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Europe, Its Problems, and Russia in the 21st Century

English Pages, 18. 4. 2013

Introduction

As someone coming here from a small Central European country, which means from Europe, from this rather problematic region which is not in a rosy, stable and promising state these days, I don’t feel I am in a position to give advice to anyone anywhere in the world, including Russia.

Europe should try to put its own house in order – to solve the visible, widely discussed but not sufficiently analyzed and understood economic and financial problems, as well as the less visible, but more fundamental political ones, connected with the gradual loss of democracy which is the inevitable consequence of massive centralization and unification of the whole European continent. The term “democratic deficit”, usually used for describing this state of affairs, is an obvious understatement. These two kinds of problems are, of course, interconnected and both of them are of equal importance to me.

However, European problems are not the topic of this conference. How to solve them is not something to be discussed here. We should discuss them at home, at our conferences. Russia might be, perhaps, interested to understand them out of curiosity and, more practically, in an attempt to have a better understanding of its own situation and of its own future.

I.

Being a guest here, I don’t think, I can afford to be as critical towards Russia as I am towards Europe, or better to say towards the European Union. In my recent top political positions, as Prime Minister and later as President of the Czech Republic, I have been  following the developments in Russia in the last two decades very carefully, but from a distance and – I hope – I have been doing it with a sufficient modesty and respect.

I have never allowed myself the patronizing attitude of so many politicians, high-brow intellectuals and irresponsible journalists who come here as “experts” representing European and international organizations and consider themselves the champions of freedom, democracy and wisdom. They preach democracy, rule of law and market economy without trying to understand the real situation and the specific characteristics of this country.

To make myself explicit, I consider the developments here in Russia in the last two decades to be a relative success – when we look at it with a proper and fair historical perspective. I consider it a relative success when taking into account the heavy burden of the heritage of the preceding 70 years. As someone who spent 40 years of his life in another communist country I think I can afford to say that.

II.

I am by no means an expert on Russia, which makes me generalize and think in broader concepts, not details. The question is what concept or perspective to take, what framework to apply. Every country is undoubtedly unique, but not totally. I always hesitated whether to accept that Russia is considered one of the so called BRIC (or BRICS) countries. [1]

I take this acronym, the initials BRIC, as a rational generalization and simplification, which may prove to be useful regardless of how descriptively imperfect it is. There is probably no scholarly or generally accepted definition of the term BRIC countries but I suppose that most of us understand what it means. For me, it is not just a name for one narrowly selected group of countries. It is much more. It is a label for a specific type of countries.

What are their main characteristics?

– All of them are big, strategically, politically and economically influential countries, which are self-assuredly aware of their present importance;

– they do not belong to the traditionally defined West and most of them are not unhappy with that;

– in the economic jargon, they are called emerging markets, not full-fledged market economies;

– in the last years, they have been growing evidently faster than the old, currently stagnating market economies;

– they have a less developed market infrastructure, weaker market institutions, less diversified economic structures. They are more dependent on primary sectors – raw materials, fuels, energy;

– they are competitive because of their lower labor costs, because of their less costly, less rigid and less counterproductive welfare systems, because of their more rational environmental policies (especially the more responsible approach to the evident nonsense of the global warming doctrine);

– they are industrializing, not deindustrializing themselves. They have not yet become victims of the selfdestructing fallacy that the engine of economic development should be the tertiary sector;

– they have a labor force which still wants to go ahead and is ready to work hard (they are far from being leisure economies);

– they have not yet reached the level of affluence (however relative the term may be) and their further economic development is not yet blocked by the diminishing motivation to work;

– they are more centrally administered, which undermines economic rationality on one hand, but makes it possible to have a long-term thinking and to carry out large-scale governmentally organized projects on the other;

– their political governance is less democratic (in the traditional Western sense), more centralized, more authoritative.

Only two of the BRIC countries had to undergo transition from communism to parliamentary democracy and market economy, a process, countries in Central and Eastern Europe know something about. Russia – because of its precommunist past and the longest and a most oppressive and destructive form of communism – was in a very unfavorable starting position.

These characteristics represent – in my understanding – a mixed blessing for these countries. Some of these characteristics are certainly not considered positive and attractive to people from post-communist Central European countries, but some are not so bad.

III.

This is the background of my position and with that on my mind I ask myself what to say here today without patronizing or giving empty and sterile recommendations?            

I see three main problems here in Russia which my country more or less succeeded in avoiding:

– the long-lasting absence of a widely shared and comprehensible transformation vision which would have given the people an elementary orientation and hope for the future. We, in my country, made it clear to everyone very soon: we wanted democracy, parliamentary pluralism, market economy with a very limited role of government. We wanted and capitalism;

– people like me followed with a well-founded fear the lack of macroeconomic and money supply control in the early years here in Russia which led to a very high and hence destabilizing inflation;      

– I became conscious of the inability to set up genuine political parties and, as a result, a full-fledged parliamentary democracy.

The changes introduced in the last decade (or one and half decade) made a difference but it seems to me that it is necessary to go further. What should be done to comply with the 21^st century challenges? I will dare to make three simple points. I don’t have any ambition to make geopolitical recommendations or forecasts. This is not my subject, my field of expertise. I do believe, however, that the basis for any meaningful foreign policy activity is the strength and stability of domestic political and economic situation. I will, therefore, stay in Russia.

1. I am convinced that the pluralistic political system is an inevitable step forward for this country in the 21^st century. The only question is how to introduce it and how to make it efficiently functioning without a long delay and without undermining the existing, rather fragile state of regional, ethnic, social and political realities which exists in any BRIC-type society. The unstructured and comfortable general textbook recommendations are of a very limited relevance. Some countries, including Russia, did not use (or perhaps were not
able to use) the opportunity to introduce such a political system immediately after the fall of communism. It was a better opportunity than now but it was up to each country to decide. I accept that it was much easier to do it in a small Central European country than here. But it must be done sooner or later. The dreams that it can be avoided because the world is entering a postpolitical, postdemocratic stage anyway are simply wrong.

2. An easier task is to enhance the existing level of openness of the economy and to complete the liberalization of foreign trade and of all other economic and financial transactions with the rest of the world. It could only help. It would undermine domestic monopolies and bring positive effects to the consumers and to the general welfare.

3. I already mentioned the dependence of some of the BRIC countries on raw materials and fuels. Being a Russian politician or economist, I would pay a lot of attention to the forthcoming oil and gas revolution connected with the new technological breakthroughs in shale oil and gas drilling. Countries like Russia continue living in the paradigm of rising oil and gas prices (as a long-term tendency), and with the expectation of relevant changes only on the demand side of the oil and gas equation. That is – probably – over. New technologies to tap shale oil and gas reserves make a revolution on the supply side, which can destroy the oil market with a potential price collapse. It can create a problem for traditional oil-and gas exporting countries, including Russia. The only solution is to diversify the economy as much as possible.

As a politician, I have never liked receiving advice from abroad. Many years ago I made a statement: “I am not ready to pay hard money for soft advice” which Milton Friedman dubbed “Klaus’s law”. I hope I was not giving any soft advice here today.

Václav Klaus, notes for the presentation at The Russia Forum 2013, Moscow, Russia, April 18, 2013