This book celebrates the transitions of Vietnam and Poland from central planning to market economies as triumphs of capitalism, but their success stories shouldn’t be mistaken for universal blueprints. While market reforms enabled growth in these nations under favorable conditions, the experiences of Ukraine, Russia, and today’s advanced economies reveal that capitalism alone cannot guarantee prosperity or prevent widening inequality.
I was living and working in Ukraine in the early 1990s, shortly after it gained independence. It faced a complex triple transition: to statehood, democracy and a market economy after three generations under the Soviet yoke. The World Bank was eager to implement change and introduce shock therapy from Poland, and the architect of the Polish transition, Leszek Balcerowicz – one of the heroes of this book – visited the country to promote capitalism to the Ukrainian Government. The country was not ready for rapid change, and what ensued was a botched privatisation programme and the widespread appropriation of state assets by a few oligarchs. For the next decade, the country’s human development indicators plummeted, and only large-scale humanitarian aid helped stave off growing poverty, while a minority became extremely wealthy.
None of this abnegates the conclusions that this book draws from the experiences of Vietnam and Poland, which are held up as examples of transitions to relative prosperity. The detailed accounts of these two transitions are of historical interest. However, the lessons are as much about the inefficiencies of central planning as about capitalism as a panacea for growth. In both cases, the transitions were long in coming based on relatively favourable conditions. These conditions included some bequeathed by a socialist system, such as sound universal education.
Additionally, in both countries, a latent entrepreneurial class existed, along with some familiarity with free markets: in the southern half of Vietnam and in the agricultural sector of Poland, respectively. The example of Ukraine demonstrates that the conditions prevailing at independence were not conducive to a rapid capitalist takeoff. It reinforces the book’s arguments that capitalism cannot be imposed from above. (The example of Russia in the 1990s offers another cautionary tale.)
Thus, while the well-documented examples of Viet Nam and Poland are of interest, their experiences cannot provide clear blueprints for transitions in other countries that have been languishing under excessive statism and central planning. Even in those two countries, there were significant setbacks, such as high inflation, which could have eroded the political will to continue with reforms. There were also downsides, as we know from the experiences of other countries that have undertaken bold reform programmes. The changes wrought by Margaret Thatcher in the UK are held up as examples of successful reform. However, the 1980s led to some failures of privatisation, the destruction of whole communities and a significant rise in income inequality, which has persisted to the present day. The book’s discussion about inequality as a blessing can also be contested. Contemporary patterns of growth in today’s advanced economies have favoured the already rich, while many have failed to see an improvement in their incomes.
The surveys conducted by the author are a strong feature of the book. They reveal that in the two countries, there is a relatively stronger sentiment in favour of capitalism and of the rich than in the longer-established capitalist countries. These findings are significant, but not surprising. Capitalism has indeed contributed to more rapid growth in most countries. Still, in more recent years, especially, it has resulted in a widening of disparities, for example, in the United States, the UK, and elsewhere. While in Poland and Vietnam, there is a widespread perception that most people can still aspire to become more affluent, the reality in other developed economies is that such opportunities have been steadily closing.
In sum, the circumstances in Vietnam and Poland were indeed conducive to a favourable transition out of central planning and into sustainable growth. However, the title of the book – and the Foreword – give the mistaken impression that the experiences of these two countries contain universal prescriptions for overcoming poverty. While evidence suggests that less statism can be beneficial, and there is a growing consensus about the limitations of development assistance in reducing poverty on a sustainable basis, other factors are also important, including strong and inclusive institutions, the judicious use of natural resources and energy, and access to overseas markets, among others. A more measured analysis would have included a discourse on the appropriate size and functions of the state, including its role in mitigating some of the distortions of capitalism, which may be a necessary, but by no means a sufficient condition for the escape from poverty.
This is a review of Rainer Zitelmann‘s How Nations Escape Poverty (Encounter Books, 2024).
Stephen Browne is a visiting lecturer at the University of Geneva and co-founder and co-director of the Future United Nations Development System (FutureUN.org) project. He is a former principal management adviser to the UN Industrial Development Organisation and has served in the United Nations system for more than 30 years, with half of that time spent on country assignments. Browne held positions as UN Representative in newly independent Ukraine and in Rwanda. His research interests include Official Development Assistance (ODA), United Nations reform, Sustainable Development Goals, peace building, and multilateralism.
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