The rapid rush toward freedom in Eastern Europe has brought with it some spectacular stories of individuals who have gone from being obscure dissidents to leaders of their countries in the space of a few months. A journalist is the new prime minister of Poland. A former musician is now set to become president of East Germany. Playwright Vaclav Havel is now president of Czechoslovakia. One of the more interesting tales involves a friend of Havel's, Vaclav Klaus, now finance minister of Czechoslovakia. Klaus is an economist who became a devotee of free-market economics by reading the work of Nobel laureates Milton Friedman and F.A. Hayek. For nearly 20 years, Klaus was relegated to obscure jobs for his persistent criticism of his country's socialist system. Now he is the point man for what he hopes will be a free-market revolution in Czechoslovakia to accompany last November's successful political revolution.
Klaus has jokingly referred to himself as the "Milton Friedman of Czecho- slavakia," and he sometimes sounds more like an economist than a politician. Certainly, he could teach most U.S. congressmen a thing or two about how markets work.
Klaus is a slim, energetic 48-year-old with a dry sense of humor. He has admired the United States and its traditions of freedom and opportunity since his six-month stint as a graduate student at Cornell University in the 1960s.
John H. Fund, an editorial writer for the Wall StreetJournal, interviewed Klaus in New York in late February, when Klaus accompanied President Havel on an official visit to the United States.
Reason: Dr. Klaus, what is the message you want to bring Americans about the new Czechoslovakia?
Klaus: The message is the same for whatever group. We want a market economy without any adjectives. Any compromises with that will only fuzzy up the problems we have. To pursue a so-called Third Way is foolish. We had our experience with this in the 1960s when we looked for a socialism with a human face. It did not work, and we must be explicit that we are not aiming for a more efficient version of a system that has failed. The market is indivisible; it cannot be an instrument the hands of central planners.
Reason: At a Council on Foreign Relations breakfast you were asked about what kind of economic system you planned for Czechoslovakia.
Klaus: Yes. I told the questioner that he did not fully understand what a market economy is. I often use the line by F. A. Hayek that the world is run by human action, not by human design. To talk about planning an economic system is to talk in old terms, and I find myself sometimes having to teach Westers about what the market really means. They often don't realize that they might need a little of a market revolution in their own countries. You cannot predict the outcome of the market process; you can only set the conditions for a challenging competition.
What we want is to establish the rules of a market economy--not to plan its outcome.
Reason: How will you bring about the transition to a market economy?
Klaus: This is the key question. It is what makes the reform process an art, not just a science. You have to develop a strategy that tells you what reform measures you should follow and in what sequence.
The sequence of reforms is a legitimate question for debate, but not, I think, the speed and direction they take. I fear that our neighbors--Hungary and Poland--may be falling into what I call a "reform trap," in which partial reforms can turn out to be worse than none at all.
Reason: But you have also indicated that you think it is wise to wait on cutting subsidies for such things as rent until the June elections bring a government with a popular mandate. Is that slipping into the reform trap?
Klaus: My budget [released on March 8] will be very tough. Subsidies will be cut at least 15 percent everywhere. This government recognizes that when you are dealing with the daily expenses of people, you need some kind of mandate. Remember, no one has elected us. This is a govemment that was called in to fill a vacuum.
Reason: You and President Vaclav Havel were quoted as telling President Bush that you wanted lower barriers to trade and investment in Czechoslovakia, but not foreign aid. Why are you the only Eastern European country that is not asking for foreign aid?
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