All Commentary
Sunday, December 1, 1996

Free Enterprise Moves East: Doing Business from Prague to Vladivostok

The Triumph of Capitalism Is Transforming Lives

Dr. Sabrin is professor of finance at Ramapo College of New Jersey and author of Tax Free 2000: The Rebirth of American Liberty.

The genie is out of the bottle. From the heart of Central Europe to the easternmost regions of the former Soviet Union, the capitalist revolution has taken root—deeply in some areas, less so in others. According to Carter Henderson, former London bureau chief and front-page editor of the Wall Street Journal, the triumph of capitalism is transforming the lives of more than 400 million people. Consumption is in, while central planning, shortages, queues, and bureaucracy are on the way out.

The remarkable progress in some of the former Soviet satellites is nothing short of breathtaking. Capitalism is running wild . . . several million private businesses have been launched . . . and households . . . are getting their first taste of life in a consumer-driven culture. Foreign investment is pouring into Hungary, Poland, and the Czech Republic. The rule of law—one of the essential elements of a market economy—is being created to secure both property rights and contractual obligations. Price controls are being lifted, trade barriers are being dismantled, subsidies are being eliminated, privatization is proceeding at a rapid pace, and monetary inflation is being curtailed. In short, free enterprise is on a roll.

Nevertheless, the progress of the former Soviet tigers stands in sharp contrast to the slow pace of reform in Romania, Albania, and Bulgaria. Whether the three laggards can throw off the legacy of Stalinism remains to be seen. But given the enormous progress in their neighbors’ well-being in such a short period of time, it would be tragic for the peoples of these nations to suffer more than they already have because of the dilatory actions of their elected officials.

After seven decades of a command economy, the people of the former Soviet Union are rediscovering the essence of entrepreneurship. Although some predict that it will take a minimum of two generations—fifty years—to bring Russia’s economy to where America was in the 1950s, the recent re-election of Boris Yeltsin is a confirmation that the Russian people do not want a return to a command system.

However, there are several major challenges ahead for republics newly formed from the remains of the Soviet empire. The Communist Party’s influence in the Parliament must be countered and organized crime drastically reduced in Russia and other countries in order for a peaceful market economy to flourish.

Carter Henderson has presented a clear and comprehensive overview of the spread of free enterprise throughout the former Soviet empire. For academics, business executives, and others who want to learn about the progress and opportunities in one of the world’s greatest economic transformations, Free Enterprise Moves East would be a good place to start.

Unfortunately, Henderson does not acknowledge the insights of the Austrian school economists who predicted the demise of central planning as early as 1922, with the publication of Ludwig von Mises’ Socialism. Had Socialism been the bible of the Russian Revolution instead of The Communist Manifesto, the peoples from Prague to Vladivostok would have avoided the pain of the past and the uncertainty of the future.

Ideas matter, and Carter Henderson shows unequivocally that the greatest social experiment in the twentieth century was conducted using one of the most fallacious ideas known to the human race—statism. Hopefully, the gallant struggle to eliminate most—if not all—the remnants of statism will accelerate in the years ahead.