Czechia 30 Years on: The Coming-Out of the Oligarchy

Source: Deutsche Welle

The pieces in the dossier 1989 Thirty Years Later were developed around the workshop “Eastern Europe after 30 years of transition: New emancipatory perspectives from the region,” held in Prague on 25-26 October 2019, organised by the Transnational Institute (Amsterdam) and the Rosa Luxemburg Foundation (Prague), coordinated by Agnes Gagyi and Ondrej Slacalek. In addition to their commentary on the present, these articles also give a virtual tour of the collapsing state-socialist world at the moment of its demise, through the memory of those who lived through it, and implore us to reconsider what critical memory might look like, that is, memory that helps us work toward a substantially different future.

Why is there so much discontent in capitalist Czechia thirty years after the fall of socialism? On paper, things do not look bad. GDP per capita has passed 90% of the EU average, outstripping the block’s formerly richer southern periphery. The unemployment rate scores the lowest level in the EU. The Gini index and many other human development indexes rank the country among the most equal societies in the world. Compared to Poland and Hungary, Czechia scores well on global indexes of liberal democracy due to the lack of a visible, politically illiberal and economically anti‑neoliberal backlash.

On the ground, the real picture can explain the discontent. The ration of GPD to GNP is around 90%, indicating a very high rate of foreign ownership in the domestic economy, which is moreover based on export-oriented manufacturing industries. Wages remain thus among the lowest in the EU. Around 10% of the whole population, mostly the working poor, is entrapped in foreclosure (exekuce) due to inability to pay back private debts. Meanwhile, one of the richest Czechs has become prime minister. Nothing of this, however, explains why there is no credible emancipatory alternative.

Czechia arrived at its current state of technocratic-oligarchic paralysis over three decades of competition between two pro-capitalist forces and their state projects.[1] We call these forces neoliberal nationalist and liberal globalist. Each succeeded in developing its own hegemonic state project and representing either nationalist or globalist fractions of new capitalist class.

If there was any socialist emancipatory alternative, it failed to develop a popular counter-movement during three decades since the so-called Velvet Revolution of 1989.[2] Such a third leading force failed to develop so as to master counter-hegemonic discourse as well as organically represent the labouring class. Rather, its fragments were either co-opted by one of the two leading fractions, or have survived in the margins of the power bloc. In addition, since the mid-2010s a technocratic-oligarchic hybrid has emerged at a conjunction of the two formerly leading fractions.

Hence, we identify the Czech power bloc as producing three state projects:the first between the early and late 1990s, the second between the late 1990s and mid-2010s, and the third since then. The first period heralded the end of communism and the ascendant leadership of a neoliberal nationalist project. In the second period, a liberal globalist variety replaced the nationalist one following to the national financial crisis. The third, oligarchic project emerged from the collapse of the pragmatic austerity coalition between both forces during the global financial crisis.

THE NEOLIBERAL NATIONALIST PROJECT

After 1989, reformers had two main tasks: privatization of state-owned enterprises and the formation of a legitimate class of proprietors in the country. The group of ex-‘68er economists around centrist post-dissident Prime Minister Petr Pithart promoted gradual privatization with foreign partners. Minister of Finance Václav Klaus became his main opponent as informal leader of a strong group of neoliberal economists.

Klaus understood the powerful connection between the two questions and proposed a combination of “market without adjectives” and “the Czech Way.” His program of “voucher privatization” gave strong public legitimacy to privatization – as everybody could participate and become “small stockholders” – and created strong owners in the so-called privatization funds, whose managers became the real winners of voucher privatisation.

Already in 1990, Klaus won a majority in the broad democratic revolutionary Civic Forum (Občanské forum) and marginalized the post-dissident gradualists. In 1991, he established the Civic Democratic Party (ODS) which won the parliamentary elections in 1992 and in the coming years neoliberal nationalist faction prevailed.

The nationalism of neoliberal forces had to be limited in this period, and not only because of the ethos of the time was expressed by the slogan “Return to Europe” and the hope of making Czechia a “normal Western country”. Neoliberal market fundamentalism and right-wing political positions could be also presented as part of this Western normality. Klaus worked hard on the integration of Czechia into NATO and the EU and contributed to the Czech-German reconciliation which was a precondition of it. The nationalist aspect of his neoliberal politics was at the time limited to building Czech capitalism. Klaus created a Czech national capitalist class which secretly sponsored his political activities in return. Also, he maneuvered very skilfully to escape strong social turbulence. Under Klaus, the privatization of banks was not concluded, with the state retaining a great deal of control over credit. But in spite of its many successes, Klaus´ model of Czech capitalism began to lose its legitimacy because of the quantity of bad credits, the number of unrecoverable debts, and the rising level of economical criminality.

Klaus’s group had always been contested by a heterogenous group which encompassed social democrats and liberal globalist forces of post-dissident origins, grouped around the presidential office of Václav Havel. The 1990s were marked by the conflict of two interpretations of the meaning of democracy, personalized by Havel and Klaus.[3] The nationalist project became the site of open conflict. From a left-wing point of view, it was quite clear that this harsh conflict was a duel between fractions in the framework of a deeper unity of the new Czech power bloc. Nevertheless, the conflict was real and made visible many limits of the Czech democratic imagination.

Havel’s idea of civil society rested on the elitist democracy of “values” and “personalities”.  Havel was the leader and icon of democratic revolution, but his thought was also heavily informed by the experience of the crisis of democracy. His thought is to some extent parallel to the western New Left, but he was at the same time heavily inspired by anti-democratic thinkers like Martin Heidegger. The Civic Forum was originally built as movement without formal membership and only informal leadership. As soon as Havel became president, he distanced himself from the movement and from political parties. As a self-proclaimed corrective of democracy, he promoted the heavy moralisation of politics through “values” and strong “personalities” who have the trust of their co-citizens.

In contrast, Klaus’ “standard political parties” rested on economization and majority governments. Besides his primacy in economic knowledge, Klaus triumphed over Havel because he had a strong talent for political organisation. According to him, politics was a sphere only for political parties and their struggle for legitimacy and support. In Klaus´ imagination, the competition of “standard political parties” looked similar to market competition. Its most important aspect was the act of election, not the quality of public debate or the division of power. While Havel´s elitism meant the moralisation of politics, Klaus´ majoritarianism meant its marketization.

THE LIBERAL GLOBALIST PROJECT

In 1997, a national currency crisis began, correlated with a corruption scandal in the ODS. A new minority government was formed under the leadership of the Social Democratic Party (ČSSD). Led by pragmatic technocratic leader Miloš Zeman, the Social Democrats exchanged their previous humanist socialist discourse into a campaign for co-optation into the liberal globalist faction and cooperation with foreign capital. At the same time, Social Democrats exchanged their harsh criticism of Klaus for his support in a nonstandard political deal called “Opposition Agreement”. This arrangement, which lasted from 1998 to 2002, was seen as a power cartel and blamed for the rise of corruption.

This transition was marked by huge protest mobilisations. The most important protests were connected with efforts to revive the “ideals of the Velvet Revolution” and use them against the Opposition Agreement. These protests twice gathered 100,000 people in the streets but failed in an attempted transformation into a viable electoral alternative. They did not have an economic critique of the transformation, and instead based their critique on the moralisation of politics.

The balance in the power bloc shifted to the liberal globalist forces, with the new coalition based on liberal globalist fraction and comprador managers providing a twofold legitimization. The crony history of the Czech transition could be redeemed by the EU accession and the invitation of foreign capital. While EU accession was to return Czechia to the right track of democratization, productive spillovers would integrated it into Western supply chains, bringing an inflow of much-needed new innovations and investment capital. On the national level, however, the shift involved an unwilling three-way coalition between the liberal globalist elite around Václav Havel as president, the Social Democrats as a leading governmental power, and the comprador network.

In the mid-2000s, the Civil Democrats replaced Social Democrats in governmental power, while Václav Klaus replaced Václav Havel in presidential office. Returning to political power, the neoliberal nationalists left the globalist project largely intact. Aligned with other globalist forces to form a coalition government, they used their power as an opportunity to deepen this project with an austerity-oriented agenda.

Indeed, the discourse of market justice was something both fractions agreed on. Austerity allowed them to roll back the Social Democratic sediments of globalist project in order to realize the anti-political fantasy of a self-reliant population. The discourse of transition to the market normalized the Czechs’ subordinate position in the European division of labour as a deserved punishment for their anti-market sins, be these the communist past and its residua, or their lower productivity of work. In the same way, the weak parts of the population needed to be punished for their dependence on state services and simultaneously re-educated in the civic and market-based manner.

At the same time, the very liberal discourse of corruption could still develop even as these forces were represented in the coalition government. This criticism includes two elements of de-politicization. First, it made it possible to interpret the penetration of external capital very uncritically as Western standards, especially those originated in the EU, were framed as of higher civilizational level against the backdrop of domestic corruption, as well as to delegitimize the Czech political class as nothing more than a service provider to the national capitalist class. This discourse implies that Czechia could achieve the Western living standard, but was not doing so due to failures of transparency and bribery.

As a nationalist discursive counterstrategy, the discourse of the colony emerged, first from neoliberal nationalist discourse, but later adapted by the nationalist left. The discourse reacted to the asymmetries and conditionalities of EU accession and the simultaneous globalist transformation of Czechia into a dependent market economy with heavy foreign ownership of the export-oriented productive and financial sectors.[4] Civic Democrats established this discourse as an offensive discursive strategy during the nationalist project in the 1990s, then as a delegitimizing strategy during the rule of the globalist project. Therefore, not only has the globalist project supported the interests of foreign capital through a transnationally-led industrial policy, it also allowed the EU, an overregulated “socialist” polity, to suffocate the domestic capitalists. “Brussels” became the new “Vienna” or “Moscow” in this discourse. The leftist version of this critique was formulated later, while becoming resonant especially with the nationalist left around the Communist Party. In her book How did we become a colony? (Czech), Ilona Švihlíková articulated this nationalist left alternative as she consolidated  long-discussed arguments about the outflow of profits, the foreign-led economic model and the EU´s internal inequalities into a guide for a national industrial strategy.

If the globalist project was politically enacted in the aftermath of the national currency crisis of the late 1990s, the global economic crisis of the late 2000s has preserved the foreign-led economic model behind the globalist project. However, the contradictions of these projects damaged the political legitimacy of post‑communist development. Driven by the discourse of market justice, centre-right governments implemented a harsh form of austerity-oriented crisis management during the crisis, even through this was not necessary and only deepened the crisis in the real economy. Dedicated to fighting corruption, these governments ironically collapsed due to corruption affairs. As the legitimacy of the political elite plummeted, the contours of economic power – foreign and domestic – became more explicit.

AN OLIGARCHIC COMING-OUT

The Czech situation was no different from the manifestations of cracking neoliberal order all around Europe. There was, however, one difference because, unlike Poland and Hungary, here state capture emerged from the economic realm. Competition and informal agreements between powerful oligarchs, not political populists, have overtaken the state. Two persons have manifested this phenomenon – the skilfully hidden persona of the richest Czech, Petr Kellner, and the notorious case of Andrej Babiš. Much attention has been devoted to Babiš who, as formerly second richest Czech, decided to turn his economic capital into a political one so that he could multiply both. Kellner and his close circle remain satisfied by controlling politicians, such as former President Václav Klaus, and new president Miloš Zeman, since 2013.

Babiš came to prominence as he established the so-called ANO movement in 2011. His discursive advantage was that he belonged to neither of the two leading forces. He was nevertheless always part of the power bloc, but probably not as close to politicians as Petr Kellner, who sponsored the neoliberal nationalist forces, or Zdeněk Bakala, patron of the liberal globalist forces.

Instead of proxy control through economic and medial power, Babiš established his own political movement attempting at direct political control. Before the elections of 2013, Babiš bought the second largest media corporation in the country, which allowed ANO to win second place. In a sense, this exemplified the weakness of his position in the power bloc rather than his strength. Only capturing direct political power allowed him to shift state strategies in the absence of civil society support.

The ANO strategy was nothing other than a hybridized product of past discourses, wrapped in the new PR package of technocratic populism. First, it absorbed the historically anti-political and anti-statist discourses of comprador managers, neoliberal nationalists, and liberal globalists, which perceived the active state as either politically corrupt or economically unproductive. Declaring he would run the state as a private firm, Babiš presented himself as a technocratic alternative to mainstream parties. Second, unlike other oligarchs, he offered himself as one of the few who paid taxes in Czechia, instead of diverting his earnings into foreign tax heavens. Not only has this allowed him to present himself as an alternative to the EU colonialism, ANO showed pragmatic ability to co-opt and simultaneously adjust to competing discourses, rather than bringing any conservative program and strong demands embedded in civil society. The absence of civil society support was made up for by flexible PR strategies.

Babiš gained 19% of the vote in the 2013 elections and 30% in the 2017 elections. He became Minister of Finance in the first government, which was led by the Social Democrats, and then Prime Minister in a minority government with the Social Democrats as a coalition partner and parliamentary support provided by the Communist Party. Neither the Social Democrats nor the Communist Party – both rapidly losing voters and members – were able to articulate alternative program to ANO, partly because ANO adopted their own programs in effort to attract their voters.

Babiš profited from the discourse of Czechia as a political colony of the EU, especially during the so-called 2015 refugee crisis. President Zeman led the anti-refugee campaign along with other, more or less organized, Islamophobic movements in the country. Babiš could present himself as defending the country against the EU and core state such as Germany on this issue.

Dependency on EU structural funds also became an issue. Scandals around conflicts of interests and fraud gave the lie to Babiš´ claims about cleaning politics up it from corrupted elites. The Čapí Hnízdo scandal erupted in 2015: Čapí Hnízdo was a family homestead which was redeveloped by one of the daughter companies under Babiš´ group Agrofert when using EU funding for small and middle enterprises.

These scandals did not shatter Babiš´ position public support or the support of his coalition partners. In a way, this illustrates how the colony discourse about funds prevailed, as the funds were dealt with as primarily EU money that, in effect, did not fall under the corruption paradigm.

Petr Kellner was a straightforward contrast for Babiš. Kellner and his allies, too, owned media platforms and were able to shape state strategies through crony networks. He did not, however, appear in public and communicated only through forewords to the annual reports of his company PPF. Headquartered in the Netherlands, PPF operated mostly in the CEE, Russia, and China. Much of its business consisted of finance, with a specialization in consumer credits, pharmaceutics, and telecommunications. Indeed, PPF´s daughter company Home Credit has been implicated in the biggest social disaster in Czechia which has almost 10 per cent of population trapped in foreclosures.

Meanwhile, it looks like that Babiš’s open, politically-based capture and Kellner’s secretive economic capture of the state might cohabit despite their utter differences. Much of this has proven possible because the oppositional forces remained weak. There were repeated new waves of protests against Babiš and Zeman. In the 2019 protest, organized by the group of Milion chvilek pro demokracii (Million Moments for Democracy), these protests twice gathered around 300,000 protesters. But this appeared as a nostalgic mutation of the previous discourses, which had lost ground.

THE MISSING ALTERNATIVE

This oligarchic emergence was inherent to the whole three decades, but only the global economic crisis, followed by Europe´s multiple crises, shifted the relations within the power bloc into the current state of affairs. The current result of this transformation is a hybrid model. On the economic side, the globalist project remains resilient as foreign capital is entrenched as a powerful productive and interest force well embedded in the capital-state nexus. The discourse of the colony resonates in Czech public debate, but has hardly brought about any results. The domestic capitalist class has found a complementarity of interests with foreign capital and use the economic possibilities rendered by current economic order, in which they send their taxes into European tax havens and use the conditions of the CEE as a primary home for consumption and production, while using possibilities to extract EU funding.

On the political side, there has been a backlash against the EU as an “external” other which lost its position as a sustainable economic space during the Eurozone debt crisis and suffered a blow to its legitimacy during the conflict over refugee quotas. Not the economic crisis as such, but the management of austerity then weakened then the political legitimacy of the globalist project. This produced a reshuffling in the power bloc which made the power structures more explicit.

What is the role of the left in this whole story? As in other cases before, it has became a minor partner. Both the Communist Party and the Social Democratic Party ended up being co-opted by Andrej Babiš. While the Communist party always mixed neo-Brezhnevite nostalgia with strong anti-German nationalism, in Social Democracy nationalist tendencies were for a long time weakened by euro-conformism. Both of them are now progressively marginalized.

The new radical left is sometimes successful in mobilizing some broader movements around anti-racism, alter-globalism, squatting, antimilitarism, environmentalism, and feminism. Bur particular platforms and single-issue movements usually do not survive a moment (or few years) of mobilisation. The problem of these milieus (especially anarchists and Trotskyist) is a strong dependence on Western models and their imitation. Symbolically and by political imaginaries, they are probably even more globalized than the liberal elites.

Against this background, there have been forces which succeeded in promoting emancipatory issues in the mainstream public debate. They were mostly exemplified with the rising prominence of trade unions under Jan Středula´s leadership, on the one hand, and the group of young journalists around the internet magazines Deník Referendum and Alarm on the other.

Despite these promising actors, overall the Czech left is in a miserable state. No leftist actor, individual or collective, has been able to generate an alternative program, let alone reach the masses with such a program. Leftist actors have been successful only when they abandoned the emancipatory program: thus, they are either co-opted or marginalized.


[1] See Jan Drahokoupil, Globalization and the State in Central and Eastern Europe: The Politics of Foreign Direct Investment, Abingdon: Taylor and Francis, 2010.

[2] See Ondřej Císař and Jiří Navrátil, “Polanyi, political-economic opportunity structure and protest: capitalism and contention in the post-communist Czech Republic,” Social Movement Studies 16:1 (2017), pp. 82-100.

[3] See Gil Eyal, “Anti-Politics and the Spirit of Capitalism: Dissidents, Monetarists, and the Czech Transition to Capitalism,” Theory and Society 29:1 (Feb., 2000), pp. 49-92.

[4] See Andreas Nölke and Arjan Vliegenthart, “Enlarging the Varieties of Capitalism: The Emergence of Dependent Market Economies in East Central Europe,” World Politics 61:4 (2009), pp. 670-702.

 

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