambitious individuals. It is very often done on the basis of well-ment ideas, of good intentions, of partial „truths“. It is one dangerous development which we - citizens of former communist countries - know too well.

Second, there has been, simultaneously, a visible increase in the „rent-seeking“ activities of various pressure groups for which the current state of democracy is an extremely fertile land. There is a danger that the strength of those groups will partialize the society as a whole to the detriment of both the society and its individual citizens.

I do not know whether we succeed in winning the battle with overlegislation and with corporativism and syndicalism in ourselves. I am afraid that both tendencies are deeply rooted in the intrinsic fabric of our societies. To extrapolate in 1997 (with the knowledge and data of the last decades) the year 2007 is not a very rosy picture, or, to put it more mildly, it is not only a rosy one.

Václav Klaus, Plenary Session, Davos, 1. February 1997