Baroness Thatcher — bright-red lipstick, bouffant blue-rinsed hair, blue suit, matching bag — calls for Scotch on the rocks for two, in honour of her friend’s swanky performance. Drinks promptly arrive in cut-crystal glasses, on a silver platter, courtesy of an unsmiling waiter wearing white gloves. The two friends engage in polite conversation, flanked by several hundred admirers attending a public lecture sponsored by London’s Institute of Economic Affairs. At an opportune moment of silence, the unknown author of a forthcoming biography of Václav Havel butts in politely to ask the Iron Lady’s friend, Dr Václav Klaus, what he thinks of his country’s President. ‘He is a half-socialist,’ says Klaus, in a frank mood, pursing his lips. ‘He has always been in favour of collective solutions. His speeches about so-called civil society are just the latest version of the same dogma. He is in love with state power.’389
So few words, so much confidence. The public lecture that he had just delivered — in honour of the well-known Austrian economist Friedrich von Hayek, the darling of contemporary neo-liberalism — was equally strident. In a chandeliered ballroom setting — it was a full house of 300 invited guests — Dr Klaus had tried to convince his audience that he and his colleagues had begun to transform the Czech Republic into a free-market paradise. What was once among the most Stalinist states of the Warsaw Pact empire was now the most vibrant, bustling, and open society in the region, potentially an economy that could in future outpace the economic performance of its long-established Western democratic neighbours. It had taken great determination and fortitude to shift a whole nation of people from totalitarian servitude to a market system of liberty, but he and his government colleagues had managed it. The catastrophe of socialism was that it had turned an aquarium into fish soup. It had posed a massive challenge: to turn fish soup back into an aquarium. And it had been done, thanks to one of the most remarkable privatization plans in modern history.
Klaus went on to explain that elsewhere in the post-Communist bloc, in Poland and Hungary for instance, privatization had been carried out without clear legal rules. That had led many investors — both domestic and foreign — to discover with regret that they did not have clear legal title to their investments. So rather than lurch haphazardly into quasi-market reforms and ‘spontaneous privatization’, Klaus and his government had insisted upon the systematic re-creation of the foundations of an efficient market and a free society — the rule of law, clearly defined property rights, an efficient system of contract. The so-called voucher scheme was exemplary of this strategy. The starting point of the scheme, Klaus argued, was to take the ideologists of socialism at their word when they insisted that state properties and industries ‘belonged to the people’. Vouchers were accordingly offered for sale at a nominal price to all citizens of Czechoslovakia. A system of auctions and bids had been created to enable the transfer of ownership of property into private hands. There it belonged, Klaus said. And the scheme had been enormously successful, he concluded. It had created widespread public support for privatization. It had proved to be an efficient way of transferring ownership rights from an irresponsible state to responsible private parties. And — since power and property are twins, as the seventeenth-century English political thinker James Harrington famously observed — the voucher system of privatization had laid the foundations for a political system capable of maximizing its citizens’ freedom.
Throughout the lecture, and in the question period that followed, Klaus presented his case with great polish and dignity — and got roundly applauded for it. Those who know him well and who have worked around him often say that he is a shrewd political actor who in his dealings with others can be ruthlessly calculating. It might even be said, with a touch of exaggeration, that Klaus’s political style in fact resembled that of a late twentieth-century Septimius Severus, the Roman emperor much admired by Machiavelli.390 The Czech Septimius Severus — tortoiseshell glasses, short grey hair, smart suits and ties — naturally had a late-modern look about him. But, like his Roman predecessor, the Czech Septimius had learned to combine the arts of manly charm and decency with the political qualities of a savage lion and a tricky fox. These qualities were first noted by others during Klaus’s first dealings, on behalf of Civic Forum, with the Communists during the Velvet Revolution. Then an economist at the Institute of Forecasting of the Czechoslovak Academy of Sciences, he quickly proved himself to be a good organizer, a tough bargainer, and a brilliant spokesman for the neo-liberal alternative to late-socialism. He developed a reputation for resolution, professionalism, and a big ego — so big that it later spawned the commonplace joke that the only difference between God and Vaclav Klaus is that God doesn’t think that He’s Václav Klaus.
The Czech Septimius Severus played an active role in the co-ordinating committee of Civic Forum and, under the so-called Government of National Understanding led by Prime Minister Marián Čaifa, he had been rewarded with the post of Minister of Finance. He was not only a competent economist but also a talented political animal who had a sharp ear for what people were saying and thinking. He was unafraid of telling people about unpleasant realities or of taking risks. He proved that he was an ambitious fighter by deciding to run for office for Civic Forum in the June 1990 elections. He was convinced he could win anywhere, so he chose to stand in a coal-mining district of northern Moravia, in one of the inhospitable heartlands of the Communist Party — and won. Klaus soon after (13 October 1990) surprised many observers by winning 70 per cent of delegates’ votes for the post of Chairman of Civic Forum at its Congress held in the Prague district of Hostivař. There should have been no surprise. For several months, he and his supporters had been very active, especially in the regional structures of Civic Forum. They had ambitions, as became evident in April 1991, when Civic Forum split and the breakaway Civic Democratic Party (ODS) was founded in Olomouc, in opposition to Jiří Dienstbier’s Civic Movement (OH) party, which remained sympathetic to Havel.
Klaus, by now playing the political role of Septimius Severus with confidence, made publicly known his strong dislike of Civic Movement’s undisciplined, left-wing laziness. Many within Civic Movement responded with the charge of careerism, which was true. Klaus worked hard to model his party on Mrs Thatcher’s Conservative Party. The Civic Democratic Party was supposed to be a party of self-confident and enterprising individuals who together would accelerate the drive to post-Communism by legislating for the reintroduction of a market economy. Convinced that socialism was just a short and disastrous interlude between capitalism and capitalism, he was for the strong state and the free market. Despite claims to the contrary, Klaus always seemed less than interested in legal and political reforms for the sake of democracy. It was the mark of a man whose theories of free-market economics were formed during the period of late-socialism. Unlike the earlier advocates of democratic ‘market socialism’, Ota Šik for instance, Klaus worked during the 1970s and 1980s for the introduction of a free-market economy, if possible under the rubric of a powerful (late-socialist) state. With the outbreak of revolution, that Utopian vision of a free market suddenly became practical. Klaus lost no time in pushing the principles of free-market economics — using bossy political tactics and existing state structures wherever possible.
Both the aims and methods of the politics of the ‘strong state, free market’ contradicted the crowned republic, and put Klaus on a collision course with Havel. Their friendship got off to a bad start during the revolution, when at one point in an early meeting with the state authorities, Havel, effectively the leader of Civic Forum, introduced Klaus to the other side as ‘Václav Wolf’. Klaus reportedly winced at the absent-minded — or unconsciously motivated — slip.391 The mutual respect thereafter dissolved in the emerging acids of party politics, so that by the summer of 1990, when Klaus was already an important force in both Civic Forum and the government (as Minister of Finance) Havel — still dreaming of a crowned republic — tried hard to get rid of him by offering him the post of Governor of the National Bank of Czechoslovakia. Septimius refused to take the poisoned bait. By now he was a seasoned political creature. He correctly sensed that Havel was mainly worried about threats to the presidency. Klaus responded by trying to clip Havel’s political wings using every available sharp instrument. He built a new power base by campaigning for the founding of the new Civic Democratic Party, which he soon ruled, unchallenged. After becoming Czech Prime Minister in June 1992, Klaus also put the frighteners on Havel by proposing the idea that the then Prime Minister of the Federal Republic, Jan Stráský, be considered as the next serious candidate for the presidency of the country.
Then there was the ongoing political war of nerves that Klaus waged against Havel. Neutral observers frequently noted Klaus’s pretended omnipotence: his political unwillingness to listen to anybody and his penchant for treating his opponents as children, or as morons. Another observer, sympathetic to Havel, noted the different political characters of the rivalling Václavs. In certain contexts, the President ‘might think that he knows what’s true and right, and that his opponent is an idiot. But he would never put it that way. Normally, he is reflective, tentative, and gives no simple answers’. Klaus, by contrast, always ‘understood something of the psychology of winning power over others by aggression’. He always had ‘a perfectly prepared strategy, which typically began with a punch in his opponent’s stomach. He detested “wetness”, even though, after conquering his opponent, he could pour on the charm.’392
Behind the scenes, the different political styles produced considerable friction, as when the two men appeared on a nationwide television talk-show filmed in Brno, in December 1992. Before their appearance, which was hosted by the well-known presenter Antonín Přidal and featured several other guests, everyone gathered in a hotel lounge to have drinks. The mood was friendly — until Septimius arrived, late, hobbling along on crutches, nursing a leg recently injured while playing tennis. The atmosphere stiffened. It did not improve after the group moved to the dinner table. Everybody began to stare at their plates as Septimius rounded on each guest in turn. In a loud voice he told Přidal, who turned as pale as a ghost, that his programme was full of intellectual bullshit. Septimius then attacked another guest for his Europhilia. ‘Brussels! A socialist nightmare that we must live without!’ he snarled. Septimius then ticked off Havel, who ate his dinner in silence. Septimius went on to sermonize against intellectuals, whom he denounced as useless and sometimes dangerous meddlers in the world of power. After everybody had been told off, the party moved to the state television studios, where Václav Klaus was in fine — dynamic, buoyant — form. Like a bull at a gate baying for blood, Klaus charged at his opponents, including the shaken Havel, who spent the session defending himself with tentative statements and complicated formulae. After the filming was over, the whole group returned to the hotel for a parting drink. Suddenly, Septimius Severus became genial, charming even. He offered around the drinks, even though nobody felt like drinking with him. After a few minutes, sensing his absence to be imperative, Klaus left, with handshakes and smiles. The rest of the group, including Havel, slowly recovered, as if from a foiled encounter with a charming bully. They stayed on until half-past three in the morning, reminiscing, chatting and joking.
The Brno encounter was not atypical, for Havel often felt unnerved by the political abrasiveness of Klaus. Havel, never a morning person, found especially unpleasant his opponent’s early-morning telephone calls, beginning with impossible statements like, ‘I can’t believe that you said what you did yesterday,’ or unfriendly questions like, ‘So can you tell me where we now stand?’ Nearly every Wednesday morning, when the two met at the Castle for a briefing session, staff noted that the polite Havel would tense up beforehand, unsure of how today he would handle the ‘attacking sarcasm’393 and other rough tactics of his unpredictable opponent. The tension was compounded by an ever-lengthening history of spats over one matter or another. Many of them were traceable ultimately to Klaus’s hard-headed, savage-minded economism — and to his intense dislike of Havel’s defensive resort to philosophical abstractions like ‘the crisis of humanity’ and the need for ‘human decency’. Klaus had one — only one, but historically big — Idea, and he repeated it constantly to Havel’s face. The Big Idea: no post-Communist society can become successful unless it quickly develops a dynamic and fully modern market-based system of commodity production and exchange. Compared with the unproductive stagnation of late-socialism, Klaus argued, economies driven by commodity production and exchange have the great advantage of enhancing their overall power by minimizing collective losses. Market forces ensure that factors of production that fail to perform according to the current (international) standards of efficiency are continuously and swiftly eliminated and forced to find alternative, more productive uses. Factors of production that are ‘uncompetitive’ go the wall. Klaus’s Big Idea, in other words, was that markets mimic Abraham Lincoln’s famous maxim that those who need a helping hand should look no further than the end of their right arm. In this way, markets invite the victims of competition to blame themselves — and to survive and then thrive by adapting to new standards of efficiency.
Ever since his teenage years, Havel had had difficulty with these arguments. He complained to his Thirty-Sixer friend Radim Kopecký about the supposed principle that life is ‘an eternal struggle, tough, even cynical and merciless egoism’.394 The sixteen-year-old Havel tried to stake out the countervailing principle of ‘soft humanism’. Sympathy for others was important, for no society could function without it, he insisted. Kopecký replied by accusing him of supposing that he somehow was living in the ancient world, in which the separation of markets from morality, politics and law went unrecognized. Modern times are different, Kopecký argued. Private property, market competition and its corresponding values of individualism tinged with nihilism are today unavoidable, whatever Communists and socialists and other moralists might think or say.395
Many years later, thanks to the aggressive political rhetoric and manoeuvring of Klaus, Havel was forced in practice to live with a competitive party system and — a greater humiliation — to acknowledge the domestic and international imperative of developing the non-state institution of legally guaranteed market forces. Klaus taught him, against his will, that the ideal of a crowned republic was just that, and that instead there must be economic limits placed upon the scope and power of state institutions. Thanks to Klaus, the subjects of the crowned republic endured tremendous structural change: output from the private sector quickly eclipsed state production; the proportion of working people employed in agriculture dropped three times; most of Czechoslovak trade switched to OECD countries; while during 1991 alone, real wages fell by 30 per cent. It might even be said that Klaus’s greatest political success against Havel was to force all Czechoslovaks to wake up suddenly to market realities — by giving each of them a taste of what it is like to return to medieval times, when (in matters such as military service, marriage and spiritual salvation) many more activities than now, paradoxically, were considered tradable items with a price tag attached.
There was a further irony produced by the tussle between Klaus and Havel. In attempting to counter the rise of Klaus, who threatened his sovereign power, Havel eventually latched on to two effective themes — democracy and civil society — that implied the need to draw stricter limits upon his own power. Not only did Havel come to accept the indispensable role of markets. He also came to call publicly for more democracy and to acknowledge the non-state sources of social morality and co-operation that both democratic institutions and markets require to function as markets.
Havel’s defence of democracy against his opponent’s mean-spirited politics was evident in a widely reported speech before the chandeliered Czech Parliament in the spring of 1996.396 Arriving to the sounds of Smetana’s Fanfáry, standing before a forest of microphones, dressed in a smart black suit and a matching black-and-white-striped tie and pocket handerkerchief, sporting glasses, sipping water, a frog permanently in his throat, Václav Klaus looking on over his shoulder, Havel talked earnestly, in long sentences for over an hour, about the importance of democracy in the Czech Republic. He acknowledged the common-sense understanding of democracy as a form of rule that sub-divides the powers of making, implementing and adjudicating laws. Democracy is ‘free competition among different political parties, the rule of law, the principle of civic equality’, he added. But he went on to emphasize that democracy must not be treated merely as a technical mechanism (soustava), or as a political machine (soustrojí). Democracy, he proposed, is ‘a certain attitude towards the world’.
What kind of attitude? Václav Klaus momentarily looked away and down as Havel began to speak of humility. ‘Democracy is a way of being [způsob bytí],’ he argued. It nurtures and thrives upon ‘respect for others, honesty, creative work, good manners and taste, solidarity and respect for the cultures of different social groups and nations’. Democracy is the rule of humility. Hubris is anathema to it, since democracy thrives on the humble willingness ‘to behave as one expects others to behave’. Democracy demands humility towards the underdog. Respect for a minority by a majority is required in a democracy. So is ‘humility towards the order and beauty of nature, as well as humility towards the beauty of things created by previous generations’. Democracy is a political system in which the exercise of power over people and power over matter, being inseparable, must be publicly controlled. Democracy cultivates a shared sense of the fallibility of human beings living in the natural world, which means, he concluded, that the quest for democracy must be ‘a never-ending obligation’ humbled by the awareness of its own fragility.
In the same speech on humility — it earned him long applause — Havel emphasized the need to cultivate a tolerant and open civil society. There were many sources of Havel’s deep interest in the subject.397 Struggling to find a public language in which to do battle with the fox- and lion-like Klaus, Havel was forced to call into question his own earlier presumption that a crowned republic led by a charismatic Ichspieler could serve effectively to replace the Communist order. In this and other speeches and writings, Havel began to develop a brilliant modern idea: that economic actors always and everywhere go about their business and do their work, and can only ever do so, insofar as they tap into, and cultivate, sources of ‘social capital’. A market economy, he insisted, can only function as such if its members are ‘embedded’ in a wider civil society that harbours social interaction based on such norms as trust, reliability, punctuality, honesty, friendship, resolution, the capacity for group commitment, humility, and non-violent mutual recognition.
The point against Klaus was put with special force from the time of his 1992 New Year’s Address to the Nation. ‘Dear friends, I wish you success in your work in the New Year’, he said. He added the kind of words that always irritated Klaus: ‘I wish you health, peace, steady nerves, much patience, hope, and strength, and that you will all understand and help one another.’ He went on: ‘We must face difficulties and people of ill-will with a wise and united perseverance. In an atmosphere of decency, creativity, tolerance and a quiet resolution, we shall bear far more easily the trials we have yet to experience, and resolve all the large problems we must yet face.’398 The sentiments were arguably more than a principled reminder that markets require morality. Havel was taking political aim at what elsewhere he called the ‘Wild West mentality’ unleashed by post-Communist conditions. ‘Spreading corruption, gold-fever, and the view that life is a jungle and so man must be a brute to man’, he said, ‘all these are simply the most familiar manifestations of that strange condition of a society in which the values of a totalitarian state have collapsed and the values of civil society have not yet come to fruition.’399 Havel here pointed, by implication, to the widespread looting of state assets in the name of privatization, for instance the practice of ‘tunnelling’ out of assets by majority shareholders taking advantage of inadequate protection by securities laws for minority shareholder rights. Havel was also in effect criticizing the Klausite uncivil effects of the obsession with state-backed privatization, especially for its blindness towards the way markets tend to ‘fail’, in the process weakening or destroying the structures of civil society upon which they otherwise depend for their survival and growth. Havel mentioned no examples, many of which however spring readily to mind. For instance: market forces tend to spread into all the nooks and crannies of social life, so violating the plurality of non-market voices and identities — friendship, household life, religiosity, community life — that are otherwise crucial to the functioning of market forces. Market forces also suffer from a certain blindness towards losers: in market competition, certain groups and individuals, and sometimes whole regions and countries, necessarily lose, and yet such losses cannot be dealt with by markets, exactly because losses (’externalities’, Klaus calls them) are easily translatable into ‘price signals’ and market criteria. Such ‘market failures’, Havel implied, demonstrate that market interaction cannot create the vital ingredients of social order upon which it otherwise depends. Klaus was blind to a basic ‘law’ of modern market economies: where there is no flourishing civil society, there can be no flourishing markets.