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Is There a Reform Fatigue?

English Pages, 26. 5. 2001

1.      Fatigue is not the right concept for describing situation in transition societies,  I would prefer to talk about the gap between expectations and reality (E - R gap).

2.      What went wrong? Expectations or reality? Probably both. Who is guilty? Probably nobody. Let´s structure it. We can distinguish at least three stages.

3.      Formation of expectations - stage No. 1. The dismantling of communism was connected with the belief that taking away the old barriers, obstacles, and constraints brings about positive economic growth and increases in living standard, even in the short run.                                                                    

4.      First adjustment of expectations - stage No. 2. The people slowly and reluctantly accepted the inevitability of the transformation shake-off - the huge loss of output, income, employment, price stability, prevailing distribution of income and property, existing degree of social security (certain, but at a low welfare level), etc. It was for them an important learning process.

To put "new expectations" in economic terms, loss of GDP in the short run, but a more or less linear growth after that.                                                                 

5.      Unexpected economic turbulence - stage No. 3. In the era of currency crises (from Mexico to South East Asia and Russia) and with growing external imbalance at home the Czech Central Bank unexpectedly (and without consultation with the government) introduced very restrictive monetary policy measures which destabilized the economy, made nervous both domestic economic agents and foreign investors, co-produced the currency crisis and economic recession which lasted for the next 2 or 3 years.

The people did not expect it. They were convinced that the market economy (as compared to central planning and state ownership) means success. They were not prepared for a business failure - both at a micro and a macrolevel. They felt having been cheated or betrayed by politicians who had sold them the idea of capitalism, of free markets, of liberalization, of deregulation, of privatization without sufficient warnings.

The issue - in my opinion - is not a reform fatigue. It is the unprepardness on the gains and losses, on risks and insecurities, on constructive destruction (à la Schumpeter) connected with capitalism.

6.      I strongly believe in stage No. 4 which I would like to see as a rational evolution - both of institutions and of behavioral patterns.

7.      It all has - in our part of the world - a very specific European dimension.

With all our reservations to the currently realised model of European integration and to the ideology behind it, there is no choice left and there is, therefore, no alternative to our EU membership. European Union is here to stay. The citizens of my country wanted and still want to be "back in Europe" (but they do not take into consideration the costs of entering EU and of being in EU) and the European activists and influential opinion-makers succeeded in presenting (or advertising) membership as an award and as a recognition of good, decent and obedient behaviour. The existing EU members do not, however, need us as members, and try, therefore, to prolong the status quo as long as possible. This brings us in a catch-22 situation.

By being forced to accept - before entry - European legislation, standards, rules and policies, we moved to be "ahead of our possibilities" which makes us more vulnerable and more "heavy" to compete with them.

We need free markets, not over-regulation nor a paternalistic welfare state. But Europe is not prepared to get rid of both of them and pro-European activists (at the same time advocates of such policies) succeeded in selling the citizens of individual European countries their substitute ideology of Europeism.

Václav Klaus, Consilium Conference, Lilianfels, Blue Mountains, Australia, May 26, 2001