Andrej Babis has more to gain from acquiring his political competitors than from competing with them.



December 2001: A founding father of the cartel party state with the man he chose as the ideal strategic partner for the petrochemicals industry.


Since 1998, Czech political parties have functioned like an economic cartel. They have employed the resources of the state to limit political competition, and to secure their own re-election and the material well being of their business partners.

But cartels, whether of the business or the political variety, contain the seeds of their own destruction. Greed destroys them. There is always at least one cartel member who cheats sooner or later. He decides that the immediate advantage of breaking ranks outweighs the eventual disadvantage of the cartel’s possible collapse.

Enter Andrej Babis. As the absolute owner of a vast business conglomerate that has been an outstanding business partner of the Czech political establishment for two decades now, by no stretch of the imagination can Babis be considered an outsider. He has been a fully paid-up member of the cartel from the start. For example, in December 2001, a founding father of the cartel party state, then prime minister Milos Zeman, awarded Unipetrol to Agrofert and this in spite of the fact that Agrofert had bid only Kc 11.5 bn, compared to the Kc 14.7 bn bid by a British-US consortium. Zeman welcomed Agrofert as an 'ideal strategic partner' for the Czech petrochemicals industry, whereas he dismissed the British-US consortium as a ‘mere financial investor’. This was odd given that the US firm in question was the petrochemicals giant Conoco. And it was stupid given that the sale collapsed a few weeks later, after the 'ideal strategic partner' failed to come up with the money.

In 2011 of course, Andrej Babis turned against the cartel of established political parties, calculating that he could do better by cheating (from their point of view, if not his) on his former partners in politics than by continuing to work with them. But no one gives a damn that Babis has decided to bite the political hands that have fed his business empire for years with public subsidies and favourable regulations. What counts is that genuine political competition will now be restored thanks to him.

One cannot collude with oneself

I would agree if the premise was correct. It is not. The political ascendancy of Andrej Babis does not mean more competition other than in the short run. Babis will end collusion between the established political parties. But ending collusion and restoring competition is hardly one and the same. For a start, cartels, especially those of the political variety, have a nasty habit of regrouping themselves (though perhaps only at the municipal level of politics to begin with).

It is naive to think that a businessman with Babis’s professional background and track record of working with state subsidies and state enterprises, both in the gift of politicians, would set about destroying a cartel, political or otherwise, in order to introduce competition.

Consider this: one cannot collude with what one has already acquired, or has in effect acquired by becoming your target’s most powerful patron, as the owner of a business conglomerate like Agrofert knows full well. If you doubt this, ask the former owners of the firms that did business with Babis before being gobbled up by him. The rulings of the Czech competition authority over recent years are full of examples of Agrofert acquisitions that have been allowed to go ahead on the grounds that the acquisition target was, for competition purposes, already indistinguishable from its would-be acquirer.

Babis is a competitive threat to the established parties today. But the question is whether his political impact will be to restore political competition or to ruin it in the future. The technocratic model that he espouses represents an existential threat to the parliamentary system as such. Far from heralding a return to a robust competition between parties, is it not more likely that the Babis technocracy will enfeeble the institution of parliament still more?

Babis is determined to remodel Czech politics in his own, fatuous managerial image. He has no time for the messy collegial habits on which democratic decision making depends. He treats every organization, not as a college, but as a hierarchy in which the leader holds absolute sway in his own domain. Examples abound of Babis’s faintly comic contempt for the inefficiencies of parliamentary politics, from a determination to keep elected politicians out of government to an effort to streamline parliamentary debate by restricting the right of the opposition to speak, as if the greatest inefficiency of all is the need to hear out all those tediously ‘inexpert’ opinions.

An unpleasant but essential purgative?

To some local commentators, such as Jan Machacek of Respekt*, Andrej Babis is an unpleasant but essential purgative. Babis is the man who kept Milos Zeman’s pro-Kremlin cronies out of parliament last November. He is a welcome slap in the face to the established parties that had grown greedy and lazy from too much power. Above all, Babis is a popular bubble that will soon burst. In essence, Machacek is arguing that Babis, having once got the Czech body politic back in good shape, will be expelled from it like any good purifying draught.

Purgatives should be used with caution and under supervision if they are not to harm the organism they are meant to cleanse. People who use excessive amounts of laxatives will eventually find the exact opposite happening—the laxatives will cause reflex constipation.

Certainly, Babis has helped the Czech electorate avoid the catastrophic mistake of voting in sufficiently large numbers for Milos Zeman’s political formation last October to allow the president to co-opt CSSD and to dictate the formation of the new government. But it is far from certain that the purgative will be used with the required restraint. It is quite possible, for example, that two of the four established parliamentary parties will not even be around to enjoy the expulsion of Babis from the body politic. Time is very much on his side in this year of elections. By the end of 2014, ANO 2011 is likely to have already won the European Parliament, Senate and municipal elections.

His electoral success this year could wipe out forever Petr Fiala’s chastened ODS. It will certainly accelerate the collapse of TOP 09, which is already fracturing thanks to the burning fuse under Miroslav Kalousek’s backside, a fuse lit with glee by his successor as finance minister. As I have pointed out elsewhere, the appointment to senior positions in the finance ministry of two accomplished critics of Kalousek, the lawyer Robert Pelikan and the auditor Lukas Wagenknecht, amounts to a declaration of chemotherapeutical war on one of TOP 09’s two vital organs. Can you kill the Kalousek cancer without killing TOP 09?

I agree with Machacek that the Babis bubble will eventually burst, but I doubt that when it does, the resulting political vacuum will be filled by reinvigorated political parties. It seems more likely today that popular movements of the ANO/Usvit strain will be chosen instead.

In conclusion, it seems highly improbable that a man of Babis's extremely acquisitive character would set out to break up a cartel-like political arrangement from which his business has been benefiting so handsomely and for so long, in order to allow party competition to flourish once again. In my opinion, his move into politics is driven by the conclusion that he has more to gain from competing with and then acquiring a discredited political establishment than from continuing to collude with it.

In short, Andrej Babis has as much interest in promoting party political competition as he does in fostering truly free and open competition in business and the media, that is to say, no interest whatsoever.


* A polemic between Jan Machacek and myself on the political significance of Andrej Babis appears in Respekt this week.