Former Soviet States Teach Capitalism 101
Pop quiz: Which European nations most improved their economic competitiveness over the past year?
It’s likely tempting to point to one of the PIIGS—Italy, Spain and Portugal have pushed through several reforms designed to foster private sector productivity, including (presumably) reducing bureaucratic red tape. Yet, according to the World Bank’s newest rankings on the ease of doing business, these measures haven’t made it much easier for folks to start or grow a small business. Sure, Greece leapt from 89th to 78th (more on this in a bit), and already competitive Ireland inched up from 16th to 15th. But Italy rose only two spots from 75th to 73rd, Portugal stayed at 30th and Spain fell from 42nd to 44th. Not the most rousing evidence of reform success (though, to be fair, these nations have adopted several measures the World Bank’s report doesn’t reflect).
The real European reforms, it turns out, happened in Eastern Europe—the former Soviet states and satellites continue embracing capitalism and private enterprise with gusto! Poland saw the biggest improvement, jumping from 74th to 55th. Ukraine, Uzbekistan, Serbia and Kazakhstan rounded out the most improved category, and Armenia was close behind. Georgia entered the world’s top 10—the first former Soviet state to do so.
This shouldn’t surprise at all. These nations spent decades under communism and Soviet oppression, which destroyed their quality of life (hence why they abhor communist imagery to this day). When they emerged from the Iron Curtain, they understood a vibrant private sector was their ticket to a better life. Ending communism wasn’t just about restoring personal and political freedom—it was about giving everyone in society the freedom to start a business and make a living of their own choosing (the real way to better life for all). Governments in these nations moved quickly to streamline these processes, and they continue putting some of their western European peers to shame.
Granted, there’s still plenty of room for reform, and as illustrated in a similar survey from the Heritage Foundation, Eastern Europe could use more economic freedom. But these nations are light years from where they came, and continued progress will only benefit their people over time.
Honorable Mention: Greece
Don’t call it a comeback (at least not yet), but Greece is beginning to show some progress in dealing with its various economic competitiveness issues. The World Bank also named Greece one of the 10 most improved countries (of 185 total) in its ease of doing business. Specifically, Greece placed 78th on the list—up from 89th last year and 100th in 2005 and just behind Mongolia and the Bahamas and eking past Brunei and Vanuatu.
The biggest contributor to Greece’s advance was a surge in the “Protecting Investors” category, which we’d note is maybe not the best place for the Greek government’s emphasis. (And a touch ironic for a country that in February subjected private-sector government bondholders to a voluntary haircut, but we digress.) We’d suggest Greece would get a bigger bang by focusing on the “Starting a Business” category, in which the nation backslid, or “Registering Property,” in which it logged no gain or loss. Nonetheless, the country made progress in reducing the time required to get construction permits, streamlining taxes, facilitating cross-border trade and the like—and those are noteworthy and laudable advances indeed.
However, in our view, Greece (and many of its PIIGS brethren) likely still has a long way to still go in raising competiveness and boosting economic growth. As other countries continue to make strides to become more economically competitive, Greece will need to continue playing catch up should it want to keep pace. So, for Greek citizens’ sake, we hope Greece can win a few more “most improved” accolades in the coming years ahead.