There is an assumption which people living in advanced and free countries are conditioned to regard as a fact. It is that freedom (economic and political) is universally desired and that therefore its implementation will succeed. The cases of Russia’s Provisional Government (1917), the fate of the Weimar Republic in Germany, post-independence Africa and the current vicissitudes in Iraq indicate that freedom and economic success are not inevitable in any society that achieves self-determination.

The derailments of central and eastern Europe’s path of recovery from Communist rule constitute specifics that support the generalization. Discussing this Europe at length is not an outlandish exercise. The region has given us two-and-a-half global wars, and its 400 million people might be League B in economic asset-creation but rank Class A in mass destruction. If they go down, the world might sink with them. The reverses so far are not final defeats but undue slow-downs on the road from serfdom (Hayek) to freedom. Disappointment and frustration is widespread.

In 1989 Helmut Kohl, then Chancellor, saw – correctly from his own perspective – “blooming vistas” in the “GDR” that joined the Federal Republic. Today it is clear that even the transferred billions of the FRG have failed to rectify the consequences of Socialism. Money can buy many things but new ways of thinking is not one of them. Next to the old “Soviet Zone,” it was Hungary that observers regarded as the most likely to catch up first with the modern world’s democracy and market economy. Events have deflated this hope, too. This essay will, therefore, concentrate on that country’s case in order to illustrate regional problems.

To begin with, Socialism has been overcome only in a limited sense. Officially a country might have been re-named (from People’s Republic of… into Republic of…). Even so, the Party’s creatures command the highest positions in culture, press, finances and within the administration. The vampires that remain in power are well-off, too. By-and-large they have discovered that it is more rewarding to be a socialist in capitalism than in socialism. How come? In the first case more is produced by the peasants and therefore more can be pocketed by the smarties. This survival need hardly surprise us. After WWII the victors intended to de-Nazify Germany. After only twelve years and total military defeat, neither the Soviets nor the West has managed o do this. Socialism’s case was more propitious: it had 74 years and it did not end with a military defeat. Bankruptcy does not lead to occupation.

Furthermore, as premier József Antall put it, the people “did not deign to make a revolution.” Thus, contrary to the Nazi case, an accounting for past crimes was not desired. Who would want to investigate himself? In Hungary, the crushing of the revolution of 1956 officially produced 33 cases in which Moscow’s gunmen massacred demonstrators. With the connivance of the old-new elite a charge has been brought in eight cases only. Try to guess the number of convictions!

It would be misleading to put the blame for the bane singularly on the skill with which the old polit-criminals mutated into a new cleptocracy. The discreet dominance of the party-state-enabled pilferers has solidified due to the unconscious participation of the victims. The election results since 1989 (at least in the countries where voting involved electing) show a pattern. At the end of their term the governing team is replaced by another clique that will be dismissed in favor of the group that had power when the charade began.

More will be said later about the social-economic consequences of short-term thinking. Also in politics, the butterfly-life outlook has damaging consequences. Europe’s East lacks good governance. The public’s inability to constitute and support a stable, long-term and principle-driven majority, is encumbering. The consciousness that could sustain policies that would bolster prosperity’s foundations is absent. Here not fear is to be feared. Fickleness is to be dreaded. Steering a consistent course is, even if successful, only possible for one legislative period. Sacrifices of the present demands are not understood and, after decades of misguided policies and the Party’s abused exhortations about a bright future, are not voluntarily made. Getting little for nearly nothing is more popular than obtaining a lot later by repressing short-term appetites. Churchill’s “Blood, sweat and tears…” would dismally fail there.

Societies that are subject to arbitrary and unpredictable governance will suffer from short-term thinking. Under Communist or National Socialist rule yesterday’s truth is the error of today, the criminal a hero and legally acquired property becomes subject to confiscation. Personal striving will, as a consequence of there being no predictable future, emphasize the enjoyment of the moment. Planning ahead will be replaced by immediate gratification. Successful societies and thriving sub-groups share a characteristic. They assume a predictable future. Therefore long-term gratification is pursued because it makes sense. Good business is – regardless of America’s sin of quarterly balances – long term business. Successful societies are moved by middle-class values. These enable their holders to forego short term temptations while long term designs are pursued.

The more arbitrary the government and the more capricious its agents, the more likely it is that short term schemes will determine individual strategies. Colloquially, grab now the “little” within reach for the “much” might not be yours later. Better a sparrow for you now than your chicken and the coop you built for them for someone else later on. “The little that can be conned today is mine. The deferred benefit that can be earned tomorrow might not help me.” All this is rational and has passed through the sieve of experience. Only it is economic common sense damagingly turned upside down! Democratic political theory and the explanation of the forces moving the market presume man’s rationality. Individuals act on their self-interest and therefore the system works to the advantage of all. Logical as this might sound, the rationality that presupposes the cognizance of realizable interests and the means leading to them is not inevitably given. Totalitarian ideology happens to be irrationality made into a system. It is logical that such a system will create a distorted frame of reference – and surviving individuals will learn to act within its limits.

If, for generations, the government determined what you could get and keep, it will be natural to conclude that the government’s generosity or malevolence causes your good or bad fortune. If this is so, then to get what you want requires that you play by the rules set by your sovereign. Today most people in the eleven time-zones stretching from the Danube to the Pacific find that their once profitable “dexterities” need to be unlearned in order to pursue a success strategy in the modern world. Learning might be difficult, but unlearning what used to work for you is much harder. You noticed this when, backing up with the trailer from U-Haul, you demolished the garage door. Officially Socialism might be gone but its habits and instincts stay. “Circumnavigating non-existing shoals” as the writer calls it, refers to a once useful tactic that vouches for future flops. Socialism’s forced communitarianism created hindrances that denied success to capable and performing individuals. Getting deftly around boulders the Party had planted used to be a prerequisite for accomplishing anything at all.

After ’89 the reefs were gone. Still, guided by instinct, most locals do not proceed straight to their goal but curve and backtrack where the impediments used to be. All this is done with impressive ingenuity. If only the cunning would not be wasted to avoid removed traps! Given this mental set, getting from alpha to omega, by circumnavigating beta twice, becomes long and expensive. The lesson: a bad system – or senseless regulations wherever you read this – evoke appropriate reactions. Even in an otherwise sane world these amount to expensive economic nonsense. The political fall-out is that freedom is undermined because it “does not work.”

Arbitrariness is the mother of corruption because favor-buying is essential where rights are not absolute. Corruption and theft, meaning “circumventing” here, can be a creative social response when it responds to impediments planted by rulers who think “the government that regulates most governs best.” In such situations craftiness is the self-defense of a prone society. It is hardly surprising that a majority still equates crookedness with entrepreneurial resourcefulness. Small wonder then that crookedness is proudly celebrated as a national talent. This tells a lot about why creative capitalism has a hard time functioning. Where success is met with suspicion achievements will be wanting. Regard this as a victory of Communism: the imitative reaction to the comrades’ misrule survived as an addiction after the system causing the malady was cast off. Communism was bad. What was left is equally good.

The actual background of the Kádár-era’s “Gulyás Communism” furnishes a peculiarly Hungarian component of what impedes fully joining the modern world. Kádár was smart enough to discover that fighting decadent capitalism with the capitalists’ money is, well, good business. Gulyás Communism, a favorite of pretext-seeking Western leftists, accomplished its eastern miracles with western credits while lacking a collateral. A burdensome economic consequence was a towering debt that the new system inherited. Credit and debt is, in itself, regardless of Third World apologists, not harmful. However, in this case the money was invested in non-viable enterprises. The beneficiaries were the show-case money-shredders of the planned economy, the industrial mutants of Stalinism. Even entry-level textbooks reveal that the enhancement of the welfare-creation function of the economy is furthered by the optimal investment of society’s resources. Whether these are raw materials, skills or capital makes no difference.

In this case dictatorship also created a psychological “hangover” that hinders even after its demise. This it did by leaving behind automatisms which lead to misdirected strivings. Having the money of others, “reform Communism” could dole out “generous” dividends – measured by the depressed standards of the “socialist camp.” For a generation the 26 hp Trabant with its cardboard body, the shacks along the lakes and enough to eat, amounted to impressive accomplishments if compared to the USSR or Romania. As it was, the credit-fed system cultivated non-profitable, therefore not market but politically driven economic activities. Personal input’s market connected umbilical cord to a commensurate share of the output was therefore severed. In case this sounds opaque: first of all, you did not have to work. The smarter and better connected, the less you needed to do. Correspondingly greater would be your share of the Party’s inequitable hand-outs. Some of the beneficiaries are even today unable to fathom the price. Take this letter-writer: “For me Kádárism was beneficial. Even if the country got into debt. In those times I could eat bananas. Everything was cheap. Is this not an accomplishment of Socialism?” Can there be a more convincing condemnation than this defense?

Being, as above, baffled by the self-evident is a disorientating inheritance of Communism. It is summarized by this incident. Following ’89 as Western company purchased an enterprise. The employees were gathered. The new owner’s representative explained the new situation, the need to improve the factors behind profits, such as performance, products and procedures. The attention received made the speaker feel successful. Then came the inevitable “any questions?” “Yes.” “You there,…” “I would like to know why we have to make a profit.”

The severance of the connection between the “doing” and the “getting” (input and output) received confirmation from the personal contact the Magyars – unlike their neighbors – were allowed to have with the outside world. This opportunity had an unrealized price. Call it the repercussion of “disinformative signals.” Those who encountered foreigners saw them while they vacationed. When the Hungarian was allowed to travel – to visit escaped relatives – he experienced the West under equally exceptional circumstances. For one thing, the émigré, as a visitor or as a host, tried to impress. Furthermore, on vacation and when receiving visitors one is more generous than normally. So, at home and abroad the Magyars were unlikely to meet the “West” at work. Its gift-disbursing representatives were experienced as the spenders of the fruits of their labor. The Hungarians missed the “labor” as it created its “fruits.” Thus an erroneous illusion was created. Capitalism meant that, as in Socialism, one took it easy. The difference: Capitalism paid sooo much better for it. Inevitably, once the Communist system was gone, the open ended opportunities had to fall short of fairy-tale-enhanced anticipations.

Eastern Europe’s slower-than-expected closing of the developmental gap is not accidental. Until a new generation takes over, stable governments with future oriented programs enjoying the support of enlightened majorities, will be a rarity. The disinformative signals transmitted from the past distort reality as they perceive it for large segments of the region’s populations. They suggest opportunities where there are none and conceal the available chances for betterment. The other conclusion pertains to “what can be done about it?” Briefly, the help the region needs is not primarily the easy thing, namely money and least of all gifts. Aid – and the control of its uses – is most effective if it is not channeled through government. What is needed is difficult – but not impossible – to transfer. Know-how needs to be transmitted as that is the key of the door to prosperity. About forty years ago, my uncle, who as a CEO lived in an underdeveloped country in Latin America, phrased the point this way: if you want to help a shoe-maker in a jungle village you should order sandals for a hundred dollars. If you wish to ruin the guy you should just hand him the dough.