Selected Skirmishes: Fast Track on a Steep Road

At the risk of indictment for insider trading, I'll give you my pick for the fast-track economy of the 1990s: Czechoslovakia. Or, for you Rand-McNally buffs, the soon-to-be "Czech Republic." Bounding fearlessly into their capitalist future, these Czechs will bounce—and prosper.

Their new president, Václáv Klaus, is the Santa of the modern Czech economy. He has gift-wrapped the relics of communist enterprise for the people, privatizing state assets along the lines of "one man, one share." Distributing state factories and real estate to the population generally, rather than auctioning them off to raise proceeds for the government, is a wonderfully democratic solution to the transitional problem of the Eastern Bloc economies. It has the political advantage of dispersing stock ownership widely among the people, naturally creating a mass constituency for private property rights. And, not that this belongs in a political discussion, it has a moral fastidiousness: It truly achieves the socialist mirage of mass ownership of the means of production. I like it.

But its biggest advantage is tactical: It's fast. The emerging democracies don't have many pay periods before evil forces of reaction sweep the politicoscape. The worst-case scenario for the formerly socialist republics is dalliance, squandering the powerful momentum for liberalization while farmers quibble with industrial workers who are beefing with professionals who are griping about former Party members concerning the distribution of spoils.

The number-one priority is to get folks working hard at economically productive pursuits. Prosperity and freedom will both logically follow from high growth rates. And since there is no perfect solution to how the booty stolen by communist governments from the sweat, toil, and pain of the workingman can be returned, a simple and ostensibly fair solution is best. Rapidly dropping property into millions of private hands will quickly lead to a society blessed with wealth creation instead of obsessed with wealth reshuffling.

Positive-sum games tend to produce greater harmonies than the reverse. In Hungary, a country with a substantial head start over the Czechs (Western companies were quietly invited to Budapest 25 years ago), a national brawl over who gets what has pilfered this early lead in favor of the cynical social quagmire that now threatens all progress. The relatively affluent Hungarians have achieved little privatization, since the interest groups that sprang up under the reforms of moderate socialism now block radical measures.

When a society loses its way, wavering between the worlds of socialism and capitalism, chaos results. And, class, what does that lead to? Come on, now, you've read about the 20th century. We've run this experiment before. Yes, that's right—the vice president of the ruling party in Hungary, a well-known writer named Istvan Csurka, now declares that the government ought to be asserting some more "Hungarianness" in its family values and that its foreign policy ought be defined by lebensraum. This was not an idle coincidence of translation—the Hon. Vice President himself employed the Deutsch. And he went on to explain that the excessive interference of Jews and foreigners was behind the country's lagging index of leading economic indicators.

Mr. Csurka is, of course, a leading indicator himself. The masses are inflammable. Not from the hardships of social transformation per se; patriots absorb mass quantities of hardship during wartime, and like it. But they need a compelling rationale to endure the bad times, and piddly little arguments over the print on who gets what fail to embolden. Indeed, they frustrate. When your entire country looks like the studio audience of a Morton Downey Jr. show, you tend to get testy. Time to blame the (virtually nonexistent) Jews and get a firm disciplinarian in to kick a little butt.

The great irony is that the economic advantages of the Hungarians have undermined their political task: Having a less desperate situation, they could afford to take a middle path on social reform. But the Czechs, starting from far below, are speeding past them. Today the Hungarians have nestled into a ridiculous post-socialist confusion, where conservatives argue that further privatization cannot proceed until the country has developed a middle class. (Quite the reverse, of course.) Meanwhile, the Czechs are dumping state-owned stores, farms, buildings, and factories on millions of small investors: Presto—a middle class! These poor folk are soon to be raising goats, not scapegoats, and milk will be produced, not spilt and cried over.

The communist countries of this century are wide and varied, but they all seem to have one thing in common: millions of poor people. It is curious. The richest ethnic group in the United States is Russian-American; Polish-Americans are number two. The Chinese—the "Jews of Asia"—do quite nicely in the United States, the Caribbean, Southeast Asia, Africa; it has been remarked that the Chinese are economically successful everywhere except in China.

Soon the Czechs will be the miracle economy of Eastern Europe, while the Hungarians will wallow in old ways and new bickerings. Maybe they can even have a nice little war with Romania. Do we see a pattern here? Do institutions matter? You may answer in any language.

Contributing Editor Thomas W. Hazlett teaches economics and public policy at the University of California, Davis.