Robert Ledger is a freelance writer and editor of the next issue of the Journal of International Relations Research.
Last month David Cameron announced that his government would be launching a “Good Governance Fund” (GGF) to encourage political and economic reform in a number of Eastern European countries, including Ukraine, Georgia, Moldova, Serbia and Bosnia and Herzegovina. The initiative has been portrayed in the press as a way to counter Russian influence in the region – to “prevent the next Ukraine” – as well as being similar to Margaret Thatcher’s “Know How Fund” (KHF), which existed at the end of the Cold War. The latter is certainly true, but whether it can have a similar impact is debatable. The strategy also poses some pertinent questions over the Conservative Party’s attitude towards aid policy.
The GGF will spend £20 million in the next year on attempting to reform these countries’ police, courts and tax systems, as well as reducing red tape, liberalising their banking and energy sectors, strengthening independent media (particularly important in combating Russian propaganda), and generally improving the business environment. This, for the most part, is remarkably similar to the KHF, launched in 1989 by Margaret Thatcher to orientate Poland towards the West. The Fund soon expanded to other countries making the transition from communism, such as Hungary, Czechoslovakia and even the crumbling Soviet Union. The KHF concentrated on technical advice for setting up a market economy, such as in banking, finance, accounting, starting small businesses and – that most Thatcherite of reforms – privatisation.
The KHF was generally considered effective in achieving its aims, and several of the countries in which it operated have been transformed. It is much less clear whether the GGF will have a similar impact. The KHF existed during the “End of History” era, which apparently saw the triumph of liberal economics and democracy. Leaders like Margaret Thatcher had cachet and appeal in the countries trying to escape communism, and the Soviet Union was in retreat. Today sees the prestige of liberal democracy dented, Russia trying to reassert itself in its near abroad, and Cameron – albeit with less time in power – lacking the influence of Thatcher.
The GGF target countries, as well as the broader region, represent quite different challenges to 1989. Georgia came 15th out of 189 in the 2015 World Bank’s “Ease of Doing Business” rankings, while Bosnia came 109th. So it is uncertain if a vehicle like the GGF can be of much use where economies have already been liberalised.
The KHF benefitted from strong civil society in places such as Poland, credible leaders like Lech Walesa and Vaclav Havel, popular opposition movements like Solidarity, as well as the macroeconomic programmes designed and implemented by the IMF. The KHF was a tool available for willing reformers. Again, it is questionable whether any of these conditions, or reformers, exist in the GGF group of states. Organisations including the European Stability Initiative have been lobbying for years to introduce the measures mentioned in the GGF announcement, in countries such as Bosnia, but without political consensus, capable leaders or a coherent civil society this has proved very difficult.
In addition, reforms such as privatisation have often already – in theory – been made, with disappointing results from a free market perspective. The KHF was set against the context of proposed membership of Europe’s political, trading and security organisations. Events in Ukraine have jeopardised this process for non-EU and non-NATO states.
The GGF, then, is a worthy scheme with impeccable Thatcherite credentials, but whether it can achieve anything like what the KHF managed to achieve is highly doubtful.