VIEWPOINTS : How to Help Eastern Europe : Economics: Instead of traditional aid to governments, try nurturing the region’s budding entrepreneurs. They exist--and could use the help.

Eastern Europe is in a race with calamity.

Our immediate response, as always, will be to send money. But money to whom? To the new governments? For the past 45 years, that’s what we’ve done for foreign governments, both democratic and tyrannical, benign and murderous--and the inevitable result nearly everywhere has been billions wasted on insane public works projects, dead currencies, poorly considered agricultural ventures and blind temporary solutions to serious long-term problems.

Our aid, for the most part, has harvested resentment, intractable debt and misery for its recipients when the initial cash infusion was used up and only the cash demand remained.

Is there any reason to assume that similar efforts towards Eastern Europe, even if made with the purest of motives, won’t have identical results? In a country such as Poland, with its combination of ecological destruction, weak infrastructure and obsolete industry, can any amount of money stave off decades of impoverishment and unemployment?

Yes. But only if the money is offered intelligently. That will mean abandoning traditional aid programs and embarking upon radically new ones. Government-to-government money, food, even joint ventures with major U.S. corporations will not be enough.

There is only one proven way to turn an economy around and create thousands of new jobs in the time that Eastern Europe has available:

Entrepreneurship.

We must aid the emerging entrepreneurs in the newly freed republics of Eastern Europe. Only they can save their societies by quickly creating sufficient economic dynamism and employment.

There has been much talk lately about reviving the Marshall Plan. Consider an alternative. Call it the Terman Plan, after the visionary Stanford University professor who created Stanford Industrial Park and helped get Hewlett-Packard (among other great companies) under way.

Fifty years ago, Frederick Terman realized before anyone else that entrepreneurship was essential to the economic dynamo of the modern high-tech world. But more than that, he understood that for entrepreneurship to survive it must be cradled in a complex web of supporting institutions: the science and business departments of nearby colleges and universities; credit lines from banks; equity money from venture capitalists; suppliers and distributors and a whole army of consultants on everything from real estate and office equipment to public relations, law and bookkeeping.

Such an infrastructure is not easy to achieve. But when it works, as it did in Silicon Valley by the mid-1970s, an entrepreneurial community is an extraordinary thing to behold: an unsurpassed generator of wealth and employment.

The goal of the Terman Plan would be to foster such entrepreneurial communities in Eastern Europe. If similar structures can create miracles in a decade’s time in South Korea and Taiwan, why not on even shorter notice in Bulgaria and Hungary, starting as they do with better-educated populations?

Unlike Western Europe, which suffers from a class structure that looks with ill-disguised contempt upon “shopkeepers,” the countries of Eastern Europe are, for the moment at least, societies of near-equals. It is precisely from such settings that economic powerhouses emerge. In fact, a leavening of Eastern European entrepreneurship might be the one thing that Europe 1992 needs to succeed.

Furthermore, as was the Marshall Plan before it, the Terman Plan is something only the United States can do. Japan certainly can’t help: It too is struggling to understand--and imitate--our unique ability to create innovative new companies.

Unfortunately, desire doesn’t match ability. No one ever wants to help the entrepreneur. Even here in the United States, a country that was built by entrepreneurs and only retains its economic strength because of them, they are undermined by government and resented by big business. And entrepreneurs themselves, notoriously antisocial and by their very nature antipathetic to bureaucracies, rank and rules, do little to help their cause.

Yet at the same time, entrepreneurial start-up companies are the most democratic of institutions. They are indifferent to race, age, class or gender, instead rewarding creativity, pluck and hard work. That’s why, with communism effectively dead, and economic and political democracy at last earning its greatest hearing, we desperately need entrepreneurs to plead our case.

Consider the Silicon Valley company Mips Computer Systems Inc. On Dec. 12, just weeks after the fall of the Berlin Wall and days before the revolution in Romania, Mips had its initial public offering of stock. By the end of the day, given the closing price of $19.50 per share, the company was valued at about $400 million. About 20 of the largest shareholders made more than $1 million that day. Perhaps 200 more--nearly all employees--saw their net worth increase by $100,000 to $500,000.

Mips isn’t unique. Here in Silicon Valley, we’ve become accustomed to meteoric companies bursting onto the stock tables. Hewlett-Packard, Intel, Advanced Micro Devices, Amdahl, Rolm, Tandem Computers, Apple Computer, Sun Microsystems--each in turn among the fastest-growing firms in American business history. Two thousand companies, a half-million jobs, scores of life-enhancing products, tens of billions of dollars in revenue--and all of it arose in just 20 years from the minds of entrepreneurs.

You can be sure that there are at least as many budding entrepreneurs in Eastern Europe, notably in retailing, agriculture and consumer products. The thriving black markets in those countries prove that these men and women exist. Freedom and capital are what they need to grow.

With help, the first new start-up firms in Eastern Europe would probably specialize simply in more efficient distribution of domestic and Western goods. But more sophisticated technology and manufacturing companies would appear soon thereafter.

Experience suggests, in this increasingly internationalized business world in which we now operate, that venture capitalists, bankers and professional service providers, if given some guarantee of an enduring free market environment, will quickly be just as eager to work under a Terman Plan with new start-up companies in Prague as they are with young firms in Sunnyvale.

The Terman Plan would have two distinct tasks:

* First, it would help create an environment in Eastern Europe conducive to entrepreneurship. This could include providing Overseas Private Investment Corp. insurance against political instability; sponsoring modern labs, student scholarships and guest professorships at Eastern European universities; extending small business loans; providing computer networks armed with inventory control software; building “garage-type” industrial parks; helping underwrite second-sourcing agreements with U.S. manufacturers and even offering courses on writing business plans.

* Then, building upon this environment, the Terman Plan could form a venture fund directed by the U.S. electronics industry and venture capital veterans (a surprising number of whom are themselves Eastern European refugees or the children of such refugees) dedicated to the formation of new firms in those countries.

Such a fund would operate as its private counterparts do: soliciting business plans, working with start-up teams and joining up with other venture firms on investments. And, as do other venture capital firms, it might actually make money as its new corporate charges “went public.” These gains could be reinvested in the fund or even, remarkably, be returned to the U.S. government.

Such a program would cost no more than $300 million, two-thirds of that for investment. That’s a tiny amount compared to our past wasted efforts in the rest of the world. And we might even get the money back; that is, if government officials can resist telling the fund directors where to invest for political, instead of sound economic, reasons.

Would a Terman Plan actually work? Ironically, the closest precedent for such a program was the opening of the American West--a legendary success. Still, success of a Terman Plan is not guaranteed. Every one of those thousands of new companies that would be created might turn out to be uncompetitive and fail. But then again, there might be a Mips or even an Apple in there, growing like topsy, spinning off dozens of other businesses that would sprout like seeds and grow into great plants. That’s the thing about entrepreneurs. They are a messy and unpredictable lot.