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Post-Soviet Europe

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I’m sure you have all heard it said many times that the nations of Eastern Europe were better off under socialism. This is a misconception that has been coming up a lot lately and is in need of some attention. Even my usually respectable International Relations lecturer raised the possibility that free market reforms have had an adverse effect on the economies and people of the former Marxist experiment states.

The graph below, called the liberalization Index, demonstrates the extent to which seven former socialist states have undergone economic liberalization. The boundaries of the index range from 0 (least liberal) to 1 (most liberal). As you can see Russia and Ukraine have been the most reluctant to adopt liberal reforms while the Czech Republic, Hungary and Poland have welcomed free enterprise.


From World Bank, World Development Indicators

Now observe the level of growth experienced by the nations that have embraced a free market compared to those that haven’t. Between 1991 and 2000 Poland has had an annual GDP growth rate of 4.4, Hungary 2.2, and the Czech Republic 1.3. Contrast this to the situation in Russia, with -3.5, and Ukraine, at -7.4. Furthermore, all but Russia is experiencing greater growth than during the soviet era when Hungary was moving at 0.9 a year and Ukraine at -7.5. It is obvious that free enterprise is the recipe for growth.


This is not to say that problems are not being experienced throughout the former USSR. When a people are subject to the kind of collectivist atmosphere - that sees creativity punished, stagnation enforced, freedom of the mind suppressed, and inefficiency encouraged - for as long as the Eastern Europeans were, the cure is never immediate. But given time, and further liberalization, communisms leftovers will be overcome.

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I?m sure you have all heard it said many times that the nations of Eastern Europe were better off under socialism.

It's a rather lame attempt to argue against the empirical evidence of the superiority of capitalism. It is clear that nations of Western Europe, let alone the United States, were much better off while Eastern Europe was under socialism.

The transition to a freer market is a bumpy ride, for sure--and the lefties, desperate for any crumb of reality to support their irrational beliefs, like to point to these bumps and exclaim triumphantly, "See, here we have an instance of capitalism causing some difficulties for some people!"

Imagine Beavis doing an IQ test and accidentally getting one of the answers right. "Uh, huhuh, look Butt-Head, I'm uh, like, a genius!"

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I was involved in establishing a manufacturing facility in East Germany after the wall came down and I can tell you that many of the difficulties we faced were the result of making only a partial transition to freedom. For example, most of the East German communists were allowed to remain in power as western-style bureaucrats -- and they promptly started generating new government regulations.

I'd be willing to bet that a similar thing occurred in the other countries.

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