Positive effects of political crisis

The political crisis in the Czech Republic, that started more than a year ago, has served as a useful catharsis. While only two years ago, the buzz words in Czech politics were "speedy privatization," politicians are now increasingly talking about "transparency," "anti-corruption measures," and "the rule of law."

Former Prime Minister Vaclav Klaus and his governments believed that the privatization process must be as speedy as possible. Various officials freely talked about "an escape from lawyers", who, in their opinions, would slow down the privatization process. Klaus also believed that the market, created through speedy privatization, possessed self-regulating mechanisms of such intensity that it would eventually create its own rules. Some observers have remarked that Klaus and his followers believed that the market could be created most effectively by "switching off the light" and then "switching it on again." Instead, they created a "jungle."

The ongoing political crisis and economic problems have been caused to a large extent by such non-transparent environment. The political establishment led by Klaus simply failed to see that a market economy can function only if the government can clearly define the playing field, the rules of the game, and, at the same time, serve as a strong and impartial referee. The belief that such rules could be created by the market itself was in a way a residuum of Marxist thinking, that has traditionally overestimated the role of "objective forces."

The fact the Czech economy has lacked transparency and clearly defined rules has promoted corruption and fraud. Many people have indeed become rich but at a high price: few Czechs believe that affluence is connected to hard work and honesty. Powerful business lobbies that were created during the privatization process are not interested in clearer rules and transparency. They have learned how to operate under the non-transparent rules created by the Klaus-led privatization process. Corruption has caught up with politics. Klaus's Civic Democratic Party (ODS) and its coalition partner, the Civic Democratic Alliance (ODA), have been greatly harmed by charges of dubious financial deals.

Most observers and ordinary Czechs have talked about the negative impact of the political crisis. As President Havel has remarked, the country is in "a foul mood." Probably the most important reason for the worsening of the political climate is that for many years Czechs were led to believe that they were exceptional. Since the "Czech miracle" collapsed last year, the pendulum has shifted from high expectations and confidence to defeatism and negative feelings.

It is no wonder that in this climate of negativism, the good news has been missed; namely, the fact that Czech politicians, across the political spectrum, now talk about the need to build the rule of law, adopt anti-corruption measures, and put in place clear and sensible rules under which the economy must function. Some steps have been taken. For example, the Securities Exchange Commission has been established. And the Tosovsky government has drafted and submitted to the parliament some laws that should help the troubled banking industry.

The fact the Czech Republic, despite its problems, has been chosen as one of the first-wave candidates for membership talks with the European Union is clearly helpful. Some of the steps that the country needs to take anyway, such as reforming its state administration system, are among the demands made by the EU. More demands will follow after the EU completes its screening of the Czech legal system and various areas of economic and political life.

The biggest economic danger for the Czech Republic is not, as it is often argued, a slow-down in the privatization process. After all, almost 70 percent of the economy is now in the private hands. Some of the so-called strategic industries, such as utilities or mining, have never been privatized even in some EU countries. What appears to be more important is the process of "civilizing" the jungle that has been created by the privatization process.

Even solutions to the biggest problem of the Czech economy--unclear ownership lines and a lack of restructuring in many privatized companies--depend on the ability of the government to adopt and enforce new rules of the game, rather than on new privatization measures. Even the privatization of the largest banks, which is needed, must be accompanied by creating a more stable legal environment, if it is to have long-term positive effects. The fact Czech politicians, after many years of neglect, are now intensely concerned about creating such an environment is in itself a positive sign.

Reuters - 13. 5. 1998