Ten Questions for Jan Švejnar

Jan Švejnar is a leading economist, specializing in developing countries and employment transformation, and the founder of the Center for Economic Research and Graduate Education at Charles University. He served as an economic advisor to former President Vaclav Havel as well as other political leaders in the Czech Republic. A professor at Charles University, he also teaches at the University of Michigan, where he is the director of the Center for International Policy. He is currently backed by the Greens and the coalition government in the upcoming presidential election. He spoke with Lukáš Kovanda on the need for a directly elected president, the economic crisis and the American and Czech educational systems.

This interview originally appeared in the Summer 2011 issue of The New Presence. For other articles from this issue, please see the Archive section.

Are you in favor of direct presidential elections in the Czech Republic? Do you think direct elections have a different meaning for ordinary voters?

Yes, I am in favor. There is no reason why direct democracy should not include direct presidential elections. The vast majority of people in this country are in favor too. Also, given the scandals among leading political figures, it is desirable for the president to be elected directly by the people.

What sort of a president do you think Czech society needs?

We need an ethical, educated president; a president with domestic as well as international experience. The president should also be able to lead the country through complex global situations.

Should the president’s powers remain the same or should they change? If they should change, in what sort of way?

I think that they should remain the same. I don’t see any issues in this respect.

After the rather scandalous resignation of Dominique-Strauss Kahn, who do you think should lead the International Monetary Fund? Should it be — as always — a European? Given the rising economic power of Asia, should it not be someone from Asia or from another developing region?

A European — or rather a European lady. However in the future, global candidates should be considered. There are many qualified people in developing economies.

Václav Klaus again stated that the Czech Republic will certainly not adopt the Euro in the foreseeable future. What is your opinion? What should be the decisive factor for the Czech Republic?

Czech exports and imports exceed 150 percent of our GDP [gross domestic product]. We are an incredibly open economy and the vast majority of our business is conducted with countries from within the Euro zone. When we consider that the exchange rate of the Crown to the Euro fluctuates 20-30 percent or more within one year, we immediately see how detrimental it is for our businesses not to be a part of the Euro zone. They are subject to great shocks they cannot prevent. Or rather, it would cost them enormous amounts of money to protect themselves from these fluctuations. This is the reason why we have less businesses than if we were a part of the Euro zone. Additionally, the businesses we have are smaller than they could be. It affects us citizens too, because there are fewer employment opportunities and therefore also lower wages and higher unemployment rates.

Martin Feldstein, advisor to Barack Obama, claims that Greece could leave the Euro zone temporarily. George Soros said that a two-speed Euro zone is inevitable. Will the Euro zone last and if so, in what form?

No one knows what will really happen because there are too many factors to consider. I believe that the most likely scenario is that the Euro zone will remain and gradually there will be greater coordination of fiscal policy within the Euro zone as well as the Union as a whole.

Some economists also blame the US Federal Reserve for the current commodities and food price rises on global markets. What is your opinion on the so-called quantitative easing II ? Can it really cause global inflation pressure (given that the US dollar is still reserve currency number one as well as the leading commodities market currency)?

Yes, quantitative easing monetary policy of the [US Federal Reserve] partially causes increase in prices in fast-growing developing economies. The eased funds naturally go to places of high-speed growth and therefore potentially faster return on investments. Many of these countries, for example Argentina and Brazil, have already reached the full extent of capacity utilization; therefore further investment partially results in increased prices rather than in increased production.

What is your opinion on the economic development of the Czech Republic in the years to come? Will we reach the same growth as before the global economic crisis? Is your prognosis related to adopting the Euro?

I expect slower growth in the next few years than in 2003 – 2008. Even the expected growth will be largely dependent on foreign demand for our exports. Our domestic demand, consumer as well as government, is stagnating.

I would like to know your opinion on the educational system in the US, in relation to tuition fees and education quality. Some claim that the bubble will burst on the education loans market, as it did with high-risk housing loans. Is the quality of top universities such as Harvard and Yale consistent? How would you compare American universities with Charles University?

The USA has the best and the worst schools in the world. The top ones are expensive and the worse ones are significantly cheaper. The important factor is that America has a high number of the best universities and is leading the world in research and innovation. This is because the universities are effectively managed as businesses; they are a part of a commercial environment and they strive to achieve the highest possible quality. That is how they increase the quality of their research and education. Our universities are run on the basis of the old system, in which global quality is not a clear target. University chancellors and deans do not have managerial powers and are not under external pressure to perform or lose their jobs. This is the reason why our universities are not one of the best, or even one of the average universities in global rankings. It is sad that twenty years after the revolution young people can purchase international products and services, but they cannot receive international education. Countries such as China prove that it is indeed possible to get a university or two into the world’s top 100.Loans are obviously very important in the USA for students from poorer backgrounds. However, I do not see a reason why the loan system in education would crumble. Investment into education has very high returns and it is profitable for the students, government and banks to retain the same system.

There is talk of establishing the American Aspen Institute in the Czech Republic. How do you evaluate your IDEA think-tank? Do think-tanks, especially foreign ones, make any sense in our closed political and “clientelist” system?

I think that think-tanks are desirable in our country, no matter where they come from. The IDEA think-tank (Institute for Democracy and Economic Analysis), which I have established at CERGE-EI is doing exceptionally well, even though it has just a small budget. Its studies and findings are used and cited widely. Of course we could achieve so much more with more resources.

About the author

Lukáš Kovanda is a Czech economist and journalist. He teaches at Prague’s University of Economics and co-founded EUportal.cz, a Euro-realist webpage in the Czech Republic.

published: 16. 6. 2013