Some confess mistakes in velvet revolt, but not Czech's Klaus
A decade after the beginning of the end of communism, key reformers in the regional economic and democracy transitions gathered in Warsaw to assess lessons learned.
There also was an unusual bit of eating of humble pie by Harvard reformer Jeffrey Sachs, no less, in both admitting he was wrong about advocating mass-privatization early on, in Poland, and in miscalculating the potential for corruption in Russia.
Poland was right in ignoring his advice and putting off mass privatization in 1990, Sachs said, concluding with others that "it doesn't work." In Russia, he said, the holdover state-owned firms "did less badly than I'd thought. I had thought it would be just rape and pillage and it wasn't." He totally underestimated "the depth of the corruption that happened with mass privatization in Russia and the Czech Republic," he said, condemning the view "that morality does not matter, that this is just privatization, that robber barons don't matter. Those are the real Bolsheviks."
The two-day seminar was organized by CASE, the Center for Social and Economic Research, founded by economist-reformers Leszek and Ewa Balcerowicz and Marek Dabrowski. Helping CASE President Barbara Blaszczyk round up potent speakers were Columbia University economics professor Stanislaw Wellisz and Stanislawa Golinowska, director of the Institute of Labor and Social Policy.
Most reformers agreed on these issues:
International institutions and advisers are useful, within limits.
Ambitious economic reforms also require an underpinning of legal and market-oriented institutional changes.
Political competition may be chaotic but actually insulates reforms and insures that "democracy" is a reality, not a sham.
The credibility of reformers may be as crucial as the reforms.
Irena Grosfeld, a Paris-based specialist on transition restructuring, said "the merit of Balcerowicz and his team was the credibility of the team and sending a signal of the irreversibility of the changes. It imposed changes in expectations and that was a most important element."
Marek Belka, finance minister under the Democratic Left Alliance (SLD) government, agreed. Balcerowicz's coup was in "getting credibility and, most important of all, setting out the agenda for reform that was so clear and so strong that no one even dared to contest it, let alone reverse it."
A major dissenter on one of the closing panels was Vaclav Klaus. He presided over Czech reforms from 1989 to 1997 as finance minister and then prime minister and, as leader of the major opposition party today, is seen by some as likely to regain power soon. Klaus ridiculed the "romantic ideas" of his "Velvet Revolution" colleagues (an apparent reference to President Vaclav Havel) that communism was defeated. "It was not defeated; it collapsed, it was too weak." And he said the expectations gap has grown, not narrowed, in the decade since. He derided the "fairy tale" that advisers from multinational institutions and investors "were only missionaries" and said "they are a very well-organized, rent-seeking group. And their goal is to prolong the transition as much as possible. So they try to block our success."
Balcerowicz, on the same panel, agreed with Klaus about the unpredictability of reform options. But, he told Klaus, just because the reforms bring with them "unintended economic consequences ... doesn't mean you shouldn't have a strategy."
Former Russian reform adviser Anders Aslund noted that "today the Czech Republic is very much the grand star that faded ... while Poland is doing splendidly and Hungary is doing okay. You (Klaus) were prime minister for most of that time, so how do you explain it?" Another questioner, noting the linkage by seminar participants of corruption not just in Russia but in the Czech Republic, asked if Klaus thought the relative absence of financial "transparency" had contributed to the "tunneling out" of investors' money.
Klaus rejected the question on "transparency and tunneling" as "inappropriate here" and then added that "there is not one more bit of 'tunneling out' (in the Czech Republic) than in any other country, including Poland." He disagreed with Sachs that advisers were helpful. "We don't need them," Klaus said. He disagreed with statistics showing that Poland had had a 120% improvement in its gross domestic product (GDP) since 1989. The only mistake he conceded was not his. "There was a tragic policy mistake by the central bank not the government," he said.
That left lots of reformers shaking their heads in confusion and wonderment.
