The Foundation's Program in Eastern Europe
1992 Annual Report
Richard E. Quandt
The events of 1989 were surprising not only because they happened at all, but also because they happened rapidly, their scope was enormous, and they occurred nearly synchronously in a number of countries with substantially different economies, ethnic compositions, political traditions, and short-term aspirations. The countries of Eastern Europe exhibit a diversity of economic characteristics (Note 1), ethnic backgrounds, and languages and, in addition, did not arrive at their revolutions by the same path. Hungary, for example, had been experimenting with looser forms of economic planning since 1968, and the freedom of writers was arguably greater there than in other Eastern European countries. But Hungary did not have a broad-based movement such as the Polish Solidarity, with which the Polish government was forced to compromise from time to time, nor a more narrowly based one such as Charter 77, which the Czechoslovak government resolutely persecuted throughout the 1980s. But the differences, large as they may have been, do not obscure the common characteristics, which have provided a basis for our general thinking about philanthropic activities in the region.
State ownership of enterprises (Note 2), required by communist ideology, prevented economic incentives, and the governments' drive for growth led to excessive investments in uneconomic heavy industries that required frequent state bailouts of near-bankrupt companies. After the revolutions of 1989, it became clear that these systems could not be salvaged and that only an unambiguous adoption of a market-oriented system could usher in an age of economic recovery. That, in turn, required the privatization of the economy and the creation of the infrastructure that market economies need, including government supervision of macroeconomic stability, financial intermediaries, and commercial legislation.
Democracy and Human Rights
With the possible exception of Czechoslovakia before 1938, none of the countries in the region had a tradition of political democracy. A widespread understanding of the basic principles of a democratic society had been lacking among the peoples of the region in 1989, and the human rights records of the pre-1989 governments were abysmal.
The Communist rulers thoroughly neglected the environment, if for no other reason than the perceived conflict between environmental protection and their growth objectives -- hence, their disinclination to use the scarce resources of their failing economies to clean up the environment. As a result, much of Eastern Europe became an environmental disaster area. Public health has also been neglected, and life expectancy in Eastern Europe is several years shorter than it is in Western Europe or the United States.
Eastern Europe imitated the Soviet system of higher education by adopting a highly compartmentalized structure characterized by: (1) universities which were designated as primarily teaching institutions, with important research carried out by institutes of the national academies of science; (2) universities with extremely narrow specializations (for example, University of Transportation in Slovakia, University of Horticulture and Food Industry in Hungary); and (3) the absence of cooperation among universities because the Communist system encouraged vertical relations between organizations (for example, between a university and a government agency controlling it) rather than horizontal ones. Combined with the low financial priority assigned by the governments to higher education, it is fair to say that the quality of higher education as well as of research declined drastically.
Since 1989, the governments of Eastern Europe have faced the monumental task of reconstructing their political institutions and economies, their environments, their systems of higher education, and, most importantly, reshaping the hearts and minds of the men and women upon whom the burdens of the transition have fallen and upon whose steadfastness future success depends. Under these conditions, Western philanthropic organizations have not faced a scarcity of worthwhile projects.
It was clear from the beginning that the needs for assistance in Eastern Europe manifested themselves in so many areas that it was difficult to imagine that any one philanthropic organization could muster the resources to make an effective contribution in all. In addition to the key areas mentioned above (economic restructuring, political democracy and human rights, the environment, and higher education) one could, in principle, add a range of other activities dealing with health and family care and all those others generally described as constituting "the social safety net." To have attempted to work in all these areas would have diluted the Foundation's efforts in any one of them, and it was therefore necessary to be willing to sacrifice some worthwhile objectives for the sake of making a greater impact on the remaining ones.
The Foundation first decided to impose on itself a geographic specialization and to concentrate on Czechoslovakia (Note 3), Hungary, and Poland. These were the countries that were relatively most advanced economically and that appeared to promise both the greatest degree of political stability in the region and the most enduring progress towards achieving democracy (Note 4). Functionally, the Foundation generally limited itself to only two areas: (1) assisting the restructuring of the East European economies by funding training efforts in economics, management, and business, and by promoting the development of market-oriented institutions, and (2) strengthening the infrastructure of universities and other institutions of higher learning, primarily by assisting research libraries and by providing higher educational institutions with computing and computer networking capabilities.
The lion's share of economic restructuring assistance has taken the form of supporting training in economics, management, and business. Communist leaders maintained an attitude of hostility toward market economies, and since the socialist economies performed "officially" as they were ordered to from above, the leaders did not believe that sophisticated economic and statistical techniques were of any value. As a consequence, few economists have been trained in Western economics and few statisticians are capable of using economic data in appropriate ways. Yet it is clear that the more indirect controls which governments employ in market economies require precisely the types of analytic and forecasting skills that economists and statisticians in the Western countries possess.
Management and business skills were equally scarce. Under the more relaxed forms of central planning, enterprise managers had some autonomy. On the whole, however, economies were run from the top down and entire fields of managerial expertise were neglected: finance, because the distinction between debt and equity was unimportant and the state provided all the financing that it deemed necessary for the enterprise; marketing, because there always tended to be a shortage of goods and no effort needed to be expended to sell them; cost accounting, because the state would make good any losses that were incurred; and banking, because banks were largely irrelevant.
It has been clear that a speedy recovery of the East European economies is essential, not only for the sake of the immediate improvement in welfare that this would engender, but also for the survival of the still fragile democracies that have been created. This means that these countries will need the services of professional economists who are able to advise ministers on macroeconomic policy, international trade, tax reform and tax policy, and economic forecasting, as well as experts who are trained in banking, portfolio management, and risk analysis. They will also need top and middle-level managers and executives who will run the soon-to-be-privatized large and medium-sized enterprises, and who will be required to function in a market environment. Finally, much hope rests on the formation of many new small businesses. For small businesses to come into being and to be able to survive, it is essential that the vast pool of potential entrepreneurs rapidly acquire certain basic business skills such as how to make a business plan, or obtain a loan from a bank or set up a bookkeeping system for the business.
These considerations have led the Foundation to conclude that economics and business training must take place on all levels, from the highest to the most basic, training experts and seeking to reach tens or hundreds of thousands of people. Fortunately, the proposals received by the Foundation encompassed all these levels. American universities and other nonprofit organizations, often working in partnership with East European institutions, took the initiative in a large fraction of these instances. In other cases, the proposals were developed entirely by East European organizations, although in some instances at the explicit invitation of the Foundation.
One of the first projects was the establishment of the Center for Economic Research and Graduate Education, a joint effort by Charles University, Prague and the University of Pittsburgh, to create a Western-style PhD program in economics. An undergraduate honors program in economics was created by a partnership between Warsaw University and Columbia University. In business and management, the Foundation supports an MBA program at Warsaw University (in partnership with the University of Illinois) and at Jagiellonian University (with the University of Hartford and several other American institutions). Finally, we should note that there exist numerous indigenous teaching institutions that provide business and management education, some of which is of a specialized nature (for example, foreign trade or hotel management). A recent report, prepared under the auspices of the Austria-based International Institute for Advanced Systems Analysis, suggests that improving the infrastructure and curriculum of this group of educational institutions is likely to have a highly beneficial impact on the quality of trainees emerging from them (Note 5).
Some projects are intended not only to train individuals, but to improve the functioning of business enterprises and entire economies more directly. The University of Pittsburgh and the Czechoslovak Management Center are providing specialized training in new-product development that the trainees can apply in their own enterprises. The MBA Corps, organized by the Kenan Institute of Private Enterprise at the University of North Carolina, provides the consulting services of recent MBAs from American business schools to selected companies. Other organizations supported by the Foundation, such as the Small Enterprise Economic Development Foundation in Budapest, operate business consulting and "incubator" services for small businesses. The Foundation in Support of Local Democracy in Poland has established fifteen regional centers for advising, teaching, and consulting with local government leaders. Finally, the Financial Services Volunteer Corps is carrying out an important effort to design appropriate financial institutions for some of the countries in Eastern Europe.
While the above classes of activities reach many individuals --- as many as several thousands every year --- they cannot reach the tens or hundreds of thousands that need to acquire rudimentary business knowledge and some understanding of market economics. For this reason, the Foundation has supported two initiatives intended to reach very large numbers of people. The first of these is a twenty-episode television series in Hungary to provide basic business education. The second one is a similar, video cassette based teaching series that will ultimately be distributed to Hungarian secondary schools, work places, and city and county libraries.
The situation in Eastern Europe does not stand still and foundations must continually monitor evolving needs. The most pervasive and enduring of these is the need to create lasting institutions that will be able to provide training long after Western interest in assisting Eastern Europe has shifted to other topics, as it undoubtedly will in time. Training provided exclusively to business practitioners who themselves will not train others (except perhaps incidentally) may be useful in the short run but fails to solve the long-run problem. Hence, the dominant approach of the Foundation's program in economics and business training has been to "train the trainers."
Another generalization (but one that does allow exceptions) is that it is more cost-effective to deliver training in Eastern Europe itself rather than in the West. A third lesson is that there is a great proliferation of business training efforts in Eastern Europe, but very little attention has been given so far to quality control or to systematic accreditation procedures. This is a problem that has to be taken seriously in the coming years.
Other priorities have shifted during the last three years: (1) It no longer appears as important as it was initially to conduct short-term workshops on "the basic functioning of a market economy," because by now large numbers of East Europeans have been exposed to these ideas; (2) Short-term workshops (of perhaps 1-3 weeks' duration) may be less effective than they used to be, because enormous numbers of these have already been organized, by both Americans and Western Europeans, and diminishing returns may have set in; (3) Short-term workshops remain effective if they are highly targeted on important, specialized subjects (for example, logistics management or banking law) in which relatively few efforts have been made so far; (4) The capital cities have experienced a surfeit of Western training programs, and training efforts henceforth ought to place heavy emphasis on provincial areas. While diminishing returns from training in economics and business are not yet generally evident, the risk of marginal effectiveness of training in specific areas requires constant monitoring.
Infrastructure Assistance to Higher Education
Computing and Networking Capabilities
Eastern Europe did not participate in the computer revolution that took place in Western industrialized countries after World War II. The main reasons for this were the suspicion with which the Soviet State treated computing and the Soviet decision to place heavy reliance in its computer industry on copying the latest (obtainable) IBM equipment rather than developing its own. Another important reason was the existence of U.S. restrictions on the export of "sensitive" equipment to the countries behind the Iron Curtain. To this day, a number of academic institutions in Eastern Europe operate old Soviet RYAD mainframes in their computer centers.
A few institutions in Eastern Europe were able to obtain some Western mainframe computers (of an older generation) and, subject to severe budget constraints, IBM-compatible personal computer clones. On the whole, however, the access of scholars and teachers to any kind of computing equipment was severely restricted as recently as 1989, with predictably detrimental effects on scholarship and education.
While an exhaustive taxonomy of what computers can do for scholarship and education is unnecessary here, we see at least four important purposes being served by easy access to computing and electronic networks in the academic environment.
Information about research findings can be disseminated rapidly, electronic "bulletin boards" permit large numbers of people interested in a common problem to hold effective group discussions, and collaborating researchers in different universities, countries, or even continents can communicate their research ideas and exchange manuscript drafts within seconds. It was clear to the Foundation that there was a considerable pent-up demand in Eastern Europe for all that computers and electronic networks can offer.
Several of the Foundation's early grants were designed to provide access to international computer networks and to create a basic computational capability in certain key institutions. Thus, grants were made to the Institute of Computer Science and Automation of the Hungarian Academy of Sciences, which became the principal EARN node in Hungary, and to the Czechoslovak Technical University, which is intended to fulfill the same role in the Czech Republic and in Slovakia. Other grants, for providing computing power or for building institution-wide networks, were made to a number of institutions, such as the JÛzsef Attila and the E-tv-s LÛr·nd Universities in Hungary, Palacky University and the Institute of Information Theory and Automation in (then) Czechoslovakia, and Catholic University of Lublin and Adam Mickiewicz University in Poland. In spite of the considerable talent of computer experts in Eastern Europe, their relative unfamiliarity with the full potential of electronic networking persuaded the Foundation to make two grants (to George Mason University) for the express purpose of spreading the "culture" of effective networking.
Progress on these fronts has been rapid, partly because hardware and software vendors have granted East European academic institutions substantial discounts, and partly because other funds have become available as well, in no small part due to the existence of more enlightened governments in the region. Fiberoptic networks connecting cities and institutions are being built, and some extremely modern equipment has found its way to Eastern Europe, such as a Cray supercomputer to Prague, eleven Convex mini-supercomputers to Poland, and numerous sophisticated workstations to several countries. The effects of these developments on the extent to which the East European academic establishment is and feels itself connected to the rest of the world are palpable.
The Foundation has had a long tradition of assisting research and academic libraries, and providing such assistance in Eastern Europe seemed to be a natural way of capitalizing on the Foundation's experience and, at the same time, assisting teaching and scholarship.
While there is substantial variation in the general condition of university and other research libraries throughout Eastern Europe, on average they find themselves in great need of various types of assistance. Some of their shortcomings are the following: (1) Because of budgetary stringencies, both before and after 1989, the buildings in which they are housed are often inadequate, lacking sufficient shelf space as well as appropriate climate and pest controls; (2) For the same budgetary reasons, and because of the ideological biases of the pre-1989 era, their holdings of Western materials tend to be poor and not up to current teaching and research needs; (3) Libraries were regarded in the Communist period only as repositories of knowledge and not as living institutions that take an active part in education --thus the use of integrated library automation systems was absent up to 1989 and access to books and journals was chronically difficult (Note 6).
When faced with this situation, the Foundation's objectives were threefold, in the order of increasing commitment of funds:
The first of these objectives was served by enabling a number of Czech, Slovak, and Polish librarians to receive intensive training in the U.S. The Foundation attempted to accomplish the second by making substantial grants to several libraries for book and journal acquisitions, as well as to the Sabre Foundation, the New School for Social Research, and other U.S. organizations for obtaining needed library materials through donations or discounted sales.
The most ambitious of these assistance programs is the third. The only library automation software that was available at all in Eastern Europe was ISIS--a useful, but relatively modest system distributed free of charge by UNESCO and capable of running even on an old-fashioned IBM/XT personal computer. Effective library operations require more ambitious software, appropriate servers with large storage capacity, and an internal electronic network with numerous terminals, as well as outside connections to INTERNET, so that foreign public access catalogues may be consulted on-line.
The needs in the various countries were quite different in many respects. We believed that in Hungary the most effective contribution was to make many relatively small grants for marginal improvements of existing systems, and several dozen libraries received assistance of this type.
In Czechoslovakia, we were persuaded that relatively little had been done to advance the cause of library automation. We invited the directors of four key libraries (Note 7) to a meeting at the Foundation's office in New York in October 1991 for the purpose of meeting representatives of the American library community and of other foundations. The outcome of this meeting was that the four library directors agreed to collaborate and to adopt a uniform approach to library automation and modernization. This agreement culminated in the creation of the Czech and Slovak Library Information Network (CASLIN), to which the Foundation made a major grant in late 1992. Management of this large project was entrusted to Mount Holyoke College, and it is our hope that CASLIN will form the backbone of a library system serving both republics, which will ultimately be joined by all other important libraries.
A third pattern became evident in Poland. The Foundation started out by making major grants to a number of important libraries (Note 8). Subsequently, these libraries discovered that they had all received grants and spontaneously decided to collaborate. As a result of this cooperation, they have decided on common integrated library automation software, and so, by a slightly different route than in the Czech and Slovak case, there is now a reasonable chance that other important libraries in Poland will ultimately adopt identical or at least compatible systems.
The smaller library projects that were typical of the Foundation's efforts in Hungary have all been successfully implemented and are contributing to scholarship and education in significant ways. The larger projects in the Czech Republic, Slovakia, and Poland are just starting, and we hope that they will show results in the next two or three years.
Several other projects were deemed meritorious by the Foundation, although they did not fall into any of the previous categories. The first of these worthy of mention is an ongoing effort by the New School for Social Research to forge and maintain intellectual and personal links with social scientists in Eastern Europe and to modernize the teaching of social sciences in the region. Because of ideological bias, the social scientists who were not Marxist-Leninists were among the most neglected and repressed of academics under the previous regimes. Revitalizing their work and their relations with the Western community of scholars appeared to be a significant step towards a broader recognition in Eastern Europe that the cause of democracy is likely to be advanced by the systematic thinking about social problems in which social scientists engage.
The second major project in this category is a pilot program of short-term fellowships for East European humanities scholars. We felt, and East European humanists agreed, that humanists were also a sadly neglected group during the previous regimes, and that East European humanists had great need to spend time in the West to acquaint themselves with on going scholarship and to pursue specific research projects. The Foundation therefore established these fellowships, approximately 25 per year, which will allow the recipients each to spend about three months at one of eight prestigious research centers in Western Europe (Note 9).
Finally, we observed that the plight of refugees is deteriorating in many parts of the world and is particularly bad in Eastern Europe, where the hostilities in the former Yugoslavia have added to an already difficult situation. In addition to grants to several refugee organizations directly involved in Eastern Europe, the Foundation made a grant to the Lawyers' Committee for Human Rights, which will enable the Committee to provide advice on refugee questions to East European agencies.
The general directions of the Foundation's grants programs have proved productive. The need for economic restructuring, and particularly for economics and management training, remains acute as does the need for improving the infrastructure of universities and other institutions of higher learning. But emphases will undoubtedly shift, in light of both changing circumstances and our observations of what works best. The Foundation's response to changing circumstances will be guided by the desire to steer a middle course between retaining flexibility and avoiding dilution of existing efforts.
The Economy and Business Training
Although the number of new and small businesses formed in Eastern Europe is one of the most encouraging economic indicators for the region, much more needs to be done in training people for small businesses. Fortunately, a number of organizations in the U.S. and in Western Europe are extremely well qualified to furnish such training, and the Foundation expects to fund in the future some projects with relatively broad appeal. It will continue to be important to train the trainers, and a recent project funded by the Foundation proposes to establish the capability of providing small-business training at several Hungarian universities.
There will continue to be a need for specialized training as more and more sectors of the East European economies become privatized and as the need arises for more sophisticated institutions. One of the potential training areas that has been neglected so far is public administration, the importance of which is increasingly recognized by the East Europeans as they realize that civil servants also need to learn about market economics.
But we must consider not only multiplying the number of institutions that can offer some type of economics or managerial training; we must also pay attention to the quality of training and research. This suggests that we shall have to consider assisting efforts to introduce accreditation procedures and peer review systems, which are generally absent in the region.
Finally, it is crucial to recognize the important role that agriculture will continue to play in the region. The potential of agriculture is high, but inefficiencies exist for which remedies must be found. First, in some regions agricultural products are not of high enough quality to compete against Western imports even on the domestic market. Second, as agriculture is privatized, tens of thousands of new managers, familiar with agricultural economics and management, will be needed in the near term. Also, farmers will need advice about techniques to achieve ecologically sound, sustainable agriculture. In addition, agricultural extension services are thought not to operate as efficiently as they might. The Foundation hopes to develop a significant program in this area, encompassing agricultural management and economics, extension services, and related areas.
Universities continue to be hard pressed to improve their infrastructure, and the Foundation hopes to continue to make contributions in this area. Some changes in approach are likely, however, because in Hungary and the Czech Republic (but perhaps not in Poland) there are some signs of greater state support for computing and networking than in the first few years following the 1989 revolutions. Accordingly, we do not expect that the support of computer and network-oriented projects in Hungary and the Czech Republic will continue on the same scale as before. (Future developments in this area in Slovakia are harder to predict.)
Libraries continue to have significant needs which remain substantially unrecognized in state budgets. The recently established library consortia in the Czech Republic and Slovakia and in Poland suggest that much is to be gained from considering library automation proposals from groups of libraries. A library automation plan developed by a group of libraries can have a number of distinct advantages over plans by individual libraries. A group plan allows economies in training library staffs and may permit a coordinated collection development program, particularly if the cooperating libraries are near one another. It is even possible that a group plan allows some hardware costs to be avoided, since two relatively smaller institutions could make do with a single server. There are encouraging signs that many research libraries want to collaborate with one another in automation as well as in defining new cataloguing standards. We therefore expect that library automation projects funded by the Foundation in the future will characteristically be for consortia of libraries. Ultimately, it is possible that all the research libraries of a given country will use the same or compatible software and will be joined in a single system.