Schumpeter’s Children

The Globe Bookstore and Coffeehouse in Prague fills up by 4 p.m. with twentysomething expatriates-most of them Americans. Many sip [...]

September 1 1994 by Chief Executive


The Globe Bookstore and Coffeehouse in Prague fills up by 4 p.m. with twentysomething expatriates-most of them Americans. Many sip Czech beer, which is among the best you can find in Europe. Some pore over English translations of semi-obscure Central European writers. A few years ago, Prague was anointed as the literary hangout for Generation X-a sort of 1990s version of Paris between the wars. No Hemingways or F. Scott Fitzgeralds have emerged yet, but tourists are in abundance. In this country of 10.3 million, there were 80 million visitors last year.

The transformation in Warsaw and Budapest is no less remarkable. Participants at Chief Executive’s roundtable discussions in each of the three cities were impressed not just by the abundance of goods in the shops or the brighter tone of daily dress, but by the impact that democracy and free markets have had on popular attitudes.

It’s tempting to infer from these street scenes that developed nations have fulfilled their obligation to the region by witnessing the birth of democratic institutions. But the cityscapes are somewhat misleading: Behind the scenes, many people are hurting, and for its part, the West hasn’t done enough to help. Polls show that most who live in former Soviet bloc nations feel democracy and capitalism have created chaos and uncertainty (see cover story). Searching for a mythical stability, Poles and Hungarians, among others, have brought back the old crowd of Communists. To be sure, local reformers did not manage the people’s expectations well. But neither has Brussels or Washington gone out of its way to support nascent democracy.

No one should expect the U.S. to bankroll transformation in Eastern Europe-the Marshall Plan was born of unique circumstances. But when the Iron Curtain crumbled, emerging democrats looked westward for help and guidance. Hungary‘s Foreign Minister Geza Jeszenszky favorably recalled the postwar “enlightenment campaign” conducted by the U.S. in Germany and Japan. Helping to explain and nurture the development of democracy, he observed, is critical for people whose direct experience of it is limited. Today, the old apparatchiks back in power sneer: “What did the reformers get for a hand extended to the West? Nothing.”

Economist Joseph Schumpeter coined the term “creative destruction,” underscoring capitalism’s power to supplant an entrenched economic order-even one of its own making. Although democratic institutions have taken hold, it would be well for the West to support them. At least it would give the lie to a frequently heard message from the old politicians: that democracy isn’t for everyone; the old ways are justified.