From the WSJ Opinion Archives
OUTSIDE THE BOX
Reality Czech
Will the EU-niks neuter Eastern Europe's surging economies?
BALLEROY, France--The Czech Republic survived four decades of communism. Now it's facing a different kind of centralizing power, the European Union. Vaclav Klaus, a former and perhaps future prime minister of the Czech Republic, explains the dilemma now facing his country. The Czechs built a free society with a functioning market economy within a decade of the Berlin Wall's collapse--a commendable feat, but one that is not yet complete. Now the nation is about to join a European Union that, Mr. Klaus says, is no longer dedicated to "removing barriers to the free movement of people, goods, money and ideas." Instead the EU seeks to create a "supranational European state aiming at the centralization of power in Brussels and the elimination of European nation states."
Speaking last week at a National Center for Policy Analysis conference here, Mr. Klaus defined an argument that will intensify over the next few years as the EU enlarges its membership and expands its control over its new members' economies.
The sun set on communism in the Czech Republic (then part of Czechoslovakia) in 1989. It was a good year for Eastern Europe for as communism faded into the twilight a new dawn awaited those nations which liberalized their economies and protected political rights. Opening of political markets came first and with it a full range of views and opinions. Then came the essential trilogy of decontrolling prices, allowing in foreign trade and easing control of the economy so that startup enterprises could thrive. These were relatively easy things to do, Mr. Klaus explains, for all you had to do was announce them. The harder things came later. Privatizing state industries--under communism, all industries--was much more difficult. But Prague has successfully accomplished that too.
From 1990 to 2000 the Czech gross domestic product doubled; inflation was moderate, unemployment fell below 9% (it's still falling), and the country's per capita income grew to one of the highest in Europe. The economy grew by 3.6% in 2000 alone. The Czech Republic paid off all of its International Monetary Fund loans two years ahead of schedule. Clearly, the end of communism and the creation of a market economy was relatively quick.
But the end of socialism is another matter. Mr. Klaus believes that in the 1990s Europe became more socialistic. "Regulation is for today's socialists what public ownership of the means of production and central planning were for their fathers and grandfathers," he says, adding that the 1990s saw "a victory of new collectivisms." In the first 10 years after the collapse of communism the dominant European slogan was "Deregulate, liberalize, privatize," but now Mr. Klaus sees a very different set of priorities: "Regulate, adjust to all kinds of standards of the most developed and richest countries, . . . get rid of your sovereignty and put it into the hands of international institutions and organizations." In short, flying one's national flag is becoming politically incorrect.
Which is why he views the policies of the European Union with apprehension. There is no question that the Czech Republic (and indeed every other small, former communist nation in Eastern Europe) must join the EU. You see, it is "the future." But what the Czechs hoped to join and what they are in fact joining are two different things.
They had hoped to join the European Common Market, an organization designed to open European markets to all countries. What they are joining instead is a "supranational European state" that wants to regulate every aspect of social and economic life. Instead of opening up the economy, the EU wants to control it carefully through regulations imposed by the unelected bureaucracy in Brussels, a bureaucracy removed from the realities of economic life and insulated from the political tugs of representative democracy and democratic capitalism.
It is likely to succeed, for leftward pressures in Europe today are preventing movement toward more market-oriented economies. A Red Brigade terrorist group assassinated the author of a plan to make it easier for small firms to dismiss workers. He was an Italian labor official. Then a union strike against the plan paralyzed Italy for a day. French authorities prefer government regulation of the content of French television channels to what Socialist Lionel Jospin's government calls the "dictatorship of the shareholders." The EU wants higher, uniform European tax rates through "harmonization" and harangues Ireland for having lower rates, calling them "unfair competition." To join the EU, a nation must comply with some 80,000 pages of fine-print regulations and adopt antigrowth policies to hold down increases in their price levels.
Some say that Mr. Jospin's defeat in Sunday's first-round presidential balloting signals, as The Wall Street Journal editorialized yesterday, that "the old left is dead and buried." I wouldn't bet on it, but in any case this is just the sort of voter inconvenience the bureaucracy in Brussels is designed to circumvent. For the EU it will be business as usual regardless of voter disgust with leftist policies.
So, the Czech dilemma: Stay out of the EU and risk economic isolation, or join in hopes the foreign investment and international trade will lift its economy. But to join is also an economic and social risk, for Brussels may well impose additional antigrowth rules to prevent new entrants from threatening existing industries and the EU's "social dimension." The Czech vision of a postcommunist society is, in Vaclav Klaus's words, "to establish the rules of a market economy," whereas that of the European Union is "to plan its outcome." They are two very different visions of the future.
Mr. du Pont, a former governor of Delaware, is policy chairman of the Dallas-based National Center for Policy Analysis. His column appears Wednesdays.
