Financial Industry Must Help Revive Eastern Europe
Having been badly singed by a spate of international loan defaults, particularly in Latin America, U.S. financial institutions are justifiably reluctant to infuse massive amounts of capital into less-than-stable foreign markets.
But with the curtain falling on Soviet Communism, the U.S. financial industry should play a key role - alongside the government - in helping the nations that emerge from the rubble to develop viable democratic institutions and a workable capitalist economic system.
What Washington Should Do
It is the U.S. government's rightful role to provide, with allied nations, basic humanitarian aid in the form of food credits, medicine, and other necessities to alleviate shortages and hardships.
Our government should also grant most-favored-nation trade status, at least provisionally, to democratically elected, non-repressive successor governments.
Several billions of dollars worth of commercial bank loan guarantees should be authorized through the Export-Import Bank of the United States.
The Departments of State and of Commerce should form task forces to promote private-sector development in each formerly Communist state, and the Federal Reserve Board should help inaugurate central banks.
The Industry's Role
The U.S. financial industry should become involved in several ways.
First, financial institutions should willingly provide financing and other support through the Export-Import Bank and State-Commerce initiatives.
I would also urge major financial trade organizations to help the Federal Reserve in any activities it may undertake to help create a central banking system.
Trade groups can also help special task forces identify executives who will teach banking, insurance, and securities skills.
The financial industry has expended far too little effort on seeking to advance the cause of reform in the former Soviet Union.
Now is the time to get involved, not only for altruistic reasons but also to make contacts with potential business leaders who could help create investment opportunities. It is certain that the European Community will be working diligently along this line, as will the Japanese.
|They Need Our Know-How'
Sen. Claiborne Pell, D-R.I., chairman of the Senate Foreign Relations Committee, said recently of the emergence of capitalism in the Soviet Union:
"It will take work by them and require help from us. They need our know-how. How do you develop a free market, how do you run a stock market, how do you set up a banking system?"
Sen. Pell is keenly aware of the role that the United States and U.S. industry should play in helping the successor states of Eastern Europe to transform themselves into modern, free, democratic nations.
A Follow-Up Investment
Since 1945, the United States has spent trillions of dollars on containing the military threat posed by Soviet tanks, rockets, and submarines.
Now, does it not make sense to invest substantially in the exciting transformation of the successor states to help ensure that the dollars spent on weapons will not have been wasted?
Of course it does.
For the United States and its financial industry, it is time to go to work. There is much to be done.
Mr. DeVito is executive director of the Rhode Island Bankers Association, Providence. These views are his own and not necessarily those of the association.