Rainer Zitelmann’s book addresses an important question of how nations escape poverty. The book emphasizes the plight that ordinary people have historically endured due to economic deprivation. Zitelmann argues that examining the institutions and processes that can help the poor escape their economic conditions is in line with Adam Smith’s concern for the poor. Contrary to the many modern scholars who have misconceived Smith’s ideas and portray the Scottish thinker as advancing the interests of the wealthy, Smith cared deeply for the ordinary folks and, for that reason, directed his intellectual energies to understanding the wealth of nations. Smith realized that the improvement in the living conditions of ordinary people does not come about as a result of redistribution and excessive state intervention. This is not to say that the state has no role in fostering economic growth. Quite the contrary. But the key to the wealth of nations ultimately rests on the division of labor, private property, trade, and economic freedom.

Having elaborated on the preconditions for escaping poverty, Zitelmann contrasts the classical liberal perspective on economic growth with the interventionist paradigm. The interventionist paradigm relies on the top-down approach, whereby Western experts use their formal knowledge and elaborate econometric techniques to prescribe specific policies to the developing regions. More often than not, the experts fail to acquire the necessary knowledge of local culture, traditions, language, and other prerequisites for effective decision-making on the ground. As a result, the formal institutions suggested by experts come into conflict with the informal local institutions, and the efforts to improve locals’ living conditions ultimately prove futile. Foreign aid—another tool sought to ameliorate the economic deprivation in developing regions—similarly fails, but for different reasons. The development projects that are funded by foreign aid bear little accountability. The taxpayers of the donor countries face too-high information costs to monitor whether the aid projects are successful. As a result, the projects are not created to be self-sustaining in the long run and largely collapse after the funding dries up. This is corroborated by the account of Frank Bremer, who noted the waste of $125 million in Ivory Coast on failed foreign aid projects. The lack of effectiveness of the foreign aid industry is exacerbated by a bloated corps of self-interested bureaucrats that produce thousands of pages of meaningless reports and the crowding out of local, private firms by foreign aid.

The author contrasts the foreign aid paradigm with the classical liberal perspective to set the comparison between the two approaches to economic growth. The classical liberal perspective, which emphasizes the spontaneous order of the market, property rights, and voluntary exchange was instrumental in uplifting millions of people in China from poverty during the twentieth century. This serves as a foundation for the ensuing analysis of the transitions in Vietnam and Poland in How Nations Escape Poverty.

The examples of Poland and Vietnam that Zitelmann elaborates on are classic stories of the transition from socialism to market-based economies, or, in other words, from poverty to prosperity. The communists united Vietnam in 1975 and proceeded to transform the country according to the traditional socialist template with the nationalization of private property, collectivization of farmers, setting prices for all goods and services, and designing the economy according to the five-year plans. As a result of the policies, both agricultural and industrial output declined, thus decreasing meager post-war standards of living even further. The process of transition in Vietnam, similarly to China, was partly initiated by grassroots movements as farmers produced increasing quantities of food from their private plots for sale on the private market. Due to the importance of the agricultural sector for the internal stability of the regime, and due to the apparent success of private farmers in Vietnam, the authorities loosened the control over agriculture and allowed for some market mechanisms, such as short-term lending of land to families for private production. These agricultural reforms in the early 1980s, along with reforms that legalized some forms of private economic activity in the cities and the countryside did not by and large alter the economic structure of Vietnam at the time. But these reforms paved the way for further transformation of the economy, and ultimately the Doi Moi reforms. The Doi Moi reforms in 1986 were a Vietnamese form of perestroika, albeit successful, that revitalized a declining economy. The subsequent policies embraced major tenets of classical liberalism and allowed for the existence of private companies and farming, opened the country to foreign trade, investments, and tourism, eliminated direct subsidies and price controls, etc., thus invigorating an age of prosperity in Vietnam.

Poland was forced on the path of socialism in 1944 when the Soviets claimed the territory from the Nazis. Zitelmann provides a vivid summary of the economic structure and living conditions throughout the communist reign. The country adopted central planning and collectivization policies by the late 1940s and consequently sought to reform the economy in response to frequent public protests and other forms of social discontent during the communists’ control over the country. Despite the efforts, the reforms under the communists proved piecemeal and failed to address the underlying cause of stagnant living conditions that prompted workers to take to the streets—socialism. Instigated by the Solidarity movement and the overwhelming public majority that craved change, the country embarked on the path to becoming “Europe’s Growth Champion” by implementing a series of liberalization policies.

Overall, the book contributes to vibrant literature on transition economies and economics of growth, including older books such as Ronald Coase and Ning Wang’s How China Became Capitalist (Palgrave, 2012) and recent books by Peter J. Boettke, Matthew D. Mitchell, and Konstantin Zhukov’s The Road to Socialism and Back: An Economic History of Poland, 1939–2019 (Fraser Institute, 2023) and The Road to Freedom: Estonia’s Rise from Soviet Vassal State to One of the Freest Nations on Earth (Fraser Institute, 2023). The book adds value to the literature due to its focus on the transition of Vietnam, which is less researched compared to the histories of other nations, such as Russia or China. In addition, the book supplies attitude surveys for Poland and Vietnam, thus contributing to the literature on the sociology of transition.

The book would be appealing to a general reader interested in learning about the transition economies and causes of economic growth in former socialist states. Indeed, the book is well-written and reads easily. Though there are pages with cumbersome—but necessary—statistics on economic growth, the personal stories of people who have lived through socialism in either Vietnam or Poland more than offset the dryness of numbers. These personal stories provide first-hand narratives of how institutions could force parents to make a personal sacrifice to consume moldy rice so that their children could be nourished with better-quality rice instead. And how the change in institutions brings about a dramatic increase in living conditions and empowerment, sparing individuals from making unnecessarily harsh trade-offs. Readers will also enjoy the study of surveys from each country. These attitude surveys teach the lesson that those who have lived through socialism in the near past are cognizant of the perils that the socialist economic system inevitably brings. According to the surveys, Poles and Vietnamese rank among the highest countries (top six) in positive attitudes toward capitalism (p. 106). Perhaps the most striking is the Vietnamese’ attitude toward the rich, with an overwhelming number of respondents either personally recognizing the importance of being rich (p. 76) or attributing positive personal characteristics to the rich (pp. 94–97). These findings are an unequivocal indictment of socialism from the individuals who have experienced socialism either directly or in the not-so-distant past.

There are several parts where the book could be improved. First, while the first two chapters emphasize the importance of market institutions for economic growth, the chapters would benefit from a detailed discussion of what specific market institutions, and how, foster growth in the long run. Such discussion, corroborated with examples, would strengthen the author’s argument. This would also set the ground for the comparison with socialist institutions, to enhance the readers’ understanding of causes for the disparity in economic growth. Second, the book rightfully emphasizes the importance of the public and ordinary workers in the authorities’ decisions to initiate reforms. However, it would have been valuable to add a more detailed context of reforms in other socialist states, like the Soviet Union and China, that have undoubtedly influenced the selection of policies and therefore trajectories of both Poland and Vietnam. Finally, neither Vietnam nor Poland relied on foreign aid to the same extent that other developing countries did. For this reason, the emphasis on foreign aid as an alternative to the market process for economic growth seemed out of place in the second chapter.