What nation is passionately attracted to free-market capitalism, has adopted a constitution modeled on our own and venerates Milton Friedman? The answer may be a surprise: Mongolia.

For seven decades, Mongolia was the Soviet Union's most dependent satellite. But in 1990 it experienced a democratic revolution. Although its 2.4 million people still suffer the effects of collectivism, they have embraced capitalism and the country has become known as Asia's most libertarian nation.

• Mongolia experienced its first free elections in 1990, at which it elected the communist Mongolian People's Revolutionary Party -- whose leaders, surprisingly enough, warmly welcomed pro-free enterprise advisers from the U.S. and expressed an ardent desire to embrace the West.

• American advisers helped them write their U.S.-modeled constitution, which was adopted in February 1992.

• An inexperienced 33-year-old Moscow State University graduate was named Deputy Prime Minister in charge of the economics portfolio -- and he promptly set in motion privatization, price liberalization and a free currency.

• An unofficial adviser who had studied the works of Harvard economist Jeffrey Sachs and was the son of the Trade Minister devised a plan to establish a stock market, which was instantly adopted by the government.

The country still suffers from a lack of foreign investment and is not yet prosperous. But inflation has slowed and small pockets of entrepreneurial activity can be found. Moreover, all across the Mongolian steppes, herders trade shares in local companies and the country's leaders dream of erecting a statue of Milton Friedman on a hill overlooking the capital.

Source: Richard Tomlinson, "Mongolia's Wild Ride to Capitalism," Fortune, December 7, 1998.