From Velvet to Guns and Cigarettes : A worldwide recession has dramatically changed prospects for the newly formed democracies of Eastern Europe.

Morality does not pay. That is the lesson that has been learned in Eastern Europe almost four years after the revolutions that replaced communism with democracy.

In the heady days of independence after the “Velvet Revolution” in 1989, thousands thronged here celebrating in the architecturally lovely Wenceslas Square. The new president, former dissident and playwright Vaclav Havel, announced that the republic of Czechoslovakia would forswear the arms trade. It was wrong, thought the idealistic new leadership, to provide prosperity to your citizens by profiting from weapons of death. Havel was feted in France and the United States as the favorite new leader of Eastern Europe, replacing Lech Walesa.

Havel went home to run his new country. We continued to sell 57% of the weapons sold to developing countries; England and France are competing with us for all the business they can get. This summer, in what is now the Czech Republic, the political leadership announced it had been “naive” to refuse to sell arms and would now do so.

The bloom is off the Eastern Europeans’ early idealistic hopes. In Hungary, Slovakia and the Czech Republic, economies have contracted by 30% in four years. People earn an average of $200 a month, and with privatizations, their jobs are at risk. In Prague and Budapest, there are almost no Western “luxury” goods for sale. Who could afford them?

What people do buy is cigarettes. One of the largest American investments in the Czech Republic was when Philip Morris bought up all the cigarette-manufacturing facilities. Also, Kmart has gone into partnership with one of the major stores in Prague. But a walk through the store, Maj, is nothing like a walk through a U.S. Kmart. People in the Czech Republic can’t afford the products sold in America.

Does the United States, which for so many years spent millions on military and intelligence activities geared toward freeing these countries from communism, have any role to play in this? The Clinton Administration has said that supporting “democratization” is one of its highest priorities. At the moment, a lot of that is done by organizing conferences, symposiums and seminars where Western experts and consultants fly to Europe and tell people how to do things. The president of one of Hungary’s largest publishing houses told me that one of his biggest problems was sparing people to attend all these conferences. He added that Hungarians joke that all the aid money for Eastern Europe is going for airline tickets and hotel rooms for Westerners. In a recent poll, more than 50% of Hungarians said they liked things better under the old system.

What most upsets the leadership and the people in these new capitalist democracies is that their neighbors do not practice what they preach. The European Community has said that it wants a “special relationship” with Eastern Europe. But that does not extend to buying their products. Western Europe--in the grip of recession and massive unemployment--wants to protect its own farmers and industries, even though it could save money by buying Czech and Hungarian agricultural products.

Even the lessons of whether there are rewards for trying to preserve democracies have been disappointing. Scholars in Budapest note that with all the American and Western European talk of supporting the new democracies, the lesson of Bosnia is that the one with the biggest guns wins.

Helping these countries is not easy. They lack a competitive industrial base, and it’s becoming obvious that many workers over 35 cannot be retrained to compete internationally. Many people carry strong grudges against neighboring countries and people within their own countries. With a worldwide recession, they have to compete with countries in Asia and in South America for investments.

The enormity of the problem is evident in Berlin and the former East Germany. For the last four years, the German government has put between $80 billion and $100 billion annually into upgrading the former east. And for all that investment, not much shows. The cities are shabby, and billions more in infrastructure investment will be needed.

At the G-7 meeting in Tokyo last month, leaders of the world’s richest industrial nations patted themselves on the back for finding $3 billion in international commitments for the 150 million people in Russia and its former republics. That’s a pittance compared to what has already been poured into relatively small former East Germany.

Prague still looks like a jewel. Its squares are thronged with tourists, many of them young and drawn here by the cheap Pilsner beer and three-course meals that cost $2. Their business is supporting many new cafes and restaurants, providing jobs for residents of Prague. But that’s not enough to develop a country.

Meanwhile, “Unveiling”--one of Havel’s plays, written in his 1970s dissident years--is being performed in a Wenceslas Square theater. Trying to explain why he and his wife lead such a simple life, the lead character says he has learned that one person cannot make a difference in changing a whole nation. There was a time when people in Prague might have challenged that. But now, as they gear up for the international arms market and have seen their country split in two, it seems Havel was right.