What's Wrong with the Conventional Wisdom

1. "On track to Europe": Not! Starting earlier this decade. the EU began offering a phenomenal amount of aid to all the East European countries, basically to keep them at arm's length. Poland, Hungary, and then-Czechoslovakia came together in the so-called "Visegrad group," named after a picturesque fortress town overlooking the Danube in Hungary. Under pressure of the Soviet collapse and the lack of American leadership, the EU elaborated benchmark criteria that Eastern Europe had to meet in order to be considered for membership. Despite hopeful declarations from the Visegrad (now-)4, there is however no firm timetable. The EU pays much less attention to Eastern Europe than to solving its own problems of establishing a single currency and implementing the Maastricht treaty. Nor does the EU always pay attention to how these solutions will affect Eastern Europe. Specialists in comparative law have done nothing but create frameworks for economic adjustment programs. Specialists in international law have done nothing but creates frameworks for the negotiation of arbitration arrangements. We have to wait for a series of IGCs (intergovernmental conferences) among EU members next year, and another series foreseen before the end of the decade to chart the further institutional development of the EU, before knowing what the place of the Visegrad countries will be in the future economic Europe.

2. "Growth will be export-led": Not! Where will the Visegrad countries export to? Despite the "Europa Agreements" they signed with the EU (a fancy name for tailor-made "association agreements" that were only political umbrellas for extending existing trade-and-cooperation agreements), the EU has major problems with the free movement of workers and free access for agricultural products from anywhere in East Central Europe and is frankly protectionist on these matters. If East Central Europe's "export-led growth" comes then from other sectors — for example from the increasingly frequent phenomenon of German factories that are simply taken apart and rebuilt a few miles over the Czech border — then it is hard to see how this will be reflected on the East European bourses. Even the German economy has fallen on hard times trying to digest the shock of absorbing the former East Germany, and recent prognoses for its recovery and growth have been greatly toned down. Even if exports will increase from the Visegrad countries, they will be in competition with the second-rung NICs (newly industrializing countries), and later with first-rung NICs, and still later eventuallywith the OECD countries. The "Europa Agreements" are very clearly not a customs union, and they are not designed to foresee one anytime before membership.

3. "Take-off is just around the corner": Not! Westerners often say that all the region needs is a good investment insurance scheme. The example of Poland is an instructive counter-example: it has a fairly stable currency and pre-war commercial law inspired by German standards. With the question of land ownership perhaps on the way to being settled, things could be set right. But, like all Central and Eastern Europe countries, Poland needs systems not only of property law, but also of accounting law, banking law, contract law, inheritance law, and bankruptcy law. And that is not as easy as it sounds. As recently as three years ago, EU specialists thought that German law could be grafted onto the Polish system, which had an interwar legal culture historically grounded in German experience. But it was quickly discovered that German accounting law, for example, was inappropriate to enterprises in a post-centrally planned economy. The extent of the problem in Central and Eastern Europe generally is suggested by the anecdote that the last professor of accounting in Czechoslovakia retired in 1947! Even such a supposedly "social-system-invariant" body as Western telecommunications law is integrated into national legal systems from which it cannot be severed. The attempt to use the Austrian legal system as a model for "modernizing" Hungarian law has run into similar difficulties.

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DR. ROBERT M. CUTLER was educated at MIT and The University of Michigan, where he earned a Ph.D. in Political Science, and has specialized and consulted in the international affairs of Europe and Eurasia for twenty years. He has held research and teaching positions at major universities in the United States, Canada, France, Switzerland, and Russia, and contributed to leading policy reviews and academic journals as well as the mass media in three languages.