Laureate Jan Libich was a guest on Otázky Václava Moravce

The economist Jan Libich, a Neuron Impulse laureate, is an expert on monetary and fiscal policy, the sustainability of public finances and economic reform. That is why he had a place in the important debate on Otázky Václava Moravce about the current situation, on the theme "Whom should the state help?" Watch the Czech Television programme of 26 June 2022.

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An interview with Jan Libich

"Within one or two generations most developed countries, the Czech Republic included, will be on the brink of bankruptcy. That is the risk if, above all, the current pay-as-you-go financing of the health and pension systems does not change," says Dr Jan Libich, who in 2012 received one million crowns from the Neuron Foundation for his economic research. He supports his warning of bankruptcy with data on population trends. Forty years ago, for instance, there were six to seven people of working age for every pensioner in Czechoslovakia. Today there are only three to four, and by the middle of the century there will be barely two people for every pensioner. "Governments in most European countries have so far merely patched holes in the budget by raising taxes and making short-term spending cuts, without addressing the core of the problem. As the proportion of working people to pensioners falls inexorably, money is missing from the state coffers every year. And that leads governments to further unsystematic cuts, which slow economic growth and increase uncertainty about the future — the circle closes," says the economist Jan Libich, who teaches at a university in Australia and, thanks to the funding attached to the Neuron Impulse, worked for a time in the Czech Republic.

What was the main subject of your research?

I worked on the influence of the demographic trend of population ageing on the economy, above all on public finances, inflation and GDP. The research studies that were the project's main goal are of course not very accessible to the wider public. That is why I tried to communicate the results of my research through articles in Hospodářské noviny. At the same time I invited renowned economists into the studio and recorded interviews with them on topical questions of economic policy. In November my book "Real-World Economic Policy" will be published in Australia; it draws on the recordings and tries to inform politicians about the right political and economic measures.

As part of your project you gave several lectures, wrote a number of specialist studies and popular press articles, and recorded several video interviews. What interested people most?

Probably the greatest public interest was aroused by my appearance at Science Café in Prague, entitled Are we facing state bankruptcy, hyperinflation, the collapse of the euro or zero growth? In it I discussed four main macroeconomic threats and their connections. I later developed this topic in the specialist study The Economic Future of Europe, published this January in the journal World Economics.

Which topic was best and which worst received by the public? How do you explain these differences?

Generally speaking, topics such as economic growth or financial literacy are better received by the public than the unsustainability of public debt or global warming. The reason is obvious. While the first category of topics brings rather good news, the second implies that people have to change their behaviour and their politicians' decisions, or serious economic, social or environmental problems will follow. And unfortunately it is probably human nature to close one's eyes to unpopular facts and avoid changes to established behaviour.

How will you apply what you learned in the Czech Republic in your further research at the university in Australia?

The Czech Republic offers many lessons for other countries, unfortunately not always positive ones. Take, for example, the Nečas government's attempt at pension reform. That reform is absolutely necessary in order to prevent the collapse of the system as a result of falling birth rates and rising life expectancy. But unfortunately the reform was badly designed and even more badly explained to the public, which made it unpopular and led to its subsequent cancellation. Pension reform in the Czech Republic also failed because it was launched during an economic crisis. Long-term changes of that kind have to be made when the economy is doing well… I hope other countries will learn from it.

What response did our botched pension reform provoke among economists outside the Czech Republic? Has it already made it into economics textbooks as a cautionary example, for instance?

Not yet, because more countries are backing away somewhat from pension reform, Poland for example.

Did the project meet your expectations, or would you like to continue with it?

The project certainly met my expectations, and I am continuing in several of the directions it opened. Among other things it also contributed to my return to the Czech Republic, where I now spend part of each year at the Faculty of Economics of the VŠB – Technical University of Ostrava.

How administratively demanding was drawing the funding from the Neuron Foundation?

The administration around the project, including the grant application, was certainly less demanding than at other institutions. Everyone at the Neuron Foundation was very helpful and reliable; they have my great thanks. I warmly recommend that researchers in various fields consider applying to the Neuron Foundation for support for their project.