And the WSJ's summary (depressing)

Poverty Jumped in Former East Bloc

As Reforms Took Hold, Study Finds

By PAUL HOFHEINZ

Staff Reporter of THE WALL STREET JOURNAL

PRAGUE -- Far from disappearing, poverty in the former Soviet Union and Central Europe has risen tenfold in the decade since reforms began, the World Bank said in a report released on Tuesday. Now, one in five people in the former Eastern bloc lives in destitution, according to the report.

The report, which is called "Making Transition Work for Everyone: Poverty and Inequality in Europe and Central Asia," says the poverty found in the former Soviet bloc is unlike most of the destitution elsewhere in the world. For starters, poverty in Eastern Europe was virtually nonexistent 10 years ago. In 1988, the World Bank says, the poverty level was only 2% of the population. Today, the figure is nearly 20%.

In addition, it says, the economic dislocations brought on by Communism's collapse fell on a highly literate, well-educated population -- a status among whom the deeply impoverished are seldom found. "Many of the people who are poor today did not expect to be poor," says Johannes Linn, the World Bank's vice president for Europe and Central Asia. "This came as a shock to them."

See the full text of the report on poverty on the World Bank's Web site.



The report also says that income inequality is increasing, and approaching the levels usually experienced in Latin American countries.

The report cites several reasons for the region's drastic fall in living standards. Most notable, it says, is the dramatic decline in economic output brought on by the collapse of the old economic system. In the former Soviet Union, for example, most economies have shrunk by around 50% in the 10 years of reform. In response, most governments simply don't have the resources to pay for basic social services any more.

The report says corruption has taken a toll, as well. Many doctors routinely require patients to pay them cash directly, because the state (which still owns most hospitals) pays low salaries to the doctors and nurses. As a result, medical care is becoming less and less adequate for many who cannot afford to pay for it, the report says.

The poorest country, according to the report, is Turkmenistan, where 80% of the population lives below the poverty line. Because of its size, Russia has the most poor people; 60% of the region's poor are found in Russia, the report says.

For the report, the World Bank set the poverty level at $2 (2.34 euros) a day -- a dollar a day more than the level the bank uses in other countries -- because of the region's extreme weather conditions. It says the harsh climate means additional heating costs in the winter.

The World Bank says one way to fight the rising poverty would be for local governments to take more measures to spur economic growth. But, it says, even economic growth must be supervised by strong government and private institutions capable of insuring that wealth isn't simply stolen or misplaced. "It is important that all people participate in the growth," Mr. Linn says.

The report also found that countries that had pursued reforms the most consistently often had the least amount of poverty. "Countries further on the reform path have lower inequality," says Ana Revenga, an economist at the World Bank and one of the report's authors. "The results [of reform] have a lot to do with how the reform is carried out."