THE NEW CAPITALISTS FRESH S
Transcript of THE NEW CAPITALISTS FRESH S
JANUARY 2000 THE WALL STREET JOURNAL CLASSROOM EDITION 13
T H E N E W C A P I T A L I S T S12 THE WALL STREET JOURNAL CLASSROOM EDITION JANUARY 2000
T H E N E W C A P I T A L I S T S
MOROCCO ALGERIA TUNISIA
SYRIA
LEBANON
IRAQ
TURKEY
IRAN
KAZAKHSTAN
CYPRUS
LondonBerlin
Moscow
Madrid
Rome
Kiev
Paris
Athens
ViennaBudapest
Bucharest
Warsaw
Minsk
Sofia
Belgrade
Brussels
Amsterdam
Lisbon
Copenhagen
Stockholm
Helsinki
Riga
B
Yerevan
Tbilisi
Dublin
Reykjavík
Bratislava
Chisinau
Skopje
Oslo
Vilnius
Tallinn
Bern
Tiranë
Valletta
Baghdad
Damascus
Algiers
Beirut
Tunis
Rabat
Nicosia
Sarajevo
Zagreb
Ankara
Prague
Ljubljana
Luxembourg
ICELAND
UNITED
KINGDOM
IRELAND
SPAIN
FRANCE
ANDORRA
VATICAN CITY
ITALY
GERMANYBELGIUM
LUXEMBOURG
POLAND
CZECH REP.
SLOVAKIA
HUNGARY
CROATIABOSNIA &
HERZEGOVINA
AUSTRIA
SLOVENIA
YUGOSLAVIA
ALBANIA
GREECE
ROMANIA
BULGARIA
MOLDOVA
UKRAINE
R U S S I A
BELARUS
RUSSIA
NORWAY
SWEDEN
FINLAND
ESTONIA
LATVIA
LITHUANIA
MONACO
LIECHTENSTEIN
NETHERLANDS
SAN MARINO
MALTA
PORTUGAL
SWITZERLAND
MACEDONIA
DENMARK
ARMENIA
GEORGIA
AZERBAIJAN
English Channel
Norwegian Sea
A T L A N T I C
O C E A N
Nor th S e a
Sea of Azov
Irish
Sea
Black Sea
Caspian
Sea
Bar en t s S e a
Baltic
Sea
Strait of Gibraltar M e d i t e r r a n e
a
n
Adriatic
Sea
While these and other factors helpedseparate today’s successes from thestragglers, the decisive factor has beensweeping economic change: the quickestand broadest moves to free-market poli-cies. “The more radical reforms you im-plement, the better off you are,” saysAnders Aslund, senior associate with theCarnegie Endowment for InternationalPeace and former policy adviser to sev-eral governments in the region.
Tallying up the region’s reformlessons isn’t just an academic exercise.Despite all the millennial taking of stockthese days, the region’s economic trans-formation isn’t over, even in the fast-track five: Poland, Hungary, the CzechRepublic, Slovenia and Estonia.
And the successes and failures pro-vide plenty of food for thought as Slova-kia, Bulgaria and other strugglingeconomies seek to make a fresh start.
Consider, first, the successes. Whena noncommunist government took officein Poland in 1989, it put aside fears of avoter backlash and moved quickly to freeprices, cut state spending and tear downbarriers that faced small businesses.
Hungary, capitalizing on earlier,communist-era market reforms, openedits borders to foreign capital and alsoprivatized the bulk of its companies byselling them to foreign multinationals.
Both countries, together with theCzech Republic, today belong to the de-
veloped nations’ Organization for Eco-nomic Cooperation and Development,and they join Slovenia and Estonia onthe short list for EU membership.
Contrast this with Ukraine, which,despite ample Western advice and heavyforeign-aid flows, failed to make thetough choices needed to get its economyback on its feet. It joins a dozen otherflailing economies that cut a swath ofcrisis from the Balkans to Central Asia.
But have free-market changes reallybeen the only recipe for success? Consid-er some other alternative explanationsthat policy makers and economists haveexamined. First, history.
Undeniably, many of Central Eu-rope’s first-rung reformers began thetransformation process well ahead oftheir southern and eastern neighbors.
While the Czech Republic inheritedthe Hapsburg empire’s industrial heart-land, dirt-poor Albania had no industryto speak of before the communist era.
The differences widened, if any-thing, under socialism: As reform com-munists in Hungary dabbled withchanges allowing private enterprise andforeign joint ventures, Romania andBulgaria languished under dictators.
Slovenia, which enjoyed broad eco-nomic autonomy in the ’80s, already wasselling most of its goods to the West bythe time Yugoslavia fell apart.
(Please turn to page 14)
FRESH STARTSome countries struggle with economic change
WHEN THE SOVIET bloc collapsed a decadeago, foreign advisers charged with bringingthe region into the Western fold declared it
a level playing field for economic transformation.Maybe it was wishful thinking, but the experts
gave precocious Hungary and backward Bulgariaeven odds for success, at least in public.
Ten years later, such talk of parity seems un-thinkable. While five countries in Central Europe arefully integrated with the world economy and likely tojoin the European Union sometime in the next
decade, three times this number in the former SovietUnion and Balkans are struggling to pay their bills.
While Poland’s economic output has raced 20%ahead of its 1990 level, Ukraine’s has shrunk by half.And while Hungarian companies borrow at ratesclose to Western European levels, Russian business-es struggle to raise cash at any price.
In trying to explain the region’s diverging eco-nomic fortunes, academics and policy makers haveexamined variables ranging from religion and cul-ture to the political complexion of the countries’ firstpost-1989 governments.
Slowly, however, a tentative consensus amongspecialists in transition economies is emerging.
These maps illustrate how
the political borders in Europe
changed between 1989 and 1999.
One of the most obvious
changes is the break-up of the
Union of Soviet Socialist Re-
publics, which is shown in red
on the 1989 map (below).
Eleven of the 15 now-inde-
pendent republics are shown in
red and orange on the 1999
map. (The rest of the republics
are too far east to be included.)
Countries in Eastern Eu-
rope are shown in yellow on
both maps and nations in the
European Union are green.
The flags in the timeline
below the maps note important
political, economic and social
events. Many of these events
are related to the transition of
the command-economy coun-
tries to free-market economies.
The flags are color-coded to
match the countries in which
the events took place.
Notice the several countries
into which the former Yu-
goslavia has been divided. In-
dependence here has been ac-
companied by bitterness and
war. The division of Czechoslo-
vakia into two nations, on the
other hand, has been amicable.
Germany is the one nation
that has reunified since 1989.
Divided after World War II,
Germany became one country
again in 1990.
How to Read These Maps
MOROCCO ALGERIA TUNISIA
SYRIA
LEBANON
IRAQ
TURKEY
IRAN
CYPRUS
Berlin
Belgrade
Bonn
Moscow
ICELAND
UNITED
KINGDOM
IRELAND
SPAIN
FRANCE
ANDORRA
ITALY
GERMAN DEM. REP.BELGIUM
LUXEMBOURG
POLAND
CZECHOSLOVAKIA
HUNGARYAUSTRIA
YUGOSLAVIA
ALBANIA
GREECE
ROMANIA
BULGARIA
U. S. S. R.NORWAY
SWEDEN
FINLAND
MONACO
LIECHTENSTEIN
NETHERLANDS
SAN MARINO
MALTA
PORTUGAL
SWITZERLAND
DENMARK
FED. REP.OF
GERMANY
VATICAN CITY
English Channel
Norwegian Sea
A T L A N T I C
O C E A N
Nor th S e a
Irish
Sea
Black Sea
Caspian
Sea
Bar en t s S e a
Baltic
Sea
Strait of Gibraltar M e d i t e r r a n e
a
n
Adriatic
Sea
BY JOHN REED
Staff Reporter of The Wall Street Journal
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Stage two of EMU
Last Allied soldiers leave Berlin, ending occupation since 1945
Bosnian Serbs take 150 UN peacekeepers hostage
Austria, Finland and Sweden join EU
European currency named ‘euro’
Bosnia’s Muslims and Croats sign agreement
Dayton Agreement signed
Milosevic elected president of Yugoslavia
Czech Republic, Hungary, Poland join NATO
Meeting for Kosovo autonomy at Rambouillet
NATO air strikes over Kosovo
Czechoslovakia splits amicably
Walesa calls for new general elections
European Summit announces eleven ‘euro-zone’ countries
European Central Bank 1st meeting
Stage three of EMU
Direct election of European Parliament
European Community endorses concept of monetary union
Spain, Portugal join EC
Greece joins European Community
Higher meat prices lead to Polish labor unrest
Yugoslavia’s Tito dies
Reagan becomes US president
Reagan calls USSR ‘an evil empire’
Martial law declared in Poland; Solidarity outlawed by government; Walesa jailed for one year
Martial law lifted after pope visit
Walesa awarded Nobel Peace prize
Riot police break-up Solidarity protest in Gdansk
Kidnapped pro-Solidarity priest murdered
Chernenko dies; Gorbachev becomes USSR leader
Gorbachev proposes ‘glasnost’ (political reform)
Breshnev dies; Andropov becomes USSR leader
Andropov dies; Chernenko becomes USSR leader
Afganistan invaded by USSR
Chernobyl nuclear disaster in Ukraine
US stock market crashes
Clinton becomes U.S. president
Deng Xiaoping, China’s 92-year-old leader, dies
China regains control of Hong Kong
EMU conversion rates set
German Parliament moves back to Berlin
Reunification of Germany
Walesa sworn in as Polish president
European Monetary Union (stage one) launch
Bush becomes U.S. President
Yugoslavian workers strike 1,500 times in 1987
Hungary’s Communist Party officials face free elections
Ethnic Albanian workers strike in Kosovo
Solidarity regains legal status
Milosevic elected president of Serbia
Hungary helps 7,000 escape E. Germany
Georgia declares independence
E. German and Czech police seize passports
Yeltsin 1st freely elected Russian president
Yeltsin denounces coup attempt atop tankE. German Krenz says Berlin Wall will remain
Fall of the Berlin Wall
Bulgaria’s Communist Party leader quits
Moldavians call for leaders to resign; troops sent in
Yugoslavia’s first direct election in 40 years
Romanian dictator Ceausescu shot by firing squad
Berlin to be German capital again
Croatia, Slovenia declare independence
Maastricht Summit
8/20 to 8/31/91 Belarus, Moldova, Azerbaijan, Ukraine, Kyrgyzstan, Uzebekistan declare independence
9/6 to 9/23/91 Estonia, Latvia, Tajikstan, Macedonia, Armenia declare independence
Turkmenistan declares independence
Kazakhstan declares independence
Lithuania declares independence
USSR dissolved; Gorbachev resigns as president
Yeltsin re-elected
Yeltsin resigns
Russia launches market reform
Bush, Yeltsin formally end Cold War
Poland’s Walesa leads formation of self-governing union
Solidarity recognized by Polish government
USSR begins withdrawal from Afganistan
Maastricht Treaty signed forming European Union
Bosnia declares state of emergency
Bosnia and Herzegovina join UN
1999
1989
Karl Hartig Maps: MapQuest.com, Inc.
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14 THE WALL STREET JOURNAL CLASSROOM EDITION JANUARY 2000
T R A C K I N G T H E E C O N O M Y
FRESH STARTSome Eastern European nations struggle with economic and political change
IN COUNTRIES that were suc-cessful, says Gabor Hunya, ananalyst with the Vienna Insti-
tute for Comparative EconomicStudies, “the new system wasn’tthat much different than what theywere used to.”
Another advantage for much ofCentral Europe: Free markets werewithin living memory of older citi-zens there, because central plan-ning was a briefer episode than inthe former Soviet Union.
But history hasn’t equaled des-tiny in every case. Poland, whichhas made perhaps the most dramat-ic transformation of any country inthe region, began the ’90s as a debt-ridden basket case. Former Sovietrepublics Kyrgyzstan and Georgiahave won praise from international-aid donors for progress on reformsdespite tough odds.
In fact, tougher starting condi-tions made for bolder policies insome cases.
Take privatization: Hungaryopted to sell most of its companiesand banks to foreigners for cash inlarge part because of its huge debtload, the region’s heaviest per capi-ta in the early ’90s.
Today, foreign-run firms inHungary, whose economy grew by5% in 1998, are more productive,generate more jobs, pay higherwages, export and invest more thantheir purely Hungarian counter-parts, and generate 75% of the coun-try’s exports, Mr. Hunya says.
Contrast this with the Czech Re-public, where a light debt load gavePrague the luxury of experimentingwith a cashless-voucher privatiza-tion program. The plan put mostcompany shares in the hands ofbank-run investment funds or other
Czech interests. The result: poorcorporate governance, falling prof-its and outright fraud at many com-panies, and a crisis at some banks.
The country is still sorting outthe effects of the privatization messand saw its gross domestic productfall more than 2% in 1998.
Although the Czechs made thefirst cut of prospec-tive EU members,the European Com-mission has putPrague on notice toget its economy inorder or risk drop-ping to the B-list.
The Baltic statesoffer a compellingexample of the dif-ference the rightpolicies can make.
All three startedoff with roughly thesame legacy of inef-ficient industry andSoviet-style com-mand economics.
Estonia quicklyseized the lead bydropping the ruble,privatizing compa-nies and land, lettingits struggling banksfail and adopting oneof the freest-tradingregimes west of Hong Kong.
It is the sole Baltic state to makethe EU’s membership short list, andits economic growth has handilyoutpaced Latvia’s and Lithuania’ssince 1995.
But politics doesn’t go a longway toward explaining why somecountries made it, either.
When the policy wonks werehandicapping Eastern Europe’stransition economies back in 1990,they said a clean break with the cor-
rupt communist rulers of the pastwas essential.
But in the looking-glass world ofCentral European politics, the politi-cal labels the region’s governmentsgive themselves had little to do withtheir economic track record.
In Hungary, the Socialist-ledcoalition government of Gyula Horn
in 1995 began an austerity-and-pri-vatization drive that averted a bal-ance-of-payments crisis, raisedHungary’s exports and made itscompanies among the region’s mostcompetitive.
In the Czech Republic, the con-
servative government of VaclavKlaus launched the poorly regulatedvoucher privatization that led to thecountry’s current economic slump.
Nor does political stability seemto have made much difference.Poland and Estonia both had revolv-ing-door governments in their cru-cial reform years, while the Czech
Republic and Slova-kia are among theregion’s most polit-ically stable coun-tries.
So, how aboutculture? Ever sincesociologist MaxWeber drew acausal relationshipbetween Protes-tantism and capi-
talist wealth a centu-ry ago, some analysts have
linked culture to eco-nomic success.
Taking the ar-gument to EasternEurope, it is worthnoting that all fivefirst-rung nationsare predominantlyRoman Catholic orProtestant. None ofthe region’s major-ity Orthodox Chris-tian countries canbe deemed econom-
ic successes.Culture has made profound dif-
ferences in these countries’ histo-ries, and thus in the development ofsuch crucial areas as civil societyand the rule of law, experts agree.But most dismiss culture as a deci-sive factor in making the transitionto economic success.
Analysts agree the level andquality of Western aid and advicehelped to determine the outcome of
countries’ economic transitions.“The five countries that got themost money were the ones that suc-ceeded,” Mr. Aslund says.
But Western help wasn’t a fool-proof formula. Much Western aidwas misdirected or geared more atrewarding donor-country intereststhan serving local needs.
Amid conflicting advice fromEuropean and American experts,Romania, for example, ended upwith a U.S.-style stock market, aGerman company law and aFrench-inspired privatization law,discrepancies that haven’t helpedthe country’s vexed efforts to retoolits economy.
Still, experts are careful not tolay too much blame for policy fail-ure solely at the door of the West.“Everybody’s responsible, but thedecisions were homemade,” saysNicholas Stern, chief economist forthe European Bank for Reconstruc-tion and Development.
Eastern Europe’s economictransformation is far from over, ex-perts are quick to note.
True, the EU’s first cut ofprospective members has led to avirtuous circle in these five coun-tries, which now are rushing toadopt EU-standard laws as moreEuropean and U.S. industrial and fi-nancial investors pump in money inanticipation of the region’s conver-gence with the EU. As they do, thewealth gap is widening betweenthem and laggard economies in theBalkans and former Soviet Union.
Still, renewed Western commit-ment to the Balkans following theKosovo crisis means these countriescould have better chances — withthe right Western prodding and in-centives — of getting their econom-ic houses in order.
Even Central Europe’s successstories face plenty of challengesahead. Poland needs to restructureits bulky steel and coal industries,and to bring its huge, inefficientfarm sector into the 20th century.
More than 75% of Hungary’seconomic output is in private hands,but the country still needs to over-haul its bloated public-health sys-tem or risk a slowing of growth.
The region’s success stories alsohave far to go to catch up with theircounterparts in the West. Assumingaverage annual economic growth of2% in the EU and 5% to 6% in Cen-tral Europe, Mr. Stern says, it willtake the region more than 20 yearsto double its per-capita gross do-mestic product — now at about one-third of EU levels — and 35 years tocatch up with the EU average.
“People thought [the transition]would be over by now,” says JanSvejnar, executive director at theUniversity of Michigan BusinessSchool’s William Davison Institute.“But it clearly will be a longer andmore arduous process than anyoneexpected.” ◆ 9/27/1999
Economic ABCs: The Underground Economy
ONDON — A survey of more than 3,000East European companies by the WorldBank and the European Bank for Recon-
struction and Development paints a soberingpicture of endemic corruption, favoredlobbies and state influence over busi-ness in the past 10 years.
The survey concludes bribery andcorruption remain widespread due inpart to continued reliance of companieson direct ties to government officials.
To assess the size of the so-calledbribe tax, researchers from A.C.Nielsen polled entrepreneurs and businesspeo-ple in 20 countries about their dealings with thestate and associated obstacles to conductingbusiness.
Among the findings: Companies in EasternEurope pay bribes amounting from as little as2% of annual revenue in Croatia to 8% in Geor-gia. “When added to what is already consid-
ered by firms to be an extremely high level ofofficial taxation, the bribe tax imposes a se-vere burden on enterprises in the region,” thesurvey said.
The average bribe tax in the former SovietUnion — 5.7% of revenue — is almost twice the3.3% of revenue in Central and Eastern Europe.
Surprisingly, bribery re-mains widespread in countriessuch as Poland and Hungarythat are considered transitionsuccess stories, the surveysays. Private-sector firms paya larger share of their revenuein bribes than state-ownedfirms pay.
Of concern to the EBRD is the impact onsmall companies, with about 40% of those sur-veyed saying they frequently pay bribes, com-pared with 16% of large enterprises.
EBRD President Horst Koehler says newfirms are critical in driving economic growthin transition countries and must be protectedand encouraged.
The study’s sharp words about corruptionand powerful business oligarchs are a depar-ture for the EBRD.
While Mr. Koehler has sought a more out-spoken role for the bank since taking over in1998, some EBRD bankers advocate a lowerprofile to avoid alienating governments.
The study found that while direct state in-tervention in the region’s economies hasshrunk since the collapse of central planning,“bargaining between the state and firms hasnot ceased but rather changed form.”
Governments continue to favor some com-panies over others by giving explicit or implicitsubsidies, including tax breaks and toleranceof debts. Meanwhile, a small group of powerfulcompanies exerts undue influence over govern-ment policies in many of these countries.
The EBRD says it expects average econom-ic growth in the region to accelerate to morethan 3% in 2000, from about 1.6% in 1999. And itfurther predicted foreign direct investmentinto Russia would jump to about $3.5 billion in1999 from $1.2 billion in 1998. ◆ 11/9/1999
Reunification BluesAfter Germany recovered from reunification
euphoria, economic growth (columns) slowed
while unemployment (black line) rose.
-15
-10
-5
0
5
10
15
20
25%
’98’97’96’95’94’93’92’91’90
Source: Eurostat
CONTINUED FROM PAGE 12
BY JOHN REED AND ERIK PORTANGER
Staff Reporters of The Wall Street Journal
L
JANUARY 2000 THE WALL STREET JOURNAL CLASSROOM EDITION 15
T R A C K I N G T H E E C O N O M Y
These charts provide a quick overviewof economic conditions in nine Europeancountries from 1990 to 1998.
France, Germany and Spain are threeof the 11 nations that are moving towarda common currency within the EuropeanUnion. The other countries are candi-dates for EU membership.
Columns represent the annual per-centage change in gross domestic prod-uct. Black lines represent the unemploy-ment rate. Notice the correlation betweenstronger economic growth and lower un-employment. Data are from Eurostat, theEuropean Communities’ statistical office.
-15
-10
-5
0
5
10
15
20
25%
’98’97’96’95’94’93’92’91’90
A Socialist-led coalition government
in Hungary has made structural re-
form a priority. Privatization and
foreign investment have aided the
country’s economic growth . . .
-15
-10
-5
0
5
10
15
20
25%
’98’97’96’95’94’93’92’91’90
As Slovenia negotiates for EU mem-
bership, it must face the economic
challenges of privatization and insti-
tutional reforms. But Slovenia boasts
a growing economy. . .
-15
-10
-5
0
5
10
15
20
25%
’98’97’96’95’94’93’92’91’90
Bulgaria’s government sought help
from the International Monetary
Fund in 1997 and succeeded in stabi-
lizing its economy. In 1998, Bulgaria
pulled out of a recession . . .
-15
-10
-5
0
5
10
15
20
25%
’98’97’96’95’94’93’92’91’90
Meanwhile, problems with a voucher-
privatization program in the Czech
Republic hurt economic progress in
1997. And in 1998, the country experi-
enced a recession . . .
-15
-10
-5
0
5
10
15
20
25%
’98’97’96’95’94’93’92’91’90
Despite political instability during
its reform years, Poland has made
the most dramatic transformation of
any country in Eastern Europe. Un-
employment continues to fall . . .
-15
-10
-5
0
5
10
15
20
25%
’98’97’96’95’94’93’92’91’90
-15
-10
-5
0
5
10
15
20
25%
’98’97’96’95’94’93’92’91’90
A member of the original European
Community, France has experienced
slow yet relatively steady economic
growth, but has been hampered by
high unemployment rates . . .
-15
-10
-5
0
5
10
15
20
25%
’98’97’96’95’94’93’92’91’90
High unemployment has also been a
serious problem in Spain and hin-
ders the nation’s progress. But the
government began to implement
some labor reforms in 1998 . . .
Estonia’s economic growth has out-
paced that of its fellow Baltic states,
Latvia and Lithuania. The slower
growth in 1998 is largely attributed to
Russia’s financial crisis . . .
The Transformers ...
i77.p11.v.02 1/11/00 6:09 PM Page 2
Putting Capitalism on the Map For related activities, see pp. 4, 6 and 10. Answers are on p. 16.
MAPS
HE MAPS and timeline on
pp. 12 and 13 of this month’s
Wall Street Journal Classroom
Edition show how the borders for Cen-
tral and Eastern Europe were
redrawn in the 10 years after the fall
of the Berlin Wall.
FRESH START, PP. 12-15Vocabulary
Arduous Laggard
Austerity Languished
Autonomy Oligarchs*
Backlash Parity
Basket case Precocious
Dabbled Privatization
Discrepancies Radical
Endemic* Socialism
Flailing Swath
Governance Wonks
* Words in Economic ABCs
Related Articles
POSSIBLE PATHS, P. 5
CULTURE SHOCK, P. 18
LIFE AFTER COMMUNISM, P. 20
Objectives: Interpret and discuss eventsbefore and after the fall of the BerlinWall. • Research to predict the outcomefor the countries in Central and EasternEurope as they make the transition tocapitalism from communism.
PREREADING DISCUSSION
◆ What do you remember about the
fall of the Berlin Wall or the breakup
of the Soviet Union? Describe and dis-
cuss the images you recall seeing in
the media. Why do you think the fall
of the Wall was important to the U.S.
and its allies?
INTERPRETATION
1 Use “How to Read These Maps,”
the maps and the timeline to answer
the following questions:
A What do the colors on the maps
and on the timeline flags represent?
B Which color doesn’t appear on
both maps? Why?
C Compare the area of the
U.S.S.R. on both maps. Which new
nations were carved out of the former
Soviet Union?
In which years did these new
nations declare their independence?
Do all appear on the map? Why?
D On the 1989 map, find
Yugoslavia, Czechoslovakia, the Fed-
eral Republic of Germany and the
German Democratic Republic. Look
at the 1999 map. Identify the countries
that were created and that disap-
peared. Give the capitals of each of
the new nations.
E Look at the early years of the
timeline. Which European country led
in the transition to a more democratic
system? What was the reaction of the
established government? Which flags
on the timeline support your answer?
You may want to research an indi-
vidual or event to better understand
how this person or event contributed to
the later changes.
2 Read and discuss “Fresh Start.”
A Which former Soviet bloc coun-
tries are more successfully making
the transition to capitalism?
B What advantage do many Cen-
tral European countries have in mak-
ing this transition?
C What does Jan Svejnar say
about the transition to capitalism? Do
you agree? Why?
3 Economic data for some European
countries are charted on pp. 14 and 15
of the student newspaper. According
to the charts, which nation is in bet-
ter economic shape: Hungary or the
Czech Republic? Why? Is this consis-
tent with “Fresh Start”?
4 While Germany was reunified in
1990, it wasn’t until 1999 that the capi-
tal was moved to Berlin from Bonn
(formerly the capital of the Federal
Republic of Germany). Read and dis-
cuss “Culture Shock.”
A How do Bonners feel about
moving the capital to Berlin? How are
Bonn and Berlin different?
B What historical, cultural, social,
or economic reasons would make Ger-
man officials move the capital?
5 In groups, use “Fresh Start,” “Life
After Communism,” “Possible Paths,”
and the maps and charts on pp. 12 to
15 to research and prepare a report
on the future of one transition nation.
How do geography, culture and politi-
cal history seem to be influencing the
economic success of this nation?
What types of businesses do you think
have the best chance of thriving?
Would you be interested in working in
this country some day? Why? What
do you think will happen to this
nation in the 21st century? Will it suc-
ceed as a capitalistic country?
For related articles and a Web
site with a live camera that shows
what Berlin looks like today, visit the
Archive on the Student Center page
at http://info. wsj.com/classroom
I
T
JANUARY 2000 THE WALL STREET JOURNAL CLASSROOM EDITION 5
T H E N E W C A P I T A L I S T S
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