Czech President: Neosocialism Threatens Europe

Václav Klaus

 Below is the text of a speech which President Vaclav Klaus of the Czech Republic gave last Sunday in Aix-en Provence (France). We thank President Klaus for his kind permission to republish his speech at this website.
Thank you for the invitation to come to Aix, for giving me a chance to address this reputable audience where I see many friends and, above all, thank you for continuing to organize the Summer University. I only don’t understand why you call it Summer University of the New Economics. Which one is the old one? We have only one, good, old economic theory and it is our adversaries who use the term “new economics” as an attack on our views.

This year’s main topic of your gathering is “Markets and Morality.” I only hope that by choosing this title you wanted to say that there is no morality, at least in the public arena, without markets. It is an important and, again, a very old message. In our early post-communist years, I was being often patronized that what we needed then was morality, whereas I stubbornly repeated that what we needed were markets. My critics argued that a strong, ex-ante infusion of morality is necessary – with the implicit expectation that it would be them, who’d be supplying it. It was the substance of my disputes with my predecessor in office, President Václav Havel. I hope the speakers at the Summer University will be on my side.
I am here already for the third time in this decade. It demonstrates – at least I wish it does – my respect for what you’re doing. I was here in August 2002 when we, at the beginning of the second post-communist decade, started to reassess our journey from communism to a free society. The title of my speech then was “Post-Communist Era: Atmosphere of Victory or of Lost Illusions?” We had a mixed feeling at that time. We had quite rapidly liquidated the formal structures and mechanisms of the communist society and successfully established parliamentary democracy and market economy. The question was whether we were building free society based on classical liberal principles or whether we – instead – had fallen into another blind alley of regulated society, of unproductive welfare state, of brave new world of European socialdemocratism and of empty and artificial Europeanism. My answer to that question was that the winner of the transition decade was democracy, not freedom or classical liberalism. Our original slogan: “deregulate, liberalize, privatize” was gradually transformed into a different one: “regulate, adjust to all kinds of standards of the most developed and richest countries, listen to the partial interests of the NGOs and follow them, get rid of your sovereignty and put it into the hands of international institutions and organizations.”
This year we celebrate already the 20th anniversary of the fall of communism and we are again in a reassessment mood. The situation has not changed for the better.
My second visit here was in August 2006. The title of my presentation was “What is Europeism (or What Should not be the Future for Europe)?” (CEP, Center for Economics and Politics, Prague, 2006) Europeism is – for me – an inconsistent, evidently heterogeneous, but in principle neosocialist doctrine, which characterizes the current thinking in Europe. It believes neither in freedom, nor in spontaneous evolution of human society. It is a “conglomerate of ideas” that includes
- economic (or social) views based on the concept of the so called social market economy (which is the opposite of the market economy);
- views on freedom, democracy and society based on collectivism, social partnership and corporatism, not on classical parliamentary democracy;
- views on European integration, which favor unification and supranationalism;
- views on foreign policy and international relations based on internationalism, cosmopolitism, abstract universalism, multiculturalism and on denationalization.
To my great regret, I am afraid the same speech should be repeated today. Europe is more and more dominated by this way of thinking despite the fact that it is an extremely naïve, unpractical and romantic utopism, not shared by European silent majority, but predominantly by European elites.
Looking back, I am slightly surprised that in 2006 I did not mention environmentalism and global warming alarmism as a new threat to our freedom and prosperity. My book “Blue Planet in Green Shackles” – after its Czech, English, German, Dutch, Russian, Polish, Spanish, Bulgarian and Italian editions – has since May also its French version with the title “Planète bleue en peril vert.” I would like to thank all those who helped to make this publication possible, most of all Professor Jacques Garello.
I am more and more convinced that the real threat is not global warming itself. The real threat is playing with the climate (and with all of us) by irresponsible politicians and all kinds of environmentalists. I tried to express this view of mine in a question I raised in the subtitle of my book “Qu’est-ce qui est en danger: le climat ou la liberté?” My answer to this question is clear and straightforward: “C’est la liberté qui est en danger. Le climat va bien.”
One frequent misunderstanding needs to be dispelled. People tend to confuse two conceptually different things – a rational protection of the environment and an irrational attempt to protect (or even to fight) the climate. I am very much in favor of rational efforts when it comes to the environmental protection because we have to take care of our rivers, lakes, seas, forests and air, but I resolutely reject any attempts to change – or as I frequently hear – to combat the climate.
The current Global Warming Debate is not about temperature or CO2 levels. It is also not part of a scientific dispute inside climatology. It is an ideological clash between those who want to change us (rather than the climate) and those who believe in freedom, markets, human ingenuity, and technical progress. It is a dispute about us, about people, about human society, about our values, about our habits, about our way of life. Temperature fluctuations are only an instrument, not a real object of interest for those who play that game.
The advocates of global warming alarmism ask for an almost unprecedented expansion of government intrusion, of government intervention into our lives and of government control over us. We are pushed into accepting rules about how to live, what to do, how to behave, what to consume, what to eat, how to travel. It is unacceptable. Radical, human freedom and prosperity endangering measures and policies owing to global warming are not necessary.
The available evidence tells us quite convincingly that:
1. The warming we witness is not global. It materializes in the cold, but not in tropical regions, in dry, not wet areas, in the winter, not in the summer, and during the nights, not during the days.
2. The warming is not large. The average global temperature increase in the last century was only 0.74 °C. In addition to it, the climate stopped warming more than a decade ago altogether. The temperature now is similar to the temperature in the year 1940, regardless of a huge increase in CO2 emissions.
3. The warming is not unique and unprecedented. The temperature in the Medieval Warm Period and in many other moments of history was higher than it is now.
4. The mild warming we experience is not dominantly man-made or CO2-made. There are many other factors influencing the temperature and climate and the whole very complex climate system is still full of major uncertainties. One author recently calculated that the term “uncertain” or “uncertainties” appear more than 1300 times in the text of the 2007 IPCC Assessment Report.

We have to come up with an optimistic message that human adaptation, human flexibility, technical progress and the markets themselves will be sufficient to deal with all future potential problems of that kind.
The last topic I would like to mention here today is the current financial and economic crisis. The economic profession, the politicians, as well as the public did not expect it to come. They all accepted the validity of the so called “Great Moderation” hypothesis based on the belief in the omnipotence of central banks and governments to control the macroeconomy and in the feasibility, rationality and positiveness of microeconomic regulation, especially in financial and banking sectors. This hypothesis was, of course, wrong and the dream about the eternal removal of business fluctuations did not materialize.
The current crisis is a consequence of a combination of government failures. On the macroeconomic side, it was the unprecedented build-up of imbalances in the world economy and the unusually long period of low real interest rates. On the microeconomic side, the existing partial and very imperfect regulation distorted the behavior of banks and financial institutions and motivated them to look for ways to escape it by means of various “financial innovations”. They found it relatively easy to move their activities outside the regulatory perimeter, the most known example of this is the securitization of subprime mortgage credit.
I am convinced that the current crisis is not the result of a market failure or of any inherent deficiency of capitalism. It is a government failure, resulting from the immodest and unhumble ambitions to control such a complex system as society and economy.
I believe this is what the whole Summer University is about.
Václav Klaus, 31st Summer University of the New Economics, Dinner Speech, Hotel Roy René, Aix-en-Provence, France, August 23, 2009


the term “uncertain” or “uncertainties” appear more than 1300 times in the text of the 2007 IPCC Assessment Report.

Compared with the absolute certainty in which Vaclav is describing the current state of the earth, one can wonder about whom of the two did the better job...

CO2 warming

I adore President Klaus, and I'm a strong climate change skeptic, but he's made a bit of a blunder here.  He insists the recent warming is not generated by CO2, but the way he describes it sounds precisely like CO2 warming:  in the winter, not the summer; at night, not during the day; in the polar regions, not in the tropics; in dry areas, not in wet areas.  Those are all signals of greenhouse-gas warming as opposed to warming generated by, say, increased solar activity, which would affect daytime temperatures for one thing.  I wish he had pointed out instead that the recent warming is primarily in the northern hemisphere and the Arctic, when both hemispheres, including the Antarctic, should be affected.

but # 3

@ Traveller

If you want to blame "Washington" for the sharp fluctuations in output that have occurred in the United States over the past two years, as well as the absurd policy responses undertaken, that is fine with me.  However, I think that the "crisis" of which Klaus spoke was a different one and of a more GLOBAL nature.  Even sharper fluctuations have occurred in some major European countries, and certainly in Russia and Japan, for which the blame also belongs to "government(s)", but not to 'Washington'. 

There is little doubt that earlier in this decade, Americans' excessive spending helped to limit the depth of the last recession in numerous other countries, for which 'Washington' was not hailed.  If it wasn't hailed then, it shouldn't be blamed either, now that the global business cycle is much more 'synchronised' than in earlier times.  Authorities everywhere, will have to learn to adjust to this new phenomenon.       

@ marcfrans

You have a point there, but it is now so ingrained in the psyche of the "other economies" that they should take advantage of the US "weaknesses" in their consumer spending and consumer credit economy that these "advantages" become very dangerous for the world economy as a whole. The US have let that situation become extremely critical in the firm belief that the "world" cannot afford the US $ to go bust.
Today we just escaped that catastrophe but we are already heading for a new one.

but # 2

@ Paganini

I agree with you that there are many forms of "market failure" in the real world, and that there is a limited role for government regulation. 

At the same time, I agree with Klaus that the current crisis is NOT the result of any market failure, but the result of "a government failure", i.e. the result of poor government regulation, both in the US and in some other major countries.  

In fact, there are two crises at the same time, which have become intertwined.

First, there is the abnormal financial crisis, which is largely the result of both (i) governmental interventions (in the US largely originating from Congress) which have distorted market signals and created massive 'moral hazard', AND (ii) poor governmental regulation of certain financial markets (mainly by the Securities and Exchange Commission, SEC,and perhaps by the FED as well). 

Second, there is the 'normal' recurring business cycle in the real economy (of incomes, and thus of corresponding real goods and services) which has been aggravated by the financial crisis.  And the reason why the current conjunctural 'recession' in the real economy is difficult to tackle, in many countries (not only the US), is that 'imbalances' have been allowed to build up over recent decades, especially high debt ratios.  These are the result of poor/lax fiscal policies which also represent a  prime example of "government" failure, although it could be more accurately described as "political failure" or "political system failure".  

We have only ourselves to blame, not some neutral abstract "market", nor an imaginary "Washington", that cannot talk back.



@ marcfrans

I have absolutely no problem to replace Washington by FDR, Paulson, Greenspan, the financial institutions Freddy and Fannie, created by Washington etc. etc.

but ...

great speech , wise words, but ...

"I am convinced that the current crisis is not the result of a market failure or of any inherent deficiency of capitalism. It is a government failure"

well, this sentence is just crap ! I am so tired of this ideological 'capitalism': the 'market' is not holy, the market is not without failure. Its pure ideology, no reality.

Anyway, it does not matter, the speech in itself is excellent.

@ Paganini

Sorry my friend, but without the criminal stupidities of Washington, compounded by the criminal greed of Wall Street, there wouldn't have been a crisis. Criminals have to be caught and punished in a functioning society. Again criminal neglect by Washington, they don't want to arrest themselves and/or their friends.

Every time

Vaclav Klaus opens his mouth, it's worth listening.

Thank you sir.