The more you look at countries in various stages of recovery from the Cold War, the more the Marshall Plan looks like a true miracle. After World War II, Europe lay in ruins, literally, not metaphorically. Continent-wide devastation then rivaled what we see only in Grozny or Kosovo. Within 10 years, however, much of Europe was economically on its feet again. By comparison, the post-communist world has experienced nothing like the same rebound; this despite the fact that the money has been kept flowing from the West for a decade.
Consider this: According to the authors of a new study published by the Council on Foreign Relations, “Promoting Sustainable Economies in the Balkans,” “If the amount of international aid is calculated as a percentage of the GDP [gross domestic product] of the countries in the region, the international community has already committed far more than what was involved in reconstructing post-World War II Europe.” This is nothing short of amazing.
The point is that a Marshall Plan is worth only what you make of it. Beneficiaries half a century ago of the $13.5 billion in American aid had democratic and financial institutions to build on, which makes a world of difference.
Take the example of Kosovo today. Last fall, Joly Dixon, deputy special United Nations representative in Kosovo, said in a report to the World Bank that he had had to start from less than scratch, trying to create a financial infrastructure: “In Kosovo, as in Alice’s Wonderland, it’s necessary to run faster and faster to stay in place,” he said. Adding to the surreal nature of his job, Mr. Dixon had to dig into his own savings to open the U.N. office in Pristina. Funds promised by the European Union had not materialized so he was bankrolling it himself, including housing, travel expenses for his team and a mobile phone bill of $1,000 a month.
Things haven’t improved much since then. Last week it was reported that Bernard Kouchner, head of the U.N.-led civilian administration, was close to despair over Kosovo’s economic standstill and political chaos. This is nothing new, though. Mr. Kouchner seems to have been close to resigning ever since he got the job. The head of the European Commission, Romano Prodi, has promised to bring the Balkans under the “European roof,” but so far, that has been quite a leaky affair.
In the Balkans right now, we have another disaster in the making unless something happens, and fast. The American public and therefore the U.S. Congress will have only limited patience with military commitments and funding requests in the absence of positive results. Disillusion will also fester in the relationship between the United States and Europe, which is evolving in new directions as Europe searches for a more assertive foreign policy role in the transatlantic relationship. Having undertaken the task of Balkan reconstruction, Europe must deliver or risk losing the strategic objective of Balkan peace as well as credibility as a partner for the United States.
But blaming it all on European bureaucrats is not good enough. You have to look at the political actions of governments in the former Yugoslavia, and they have not been promising.
The problem, so the Council study’s authors Steven Rattner and Michael B.G. Froman argue, is not actually money. “What is critical is reform,” the report says. To take advantage of foreign aid or rebuild on their own these countries need the will. Reform cannot be imposed from abroad, but depends on individual governments to make forward-looking choices on their own. Half a century ago, it was not every country that used its Marshall Plan money wisely, either. In Britain, the largest recipient, a Labor government squandered its share on subsidies of state-owned enterprises. In Germany, private bankers were placed in charge by a conservative government with phenomenal results.
The Balkan area has far to go. Right now, it forms a kind of bridge between Europe and the Third World. Recall that this used to be the most modern and prosperous area of the the socialist world. Today, if you add up the whole area, you get 53 million people when everybody’s home, or 14 percent of the total population of the European Union. Yet, it accounts for just 1 percent of the EU’s GDP. In Kosovo, per capita GDP is about $400 as best as anyone can tell. In relatively rich Croatia, it is all of $4,500.
Macroeconomic recommendations presented in the Council’s study include control of government spending, creation of working taxation systems, independent central banks, and price stability. On the microeconomic level, governments need to liberalize regulation of the private sector and create opportunities for foreign investors something that undeniably remains related to potential warfare breaking out. Non-economic challenges include legal reforms, institution-building and the fight against corruption.
Long, and by no means exhaustive, as this list is, assuring cooperation across borders will be essential. Trade barriers and customs duties need to come down. Cooperation in the development of infrastructure, particularly going east to west, is desperately needed. For nations who have just spent the better part of a decade fighting each other none of this will be easy. Yet, if the example of post-World War II Europe is considered, it is not impossible. The close collaborative relationship that developed between former archenemies Germany and France proves the point.
Will any or all of this happen in the absence of American engagement? There’s the rub. As noted by Mr. Rattner, one of the study’s authors, “There is great suspicion in the Balkans of Europe. They want the Americans to stay to make sure that the Europeans deliver.” Seems it’s been this way for 50 years, and maybe that’s not such a bad division of labor either.