Compare and contrast in order to catch up

By Edward Lucas

Date: 17/11/05

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 Vladim’r 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.

• Edward Lucas is Central and Eastern Europe correspondent for The Economist.

Comment feature looking at Western expectations and perspectives on progress in economics and institution-building in Central and Eastern European transition states.

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