Monday, 16 January 2012

The Next Transition

Vienna can be regarded as the heart of 'old Europe'. The remarks made there by Vaclav Klaus, president of the Czech Republic, seem to come with even greater weight, spoken in Vienna.    And when he is speaking of the political economy of introducing free markets, citizens of new and old Europe  pay attention.

The non-economic factors of economic reforms, as experienced in fundamental systemic change, create a multidimensional process.

"Politicians like me, who were actively involved in the Transition ...understood quickly that sophisticated theories of the optimal sequencing of reform measures prepared in the communist era both in our countries and in the West were practically of no use. ...complex systemic change couldn't be organised by a philosopher-king (nor by a group of academic economists)."

"...millions of finally free people... wanted to live without being planned and controlled by anyone and there was no way of stopping them doing so."

" was relatively easy to build a negative consensus..., to agree upon what we did not want, such as continue living under communism,... it was much more difficult to find a ...positive vision... where to go and how to get there. The genuine conflict of visions, a healthy process in a democracy...led to inconsistent, controversial and contradictory steps and measures ... overall systemic change is not an exercise in applied economics.
...changes started whether we wanted them or not, whether ... highly needed preconditions had been met or not... it was not possible to stop the spontaneous behaviour of millions of people... even had we wanted to.

...Our critics did not see that there were transformation measures with objectively different time requirements...The institutional framework and the rule of law have to evolve, they can't be "introduced". ... [Yet, at the same time] It was necessary to put forward at one moment a critical mass of reform measures in order to send a strong signal to the citizens of our countries that were ... determined to transform the country.   ...the rule was: whenever there was an opportunity -  to implement any measure ... [that was] prepared.

"...economic transitions of the 1990s vintage are neither repeatable, nor necessary now ... There is however, another inevitable transition Europe: the transition from die soziale Marktwirtschaft to free markets.  To achieve it would require similarly deep and radical changes, similar courage and risk-taking."

"... die soziale Marktwirtschaft  prefers social policy based on income redistribution to productive work.  It prefers free time and long holidays to hard work.  It prefers consumption to investments, debts to savings, security to risk-taking.  All of it is part of a broader civilizational and cultural problem, deeply rooted in the European continent or in most of its countries.  It cannot be exterminated overnight, it can't be changed as a result of one or another EU summit, it can't be changed by painless cosmetic changes.  It requires a deep systemic change, something structurally similar to the task we had to accomplish two decades ago in the moment of the fall of communism."


Antisthenes said...

That is exactly the truth of it. The truth of where we are now. How we effect a deep systematic change not in the same way that communism was brought down I think. The majority like the current system it is only a minority who recognise that the system is not working and destroying itself. So a popular uprising against the systems is not going to happen. Uprising are occurring but not against the system but to demand it's continuance. Because of the system Europe is on it's knees. It will have to wait till it is flat on it's face at which time the system will be no more. What will replace it is anybodies guess but what ever it is it is unlikely to be one most of us will like.

Caronte said...

If die soziale MarktWirtschaft is such a failure, how does Germany manage to be the most successful European economy in spite of it?

Nick Drew said...

ask us again in December, Caronte

hatfield girl said...

President Klaus so often has the truth of it, A. Very fine economist, even better politician, and a brave man.

"a popular uprising against the systems is not going to happen".

No, you pin it down there. We don't hate the system as the poor Europeans on the realised socialism wrack did. Nor is the Soviet Union sitting there in tanks waiting to bulldoze us all into submission.

Not that I can imagine how the socialist-lite mindset can be overturned if the horrors of 19th and 20th century politico-economic thought made real cannot convince them. They keep saying that it is possible now to correct the inefficiences of socialist allocation, to replicate the markets with computerised planning. But as Janos Kornai noted, it is his generation's last duty to continue to assert and explain the failure of socialist systems. He wasn't at this Viennese shindig, but the steady effort to point out the obvious continues.

hatfield girl said...

Die soziale MarktWirtschaft is not a failure, C, but it is responsible for producing the whole set of ills delineated by Klaus. Who is to say that German success might not be even greater without it? Or that only Germany could cope with its effects upon economic and politico-cultural realities?

Certainly it has laid a dead hand upon economies less broadly-based, technically innovative, and with less adequate physical and social infrastructures; not to mention less ideal geopolitical placements.

hatfield girl said...

December's only just gone ND. Another year for doom-saying? We're all supposed to have collapsed into a heap of Euro-fragments by now.

There isn't any flicker of euro-doom feelings to be picked-up on in the places I go to. The euro is, as was remarked in Rome, our currency, not a substitute for some 'real' currency we secretly work in. We're quite keen on it, and on the comforts of European civilisation and European amenity.

But then, I'm a European now and while I agree with the president of the Czech republic, it's a political matter to be put right by political means, not some kind of destructive urge ad oltranza of the kind displayed by the English media.