A longer and more detailed version of this article appeared with the Harvard University Center for European Studies working paper series in 1992. For the tremendous amount of help I received in researching and writing this article, I thank Joe Achen, George Breslauer, Eileen Doherty, Philip Goldman, Ernst Haas, Peter Katzenstein, Todd LaPorte, Andrew Moravscik, John Odell, Molly O'Neal, David Spiro, David Stuligross, Raymond Vernon, Felicia Wong, Mark Zacher, Nicholas Ziegler, John Zysman, and two anonymous reviewers. I also thank the many European Bank for Reconstruction and Development staff, government officials, and business people who granted me interviews; I have honored requests for anonymity by providing only institutional affiliations. The Council on Foreign Relations and the University of California at Berkeley Simpson Chair in International Relations provided research support.

1. European Bank for Reconstruction and Development (EBRD) Articles of Agreement, Article 1.

2. Geoffrey Garrett reviews this point in “International Cooperation and Institutional Choice: The European Community's Internal Market,” International Organization 46 (Spring 1992), pp. 533–60.CrossRefGoogle Scholar

3. I am borrowing and adapting slightly categories described by Oran Young in “The Politics of International Regime Formation: Managing Natural Resources and the Environment,” International Organization 43 (Summer 1989), pp. 349–75.CrossRefGoogle Scholar I am avoiding here a full-fledged review of regime theory and associated arguments but will later discuss some relevant arguments not included in Young's categorization.

4. This is the familiar hegemonic stability thesis, modified to provide for the possibility of k-groups for the perpetuation of extant cooperation by Snidai. See Snidal, Duncan, “The Limits of Hegemonie Stability Theory,” International Organization 39 (Autumn 1985), pp. 579–614 and in particular p. 599.CrossRefGoogle Scholar The choice of alternative institutions can reflect the powerful state's valuation of the distributional consequences of the choice. See Krasner, Stephen, “Global Communications and National Power,” World Politics 43 (04 1991), pp. 336–66.CrossRefGoogle Scholar

5. Young, , “The Politics of International Regime Formation,” pp. 357–58.Google Scholar

6. For a review of these steps, see Scott, W.Richard, “Unpacking Institutional Arguments,” and Scott, W. Richard and Meyer, John W., “The Organization of Societal Sectors: Propositions and Early Evidence,” both in Powell, Walter W. and Dimmagio, Paul J., eds., The New Institutionalism in Organizational Analysis (Chicago: University of Chicago Press, 1991).Google Scholar

7. See for example Scott, W. Richard and Meyer, John W., eds., Organizational Environments: Ritual and Rationality (Beverly Hills, Calif.: Sage, 1983);Google ScholarScott, W. Richard, Organizations: Rational, Natural and Open Systems, 2d ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1987); and Scott, “Unpacking Institutional Arguments.”Google Scholar

8. Scott, , “Unpacking Institutional Arguments,” p. 167.Google Scholar

9. See for example Snidai, “The Limits of Hegemonie Stability Theory.”

10. For a recent example where authority claims are said to be validated increasingly on the basis of scientific rationality and efficiency criteria instead of through coercion and force, see Rosenau, James N., Turbulence in World Politics: A Theory of Change and Continuity (Princeton, N.J.: Princeton University Press, 1990).Google Scholar

11. See Gilpin, Robert, War and Change in World Politics (Cambridge: Cambridge University Press, 1981);CrossRefGoogle Scholar and Blainey, Geoffrey, Causes of War (New York: Free Press, 1973).CrossRefGoogle Scholar

12. Scott, and Meyer, , “The Organization of Societal Sectors,” p. 117.Google Scholar

13. See Tagliabue, John, “Polish Debt Rescheduling Deal,” The New York Times, 11 11 1989, p. Al;Google ScholarLeadbeater, Charles, Garnett, Nick, and Marsh, Peter, “Investing in the Revolution,” Financial Times, 15 01 1990, p. 16;Google Scholar and Murray, Alan, “Poland's Hope for Strong U.S. Investment May be Misplaced, at Least in Short Run,” Wall Street Journal, 7 12 1989, p. 13.Google Scholar About $1.6 billion of German aid was targeted for bank loan guarantees and insurance for joint ventures; see Tagliabue, John, “Kohl Recalls Auschwitz and Agrees to Aid Poles,” The New York Times, 15 11 1989, p. A14;Google Scholar and Poland/Hungary, Aid for Restructuring Economies (PHARE), “Indicative Financial and Aid Commitments and Near Commitments in Favour of Poland and Hungary,” internal document, 5 03 1990.Google Scholar

14. See Lloyd, John, “Central Europe Urged to Lay Welcome Mat for Foreign Investors,” Financial Times, 31 07 1990, p. 2;Google Scholar and “G-24 Assistance to Central and Eastern Europe: Summary Tables,” European Community (EC) Commission document prepared for G-24 Ministerial Meeting, 11 11 1991. The statistics were roughly similar a year later;Google Scholar see “Central and Eastern Europe in Transition,” Schroder Economics Report, 08 1991;Google Scholar and “Aid to Eastern Europe: The Scorecard,” The Economist, 29 06 1991.Google Scholar

15. “Central and Eastern Europe in Transition,” Schroder Economics Report.

16. See Fidler, Stephen, “Polish Debt Rescheduling Deal,” Financial Times, 17 February 1990, p. 2;Google Scholar and Greenhouse, Steven, “Poland's Foreign Lenders Accept Unusual Extension of Payments,” The New York Times, 17 02 1990, p. Al.Google Scholar

17. Mitterand's promise fell short of a total cancellation of Poland's official debt. See Davidson, Ian, “France Agrees on Aid Package for Poland,” Financial Times, 30 05 1990, p. 3.Google Scholar

18. In 1989 Japanese exports to and imports from CEE made up just 0.23 percent and 0.35 percent of Japanese totals, respectively.Google Scholar

19. See Weisman, Steven R., “Japan Moves Toward Modest Aid Plan For Poland,” The New York Times, 29 10 1989, p. A19;Google Scholar and Japan External Trade Organization survey, as reported in Wyles, John, Financial Times, 5 06 1990, p. 3.Google Scholar

20. See Dubois, Martin, “Japan's Prime Minister is Ready to Seek Closer Ties with European Community,” Wall Street Journal, 10 01 1990, p. 10;Google ScholarSekiguchi, Waichi, “Kaifu's Europe Trip: A Boost for Japan Diplomacy—And His Image,” Japan Economic Journal, 13 01 1990, p. 1;Google Scholar and Weisman, Steven, “Tokyo Broadens Plan to Aid a New Poland and Hungary,” The New York Times, 7 01 1990, p. 8.Google Scholar

21. One exception was the substantial joint venture investment by Suzuki in Hungary reported in Graven, Kathryn, “Suzuki Reaches Accord to Build Cars in Hungary,” Wall Street Journal, 10 01 1990, p. 1.Google Scholar For further details see The Economist, 29 06 1991;Google Scholar and Japan Economic Journal, 24 02 1990.Google Scholar For reasons why this was not seen as a harbinger of broader involvement by Japanese firms, see Wagstyl, Stefan, “Japanese Bank Sees 10 Percent Growth for E. Germany,” Financial Times, 28 06 1990, p. 4.Google Scholar

22. Secretary of State Baker, James, “The Euro-Atlantic Architecture: From East to West,” speech delivered at the Aspen Institute, Berlin, 18 06 1991, reprinted in U.S. Department of State, Dispatch, vol. 2, no. 25, 1991.Google Scholar

23. Personal interviews with U.S. Foreign Service officer in Europe, Brussels, 06 1990, and with U.S. National Security Council (NSC) official, Washington, D.C., December 1990.Google Scholar

24. Washington had already pledged $219 billion to Poland for food aid and technical assistance. See “U.S. Considers New Steps to Help Polish Economy,” Wall Street Journal, 29 09 1989;Google ScholarFriedman, Thomas, “White House Adds $200 Million to Polish Aid Plan,” The New York Times, 5 10 1989, p. A11;Google Scholar and Seib, Gerald F., “Bush Proposes Aid of $200m for Poland Fund,” Wall Street Journal, 5 10 1989, p. 3.Google Scholar

25. Bush reluctantly signed the “fiscally irresponsible” bill, saying that the $850 million commitment was twice what he had wanted. See “House Approves an Aid Package for Poland,” The New York Times, 17 11 1989, p. A28. The same constraints were evident in the 1990 foreign aid bill in which Poland, although described as the big winner, received just $225 million.Google Scholar See Pear, Robert, “Poland is Big Winner as Administration Lists Shifts in U.S. Foreign Aid,” The New York Times, 1 02 1990, p. A4.Google Scholar

26. However, U.S. money came disproportionately in the form of grants, as compared with other donors. See “Business This Week: Heading East,” The Economist, 29 06 1991, p. 55.Google Scholar

27. See Dawkins, William, “Bush's Business Friends Back his Vision of Europe,” Financial Times, 28 December 1989, p. 3;Google Scholar and testimony of Mark Palmer, former U.S. ambassador to Hungary, in U.S. Congress, House Committee on Foreign Affairs, United States Policy Toward Eastern Europe: Hearings Before the Subcommittee on Europe and the Middle East, 101st Congress, 2d sess., 5 06 1990, p. 6.Google Scholar

28. Personal interview with a chief executive officer of a major U.S. industrial concern, Washing-ton, D.C., 06 1990.Google Scholar For samples of the published opinion, see Leadbeater, Charles, Garnett, Nick, and Harsh, Peter, “Investing in the Revolution,” Financial Times, 15 01 1990, p. 16;Google Scholar and “Conversation with John F. Smith” (vice-chairman of General Motors), Europe, 09 1990, p. 18.Google Scholar

29. EC Commission, “The Development of the Community's Relations with the Countries of Central and Eastern Europe,” communication from the EC Commission to the EC Council and EC Parliament, Brussels, 1 02 1990.Google Scholar

30. EC Commission, “The Development of the Community's Relations with the Countries of Eastern Europe.” See also “Conclusions of the Group of 24 February Meeting,” EC News, no. 5/90, 20 02 1990.Google Scholar

31. Personal interviews with U.S. Foreign Service Officer in Europe and EC official connected with PHARE, Brussels, 06 1990.Google Scholar

32. Personal interview, U.S. Foreign Service Officer in Europe, Brussels, 06 1990.Google Scholar

33. See World Bank Transition 2 (06 1991), p. 10;Google ScholarMurray, , “Poland's Hope for Strong U.S. Investment May be Misplaced, at Least in the Short Run,” Wall Street Journal;Google ScholarNorris, Floyd, “Eastern Bloc Shift Worries Western Banks,” The New York Times, 4 01 1990, p. Cl;Google Scholar“Poland Proposes Reduction on Debt,” Financial Times, 15 06 1990, p. 2;Google Scholar and Cohen, Norma, “Banks Wary Over Loans to Eastern Europe,” Financial Times, 1 03 1990, p. 2.Google Scholar

34. This description of France's strategy and the quotation are from personal interviews with two senior EC officials of DG-I (external relations), Brussels, 06 1990.Google Scholar Mitterrand's speech before the European Parliament is reported in Ferdinand Protzman, “Bonn Giving Poles Aid of $1 Billion,” The New York Times, 26 10 1989, p. Al.Google Scholar

35. Personal interviews with senior EC official, DG-II, Brussels, 06 1990, with PHARE official, Brussels, 06 1990, with EBRD official, 06 1991, with U.S. Foreign Service officer in Europe, Brussels, 06 1990, and with E.C. representative in United States, 05 1990.Google Scholar Also see Norman, Peter, interview with Jacques Attali, “European Bank Aims to Start Lending by June,” Financial Times, 15 04 1991, p. 1.Google Scholar

36. Personal interview with EBRD official, London, 06 1991.Google Scholar

37. Personal interviews with EBRD officials, London, 06 1991.Google Scholar

38. These concerns are drawn from personal interviews with British, French, German, and EC officials with first- Or second-hand knowledge of the negotiations and were conducted at EBRD, London, and in Brussels, 09 and 12 1992.Google Scholar

39. Riding, Alan, “Western Europe Pledges to Aid East,” The New York Times, 19 11 1989, p. A28.Google Scholar

40. Personal interview with U.S. Federal Reserve official, Washington, D.C., 12 1990.Google Scholar

41. Britain, Germany, and Holland were key supporters of a central American role in the bank. Based on personal interview with EC official, DG-II, Brussels, 06 1990;Google Scholar and personal interview with PHARE official, Brussels, 06 1990.Google Scholar

42. Mitterrand could not really speak with the authority of the EC, since the presidency of the EC was about to pass from France to Ireland. Commission officials were surprised and annoyed at Mitterrand's move. Based on personal interviews with EC officials, Brussels, 06 1990, and with an EBRD official, London, 06 1991.Google Scholar

43. Interview with U.S. NSC official, Washington, D.C., 12 1990.Google Scholar Also see Riding, Alan, “Bush and Mitterrand Meet Today on Europe's Role,” The New York Times, 6 12 1989, p. A5.Google Scholar

44. Skepticism about regional banks was long-standing and deep. For discussions, see Dell, Sidney, The InterAmerican Development Bank: A Study in Development Financing (New York: Praeger, 1972);Google ScholarWilson, Dick, A Bank for Half the World (Manila: Asian Development Bank, 1987);Google ScholarRowan, Hobart, “The Washington Agenda,” Institutional Investor, 15 09 1981, pp. 337–38;Google Scholar and the particularly blunt statements in testimony of Conrow, James W., deputy assistant secretary of treasury for international affairs, in U.S. Congress, House Committee on Banking, Finance, and Urban Affairs, To Provide for Increased Participation by the U.S. in the IBRD, IFC, and African Development Fund: Hearings Before the Subcommittee on International Development Institutions and Finance, 99th Congress, 1st sess., 16 04 1985, pp. 9 and 23“.Google Scholar

45. IMF conditionality has (justifiably) attracted much more attention than have the small private-sector lending programs developed by the World Bank and regional development banks during the 1980s. For a more detailed discussion of changes in World Bank market-oriented lending philosophy and practice, see Weber, Steve, “Origins of the European Bank for Reconstruction and Development,” working paper of the Center for European Studies, Harvard University, 1992.Google Scholar

46. This conclusion is based on personal interviews with a U.S. NSC official, Washington, D.C., 12 1990, with U.S. State Department official, Brussels, 06 1990, and with EBRD officials, London, 06 1991.Google Scholar

47. Ibid. Several participants told me that Brent Scowcroft played a central role in support of American participation, but I have not been able to confirm this directly.

48. Now the member states plus the EC and EIB would take just over 50 percent of shares, while Japan, the Soviet Union, and the United States would each take 8.5 percent. Personal interview with U.S. Foreign Service officer, Brussels, 06 1990.Google Scholar

49. See Buchan, David and Raun, Laura, “Brussels Steps Up the EC Drive to Aid East Europe,” Financial Times, 12 01 1990, p. 3;Google ScholarGreenhouse, Steven, “New Bank to Help East Bloc Revive Its Economy,” The New York Times, 14 01 1990, p. A10;Google Scholar and personal interview with U.S. Foreign Service officer, Brussels, 06 1990.Google Scholar

50. Personal interview with U.S. NSC official, Washington, D.C., 12 1990.Google Scholar See also Greenhouse, Steven, “Talks on a Bank to Finance East Bloc End in a Dispute,” The New York Times, 17 01 1990, p. A6.Google Scholar

51. See “Eastern Europe,” in Europe General News, no. 5174, Agence Internationale d'Information Pour La Presse, Brussels, 18 01 1990, p. 9.Google Scholar

52. Personal interview with U.S. Treasury Department official, Washington, D.C., 11 1990.Google Scholar

53. Personal interviews with French Foreign Affairs officer, Berkeley, Calif., 05 1990, and with European Commission official, Brussels, 05 1990.Google Scholar

54. Personal interviews with U.S. NSC official, Washington, D.C., 12 1990, with EC official, Brussels, 06 1990, and with U.S. State Department official, Washington, D.C., 12 1990. According to the latter, some U.S. participants in this meeting felt that “the French plan looked very much like the failed multilateral development banks of the past, as if the French had learned nothing from the experience with Latin America.” Washington also remained worried about the proposed status of the Soviet Union in the EBRD.Google Scholar

55. Personal interviews with senior NSC official, 12 1990, and with U.S. State Department official, Washington, D.C., 12 1990.Google Scholar

56. Personal interview with U.S. NSC senior official, 12 1990.Google Scholar

57. Personal interviews with U.S. NSC senior official, and with U.S. State Department official with first-hand knowledge of the negotiations, Washington, D.C., 12 1980.Google Scholar

58. See Greenhouse, Steven, “New Bank for East-Bloc Aid Extends Scope to Public Works,” The New York Times, 12 03 1990, p. A9.Google Scholar

59. Personal interviews with U.S. State Department official, Washington, D.C., 12 1990, and with U.S. Federal Reserve official, 12 1990.Google Scholar The United States pressed for its own, nonrotating seat on the board, which assured that other large subscribers would do the same. For an account of continuing disagreements over the role of the board versus management in setting operational policies for EBRD, see Riddell, Peter, “Shareholders in EBRD Call on Attali to Rethink,” Financial Times, 30 07 1990, p. 1;Google Scholar and Farnsworth, Clyde H., “U.S. May Not Support East Europe Aid Bank,” The New York Times, 4 08 1990, p. A18.Google Scholar

60. On results of other programs that use local development finance institutions, see testimony of Owen, Henry in U.S. Congress, House Committee on Banking, Finance, and Urban Affairs, U.S. Role in the International Economy—The Value of U.S. Participation in Multilateral Development Bank: Hearings Before the Subcommittee on International Development Institutions and Finance, 99th Congress, 1st sess., 4 04 1985, p. 44.Google Scholar On how EBRD might suffer from similar problems, see testimony of Roberts, Paul Craig, in U.S. Congress, Senate Committee on Foreign Relations, European Bank for Reconstruction and Development: Hearings Before the Subcommittee on International Economic Policy, Trade, Oceans, and Environment, 101st Congress, 2d sess., 22 03 1990, p. 24.Google Scholar

61. In Washington, Republican Senators Dole and Kasten spearheaded a move against U.S. participation, arguing that EBRD could not and would not improve on the performance of other regional development banks, particularly when it came to private-sector lending and SME projects. Similar arguments were made in Britain and the Netherlands. Other EC states were concerned mostly with limited distributional issues, about where the bank would be based, and who would serve as president. See Farnsworth, Clyde H., “U.S. Role in Aid Bank Draws Fire,” The New York Times, 12 04 1990, p. Cl;Google Scholar Letters to editor, The New York Times, 22 04 1990;Google Scholar Editorial, “Mitterrand's East Bank,” Wall Street Journal, 6 04 1990, p. A18;Google Scholar U.S. Congress, House Committee on Banking, Finance, and Urban Affairs, Proposed U.S. Participation in the European Bank for Reconstruction and Development, and Update on Exchange Rate Report, Subcommittee on International Development, Finance, Trade, and Monetary Policy, 101st Congress, 2d sess., 9 05 1990, especially pp. 2, 10, and 47;Google Scholar and personal interview with PHARE official, Brussels, 06 1990.Google Scholar

62. See testimony of Mulford, David, in U.S. Congress, European Bank for Reconstruction and Development: Hearings, pp. 13 and 20, from which the quotation was drawn.Google Scholar This was certainly reinforced by more plain U.S. interests: since given the weaker position of U.S. banks and corporations in CEE relative to German and others, a U.S. commitment to EBRD could be a sensible and “good investment for U.S. business.” See testimony of Ed Hewett, then a senior fellow at the Brookings Institution, Washington, D.C., in ibid., p. 27.

63. Both quotations are drawn from the testimony of Mulford, in ibid., pp. 5, 16, and 17. Treasury Secretary Nicholas Brady had told a House subcommittee one week earlier that “the U.S. does not want to be a part of the bank if a major part of the funds are diverted to Soviet lending.” In an acknowledged compromise from the earlier U.S. stance, Brady asked that EBRD limit Soviet borrowing to Moscow's hard currency, paid-in subscription for five years, with a change after that time requiring approval by countries holding 85 percent of the bank's shares. See Farnsworth, Clyde H., “U.S. Threatens Not to Join Bank for East Europe if Soviets Benefit,” The New York Times, 15 03 1990, p. Al.Google Scholar

64. Testimony of Mulford, in U.S. Congress, European Bank for Reconstruction and Development: Hearings, p. 17.Google Scholar

65. This was particularly the case for Britain, Japan, and the Netherlands. None of these governments threatened explicitly to drop out of the bank over this issue but each gave signals it would take a more distant view of EBRD if the United States were not a member. See Farnsworth, “U.S. Threatens Not to Join Bank for East Europe if Soviets Benefit.” The CEE countries themselves badly wanted the United States to be a member of the bank for obvious political and economic reasons.

66. It was also agreed that EBRD would be capitalized initially at ECU 10 billion (about $12 billion, one-fourteenth of the World Bank's size), with 30 percent of capital paid in (either in ECU, dollars, or yen on the basis of a fixed exchange rate). See Riding, Alan, “Industrial Nations to Create Bank to Aid Eastern Europe,” The New York Times, 10 04 1990, p. C12.Google Scholar

67. This observation is from a personal interview with U.S. Federal Reserve official, Washington, D.C., 12 1990.Google Scholar See also Greenhouse, Steven, “Frenchman Head of New Aid Bank,” The New York Times, 21 05 1990, p. C4;Google ScholarNorman, Peter, “Mitterrand Sees Wide Role for New European Bank,” Financial Times, 30 05 1990, p. 2;Google Scholar and particularly the comments of Secretary Brady cited in Greenhouse, Steven, “A New Bank Plans East European Aid,” The New York Times, 30 05 1990, p. A8.Google Scholar

68. For Attali's view, see “The Bank of Europe's Post Cold War Program,” speech delivered to Bretton Woods Committee, 22 09 1990, reprinted in Harvard International Review 13 (Fall 1990), pp. 8–11.Google Scholar

69. The International Finance Corporation mandate is to lend to the private sector but not specifically to SMEs, and in practice it has had difficulty identifying bankable SME projects not funded by commercial lenders or dependent on import protection. As a result corporation loans have tended to support large-scale, sometimes government-assisted projects heavily oriented toward the export sectors, and it has been criticized for duplicating and crowding out private investors. See World Bank, “The Development and Contribution of IFC Operations,” IFC Discussion Paper no. 5, Washington, D.C., 1989.Google Scholar

70. That is, the development of new small businesses under the direction of private citizen entrepreneurs was thought to reinforce in Europe the political foundations of democracy, even as the economies of these countries as a whole suffered the aggregate traumas of transition.

71. EBRD, “EBRD,” mimeograph, London, 5 09 1990.Google Scholar(This was a document issued by the bank to private-sector institutions.) Bank officials connected with finance acknowledged the tension between this corporate culture issue and the natural tendency of the new bank to act conservatively (in part to retain a Triple-A credit rating) but thought that an appropriate balance could be struck over time (personal interviews with EBRD officials, London, 06 1990).Google Scholar

72. See Norman, Peter, interview with Attali, Jacques, Financial Times, 15 04 1991, p. 1.Google Scholar

73. For evidence of this change, see the contrast between the tone of 1990 and 1991 articles in the European press and those appearing in 1992.Google Scholar For example, The Economist said of EBRD in spring 1991 that if “EBRD didn't exist it wouldn't have to be created.”Google Scholar In 1992 the headline “EBRD Wins Credibility With a Hard-Nosed Approach” appeared in Judy Dempsey, Financial Times, 31 03 1992, p. 2.Google Scholar

74. EBRD, “EBRD,” p. 3.Google Scholar

75. This was brought out most poignantly by representatives from the CEE countries themselves when bank shareholders met in London in 01 1991.Google ScholarOld troubling questions—especially, Did the EBRD have any particular reason to exist?—were raised again, if more quietly, at this meeting. Personal communications with U.S. State Department official, Washington, D.C., 03 1991Google Scholar, and with U.S. Treasury Department official, Washington, D.C., 03 1991.Google Scholar

76. Of course, the scope and consistency of reform measures varied widely, and recession in the West was a factor. But even so, FDI was minimal: Hungary, the most successful of the three countries, took in just $0.9 and $1.5 billion in 1990 and 1991, respectively, which was 60 percent of total FDI in the region but just under 1 percent of total worldwide FDI.Google Scholar

77. See the remarkable results of a survey of fifty-four large firms reported by Collins, Susan and Rodrik, Dani, Eastern Europe and the Soviet Union in the World Economy (Washington, D.C.: Institute for International Economics, 1991), appendix C, pp. 141–51.Google Scholar

78. The 04 1991 white paper issued by the bank in connection with its formal inauguration demonstrates the modified rationale, stressing the need for the bank to focus on “basic market economy building blocks” that “will necessitate difficult and time-consuming preparatory steps, essential for the development of the human and institutional base” of a market.Google Scholar See EBRD, “Operational Challenges and Priorities: Initial Orientations,” mimeograph, EBRD, London, 04 1991.Google Scholar

79. The obvious parallel here is to the European Coal and Steel Community and Euratom as predecessors to the EC. Attali and other EBRD spokesmen painted this analogy frequently in their public comments.

80. Personal interview with EBRD official, London, 06 1991.Google Scholar In build–operate–transfer projects, a private concern or consortium constructs an infrastructure-related project and is granted a concession for a period of years, after which the project is transferred to the host government. There has been renewed interest (and some loan activity) in that format and related schemes at the World Bank as well over the last several years.

81. This strategy was enunciated by a senior vice president, as reported in Stephen Fidler, “World Bank to Play a Smaller Role in Long Term,” Financial Times, 6 07 1990, p. 2.Google ScholarThe World Bank at this time planned to lend about $2 billion to the region in 1991, a sum that EBRD officials had hoped (with their original $1.2 billion capitalization) to match that year.Google Scholar

82. I thank Michael Shackleton, a senior official of the European Parliament, for helpful discussions on this score.

83. There has been some grumbling in the German government and press that the EBRD tends to exclude German influence too much; see for example “Osteuropabank bemuht sich um deutsche Mitarbeiter” (Eastern European bank makes an effort to have German employees), Suddeutsche Zeitung, no. 78, 2 04 1992, p. 34.Google Scholar

84. See Baker, “The Euro-Atlantic Architecture: From West to East.”

85. See U.S. Congress, House Committee on Banking, Finance, and Urban Affairs, Proposed U S. Participation in the European Bank for Reconstruction and Development, and Update on Exchange Rate Report: Hearing Before the Subcommittee on International Development, Finance, and Trade, and Monetary Policy 101st Congress, 2d sess., 9 05 1990.Google ScholarOfficials from the U.S. Treasury, during a spring 1991 controversy with the World Bank over the World Bank's weak commitment to private-sector lending, held out EBRD as an example to which the World Bank might aspire.Google ScholarBased on personal interview with EBRD officials, London, 06 1991;Google ScholarFidler, Stephen, “U.S. Urges World Bank Policy Shift,” Financial Times, 19 04 1991, p. 24;Google Scholar and Bradsher, Keith, “World Bank Accord Seen on Private-sector Lending,” The New York Times, 28 06 1991, p. D2.Google Scholar

86. EBRD, “Operational Challenges and Priorities,” pp. 16 and 17. By spring 1992 the EBRD had developed two such deals with private Western banks, each of which would be responsible for providing at least one-half the capital for the credit line.Google Scholar

87. In 1991 EBRD committed nearly $350 million in new telecommunication loans and was in the process of evaluating and approving many more. For comparison the World Bank committed $270 million to telecommunications in the region during 1991; the EIB, about $200 million.Google Scholar

88. The Germans probably held this view in part for more parochial reasons—like buying Soviet acceptance of German reunification within the North Atlantic Treaty Organization. Based on personal interview with EC official, DG-I, Brussels, 06 1990.Google Scholar For details of German assistance to Moscow in the shadow of the “2 + 4” negotiations see Buchan, David, “Soviet Aid on Dublin Agenda, Says Hurd,” Financial Times, 19 06 1990, p. 3;Google ScholarCampbell, Katherine, “Bonn Go-Ahead for an to Moscow,” Financial Times, 22 06 1990, p. 3;Google Scholar and Protzman, Ferdinand, “Bonn to Prop Up Kremlin Reforms with $3 Billion an Guarantee,” The New York Times, 23 06 1990, p. Al.Google Scholar

89. From early in 1989 the U.S. government drew a clear line between CEE and the Soviet Union, maintaining that aid to the Soviet Union should be handled principally through intergovernmental coordination and the G-7; if multilateral institutions were to be involved, it would be the IMF and World Bank.Google Scholar

90. Personal interview with senior U.S. NSC official, Washington, D.C., 12 1990.Google Scholar For an example of this skepticism, see Carrington, Tim, “Another Economic Development Bank Is Forming in Europe, but Is It Needed?” Wall Street Journal, 6 04 1990, p. All.Google Scholar

91. Even among the G-7 the best outcome on Soviet aid in 1990 was an agreement to disagree—what the communiqués called a “complementary approach” by which each state would take its own course vis-á-vis Moscow and provide whatever bilateral aid it favored.Google Scholar See Rosenbaum, David E., “Three Key Economic Issues Undecided as Meeting Ends,” The New York Times, 12 07 1990, p. A10;Google Scholar and Riddell, Peter, “G-7 Compromises over Soviet Aid,” Financial Times, 12 07 1990, p. 6.Google Scholar

92. In 06 1990 Mitterrand called for the G-7 to provide $15 billion through EBRD for Soviet aid. The G-7 a few weeks later agreed only to include EBRD in a consortium (along with the IMF, Organization for Economic Cooperation and Development, and World Bank) that would conduct a comprehensive study of the Soviet economy.Google Scholar See “IMF Leads Moscow Delegation,” Financial Times, 27 07 1990, p. 2;Google ScholarWorld Bank Transition 2 (01 1991), p. 4.Google ScholarIn 1991 Mitterrand wrote to each G-7 government suggesting that the West lift the ceiling on Soviet lending at EBRD as a small symbol of support for Gorbachev. Germany and Canada concurred but Washington blocked the move.Google Scholar See “G-7 Members Critical of Gorbachev's Reform Plans,” Financial Times, 15 07 1991, p. 1;Google Scholar and The New York Times, 16 07 1991, p. A4. Attali also invited Gorbachev to visit the bank in London in 07;Google Scholar that bold invitation came before the G-7 leaders had decided finally whether to hear Gorbachev at their annual summit, also scheduled for mid-July in London. Personal interviews with senior EBRD officials, London, 06 1991.Google Scholar Also see “Jacquerie at the Bank,” Economist, 10 08 1991, p. 41;Google Scholar“U.S. Agrees $1.5 bn. in Farm Credits to Soviet Union,” Financial Times, 12 06 1991;Google Scholar and “Poland Asks IMF to Ease Monetary Restrictions,” Financial Times, 17 06 1991.Google Scholar

93. Bank officials developed a controversial legal argument that the new republics could join EBRD simply by expressing their desire to do so and agreeing to the charter, by virtue of the fact that they had already been members as part of the Soviet Union. At the same time, the limit on lending would no longer apply to the successor states since the state that had been the object of the restrictions had ceased to exist. Legal merits notwithstanding, there were serious and possibly divisive political issues surrounding these points.

94. The technical environment for EBRD has if anything become more demanding. EBRD lacks personnel to expand greatly its operations in this vast, unfamiliar, and now increasingly heterogeneous territory, and there remain problems with political reform in many of the former republics that will inhibit management from actively proposing projects to the board. In any event EBRD's role as project financier is severely constrained unless and until macroeconomic reform proceeds.

95. This decision was made in principal at the end of 01 1992 at the same time (and for many of the same reasons) that the former republics were invited to join Conference on Security and Cooperation in Europe.Google Scholar

96. See EBRD internal documents; and International Financing Review, 04 1993, p. 6.Google ScholarAs of 03 1993, however, nearly 40 percent of EBRD technical cooperation projects were taking place in the twelve former republics (30 percent in Russia) and an additional 8.5 percent in the Baltics.Google Scholar

97. For a detailed defense of this assertion, see Weber, Steven, “Institutions and Change,” in Doyle, Michael and Ikenberry, G. John, eds., International Relations Theory and the Problem of Change, forthcoming.Google Scholar

98. For a more general theoretical discussion and critique, see ibid.

99. James and Lake distinguish these “three faces of hegemony” in James, Scott C. and Lake, David, “The Second Face of Hegemony: Britain's Repeal of the Corn Laws and the American Walker Tariff of 1846,” International Organization 43 (Winter 1989), pp. 1–29.CrossRefGoogle Scholar

100. There were certainly groups of economists, political scientists, bankers, and others who shared principled objectives and causal understandings (at least in the most general sense) about how to achieve successful transitions in CEE. But while the political decision makers who created EBRD drew selectively on the expertise of those groups, there is little evidence to suggest a central and independent causal impact of any one epistemic community. To assert the triumph of one particular epistemic community, in any case, would still beg the question of why that one and not others?

101. For further discussion of this point, see Weber, Steven, “Shaping the Postwar Balance of Power: Multilateralism in NATO,” International Organization 46 (Summer 1992), pp. 633–81.CrossRefGoogle Scholar

102. There certainly were (and are) forces challenging the institutional network in a variety of ways. This is not limited to right-wing German nationalists (a tiny minority) or deutsche mark superenthusiasts (a more substantial group) but includes antifederalists throughout the EC, some of whom (including the followers of Margaret Thatcher) would leverage the question of enlargement for this purpose.

103. Ruggie has developed this type of argument in much of his work. See, for example, Ruggie, John Gerard, “International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order,” in Krasner, Stephen D., ed., International Regimes (Ithaca, N.Y.: Cornell University Press, 1983), pp. 195–232.Google Scholar

104. For different views, which I do not consider necessarily antithetical to mine since each deals with an earlier historical period, see Krasner, Stephen, “Westphalia and All That,” in Goldstein, J. and Keohane, R., eds., Ideas and Foreign Policy (Ithaca, N.Y.: Cornell University Press, 1993);Google ScholarMoravscik, Andrew, “Negotiating the Single European Act: National Interests and Conventional Statecraft in the European Community,” International Organization (Winter 1991), pp. 19–56;CrossRefGoogle Scholar and Garrett, “International Cooperation and Institutional Choice.”

105. EBRD documents, 21 04 1993.Google Scholar My totals for project investment include both the bank's contributions (which are just over ECU I billion) and the additional funds catalyzed from private investors and other official institutions. Under the assumption that these projects would not have gone forward without EBRD participation, it is possible to say that EBRD leverage is more than three to one. The assumption is clearly wrong in at least some cases but hard to determine in many others.

106. I consider this point in detail in Steven Weber, “Is European Community Conditionality Distinctive?” working paper, Center for German and European Studies, Berkeley, Calif., forthcoming.

107. In 04 1993 the bank came under intense media scrutiny for its lavish spending outfitting its new and quite luxurious headquarters.Google Scholar This was a valid criticism, but the real issues concerning the bank's technical characteristics are the shape of its portfolio and the difficulties in disbursing funds—although the latter problem is largely a comment on borrowers in the region and is being experienced similarly by other lenders, including the World Bank and private banks.

108. As mentioned above, it is important to acknowledge that the decision to cooperate is not an end point for this question; the history of international politics is littered with the skeletons of formal institutions that were born of general principles and broad ideas.

109. For example, see Eckstein, Harry, Division and Cohesion in Democracy: A Study of Norway (Princeton, N.J.: Princeton University Press, 1966), particularly chaps. 5, 7, and 9. I thank David Spiro for helpful discussions on this point.Google Scholar

110. Deutsch, Karl, Political Community and the North Atlantic Area (New York: Greenwood Press, 1969).Google ScholarAdler, Emanuel takes a different view than I do in “Seasons of Peace: Progress in Postwar International Security,” in Adler, Emanuel and Crawford, Beverly, eds., Progress in Postwar International Relations (New York: Columbia University Press, 1991) and other recent work. Selznick's early work in organizations is analogous;Google Scholar See for example Selznick, Philip, Leadership in Administration (Evanston, III.: Row, Peterson, 1957).Google Scholar

111. These points follow DiMaggio, Paul J. and Powell, Walter W., “The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields,” American Sociological Review 48 (04 1983), pp. 147–60.CrossRefGoogle Scholar