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.

i77.p12.v.02 1/10/00 8:33 PM Page 2

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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