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 an 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 dime.
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 G.E. 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 democracy.
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.
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