November 30, 2006
By Edwin J. Feulner, Ph.D.
It's always a pleasant surprise when a government program works
well and accomplishes what it was set up to do. And it's always
unpleasant, but never really a surprise, when a successful program
is hampered by government's tendency to micromanage. Both are
happening right now.
First, some background.
In 1989, the Berlin Wall was finally torn down. Residents of
countries that had spent decades behind the Iron Curtain celebrated
the death of communism and their first taste of freedom. But when
the dust settled, many found themselves wondering, "What next?"
To get their economies moving in the right direction, Congress
passed the East European Democracy Act. The idea was to create
enterprise funds to invest in existing companies, start new
businesses and provide loans to individual entrepreneurs.
These enterprise funds were set up first in Poland and Hungary.
Washington contributed $300 million in grants, but the funds were
run by private individuals working pro bono.
Within 10 years, Poland's economy was humming. So many people
were eager to invest directly that an enterprise fund was no longer
needed. Its assets were sold off, with half the money going to the
U.S. Treasury and the rest used to fund the Polish-American Freedom
Foundation. That organization is still paying dividends for the
United States: It works hard to promote civil society, democracy
and the market economy, and it doesn't cost American taxpayers a
And here's where today's debate begins.
A number of similar enterprise funds, including those in
Hungary, Russia and Central Asia, are preparing to wind down. These
areas have improved so much that, as in Poland, private investors
are lining up. In Russia, for example, the enterprise fund
established Delta Bank, one of the first banks in that country to
provide credit cards to middle-class Russians. It was so successful
that GE Consumer Finance paid $100 million to buy it.
So as the enterprise funds close -- "victims" of their own
success -- the question is what to do with the capital they've
built up. Some in our government want the same deal they got from
the Polish fund: half for the Treasury, half to promote freedom and
But this wouldn't be a good deal for American taxpayers. When
the Polish fund closed, the money it provided to the Treasury was
simply swallowed up. Sad to say, but a few hundred million dollars
doesn't go very far in Washington, D.C.
This same investment, though, would make a big difference in
Russia, where President Vladimir Putin's government seems to be
sliding back toward autocracy. The United States needs to promote
the rule of law, encourage open government and protect access to
information in Russia. If our bureaucrats will allow it, we could
set up a private foundation right away with the $330 million earned
by the U.S. Russia Investment Fund.
This idea has broad support on Capitol Hill and in the
"At a time when U.S. funding is declining in Russia for
pro-democracy, rule of law and civil society assistance programs,"
Sen. Richard Lugar wrote this summer, such an investment would
"provide an opportunity to make important contributions and achieve
results in Russia." And, he notes, these advantages would come "at
no cost to the taxpayer."
While in St. Petersburg for the G-8 Summit this year, President
Bush announced plans to form such a foundation. But while parts of
the government (State Department, USAID) support it, the Office of
Management and Budget opposes it, because it wants the money now
and apparently isn't considering the long-term benefits a
foundation could deliver.
It's time to make this worthwhile project happen.
We've already shown Eastern Europe the best the United States
has to offer. Let's make sure we keep doing so, by investing all
the earnings from the various enterprise funds in efforts to
promote freedom in the region.
is president of The Heritage Foundation (heritage.org), a
Washington-based public policy research institute and co-author of
the new book Getting America Right.
First appeared in the Chicago Sun-Times
It's always a pleasant surprise when a government program works well and accomplishes what it was set up to do.
Edwin J. Feulner, Ph.D.
Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
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