For centuries, economics has been known as the “dismal science”. The term was supposedly coined by the Scottish writer Thomas Carlyle in response to Thomas Malthus’ gloomy prediction that population growth would result in starvation and misery. Yet, there is another possibility. According to some scholars, Carlyle was reacting to the English philosopher John Stuart Mill, “who argued that institutions, not race, explained why some nations were rich and others poor.” Carlyle, in other words, attacked Mill for advocating in favour of slave emancipation.
If institutional economics is little known to the general public, it is because the building of progress-enhancing institutions is a difficult task. Any economist can show that free trade leads to cheaper and more varied goods, but there is no blueprint for “building” a society that respects the rule of law. That vital ingredient, including an impartial judiciary and respect for property rights, does not emerge from edicts promulgated by democratically elected parliaments and enforced by politicians, policemen and judges. It emerges slowly and incrementally from shifts in cultural norms and popular expectations.
The Nobel Prize-winning economist Douglass North showed that changing institutions, including the evolution of constitutions, laws, and property rights, were instrumental to sustained economic development. I was reminded of the importance of institutional development as I observed the changes happening in ex-communist countries in general and Slovakia in particular over the last 30 years.
The road toward sound institutions hasn’t been easy, but with the election of Zuzana Caputova to the presidency on March 30, Slovakia’s institutional improvement may have reached a point of no return.
When my family emigrated from Czechoslovakia in 1992, Slovakia was on the cusp of self-determination. Today, it is generally recognised that the country was unprepared for independence either economically or politically. Much of its industrial base was devoted to producing antiquated weaponry for the Soviet bloc and many of its most qualified bureaucrats opted to remain in Prague. Compounding the problems of the nascent country was a culture favouring strong-men cum messiahs, who would, so the theory went, make the country’s problems disappear. What followed was, with a couple of exceptions, a succession of bad governments.
First came Prime Minister Vladimir Meciar (1992-1998) who presided over an orgy of corruption, exhibited increasingly authoritarian behaviour toward the opposition and, finally, brought about an economic crisis that ended his premiership. A relatively benign government between 1998 and 2002 stabilised the economy and set the stage for Slovakia’s entry into the North Atlantic Treaty Organisation and the European Union. The halcyon years between 2002 and 2006 followed, with much-needed economic reforms undertaken by Prime Minister Mikulas Dzurinda culminating in a miraculous 11 per cent GDP growth in 2007.
Unfortunately, government’s corruption scandals and skilful demagoguery on the part of the opposition brought to power a man who has dominated Slovak politics since 2006. Robert Fico, who ran the Slovak government, with one short interruption, between 2006 and 2018 continues to pull the strings of his puppet successor, the current Prime Minister Peter Pellegrini.
Like Fico, many members of his three governments, as well as most of Slovakia’s Presidents since independence in 1993, were former communists. To this generation of politicians, transition from central planning and dictatorship to a market economy and democracy was an opportunity not for public service, but for self-enrichment.
The countless corruption scandals that dominated the newspaper headlines over the last 30 years would fill a multi-volume opus, rather than a short opinion piece. Suffice to say that on the World Bank’s Control of Corruption index, Slovakia ranked in 70th place in 1996 (on par with Jamaica) and 76th place in 2016 (on par with Saudi Arabia). In Transparency International’s Corruption Perception Index, Slovakia ranked between Belarus and Jamaica in 1998, and Italy in 2017. To date, no Slovak politician has yet served time for corruption.
The fish, they say, smells from the head. Over time, Fico has become “a patron of an unhealthy pact between politicians of his party and oligarchs,” noted Marek Vagovic, an investigative reporter who authored a book on Fico’s oligarchy and mentored a young journalist Jan Kuciak. On February 21, 2018, Kuciak was shot dead, along with his fiancé, in the midst of writing an article about business links between the Italian mafia and Fico’s “chief advisor” and, most likely, lover, Maria Troskova.
For years, the former Prime Minister and the current head of Slovakia’s largest parliamentary party, SMER, has lived in an apartment belonging to Ladislav Basternak, an entrepreneur jailed for tax fraud. Fico’s neighbours included another controversial businessman, Marian Kocner, who stands accused of ordering Kuciak’s murder. Following the largest protests in Slovakia’s post-communist history, Fico handed the premiership to his hand-picked successor and then concocted a plan to get appointed to the country’s Constitutional Court. When that failed, Fico tried to get one of his cronies elected to the presidency.
Alas, presidential pardon for Fico’s misdeeds will not be forthcoming. Fed up with decades of misrule, the public threw its weight behind a united opposition candidate Zuzana Caputova, who won in the second round of this year’s presidential election by 58 per cent to 42. The former anti-corruption campaigner from a non-governmental organisation Via Iuris, she will head the country when the next parliamentary election takes place in February 2020. Based on current trends, Fico’s SMER will be tossed out of power and Slovakia will, at long last, have a chance to build a cleaner set of governing institutions.
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