Leszek Balcerowicz, president of the National Bank of Poland, writes in today's Wall Street Journal (page A14 in the print edition):
...with the collapse of the communist system, a great natural experiment began. Looking at its results, one is struck by the huge differences among countries of the former Soviet bloc:
In 2004, GDP had increased, relative to 1989, by 42% in Poland, 26% in Slovenia, and 20% in Slovakia and Hungary. In contrast, it declined by 57% in Moldova and 45% in Ukraine. If the shadow economy were included in the calculations, the differences in output would be smaller, but they would still be large...
What explains these enormous differences? In terms of GDP growth, it is tempting to look at differences in the initial conditions. For example, the Baltic countries -- Estonia, Latvia and Lithuania -- were much more dependent on exports to the old Soviet trading club, Comecon, (30%-40% of GDP) than were the Central and Eastern European communist countries (4%-15% of GDP). Following the collapse of the Soviet bloc, it might be argued, the Baltics were exposed to a much deeper decline in GDP.
Such differences in initial conditions, however, can explain only a part of the difference, and only in the early years. Despite huge initial shocks, the Baltics performed in the longer run much better than, say, Romania, which was relatively less dependent on trade with Comecon.
The differences in longer-run growth are largely due to more extensive market-oriented reforms and more successful macroeconomic stabilization. This conclusion is supported by a considerable, serious empirical literature.
Taht's an interesting contrast to this...
[EU industry commissioner Gunter] Verheugen insisted that the way forward for the European industry was through a "clear rejection of protection or sheltering of markets" and "a clear refusal to engage in (state) interventionism."
French President Jacques Chirac said on Tuesday that it was "not normal" for the commission -- in his view -- not to get involved to ease the blow of a big international lay-off plan by US computer maker Hewlett Packard, which is hitting France particularly hard.
"The vocation of Europe and the European institutions is ... above all to defend Europe, defend the economic, financial and social interests of Europe," Chirac said.
.. and this:
Fearing what he called "social dumping" in Europe's services sector, German Chancellor Gerhard Schröder on Thursday slammed the EU's planned de-regulation of labor laws.
German Chancellor Gerhard Schröder on Thursday added his voice to the growing chorus of critics of the European Union's so-called "Bolkestein Directive" aimed at de-regulating the services sector in the bloc's 25 member states.
I'm not sure who will win the argument, but the stakes seem pretty high.
You can find more on the Verheugen proposal at EurActiv.com.