BANKS AND CAPITAL markets are to mature market economies what central planning offices were to command economies. By allocating resources to certain projects and sectors – and denying them to others – they organize the economy. In Hungary, the Czech Republic, and Poland – which are comparable, fast-track reformers – creating capital markets has been a key facet of the transition to a market economy. Because a liquid capital market is the most transparent allocator and mobilizer of an economy’s resources, it is a useful indicator of economic reform.
