February 18, 1999

Briefing of the

Commission on Security and Cooperation in Europe

WASHINGTON : 2000

106th CONGRESS Printed for the use of the

1st Session Commission on Security and Cooperation in Europe

CIVIL SOCIETY, DEMOCRACY

 AND MARKETS IN

EAST CENTRAL EUROPE AND THE NIS:

PROBLEMS AND PERSPECTIVES
COMMISSION ON SECURITY AND COOPERATION IN EUROPE

234 Ford House Office Building

Washington, Dc 20515-6460

(202) 225-1901

csce@mail.house.gov

Http://www.house.gov/csce/

LEGISLATIVE BRANCH COMMISSIONERS

EXECUTIVE BRANCH COMMISSIONERS

(VACANT), Department of State

(VACANT), Department of Defense

(VACANT), Department of Commerce

COMMISSION STAFF

DOROTHY DOUGLAS TAFT, Chief of Staff

MICHAEL R. HATHAWAY, Deputy Chief of Staff

ELIZABETH M. CAMPBELL, Staff Assistant\Systems Administrator

MARIA V. COLL, Office Administrator

OREST DEYCHAKIWSKY, Staff Advisor

JOHN F. FINERTY, Staff Advisor

CHADWICK R. GORE, Communications Director, Digest Editor

ROBERT HAND, Staff Advisor

JANICE HELWIG, Staff Advisor

MARLENE KAUFMANN, Counsel for International Trade

MICHAEL KOBY, Special Counsel

KAREN S. LORD, Counsel for Freedom of Religion

RONALD J. MCNAMARA, Staff Advisor

MICHAEL J. OCHS, Staff Advisor

ERIKA B. SCHLAGER, Counsel for International Law

MAUREEN T. WALSH, Counsel

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HOUSE

CHRISTOPHER H. SMITH, New Jersey

Co-Chairman

JOHN EDWARD PORTER, Illinois

FRANK R. WOLF, Virginia

MATT SALMON, Arizona

(VACANT)

STENY H. HOYER, Maryland

EDWARD J. MARKEY, Massachusetts

BENJAMIN L. CARDIN, Maryland

LOUISE MCINTOSH SLAUGHTER, New York

SENATE

BEN NIGHTHORSE CAMPBELL, Colorado

Co-Chairman

SPENCER ABRAHAM, Michigan

KAY BAILEY HUTCHISON, Texas

SAM BROWNBACK, Kansas

FRANK R. LAUTENBERG, New Jersey

(VACANT)

BOB GRAHAM, Florida

RUSSELL D. FEINGOLD, Wisconsin

(VACANT)
ABOUT THE ORGANIZATION (OSCE)

The Conference on Security and Cooperation in Europe, also known as the Helsinki

process, traces its origin to the signing of the Helsinki Final Act in Finland on August 1,

1975, by the leaders of 33 European countries, the United States and Canada. Since then, its

membership has expanded to 55, reflecting the breakup of the Soviet Union, Czechoslovakia, and Yugoslavia. (The Federal Republic of Yugoslavia, Serbia and Montenegro, has been

suspended since 1992, leaving the number of countries fully participating at 54.) As of January 1, 1995, the formal name of the Helsinki process was changed to the Organization for

Security and Cooperation in Europe (OSCE).

The OSCE is engaged in standard setting in fields including military security, economic

and environmental cooperation, and human rights and humanitarian concerns. In addition,

it undertakes a variety of preventive diplomacy initiatives designed to prevent, manage and

resolve conflict within and among the participating States.

The OSCE has its main office in Vienna, Austria, where weekly meetings of permanent

representatives are held. In addition, specialized seminars and meetings are convened in

various locations and periodic consultations among Senior Officials, Ministers and Heads of

State or Government are held.

ABOUT THE COMMISSION (CSCE)

The Commission on Security and Cooperation in Europe (CSCE), also known as the

Helsinki Commission, is a U.S. Government agency created in 1976 to monitor and encourage compliance with the agreements of the OSCE.

The Commission consists of nine members from the U.S. House of Representatives,

nine members from the U.S. Senate, and one member each from the Departments of State,

Defense and Commerce. The positions of Chair and Co-Chair are shared by the House and

Senate and rotate every two years, when a new Congress convenes. A professional staff

assists the Commissioners in their work.

To fulfill its mandate, the Commission gathers and disseminates information on Helsinki-related topics both to the U.S. Congress and the public by convening hearings, issuing

reports reflecting the views of the Commission and/or its staff, and providing information

about the activities of the Helsinki process and events in OSCE participating States.

At the same time, the Commission contributes its views to the general formulation of

U.S. policy on the OSCE and takes part in its execution, including through Member and

staff participation on U.S. Delegations to OSCE meetings as well as on certain OSCE bodies.

Members of the Commission have regular contact with parliamentarians, government officials, representatives of non-governmental organizations, and private individuals from OSCE

participating States.

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CIVIL SOCIETY, DEMOCRACY AND MARKETS

IN EAST CENTRAL EUROPE AND THE NIS:

PROBLEMS AND PERSPECTIVES

FEBRUARY 18, 1999

PARTICIPANTS

Dorothy Douglas Taft, Chief of Staff, Commission on Security

and Cooperation in Europe ................................................................................................... 1

Adrian Karatnycky, president, Freedom House ...................................................................... 2

Alexander Motyl, Deputy Director, Center for Global Change and Governance,

Rutgers University ................................................................................................................ 6

 E. Wayne Merry, former Senior Advisor, Commission on Security

and Cooperation in Europe ................................................................................................... 8
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CIVIL SOCIETY, DEMOCRACY AND MARKETS

IN EAST CENTRAL EUROPE AND THE NIS:

PROBLEMS AND PERSPECTIVES

THURSDAY, FEBRUARY 18, 1999

COMMISSION ON SECURITY AND COOPERATION IN EUROPE,

 WASHINGTON, DC

The briefing convened in Room 2172, Rayburn House Office Building, Washington, DC,

at 10:00 a.m., Ms. Dorothy Douglas Taft, Chief of Staff, moderating.

Ms. TAFT. Good morning. I again apologize for the delay in our getting started this morning. We now have our audio equipment functioning and can proceed.

On behalf of the Co-Chairmen of the Helsinki Commission, I want to welcome each of

you to this briefing on Civil Society, Democracy and Markets in East-Central Europe and the

NIS.

My name is Dorothy Taft, and I am the Chief of Staff for the Helsinki Commission. The

House Co-Chairman is Congressman Christopher Smith, and the Senate Co-Chairman is

Senator Ben Nighthorse Campbell.

Todays briefing and its title had been impelled by the just released book Nations in

Transit 1998, a study and analysis of 25 post-Communist countries. A standardized overview

of these 25 countries, all of which are now participating States of the Organization for Security and Cooperation in Europe, is very helpful to our mandate to monitor the compliance by

OSCE countries to their Helsinki commitments.

Indicators such as a countrys development of its political process, civil society, independent media, and rule of law track very closely with many of the OSCE commitments.

Here to discuss the document, to interpret some of the trends in the region, and to distil

some of the insights provided in the tome, are three distinguished witnesses.

Our first witness, Adrian Karatnycky, is president of Freedom House, a non-partisan

organization that promotes democracy, civil society, and the rule of law. He serves as coordinator of the annual global Survey of Freedom and is co-editor of Nations in Transit 1998.

Mr. Karatnycky has co-authored three books on Soviet and post-Soviet politics and appears frequently in the Wall Street Journal, the Washington Post, Foreign Affairs, the Washington Times, and other periodicals. Mr. Karatnycky was formerly Assistant to the President

of the AFL-CIO.

Next we will have Professor Alexander Motyl, professor of political science at Rutgers

University in New Jersey, and Deputy Director of the Universitys Center for Global Change

and Governance.

Professor Motyl has authored and edited 10 books on Soviet and post-Soviet politics and

history. Most significant for our briefing today is the fact that he was the coordinator of the
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Freedom House Academic Review Board for the Nations in Transit survey, and is, as well, coeditor of Nations in Transit.

Our final presenter will be E. Wayne Merry, who in the fall completed a posting as the

Senior Advisor at the Commission on Security and Cooperation in Europethe Helsinki

Commissionand who has just completed a long and distinguished career as a foreign service officer.

He served two tours at the U.S. Embassy in Moscow, where he worked on Soviet and

Russian domestic political affairs. Mr. Merry has also served at U.S. Embassies in East

Berlin and Athens, plus service at Main State in Washington. Additionally, he has worked at

the Office of the Secretary of Defense as Regional Director for Russia, Ukraine, and Eurasia.

At the conclusion of the presentations this morning, we will open the floor to questions

from the audience, and we welcome your participation.

First, Ill turn the microphone over to Mr. Karatnycky.

Mr. KARATNYCKY. Thank you. I am delighted to have the opportunity to talk a little about

our findings, particularly in the environment of the Commissions work because, precisely as

you mentioned, we are examining many of the indicators of democratic and civic life and

respect for human rights and the rule of law that the Commission tracks; but equally, these

objectives are a stated objective of U.S. and other international donor activity in the postCommunist world.

This report is supported with grants from the U.S. Agency for International Development, but it has been developed independently by Freedom House and by our academic experts and really reflects only the judgments of Freedom House and the research team.

It is usedand should be usedby people inside and outside the government as a basic

overview of the trends and directions in democratic and economic reform in the post-Soviet

space.

It is now 9 years since the fall of the Berlin Wall, and more than 7 years have passed

since the failed August 1991 coup. This is an ample interval to take a hard look at the gains

and reversals that have occurred in this expanse of countries, and really this is what our

study attempts to do.

It is available, for those of you who are interested, through our websitewhich is

www.freedomhouse.organd it can be read with an Adobe Acrobat readerwhich also, if

you dont have it installed on your computers, can be downloaded through that same site. It

represents precisely the same data that are in the book.

The book is distributed to a limited degree to the U.S. Government and our main funding agency, U. S. AID, but also is made available to various Congressional staff and Congressional committees; and those have begun to be distributed. But those of you who want to

access itif you dont want to buy the commercial edition of this book can go to our Website and download the analytic articles and the individual country reports.

The report covers a territory that isas you are all well awarerather extensive, populated by over 415 million people. We track 52 questions organized in the categories of political processes, civil society, independent media, the rule of law, governance and public administration (a new category we added to the 1998 report on corruption), macro-economic policy,

micro-economic policy, and privatization.

We conduct these findings, often in collaboration with think tanks and research institutes, both in the United States and in the indigenous countriesin other words, we task
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some of the reporting and writing to people overseas. The date is then reviewed and filled in,

made more full by our core research staff, and reviewed by a distinguished board of scholars

and experts. Alex Motyl can tell you more about those. But I want to focus my remarks on

what the findings show.

The survey divides States into three broad categorieswhat we would call consolidated

democracies and consolidated market economies; transitional polities and transitional economies; and consolidated, or autocratic, and statist systems.

The data reflect events through April of 1998 and show that seven countries are defined

as consolidated democracies. They are the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Slovenia.

There are 17 countries that are designated transitional polities and economies; and

there are four countries that are, in our judgment, designated as consolidated autocracies

and statist economies: Belarus, Tajikistan, Turkmenistan, and Uzbekistan.

With the exception of the Baltic states, none of the former Soviet Republics have established what we judge to be consolidated democracies or market economies. Eight of the postSoviet states are transitionaleight of these non-Baltic post-Soviet states are transitional

polities and four are consolidated autocracies and statist systems.

The situation is markedly different from the trends in Central and Eastern Europe. I

think there is nothing surprising in seeing this kind of pattern, but I think I will talk a bit

and I think Alex will in his remarks alsoabout some of the factors that have influenced this

state of affairs. Such factors include U.S. engagement in the region but also include historical legacies, cultural legacies, and the like.

The most important findings in the survey are that there is a strong correlation between

economic reform and political reform. That is, contrary to some arguments, the States that

have opened their political systems have also been abledespite, or maybe because of, the

engagement of the publicto move forward with more rigorous economic reforms.

There had been arguments about the idea that maybe some of these systems would

move more rapidly to adopt market systems if there were more authoritarian transitions.

Indeed, the argument was made that if you have an active civil societyactive trade unions,

a public that can organize, and an electorate that can block the path of reform by electoral

meanssomehow that might slow the pace of economic reform.

The findings show exactly the opposite trend. Those societies that are more open to

these kinds of civic influences tend to move more quickly toward reform. And two pathsthe

vector of fundamental economic reform and the vector of fundamental political reform

reinforce each other and go hand in hand.

Another finding in the data for 1998 was that there is a reasonably strong correlation

between economic growth and political and economic reform.

For example, if you looked at the countries that were consolidated market democracies

and looked at their average growth rates in 1997, these stood at 4.7 percent. The transitional

countries represent a very broad expanse of experiences. For example, they include countries

that have been moving forward with reforms and countries in which reform has stagnated or

has been reversing, and they were in this middle area.

So you have very wide variations in this transitional category. You have growthlarge

growth for some countriesand some setbacks, but as a group they averaged a growth rate

of only 1.39 percent.
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Among the consolidated statist autocracies, the gross domestic product declined on an

average of 2.85 percent in 1997, even though there had been a positive rate then recorded by

Belarus; and that rate is subject to interpretation and question because the statistics in

Belarus are not entirely reliable, and it is not a system thats based on a market evaluation

of the values of goods and services.

We similarly found a fairly strong correlation between the corruption indicators and

rates of growthagain with the countries that were judged to have a better record or a lower

level of corruptionshowing more significant growth than their more corrupt counterparts.

Now, in these statistics for 1997 and early 1998, we excluded Yugoslavia and Bosnia

and Herzegovina, which were a part of the study. We did so because these were countries

which were recovering either from periods of substantial impact of economic sanctions or

substantial and protracted civil war and the rebuilding after civil war. So that the findings

for growth rates would not be as significant or reliable with that as a benchmark.

We also found that there was very little forward significant reform momentum from the

previous year. We had done this study before in 1997, and since that last report there are no

new major entrants into the ranks of democratic states. However, we did identify that in the

short and mid-term there was potential for significant reform momentum in Georgia, Bulgaria, Bosnia, Rumania and Slovakia.

I think that if we were doing this assessment right now, we probably would have graduated Slovakia into the ranks of the more consolidated and open systems.

In any event, we will try to talk a bit about reform trajectories and the likeand I hope

that Alex can take a look at itbut I want to focus on the transitional countries.

We know there are a number of countries with authoritarian systems that are resistant

to fundamental economic reformwhat we call consolidated autocraciesand we also know

there are a number of countries that have passed the threshold and seem to be irreversibly

on the path of democratic institution building and of becoming a part of the community of

open societies.

The real problem is represented by the middle range of countries: to what extent are the

middle countriesthe largest set of countries of about 17 in the studyreally transitional

countries; and to what extent do they have some of the characteristics of a fixed system

which is midway between a market and a statist socialist system?

Again, Ill talk a bit about this; but before I do, I want to point to one remarkable thing

that should be kept in mind in this transition. Of the 28 countrieswe have expanded, actually, since this list; so we now are covering 28 countriesunder examination, only 6 exist

within the boundaries that they had in 1989.

Those are Albania, Bulgaria, Hungary, Mongolia, Poland, and Romania. So most of these

States were shaping their identities on the basis of both substantially new boundaries as

well as new institutional arrangements, and this is certainly a factor that we should consider

as we take a look at the vectors of transition.

Again, this is more a topic for Alexs talk; but one of the factors in the report that is

significant is that while the majority of states and the breakup of these systemsapart from

the breakup of Yugoslaviawas not extremely violent, the majority of the post-Soviet states

faced challenges to their internal territorial integrity from internal secessionist movements

and secessionist sentiments which had regional concentrations.

Each of the Caucasus statesGeorgia, Azerbaijan, and Armeniafaced some struggles
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that emanated from these kinds of phenomena, either breakaway trends or irredentism,

however you may want to define it. In any event, they were engulfed in conflicts that arose

from separatist movements seeking to carve new territories.

Russia had the experience of Chechnya; Moldova or the Transdnistria Republic; Tajikistan had a civil war which had some regional rivalry and clan interests, if not purely ethnic

division; and Ukraine faced a peaceful but potentially troubling problem in the predominantly Russian, ethnically Russian Crimean peninsula.

In any event, the question that I want to turn to is really this question of transition

versus stagnation; and here, while Nations in Transit describes as transitional societies a

very broad range of countries, there are countries which, in our view, are not registering

forward reform momentum.

That is to say, they are not transitioning towards a more open system. They seem to be

in this middle category. Russia is a paramount example of this type of country. Ukraine to

some degree is another example. They merit particular attention partly because of their

geographic and geopolitical weight.

While both have made some strides in privatizing state industries and bringing budgets

into greater balance than in the pastalthough in Russia this may come undone in restraining inflationcompared to the periods of hyperinflation, and adopting some of the characteristics of a market system, they have failed, really, to create the basis for an entrepreneurial

economy in which small business is a driving engine for political growth.

I think that if you look at the study and at some of the macro- and micro-economic

indicators on the legal framework, there are some ways of getting at and thinking about

these questions and looking at them on a comparative basis to see what successful countries

have done to understand less successful experiments.

Certainly on the political side, we would not question that over the last 10 years

certainly since the Soviet periodRussia and Ukraine have made significant strides. Their

citizens dont normally fear to express their political beliefs. Political parties and civic groups

can freely organize and engage in the public square; and there are relatively open, competitive political processes and the like.

The press expresses a broad range of opinion, although the media are heavily dependent

on commercial interests and partially on state patronage, but it would be still tempting to

view these countries as being in the middleat the midpointof an evolution towards a

fully fledged democracy and market system.

I think that if you look more carefully, you might say that what is occurring in the

system is that we see an emergence of a rather important role played by a financial industrial oligarchy which has been favored by the State or has been manipulating the State from

within and also from without, and at the same time has been manipulated by the Statesby

each of these States, Russia and Ukrainein their search for some kind of a social and

economic base for rule, particularly in the face of hostile parliaments in which the left is

powerful.

What is occurring in Russia and Ukraine is accompanied by something that very much

resembles what Max Weber would refer to as the patrimonial state. Patrimonial systems are

characterized by a state that dispenses licenses to insidersauthors, privileged and selectively applied subsidies, special favors and services, targeted tax amnestiesand exerts pressures on new economic actors and new competitors.
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Because there is this kind of system, it is important for us to think about these countries

not as simply in transition or on the path of instability. There is no reason to not believe that

these systems can last and subsist and persist for a reasonably long time.

These patrimonial corporatist systems and regimes have survived for long periods, and

there are cases of Latin American statesBrazil and Argentina from the Fifties to the midEighties; more recently examples of Indonesia and Malaysiawhich have some of the features of party controls: a local ruling elite (sometimes more tyrannical and more dictatorial,

sometimes not), that restrains the growth of the private sector, acts in a way to favor insiders, and builds a crony system.

In the end, this kind of system may lead to change: and these are inefficient systems

that impede change and, to some extent, some limited marketization opens up over time

the development of a private entrepreneurial classand there may be discontent among

workers and the like. Such patrimonial systems often evolve in a democratic direction, but

they can persist for a fairly long time; and, frankly, western open economic systems can get

along with them reasonably wellcan trade with them, can transact business, and can eventually in climates of stability make reasonable profits.

In any event, I think that, in concluding, what Id like to say is that our study suggests

that we need to look very closely at the reform vectors and reform directions. We believe that

ours is a useful tool in the shaping of appropriate policy responses by the U.S. Government

and by other international donors.

In other words, if societies have lost their reform momentum, a different array of projects

and programs may be called for and required to break that deadlock; but we also ought to be

aware that not all of the assistance that is provided to unsuccessful transitions or stalled

transitions or even the evolution of these new semi-permanent systems is money that has

been wasted.

In the absence of intervention and engagement by the West, the unsuccessful outcomes

could have been even more harmful than they have. I want to conclude with these remarks.

Ms. TAFT. Thank you very much. Next we will have Professor Motyl.

Professor MOTYL. Thank you. Its an honor and a pleasure to be here before this distinguished audience.

I take as my starting point Adrians reference to the fact that a variety of stable systems

has emerged within the post-Soviet context. Id like to discuss briefly why that is the case

and then suggest what some of the lessons and challenges are.

It is striking that clusters of countries with stable clusters of scores have emerged in the

last 9 years. Since 1991 more or less all of the East-Central European StatesPoland, The

Czech Republic, Slovakia (with some exceptions), Hungary, Slovenia and the Baltic States

have been doing relatively well across the board.

Then theres the rest, which are not doing well across the board. That is to say, there is

a geographic division as well as of countries, a syndrome of reform. Economic, political, social, and cultural reforms seem to be interrelated and mutually reinforcing.

Why has there been relatively insignificant change in the countries to the east of EastCentral Europe? The standard response is that there has been a failure to reform; ineffective

or incorrect policies have been adopted. But why have countries only to the east of the EastCentral Europeans proven incapable of adopting correct policies? Although there has been a

failure of vision and leadership, I submit to you that the problem is much deeper, having to
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with the historical legacies that these countries inherited as they emerged from the Soviet

bloc.

One such legacy is cultural. There is no question that the countries that are doing better, comparatively speaking, have some traditions of democratic as well as market-oriented

culture.

Equally important are the institutional legacies, the institutional baggage that these

countries inherited from their Soviet past. Here, the distinction between being part of the

Soviet Union and not being part of the Soviet Union is critical.

The experience of 70 years of Soviet Communism was fundamentally different from that

of the East-Central Europeans. Seventy years of totalitarian Communism destroyed the political elites, destroyed the cultural elites, destroyed the society, destroyed whatever markets existed, destroyed whatever civil society existed, and transformed whatever incipient

political classes that these countries had into bureaucratic apparatchiks of the Communist

party.

That was especially true further out in central Asia, but it was also very much true in

Russia, Belarus, Ukraine, Moldova, and many of the other States. In contrast, Czechoslovakia, Poland, Hungary, even (to some extent) the Baltic States, were able to retain various

more-or-less autonomous social structures, cultural and political structures, as well as some

elements of markets.

They were called Socialist markets, but those Socialist markets were introduced in places

like Poland and Hungary in the 1950s and 1960s, so that by the time they became independent 20 to 30 years later, there was already something resembling a market in place.

 Poland had a vibrant Catholic church. Poland had a robust peasant class. None of that

existed to the east. In Hungary, since 1968, with the introduction of the New Economic Mechanism by Janos Kadar, there was some private entrepreneurship.

These are fundamental differences, and I submit to you that they structured the playing

field and determined the rules of the game after 1991.

As a result, the room for maneuver in the post-Soviet States was significantly narrower

than in the East-Central European States. In that sense, the suggestion that Russia should

have learned from Poland is quite irrelevant, because Poland was not like Russia.

That is not to say that marketization, democratization should not be pursued in the

Soviet successor states. Of course, they should. Its just that the policies that are pursued in

the former Soviet space should not be based on a one-size-fits-all kind of thinking.

This lesson holds for local elites as well as for the United States. Consider in this light

lessons of the Russian fiasco. That one cannot build markets without some kind of established rule-of-law State should have been obvious 10 years ago. After all, how does one transform societies that lack the fundamental rules of the game that we take for granted in this

country and which Poles, Hungarians, and Czechs, to a large degree, could have taken for

granted even in 1989?

The state, the political arena, has to be defined. Rules of the game have to be defined. A

certain kind of rule-of-law environment has to be created before these additional changes can

be brought to fruition. This is not to say that one shouldnt pursue any changes but that

attention must be paid to local conditions and that this process is obviously going to be long

term.

That is another one of the sobering lessons of the Russian financial crisis. Its not going
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to take 10 years. It might take several generations to transform these societies. Its unrealistic for us to think that we can in the next 5 or 10 years fundamentally transform Russia or

Ukraine into flourishing democratic, market-oriented states. We cannot. We can push. We

can pull. And they too must push and pull. Great leaps forward of the kind that we would like

them to embark upon are unlikely to take place. There are, in sum, limits to what can be

done.

What can we do? First and foremost, these countries dare not become isolated from the

rest of the world. It is absolutely imperative that these countries not be bypassed by the

processes of integration and globalization currently taking place within the world, that they

not be left to a ghetto of their own.

Second, we can also affect the interstate relations between these countries, especially

those between Russia and its neighbors. Our leverage is limited but not insignificant.

Both policy goals will face severe challenges in the near term. One such challenge is

Russia. The possible emergence in Russia of a potentially aggressive Russian nationalism in

combination with an authoritarian regime could destabilize Russian-non-Russian relations.

The European Unions expansion is another challenge. The central European States

want to join by the year 2005 but in order to do so must transform their societies radically.

Unfortunately, radical change can be destabilizing, and we have to be attentive to what

radical reform will mean for Poland, Hungary, The Czech Republic, and others.

Finally, the expansion of the European Union to include the East-Central European

States has the potential of creating another institutional boundary between the Eastchaotic, corrupt, unstableand the Westrich, prosperous, and stable. Such a division has the

longer-term potential to undermine the stability of the East and the security of the West.

Thank you.

Ms. TAFT. Thank you very much. For some more reaction, we would invite Mr. Merry.

 Mr. MERRY. Thank you very much, Dorothy.

I would like to begin by heaping praise on the Freedom House report Nations in Transit

both for the immense amount of effort that obviously went into it and for the gold mine of

information which it contains, and then move immediately to a suggestion for how it might

be made better and a suggestion which will certainly not be a novel one to its editors, which

is that for most readers picking up this volume and turning to any particular country, what

one would like to see is an introduction that synthesizes all the information contained in the

very specific questions which the reports contain.

I know, having been an editor myself, that nothing could be a more contentious or difficult job for an editor than to reach agreement on a short statement for any country of How

am I doing and where are we going? I make this suggestion, however, because my own

memory of the shortcomings of U.S. Government intelligence and policy making during the

1980swhich led up to the end of the Cold War and the dramatic changes which took place

in all of these countriesis that its greatest shortcoming was that it looked at different

elements of society in isolation and failed to understand that in human organisms nothing is

in isolation, and that changes which take place in one element of a society have a synergistic

impact on everything else that goes on.

The United States Government was extremely well informed about every element of

change within eastern Europe and the former Soviet Union and yet almost without exception

failed to anticipate and sometimes even to creditwhen they actually happenedthe huge
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changes which would come about, precisely because they failed to look at these things as part

of a social whole.

It is the need to see that societies are organisms in which the whole is greater than the

sum of the parts that is the essence of good analysis for where things went in these societies

and where things are going now. It is trying to understand their momentum, whether for

good or for ill, that I think is the real challenge for the observer and the analyst in the West.

I would also make a small suggestion that there is one country which is very near and

dear to my heart which might be included in Nations in Transitcontroversial though the

suggestion would beand that is Germany, because the incorporation of the former German

Democratic Republic into a unified German state has proven a somewhat more challenging

prospect than many people thought, not just economically, but also socially and politically.

In addition, the German State itself became sovereign and removed from all Allied authority only at the time of unification. Therefore, we are dealing in central Europe with a

country which, while it is not in transition in the same way one could say for central Asia or

the Caucasus, is nonetheless a new entity on the map of Europe.

What happened in 1991 was not just the disappearance from the map of the old GDR,

but the disappearance of the old FRG as we knew it and the creation of a new and in some

ways very different German state.

In looking at the process of democratization and building civil societies throughout all of

this region, I think its absolutely correct to say that there is no one-size-fits-all approach,

that there is no one right way or model. As I have frequently advised people from that part of

the world, the model they should be most cautious about emulating is the American, because

the American developed in such an unusual and unique historical environment.

I believe firmly that any kind of growth of democratic institutions and civil society must

develop roots which are organic to that society, that you cannot have an effective shock therapy

for building democracy or rule of law.

I remember very well the late Russian historian, Dmitri Volkoganov, telling me in the

early 1990s that the real problem is that there simply are not enough good people to go

around. For the kind of challenges that these societies face, you need good people in politics,

in law, in education, in the economy, in a host of areas; and there simply are not enough good

people to go around.

The question then becomes: Do these good people, in whatever institution they work,

become catalysts for further change or do they become sort of martyrs overwhelmed by the

inertia of the bureaucratic and other structures they face?

I think there is good news if one looks a bit further afield. A country that strikes me as

a good case study to look at is Portugal, which is now, I think, recognized as one of the most

successful countries in western Europe; and yet a quarter of a century ago it was an imperial

power bogged down in hopeless wars in Africa, an authoritarian state with huge violations of

civil liberties and civil rights, and most people at that time would have said its future was a

very dismal one indeed.

Yet its a society which made some fundamental choices about where it wanted to go and

what kind of place it wanted to be. A generation later, the success is there. It was a success

which was heavily underwritten by its membership in the European Union, but I think the

good news is that with the famous political will, societies can make huge changes within as

little as a generation.
10

The bad news is that a generation is not a long time in the life of a nation. I think, if one

looks at Poland, one has to see that the success that it has achieved in the last decade was

built upon several previous decades of slow, difficult, and often bloody societal development

which provided the soil in which this process of social changewhich exploded under Solidaritycould take place. The notion that societies farther east can emulate that change in a

short period of time, I think, is simply naive.

However, I also think we should try to get away from looking at the changes taking

place in this part of the world in ideological terms. If a Rip Van Winkle went to sleep in 1899

and woke up this year and looked at a map of Eurasia, I think he would have no notion that

there had ever been a thing called Marxism-Leninism or even fascism or even the Soviet

Union.

What he would see would be the breakup of empiresnot just the Soviet Russian empire, but a great many empiresand the dilemma that he would see facing Eurasia would be

a problem which was very obvious 100 years agothe growing development of romantic

nationalism and the challenges which nationalism presents to the growth of democratic institutions: civil liberties, growth of a civil society, and particularly protection of minorities.

Those problems, which we see so obviously throughout much of the region today, were

there 100 years ago; and in many ways I think the roots that we are looking at of these

problems are ones that are often obscured if we look at them through the prism of the Cold

War.

I think, in almost every case, what we are looking at is much more similar to the process

of decolonialization which took place in the 1950s than it is an ideological question; and

many of the same problems and challenges which have taken place throughout the world

with the breakup of the Ottoman Empire, the Hapsburg Empire, British, French, Belgian

empires, are playing out in eastern Europe and throughout the area of the former Soviet

Union.

The good news is that none of the problems that these countries are facing is new or

unique. The bad news is that the historical record shows that these problems will create new

conflicts and new challenges for the outside world rather than developing in a relatively

benign fashion.

I think a major fallacy of the United States approach to dealing with the end of the Cold

War was to look back on our experience at the end of the Second World War and assume that

we were facing the same kind of challenges, that we could do vis-a-vis the former Soviet

empire what we had done in western Europe and Germany, in eastern Asia and Japan.

Despite the incredible naivete and arrogance of triumphalism which this reflects, what

it failed to recognize was that not only did we not bring the same resources and authority,

and not only did many of the countries in the former Soviet empire not have the same kind of

historical experience which had been present in western Europe and even in eastern Asia,

but that a key motivating factor was missing. As Napoleon said, there are only two levers

which move human beings: fear and self-interest. In the aftermath of the Second World War,

the key motivator was fear, the fear of the large domestic Communist movements backed up

by an aggressive Soviet Union with the specter of the Red Army behind it.

It was only that motivator which moved the governing elites in western Europe and east

Asia and elsewhere to make the kinds of reforms which the United States was demanding as

a price for our assistance and particularly to engage in multilateral mechanisms of coopera-
11

tion rather than continuing the kind of individual beggar-thy-neighbor policies of the 1930s,

which is what most of the governing elites in western Europe and east Asia wanted to do in

the aftermath of the war.

Now, at the end of the Cold War, that motivating factor was almost completely missing.

None of the countries that emerged from the breakup of the Soviet empire really faced much

of a credible external threat, though some of them created internal threats as weve seen in

the former Yugoslavia; and what most of the governing elites of these countries in transition

were most concerned with was self-interest with a heavy emphasis on self. The policies of the

western countries, the western financial institutions and the United States, had an unfortunate tendency to reinforce that selfishness by our belief that development of market economies would automatically produce development of civil societies.

Now, I certainly recognize that theres a high degree of correlation between the two, but

the direction of causality, it seems to me, is not quite so clear. I believe the direction of

causality is bilateral, that the two tend to reinforce each other; but it was, unfortunately, the

approach that we brought as a government that development of rule of law, civil institutions

and civil liberties were the soft issues which would solve themselves, more or less, after the

hard issues of economic and market reform had been dealt with.

It is my experience, however, that most western businessmen and investors, when they

complain about their operations in these countries, complain about things which fall under

the rubric of rule-of-law. Most western businesses are quite capable of dealing with an outmoded industrial plant, with poor infrastructure, with workers who dont understand technology. They understand how to deal with this. The problems they complain about are lack of

contractual relationships, capricious taxation systems, crime and corruptionall rule-of-law

issues.

The unfortunate result of our encouragement in many of these countries of the development of what has appropriately been called crony capitalism is a cost that is much greater

than just the money. It has cost the prestige and authority of western approaches in many of

these societies. It has reversed the progress of growth of democratic institutions and civil

society in many of these societies; and, in the more extreme cases, it has produced a situation

in which societal change has deteriorated where the whole is now less than the sum of the

parts.

Now, I think we have to recognize that the challenges to rule-of-law and democratic

institutions in much of this regionparticularly in the former Soviet Unionwill get worse

rather than better, both because of internal and external problems.

First, many of these regimes now feel themselves established and no longer feel compelled to assuage western concerns about civil liberties and human rights. At the outset of

their independence, many of these governments signed a variety of international commitments quite literally without reading them and certainly with no intention of carrying them

out. However, as we can see by a series of recent electoral farces, crackdowns on civil liberties, and the growth of merely the facades of democracies, what is developing in a number of

countries is not so much a replication of the old Soviet system as replication of what in Africa

is known as a Big Man regime.

There is nothing new or unusual about this; but we have to recognize that thats what it

is and that a quest for the rather will-o-the-wisp stabilitywhich policy makers often feel is

the basis for an effective policysimply tends to encourage the growth and development of
12

the kind of regimes which we have seen too often in the Third World and is almost a guaranty

for a failure of all aspects of society, particularly democratic institutions.

I think recent events, particularly in Uzbekistan as a good case, show there is a great

deal of underlying fragility and brittleness in many of these societies. This is partly related

to their failure to deliver the economic goods that were promised at the time of independence.

Many of these countries have shown the same kinds of shortcomings and failures in their

economic structures as had the old Soviet Union; and since many of these peoples opted for

independence precisely because of the failures of the Soviet economy, why should there be

any sense of societal loyalty to a regime which has merely transformed the kind of political

repression under which people lived and delivered nothing better on the economic side? This

will, obviously, lead regimes to seek villains and scapegoats, both at home and abroad, and to

increase their repression.

Finally, I think we have to recognize that the borders which emerged from the breakup

of the Soviet empire are not likely to remain for very long. I think I can say this with absolute

confidence, because every imperial structure which has broken up in the last 200 years has

produced a series of regional conflicts and changes of borders. We could only imagine this

would not happen in this region if we would expect a much higher level of statesmanship and

political leadership than has been the case anywhere else in the world.

Also, I think we have to recognize that, in much of the region were talking about, there

are things that are worth fighting for, particularly natural resources, and there are leaderships

which are quite eager to fight not just for these tangible benefits but also for the achievement

of national greatness, regional hegemony, and the establishment in some cases of dynastic

power structures. This has been, to some degree, encouraged by the West which has fed the

self-perception of some of these regimes of this greatness.

There will be outside participants in this process. Russia is, obviously, one of them but

by no means the only one. Turkey and Iran, Pakistan and India, China and Japan will also

contribute to this process, and Im not sure that very many of them will place civil liberties

and human rights issues very high on their agenda.

The United States, of course, is also a player but not necessarily a benign one. Unfortunately, we have tendedas we did in much of the Third World in the post-colonial period

to place a very low emphasis on the development of civil institutions and rule of law, giving

much more attention to our quest for stability and to issues such as security and economic

change.

We have also not learned that in the area of defense and military cooperation it is much

easier to supply weapons and training than it is to achieve a common agenda. You would

think that this is one area in which we would have learned from our failures in the Third

World, but we have not.

One need only look at the fiasco of our policy in Albaniawhich was referred to in the

Pentagon as the poster child of U.S. defenseand military cooperation in the Balkans until

the time when our assistance contributed to and helped make worse the civil collapse which

took place in that country.

Certainly, the very first victims of any regimes quest for national greatness, expansion,

and empire will be democracy, rule of law, and civil liberties. I think if there is any lesson

that the United States should learn from this, its that these so-called soft issuescivil

liberties, democratic institutions, rule of laware in fact the real core upon which any long-
13

term policy of self-interest should be based.

After all, of the 3 so-called baskets within the Helsinki Final Act, which was the one

which provided the actual basis for long-term change? It was the human rights basket, not

the economic or the security basket. I think if we look back on that experience, we can see

where our own self-interest lies.

Ms. TAFT. Thank you very much for that detailed response and analysis.

Before we turn to the audience for questionswhich Im sure youve been formulating

during this time of presentationwe do have some reaction from our other panelists. Well

hear their reaction; then well turn to our audience.

Mr. KARATNYCKY. Well, I have the advantage of being in fundamental agreement with

the other speakers, but I did want to point to a couple of issues in both presentations where

I might want to highlight a couple of different aspects.

The first isand I know that this wasnt the impression that Alex intended to make

that historical and cultural legacies are important, but they are not iron laws, so to speak.

Such legacies dont determine these kinds of outcomes, and there could have been a different

evolution.

I think that one of the factors that also contributed to this course of events was not a

distant historical legacy but a more recent legacy, i.e., how the reform processes began. In

eastern Europe, East-Central Europe, change was initially stage-managed by the governing

elite; but then power very quickly transferred into the hands of the opposition, and true

opposition and anti-communist forces came into power and ruled.

After a while, they implemented fundamental reforms, and some of these leaders were

tossed out of office; but they were really tossed out of office usually by ex-communists who

were playing by the democratic political rules, and then the reformers came back again into

power through the democratic process.

In many of the former Soviet bloc countriesand certainly in the case of Yugoslavia,

Serbia, and Montenegrothat kind of transition never occurred. In the best cases you had

semi-reformists from the old political elite who used nationalist slogans to consolidate their

own power, sometimes in coalition with a group of democratic reformers; but you never had

the rise of a civil society or the degree of civic activism that you saw in the East-Central

countries. Of course, some of this is traced to the historical legacies. But I think in part it was

a matter of how this process played itself out.

The second issue is the emphasis on rule of law, but also the emphasis on crime and

corruption as part of the business environment. It is absolutely an important emphasis that

was considered perhaps neglected. On the other hand, there are mid-course corrections that

policy makers often make, and sometimes they too can lead to unintended consequences.

Let me give you an example. Many of the current anti-corruption campaigns being waged

in the former Soviet bloc are basically attempts to get at the political enemies of a governing

elite. And we really have to track our encouragement of anti-corruption efforts to ensure that

they not be limited exclusively to the settling of scores of political opponents and to the

consolidation of power.

The second thing is to keep in mind in these anti-corruption efforts: who is it that comes

to the fore, or who makes the case for playing a more important role in the political system?

It seems to me that the national security apparat of the old security state resurfaces.

So, today, there is a new emphasis on combatting corruption in Russia. And we see that
14

its not only Primakov who had a close relationship with the security apparat of the Soviet

period, but his chief of staff is a former high ranking officer of foreign intelligenceas is

Yeltsins chief of staff, Yeltsins deputy chief of staff in charge of personnel, the head of a

major Russian news program on Russian television, head of Radio Rossiya, the head of ITARTASS, the press secretary of Mr. Maslyukov, and the head of the Russian arms exporting

agency.

It seems to me there are internal cultures and legacies within this system that preserve

some cohesiveness. In other words, we have some industrial elites, some political networks,

some regional elites; but we also have other systems, relationships, networks that exist, and

we have to be very mindful that a new emphasis on addressing different types of problems

should not give encouragement and reawaken the power of these types of forces within those

societies.

Finally, I would say that the one thing that I hope comes out of this study is that despite

many difficulties in the reform trajectories that have been discussed here and the reasons for

the problems, that it is still infinitely easier to think about pushing these countries and

urging transitions towards greater openness in this condition of greater dispersal of power

within a more pluralistic system relative to the old totalitarian model.

In other words, the half-life of semi-open societies is shorter than the half-life of fully

authoritarian and compact dictatorships. So despite all the emphasis on the many problems

and the failures of reform, and despite the fact that, I think, some of these systems can

muddle along for a fairly long period, they offeryou know, within the boundaries that these

systems imposed, whether they are more or less authoritarian, more or less closed, they

nevertheless have some space for civic life, some space for private commercial life.

That, I think, speeds up the prospect of their eventual transformation.

Ms. TAFT. Okay, thank you very much. We will have ourOh, you wanted to respond?

Professor MOTYL. A number of fascinating points have been raised, and I would like to

comment on a number of them.

Wayne mentioned the notion of imperial collapse and that this is an appropriate framework for viewing events in the former Soviet Union. I couldnt agree more. We can learn a lot

by comparing these countries with past experiences in Africa and Asia. But the Soviet Union

was a unique empire. It was imperial, but it was also communist. In contrast to just about

every other society that emerged from empire in the past, the Soviet republics did not just

lack state administrations and bureaucraciesAfrican and Asian states lacked those, too

did not just lack elitesthe Africans did, toobut they lacked autonomous cultures. They

lacked civil societies of any kind. They lacked market-oriented structures.

The challenges facing the former Soviet republics were in some ways fundamentally

more problematic than those facing African and Asian states. That gives us, I think, reason

to think twice about the ease of the transition.

Waynes point about nationalism is also very important. But its not just that nationalism poses challenges for civil society and democracy. Democracy actually promotes national

identity and nationalism. Stable countries with functioning economic and political systems

can direct this process into more or less constructive channels. In countries that are weak,

however, nationalism can pose a challenge to democracy; but the introduction of democratic

procedures can facilitate the development of even more nationalism.

Adrians comment is very well taken. One of the fundamental challenges facing the
15

former Soviet states stems from the fact that they emerged in a process that was remarkably

peaceful. That is the good news. That is also the bad news, to use Waynes terminology here.

When systems break down, when they collapse, when mass disturbances of one kind or other

take place or, for that matter, when wars occur, that has one salutary consequence. It gets

rid of the bad guys.

Social mobilization enabled East-Central European elites to remove communists from

the political arena. In contrast, the Ukrainians and Russians had little choice but to incorporate communists.

Ms. TAFT. Thank you. Well begin here with our first question. If you dont mind, use the

microphone there so that our transcriber can record it; and if you could identify yourself, that

would be helpful.

QUESTIONER. Im Dick Murphy with the Center for Strategic and International Studies.

My question, I guess, is as much of an observation as a question. But the presentations,

I think, make the pointparticularly Alexs presentationthat youre dealing with different

mindsets and, particularly in the former Soviet Union, quite different mindsets, which we

have to take into account in promoting the efforts toward reform.

We have a problem ourselves in the United States. We have a mindset which is a problem, and that is we Americans are an impatient, results-oriented lot; and we tend to look at

things through the analogy of sportswinners and losers, you know. We want results, and

we want them fast.

Here, we are dealing with a situation which has been pointed out as going to take a

generation or many generations before you really see the fruits of progress.

My question is: How do we change our own mindset? For example, the Clinton administration has had a proclivity in foreign policy for looking for successes. Russia was going to be

one of those successes, I remember. Haiti was another one. We dont hear much about that

anymore. I dont mean to single out the Clinton administration necessarily, because its a

reflection of our own impatient desire for concrete results quickly. How do we address our

own mindset? What can we do to change our own outlook towards this area and what were

trying to achieve there?

Mr. KARATNYCKY. Before I turn it over to you, I wanted to say that we are not just resultsdriven in declaring and seeking successes; but we are also very results-driven in seeking

failures.

I think that one of the points is that there may be some countries in which the environment looks very unstable, and there may be some geopolitical reasons or economic reasons to

be involved in some limited relationship with those countries that have ossified and are the

most resistant to change; but I would argue that there is a broad array of countries somewhere in the middle where some substantial engagement over the long term is not an evidence of failure but evidence of an objective condition, and its not a question of evading

responsibility for a rapid success model.

There are, after all, many historical legacies, political legacies, internal ethnic and other

legacies within these countries that mean that our engagement should be focused on the long

term and that the policy community ought not to equate a long-term relationship with failure.

So the search not only for successes should be shunned, but the search for rapid failures

should be shunned as well.
16

Professor MOTYL. Mindsets, like political cultures, generally take generations to change

if nothing intervenes; and if something intervenesthat is to say, a genuine crisis or a failurethen confidence is shaken. Nothing succeeds like success, but nothing fails like failure.

The mindset you described has been shaken in a very fundamental way by the events of

August 1998 in Russia.

There is something like an epiphany in the process of unfolding. Lightning is striking

slowlyperhaps too slowly, but its striking, nonetheless. There is surely a growing appreciation that things are difficult and that there are no easy answers. Thats only the start of

the rethinking process.

We have no choice but to shift because, for better or for worse, this country has defined

Russia as its problem. And there is no alternative to facing the fact that the 1998 fiasco in

Russia represents a policy failure on our part.

In this regard, Im hopeful. Im beginning to see a shift that leads me to think that more

long-term policies will be adopted, that well begin to see things in their larger context and

complexity.

Ms. TAFT. Thank you. Mr. Merry.

Mr. MERRY. Well, the American government will always be American, which means it

will always attract people who are energetic, results-oriented, and filled with good intentions; and thats a fearsome combination, when you export it to the outside world.

I would identify a different concern, which is the unending fallacy that whatever situation were dealing with is sort of the end of the road of change and that, therefore, our current

agenda is the agenda we will be dealing with in the future.

You simply have to think back 12-15 years when most of official Washington not only

didnt recognize what was going to happen in eastern Europe and the former Soviet Union

but didnt want it to happen. Washington was not only extremely resistant to understanding

these processes of change. The idea that these changes would take place was repugnant to all

except a very, very small minority of people in this city.

The notion that somehow any of these changes were the result of CIA activities or plots

or American conspiracies is nonsense. If the U.S. Government was trying to do anything, it

was to slow down the processes of change; and when people of their own volition tore down

the Berlin Wall and starting tearing apart these imperial structures, the response in Washington was not one of great satisfaction. The response was one of very, very great unhappiness that stability was not being preserved.

The concern I would identify is that, again today, people keep saying that what we want

is stability, stability, stability. In human affairs, stability exists only in the grave. The whole

process of the world in which we live is that things are continually in change. Is this true

anywhere more than in our own society, for heavens sake? But this sort of bitch goddess of

stability that you hear from press spokesmen from the State Department and other parts of

the U.S. Government basically means that people dont want the normal processes of change

to take place.

The part of the world were discussing is in the infancy of its post-communist, postSoviet, post-imperial change. Were only in the very early phase, and a lot more is going to

happen. Some of it is going to be good. A lot of it is going to be bad.

The borders that we see on the map of Eurasia today will be theremost of them will be

therefor a while. Some of them are going to change, because thats simply the nature of the
17

human experience. I would say that the real problem with American policy is that it assumes

that our agenda is the agenda for other governments and other peoples, and it aint necessarily so.

QUESTIONER. I realize that the

Ms. TAFT. Would you identify yourself, please?

QUESTIONER. Yaro Bihun from the BBC. I realize that the Secretary has yet to make her

announcement concerning the certification of Ukraine, but what I ask each of the panelists

to comment upon, whichever way the announcement goes, how that fits into what you have

been saying today about the transitional democracies and the region.

Mr. KARATNYCKY. In any relationship and in any calculation in which the United States

is involved and that involves a country as strategically important as Ukraine, there are both

objectives of promoting internal reform and an understanding of how that reform unfolds

within the geopolitical context. Ukraine is subject to a certification of whether it has made

some progress in establishing a more equitable business environment and enforcing more of

what Wayne Merry has referred to as the rule of law in a business setting; and part of this

process involves looking at how Ukraine is treating U.S. investors within the country and

enforcing contracts and their right to reasonable and fair competition.

If the Secretary certifies that Ukraine has made significant progress, the amount of

foreign aid will be twice what it would if she were not to make that certification. That certification is due today.

In my own view, this is a laudable way of trying to nudge the Ukrainian Government

and to use these economic means to press the Ukrainian Government towards more fundamental economic reform and a more equitable system.

On the other hand, this process has led to some limited movement, as I understand it, on

the part of the Ukrainian Government to respond to this kind of pressure. So its already had

a limited effect. It probably hasnt had the kind of effect, dramatic effect, that the authors of

the legislation would have liked. Nevertheless, this decision is also unfolding in the other

context, not just in the context of trying to promote best practices in Ukraine, but also trying

to view Ukraines place in the geopolitical environment.

We had in December 1998 the establishment of the first steps of a treaty to create a

confederation between Belarus and Russia. Unlike the earlier attempts, this attempt has

some legs. That is to say, there is more support across the board within the ruling elite in

Russia, particularly since most of the economic reformers who objected on economic grounds

to an earlier such attempt at confederation have passed from the scene.

Within the Russian political elite, this is viewed as the first step towards at least an ingathering of the Slavic core. Many of the Russian institutionsincluding the Russian Defense and Foreign Policy Council, a small semi-official think tank, certainly one that represents a broad spectrum of the political elitehave viewed the integration of Belarus as the

first step to exert greater pressure on Ukraine to integrate.

It seems to me that part of the calculus of deciding on what kind of an aid package to

present to Ukraine must be taken within this context. The cutting back of funding for Ukraine

can be perceived, both by Ukrainians themselves and by the Russians, as a drawing back of

the relationship between the United States and Ukraine.

In a context where there is going to be intense and intensifying pressure on Ukraine to

join first some inter-parliamentary structures and then some broader political structures
18

leading towards eventual confederation, this should be also seen in this broader geopolitical

context.

So while I have no direct sense of how the Secretary will act, it would seem to me that it

would be advisable in this context, particularly in this year where there is this momentum

towards integration and Slavic integration, that we not scale back our relationship and our

aid relationship with Ukraine.

Ms. TAFT. Mr. Merry.

Mr. MERRY. I would note that congressionally-mandated certification requirements create two challenges, one for the governments concerned but the other for American bureaucrats to fashion words to rationalize whatever outcome the administration wants to produce.

I myself have participated in some fairly elaborate circumlocutions to meet Congressional

certification requirements.

I think in the case of Ukraine, the utility of this exercise may be more a psychologicalpolitical one than a tangible economic or financial one, in trying to get authorities in Kiev to

stop believing their press notices.

A failure of U.S. policy towards Ukraine was that we told them that we loved them and

how important they were, to such an extent that they came to believe there would be no real

sanction for failure to implement serious structural and other reforms, and a belief that,

since they were so important that, therefore, the West would bail them out almost regardless

of what policies they conducted.

I think its high time for Ukraine to understand that its a big world out there, and they

are only one country of many that are on our agenda; and they at the moment get a lot less

attention in Washington than do somewhat larger economies like Brazil and South Korea.

I think, if anything, this certification exercise, hopefully, will communicate to people in

Kiev that their problems are, first and foremost, theirs; and the outside world simply will not

and cannot support them if they will not make the changes that are necessary in their own

self- interest.

Ms. TAFT. And Professor Motyl.

Professor MOTYL. I dont think anyone should have any illusions that most of the former

Soviet republics will be able to do what we want them to do. If thats the requirement of

certification, then we may as well just close shop and go home.

The larger issue, which I alluded to in my presentation, is whether we want these countriesand here I mean not just Ukraine, but all of them in generalto be more or less

integrated into international, global and west European, and other kinds of structures and

institutions or whether we dont want that and are willing to accept the consequences.

If Wayne is right in painting the relatively dark picture that he painted, then I submit to

you that it will be even darker if these countries are not integrated, however minimally, in

such structures. The point then is to see the problem of certification within the larger context. Thats the choice facing this country.

Ms. TAFT. Thank you very much. Do we have other questions from the audience? Yes,

sir?

QUESTIONER. John Karch, Slovak League of America. I have not read your report, but I

have heard you. It is both depressing and encouragingencouraging in the sense that there

is, obviously, recognition by all of you that we are impatient with the changes in CentralEastern Europe and farther east, that we insist on changes, reforms, as in baseball, basket-
19

ball and football, to have results quickly; recognition, however, by you that these are historical problems. They are not easily solved.

It should be a long-term commitment. Encouraging that the United States is there. It

has taken leadership in NATO enlargement, in the reforms in various programs.

There are weaknesses in our programs, and discouraging, depressing from my long

decades longexperience in the United States (I was with the U.S. Information Agency for

decades and Foreign Service as well) that we are going to do very little about this.

We have the media here, and yet what do we see in our newspapers, on our television

and radio? Precious little about these things. There is such little understanding by the American public about these issues, very serious issues that you have raised, and it is in the U.S.

national interest.

This is made quite clear by everybody, that we should be involved. There should be

changes. We should give assistance, and we are graduating out countries that desperately

need help in a few years. That is the depressing part. Please comment on these things.

Mr. KARATNYCKY. Well, I would argue that it does make sense to graduate certain countries that have made rudimentary changes. On the other hand, I dont think it makes sense

to block a relationship with a civil society, with the independent media, with the architecture

of democratic discourse, with education systems and the like. Those kinds of changes take a

lot more time to percolate through systems, even if you establish a reasonable private sector

best-practices and a favorable macro- and micro-economic environment.

I would say thatand I think that there is a framework in which American foreign

policy is shaped. It does involve, to some degree, public sentiments and public attitudes, and

I think that this effort to graduate is not just a rush to judgment. Its also to respond to the

American public that we are not infinite, that we are not involved eternally with particular

countries as our natural dependence, economic dependence.

I think that is an attractive thing and ought to be preserved within the U.S. foreign aid

and donor strategies. On the other hand, we ought not to prematurely declare victories in

countries where those transitions are not, by the judgment of many people, durable.

I would say that Slovakia is a country that has made very many major steps towards a

fundamental transition. I think its stillYou know, it may be a question of how durable

those changes are. I would argue that they are pretty durable, that civil society is pretty

robust in that country, that there is a fairly assertive and reasonably objective media (some

of it party oriented); but in general Slovakia had all the infrastructure to make this kind of a

leap.

I dont think that it is unusual after a period of time for the U.S. to decide on an exit

strategy for a major commitment to that kind of a country, providingfor that kind of a

successful transition, providingthat it retains some residual resources and that those are

mainly concentrated on what Wayne has referred to as the soft issues but which really are

the fundamental issues that make all these other dimensions of our transition efforts work.

Mr. MERRY. Despite my own long personal and professional involvement with this part

of the world, I would be very cautious about how much the American voter and taxpayer

should be expected either to know or to care or to contribute to the developments in these

countries.

The world is a very big place. There are a lot of parts of the world where there are people

in much greater need of American assistance than in this part. Most of this part of the world,
20

Eurasia, has ample resources to take care of its own requirements, if the countries, the governments, choose to do so.

I think, for the most part, American assistance should get away from the big-money

type activities. I think that theres a great deal that we can do in encouraging democratic

institution building, rule of law, developing civil society, for very, very modest sums of money,

and that beyond that the major contribution our country can make is to give these countries

normal trading relationships and to try to bring them into the first world economy and help

their transition out of the second world economy.

I think the experience of the United Statesnot just in the last few years in the former

Communist states but in the past half century in many of the former colonial states around

the worldshould give us a great deal of caution.

I think almost anyone who has ever dealt in detail with an American assistance program in any foreign country comes away from the experience, hopefully, at least humbled, if

not even more motivated to caution.

I would repeat something I referred to before. I think if there is any one area where the

United States should show very great caution, it is in the development of military relationships with many of these countries where we are helping to build up capabilities and institutions over which we will be able to exercise no control whatsoever.

Its not just the internal problems that these can create, as we saw most dramatically in

Albania, but what happens when governments start looking outside their own borders. This

is a situation in which we could find out that our agenda is not their agenda and that, once we

have made a contribution to their capabilities, we will frequently create more problems than

we help to solve.

Professor MOTYL. Wayne mentioned a very important point, namely, normal trading

relationships. Rather than thinking in terms of providing aid and assistance and shifting

money from here to there, we should be putting our money where our mouths are. We talk of

liberalizing trade. We talk of globalization. And East Europeanshere, I mean the EastCentral Europeans plus most of the states of the former Soviet Uniondo not have access to

west European and American markets for the things that they can actually sell.

The common agricultural policy in the European Union is a major barrier to the Hungarians, the Poles, the Czechs, not to speak of the Ukrainians and Russians and others.

These countries also produce steel cheaply. Theyre not dumping steel on west European and

American marketsnot if youre earning ten dollars a month. Nevertheless, anti-dumping

procedures have been initiated against Russian and Ukrainian steel. Opening Western markets would be an important way of promoting genuine economic change of promoting entrepreneurship and markets. Force these people to compete on the market by embracing them,

not by keeping them out.

Ms. TAFT. Thank you very much.

To bring our morning briefing to a close, I want to thank each of you for attending this

morning.

I particularly want to commend Freedom House for taking on the challenge of producing

such a survey and analyzing all the various countries. I want to express appreciation especially to you three gentlemen for the time you took to prepare for your presentations and to

be here this morning. So thank you very much.

[Whereupon the briefing concluded at 11:55 a.m.]
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