Loading ...
Sorry, an error occurred while loading the content.

IMF an alter ego for congress?

Expand Messages
  • m4thdown
    ... The Congressional Record (House) Abolish the IMF By William E. Simon October 23, 1997 (House of Representatives) [Page: E2075] Mr. PAUL. Mr. Speaker, it
    Message 1 of 1 , Aug 23, 2004
    • 0 Attachment
      ----------------------------------------------------------------------
      ----------



      The Congressional Record (House)
      Abolish the IMF
      By William E. Simon
      October 23, 1997
      (House of Representatives)


      [Page: E2075]

      Mr. PAUL. Mr. Speaker, it has recently come to my attention that
      William E. Simon has publicly called for the Congress to reject the
      Clinton proposal to approve $3.5 billion in new funding for the
      International Monetary Fund (IMF). He points out that the IMF was
      established over 50 years ago as an institution to maintain the
      Bretton Woods system of stable exchange rates that the world rejected
      in the early 1970's. The IMF has a poor track record. `All of the
      major currency and banking crises of the last five years have
      occurred under conditions of heightened surveillance by the IMF,'
      according to Gregory Fossedal, a leading expert on the subject.
      George Schultz, the former Secretary of State and of the Treasury,
      has also called for the IMF's elimination. Wisely, the House of
      Representatives did not include any new appropriation for the IMF. It
      is hoped that the conference committee will act as prudently.

      Mr. Simon, the former Secretary of the Treasury and the current
      president of the Olin Foundation, authored in today's issue of the
      Wall Street Journal an incisive article on the subject that I would
      like to include in the Record. This article clearly explains why the
      IMF `may actually promote crises, because governments often resist
      sound economic and financial policies * * * because they know that
      the IMF will be there to bail them out in the event of a crisis.' We
      should add that the IMF will be bailing them out with U.S. taxpayers'
      money if the conference committee fails to follow the sound judgment
      of the House and reject any additional IMF funding.

      [FROM THE WALL STREET JOURNAL, OCT. 23, 1997]

      (BY WILLIAM E. SIMON)
      The Clinton administration is asking Congress to approve $3.5 billion
      in additional funding this year for the International Monetary Fund.
      Congress should not only reject this proposal, but also take the long
      overdue step of ending all future funding for the IMF. As a practical
      matter, the institution cannot continue to exist without the
      participation of the most powerful nation in the world. By
      withdrawing its funding, then, the U.S. can take a leadership role in
      putting this outdated organization out of business.

      The IMF is ineffective, unnecessary and obsolete. It was established
      after World War II, together with the World Bank, to promote trade
      and development in an international economy that had been torn apart
      by two decades of depression and war. In the system of fixed exchange
      rates established by the Bretton Woods agreements, the IMF's purpose
      was to provide short-term loans to countries experiencing temporary
      problems with their balances of payments. This was an important
      function during the period following the war, and the IMF generally
      performed it quite well.

      But this function became obsolete in the early 1970's when the world
      abandoned the Bretton Woods system in favor of the current system, in
      which currency values are set by the market. Instead of going out of
      business as that new system matured, the bureaucrats at the IMF
      invented a new function for themselves--namely, to provide so-called
      structural adjustment loans to countries that are, for various
      reasons, deeply in debt. These loans are granted on the condition
      that the recipient countries take steps to reduce their debt, often
      by increasing taxes and reducing government spending. This mission,
      of course, was never contemplated in the IMF's original charter;
      indeed, these structural adjustment loans look very much like the
      development loans that are supposedly under the purview of the World
      Bank.

      Many critics of the IMF point out that these loans have been quite
      ineffective in preventing currency crises and in promoting stable
      economic growth in developing countries. Quite the contrary, as these
      critics say, the IMF may actually promote crises, because governments
      often resist sound economic and financial policies (which may be
      unpopular) because they know that the IMF will be there to bail them
      out in the event of a crisis. As Gregory Fossedal, a leading expert
      on the IMF, has pointed out, `All of the major currency and banking
      crises of the last five years have occurred under conditions of
      heightened surveillance by the IMF.' These include the crises in
      Mexico in 1994, in Africa in 1995 and in Thailand, Korea and Malaysia
      in 1997. The IMF, with the help of the U.S., has now bailed Mexico
      out four times since 1976, and it will no doubt do so again and again
      unless the IMF is put out of business once and for all.

      Because the IMF has no legitimate function in our present system of
      floating exchange rates, we can eliminate it, and safely rely on
      private institutions, operating in the context of a free market, to
      provide liquidity and capital for developing nations, just as they do
      for the industrial nations.

      As a former secretary of the Treasury, I do not lightly call for the
      elimination of a financial institution that has been in operation for
      more than 50 years, and that served a pivotal role in the
      international economy in the period following World War II. It is
      obvious, however, that the IMF no longer serves a constructive role
      in the world economy, and has not done so since the 1970s. We should
      therefore have the courage to close it down--and the most effective
      way to accomplish this goal would be to withdraw U.S. funding.

      A few years ago, such a call to end the IMF would have been attacked
      on all sides as an extreme and highly controversial recommendation.
      But today a growing number of respected observers agree that the
      organization is no longer needed. George Shultz, the esteemed former
      secretary of state and of the Treasury, has recently called for the
      elimination of the IMF. In a 1995 lecture before members of the
      American Economic Association, Mr. Shultz observed that `the IMF has
      more money than mission.' As a consequence, he said, we should `merge
      this outmoded institution with the World Bank, and create a charter
      for the new organization that encourages emphasis on private
      contributions to economic development.' This would make a great deal
      of practical sense.

      The House and Senate now have a golden opportunity to force the long
      overdue elimination of the IMF. There is no longer any reason to
      burden taxpayers with the expenses of this outdated institution.


      (Bulleted paragraphs were entered into record but not spoken because
      of time constraints.)
    Your message has been successfully submitted and would be delivered to recipients shortly.