Don't Throw Money At Kosovo

SARAJEVO -- Last week U.S. President Bill Clinton visited Kosovo with his daughter Chelsea and spoke with all the main players in the continuing local crisis. To the ethnic Albanians he preached forgiveness. To American troops he held up their multi-cultural togetherness as an example for the Kosovars. But to the international community administering Kosovo, Mr. Clinton had nothing to offer. It will probably continue a policy stance that could only be described as "aid blackmail." That is, before the locals get any services or serious economic assistance, there has to be reconciliation between ethnic Albanians and Serbs. But looking at the way the Kosovars are taking care of themselves, perhaps the aid money should be held up for ever, even if reconciliation is achieved.

For a look at how aid money can be counterproductive, look at Bosnia. A new report from the International Crisis Group proclaims that, in effect, the Dayton Agreement, which patched Bosnia-Herzegovina back together, has failed. Residents of its capital, Sarajevo, have been slow to repaint and rebuild its damaged buildings. Unemployment remains extremely high, wage earners go for months without seeing a paycheck, and pensioners seem ready to riot. A series of labor demonstrations at the end of October appear to have been orchestrated by ex-Communist union leaders and insiders in the Bosnian government, but nonetheless illustrated the depth of popular disaffection.

Part of the problem is rooted in Bosnia's past. Of the six "republics" and two "autonomous provinces" that made up Titoite Yugoslavia, a Marxist state, Bosnia was always considered the most Yugoslav, the most Titoite, and the most socialist. Today, this heritage manifests itself in diverse ways. Bosnia's residents, at least in Sarajevo, are extremely irritable about hearing Marshal Tito described as a "dictator," since, they insist, they lived well under his rule.

In fact, Tito's Yugoslavia survived on a kind of dual international welfare system. The Russians paid the Yugoslavs, including many Bosnians, hard currency to build buildings, computers and ships. The West subsidized the Yugoslav military on the presumption Belgrade would side with NATO in a war against the Warsaw Pact. When the Wall came down in 1989 and the Cold War ended, neither side needed Yugoslavia any more, and the shock blew the country apart.

Since the Dayton peace agreement, the international community has, curiously enough, revived Titoism in a new form. They did not encourage the Bosnians to tap their own resources -- a high level of education and a tradition of links to the outer world -- to find a global niche for an independent Bosnia. Rather, the foreign powers spent money mainly on their own personnel, in pursuit of the politically correct but also elusive and abstract goal of ethnic reconciliation between Serbian, Croatian, and Moslem Bosnians.

Claude Ganz, a former emissary of U.S. President Bill Clinton to Bosnia, notes that as much as 30% of the Bosnian economy is directly tied to the presence of the international community, which has created little in the way of permanent local jobs. That private economic enterprise involving all three communities could put money in people's pockets and therefore dampen the fires of communal resentment was never even considered by the international powers. As Robert J. Donia of the University of Michigan put it: "All the solutions offered by the international community in the region have been statist."

So Bosnia, which has received billions in international assistance and was supposed to have been a showpiece for the politics of international rescue, is stagnating. On the other hand, Kosovo may achieve reconstruction and even prosperity much faster. Taken together, the two cases present a study in contrasts that ought to be an object lesson for future efforts at nation building.

In Kosovo, the U.N.-led government is unable to pay the salaries of public employees or enforce the rule of law. A donor's conference in Brussels this month agreed on paper to pay $1 billion for reconstruction, but no money is likely to become available before the end of the year, and probably not till the end of an exceptionally hard winter.

Paradoxically, the international community's parsimony may in fact be a boon to Kosovo. For beneath the chaos of an incompetent administration is the potential for a vibrant civil society, and already in place, a dynamic, small-scale entrepreneurial economy. This is partly because, as U.S. undersecretary of commerce David Aaron observed after a visit there, Serbian strongman Slobodan Milosevic did the Kosovar Albanians a macabre sort of favor. "There was a blessing in the last 10 years of martial law . . . in which ethnic Albanians were kicked out of managerial and administrative positions by the Serbs. The result was to create thousands of small entrepreneurs -- shopkeepers, retail distributors, builders -- and they are a vibrant group for recovery."

Mr. Aaron claimed that almost every house in Kosovo is being rebuilt. While this appears a bit too optimistic, it is true that Pristina, the Kosovo capital, seems to feature more small business on a single muddy lane than are found on the length of Sarajevo's aptly named Marshal Tito Street.

Bernard Kouchner, the international community's appointed administrator of Kosovo, has a chance to fulfill his and others' promise to avoid the mistakes made in Bosnia in this latest rescue effort. They should quit wasting vast amounts of money on reconciliation, which especially in Kosovo is an illusion at best, and concentrate on reconstruction. And they should do it by putting the economic reins in the hands of Kosovo's large and enthusiastic small business class, a social stratum that was and remains missing in Bosnia.

But they probably won't. A neocolonialist form of welfare dependency seems easier to impose. And besides, it's politically correct.

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