[Congressional Record Volume 141, Number 76 (Tuesday, May 9, 1995)]
[Extensions of Remarks]
[Page E980]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



[[Page E980]]

                   THE METAMORPHOSIS OF CZECH SOCIETY

                                 ______


                        HON. BARBARA B. KENNELLY

                             of connecticut

                    in the house of representatives

                          Tuesday, May 9, 1995
  Mrs. KENNELLY. Mr. Speaker, the Center for Democracy last Wednesday 
honored the Prime Minister of the Czech Republic, Vaclav Klaus, by 
awarding him its prestigious International Democracy Medal for 1995.
  The Center for Democracy is a nonpartisan, nonprofit organization 
dedicated to supporting the democratic process throughout the world. In 
previous years, the center has honored Presidents Raul Alfonsin, 
Corazon Aquino, Oscar Arias, Patricio Aylwin, Violeta Chamorro, Arpad 
Goncz, and Boris Yeltsin.
  I was fortunate to be at the dinner award ceremony and hear Prime 
Minister Klaus' acceptance address. His comments on the democratization 
process are profound, and I am including the text at this point in the 
Record.
                   The Metamorphosis of Czech Society

       It is a great honor for me to be awarded the International 
     Democracy Medal from your distinguished society. And it is 
     extremely intellectually stimulating to have the unique 
     opportunity to speak here today and share with you some of my 
     ideas about the fundamental systemic change which has been 
     going on in the Czech Republic for the last five years.
       As well known, the Czech Republic suffered for many decades 
     under an oppressive, undemocratic and totally inefficient 
     communist political, social and economic system. It was a 
     system irresponsive to human wants and desires. It is over 
     now. I have to admit that I do not feel enough motivated 
     these days to discuss at length the intrinsic logic as well 
     as peculiarities of the functioning of such a system although 
     I am convinced that the standard ``sovietologist's'' paradigm 
     of explaining it needs substantial rewriting and though 
     communism is not an unrepeatable, singular event which can 
     never happen. But we are already on the other side of the 
     Rubicon.
       The task of our time has been positive--to replace such a 
     system with a free, democratic society, based on political 
     pluralism and the rule of law, with a well-functioning, 
     efficient market economy, based on private property, private 
     initiative and limited government.
       I will try to argue here tonight that the Czech Republic 
     has already introduced basic elements of such a system and by 
     having done so, the country has entered what we call the 
     early posttransformation stage.
       In all our effort during the last few years to dismantle 
     communism and institute free society and market economy the 
     central idea was that of democracy. Several years ago I 
     coined the phrase ``market economy without any adjectives'' 
     in an attempt to reject all forms of ``third ways'' of 
     economic organization and it seems to me now that I can say 
     as well ``democracy without adjectives'' because it contains 
     the same message. We do not want to make the term fuzzy, 
     therefore, we don't like people's democracy, socialist or 
     social democracy, christian democracy, etc. Whether this is 
     really understood or not is exactly what distinguishes 
     successful from unsuccessful approaches to the transformation 
     of the postcommunist countries.
       Talking about the metamorphosis of Czech society (and those 
     of other Central and East European countries), the most 
     important thing now is to avoid falling into the dangerous 
     reform trap of half-measures and useless political and social 
     concessions, and not to give up the fight against an already 
     emerging ``reforme fatigue''. The transformation has nonzero 
     ``transformation'' costs and our task is to minimize them. 
     This cannot be achieved only by spontaneous evolution of 
     social institutions. The profound systemic change can be 
     successful only if it is based on a clear and transparent 
     vision of the future, the ability of politicians to sell such 
     a vision to the citizens of the country and a pragmatic, and 
     rational (and definitely not simple) transformation strategy.
       To structure the logic of the whole process, to 
     differentiate between the intentional and the unintentional 
     the organized and the spontaneous parts of it, it is helpful 
     to distinguish between passive and active transformation 
     measures.
       The passive (nonconstructivistic and noninterventionist) 
     side coincides with deregulation and liberalization. The 
     political transformation was fully based on this, i.e. on 
     creating preconditions for a free entry into the political 
     market. We realized very soon that this was sufficient and 
     that no direct measures were indispensable (it was almost not 
     necessary to prohibit anything). This is not a trivial 
     conclusion. The free political space was very soon filled 
     with new political entities and by now, in my country at 
     least, the standard political structure--characterized by 
     ideologically well-defined political parties--has been 
     developed. The political structure is more European than 
     American, with more than two political parties, which results 
     in a coalition government and standard pressures between the 
     cabinet and parliament.
       The economic transformation was, of course, based on 
     liberalization as well. It has been proved that 
     liberalization of markets, that is of prices, foreign trade 
     and private entrepreneurship, is necessary for the 
     fundamental change of the system, but we realized that this 
     is not sufficient. As I said before, the passive 
     transformation plus waiting for evolutionary emergence of 
     efficient markets and strong economic agents would last too 
     long and be too costly. It was, therefore, supplemented with 
     positive, more or less active transformation measures.
       As--I am sure--you expect, the most important shift at the 
     microeconomic level was achieved by privatization. In our 
     country we managed to effect the fastest and most extensive 
     transfer of property rights, at least in this direction. As 
     you know, it is much easier to nationalize than to privatize, 
     it is more difficult to build than to destroy. The job 
     required a very special mix of standard and nonstandard 
     privatization methods, and the innovative Czech voucher 
     privatization, which involved millions of our
      citizens, proved to be a catalyst of the economic 
     transformation. Now, five years after the Velvet 
     Revolution and four years after the beginning of 
     privatization, the massive, ``wholesale'' privatization is 
     practically over. We have to settle some residual cases, 
     but these are already part of our posttransformation tasks 
     and challenges.
       Speaking of the posttransformation stage, we have to 
     complete the process of liberalization, deregulate the few 
     still regulated prices (though the list of regulated prices 
     in the Czech Republic is not longer than in the Western 
     countries) and institute full convertibility of the currency; 
     complete the privatization process, which is anyway coming to 
     its close.
       This kind of institutional refinement is the 
     posttransformation task of the government. In addition, we 
     need to deepen the markets and to strengthen the health of 
     participating economic agents. This is, however, already a 
     part of the Hayekian evolutionary process, in which the role 
     of government is marginal.
       But it is connected with another important challenge which 
     is no more an integral part of our original transformation 
     task. That is the need to safeguard economic freedom and 
     resist the temptations for the government (magnified by 
     strong lobbyist pressures) to introduce the same forms of 
     regulation, control, licensing, etc. as we can see in some 
     Western countries these days.
       I know you have your own experience in this respect in your 
     country, you have your own prophets of a limited or expanding 
     government, and I can assure you that we followed your 
     domestic political debates with great interest before our 
     Velvet Revolution and we do with enormous interest now.
       Let me make a few comments about how I see it from Prague. 
     The ideological conflict over communism is over and it makes 
     us very happy. There are new conflicts and new dubious, but 
     attractive and fashionable ideas which must be discussed and 
     their pitfalls and unintended consequences must be exposed. I 
     have in mind the protectionist arguments for the so-called 
     fair trade (I always try to relate the dispute between free 
     and fair trade to the difference between free and fair 
     speech); competition constraining arguments based on the 
     criticism of the alleged social and ecological dumping; 
     collectivistic features of communitarianism and the ideology 
     of civil society; environmental extremism and overkill, etc.
       The protectionist blueprint is an illusion, based on fear. 
     In the end, it will not protect jobs but destroy them. The 
     accusations of ``dumping'' neglect the law of comparative 
     advantage, different levels of productivity of labor and 
     wages (and related working conditions), as well as the 
     connection between wealth and externalities. 
     Communitarianism, instead of advocating the importance of 
     voluntary associations and naturally emerging intermediating 
     structures, preaches nostalgic reminiscences about a past 
     that never existed and criticizes modern society. 
     Environmentalism with its distinctly Calvinistic flavour and 
     an obvious biblical quality is based on widespread 
     misinformation, myths, sensationalism and promotes a 
     collectivist, redistributionist political agenda.
       Our experience gives us special sensitivity to all that and 
     we see the similarities of arguments used in our country in 
     the past and now in the sophisticated debates in your country 
     and elsewhere. It is our duty to remind of that. We all have 
     to watch our own policies and institutions. There is always 
     the danger of creeping etatism and stronger government 
     powers. And it is our duty not to let it destroy our fragile 
     free and democratic society.
     

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