I welcome this opportunity to testify before your committee on the dangers of the post- communist world. I feel reasonably well qualified to speak on the subject and I have a great deal to say—perhaps too much for this hearing.

I have devoted much of my time, energy, and money to Central and Eastern Europe and the former Soviet Union in the last five years because I believed that the collapse of the Soviet system was an historic, revolutionary event and that the outcome would shape the course of history.

I have established a network of foundations whose aim is to help and promote the transition from a closed to an open society. Actually, I set up the foundation in 1979 and started the first local operation in my native Hungary in 1984, but my involvement increased as the collapse of the Soviet system accelerated. There are now foundations operating in 23 different countries and my annual contributions have risen from $3 million in 1979 to $300 million in 1993—but the amount of money spent is not the best indication of the efficacy of the operation because some of the best projects take the least money.

At the time I became involved, communist dogma had given rise to a closed society in which the state was dominated by the party and society was dominated by the state. The individual was at the mercy of the party-state apparatus.

Communist dogma was false exactly because it was a dogma that claimed to incorporate the ultimate truth. It could be enforced only by doing a great deal of violence to reality and, even then, it could not be sustained indefinitely. The gap between dogma and reality became ever more evident—the sway of dogma over people’s minds ever more tenuous—until, eventually, the regime collapsed in a rapidly accelerating fashion that amounted to a revolution.

There was a moment of euphoria, in 1989, when people felt liberated from an oppressive regime and that moment could have been used to set into motion the transition to an open society. That was the opportunity I saw which induced me to throw all my energies into the process. But I must now admit that the moment has passed and the opportunity has been missed.

The breakdown of a closed society does not automatically lead to an open society, because an open society is a more advanced, more sophisticated form of organization than a closed one. Freedom is not merely the absence of repression. A society in which people are free requires institutions which protect freedom and, above all, it requires people who believe in those institutions. The institutions themselves need to be much more sophisticated because they must allow for the expression of different views and interests, whereas a closed society recognizes only one point of view—the ruling one. In short, the transition from a closed to an open society is a step forward and upward and it cannot be accomplished in one leap without a helping hand from the outside. That was my motivation for getting so involved. But the open societies of the free world were not similarly motivated. There was a lot of good will toward Eastern Europe at the time, but somehow it was not translated into effective action. Government policy, both in Europe and in the United States, was characterized by a singular lack of comprehension and lack of vision.

Compare the reaction to the collapse of the Soviet empire with the reaction to the collapse of the Nazi empire. Then, the United States still had the vision, and the generosity, to engage in the Marshall Plan, and the Marshall Plan worked wonders. It did not merely provide assistance, it provided a framework within which the countries of Europe could cooperate. It did not merely send technical experts to impart their wisdom, it brought large numbers of Europeans to the United States and allowed them to form their own agenda. We seem to have forgotten all these positive experiences. By the time the Soviet empire collapsed, there was no political support for any kind of large-scale assistance and the Marshall Plan had become a dirty word.

In the absence of Western leadership, the collapse of the Soviet system did not lead to the emergence of open societies. Moreover, there can be no assurance that what was not accomplished in the heat of the revolutionary moment will be attained by a slower, more laborious process. On the contrary, insofar as a pattern is emerging, it is pointing in the opposite direction.

The breakdown of a closed society based on the universal dogma of communism has led to a widespread rejection of all universal ideas, and the countries which used to constitute the Soviet empire are trying to find an organizing principle in their own particular history. There are, of course, exceptions to the rule. But the dominant theme which seems to be emerging is national or ethnic identity rather than any universal concept such as democracy or human rights or the rule of law or open society.

This creates a very dangerous situation because national grievances can be exploited to form more or less closed societies, and that is a recipe for conflict. In order to mobilize society behind the state, you need an enemy and, if you do not have one, you have to invent one. That is what Hitler did when he identified Jews as the enemies of the German Volk, and he has many imitators in the post-communist world. Unfortunately, there is no shortage of grievances, because communist regimes used to suppress all national or ethnic aspirations which did not suit their purposes.

Although some of the nationalist leaders are former dissidents, former communists are usually more adept at exploiting national sentiment because they understand better how to operate the levers of power. They can forge greater national consensus than democratic leaders striving for an open society. Look at Milosevic in Yugoslavia, Tudjman in Croatia, Meciar in Slovakia, and Kravchuk in Ukraine, and compare the kind of majorities they could muster at the height of their popularity with the narrow political base that pro-Western democratic governments have had to contend with in countries like Russia, Poland, Bulgaria or Macedonia.

In this context, I do not find the recent electoral victories of former communist parties in countries like Hungary, Poland or Lithuania disturbing at all. These are reform communists who want to get away from communism as far as possible. Their re-emergence constitutes a welcome extension of the democratic spectrum. I am particularly pleased with the outcome of the recent elections in Hungary. The nationalist line was rejected by the electorate, and the fact that the Socialist party entered into a coalition with the Free Democrats on the basis of a well-conceived and well-articulated reform program augurs well for the future. In the case of Poland, the changeover is less fortunate because the radical and painful reforms undertaken in 1990 had just begun to bear fruit and the government had just begun to function properly when it was defeated. But the course of reform is irreversible and Poland is probably the most dynamic country in Europe today, both in terms of its economy and its spirit. The worst that can happen is that it may lose some momentum.

All in all, I see hardly any chance of a return to communism. Communism as a dogma is well and truly dead. The real danger is the emergence of would-be nationalist dictators—I call them “NADIs” for short. They are playing in a field that is definitely tilted in their favor. It is much easier to mobilize society behind a real or imagined national injury than behind an abstract idea like democracy or open society. Building an open society is essentially a constructive process, and it is only too easy to use ethnic conflict to undermine its foundations.

Take the case of the former Yugoslavia, a relatively prosperous country which had been open to the West for twenty years and had developed the intellectual resources which are needed for an open society. I remember 1990, when monetary reform was introduced in Yugoslavia and Poland at the same time. Yugoslavia was much better prepared to carry it out. It had a group of people who had been trained by the IMF and the World Bank, and the reform was, in fact, much more successful than in Poland. That was in May 1990. Then Milosevic raided the treasury in the course of his electoral campaign and destroyed monetary stability. That was the end of the attempt to transform Yugoslavia into an open society.

And now we have an even more striking example: Greece. Here is a country that is a member of the European Union, of NATO, fully integrated into the international community. Yet it has been possible to whip up national sentiment to a frenzy over the name “Macedonia.” A small and weak neighbor to the north is blown up into a threat to the territorial integrity of

Greece. Admittedly, there is a minority in Macedonia which harbors irredentist dreams based on ethnic injuries suffered in the past. But the government of Macedonia is genuinely devoted to the creation of a multi-ethnic, democratic state. It is ready to make every concession short of giving up its own identity. But Greek public opinion resonates to the Macedonian extremists, not to the Macedonian government, and the issue has been exploited for domestic political purposes in Greece.

In the meantime, the Macedonian economy, already severely damaged by the sanctions against Serbia, is collapsing under the weight of the Greek embargo. The railroad connection runs north and south, and Macedonia is cut off on both sides. As a result, heavy industry, which relies on rail transportation, has been brought to a standstill. The economic crisis is endangering political stability. The multi-ethnic, democratic coalition is threatened by extremists on both the Slavic-Macedonian and the Albanian sides. It may easily fall apart in the next elections and, if Macedonia falls apart, we have a third Balkan war.

As you can see, there is plenty to worry about in Eastern Europe. When I embarked on my project, I was planning on a short-term campaign to seize the revolutionary moment and

to provide an example that would be followed by the more slowly moving, more cumbersome institutions of our open societies. But I was sadly mistaken. Now I must think in biblical terms— forty years in the wilderness. The battle for open society is not lost, as the examples of Poland and Hungary demonstrate, but it will take a long time and a lot of help from the outside and that is what I am worried about.

I have always been aware of a fatal weakness in the concept of open society. The weakness is that people living in an open society do not even recognize that they are living in an open society, let alone treat open society as a desirable goal for which it is worth striving and making sacrifices. In one way, freedom is like the air: people struggle for it only when they are deprived of it. When it is there, they take it for granted. But, in another way, freedom is very different; if you do not care for it, and do not protect it, it has a tendency to disappear.

If there is any lesson to be learned from the revolutionary events we have witnessed in Eastern Europe since 1989, it is that freedom is not merely the absence of repression, and the collapse of a closed society does not automatically lead to an open society.

The trouble is that this lesson has not been learned. When the Soviet empire collapsed, we had no hesitation in declaring it a victory for the free world. But, equally, we had no inclination to make any sacrifices for the sake of establishing free and open societies in that part of the world. The consequences are now painfully obvious, but we have not even started to recognize them.

What has gone wrong? I believe our concept of freedom has changed. In the Second World War, it was promoted into an idea that we were ready to fight for and to sacrifice for. And the idea as it was then conceived involved freedom not only in our own country, but also in the countries which were the victims of a totalitarian regime. This conception carried over into the post-war period. It was responsible for the dismantling of colonial regimes and the forging of an anti-communist alliance.

But gradually the idea faded and another idea emerged which explicitly rejected the pursuit of freedom as a valid objective of foreign policy. That idea was “geopolitics” which maintained that states ought to pursue their own self-interest as determined by their geopolitical situation, and moral or ethical considerations have only a secondary role to play. They can be useful for propaganda purposes—mobilizing public opinion at home or abroad—but you can get into a lot of trouble if you actually believe your own propaganda.

The companion piece to geopolitics in international relations was the concept of laissez- faire in economics, which enjoyed a miraculous revival in the 1980s. As you know, it holds that the unhampered pursuit of self-interest leads to the best allocation of resources. These have been the two main concepts which have guided us in our response to the collapse of the Soviet system and which continue to guide us today. I find that they are woefully inadequate for the situation at hand.

As long as we were locked in deadly combat with the Evil Empire we lived in a stable world order and we had a clear view of our own place in the world. The world order was stable because both sides had the capacity to destroy each other and therefore neither side could risk all-out war. And we could define ourselves in terms of our enemy: we were the leaders of the free world. But the stability of the world order has been destroyed by the internal disintegration of the Soviet empire and, what is worse, we have lost our sense of identity. We still want to be  a superpower and leader of the free world, but we do not know what these terms mean. We do not know what the free world stands for and we don’t know whether we should stand for the free world because we have come to believe that our way of life is based on the pursuit of self- interest, as exemplified by the doctrines of geopolitics and laissez-faire.

In some ways the present situation is unprecedented. In the past, peace and stability have been maintained either by an imperial power or by a balance of powers or by a combination of the two. Right now, we do not have either. The United States does not have the capacity, or the interest, to dominate the world the way Britain did in the 19th century. Britain derived enough benefit from free trade to justify maintaining a fleet in being. The United States, however, is no longer the main beneficiary of free trade and it cannot afford to be the policeman of the world. We must depend on collective action, but we have no clear idea what the collective interest is.

The result is a dangerous power vacuum. There was some hope that it would be filled by the United Nations, but the U.N. is no better than the states that constitute it. Indeed, it is worse, because the member states generally pursue their own national self-interest, to the detriment of the collective interest, and the U.N. is managed by a bureaucracy that is more interested in its own survival than in the survival of our civilization. There has been no instance in history when peace was maintained by an international institution and there is no reason to believe that the current situation will be any different.

What is to be done? I don’t have all the answers, but I have a suggestion which may help. I propose that we should declare the creation and preservation of open societies as one of the objectives of foreign policy, and in the case of the former Soviet sphere we should declare it  as the main objective. I draw a distinction between the former Soviet sphere and the rest of the world because the Soviet system has irretrievably broken down; what system takes its place will have a profound influence on the course of history and therefore on our own future. In the rest of the world, the promotion of open societies is one of many competing objectives, but in the former Soviet sphere it is of paramount importance. In my opinion even the nuclear issue ought to be subordinated to it.

When I speak of open society, I mean a form of organization that can be loosely described as democracy. But the concept of open society is more comprehensive. It means not only a democratically elected government but also a society that is not dominated by the state; that means a strong civil society and the rule of law. And it is not enough for the government to be elected by a majority; it must also respect minorities and minority opinions. In other words, I propose substituting the framework of open and closed societies for the old framework of communism versus the free world. The old framework was highly suspect even when it was relevant, because anti-communism could be used to justify actions which were incompatible with the behavior of an open society. The new framework allows us to define ourselves in terms of what we stand for rather than in terms of our enemies. It provides a perspective which is woefully lacking at present. For one thing, it tells us that nationalist dictatorships are as much of a threat today as communism used to be.

How can this perspective be translated into policy recommendations? First, we need a strong European Union capable of taking foreign policy decisions. That is missing today, as the quagmire in Bosnia has so sadly demonstrated. Second, the European Union needs to become more open, especially towards the East, and not turn into a fortress protecting itself against the turmoil outside its walls. The countries of Central and Eastern Europe need the clear prospect of being able to join the European Union in order to complete the transition to open society. They need private investment more than they need government aid, and the prospect of membership is the best recipe for attracting private investment. I believe that the United States and Germany, if not all the other members of the European Union, would agree on this point.

Third, NATO—which is essentially an alliance between North America and Europe—ought to serve as a mainstay of the new world order. Whether a direct link is needed between NATO and our Asian allies like Japan and Korea is an open question. But one thing is certain: NATO cannot fill the power vacuum that has been created by the collapse of the Soviet empire; there needs to be an alliance between NATO on the one hand and Russia and the other successor states on the other. NATO can be extended to include the Central European states which are candidates for membership in the European Union but, if it also included Russia, it would be so diluted as to become meaningless. That is the origin of the Partnership For Peace but, in its present form, the Partnership does not even begin to fulfill the function for which it was designed. It is not much more than an empty gesture. It is a worthy successor of the vacuous and dilatory policies of the Bush Administration, and it is perceived as such in Russia. Here is the point where a fresh perspective could be useful. I have argued that Russia and the other successor states are in need of outside assistance in order to make headway with their internal transformation. They do not perceive issues of external security as a threat; rather, they see them as opportunities to divert attention from their economic failure and to mobilize political support. In these circumstances, a Partnership For Peace, on its own, is bound to remain an empty gesture. It needs to be accompanied by a “Partnership For Prosperity,” a latter-day version of the Marshall Plan, to give it substance.

The idea is not as preposterous as we have conditioned ourselves to believe. It could be financed by the IMF with an issue of Special Drawing Rights and, if successful, it could be repaid in full. It would solve the most burning issue of the region: how to create a common economic space without total political domination by Russia. In this context, the recent presidential elections in Ukraine which produced a president who is genuinely interested in economic reform offers an opportunity which I hope we shall not miss. A genuine Partnership For Peace, coupled with a Partnership For Prosperity, would provide a firm foundation for a new world order. In its absence, we are going to have world disorder.

Let me end with Macedonia. This is a clear case where an ounce of prevention can save us tons of troubles. We ought to make it a matter of priority to come to the aid of this tiny country with a democratic, multi-ethnic government, which is on the verge of economic collapse for reasons which are beyond its control.