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29 November 1993

29 November 1993

In preparation for the NATO summit at the beginning

January 1994 , the U.S. Administration has launched a new ini- tiative called Partnership For Peace. I propose a radically differ- ent kind of Partnership For Peace and my argument is laid out in this paper. It was prepared for the November 12 - 13 confer- ence on "Democracy, Peace and Security in the New Europe" sponsored jointly by the Council on Foreign Relations and the Central European University. It was subsequently revised in light of that conversation. It represents my personal views, not

a consensus of the participants.


I realize that time is short, but I hope my proposal will receive serious consideration prior to the NATO summit and President Clinton 's visit to Russia.






he Comin g World Disorder


A Conceptual Framework .

. 3

A Theor y of Revolutionary Change


Open and Closed So c ieties



Diagnosis of th e P r esent Situation


The Need for Col l e cti ve Security



h e

Future of NATO


Partnership For Peace -- as proposed



Real Part n ership For Peace


Problem s of Econom i c Assistance


Economic Cooperation





© November 1993 by The Soros Foundations 888 Seventh Avenue, New York, NY 10106 Tel: 212/757-2323 • Fax: 212/974-0367




It is clear that the world order that prevailed since the end of the Second World War has come to an end. It had been based on two superpowers vying for world domination. They stood for diametrically opposed principles of social organization and they considered each other mortal enemies . The global conflict between them governed all the local conflicts. Occasionally it came to actual fighting, but both sides avoided an all-out con- frontation because each side had the capacity to annihilate the other. It was possible to score local victories but they had to fall short of threatening the survival of the other side, because it might have endangered one's own survival . The prevailing order was called the Cold War . The name was apt because both sides were mobilized for war, battle lines were drawn throughout the world, and internal conflicts within each camp were kept frozen by the external threat .

The collapse of the Soviet empire was an internal develop- ment . Undoubtedly external pressure played a role but was not directly responsible for the collapse; otherwise, it would have been re s isted. But that internally-generated revolutionary event has also changed the prevailing world order.

All this is clear now, but it was far from clear at the time it occurred. It caught most of the participants unaware. This is true of the leadership within the Soviet Union, but even mo r e true of the leadership in the We s t . Gorbachev and his team were con- scious that their i nternal reforms would change the world order; indeed, they were looking to a fundamental change in the rela -

t i o n sh ip be t wee n th e sup er pow e r s a s the k ey to making th e i nt er - nal tran s f o rm a t ion s ucc e s s ful . I t s hould b e re memb e red th a t th e F or ei gn Min is tr y was th e o nl y part o f th e So v i e t bureaucrac y th a t w a s squar e l y b e hin d pe r es t roika , and for ei gn polic y wa s th e o nl y part o f th e so - ca ll e d " n ew th i nkin g" th a t was pr ope r l y e lab ora t ed .

Cor b ac h ev's co n cept w a s to f orge a n alliance bet w een the t wo s up er po w e rs whic h w oul d d o m i n a te th e U nited N a t ion s a nd mak e it a wor kabl e i n s titution . It w ill b e re c a l l ed that one o f th e f i rst acts o f t he new reg ime w a s to pa y up i t s arrea rs t o th e United Nation s . B e hin d this c o ncep t lu r k e d the hop e that Wes t er n a i d, and We s t e rn i n ve stm e nt, w ould help to r e f or m the S ov i e t e c o n o - my. But th e re w as n o plan, ind ee d no concepti o n , h ow to ac c om- plish i t .

I know this from persona l exp e rience because I s et up an

international task force for creating an open s e cto r in t he Sovie t e c onomy under the authority of Prime Mini s ter Ry z hkhov in 1988 , and I was appalled by the lack of clarity and the inabilit y to

implement anything that characterized the proceedings .

E v en so , e v ents could ha v e taken a different course if the

Western leader s hip had an y comprehension of what was going on in the So v iet Un io n. It w ould not have been s o difficult to a s si s t Gorbache v to produce some positi v e re s ults so a s to sho w that perestroika could work . But the idea that Gorbachev wa s gen - uinely seeking both assistance and alliance simply did not pene- trate into the minds of a leadership that was bent on wag i ng the Cold War; b y the time it did, it was too late -- or at least it could be argued that it w as too late .

Even today, the col l apse of the So v iet empire is not proper - ly understood. This is not just the normal delay in registering change. Ther e is a fundamental lack of understanding which comes from working with false premises. The State Department is concern e d with the relationship between states . That was


appropri a t e duri ng the Cold War , w h en the w or l d map w as w ell d e fin e d a n d k ept i n p lac e b y th e riva lr y b e t we en the t wo s up er - p owe rs . B ut it is no t appropr i at e tod ay, w h e n ex i s ting stat es a nd e mp ires are br e a king d ow n a nd new s t a t es a re br o ught into ex is- t en ce , m any of w h i ch d o n o t r e all y q ua lif y as states . We n e ed a t o t a ll y differe nt c o nce p tual fram ewor k f or dealing w ith this s itua- t io n , b e c au s e it i nv o l v es not onl y r e la t ion s hip s bet w een states but a l so re l a ti ons hip s with i n st a te s, or w hat u s ed to be states.

I t is th e characteristic of revo lutions that peopl e do not full y und ers t a nd what is goin g on; that is w h y events s pin out of contr ol a n d the pr ev ailing order br e aks d ow n. There is no d o ubt

th a t the coll a pse of the So v iet s y stem am o unts to a re v o lut io n, and this fact is n o w gen e r a lly rec o gni ze d. But t h e co l l a ps e o f the

So v iet empi r e has a l so brought about a re v olutionary chan g e in

the p r e v ailing world order and this fact is not properly recog- nized . Indeed , it is widely ignored. People in the former Soviet empi r e cannot help being aware of the revolution , but people in the Western w orld have not been so di r ectly affected. The Foreign Ministr y o f the former Soviet Union did produce some new think - ing, even i f it w as rendered irrelevant by subsequent events; but o ur Stat e Department ha s done practicall y no new thinking at all . Unle ss we de ve lop a new frame o f r e ference, the world order that pr eva il e d si nce the Second World War i s likely to be followed by world di so rder.


I s hould like to put before y ou a conceptual framewo r k in terms o f which the p r esent situation can b e unde r stood . It has two maj o r components: one is a th e ory of history, with pa r ticular refer e nce to rev o lutionary change, and th e oth e r is a distinction betw e en open and c l osed soci e ties . T he two e lements are inter - conn e ct e d -- they s hare th e same philosophical foundat i ons -- but th e c o nn e ction is not ver y strong . It is possible to d i stingu i sh


between open and closed societies, as Karl Popper did, without any insight into the process of revolutionary change; and it is pos - sible to use my theory of history without introducing the concepts of open and closed societies as I myself have done in my dealings in financial markets. But, at the present moment in history, I find the combination of the two elements particularly revealing.

I put forward my conceptual framework with some trepi-

dation . For one thing, it is not fully developed. For another, it would take more than a few minutes to propound it properly . But

I must make the attempt because I have used it and it works - -

and I have been repeatedly surprised at how different it is from the way most people think .


My theory of history is based on the recogni ti on that our

understanding of the world in wh i ch we live is inherently imper-

fe c t . We have to act without full knowledge of the facts because the

facts are created by our dec i sions. There can be no correspondence between our view of the world and the actual state of affairs, because the actual state of affairs is not independently given and our view of the world has nothing definite to correspond to. Therefore, there must always be a discrepancy between the partici - pants' thinking and the actual state of affairs and that discrepancy provides the key to understanding the course of history .

There are times when the discrepancy is relatively minor, and there is a tendency towards convergence between people's views and the actual state of affairs. That is the case when pre- vailing institutions are flexible enough, so that they can be adjust- ed to meet people ' s desires, and there are critical processes at work which bring people's thinking in line with practical possibil - ities. In these near-equilibrium conditions, the discrepancy does not influence the course of events to any great extent and it can be


safely neglected. It is in these conditions that the timelessly valid generalizations of economic theory, perfect competition, efficient markets, the discounting of future expectations, are relevant .

But there are times when the discrepancy between percep - tion and reality is very wide and shows no tendency towards convergence. On these occasions, the course of events follows a totally different pattern and the normal rules do not apply. These far - from-equilibrium conditions arise at the two extremes of changelessness or rigidity on the one hand, and changeability or instability on the other.

The Soviet system under Stalin was a good example of the first kind of extreme, where the Bolshevik dogma was extremely

rigid and incapa bl e of modification . So c iety itself was highly

regu l ated a n d frozen i n to inactivity. Yet there was

an enormous

gap between t h e prevailing dogma a n d reali t y, with

absolutely no

tendency for the two of them to come closer together . If anything, they drifted fur th er apart as the outside world continued to evolve.

The progressive collapse of the Soviet system after 1987 is a very good example of the second kind of extreme, where the participants' thinking failed to keep up with the changes that were occurring in the real world and, because of the large diver- gence at a time of rapid change, events spun out of control . There was a catastrophic acceleration in the pace of events and a break- down and disintegration which has perhaps not yet reached its climax. It is impossible to foretell how far it may go. I have been speaking of a "black hole" and there can be little doubt that we came close to it on Sunday night, October 3rd. Indeed, it was only the prospect of that " black hole" that finally convinced the army to intervene at 2:00 a . m . Monday morning. It is possible that, in retrospect, this may have proved to be the turning point in the process of disintegration; but it is also possible that it was only a temporary resistance point in a trend that has not yet run its course.


I have made a special study of these conditions of dynam-

ic disequilibrium, both in the financial markets and in other set - tings. I find the boom/bust pattern that is common in financial markets also very helpful in understanding the rise and fall of the Soviet system. But, of course, one must not apply the pattern uncritically .

I shall not go into the details of my theory . The most

important point I want to make about the boom/bust pattern is that it is a time - bound, one-directional process but it is open- ended and also characterized by discontinuities. That is to say, a prevailing trend can be reversed at any time; indeed, an eventual trend reversal is an integral part of the boom/bust pattern and the point at which the trend is reversed is not determined in adv a n c e. Indeed, in the financial markets, for every boom/bust pa t tern that becomes fully developed, a great many are aborted in the early stages.

Another important feature of the boom/bust pattern is that it is asymmetrical . The boom is drawn out, the bust is con- densed . It is the lack of time that makes the bust so violent . Events happen so fast that it is very difficult to adjust one's think - ing and behavior to changing circumstances. Policies which would have been appropriate in the early stages are ineffective or counterproductive at another. This can be very disorienting, especially when people do not recognize a distinction between near - equilibrium and far - from - equilibrium conditions.


This brings me to the second part of my conceptual frame - work . To understand the current situation, I contend that it is very useful to draw a distinction between open and closed soci - eties. The distinction is based on the same philosophical founda - tions as my theory of history, namely, that participan t s ac t on the



basis of imperfect understanding . Open socie t y is based on the recognition of this principle and closed socie t y on its denial . In a closed society, there is an authority which is the dispenser of the ultimate truth; open society does not recognize such authority even if it recognizes the rule of law and the sovereignty of the state. The state is not based on a dogma and society is not domi - nated by the state. The government is elected by the people and it can be changed. Above all, there is respect for minorities and minority opinions.

I think the distin c tion between open and closed societies is more revealing in the present situation than the Cold War distinc - tion between communism and the free world, because it allows us to see the Soviet system as just one particular form of closed soci - e t y. The impor t an t t h i ng t o recognize is t hat an open society is a more advanced, more sophisti c ated form of social organization than a closed soc i e t y . In a closed society, one particular point of view prevails; but i n an open society, every c itizen is both allowed and required to have his own point of view. This means that an open society is both more desirable and more vulnerable . While a closed society may expend practically all its energies on maintain - ing the existing order, an open society takes a state of law for granted and builds a complex structure of institutions on top of it capable of producing wealth, prosperity and progress. The struc- ture cannot evolve if the proper foundations are missing, and it can collapse if the foundations are disturbed.


The Soviet system was a universal closed society because communism was a universal dogma. But the system has broken down and communism as a dogma is well and truly dead. There was a chance, a t the early s t ages of the breakdown , to make the t ransition t o a universal open society; but that would have required a major effort on the part of t h e free world and the effort


was not forthcoming . Ther e fore, that option i s no l o nger op e n . The uni ve rsal clos e d society he l d together b y communist dogma has brok e n down int o i t s territorial compon e nt s. Some p a rt s, lik e Poland and Hungar y , a r e m a king progr ess tow a rds a mor e open society; but e ve n thes e countries t e nd to fall b a ck on what pre - v ail e d b ef ore th e co m muni s t re gim e . Oth er p a rt s a r e r e con s titut - i ng themselve s as more or les s clo s ed s ocieties , or the y just contin- ue to di s i n tegrate.

To const i tut e a clo s ed s ociet y , y ou n e ed to mobili ze s oci ety behind the stat e. Since communi s m is dead and univ ers al ideolo - g ies are generally discredited , a closed s ociet y n e ed s to b e based on a na t i o n a l or ethnic p r inc i ple . To establi s h s uch a p r incipl e, y ou need an e nemy ; if y ou don't have one, y ou need to in ve nt i t . In the post-communist world, you don't need to go v er y far t o find an enem y because communism generall y neglected or oppressed national aspirations .

Milosevic has pro v ided t he ne w paradigm: as head of t he Communist Part y in Serbia, he decided to change hor s e s, and he discovered that nationalism is a muc h more vigorous animal t h an communism. He became popular w h en he as s erted Serb i an supremac y o v er Koso v o in a speech he delivered A pril 2 4, 19 87 a t Kosovo Polje . E vents might hav e taken a differ e nt course if the economic reforms introduced by th e Fed e ral Prim e M inister, Ante Ma r ko v ic , o n Januar y I, 1990 ( the s ame dat e a s the "b ig bang " in P oland), ha d bo r n f ruit . A t first, the s t a bili z ation p rogr am wa s e v e n more successful than in Poland , but in th e c o u rse o f th e Serbi a n e l e cti o n s, M il os e v ic r aid e d th e F e de ra l tr eas u ry and des tro ye d th e s tab i lit y of th e c u r r e nc y. F rom th e n on , he se t th e agenda. Th e West e rn pow ers and th e internati o nal community c o mmitt ed a n umb e r o f e greg i o u s error s in d e alin g with th e Y ug os la v si tu a t i on but, in r e t ros p e ct , it i s c l ear th a t th e d i s int egra - tion of Yu g osla vi a w o uld hav e been dif f icul t to pr eve nt ev en i f th e We s t er n powers h a d done ev ery t hing ri g ht . T he e a se w ith w hich

M ilose v ic destroyed the economic reforms instituted b y Ma r ko v ic

proves the point : open s ociety i s a d e licate con s truct which it is

easi e r to dest roy than to de ve lop .

This conc e ptual f r am e work s e em s t o pro v ide a fairly accu - r rate di ag no s i s of the si tuati o n , Th e tr e nd i s s et in th e dir e ction o f nationali s t dictatorships and / or e conomic collapse, w ith the rise of nationalism hastening the e conomic breakdown and the break-

do w n e ve ntuall y leading to the ri s e of a mil i tar y s trongman

e s pousing nationali s t principle s . Thi s s equ e nc e of e v ents is not ine v itabl e but it would require re s olute action to avoid it .

Mi l ose v ic, on hi s o w n , doe s not con s titute a secu r it y threat

to Europe or to the re s t of the world; but nation a list dictat o rships

do. Tha t i s the point that European s tatesmen who are set on appeasing M ilose v ic fail to understand . Alread y Serbia has a worthy counterpart in Croatia . Croatian forces recently commit - t e d a mass a c r e in a Bosn i an vi ll age, provoking reta l i ation by Bosnian Moslem forces; the effect is to force Bosnian Croats to flee from areas where the y are in a minorit y to area s held b y Croat forces, thereby constituting a ma j ori t y there.

It i s v er y tempting to appeal to nationali s t emot io ns in order to di ve rt attention from e conomic failu r e. M eci a r is doing it right n ow in Slo v akia . Ili e scu in R o mania relies o n extreme

national is t s

flirted w i th doing so. But, parado x icall y , w hen economic disinte - grat i on i s too advanc e d, it may be too late to mobilize so c iety behind a national cau se. That w a s certainl y th e ca se in U kr ain e , where Krav chuk tri ed t o pl ay th e nat io nal is t ca r d in conn e ction w ith th e Black S ea Fl ee t but fail e d, a nd it ma y a lso be true o f R u ssi a . If that i s so , the d a ng er of a nat i onalist dictator s h i p e m erg in g i n Ru ssia -- w h i ch is, a f t e r all , th e m o s t imp or tant coun - t ry f r om a securit y poi nt o f v i e w -- wi l l b e th e gre at e st aft e r th e e c o nom y ha s s tabili zed.

for his parli a m e ntar y majo r it y, a nd A ntall in H unga ry

It is still possible to avert the danger, but who is going to make the effort? T hat is where my conceptual framework fails to provide an answer . T he s o-called fr ee wo r ld failed to rise to the chal l enge w h e n it w ould hav e been po ss ibl e to s et in motion a t r end towa r ds an ope n s oc i et y. Wh y s h o uld it do anything now, when ev en ts are clear l y g o ing in th e w r o n g d i r e ct i on and the fr ee w o r ld ha s incr e asin g problems of its ow n?


W e d i d not oppose th e So v iet Un i on because it was a

c losed societ y , but b e cause it posed a thr e at

threat has now disappeared and it is difficult to justif y any kind o f intervention - - whether it is political, e conomic or military -- on the grounds of national self-interest . I t is true that the danger of some kind of nuclear disaster remains, but it concerns the rest of the world at least as much as it concerns us . Therefore , the only basis for action i s collective securit y. And that is where the prob - lem lies. The collapse of the Soviet empire has created a collective securit y problem of the utmost gra v it y . Without a ne w world order, there will be disorder; that much is clear . But who w ill act as the world's policeman? That i s the question that need s to be

to our exi s tence. That

answered .

Th e Unit e d States , as the r emaining s uperpo w er, i s w eighed do w n by dome s tic difficul t ie s which derive , at least par- tially, from the burdens of being a s uperpower. We are not like England in the nineteenth century which, as the main beneficiary of the world trad i ng system, cou l d afford to maintain a fl e et in being that could be sent to distant trouble spots. There i s a dis - crepancy betw e en th e needs of the world for a new world o r der and the national self - interest of th e United States . The United States cannot be expected to act on its own . Can it act in concert with others?


Let u s tak e a look at Europe . Europe has respond e d to the

So v iet collap s e and the reunification o f G e r man y b y accel e rating the i nte gr at io n o f the Eu r opean Co mmunit y . But the reuni f ication of Germ a n y cre a ted a d y namic d is e q uilibrium in th e Eur o p e an

M on e t ary S ys t e m and

E ur o p ean fo r e i g n po lic y came a c rop p er in Yugo s la vi a . As I ha ve e x plained o n a different occasion" , the M aa s tricht Treat y turned into a b o om / bu s t s equence which i s now s elf - reinforcing in the n eg ati ve dir e ction . How far the pr o c es s of disintegration will go

is impossible to sa y , but it ma y go much further than currentl y

anticipat e d unle ss resolute action is tak e n to revers e it .

th e at t e mpt t o es tabli s h a common

The United Na t ions m i ght ha ve become an ef fe ct iv e or ga-

ni z at i on i f it we r e under the l e a dersh i p o f t wo supe r powe r s coop -

erating with each other. As it is, the United Nat i ons has already

failed a s an institution w hich could be put in charge of U . S. troops . This lea v es NATO as the only institution of collective

s ecurit y that has not failed, because it has not been tried. NATO

ha s the potential of ser v ing as the basi s o f a new w orld o rd e r in

that pa r t o f the w orld which i s most in need of order and stability. But it can d o s o onl y if its mission i s red e fined . There is an u r g ent need for so me profound ne w thinking w ith regard to NATO .



T he o r iginal mission wa s to defend the free world against

the So v ie t empire . That mis s ion is obsolete; but the collapse of the


v iet e mpir e has left a security v acuum which has the potential


turnin g into a " black hole." This presents a different k i nd of

threat than the Soviet empir e did . There is no direct threat from the r e gion to th e N ATO countries; the danger is with i n the region, a n d it concerns c o nditions within states a s much as relationships betw e en states . T h e refore, if NATO has any mission at all, it is to

* G eo r ge S or o s, PRO SP E C T F OR EU R O P E AN


The Soro s

Foundation s , New York, 29 S e pt e mb er 199 3 .


project its power and influence into the region, and the mission is best defined in terms of open and closed societies .

Closed societies based on nationalist principles constitute a threat to security because they need an enemy, either outside or within. But the threat is very different in character from the one NATO was constructed to confront, and a very different approach is required to combat this threat. It involves the building of democratic states and open societies and embedding them in a structure which precludes certain kinds of behavior. Only in case of failure does the prospect of military intervention arise. The constructive, open society building part of the mission is all the more important because the prospect of NATO members inter- vening militarily in this troubled part of the world is very remote. Bosnia is ample proof.


Unfortunately, the American proposal for the forthcoming NATO summit, the so - called Partnership For Peace, does not deal with this issue at all . It is a very narrow, technical proposal for holding common exercises and otherwise preparing for possible future cooperation with member countries of the former Warsaw Pact . The scope of possible future cooperation is described as peace-keeping, crisis management, search-and-rescue missions, and disaster relief. While useful as far as it goes, it fails to address the conflicting security needs of the countries concerned.

The countries of Central Europe are clamoring for full membership of NATO as soon as possible, preferably before Russia recovers. Russia objects, not because it harbors any designs on its former empire but because it sees no advantage in consenting. Its national pride has been hurt and it is sick and tired of making concessions without corresponding benefits.


The Partnership For Peace, far from being the product of profound new thinking, is a rather superficial attempt to paper over the differences by making an overture to all the former mem- bers of the Warsaw Pact indiscriminately, while leaving the prospect of some countries joining NATO deliberately vague . It may end up engendering more conflicts than it resolves .

This is a great pity because the conflicts could be easily avoided if the real needs of the region were addressed. The primary need is for constructive engagement in the transition to democratic, market - oriented, open societies. This requires an association or alliance which goes far beyond military matters and contains a significant element of economic assistance . Both the military and the economic aspects of the alliance have to relate to internal political developments within states as much as to relationships between states, because peace and security in the region depend first and foremost on a successful transition to open society.


The mission of this new kind of alliance is so radically dif- ferent from the original mission of NATO that it cannot be entrusted to NATO itself . If it were, it would change NATO out of all recognition. A different kind of organization is needed, and the proposed Partnership For Peace could be that organization .

The Partnership For Peace would not contain any of the automatic guarantees which have given NATO its clout. In the current unstable conditions, that would be unthinkable. Its main task would be to help with the process of transformation into open societies. For that purpose it must lay the emphasis on the politi- cal and economic aspects of the transformation.


In order to hav e any clout at all , th e Pa r tnership for Pe ace must have a structur e and a budge t . T hat i s what N ATO c o uld bring to the table .

NA T O has a uni f i e d command s tr u ctur e which b r in gs togeth e r the Unit ed States and W e st e r n E u ro pe . T he re are grea t ad v antages in ha v ing s u c h a s t r on g West ern pilla r : it leads to a l opsided s tructu r e f irml y r o oted in the W es t . T hi s i s a s it s hou l d b e s i nce th e g oal is to reinforce and g r a tif y th e d es i r e of th e region for joining the o p e n so ci et y of the West .

I t w ould be an express condition of membership in the Partn e rship for P e ace that NATO is f r ee t o invite any membe r country to join NA T O. This would avoid an y c on fl i ct that could arise either from the enlargement of NATO aga i nst the wishes of Russia or from giving Russia veto over NATO membership . T he specter of the past looms large: one must avoid t h e suspicion of either a new "cordon sanitaire" or a new Yalta. A Pa r tnership For Peace along the lines outlined here would avoid both suspicions . It must be attractive enough to induce Russia to s ubscribe. It if does , there is nothing to prevent countries like Poland , the Czech Republic and Hungary from being admitted to some form of member s hip in N ATO, the character of w hich w ould depend on their internal dev e lopment .

The budget of the Partnership for Peace must come out of the NATO budget . There may be s ome elements in the militar y - industrial comple x that may object to such a re - allocation of resources, and they have a strong argument in their favor: if noth- ing is done on t he economic and political front, defense budg e ts will soon have to be increased rather than reduced; but if the Partnership For Peace is succ e ssful, a more than prop o rtional reduction in def e nse budgets could be sustain e d. It i s on this issue that political leader s hip must be brou g ht t o bear.


There i s a cl e ar and pre s ent dang e r to our coll e ct ive s ecuri- ty. The Yugo s la v e xperienc e has s ho w n that militar y inte rve ntion is not a v iabl e option. Ther e fo re th e o nl y w a y to deal w ith it is b y con s truct iv e engag e ment , in c luding e c o nomic aid. But econ o m i c aid do es c os t mo n e y and the mon ey c an onl y be f o und in t h e

bud ge t s . I t s h o uld s till p ro duce a n e t re ducti o n in

defens e ex pend i ture s .

d e f e n se

The countries of Europe must bear a larger s hare of the co s t and ha ve a correspondingl y larg e r s a y in NATO. Econom i c aid to Eastern Europe would p r o vi d e a much needed s timu l u s to th e depressed European e conomi e s. T he f act that the p re sent command s tructure of NATO i s t oo lopsided in fa vo r of the Unit e d States i s well recognized b y all parties ; makin g NATO the pillar of the Partnership For Peac e would hasten the process of adjustment . Specifically, it should i nduce France to re-ente r as a full member. That would serve as the test of the success of its internal reorganization.

There is onl y one deficienc y in this design: it lea v es Japan out of account . Japan should be asked to join NATO. Then we would ha v e the beginnings of an architecture for a new world order. It is based on the United States as the remaining super- po w er and on open societ y a s the organizing principle . It consists of a s erie s of alliances, the most important of which i s NATO and, through NATO, the Partnership For Peace which girds the Northern Hemi s phere. The United States would not be called upon to act as the policeman of the world. When it acts, it would act in conjunction with others. I ncidentally, the combination of manp o wer from Eastern Europe with the technical capabi l ities of NATO would g r eatly enhance the mili t ary potential of the Partnership because it would reduc e the risk of bodybags for NATO countries, which is the main constraint on their willingness to act . This i s a v iable alternati ve to the looming world disorder.



It should be r e cognized that p rov iding economic as s i s -

tance to the former So v iet Union ha s been a n un m itigated fa i lure .

I l i ke to di v ide the hi s tor y of West e rn a ssis tance into thr e e pha s e s:

first , when Weste r n assi s tance s hould h ave been promised but

w as not ; second, w h e n i t w as p ro mi se d but it w a s not d e li v ered ; and third, w h e n it i s del ive red but it d o e s not w ork . We are no w enter i ng the t hird pha s e .

One o f th e r eason s for the f ailu r e i s that e ach donor c o un-

tr y is acting on i ts own and is guided b y it s o wn intere s ts and not

that of the re c ipi e nts. In my foundation , w e describe Western

assistance to the formerly communist countries as the "la s t bas- tion of the command economy . " That may be unavoidable, but at

least there ought to be a unified command . In this respect , NATO offers a better culture than the European Commission which has been put in charge of coordinating economic assistance. The G-7 ought to ha v e de v eloped a command s tructure for dealing with economic aid to the former Soviet Un i on , but did not . There is much to be gained from giving the task to the Partner s hip For Peace. For one thing, it would put the emphasi s on conflict pre- v ention rathe r than intervention; for another, it w ould put the economic co s t in the conte x t of the gain in s ecurit y . Incid e ntall y , it

w ould focu s att e ntion o n the con s titu e nc y in the form e r So v iet

Union whi c h i s the mo s t important f r om a securit y point of v ie w,

namel y the milit ary . I n current economic condit i on s, e ve n v er y s mall expenditur e s benefitting the milit a r y would ha v e a major effect in their at titude and behavior.

A str o ng ca s e can be made that e conomic assistanc e to

Russia and th e oth e r n e wl y independ e nt s tat es is justifi e d o nly in the conte x t of a P ar t n er ship For P e ac e . If my ea r lier anal ysis i s c or rect, the danger o f nationalist dictator s hip s ari s ing i s the g r e at- e s t after th e e conom y h as s tab i li z ed . It i s imp e r a ti v e to c reat e a s tructur e that o b v iat es th e dan g er .



The multilateral structure of the Partnership would be particularl y useful in ree s tablishing ec o nomic ties among the member countries of the former So v i e t Un i on. Ther e is an urgent need for s ome kind of economic union because the Soviet econo- m y was totall y c e ntralized w ith ve r y littl e redundanc y bu i lt into the sy stem and if the lifeline s are cut, individual countries bleed to death, as the e x ample of Ukraine demon s trates. But the newly indep e ndent states justly fear the pro s pect of renewed domina - tion b y Moscow and Western participation could alla y their fears.

Perhaps the greatest accomplishment of the Marshall Plan was that it fostered European cooperation. The need for coopera - tion among the formerly communist countries is even greater than it was in post - war Europe and it is in this field that the Partnership For Peace could make its greatest contribution to security. But the reform and reconstruction of economic ties among the formerly communist countries should not be pursued at the e x pense of their integration into the European economy . Countries like Hungary have almost completely broken their dependence on the Soviet market; the y need better access to European markets more than any other form of economic assis- tance. B y allowing differentiated treatment, including member- ship in the European Union and NATO, the Partner s hip For Peace should help fulfill their aspirations.


I r e alize that the mood in the NATO membe r countries is not favorable fo r the kind of radical new departure I advocate. But at least the n e ed for it is recognized; otherwise, the paltry measure s offered by the U'S . administration would not have been named "Partnership For Peace . "


I am con v inc e d that th e kind o f Pa rtn ers h i p F or P eace I ou tlin ed h ere is feas ibl e . I t wo uld b e we l co m e d b y b o th Ru ss i a and th e o t her new l y inde p e n de n t sta t es, as we ll as th e co unt ries of C e nt ra l Europe. It wo uld be f a r c h eaper than a ll ow in g t h e inci p ient world disorder to develop unh indered . It wou ld c h ange t he co u rse of history for the b e tt e r.

There is little time left befo r e t h e January NATO su mm it and Presiden t Clinton's visit t o Moscow . Never th e l ess, I hope th at my proposal will receive seri ou s c o n si d era ti o n.



29 November 1993



To be effective , economic a id ought to be minimi z ed and not ma x im iz ed because it is a means to an end and not an e nd in itself . The g oal of the Partnership Fo r Peace is to cr e ate a state of law both w ithin Russia and th e othe r newl y - independ e nt states and among them . Wi t hout a legal framework there can be no eco - nomic de v elopment . E c onomic development does require capital and know - how b u t it should be s upp l ied b y the private sector. The ro l e of foreign aid is to provide an inducement b oth for the dev e lopment of the l ega l f ra m ework and for the private sector to par t icipate. In practice, the Par t nership fo r Peace would include l i t t le addi t iona l f in a n c i al com m itm e nt be y ond that whi c h ought t o be provided b y t h e G7 proce s s but is no t . It would consist ma i n ly o f a s ub s id y to the m i litar y in t h e fo r m o f j oi nt exercis e s.


The Soros

Foundations, New York, 29 November 1993.

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