How did you perceive the help and steps taken by the government? On the one hand, the so-called windfall tax, capping energy prices, on the other, medium-term plans. There is even talk of part of ČEZ going back under 100 percent state ownership. How do you perceive it and how did you perceive it last year?
Looking back, the government managed it relatively well. I think she handled the presidency and also managed the pressure on Germany to cap the prices and correct the market. The question is reaction speed.
It must be said that the determination to enter the market took a little longer than it should have. Trampling in place allowed the market to spiral out of control. But in the end it ended, one might say, with a happy ending, and the steps taken by the government, even in the European dimension, led to the calming down of prices.
In the context of the European Green Deal, before the invasion of Ukraine, you spoke about the need to turn the Green Deal into a Real Deal. Will the events in Ukraine, or rather the latest steps that you see both in the Czech Republic and at the European level, contribute to this? Will the ambition to work with energy meet environmental protection criteria and reflect current needs and possibilities?
This is a complex, complex question. The Green Deal is a broad spectrum of behaviour, different opinions, actions at government levels and leads to consumer behaviour. Of course, the war in Ukraine hastened something, but it also delayed something. The Real Deal is more about bringing change to a successful conclusion.
Will we be able to bring it to a successful end?
It’s a daily struggle. And a lot of ideas are not fully developed. On the other hand, there is a huge amount of money that goes into these ideas. If you look at the history of mankind, if a lot of money has been invested in something, then the intention has mostly been fulfilled.
Whether it is a flight to the moon or building an atomic bomb, all of which were not entirely easy tasks. If the technological and scientific background receives an unlimited amount of money, which it receives under the Green Deal, then it will probably succeed.
Part of what we’re going through right now is, generally speaking, getting sober. We can mention the connection to Russia, which has an energy dimension. It was expected that Russia would be an increasingly democratic market. But that didn’t come true. You opened a plant in Russia, from which you are currently cut off. How will you continue to think about cross-border ties, especially to regimes that are not friendly?
Russia was and is a big problem. But there are still many other different questions and bigger problems ahead of us. This mainly concerns China. There was some dimension to the trade with Russia, but it would be much more intense against the trade exchange that the global world is doing with China. If we talk about the disruption or severing of ties, we are talking about a possible conflict in Taiwan and the construction of a new iron curtain.
One of the theses that dominates today says that individual economic regions will become more and more closed to each other. Globalization will remain, but it will be less robust at the level of norms and standards. Do you feel the same way?
This is already happening in some fields. The more strategic the industry is for the state, the greater the effort to bring production back. But gradually the situation in the world will calm down and globalization will rise again, because the consumer pressure to get something, buy it, make it cheaper is still here and will always exist. States and companies will be shocked by this and start looking for places where they can buy more easily and cheaply.
When a flood comes, you run away from the river, but in ten or twenty years you will forget about it and build a little house there again. If the situation, especially with China, calms down, there will be reverse globalization, if it escalates, there will be a definitive retreat from the river and we will be closed in the Euro-Atlantic area.
At this moment, we are in a phase of transformation of the world as we know it. It is turning into something that we don’t yet know what it will look like and what the rules of the game will be. You recently said that the worst thing is the unpredictability of future developments. How to run a manufacturing company at such a time?
The less predictable the world, the more you consider investing, looking for places where there are less risks. It will take a few years before the business gets on predictable tracks. Companies are now making reserves for times that would again shake the economy. I definitely recommend a few years of caution.
In previous decades, it was mainly about margins and how to find the next penny. Supply chains were lengthened, new subcontractors were sought. Now it’s said to be much more about durability and flexibility. In other words, at the moment it is not about increasing margins, but rather avoiding risk even at the cost of lower margins. Is that your reading of the situation too?
Undoubtedly. The safe bet is valid here and will be valid for many years to come. This will of course mean higher prices. We have to accept that globalization has reduced prices to an absolute minimum and that everything will be a little more expensive.
Are we in for a period of higher inflation, higher rates and more turbulence?
Everything will certainly not return to the tracks we were on before the covid-19 pandemic. The world will be different and it will be years before, if ever, it returns to the model that was here years ago.
A specific feature of the current recession is that unemployment is still very low and that many companies are having problems finding qualified labor. Is it one of the big challenges that can complicate your life not only now, but also in the future?
I have absolutely no idea why unemployment is still so low. Here are all the basic economic rules. There is and will be a great struggle for people in Europe. And the more the world moves towards a more advanced economy, the greater the struggle will be. We have to be able to react to it, we have to be able to bring people to us, otherwise we will find ourselves in big problems.
Another challenge is setting up a part of the consumer community that has begun to reflect the needs of environmental protection. How do you perceive the trend of renewable sources, the so-called greening of the energy sector?
That pressure is there, it’s increasing, and it’s change that creates opportunity. Personally, I think that this change is relatively positive. The Green Deal is also a type of consumption to some extent. If earlier the economy was driven by the fact that we wanted a zhigulyka, a cottage and a vacation by the sea, now we got everything.
In order for the economy to move forward, it needs consumption. If the new generation no longer has a fundamental need to have two cars or to buy expensive handbags, and if consumption rushes into ecological or gentle products, then it is still consumption.
But it is a positive consumption that does not devastate the planet like previous consumptions. If this process does not speed up senselessly, or if it does not reach a point where it stops working economically, then it is essentially an incentive for the economy.
Some critics claim that it is social engineering that we should avoid. What do you make of this argument?
Yes, it is in part and without a doubt social engineering. It is precisely this social engineering that risks missteps and excesses. I think it’s more about the state, which has to be a little reasonable. And that we are going in this direction is entirely good.
Do you belong to the group of people who say that there must and will be a manufacturing renaissance in Europe? Are you waiting for a renaissance of better, cleaner manufacturing, or production, which we have been sending away for almost a quarter of a century?
This will be very difficult. The winners of the return of production will probably come from somewhere other than Europe, which is not ready for it. Starting to manufacture or build anything here is very difficult. I expect America or India to be among the winners.
It is not fair to pretend that your hands are clean, but to get it dirty somewhere else, because that is part of social engineering. Something will come back to us, but I don’t really believe that smelters would start to be built here and the mining industry would reopen.
With challenges and unknowns come exciting opportunities. Where do you see them specifically? You mentioned somewhere that whoever doesn’t take advantage of the opportunity is dead Homolka.
Czech industry is waiting. In many cases, he is in a subcontracting position, where the customer orders him what to do. A number of companies are unable to actively go to the market to participate in investment activity. But it is never too late and now is the moment when we should learn to come to market with our own products.
It’s not just energy. A big change awaits the Czech automobile industry, which will fundamentally change. It now employs hundreds of thousands of people and is a huge chain. This segment will suffer greatly and now is the last moment for companies to start looking for opportunities elsewhere and try to come up with their own products.
You are a signatory to the call for economic transformation. How close or far are we from words to actions? And when will the mindset be set that is needed to actually begin the transformation?
It’s really five minutes to twelve. The model on which the Czech economy and our companies grew is moving away at a tremendous speed. We have to adapt to it.
Even the state must understand that this is a big change in the economy and must go against it. In short, they must push the economy forward and not passively wait to see what will happen to us and where the market will take us. It’s a huge challenge that can’t be seen, but is just below the surface. The Czech Republic must be able to deal with this, because there are either huge opportunities or a huge problem.
The author is a strategist at Alternative Perspectives