Russia Aid: Bush Plan Falls Short

April 05, 1992|By JAMES L. HECHT

Stung by Richard Nixon's criticism that the administration's parsimony with aid to the former Soviet Union was not serving American interests, George Bush knew he had to do something. However, his response Wednesday not only gives too little assistance and virtually ignores long-term needs but also misses a political opportunity.

The level of aid which Russia and other republics need can be justified by the rationale put forth by President Nixon and many others -- each of whom in their own way has reiterated the old adage that an ounce of prevention is worth a pound of cure. But for political reasons, the president at this time cannot support that level of aid. The American public is focused on meeting domestic needs and is not receptive to helping people in foreign countries.

Thus, when we did an in-depth study of public attitudes on aid to the former Soviet Union, I was not surprised to find that less than one-third of the public supported giving direct monetary aid to the new republics to allow conversion to a market economy.

But what did surprise me was the extent to which people supported aid which would help American firms compete with foreign companies. On this issue the American people appear far wiser than their political leaders: 85 percent approved using U.S. government funds to send Americans to the former Soviet Union to provide training in business and technical skills.

There is a great need to train ex-Soviets in business; a market economy cannot succeed in a country where hardly anyone understands how the free enterprise system works. However, American firms also benefit from such programs because the training familiarizes ex-Soviets with U.S. companies, the products they sell and the ways that they do business.

Similarly, technical training, such as methods to conserve energy or improve crop production, will lead to markets for American products and services. Most of the money spent for such training will not end up in a foreign country but in the pockets of the Americans who provided these services.

Some technical assistance programs, mostly private initiatives, already exist, but they meet only a tiny fraction of the need. If the Pentagon budget were reduced to provide one billion dollars a year for such technical assistance programs, that would consume the military budget for just one day.

Such a step by the United States would still provide a level of aid proportionally less than that of Germany, which already has committed $1 billion to business training. Japan, Italy and even Austria also have been spending large sums on training programs for people in the former Soviet Union.

Given the size of the former Soviet Union, would several billion dollars spent in this manner over a period of several years make a real difference in moving the new republics to successful market economies? Based on what has happened in small programs with former Soviets and in other programs for people from Eastern bloc countries, the answer is "yes."

Training can be provided with great cost efficiency. For example, after the most valuable course material had been defined, it could be presented to large numbers of people through videotapes. Also, many recently retired executives would probably be willing to work for modest pay as mentors for ex-Soviets.

A different type of long-term economic aid, consistent with the political necessity of both low cost and having a favorable impact on U.S. business, would be to provide ample investment insurance against political risks such as expropriation, war or revolution. American companies have been able to obtain such insurance when investing in most countries -- but not in the former Soviet Union -- through the U.S. government. German, Japanese and French companies have been able to get such guarantees from their governments. The aid package announced April 1 will extend insurance to the former Soviet republics, but does not provide sufficient funds to cover the demand this will create.

Our study of public attitudes indicates that about two-thirds of the public support political-risk guarantees. In all probability, such guarantees would never cost a penny. Countries, like people, seldom bite the hand that feeds them, particularly if it is obvious that the bitten hand would no longer feed.

Political risk insurance alone will not result in a flood of investments by American companies. There are other problems. But the availability of risk insurance will quickly increase the number of companies making investments and the size of the projects.

Moreover, risk insurance coupled with other incentives for investment, some given by Moscow and some by Washington, will result in the type of massive investment necessary for a successful conversion to a market economy.

Even with an aid package far greater than advocated here, more than a decade will be required before Russia or any of the other republics has a market economy that approaches that of the West. What is vital to the United States is that in this period the former Soviets, particularly the Russians, do not abandon reform and revive the cold war.

We must give Russia enough help so that the Russian people do not lose faith in the course onto which their leaders have plunged them. The good news is that Americans appear willing to support aid which will be effective and sufficient; the bad news is that this was not recognized by President Bush.

James Hecht is director of the Project for the Study of the American Future at University of Delaware and editor of "Rubles and Dollars: Strategies for Doing Business in the Soviet Union."

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