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Figure 1

Growth of GDP per Capita Adjusted for Inflation and PPP (1989­2004)

Czech Republic

Hungary

Poland

Slovakia

18000

16000

14000

12000

10000

8000

6000

Source: "World Development Indicators Online," World Bank, June 25, 2006, http://publications.worldbank.org/WDI.

At the end of the communist period, eco-

Czech Republic amounted to 11.52 percent

nomic freedom in Czechoslovakia and Hungary

of GDP (2002). In Hungary they amounted

was virtually nonexistent. In Poland, farmers

to 10.75 percent (1995), in Poland to 5.60

enjoyed some very limited freedoms, but the

percent (2000), and in Slovakia to 16.89 per-

cent (2002).7 Rising capital inflows were

economy as a whole was subjected to the same

central planning as the rest of the Soviet bloc. By

accompanied by growing productivity and

2004, the Fraser Institute's Economic Freedom of

low inflation, which fell from double digits

the World: 2006 Annual Report shows, Hungary

(triple digits in Poland) in the 1990s to

between 2 and 8 percent in 2004.8

was Central Europe's freest economy and

ranked 20th out of the 130 countries surveyed.

The post-communist era also saw improve-

Hungary was followed by the Czech Republic

ments in the region's human development

and Slovakia, both in 45th place, and Poland in

indicators (see Figures 2­4). The child mortal-

One of the most

53rd place.2

ity rate fell,9 and the number of physicians

important,

rose.10 The life expectancy increased.11 The

Initially, Central Europe experienced eco-

though largely

nomic contraction, as many of the inefficient

same was true for health expenditure as a per-

centage of GDP.12

and heavily subsidized firms were forced to

unexplored,

shut down. By the mid-1990s, however,

Education spending as a percentage of GDP

reasons for the

Central Europe was growing again. Between

rose in two out of four Central European coun-

1995 and 2004, GDP per capita3 rose by 28

tries.13 The region as a whole has maintained its

rise of populist

percent in the Czech Republic, by 49 percent

historically high record of gross school enroll-

parties in the

ment.14 In fact, between 1991 and 2003, the

in Hungary, by 46 percent in Poland and by

44 percent in Slovakia (see Figure 1).4

region is the

gross primary, secondary, and tertiary school

enrollment ratio increased throughout Central

The net inflows of foreign direct invest-

scourge of

ment5 to the region substantially increased.6

Europe.15 The above statistics are especially

corruption.

important, considering the common misper-

At their highest point, net FDI inflows to the

3