Communism’s Comeback?

by Vaclav Klaus

Communism’s Comeback? | In the countries of Central and Eastern Europe, we are currently remembering the 25th anniversary of the fall of Communism. Communism, one of the most irrational, oppressive, cruel and inefficient political systems in history, ceased to exist suddenly and relatively quietly. It fell simultaneously in Central and Eastern Europe, and a little later in the Soviet Union too, in spite of the many differences among the countries of the former Soviet bloc. This proves that our common features — even though we all supposed that we were unique — were stronger than our differences.

Communisms Comeback
Communisms Comeback

This radical and far-reaching breakthrough brought us many positive improvements. We were happy,  joyful, full of hope. We were fascinated with ourselves, and praised by our friends and supporters in the rest of the world. We enjoyed their approval and our rapid acceptance into the community of free nations. The overwhelming majority of our citizens have no doubt that they now live in a much better world.

It is also the appropriate time to say that when we became part of the free world we had mixed feelings. We realised that the world did not quite understand us, our fate, our experience, our dreams and our ambitions. The lack of freedom, the irrationality of the Communist system and the oppression we had to go through were severely underestimated. But our understanding of the free world, which we were not part of for such a long time, our ability to behave quite normally, our level of education, and our knowledge of our common European culture proved to be greater than most people in the West expected. Despite long-lasting Communist propaganda and indoctrination, we knew more about the capitalist West than the non-Communist world knew about us. I am afraid this asymmetry persists even now.

Communism still remains misunderstood. It ceased to be discussed and analysed too quickly, especially its later stages, its gradual weakening and softening, as well as its complete failure to defend itself or, luckily, to fight back. In the final stages of Communism, practically nobody believed in the original pillars of its ideology. If we do not correctly interpret the later, in many respects milder, stages of Communism we cannot understand its sudden and bloodless end, comprehend all the tenets of the post-Communist transition, and focus more intensely on the present era.

The Communist regime was in many respects already an empty shell. As a result, Communism melted away; it was not defeated. There are people who don’t like this interpretation of events, and claim that they defeated Communism. It isn’t true. I don’t want to diminish anybody’s merits, but Communism in 1989 needed just one last straw. The subsequent chain reaction of millions of people happened spontaneously and automatically. Everyone — especially in the West — expected that the end of Communism would bring about shock, chaos, disorder, even civil war. As we know, this did not materialise. Even in the Soviet Union, where Communism lasted for more than seven long decades, it foundered more or less quietly. All of us who knew the book by Andrei Amalrik, Will the Soviet Union Survive Until 1984?, written at the end of the 1960s, expected much more dramatic events. This relatively quiet end reveals the weakness and effective defencelessness of Communism at the end of the 1980s.

Despite all my criticism of subsequent developments in my country and elsewhere — which I experienced both as a citizen and as a leading politician — I must admit that the post-Communist transition (or transformation) was a success. Criticism of certain aspects is undoubtedly justified but the fact that it was essentially positive cannot be disputed.

In Czechoslovakia we rapidly succeeded in establishing the framework of a fully-fledged parliamentary democracy. It proved that it was not necessary to create a political system: it was sufficient, to use economic terminology, to begin the process of entering the political market.

This favourable political structure lasted until the end of the last decade, and the outbreak of the 2008-09 financial and economic crisis. Different political tendencies then started to prevail. It led to the shift from standard politics to post-political, post-democratic arrangements, from authentic, ideologically well-defined political parties to ad hoc political projects based more on marketing than on ideology or party membership.

It was not a consequence of the economic crisis; the crisis only accelerated it. I am afraid this is a more general European trend. It is the consequence of the increasingly destructive weakening, if not destruction, of the nation-state by the European Union and of the strengthening of global governance. It is also a result of the gradual replacement of traditional European and Western values with politically correct norms based on new “isms” — cultural relativism, human rightsism, multiculturalism, NGO-ism, feminism, homosexualism, environmentalism, juristocracy and mediacracy. Classical political democracy is, I am afraid, finished.

On the economic side, we organised a rapid systemic change. We proclaimed very early and quite explicitly that we wanted capitalism. We resolutely refused any kind of “third way” or any convergence of existing economic and political systems. What we are now getting, however, is not the “first way”. It is the old, well-known “second way” — European socialism. This is another reason for our frustration. What we really wanted 25 years ago was to avoid a non-transformation. We didn’t want to give a chance to all kinds of groups which sought to preserve the status quo and/or steal the whole transformation process for the benefit of their vested interests. This influenced our position vis-à-vis all versions of gradualism, which we considered a non-reform. We did not believe that gradualism was a realisable reform strategy (in a politically free society) and we disagreed with the term “shock therapy”, both as a useful reform concept and as a description of the reality of our country and elsewhere. We refused to accept the “shock therapy vs. gradualism” dilemma that is even now discussed in economic debate as meaningful alternatives. The term “shock therapy” is not an analytical term. It is a political charge used by socialists like Joseph Stiglitz.

We considered economic and political reforms to be interconnected and indivisible. To separate them à la China was, in Central and Eastern Europe, impossible. The unrealistic concept of gradualism was (and is) based on the belief in the possibility of a detailed programme of reform. It would have been, however, possible only in the absence of political freedom, which was not our case.

We knew that the transformation project had to be ours, based on our ideas and realities. We did not consider ourselves representatives of international institutions and we did not feel any reason to please them. We tried to find our own “Czech way” and to give the people a chance to be part of the game, not just passive observers.

The decisive part of the transformation process was massive, wholesale privatisation. In our case, it was based on several ideas: Our goal was to privatise practically all the existing state-owned firms, not just to allow the setting up of new firms on “green fields”.

Swift privatisation was considered to be the best contribution to the much-needed restructuring of inefficient state-owned firms (we did not believe in the ability of the government to restructure the firms prior to privatisation). Privatisation of firms in the real economy couldn’t wait for the completion of bank privatisation (it had to go in parallel). Because of the lack of domestic capital (which did not exist in the Communist era) and because of the very limited number of serious potential foreign investors, firms had to be privatised at a low price. This idea led us to the concept of “voucher privatisation”, which played an important, but not dominant, role in our country which is often misunderstood. Less than a quarter of the Czech privatisation programme was carried out by means of vouchers.

From the very beginning, we knew we had to privatise the economy we inherited as quickly as possible. We did not want to leave our shortly-to-be-privatised-firms in a pre-privatisation limbo in which they would rapidly lose their value. For that reason, we did not have any great interest in the maximisation of the proceeds of privatisation. The speed of privatisation was seen as an asset, not a liability.
At the same time, we liberalised, deregulated and desubsidised the economy radically and quickly. This liberalising tendency lasted, to our great regret, for only part of the last 25 years. Partly because of the slowing of our own reform momentum (for domestic political reasons), but mostly because of our applying to and finally entering the EU, we started a reverse process. That is why our economy is more regulated and subsidised (and harmonised and standardised) now than 10-15 years ago. The final blow came with the recent financial and economic crisis, and with the methods of its “treatment” by means of very extensive government intervention.

Our economy is now more regulated and subsidised than we imagined at the time of the collapse of the fall of Communism. We did not believe it could ever happen. It seemed to us that the masterminding of the economy from above was so discredited by the Communist experience that it could never return. We were wrong.

We also assumed that everyone understood that government failure is inevitably much bigger than any imaginable market failure, that the visible hand of the state is always much more dangerous than the invisible hand, and that vertical relations in society must be less productive (and less democratic) than horizontal relations. Again, we were wrong.

Twenty-five years ago, I warned against creating a negative expectations-reality gap because it would have undermined our reform process. I have to accept that I myself feel such a huge expectation-reality gap now. I expected to live in a much more free and democratic society and economy than is the case today.

It was caused partly by the victory of social democracy in our country and partly by the importing of the European economic system, with its overregulation, high taxation and redistribution, welfare state, and fascination with all kinds of anti-market measures, connected nowadays mostly with environmentalism, with its anti-democratic social ideology which successfully hides its real substance while pretending to care about nature, the environment and our Blue Planet. We may be oversensitive in this respect because of our long Communist experience but we see many similar phenomena, tendencies, ambitions   and arguments around us today.

To allow this to happen means that we have learned nothing from history, and especially from the Communist era. It means that celebrating the end of Communism is inappropriate. It is creeping back in different forms, under different flags and slogans, without sufficient resistance from us.

Alvin Rabushka presents Flat Tax

Alvin Rabushka Flat Tax | If you like to be updated on the Flat Tax, watch Alvin Rabushka’s speech at the Institute of Economic Affairs in London, held on November 19, 2014. It’s a 45 minute presentation on why the Flat Tax is good for Britain.

Das Sterben der Fiat-Währungen

Das Sterben der Fiat-Währungen. Stehen wir vor Hyperinflationen? Eine neue, alarmierende Graphik von Dr. Werner von Tabarelli – Geld- und Waehrungsexperte und Stiftungsrat der European Center of Austrian Economics Foundation.

Die Schulden im 21. Jahrhundert

Daniel Stelter, Die Staatsschulden im 21. Jahrhundert
Daniel Stelter, Die Staatsschulden im 21. Jahrhundert

ECAEF-Buchempfehlung (Austrian School of Economics applied!) – Daniel Stelter* “Die Schulden im 21. Jahrhundert – Was ist drin, was ist dran und was fehlt” feierte kürzlich Buchpremiere.  Die gute Nachricht für Befürworter der Österreichischen Schule der Ökonomie: Daniel Stelter widerlegt mit seiner Schrift Thomas Piketty. Stelters Buch von nur 160 Seiten ist ein knalliger Gegensatz zu Piketty’s 800 Seiten starkem „Das Kapital im 21. Jahrhundert“. Und um noch eins draufzusetzen, nennt Stelter sein Büchlein „Die Schulden im 21. Jahrhundert“.
Stelter zeigt eindrucksvoll, dass Piketty die Bedeutung der Schulden völlig unterschätzt. Nur wer die Dynamik von Verschuldung und Entschuldung verstehe, könne aber Vermögensverteilung und Wirtschaftskrisen verstehen und Lösungen erarbeiten. Die diesbezüglichen Argumente des Autors sind schlüssig und überzeugend.
Aber es gibt auch eine schlechte Nachricht: Selbst Stelter weiss keinen schmerzlosen Ausweg aus der expliziten und impliziten Schuldenkrise. Die Aussicht auf höheres Wirtschaftswachstum stösst schon aus Gründen der Demografie an Grenzen; — die Bevölkerung wird immer älter und schrumpft, die Gesamtproduktivität nimmt deshalb eher ab als zu. Eine moderate Inflation will und will sich nicht einstellen. Wenn das ‘Gelddrucken’ so weitergeht, sei eher eine Hyperinflation wahrscheinlich – eine Katastrophe ohnegleichen! So bleibt als einzige Lösung die Sanierung der Finanzen durch einen Schuldenschnitt. Für Piketty ist der Schuldenschnitt eine Frage der sozialen Gerechtigkeit, für Stelter ein solcher Schritt  nur ökonomische Logik.

*) Daniel Stelter ist Gründer des Forums Beyond the Obvious und davor Senior Partner und Managing Director bei The Boston Consulting Group – BCG.

Jacques Rueff Conference

Jacques Rueff Conference in Monaco

“No religion spread as fast as the belief in full employment, and in this roundabout way, allowed governments that had exhausted their tax and borrowing resources to resort to the phony delights of monetary inflation.” Jacques Rueff (1896-1973), 7th Minister of State of Monaco

Irresponsible socio-economic and fiscal policy measures with alarming demographic problems and depleted state coffers have brought most of the European Welfare State to the brink of collapse. The explosive immigration issues lures masses of disenchanted citizens increasingly to populist rhetoric and confiscatory government actions that challenge the very foundations of a civil society, democratic principles, and the rule of law.

The I. International
Jacques Rueff Conference

Principality of Monaco, November 8, 2016

On the Worldwide Collapse of the Welfare State.
Will the End of a Daydream Turn into a Nightmare?

The I. International Jacques Rueff Conference is an academic one-day academic co-operation of CEPROM (Center of Economic Research for Monaco, MC) and ECAEF (European Center of Austrian Economics Foundation, FL).

Academic Director:  Kurt R. Leube, ECAEF (
Administrative Director:  Emanuel Falco, CEPROM (
Media Contacts: Nicolas Saussier, CEPROM (
Conference Date: November 8, 2016
Participation: by invitation only
Location: Musee Oceanographique de Monaco, Principality of Monaco
Conference Languages: English and French; simultaneous translation

Conference Venue:
09:00-9:30 Registration
09:30-9:45 Welcome: H.S.H. Prince Albert II. and H.S.H. Prince Michael of Liechtenstein

Session I: The End of a Daydream (9:45-12:15)
09:45-10:00 Chair: Pedro Schwartz (ES)
10:00-10:30 10:00-10:30 Unlike Socialism, the Welfare State cannot be Defined: Antonio Martino (I)
10:30-10:45 Discussion
10:45-11:15 Coffee break
11:15-11:45 The Fatal Illusion of ‘Social Justice’: Hardy Bouillon (D)
11:45-12:15 Discussion

12:15-14:15 Luncheon for speakers and invited guests

Session II: The Beginning of a Nightmare (14:15-16:30)
14:15-14:30 Chair: H.S.H. Prince Michael of Liechtenstein (LI)
14:30-15:00 Unintended Consequences of the Welfare State: Victoria Curzon-Price (CH)
15:00-15:15 Discussion
15:15-15:45 On the Looming Financial Fiasco: Pascal Salin (F)
15:45-16:00 Discussion
16:00-16:30 Coffee break

Session III: There is a Way Out! (16:30-18:40)
16:30-16:45 Chair: Pedro Schwartz (ES)
16:45-17:15 An Inspiring Revolution: Pension Savings in Personal Accounts: Carlos Gomez (Chile)
17:15-18:15 Panel discussion with Bouillon, Curzon-Price, Gomez, Klaus, Salin)
18:15-18:30 Discussion general
18:30-18:40 Farewell Remarks: Emmanuel Falco, CEPROM (MC)

18:50-19:50 Farwell Reception at the Palace for invited guest and speakers, hosted by H.S.H. Prince Albert II.