Sunday, April 25, 2004

Here's a big honking surprise

Anders Aslund in the WaPo - An Expanding Europe, in Decline: The EU Is an Economic Laggard. If You Want Growth, Kazakhstan's the Ticket:
Next Saturday, the European Union (EU) will admit 10 states, eight of them former communist countries. This is a moment to celebrate: In the 12 years since the fall of the Soviet Union, these countries have become fully democratic and are now, to varying degrees, integrated into the West.

But it is also a moment of economic concern. For the past five years, the new Central European members -- Poland, the Czech Republic, Slovakia and Hungary -- have had a mediocre economic growth rate of 3 percent a year. Those four countries constitute almost 90 percent of the population of the entering states. (The other six -- Estonia, Latvia, Lithuania, Slovenia, Malta and Cyprus -- are mini-states, with only 10 million people among them.)

The EU has many advantages, but economic dynamism is no longer one of them. In order to qualify, the applicant countries had to adopt all the bureaucratic EU regulations, including the most moribund of them, known as the Common Agricultural Policy -- a system of subsidies paid to EU farmers. As a result, the Central Europeans should expect their growth to slow: This year, the 15 preexpansion EU members were expected to post an economic growth rate of less than 2 percent. By contrast, the U.S. economy and that of the world as a whole are set to expand by 4.5 percent.
Meanwhile, in a development that has gotten little notice amid the EU expansion hoopla, the post-Soviet countries further to the east have been booming since 1999. The nine market economies in the former Soviet Union (Russia, Ukraine, Kazakhstan, Moldova, Georgia, Armenia, Azerbaijan, Kyrgyzstan and Tajikistan) have on average grown annually by no less than 7 percent for the last five years. The new tigers are Kazakhstan, Russia and Ukraine -- far more so than Poland, Hungary or the Czech Republic. The three Baltic countries are doing significantly better than the Central Europeans, but not as well as their eastern neighbors.

This is a dramatic turnaround.
Why's that, you ask?
The truth, which may shock you, is that the post-Soviet countries have a more efficient economic model than the Central European ones because they are free from the harmful influences of the EU.
More by following the link.