23 years on, and our rulers close ranks again behind one big idea.


"The expulsion of the Germans would be a rather marginal event in the overall context of our energy market..."



Chrystia Freeland, in a recent article in the NY Times entitled “The self-destruction of the 1 per cent" explains how ruling elites self-destruct, dragging down the rest of society with them.

She chooses 14th century Venice to illustrate her point. “Medieval Venice was one of the richest cities in Europe. At the heart of its economy was the colleganza, a basic form of joint-stock company created to finance a single trade expedition. The brilliance of the colleganza was that it opened the economy to new entrants, allowing risk-taking entrepreneurs to share in the financial upside with the established businessmen who financed their merchant voyages.”

Freeland goes on to describe how the Venetian elite, even though it was the principal beneficiary of this open economy, abolished the colleganza in a determined effort to protect its privileges from outsiders. La Serrata, or closure as it became known, destroyed the wealth and power not only of its rulers but of the city-state itself.

In a more academic version of the same idea, the American authors of “Why Nations Fail: The Origins of Power, Prosperity and Poverty,” argue that what separates successful states from failed ones is how ‘extractive’ (or plainly said, greedy) their ruling elites become. Extractive states are run by those who keep as much wealth for themselves by cutting out the rest of us. Greed is their motivation. But the wilful exclusion of others, lawful or not, is their method.

Extractive elites self-destruct by destroying the wealth-creating potential of the societies they lead. This sounds familiar. But the difference between the Czech elite and the Venetian oligarchs is that the Venetians actually created the prosperity that they then unwittingly ruined through shutting out new money. Whereas the wealth of this country’s post-1989 elite is largely the result of what economists call ‘rent-seeking’, economic and regulatory privileges grabbed by the powerful few.

This difference might be the difference between Andrej Babis and Martin Roman (although I am not convinced). Where Babis seems to have created the wealth which he is now busy trying to protect by moving into politics, Roman is a classic rent-seeker. Both men, however, display a distinctly Venetian inclination to lock-in their privileges by keeping competitors out.

The failure of local regulators to protect economic competition, whether in the generation of electricity, the origination of mobile phone calls or the baking and distribution of brown bread is not a failure of regulatory expertise. It is an intentional failure, secured by lobbyists, badly disguised as government ministers or latter-day dissidents, determined to destroy competition.

I accept Erik Best’s argument that investors are being driven out of this country on purpose, and that their departure is not merely a ‘by-product of someone's greed’. Best gives as an example the attempt by Miroslav Kalousek to cancel the U.S.-Czech bilateral investment treaty.

“When the solar scam was being planned, the organizers failed to take into account the full impact of the protection provided to solar investors who used U.S. investment vehicles. The ‘preferred’ investors into the solar scheme were bought out by CEZ when the subsidies were reduced, but other investors not involved in setting up the scheme will be able to use the treaty to sue the Czech state. This increases the total costs to the state, which will make any similar dubious deals in the future more difficult to justify. So the investment treaty with the U.S. must be abrogated.”

Freeland quotes an American economist, who points out that “most lobbying is pro-business, in the sense that it promotes the interests of existing businesses, not pro-market in the sense of fostering truly free and open competition.”

Babis and Roman are pro-business, but neither of them is pro-market. And nor is President Klaus, the most vigorous free market politician, both in word and abroad, that any nation has ever known, pro-market. Once get him home, and he actively drives away new money in order to protect his chosen few. Indeed, there is not a single influential Czech politician that fights for truly free and open competition. On the contrary, the mantra has become 'Naše země, naše pravidla!' or 'Zde domov můj'.

The ruling elite of this country now champions the virtues of a closed society and a one-way, export economy built on abundant electricity generated by a monopoly using nuclear technology from the 1950s -and owned by the very same ruling elite.

All parliamentary parties support the nuclear vision of this government regardless of the costs, both economic and geo-political. All support the disqualification of Areva from the Temelin bid. All subscribe to the view that the Germans are irrational and 'anti-Czech' in moving away from nuclear. All dismiss renewable energy as childish nonsense (and invested in the photovoltaic scam.) All support the national energy champion and its abusive behaviour. And all are funded by it.

I call this Temelinomics. You may call it La Serrata. But whatever you call it, this concentration of economic and political power in the hands of the ruling elite, and the closing of minds that results, is depleting the common wealth of the Czech Republic.