The $74 Trillion Global Economy in One Chart


By Václav Klaus

There is a problem with the term economic strategies. Are we economists or political strategists? I don’t know any institution I would be motivated to give advice to. And I suppose there is – symmetrically – no institution waiting for my advice.

The time has come to return economics back to science in the old sense. Giving advice and suggesting strategies have undermined its credibility. It, of course, started with Keynes.

My experience with communism and with its dismantling teaches me to strictly differentiate between useful partial reforms (government strategies or IMF structural reforms recommendations) and changes of an economic system. In some situations partial reforms are irrelevant, whereas systemic changes are absolutely crucial. And inevitable. It was the case of communism, it is the case of the current economic and political system in the Western world as well.

The contemporary economic system (both in major countries and internationally) can´t be changed by better strategies of international institutions. In their behaviour they are not autonomous or independent. They are not autonomous players or independent entities. They are the product of the world economic system, of the prevailing economic orthodoxy and of vested interests. Their behaviour can´t be changed by giving them advice.

The current world requires a paradigm shift, not better strategies. We have to return to – what used to be – a normalcy. We should resolutely reject the advocacy of all new-normalcies. We have

– to return to liberal economic policies;

– to refute protectionism;

– to deregulate and desubside the economy.

In the old terminology, we have to return to free markets.

We have to return also to traditional monetary policies. We have to start with getting rid of the policy of quantitative easing. It didn´t help. It just created all kinds of bubbles and disequilibria. The QE is – in its substance – a passive, accommodating policy which accepts the current degree of government regulation and intervention as given (in other terminology, the current level of incompetitiveness of Western economics). It hopes to overcome it by Keynesian remedies. The never-ending attempts to find a more sophisticated forms of policies and regulation have to be abandoned.

It relates to the US, but much more to the EU. Instead of relying on subsidies and redistribution, the EU economy should return to profit making. Europe is approaching the moment when we will have to organize a systemic change there. We have, in Central and Eastern Europe, some useful and applicable experience with it.



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