When the Polish army under Gen. Wojciech Jaruzelski imposed martial law to break Solidarity, Lech Walesa's independent labor movement, the almost universal observation was that the West could do little about it without risking war with the Soviet Union.
But there is in fact an effective economic lever that the West could use--$26 billion in hard-currency loans that Poland owes to Western banks and to Western governments and is in no position to pay off. Of this, about $16 billion is owed to private banks, and the balance to the United States and other Western governments.
The Polish debt to the West is not unique, just the tip of the Soviet bloc's loan iceberg. According to Wharton Econometric Forecasting Associates, Eastern Europe countries and the U.S.S.R. owe capitalist bankers and governments about $70 billion, a figure that will grow to the $120 billion-$140 billion range by 1985 if the present pattern is unaltered.
In a meaningful way, the West must make clear that such a generous hand propping up the Soviet bloc economy won't be extended unless Soviet repression is modified. The Soviets and the Eastern bloc nations don't have to declare communist theory dead and pledge allegiance to Adam Smith. But Moscow has to adopt a policy of live and let live on the most elemental and basic human levels.
As an immediate step, the best way in which President Reagan could support Solidarity would be to take a tough stand in the name of the American taxpayer. For example, the Commodity Credit Corp. has extended $1.8 billion in loans and guarantees to Poland. Of that, $741 million was due last year, but "rescheduled"--a euphemism for postponement. According to CCC officials, another $310 million is due in 1982.
Unless the United States "reschedules" this $1 billion-plus in past-due CCC repayments, the Polish government will be in default. Reagan should refuse to discuss any further rescheduling until Poland drops some of its repressive measures. That would be no wrist-slap. European nations might choose to follow such a U.S. action, rather than advancing Poland the money to pay Uncle Sam.
No doubt, such a governmental warning would panic the big international bankers, who are more interested in getting their extravagant commitments to Poland and other Eastern European countries "rolled over" into new loans than in restoring the freedom movement in Poland.
As Karin Lissakers of the Carnegie Endowment for International Peace wrote in The New York Times on Jan. 8, "the private banking community has greeted the Polish government crackdown with a sigh of relief." An expert on how banks have carelessly increased their exposure around the world by loans to Third World countries, many of which couldn't really afford to take on huge new debt, Lissakers added:
"Suppression of the independent unions and banning of strikes, bankers believe, will get the Polish economy functioning again and enable the country to increase exports. And they also believe that Polish authorities' compliance . . . ensures that the Soviet financial umbrella, will, if necessary, extend to Poland's debts."
One American banker willing to discuss this issue told me: "If you force a default, that's the end of the ball game." Thus, the private banking community is not anxious for Reagan to set a tough example, even short of calling for a default.
Poland's basic problems, as Lissakers pointed out, have their roots in "10 years of a corrupt and inept economic policy--a policy financed in large part by the banks and other Western creditors, including Western governments."
When bank loans to Poland for new factories didn't generate enough earnings to pay for themselves or for imports of desperately needed raw materials and consumers' goods, the Polish economy was choked to death by a regime trying to squeeze what it could out of exports, so as to pay off the bankers. That's what brought on the Gdansk shipyard strikes and Solidarity.
President Reagan defends his very limited "economic sanctions" as evidence of a "moral" stand.
But so far, it appears he only wants to talk tough, not act tough. The time has come to start playing hard ball, to stop worrying about the big bankers, and to develop a policy on this issue that would provide some incentive for the Polish army and the Russians to back off. The tool is there in the Polish debt.