Janine Wedel - Collision and Collusion - The Strange Case of Western Aid to Eastern Europe

Aid donors generally established funding ceilings, under which contracting decisions could be made without competition. EU rules stated that all projects above 50,000 ECU (European Currency Unit)—the common currency used in Europe—had to be competed in all 15 member states. Likewise, competition for British Know How Fund awards above 50,000 pounds was obligatory.48

Thus, within a matter of months after the revolutions of 1989, donors had at their fingertips new agencies, procedures, and mechanisms to facilitate aid efforts in the Second World.

A MARSHALL PLAN OF ADVICE

With the superstructure of the aid machine in place, it might have seemed to innocent observers in both East and West that implementation was the only obstacle to relief for millions of Central and Eastern Europeans. But even as the aid effort was in its nascent design stages, portents of trouble were beginning to appear.

One such portent was the initial hint of suspicion on the part of Central and Eastern Europeans that aid from the West was seriously mismatched to their needs. Despite talk of a new “Marshall Plan” for reviving the economies of the former Communist Bloc, few Western policymakers had advocated a serious commitment on the order of tens of billions of dollars in capital assistance. In the United States, for example, this magnitude of capital investment never hit the budget agenda, although some politicians and pundits called for such an investment. “We didn’t do a Marshall Plan,” a catch phrase of later years, was an acknowledgement that a comprehensive aid package for Central and Eastern Europe (implying strategic planning, commitment of high-level officials, and, above all, massive capital assistance) was not made available. As early as May 1990, the United States had ruled out a modern-day Marshall Plan for reviving the economies of the former Communist bloc.49

Still, there remained a huge disconnect between Western plans and what Central and Eastern Europeans believed was possible. Minister Witold Trzeciakowski, Poland’s aid coordinator from 1989 to 1990, has stated that when he called, in 1989, for a $10 billion “Marshall Plan” for the former Eastern Bloc, he envisioned not only aid in large amounts, but also an aid package largely of grants, as in the Marshall Plan, not primarily of technical assistance and loans.50 Although the Marshall Plan had consisted of nearly 90 percent grant aid—largely capital assistance to rebuild war-damaged infrastructures and industries—as of the beginning of 1992, Western aid to the former Eastern Bloc offered little more than 10 percent in grants.51 Most aid to the region was in the form of export credits, loans, and debt relief. Technical assistance through advisers who provided expertise and training made up the bulk of grant aid. American technical experts had played key roles in the Marshall Plan, but as part of targeted, strategic assistance that accompanied massive capital investment.52 It was not until 1993, Trzeciakowski says, that it finally became clear to him that a new Marshall Plan would not be forthcoming.53

Because few people in the region, including officials, had anticipated that the assistance would take the form it did, an even wider gulf was created between Marshall Plan rhetoric and the aid that was sent. Discussions about aid occurred in a highly charged political climate, in which the main actors were only beginning to confront the enormous task of converting social aspirations into reality. Even the highly educated and well-traveled elite generally had little knowledge of Western assistance goals, institutions, and results in the Third World.

The recognition on the part of Western officials of the limits of assistance (a “Marshall Plan of advice” or a “Mini Marshall Plan”), as Western aid officials sometimes referred to it among themselves, did not seem to affect the expectations of billions of dollars in aid in the East. As Poland’s chief coordinator of foreign assistance, Jacek Saryusz-Wolski, explained in 1991, at the height of the country’s frustration with aid efforts: “When people in Poland hear that billions of dollars come to Eastern Europe, they expect that Poland gets one-half or one-third of that money.… Very often people ask us what happened to it.”54 In 1992, Polish president Lech Wałęsa articulated the growing resentment when he spoke at the European Parliamentary Forum in Strasbourg, charging that “it is you, the West, who have made good business on the Polish revolution.… The West was supposed to help us in arranging the economy on new principles, but in fact it largely confined its efforts to draining our domestic markets.”55 Similarly, Hungary’s chief aid coordinator, Béla Kádár commented that “the public learns from official statements that the Western world has transferred resources on the order of $40 billion to $70 billion so far to promote transition in the post-communist countries. One has to ask, where have all these billions gone?”56

Where indeed? There was a considerable gap between donors’ allocations and actual disbursements in the region. In 1992, only an estimated 11 percent of the committed monies had actually been disbursed.57 Not only was there a wide gap between the loose rhetoric about a Marshall Plan and the donors’ actual promises, but another chasm yawned between the donors’ promises and their deliveries.

Assistance to Central and Eastern Europe bore little resemblance to postwar aid in still other ways: The Marshall Plan, which entailed strategic and targeted assistance and the commitment of high-level officials, was directed by the United States, the world’s only economic superpower at the time. The aid effort to the Second World, on the other hand, involved many donor nations that dispensed limited funds among many recipient targets and projects. The nature of the aid efforts coming from Western Europe and the United States were necessarily distinct, reflecting differences in politics and cultures, ties to recipient nations, and strategic agendas. Each donor nation dispersed resources among myriad constituent groups, each of which laid claim to a piece of the pie.

With regard to U.S. assistance alone, the State Department was given only a nominal “oversight and coordination” role. The SEED legislation of 1989, which made possible U.S. aid to Central Europe, established some 25 priority areas and called upon the expertise of up to 35 federal agencies, all with their own agendas. Similarly, the Freedom Support Act of 1989, which authorized U.S. assistance to the former Soviet Union, engaged 19 agencies.58 The legislation did not consider how the expertise of all these agencies was to be coordinated, and there were few guidelines for managing the process. The structure of U.S. coordination to the former Soviet Union was so convoluted that Congress asked the General Accounting Office (GAO), the body charged by Congress with investigating how appropriated monies are spent, to investigate. GAO’s subsequent report was titled “Former Soviet Union: U.S. Bilateral Program Lacks Effective Coordination.”59

Also less than optimal was the lack of coordination among the various donors, which carried out both diverse and often overlapping aid programs. As Ambassador Robert L. Hutchings, Special Adviser for East European Assistance, Department of State, acknowledged in congressional testimony, “There is too much duplication and competition among donors, and too little coordination of activities so that we can make the best and most effective use of our collective resources.”60 Bilateral donors tended to operate in isolation from one another and often, in priority areas, to compete for projects.61 The very structure of bilateral aid lacked incentives to encourage sharing pertinent information or working together in the interest of the recipient nation. An evaluation of a British Know How Fund employment project in Hungary described a duplication of effort that was far from unique: