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Václav Klaus: We Need Political World Economy, not Geoeconomics

English Pages, 21. 9. 2023

To make sure I am well understood, I will start with three short introductory remarks:

1. We are quite rationally interested in the development of the world economy because it has a huge impact on the countries where we live, but the term geoeconomics – a fashionable term these days – pretends to be based on a well-established theory, which it is not. Economics is a scientific discipline, geoeconomics is not. This is not a well-defined field of inquiry and studies.

2. I was not asked to give advice in the communist era. After the fall of communism, I became Minister of Finance, Prime Minister, and finally President, someone who was supposed to be advised. For that reason I don’t have the mentality of an adviser. At conferences like this one, this is the attitude of many speakers.

3. I come from a small country with no geopolitical ambitions, from a country that, by joining the EU, lost its short era of independence and sovereignty which we enjoyed after the collapse of the Soviet empire. Europe is, however, a very weak source of identity. That is why I don’t possess an authentic European way of thinking, not to speak about possessing European ambitions.

The world is fragmented and not homogenous plus we are inevitably biased (because of our vested interests). It is, therefore, difficult to generalize. The only generally valid idea about the current era is that there is a huge geopolitical and economic uncertainty now that is undermining economic growth. Slower growth will become a global phenomenon.

Let me focus my comments on the West. I fear for its fate. It seems problematic and unwarranted now. In our institute in Prague, we have just completed a small book, a collection of essays, with the title “The Self-Destruction of the West”, which is a new, totally revised version of a similar, three years old book.

I repeat, it is not about the destruction of the West, it is about its self-destruction. This slow, but powerful process is not a consequence of an external shock, pressure, threat. It has, of course, not fallen from the sky. We are convinced that it is a self-made, self-imposed, self-inflicted injury. It has not been imported from the East or the South. It has not been imposed on us from somewhere. Neither is it the outcome of a diabolical plan of a group of crazy conspirators who want to destroy the world as we know it.

This process seems to be the consequence of an endogenous mechanism. It is the outcome of an evolutionary process based both on ideologies and interests (as always in human history). The Western society has been intentionally getting rid of its basic pillars which were the source of its success and prosperity in the past.

Individual freedom and free markets have become disgraced. No one is defending them. Because of the strength of currently dominant ideologies, their defense is considered politically incorrect, more or less reactionary. To advocate them, as I recently tried at a major international conference, is not welcome, even though many participants congratulated me – silently, ex-post – for having the courage to raise these issues. Some of us were used to live in such a world for a very long time. It asked for courage and resolution to express criticism of the official ideology in the communist era. I must say that we didn´t expect to return to something similar to that so quickly.

The new ideologies of aggressive environmentalism, multiculturalism, genderism, NGOism or in the field of economics of such a nonsense as the extreme version of post-Keynesianism called the new monetary theory have been promoted, heralded and, consequently, more or less smoothly accepted as a new orthodoxy. This is beyond my understanding.

I will stay in the economic field. Let me mention several points I see as important:

1. The autonomy of the economy has been – in the West – reduced in a way and scale that the current reality can be compared to the communist era, where the economy was run by a powerful central authority. (The real economic system in the communist era was, of course, very far from its textbook normative model which, however, still dominates the public debate about communism.)

Half a century ago, people like me used to argue that the politics shouldn’t go ahead of the economy and that economy needs an elementary autonomy. Central planners did not want to hear it, but the debate was becoming – as a consequence of more and more visible deficiencies of the economy – possible at that time. Today, any debate with the Greens is impossible. They and their apologists in all political parties don’t pay attention to arguments. The penalty when you openly disagree with them is similar now to that we experienced in the late communist era – you are not promoted and you don’t get the government grants. (Now especially the EU grants, which some of us would never accept anyway.)

2. The economy has been damaged by the enormous amount of subsidies of all kinds. Communism, with its suppression of markets and distortion of prices, was inevitably based on subsidies. One of the main slogans of our transformation era was, therefore, desubsidization. The time has come to return to that concept.

3. The economy is once again overregulated, with all kinds of external “standards” imposed upon it. A specific role is played by ridiculous green imperatives, recently under the banner ESG (Environmental, Social and Governance). Running corporations for the benefit of shareholders is out. It doesn’t mean anything but a fundamental systemic change. People still blindly believe they live in a capitalist system and a market economy.

4. Economic agents are overtaxed. It shifts their position on the supply curve, they decrease their efforts. When taxes are not large enough, the government expenditures are “funded” either by deficit financing or by inflation as is the case just now. A debilitating vicious circle starts.

5. The managerial revolution of the 1950s has been completed. The managers and technocrats have become, to some people surprisingly, the main fighters for a non-economic way of thinking. This should not be surprising. They have totally different interests than the owners.

These (and many other) characteristics of the contemporary economy are relevant for the whole world (and are promoted by internationalists all over the world) but their main domain is the West. I always quote one of my heroes Aldous Huxley and his Brave New World. This January, I put together a small book with the title Brave New West. Perhaps, I should also mention a recent book by Carl Trueman “Strange New World”. We, who are here, instinctively feel that the world we live in – and its “geoeconomics” – is not only strange but fundamentally wrong. We should be saying that loudly.

Václav Klaus, The Third Danube Geopolitical Summit, Budapest, Hungary, September 21, 2023, Panel Geoeconomics