Hidden Prosperity In the CEE

Scandals and ­misguided reforms overshadow Central Europe's wealth

Money

Despite stalling growth in much of the EU the east is doing better than most | Photo: APA

What do countries as different as Slovakia, Moldova, Slovenia and Estonia have in common? In the 2012 Legatum Prosperity Index, published by the London-based Legatum Institute, these four made the biggest leap forward among European countries, raising the prosperity of their citizens in the eyes of the index’s analysts.

There are numerous charts that try to measure the quality of life globally. The analysts at Legatum – where the director of political studies is Anne Applebaum, historian, journalist, and wife of the Polish foreign minister – have been crunching data on 89 different criteria to compile their prosperity ranking since 2009. It will probably not shock many that Norway landed in first place and the Central African Republic in last, at 142nd. People might, however, be taken aback to find the United States in 12th place.

What will surprise Central Europeans is what the ranking tells them about themselves. Since 2009, the Czech Republic has dropped four places to this year’s 28th place. That appears to correlate with the citizens’ collective (and in the recent regional elections proven) theory about a crisis and the poor mood across the country. But, after Slovenia, the Czech Republic is the second highest-ranked, post-communist country, while the Poles, Slovaks, and Hungarians all find themselves only in the 40s. Although the flood of scandals, populism, and the messianic economic ideas of Viktor Orban’s government in Hungary distracts, we in Central Europe still live in the richest third of the world.

 

Better off than we think

The Slovaks – together with the Estonians, Slovenes, and Moldovans – even jumped ahead of Western European countries in categories such as education and security. While in the western part of the continent the situation has worsened, in our region, things seem to be getting better. It would seem crazy to tell that to the Slovaks, with their labour emigration and scandals over cheap college degrees for politicians, as well as the plans of the current government to reduce the number of college preparatory schools and force young people to attend trade schools instead. A closer look at the details of the analysis, however, shows that Slovakia and Estonia do have educated workers; on average, each of them has five or six years of secondary education. There, the workforce is growing more qualified.

Jeff Gedmin, president of the Legatum Institute and the former head of Radio Free Europe, interprets the results of the study as an indication of Europe’s division into two speed zones. The divide no longer runs so much along the old boundary between the post-communist states and the old democracies, but between those who are managing, even in the midst of crisis, to improve themselves and search for solutions; and those who just complain. The key factor is efficient and responsible government, which is one of the categories that the index examines.

From this perspective, the Czech Republic doesn’t come out looking too good. We are falling behind in three of the eight categories surveyed: personal freedom, social capital and quality of governance. The last two categories raise the reddest flags for the further development of Czech prosperity. Social capital is a reflection of mutual trust in society and is directly related to economic development. The higher the social capital, the easier it is to establish a company, for example. Higher social capital also leads to less regulation of business and greater tolerance in society as a whole.

 

Concentrated power 

We’ve all heard the long-winded debates about governance in the Czech Republic and other post-communist countries, the analyses of where it is worst and whose politicians are worse at governing than others. The only common trend is that political power has been funnelled into just one pair of hands in each country (Viktor Orban, Robert Fico, Vaclav Klaus and even Donald Tusk). And behind those hands, one can detect the pervasive influence of selected groups of lobbyists and businessmen.

The Legatum Institute’s ranking – which covers 96% of the world’s population and 99% of global GDP – doesn’t venture into such territory. Even so, the comparison of developments over the four years of the prosperity rankings is both interesting and stimulating.

Martin Ehl is the award-winning foreign editor of the Czech daily Hospodarske noviny, where this column originally appeared.  He tweets at @MartinCZV4EU.

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