The East's Salvation May Lie in Private Hands


Stockholm. -- The Western debate on helping the Soviet Union and the ex-communist countries of Eastern Europe has been dominated by ideas of government-to-government transfers. Private investment is expected to follow. This may be logical, but it probably is not going to work.

The industrial and commercial culture of the East has to be changed, and that will not come from actions at the top. The Eastern countries have to learn the ordinary processes of economic and political debate and decision which make Western market economies and democratic governments work. That is done by doing it.

The head of the new European Bank for Reconstruction and Development, Jacques Attali, recently said to the Paris daily, Liberation, "I do not believe that you can say 'change your society; we will help you afterwards.' Rather, you must say: 'join us in the concert of nations who speak the same language, within the same mental paradigms -- at the moment you do that, your success will have become inevitable.' "

An interaction with the West has to be created, and that will come from private initiatives and investments more easily than from what governments do. The Swedish (but Swiss-based) multinational, ABB Asea Brown Boveri, dealt with Iron Curtain Europe two and a half years ago "as some remote region -- it could as well have been West Africa." Today the company has 20,000 employees in the East, and within a year expects to add another 10,000.

It has upgraded machinery and demands the same quality of performance in the East as from its employees in the West. It has to, because there is little or no domestic market in the East. The Soviet Union has stopped buying and local demand has fallen. Hence factories in the East have to make goods of a standard to sell internationally, while waiting for domestic markets to recover. (A European Commission study has concluded that only a tenth of all products currently manufactured in the East could be offered on western markets.)

The head of ABB, Percy Barnevik, told a recent conference on Europe's outlook, called by the Swedish prime minister's office, that "it is not primarily a matter of transferring capital. I would not even say that transfer of technology is the most critical. The most critical matter is (that they) . . . become market-oriented instead of production-oriented. . . . It sounds simple, but it is a huge change and it is all done by [local] people. [We have] only a handful of foreigners in supporting positions."

A limited number of people are sent for training in the West and individual Western "mentors" continue to work with these from a distance. This "turns out to be extremely effective in transferring know-how on a broad basis."

Mr. Barnevik added that because of currency problems, an international company needs "to create [its] own trade balance. . . . When we sell Polish turbines in the Third World or in Western Europe, the hard currency earned can be used to import air-pollution control equipment from ABB . . . in Sweden."

This is not a program expected to produce a short-term return for the Western company. It might provide a privileged position when the Eastern economies have developed, and be profitable then, but that is acknowledged to be a long way off.

Why do it, then? The answer is that if the East cannot be integrated into the western system, Western Europe -- and the American economy -- risk becoming undermined by chaotic conditions in the East. The motivation thus is civic as well as commercial and incorporates the recognition that the long-term interest of Western business is served by economic progress and political stability in the Soviet Union and Eastern Europe.

The West Europeans' sense of danger next door to them -- 100 miles across the Baltic for the Swedes -- is one explanation for the massive discrepancy between West European investment in the East and that of American companies. American business culture currently is hostile to decisions accountable to any reasoning other than profitable return -- usually short-term return.

That could seriously handicap the United States in a future marketplace of some 450 million people, most of them with sophisticated consumer longings. Poor as these people are today, they are not as poor as the overwhelming majority of people in Asia, where many American businesses have been looking for future markets. China's (official) Gross National Product per capita is about $250 per year. Even Thailand's is under $1,000. Most countries in Eastern Europe produce more than twice that even today.

However the crucial argument is not the commercial one. Business and industry depend upon the larger society in which they function, and they have obligations to that society. The integration of the ex-communist world into a politically stable and economically progressive system of market-economy democracies is essential to peace, and to the stability of the West as well as that of the ex-communist countries.

This will not be accomplished by governmental negotiations and summit decisions. The web of interactions must be spun as widely and densely as can be done. The private sector in the United States as well as Western Europe bears a public responsibility. Too much is at stake for that responsibility to be neglected.

William Pfaff is a syndicated columnist.

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