Hlavní strana » English Pages » Laudacio on the occassion of…

Laudacio on the occassion of awarding the Karel Engliš Prize to Professor Jacob Frenkel

English Pages, 19. 12. 1997

It is a great pleasure for me to be asked to say a few words about Professor Jacob Frenkel on the occassion of awarding him the Karel Engliš Prize.

I myself was given this prize in 1995 and I was really honored, but awarding Jacob Frenkel means that we visibly raise the „barrier to entry“ this distinguished club - I am afraid almost too much.

In my introductory remarks to the recent publication of Karel Engliš masterpiece „Národní hospodářství“ (Nadace Universitas Masarykiana, Brno, 1994), I tried to stress the unique achievements of Karel Engliš which - in my understanding - belonged to three main areas:

- economic theory;

- economic policy;

- teaching and pedagogical activity.

On the basis of everything I know about Jacob Frenkel, I am deeply convinced that he is the best candidate for this year’s Karel Engliš Prize because he has achieved a lot exactly in the three fields which were - in the first half of this century - Karel Engliš fields.

Jacob Frenkel is a world-known economist, theoretician, author and editor. We can very easily describe his theoretical domain by presenting the titles of his books or publications without adding anything else:

- The Monetary Approach to the Balance of Payments;

- The Economics of Exchange Rates;

- Exchange Rates and International Macroeconomics;

- Fiscal Policies and the World Economy;

- Macroeconomic Policies in an Interdependent World;

- The International Monetary System;

- Optimum Currency Areas, etc.

He was mostly influenced by his undergraduate studies at the Hebrew University in Israel and especially by his graduate studies at the University of Chicago where he received his Ph.D. degree in economics in 1970. He was enriched by his collaboration with such prominent economists as Harry G. Johnson, Rudiger Dornbusch, Michael Mussa, Morris Goldstein and many others. He has never been a part of the Chicago School in its narrow interpretation (connected with such names as Milton Friedman, George Stigler or Gary Becker), but he was and is a distinguished member of the broader, more analytical and at the same time younger Chicago School which represents one of the most productive groupings in current economic theory.

Jacob Frenkel is an extremely successful public servant, because he is a policy-maker with clear visions and necessary analytical skills. He is, in this respect, one of the few in the world of today. From among his many public policy activities, I will stress the two most important:

In 1987, he became the Director of Research in the International Monetary Fund in Washington, D.C. This position is considered by many economists as one of the most challenging and most valued. To be able to be one of the key decision-makers in IMF, to have the world-wide perspective, to direct and administer the most sophisticated group of analysts, to be forced to react to any important economic event in any country in the world, to explain what happened with the benefit of an uninvolved but passionate observer, and to suggest - on behalf of IMF - the appropriate policy measures how to solve the problem is something very special. I can assure you that he was extremely successful in this role;

In 1991, at the top of his career in IMF, he was asked by his government to accept the position of the Governor of the Central Bank of Israel. I happened to be in Washington at the moment of his difficult decision. I was even asked to give my opinion. I know that his brave decision to take this very difficult and unthankful assignment was right. In the last seven years, he has been the key economic policy-maker in Israel and has been fighting for macroeconomic stability and institutional reform in the direction of privatization, deregulation and liberalization of a previously highly controlled and administered economy. As far as I know, he has been very successful. In 1996, he was re-appointed for a second five-year term and was named „Man of the Year“ of his country.

Jacob Frenkel spent twenty years as Professor of Economics, most of the time in the Department of Economics at the University of Chicago. He is a very efficient teacher. He is able to formulate his ideas clearly and in an understandable way. Even I can say that I understand him. His clarity of thinking, his ability to structure the problem in a productive way makes him a frequent chair-person of international conferences and similar gatherings. I remember enjoying his way of handling tasks last time less than four months ago at a conference in Jackson Hole in Wyoming, U. S. And I remember as well our talks during our two-hour walk in the beautiful Grand Teton mountains after that. As usually, or better to say as always, we discussed economics and public policy.

Now I have to return to the relationship between Jacob Frenkel and the Czech Republic. During my first appearance at the World Economic Forum in Davos at the end of January 1990, several weeks after the Velvet Revolution in this country, in a crowded room of several hundreds of well-known politicians, economists, scientists and journalists, I met a man who was extremely interested in the revolutionary changes in this country. We decided - very soon - to leave the room where it was almost impossible to hear each other, and we went to the close-by hotel and spent a long time exchanging our views. It was Jacob Frenkel. Since that time, we have met many times, in many places around the world, in Europe, in America, in Asia, in the Czech Republic (today even in Brno), and of course in Israel. I remember sitting with him and with Turkish Prime Minister Tansu Ciller (another Prime Minister - professor of economics) at the Tel-Aviv airport on the day of Prime Minister Rabin’s funeral. We spent several hours talking about the dangers of introducing convertibility of the Czech crown. He is always serious and analytical.

Jacob Frenkel was very helpful to our very rapid entry into the International Monetary Fund, in the preparation of the first IMF program for Czechoslovakia and in supporting and defending our specific approach to the economic transformation. Some of you may remember that we both had a very unique dialog - for the first time in English on the Czechoslovak TV - in the spring of 1990 about the market economy and the transformation process. Afterwards, he gave a lecture in Prague (April 3, 1990), where he warned us against false transformation concepts as well as against false expectations. I will quote some of his ideas from the remarks I made seven and half years ago:

- there is no way to avoid pain, transformation is not a nice picnic;

- do not create wrong expectations;

- do not start without removing subsidies;

- do not compensate by creating new distortions;

- do not use exchange rates, prices or wages, use budget;

- you must be willing to incur political costs;

- the real choice is between gradualism and credible drastic policy, not between gradualism and shock therapy;

- as you go slowly, the opposition goes stronger and you are tired;

- do not transform a once-for-all problem to a permanent problem;

- recipe for paralysis is waiting for the whole blueprint;

- bad economics is bad politics;

- do not fight yesterday’s wars, etc., etc.

Those were few excerpts from my notes of Jacob’s speech. I must say - reading them now with the benefit of my seven-year experience - that he was, as always, right. He even mentioned something what I consider as an important wisdom - "Social transformation is a long-run project (like marathon) and therefore, do not declare victory prematurally. The victories are mostly illusory."

I am deeply convinced that it is an honor for all of us to have Jacob Frenkel as a recipient of this year’s Karel Engliš Prize.

Václav Klaus, Brno, December 19, 1997.