Capping prices will not bring about any necessary change, ex-president Klaus tells

photo: Hans Štembera, President Václav Klaus

INTERVIEW “Capping energy prices does not solve the essence of the problem. This idea is based on the assumption that someone is maliciously raising prices. But the movement of energy prices is part of the overall movement of prices, i.e. inflation,” says former President Václav Klaus in an interview for

Dear Mr. President, not only the Czech Republic is facing an energy crisis. Gas and electricity prices skyrocketed. Could you explain what is actually going on? Has the invisible hand of the market failed, as some claim, or are politicians to blame?

The invisible hand of the market did not fail, it was the politicians who continuously meddle with the market – especially in energy. European politicians get involved in it more than politicians in countries that experienced the irrationality of the communist planned economy. But this does not mean that our politicians will enter the market when communism is already forgotten, or they forgot it or didn’t live it, they don’t mistake it either. Today’s Fial government is a sad example of this. Politicians – including ours – preferred “greenness”, the fight against CO2and the Green Deal before elementary rationality.

The price of electricity is determined, among other things, according to the most expensive source (the final power plant), which is still needed to satisfy the demand. Why were these rules set up and what is stopping them from changing?

The word “final power plants” belongs to energy experts, it is not a generally used term. But it is based on the correct economic concept, which since the rejection of Marx’s labor theory of value, which is almost 150 years ago, tells us that the price is determined by the so-called marginal costs, not the average costs. This somewhat counterintuitive principle is the alpha and omega of economic theory.

The cost of the least efficient power plant, which still has to be used at a given demand, determines the price. Almost every educated person has seen supply and demand curves. When prices are created other than on this principle, an imbalance occurs, either there is a lack of goods or there is too much of them. Hence “conclusive” (economists say marginalist) reasoning.

Several different solutions are being discussed, such as capping the price of energy, a “war” tax, and the transformation of ČEZ. If we talk about price ceilings, for example, isn’t there a risk that prices will be set too low, so that demand will be high and energy will be in short supply? What about the war tax? If the state intends to intervene in the market, wouldn’t it be better to reduce the profits instead of collecting taxes for the state, which will redistribute them, so that they would be reflected in more favorable prices for energy supplies? Which of the proposed solutions make sense to you?

The first thing is to differentiate the time dimension, or what can be done in the short term and what in the long (or medium) term.

In the long term, it is possible to cancel (or at least minimize) the interference of the state, the visible hand, in the market. In energy, this means canceling green thinking, stopping believing in the absurd doctrine that human-caused CO emissions2 they dictate the earth’s climate and the average global temperature, abandon the Green Deal and its associated emission allowances and all other ways of fighting coal and oil.

Without it, nothing can be done about the essence of the matter. Without this, it is only possible to compensate for the consequences of the state’s current policy with the help of taxpayers’ money, assuming that the state has the money. Our state doesn’t have them, so whatever it does, it does it on debt.

Capping energy prices does not solve the essence of the problem. This idea is based on the assumption that someone is maliciously raising prices. However, the movement of energy prices is part of the overall movement of prices, i.e. inflation. Capping prices will not bring about any necessary change, or it will cause an increasing demand for energy (or at least a continuation of the existing demand) and will cause a decrease in supply, because some of the “closing” power plants will no longer fit. And closes.

All taxes, with different names, are just a way to make it easier for the state to compensate for inflation, that is, to enable it to continue its pernicious policy.

Social assistance is something else, let the state do that.

There is a real possibility that we would only sell surplus electricity produced here on the German stock exchange.

Through the German exchange, we only sell surpluses (or buy only the missing amount) of electricity at that specific moment. Whether we like it or not, the Leipzig Stock Exchange reflects the whole of the European electricity market. We are part of it. We cannot leave the European continent. We can only withdraw from the EU or change its policy. But that would be a miracle.

Do you think Europe works in solidarity? In layman’s terms, if there really was a gas cut, would anyone break up with us? Do you think the EU works fast? Shouldn’t the agreements on the future situation have already taken place in March, when we decided to support Ukraine? Wasn’t it naive to think that we would have an excess of gas? Will the EU withstand this crisis, or can the situation escalate to the “crisis” of the EU and its disintegration?

That’s a lot of questions in one. Solidarity does not exist in the EU, each of us is more Czech, German, Italian than EU citizen. Solidarity is difficult in any entity other than the family, than in a small circle of people. European “solidarity” is the decision-making of European leaders for the money of European taxpayers, who were not asked about it.

In addition to the Green Deal (and all its “preliminaries”), the price of energy was also affected by the Ukrainian war and the EU’s unequivocal decision (pushed by the militant Blacks of all EU countries and America) to introduce extensive sanctions against Russia. It was possible to introduce them, but it was necessary to know what they would do to energy prices for every European. And to defend in front of the citizens that it is worth it. If it is so, if it was done with this awareness, then everything is fine. Then let’s make sweaters with Mrs. Pekarová. However, I am afraid, or rather certain, that it was not known.

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The article is in Czech

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