When the Soviet Union committed suicide on Christmas Day 1991, NATO was in trouble. After a brilliant 40-year-long career in the security business, the alliance suddenly found itself in the position of a company that is losing its market. The strategic threat that had spawned and nourished it was receding, and so was the demand for its classic products: deterrence and defense.

What does such a company do? None of its shareholders wanted to close up shop. So NATO decided to hawk its old wares in a new, eastern market--a gambit that needed no market research. Demand was vast and pressing; everybody from the Baltics to Bulgaria wanted in--and immediately. There was just one problem. Russia, the monopolist that had cornered the East European security market since 1945, did not like it. The grumbling has turned into a growl. NATO's eastward expansion could turn Europe into an "arena of war," Boris Yeltsin snarled. His Defense Minister, Pavel Grachev, has threatened the formation of an "anti-NATO" bloc.

But for NATO to close the door to Warsaw et al. just because of old-style Russian bluster would be the wrong response at the wrong time. Indeed, the more menacing the Russians, the more legitimate and urgent the inclusion of the East Europeans. At heart the cold war was about the Soviet claim for veto power over the West's strategic choices in Europe--from West German rearmament in the 1950s to the deployment of Pershing II and cruise missiles in the 1980s. It would be ironic and foolhardy to grant a weak and needy Russia what we refused to yield to a strong and expansive Soviet Union.

The crux lies elsewhere. The issue is not whether to appease the Russians. Politics is not psychiatry. The real question is twofold. First, we must ask our would-be affiliates: Are you security producers or security consumers? The answers of Czechs and Hungarians are fuzzy; above all, they want a home--any home--in the West. That we must--and can--extend by opening the European Union to them. Since we care about the fate of democracy in Eastern Europe, we should make sure the economics are right. Access to our vast market, hence trade-induced growth, will do more to secure democracy than a seat at the NATO council table.

But as an alliance, the West must think coldly about costs and benefits, and so new members must bring in more than they take out. They must commit clearly and credibly to both parts of the Three Musketeers' motto--not just "all for one" but also "one for all." If they don't want to shoulder the collective burden, a bigger NATO will be not a better NATO but a feel-good club.

The second question NATO must address is to itself: Do we want to be a welfare agency or an effective alliance? As it is, the 16 would rather undergo root-canal treatment than have to agree on a collective strategy. Just look at the sorry story of NATO peacemaking in Bosnia. For three years, key NATO countries demonstrated their prowess by sniping at one an-other. Add three, four or more members, and you will subtract from cohesion, which is the essence of a credible alliance.

Also, are we going to sell the "real thing" to the "Easties?" Without making it explicit, NATO has clearly decided: no nuclear weapons. Nor would we put American, German or French troops on Poland's eastern border. But as the Poles remember so well from the first days of World War II, treaties without troops are but words.

In the end (and after a nasty debate in the U.S. Senate), there would be two NATOs. One would continue to enjoy "Classic Coke": that is, real security guarantees including American troops and American nukes. The others would get "New Coke," a sweetish concoction of second-class membership minus the iron bond of mutual obligation that has turned NATO into the longest-lived alliance of free nations.

But our troubles would not end here. What about those nations--the Baltics, Ukraine--that are most vulnerable but will be left out? Whatever line NATO draws will mark off new areas of influence willy-nilly. That is like signaling to the Russians: "Come and get it." Enlargement will act as a silent invitation to Moscow to absorb the rest in its sphere of power. How could such a new market-sharing agreement enhance stability and freedom in post-cold war Europe?

Amassing new affiliates, as many firms learned in the 1980s, is not a sure road to prosperity and profit. On the way, intra-firm frictions grow while resources are plundered from the core business. What is NATO's core business? It is to maintain a well-oiled production line for its two classic products, deterrence and defense.

Sure, the demand has dropped. But given the uncertain future of Russia, which--"red" or "white"--has always been too big for Europe, the alliance would be foolish to auction off the machinery. Rebuilding the plant would be much more costly--and probably impossible because, in the meantime, we would all have renationalized our defenses, like so many mom-and-pop stores. And Europe has not done well when everybody has gone into the security business on his own.

Less demand means downsizing, plus a rapid reconstitution capability. It is wiser to keep NATO lean and mean rather than to turn it into an open-admissions club. Will that leave the "Easties" out in the cold? Ironically, a compact, cohesive and hence credible alliance will radiate more security to the East than a feel-good fraternity with a two-class membership.

Josef Joffe is foreign editor of the Suddeutsche Zeitung.