Troubled Foundation : Democracy-- Export Stirs Controversy

In 1982, when President Reagan proposed a new program to export democracy, the idea seemed irresistible. With more than 200 years of national experience to draw on, American citizens would help people around the world develop the free institutions that form the foundation of representative government.

It may yet work out that way. But so far the National Endowment for Democracy, the quasi-private foundation established in 1983 to funnel government money overseas, has generated a string of controversies that have overshadowed its modest successes. Its critics wonder why the endowment has found it necessary, for example, to promote democracy in France and to back a candidate in the 1984 Panamanian election.

“This thing is not the National Endowment for Democracy but the National Endowment for Embarrassment,” said Sen. Ernest F. Hollings (D-S.C.).

Variety of Programs

Although the endowment is by law a private organization, it receives virtually all of its annual $18-million budget from the federal Treasury. It uses the funds to support a variety of programs abroad, ranging from anti-communist labor unions to a magazine published by Soviet emigres.

The endowment’s bipartisan board of directors, which parcels out those funds, is a virtual “Who’s Who” of U.S. business, labor and politics. It spans the political spectrum from former Vice President Walter F. Mondale to Sen. Orrin G. Hatch (R-Utah). The AFL-CIO, the U.S. Chamber of Commerce and the Republican and Democratic national committees have at least two high-level representatives each on the 17-member board, a situation that assures the organization of enormous political influence. New board members are chosen by vote of existing members.

To date, the endowment has channeled most of its funds through organizations sponsored by the AFL-CIO, the Chamber of Commerce and the Republican and Democratic national committees. Conflict-of-interest charges have inevitably followed.

Credibility Issue Seen

“Approximately 90% of NED funds go to groups represented on the board,” Rep. Hank Brown (R-Colo.) said in congressional testimony. “The potential conflict of interest weakens the credibility of the post-project evaluation and accountability of projects, as well as the initial awarding of grants.”

Endowment President Carl Gershman responded that board members are not allowed to vote on the projects of their own organizations. “The original idea of the endowment was that these major interests in American life would come together to try to strengthen their counterparts abroad,” he said. “The board was not originally seen as an oversight body but one through which these organizations would coordinate their programs.”

One observer--an early supporter of establishing an endowment but a severe critic of the organization that evolved--traced the endowment’s structure to a study committee composed of representatives of the same groups heavily represented on the board--the AFL-CIO, Chamber of Commerce and the political parties.

“It wasn’t a study, it was a deal cutting,” said the former backer, who asked not to be identified by name. “Not surprisingly, what they came out with was a proposal to establish something grandiloquently titled National Endowment for Democracy whose purpose would be to give money to the Republican Party, the Democratic Party, the Chamber of Commerce and the AFL-CIO.”

So far, about 60% of the money has gone to the AFL-CIO’s Free Trade Union Institute, which has been supporting non-communist labor organizations since just after World War II.

The Chamber of Commerce’s Center for International Private Enterprise and the international institutes of the Democratic and Republican parties, which were created especially as conduits for endowment money, have each received about 10% of the endowment’s grants.

For all the charges of conflict of interest, there is no doubt that the endowment has made itself felt in many corners of the globe.

“We are talking about $18 million being used to spread democratic principles around the world to offset the $3- to $4-billion expenditure being used by the Soviets to work against democracy all over the world,” Hatch said. “The National Endowment for Democracy is making a tremendous impact for the forces of freedom worldwide.”

Supporters say the endowment has provided funds to help keep alive the Solidarity movement in Poland. They cite support for independent labor organizations in Nicaragua, Chile, the Philippines and South Africa; a get-out-the vote drive before Grenada’s first free election last year; financial support for La Prensa, Nicaragua’s only opposition newspaper; publication of political books in Central America, and financial support for Afghan rebels.

Close Links to Marcos

The endowment hopes to score another success in the Philippines. The Democratic and Republican party institutes are jointly sponsoring a delegation of observers, drawn from democratic political parties around the world, to keep tabs on the fairness of Friday’s presidential election.

But even this project has raised eyebrows because the treasurer of the Democratic institute, Peter G. Kelly, is a partner in a lobbying firm that represents the Chamber of Philippines Manufacturers, Exporters and Tourist Assns., an organization with close links to President Ferdinand E. Marcos’ government.

The endowment’s backers point with pride to criticism from the official newspaper of Nicaragua’s leftist government, which said a $50,000 endowment grant was part of “a scandalous conspiracy” between the U.S. government and Nicaraguan guerrillas “to strengthen the Nicaraguan opposition.”

In addition, endowment supporters quote a letter from Vladimir Bukovsky, a Soviet dissident now living in the West, who called endowment-sponsored projects in the Soviet Bloc “the only hope for our friends behind the Iron Curtain in their struggle for freedom.”

But for all the endowment’s triumphs, it has also been party to some major debacles. Too often, critics say, the endowment does more harm than good.

In the 1984 Panamanian election, critics say, the endowment gave money to Nicholas Ardito Barletta, the candidate backed by the nation’s armed forces, despite official U.S. neutrality. Ardito Barletta won the election, which the opposition charged was fraudulent, but was later forced to resign in a dispute with his former backers in the military.

“U.S. intervention in other people’s elections is not, in my view, a convincing way to promote democracy,” said Sen. Edward Zorinsky (D-Neb.).

Publishers Balk

Opponents also note that the American Assn. of Publishers returned a grant last year after the endowment demanded changes in the list of books the association plans to send to the Moscow book fair.

Perhaps most significantly, critics of the endowment point to a $575,000 grant to the French National Inter-University Union, a small student and faculty organization accused by a parliamentary committee of right-wing political violence. The group is a bitter foe of the Socialist government of French President Francois Mitterrand.

The endowment is also contributing to programs in Spain, Portugal, Britain, Northern Ireland, Belgium, Venezuela and Israel. None of the recipient groups are engaged in outright opposition to the government, but critics say it is a waste of the endowment’s limited funds to support programs in countries where democracy seems to be firmly rooted.

In the critics’ view, the endowment’s successes could have been achieved as easily by the government’s Agency for International Development or U.S. Information Agency. Endowment officials say some recipient groups abroad would be reluctant to receive funds directly from the U.S. government, but the distinction between the endowment and the government has become so blurred that foreigners generally assume endowment-funded programs are backed by the U.S. government.

Although the endowment was established to bring the American private sector into world politics, it relies on government funds for all but an insignificant fraction of its budget. Critics say its organizational structure does not permit the free-wheeling independence that a truly private organization would enjoy, yet its accounting methods and supervision fall far short of what usually would be demanded of a government enterprise. Although it is required to issue regular reports to the U.S. Information Agency, the reports contain limited information on individual projects, and the USIA has no veto over those projects.

Whims of Congress

Unlike truly private organizations, however, the endowment is subject to the whims of Congress, which prohibited it in fiscal 1985 from giving any new money to the Republican and Democratic party institutes. The board kept the institutes operating by reprograming money from the previous year. The Senate voted to continue the ban on the party institutes in the current fiscal year but eventually gave in to the House, which supported the institutes.

For this year, Congress also clamped a 25% cap on the proportion of endowment money that could be allocated to any one organization, a limitation that requires a cut of more than half in the funds for labor’s Free Trade Union Institute.

Eugenia Kemble, executive director of the Free Trade Union Institute, said the 25% cap could prove disastrous.

“We were given the ability to create major new programs with the understanding with Congress and the endowment board that we would have the funds to carry them through,” she said. “(The budget cap) says to our friends that there is no consistency here. It’s a slap in the face. It says to everyone that we are not reliable.”

Feeling Their Way

The institute received the largest share of the endowment’s money in the first two years because the AFL-CIO already had a track record of international programs in support of non-communist unions, while the business and political party institutes were still feeling their way.

By law, the U.S. party institutes are prohibited from sponsoring programs that might have an impact on U.S. political races, but critics argue that it is not always easy to keep domestic and international programs separate. One disillusioned former supporter recalled that he recently tried to warn an official of the Democratic Party institute that his organization could be dragged into domestic politics.

The political parties, he observed, regularly ask for contributions from executives of companies that operate abroad. He said the head of a U.S. mining company might tell a Republican fund-raiser that he would be happy to double his contribution to the party if the Republican international institute would teach miners in Bolivia that it is not democratic to put dynamite under the hood of the mine manager’s car.

When the Democratic official heard this, according to the disillusioned endowment supporter, “the guy’s eyes lit up and he made a note of it. He said there might be similar opportunities for the Democrats.”