The financial crisis provokes strong emotions. Some say it is the capitalistic pursuit of profit that caused it all, others blame the situation on crypto-communists like George W. Bush who weakened the healthy market forces to a level that is no longer sufficient. Fear for our wallets takes our ideological prejudice to extremes.
Back to Erhard
When German cleric Ludwig Erhard came up with the term Social Market Economy a long time ago, it seemed a half-dog half-cat creature was born. But it has survived half a century, becoming an acceptable compromise that has kept Europe in the lead in terms of competitiveness and prosperity. The new winner of the Nobel economics prize, Paul Krugman, says it is the European half-dog-half-cat that is now saving the world from the financial infection spreading from the USA.
However, the current crisis is in particular a crisis of confidence. Our ability to produce and invent new things remains the same. Our potential to produce and to create has not changed. We are only reconsidering who is responsible and trustworthy and who is not. We are searching for information. Once we have a new confidence layout, we will start making up for lost time.
Maybe we temporarily need more accurate and stricter rules. During wars and deep crises, it has always worked this way. A time has come that we have to help establish confidence by demanding more from one another. The stricter we are with ourselves, the sooner we get out of troubles. We have tried it. Maybe we have to give up little pieces of freedom. But we will not give it up for ever. Perhaps for a few weeks or months. Perhaps for a year or two. Extraordinary powers may be necessary to deal with the impacts of the crisis. Do not give much of these powers to politicians, but rather to independent institutions. In our country, it should be the Czech National Bank. Politicians are always concerned about the next elections, so they do things half way. An independent regulator has more powers and better qualification.
At this moment, I would prefer giving more powers to the Czech National Bank. The state and its regulator cannot be blackmailed, and need to have adequate tools. Of course for a limited period of time. I will definitely be glad if these powers remain on paper only. A regulator should be able to only react promptly, quickly restructure the infected entities and give managers a clear signal that no breach of rules will be tolerated. If necessary, it should be able to provide higher guarantees to clients for a limited period of time. Protecting the market means protecting freedom. Protecting freedom may require adopting potentially restricting measures for some time.
Topolánek off his head
Europe has taken a lot of steps even on our behalf. Just to deal with fear. The measures came after Czech Prime Minister Topolánek said there were virtually no problems in the Czech Republic and in Europe. Let us note that none of the great Europeans commented on Topolánek’s statement, including his bizarre threats that he would veto EU interventions. It is sad proof that nobody is interested in the folksy opinions of this Czech prime minister, despite the fact that he should lead Europe as of January.
Jiří Havel is a teacher of economics at the Charles University and shadow education minister for the Social Democrats (ČSSD).
Translated with permission by the Prague Daily Monitor.