A Giveaway Out of Touch With Reality : U. S. aid: Without structural reforms, our tax dollars will do little for Eastern Europe.

Thought you had seen the last of inefficient, centralized economies in Eastern Europe? Think again. Congress is plodding forward with a multibillion-dollar aid package designed to reward even the most committed centralized planner.

In fact, what started out as a legitimate effort to assist the emerging democracies has become a contest to see who can spend the most tax dollars in the shortest period of time. These efforts ignore past experience with our foreign aid budgets, as well as current fiscal and political realities.

While direct U.S. aid will certainly play a valuable role in the developing economies of Eastern Europe, aid without structural reform will be ineffective. Britain, the largest recipient of U.S. aid from the Marshall Plan, continued to rely on socialist economic policies during the postwar era. As a result, it remained economically stagnant throughout much of the 1950s. West Germany, which adopted more aggressive market-oriented policies in 1948, received far less U.S. financial aid but recovered in a matter of a few years.

The United States cut off economic assistance to South Korea in the early 1960s, believing its economy to be hopeless. Today, as a result of structural reforms, South Korea has one of the strongest economies in Asia. The lesson is that money is no substitute for sound market-driven economy policy.

The United States, the World Bank and the International Monetary Fund have already committed more than $2.1 billion to Poland alone. Japan and other Asian and European countries have pledged billions more.

Meanwhile, legislation for the multibillion-dollar giveaway moves along. Some experts are now concerned that the economies of the region may have difficulty absorbing these vast resources. Asst. Secretary of State Lawrence Eagleburger told the House Budget Committee in March: “We may get more out of spending less each year for the next several years.”

President Vaclav Havel of Czechoslovakia expressed similar concerns. “We do not want direct aid,” he said during his visit to Congress. Another Czech official was even more blunt. “Foreign aid,” he said, “is for Third World countries.”

So why isn’t Congress listening? Unlike the new leaders of Eastern Europe, many still fail to grasp the benefits of private enterprise and free markets. The cure for any ailing economy is free trade, not aid. We need creative, private sector means of helping our friends in Eastern Europe.

To spur U.S. investment, Congress should provide tax incentives for American businesses who hold business management conferences in Eastern Europe.

To improve human capital, a fellowship training program should be established to bring young leaders from Eastern Europe to the United States to work with Congress, businesses and the media.

Small business development is the engine that drives any free-market economy. Retired American business executives are a valuable resource. The Small Business Administration’s Senior Corps of Retired Executives program, which consists of volunteers willing to share their talents and expertise, could be expanded to provide management assistance for emerging entrepreneurs in Eastern Europe.

And the U.S. government should practice what it preaches. If the goal is to encourage private sector development in Eastern Europe, it makes no sense to expand our own bureaucracy to do it. American aid should be funneled through private organizations whenever possible. Last November’s aid bill contained more than $938 million for Eastern Europe, but much of it was sent through the already overworked U.S. embassy system.

The United States has a critical role to play in Eastern Europe’s transition from centrally planned economies to free markets and private enterprise. In our zeal to pass along America’s secrets to success, great pains must be taken to ensure that we don’t also pass along our mistakes. International welfare programs only increase dependence and remove incentives for individual initiative. As the old Chinese proverb says, “Give a man a fish, and he will eat for a day. Teach him to fish, and he will eat for a lifetime.”