SLOBODAN Milosevic, the butcher of the Balkans, has finally arrived at the war-crimes tribunal in The Hague and will appear in court today. To most Americans, that may seem to signal a long-awaited end to the Balkan agony. No such luck - not even if Slobo is found guilty.

The Balkan wars began in age-old rivalries, exacerbated by the warped political and economic habits engrained by Communism. And the West's policies have little chance of bringing them to a rational end.

Simultaneous with Slobo's arrest, for example, the West agreed to bestow $1.25 billion in aid on a democratized Serbia. But this is insufficient to resolve the Balkan tangle - or even to move it from the top of the global-crisis list.

Throwing money at problems has not helped Bosnia-Herzegovina, where $5 billion has been spent since the Dayton agreement of 1995, with almost no progress to show for it.

The Balkan nations need the foundations of modern capitalism, not international welfare: They need a solid banking system, microcredit and other incentives to start businesses and meaningful, accountable investment.

The United States cannot and should not shoulder the burden for such reform alone, but neither should we let the European powers continue their incompetent policies of bribing local politicians to make nice. We should export our values, not our funds, to the war-torn Balkans, by assisting local entrepreneurs in setting up their own economies.

The West has already stimulated expectations we cannot satisfy, with dangerous results.

Yugoslavia today consists only of Serbia and tiny Montenegro, the latter a country of less than a million people, with no significant resources. Under President Clinton, America encouraged Montenegro to seek independence - then backed off after Milosevic's fall last year, leaving Montenegro's people hanging.

Macedonia, which is collapsing in a new Albanian-Slav war, represents another point where Western fumbling has aggravated the crisis.

Albanians in Macedonia were historically prosperous and contented, especially compared with their brethren in Kosovo and Albania proper. But after the Kosovo intervention, the West promised the Kosovo Albanians the world, and delivered nothing of what they really need: privatization and other economic reforms.

If there were not at least half a million restless, unemployed young Albanians in Kosovo, many of them veterans of the Kosovo Liberation Army, conflict would not have been exported to neighboring Macedonia. In the Balkans, war is a traditional form of domestic relief for joblessness.

Clumsy Western efforts at "nation building," in places where nobody agrees on what the "nation" would consist of, are merely fueling the flames. While President Bush and his advisers praise the Macedonian Slav leaders for their democratic habits and call for recognition of Albanian grievances in education and other areas of perceived discrimination, both Albanians and Slavs are headed in more and more extreme directions.

The Western powers have come to see themselves as peacekeepers in the Balkans. But we never seem to address the real causes of conflict in the region: disparities in economic outlook, and the need to heal societies deeply harmed by decades of Communist tyranny.

Simply put, the Albanians and other disaffected communities in the Balkans typically seek to get their people into the free-market world. Meanwhile, the Serbs, Macedonian Slavs, and other controlling ethnic groups hang onto the remnants of Communist domination, when they prospered by taxation and bureaucracy.

The situation in Macedonia has deteriorated so far, so fast, that another partition, complete with Western peacekeepers, is probably inevitable. The only chance to head things off would be for President Bush to announce this week that his new administration will seek an entirely fresh perspective on the Balkans, based on free-market economic values.

When the battling Balkan nations encounter new economic standards and opportunities, peace will come, and the U.S. will be able to come home from a part of the world where we have seldom understood how to do the right thing.

Stephen Schwartz is the author of "Kosovo: Background to a War."