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Václav Klaus: Notes for Munich 2025

English Pages, 13. 2. 2025

The organizer of this gathering, Shafik Gabr, a friend of many of us, sent me in advance two difficult but important questions that should be addressed here tonight: Will the war on Ukrainian territory end in 2025 and what impact will Trump’s tariff policy have on global trade?

I wish I knew the answers. I am not an omniscient oracle, I am only able to give very modest, cautiously formulated answers.

The war that has already been going on in Ukraine for three years is not a war between Russia and Ukraine. To base an answer on such an assumption would be wrong. It is a war between Russia and the West, especially the US. Ukraine is just an instrument in this war and, of course, its main victim. When I say this, it does not imply that Ukraine did not play an important role in it. Its irresponsible policies, which led to Maidan in 2014, made the February 2022 Russian military attack almost inevitable.

We all – me included – are left to speculate about the plans of the US and Russia, Trump and Putin. Some optimists even believed Trump could bring the war to a rapid end (perhaps within 24 hours), but that was – evidently – just a sort of wishful thinking. I am afraid the war will continue. The overall destruction and thousands of dead will stay with us for some time.

The West has invested so much in this conflict that it must get a result that could be interpreted as its victory. This will be, however, difficult to achieve.

I would like to mention another important, often neglected factor which should be taken into consideration now – the rapidly changing atmosphere and mood inside Ukraine. I don’t possess any special or secret information, but many easily available sources of information suggest that we are witnessing
- evidently unfulfilled expectations of Ukrainian citizens that were wrongly based on Trump’s earlier rhetoric,
- growing war fatigue and the increasing disagreement of Ukrainian citizens with government’s brutal ways of forcing men into the army,
- Ukrainian citizens started to see the continuation of the enormous degree of corruption and the misuse (if not disappearance) of both domestic and foreign funds coming into the country as unacceptable.
This, together, creates chaos and instability which can easily reach the level of something like civil war even if the war with Russia eventually comes to an end.
I am, therefore, not an optimist in this respect.

As regards the second question, when talking about Trump’s tariffs, we don’t know what part of it is just his aggressive style of preparing an advantageous negotiating position and what is a serious plan.

What bothers me is something else and something more fundamental. A new version of the “New Political Economy”, which is being taught these days even at serious universities, returns to the old-fashioned concept called the infant industry doctrine, which was rejected by the economic science two hundred years ago. This recently rediscovered doctrine considers tariffs as a legitimate instrument in the hands of governments. I fully disagree.

After the fall of communism, I organized a return to the free market economy in my country, to free markets, not just markets, not highly regulated, not highly repressed, not highly manipulated markets. The introduction of tariffs did not belong to our reform blueprint prepared and implemented 35 years ago. It is different now. But I still am a “non-tariff man”.

In spite of that, I am – perhaps surprisingly – not horrified by Trump’s plans and ambitions. His tariffs – if implemented – will be a relatively small addition to all the anti-market measures and interventions that have been introduced into the Western economic system in recent decades. It may be a problem for individual firms, which have been the beneficiaries of regulated, heavily subsidized markets.

Trump’s tariffs will be a small additional violation of free market principles as compared to the whole idea of the Green Deal and to all kinds of social, environmental, healthcare and many other norms and standards that have been introduced by activist governments over the past decades.

The international community shouldn’t panic. It should have panicked and loudly protested decades ago when it all started. We should simply try to return to the free market principles. Let’s return to such names as Mises, Hayek and Friedman, let’s forget names like Stiglitz, Draghi and Lagarde, and many other names which belong into the category of “homo davosensis”.

These are the comments of an insufficiently wise old man.

Václav Klaus, Expecting the Unexpected Dinner Conference, Munich, Hotel Bayerischer Hof, February 13, 2025.