This Mouse Is Roaring

By Steve Forbes

Here's a twist: The mighty capitalist U.S. could take some economic lessons from the tiny Balkan country Albania, which for decades writhed under the cruel rule of a Stalinist dictatorship. Today Albania has the most vibrant economy in Europe. It was virtually the only European nation to grow in 2009. This once hermitlike nation is expanding again this year. Exports are up 85%. Foreign direct investment is flooding in. The government budget has been cut, with the deficit coming in at a paltry 3.1% of GDP vs. Washington's 10%. Albania's deficit is proportionately less than one-third of ours. The U.S. poverty rate is moving up, but Albania's is declining dramatically.

While the Obama Administration undermines contract law and property rights, Albania is going in the opposite direction: It is taking steps to strengthen the independence of its judiciary, and the government has just cleared a property rights law in parliament.

The architect of Albania's economic miracle, Prime Minister Sali Berisha1, stopped by our offices recently and was brimming with pride over what his country has wrought. In 1992 per capita income in Albania was barely $200 a year; today it's over $3,500.

How did Albania do it? By following free-market principles that the current White House and Congress are oblivious of. Three years ago Berisha pushed through a tiny 10% flat tax on both personal and business incomes. The payroll tax has been cut from 32% to 15%.

The government is streamlining approval procedures for foreign investors, as well as for local citizens who wish to start their own businesses. Ireland, which was once the poster child for the recruitment of overseas firms, can no longer rest on its laurels: Albania has enacted so-called one-euro zones in which land is leased--at virtually no cost--to firms constructing new facilities.

Berisha says his inspiration came from studying Ronald Reagan. Albania, a Muslim nation that easily tolerates other faiths, remains a proudly staunch ally of the U.S. Thanks to strong U.S. support, Albania has become part of NATO. The country is also vigorously pursuing membership in the EU.

Too bad science hasn't advanced far enough to enable us to clone Berisha so we could replace all the economic officials in our government today.

1*Look for the Berisha interview at Forbes.com's Intelligent Investing, Oct. 11.