The Soviet Union, strapped for cash, keeps hinting that it would not mind a hefty handout from the West. President Mikhail Gorbachev, in remarks that got garbled in translation, muttered last week that "100 billion" could really help. Several U.S. scholars have spoken earnestly about a massive aid package on the scale of the Marshall Plan that helped a shattered Europe recover after World War II.
While it's interesting to hear such grand ideas, their sponsors are betting, at least for the moment, on the wrong horse. Yes, the Soviet Union badly needs help. But its chaotic plight is largely the product of its ossified system of centralized political control; and until that system is discarded - not "modified," but discarded - massive bailouts from the West would largely go to waste.Another recipient is far more deserving, however, and that is Eastern Europe. Its fledgling democracies are now struggling to throw off 40-odd years of communist rule. Several have imposed drastic economic reforms, which are beginning to show positive results (even as they pinch). But, since the transition from communism to economic freedom is going to be painful and wobbly, the West should be poised to offer massive assistance.
It is hard to overstate the high stakes involved. If democracy flourishes and free economies bloom, prospects for a stable and prosperous Europe will be enhanced. But: If Eastern Europe's economies should founder under the strain, democratic hopes could fade, and all Europe would face new risks.
Poland presents an especially telling case. The largest of the formerly communist states in Europe, Poland was the first to try basic economic reforms and may have the best chance to convert successfully to a market economy.
This would be good news, encouraging not only to Poland but also to the many radical reformers in the Soviet Union. John Davis, a former U.S. ambassador to Poland, said recently that if Poland's transformation can prove effective, then "people in the Soviet Union who advocate a market solution will be able to speak up with more confidence."
The former communist states of Europe have made bold strides on their own, letting prices rise, devaluing currencies, reforming tax codes and starting the complex process of turning businesses over to private hands. In response, there already have been substantial promises of aid from the West: Since July 1989, according to a new Central Intelligence Agency study, the United States and other Western donors have pledged almost $45 billion in credits and other assistance to Eastern and Central Europe.
This sounds like a lot, but it won't do the job. Much of this money, pledged over several years, has only started to flow; much of it gets offset by the need to repay loans to the World Bank and other lenders; and much of the aid tends to be offered as loans at rather steep rates of interest.
The nations of Central and East Europe need more money to speed the process of privatization.
Central European leaders and Western experts also stress the need for expertise - in finance, communications, law, business organization and like. The World Bank, the U.S. government, Western universities and other institutions are busily loaning out such experts, but my sense is that the demand still far exceeds the supply.
A "Marshall Plan II" could give Eastern Europe greater visibility and could persuade industry to help by loaning some of its experts. Why couldn't Congress offer tax credits to U.S. businesses willing to make such a commitment?