GMF - The German Marshall Fund of the United States - Strengthening Transatlantic Cooperation

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Imagine you're the leader of a country where economic growth is running at 6.3%, your government has been praised by the World Bank as the best market reformer in the world, unemployment has fallen to a record low of 10.6% from around 20% in just four years and your flat 19% corporate, value added and income tax rate led Steve Forbes to call your country an "investors' paradise." Imagine, also, that your country has seen foreign investment sky-rocket to the point at which it will shortly become the world's biggest per capita car maker, and where your people's feelings about their sense of national worth have gone from shame to something approaching pride. Oh, and as icing on the cake, imagine too that you got your country into the European Union and NATO.

With this record in mind, now consider that you face parliamentary elections this Saturday at which, unless the opinion polls change dramatically, you risk annihilation by a leftist opposition party with no experience of government and a policy agenda filled with populist rhetoric.

Welcome to the world of Mikulas Dzurinda, prime minister of Slovakia, who for the past eight years has led what can reasonably claim to have been the most successful neo-liberal government of the 21st century so far.

At first glance, Slovakia was an unlikely place for a neo-liberal revolution. Never before independent, except in the distorted sense of having been a puppet state of Nazi Germany, the country emerged from the breakup of Czechoslovakia in 1993 with a host of problems and complexes.

For a start, most of Czechoslovakia's intellectual elite was based in Prague, and those prominent intellectuals who did live in Slovakia were unsure whether independence was the right way to go. That uncertainty hardly endeared them to voters and strengthened the hand of hard-line nationalists and shady businessmen around former Prime Minister Vladimir Meciar who gorged themselves in an orgy of corruption.

Political opponents faced constant harassment. The West shunned the country as a pariah. Most foreign investors, not surprisingly, wouldn't touch the place.

Without knowing this history, it is hard to appreciate the work Mr. Dzurinda and his colleagues have done. Apart from establishing a functioning democracy and joining Europe's elite clubs, that work has included reducing bureaucratic obstacles to setting up businesses, introducing ways to ensure that when contracts are signed they mean something, privatizing major banks and utilities, launching an offensive against corruption and tax evasion, and ending crony capitalism -- not to mention that famous flat tax.

Slovakia is another example of how far a country has to fall before it can radically reform. At the end of the Meciar era, most ordinary Slovaks were desperate for root and branch change. And that is what they got. But Slovakia also illustrates that once the national mood has changed for the better, the appetite for continued radicalism, and the short term pain that goes with it, diminishes. As Margaret Thatcher herself found after revolutionizing Britain in the 1980s, reformists often become victims of their own success.

In spite of the upward trend, economic hardship remains a fact of life for millions of ordinary Slovaks. The average wage is only a little over $500 a month. The reforms will bring greater wealth and they will continue to reduce jobless rates and poverty. But people live in the here-and-now, and are tired of hearing Mr. Dzurinda tell them it'll take time for the major benefits of reform to filter through.

In this kind of environment, populists thrive. Mr. Dzurinda's chief opponent Robert Fico, who heads the left-leaning SMER party, has variously promised to raise wages and pensions, cut unemployment, increase spending on public services and abolish the flat tax. If Slovakia had qualified, he'd have promised to bring home the World Cup, too. In short, he has promised everything to everyone, and it has made him popular. According to the most recent polls he stands to take between 25%-30% of the vote compared to just 12% for Mr. Dzurinda's SDKU.

But the logic of Slovak politics means the reforms are likely to remain more or less intact. The country's proportional representation system means that Mr. Fico would need at least two coalition partners to form a government and all of the most likely candidates have said they will make retention of key reforms -- including the flat tax -- a non-negotiable condition of joining a new cabinet. It is also too soon to write off Mr. Dzurinda, a brilliant tactician who saw a last-minute surge in his support at the previous elections in 2002. It's possible that he or a like-minded successor could form a government, though probably only with minority support in parliament. And even if Mr. Fico does take the helm, it will be far easier for him to satisfy his populist instincts by distributing some proceeds of rapid economic growth through the welfare system than tampering with tax rates.

What is difficult to envisage under any scenario, however, is a continuation of the pace of radicalism witnessed over the last eight years. There is only so much that certain people at a certain time can accomplish before voter fatigue sets in.

If Slovakia is now headed for a period in which there is little movement one way or the other, that's no great concern. Given what has already been achieved, Mr. Dzurinda's work will be felt for years to come.

Mr. Shepherd is a senior transatlantic fellow with the German Marshall Fund of the United States.