Tomáš Sedláček Interview: Part 2 - Transparently Untransparent

This is the second part of an exclusive interview with "economics superstar" Tomas Sedláček, courtesy of the Prague Daily Monitor and PragueConnect.cz. Named one of the "five hot minds in economics" by the Yale Economic Review, Mr. Sedláček is the chief macro-economic strategist for the ČSOB bank and a member of the Czech National Economic Council. He also spoke at the recent World Economic Forum in Davos, Switzerland.

In Part 1 of the interview, Mr. Sedláček explained his view that economics has a strong link to ethics and philosophy, art, sociology, politics, law, and philosophy. In his book, Economics of Good and Evil, the lecturer and columnist explains that, although economics is categorized as an objective science free from values, it's actually a cultural product -- a story or a parable, a way to help us in the effort to understand the world around us. Subtitled From Gilgamesh to Wall Street, his book examines the history of economic parables and how they affect economies today.

Mr. Sedláček will be the guest speaker March 21 in Prague at the Prague Business Leaders Networking 2012 event, sponsored by The Prague Daily Monitor and Prague Connect (see details below).

Transparently untransparent: corruption in the Czech Republic
"The rule in economics is always, 'Do Not Talk About Ethics.' But it's not possible to have a society without ethics. You can't not talk about it." Tomas Sedláček chuckles at his own double-negative, which positively emphasizes his point.

The fiery-haired Prague economics expert is explaining his view on how society's myopic insistence on economics as a science -- ignoring philosophy, religion, ethics and other inter-related disciplines -- has inevitably led to the current economic crisis.

But this classically trained Charles University PhD and bestselling author doesn't shy away from talking about ethics -- or the lack of them -- in the Czech Republic.

"Corruption here is visible and becoming systemic," he says with regret in his voice. "It's transparently untransparent." He believes that the Czech Republic stands out -- or stands alone -- as a country where corruption is so obviously visible.

Why should that be so?
In his chatty, conversational style he gives us a quick economics lesson, describing the three "economic angels" which are guarantors of order. The first is strong competition, which creates high standards. The second is safety regulations, which prevent dangerous or lethal products from entering the marketplace. And the third is the internal standard a society sets for itself from a sense of ancestral duty and pride.

"In the transition from the state we didn't have a market, and regulation was a kind of 'swear-word' after 40 years. Individual decency was the only leg left" for the economy to stand on, he says.

"In the '90s you could legally steal here," he points out, laughing incredulously at the absurdity. "It's a miracle that nothing was wholly stolen. We did pretty well. It's a compliment to Czechs."

Born in Roudnice, but half Slovak, and raised in Finland, this energetic economist, who has an incisive world view of economics, speaks with a broad American accent, tinged with just a hint of a Finnish lilt.

But as corruption spreads, he adds, we're forgetting that third leg -- internal, personal standards. By not actively quashing corruption, our society supports it. "You lose the best people who want to do the business of business, not of envelope strategies" which actually repel business. "Corruption is the biggest inefficiency. It's easier to just throw the money out the window," he says.

Is there generally a Czech characteristic allowing corruption to flourish here more than in other countries? How do the neighbors handle it?  "We only debate and never decide on anything. We debate corruption so long, it's becoming boring. People [here] have to understand it's a fruitful investment to change their standards," he says.

"Slovakia, Poland -- they realized that corruption was destructive. They imposed very strict anti-corruption measures, and the world saw that." Interestingly, he points out an unlikely suspect in the case: the healthy Czech economy of the 1990s.

"We were always comfortable," he explains. "The Slovaks had a bad period of economics and they had to make decisions. They were digging in the mud -- I can say that because I'm half Slovak -- and they had to become more responsible. They learned that they were not the beginning and the end of the world.

"Slovakia didn't have to have a debate; they decided, then they created the mechanism to implement" strict anti-corruption laws.

But Czechs are still debating.

"Czechs are very clever," he allows, "but they just can't decide anything. Czechs work very well when they have rules." Like in sports, he suggests: "'No, it's football," you know?" he says with exaggerated patience and a big smile. "'No, you can't touch the ball with your hands,'" he chuckles.

"We put too much energy into going around something, into not changing. It's a pity."

Sitting on our potential
"The key to success is cooperation, working with your allies and friends," he says. "But 'How much does it cost?' is always the first question the Czechs ask. We're used to the position of the poor neighbor with its hand open," the economic strategist says.

He produces another cigarette and lights it. "We were afraid if we joined the EU we would dissolve like sugar in coffee," he continues. "But a sovereign nation is secure in its identity and is not fearful of losing it. A sovereign nation therefore is able to react," he points out.

"Take the radar question [the proposal to install radar equipment on Czech soil] as an example. They asked us about something that didn't directly involve us, something that required low involvement only, and the only answer we could come up with was 'We don't know." The same thing happened with the collapsed EU presidency.

"We're sitting on our potential," he says, shaking his head.

Still, the young bestselling author is hopeful for the future. "Our national, cultural character needs a longer-term perspective," he says. "The next generation of politicians will decide to make a better nation, rather than choosing to just be politicians," he predicts.

• Mr. Sedláček welcomes your questions and discussion at the Prague Business Leaders Networking 2012 event, to be held Wednesday, March 21 at the Kempinski Hybernská Prague