Faculty Q&A with Jan Svejnar: How Billionaires Affect the Economy

by William McGuinness – February 25, 2016

Columbia News

Jan Svejnar was born in Czechoslovakia when it was still in the grip of a totalitarian Communist regime. Certain things worked well, such as rebuilding the country from the devastation of World War II, yet there was very little freedom. Then, in 1968, when Jan was 15, the Communist Party adopted more liberal policies, including abolishing censorship and allowing trade unions to try to bargain. Economists like Svejnar’s father were permitted to work on market-oriented reforms, and Jan himself spent the summer in England learning English. Within a few months, however, Russian tanks rolled in to quash the Prague Spring reform movement, and Svejnar’s family fled to Switzerland in 1970.

“It was a big bifurcation in my life,” he said. “After the fall of the Berlin Wall, I went to a high school reunion and the whole evening, people were kind of looking at each other. About six or seven of us had managed to escape and the rest of them stayed behind. I thought, `Well, I probably would look like this person had I stayed,’ and they were thinking, `Well, I probably would have pursued a path like this person who left.’ It was kind of surreal seeing how life can be affected by an external force of this kind.”

Once safely in the West, Svejnar followed in his father’s footsteps and studied economics. His immersion in the subject has led to a distinguished academic career, with a current research focus on the impact of government policy on firms, labor and markets; corporate, national and global governance; and wealth inequality. Svejnar also served as economic adviser to Czech President Vaclav Havel and in 2008, ran for president of the Czech Republic, ultimately losing to incumbent Vaclav Klaus. Svejnar said he ran because he felt Klaus “held extreme views, denying the existence of global warming and being openly europhobic.”

“The country needed to see that there could be leaders with alternative values and world views,” he said. His most recent work examines capitalism in its many forms, including how it is implemented in different countries.

Q. Could you explain some of your recent research on capitalism?

A. The 20th century was a century of huge experiments in “isms”—capitalism, socialism, fascism, communism— systems that were tried for years or even decades. Capitalism emerged the winner, because it was the best—or the least bad— of all the systems, and also the most flexible. Of course, capitalism has different forms. In some countries there is a very free market-type system, and in others the state intervenes a lot. As markets were liberalized and capital started flowing around the world toward the end of the 20th century, there was a rise in the number of very rich people and suddenly the billionaires begin appearing. When I started studying as an undergraduate at Cornell in 1970, the leading hypothesis in my sociology course was that it was no longer possible to rise to riches as Carnegie, Mellon and Rockefeller had—the “American dream” was dead. American society was seen as stagnant. That has changed. What is striking, however, among today’s billionaires is that while some rose as a result of their talent and skills, others did so because of political connections, especially in countries where regulations and rule of law are not strong.

Click here for the full interview.