ebrd

Compare and contrast in order to catch up

By Edward Lucas

Reading the latest annual survey from the European Bank for
Reconstruction and Development (EBRD) of the progress of the
ex-captive nations in economics and institution-building, I wondered
about an ideal world where the engineers are Czechs, the chefs
Hungarian, the soldiers Polish, the bureaucrats Estonian and the
musicians Russian. And in a nightmare world, the bureaucrats are
Russian, the soldiers Czechs, the chefs Estonian and so on. Such jokes
are a good way to make friends - and lose them. No country likes to
dwell on its weak points (and I should say quickly, before my inbox
starts bursting with protests, that I have had many delicious meals in
Tallinn, know some very brave Czechs and highly efficient Russians).

But behind the more-or-less amusing stereotypes is a serious point
about the right way to look at the post-Communist world. There are two
traps. One is defeatism, the other arrogance. The best example of the
latter came in the 1990s, when Russia was the unfortunate beneficiary
of a great deal of enthusiastic and intrusive Western advice and
scrutiny. Locals and others complained with some justice that it was
wrong to expect the country to meet Swiss standards of administrative
efficiency, German altruism in foreign policy, American workaholism
and Dutch openness to foreign trade. It would be fairer to expect, at
least at first, Italian standards of public-sector efficiency, French
political maturity, German flexibility and Swiss cultural openness.
Such critics had a point. It was ludicrous, for example, to expect a
huge country emerging from decades of totalitarianism and isolation to
develop in the space of a few years the financial system of an
advanced capitalist country. The attempt to do so meant that hot money
sloshed round weak crooked institutions, leading to an inevitable
financial bubble that cost millions of Russians their savings in 1998.

But it is wrong for two reasons to take the opposite view and say that
post-communist countries are doing very well if they meet the worst
standards of old Europe.

The first is that the collapse of Communism did give the chance of a
fresh start. In countries like France and Italy, many people still
sincerely believe that the system of past decades can work, with a bit
of judicious tweaking. It was very hard, almost impossible, to believe
that about Communism in 1989. Different countries approached that
fresh start in different ways and with different starting points, but
it was there. Good policies paid off; bad ones brought a high price in
lost time, wealth, jobs and happiness. Hungary got it right with
privatisation for example; the Czech Republic got it wrong. Slovakia
wasted time under the dreadful Vladimir Meciar. Ukraine dithered,
while Russia at least tried to privatise and liberalise.

Second, post-Communist countries don't have the luxury of hanging
about. Italy can still just about afford its comic-opera politics, for
the same reason that it can afford grand opera at La Scala: because
it's a big rich country. Ukraine, if it wants to catch up this
century, can't.

What I'd really like from the EBRD is a detailed comparison that
includes old Europe as well as new. It's good to see that in some
respects ex-Communist countries' business environments are nearing
those in Germany - a country the report uses as a benchmark. But it
would be even more interesting to see further comparisons. How does
Hungary stack up against Austria? Or Estonia against Finland? That
would spur the ex-captive nations to greater efforts - and perhaps on
some fronts be a salutary shock to the richer countries' comfortable
complacency.