Letter from Reps. Ron Paul, Tom Campbell, Bob Ney, Bob Barr, Dave Weldon, Vince Snowbarger, Walter Jones and Bill Redmond to Speaker Newt Gringrich and Republican Leadership Opposing IMF Additional Funding
October 7, 1998
(J. Bradley Jansen was Ron Paul’s legislative staffer for these issues at this time)
October 7, 1998
Speaker Newt Gingrich
Washington, DC 20515
Cc: Republican Leadership
The fragility of the global monetary system and the implications for our own financial system compel us to urge you, at a minimum, to reject any additional funding for the International Monetary Fund until after reforms have been enacted and Congress has ratified the authenticity of those changes. With universal agreement on the need for reforms, to do less would be to shirk our responsibility. We must provide leadership to world markets.
Any steps taken down the path towards a new international financial architecture must adhere to sound, free market alternatives–proposals suggested have ranged from Federal Reserve Board Chairman Alan Greenspan (gold standard), economist Steve Hanke (currency boards), and Nobel laureates Milton Friedman (free floating exchange rates without governmental interventions), and F. A. Hayek (private or competing currencies), for example. Monetary expert Anna Schwartz and former Federal Reserve Board Member Larry Lindsey have explained why a global Lender Of Last Resort cannot work. We must lead ultimately to IMF termination and reject outright any proposed global central bank.
Since its inception by then Treasury Deputy Secretary Harry Dexter White and economist John Maynard Keynes, the IMF has pursued their goal of international state-building–predictably resulting in corruption, large state bureaucracies and debt dependency. Ever-increasing, and unsustainable, debt burdens are a symptom of IMF disease. Noted scholar Alan Meltzer points out the Mexican people, no better off economically now than in 1974, are protesting IMF bailouts’ effects: a quadrupled public debt–the transfer of obligations of rich (sometimes official) risk-takers to the people via the state under IMF tutelage.
The arguments that the crises would have been worse without the IMF are specious. In Asia, the countries rejecting the IMF ideology of “burden sharing” remained notably healthy: Taiwan (with sizable reserves of real gold not SDR “paper gold”) is not a member of the IMF. Hong Kong has a currency board limiting artificial credit creation and government intervention. Singapore does not provide deposit insurance to its banks. In short, the more a country followed free market policies, knowing it had to act responsibly, the better it withstood the contagion.
Spuriously claiming that governments fail to enact its dictates, the IMF dodges responsibility for causing instability and spreading contagion. In fact, the IMF money provided a lifeline to corrupt, inept and often brutal governments later kicked out by their own people. The IMF approach in Thailand to promote stability and staunch contagion failed: we promptly bailed out South Korea and Indonesia–both had bailed out Thailand only months earlier. We agree with Harvard’s Jeffrey Sachs’ characterization of the IMF as the “Typhoid Mary” of emerging markets spreading the IMF fever of recession beyond Asia. The fact that IMF funds went to likely corrupt individuals in Russia is the latest and most glaring example.
We must stop the spread of IMF fever now threatening Latin America and, ultimately, our own financial system. Watching our export markets suffer the symptoms of the IMF fever, groups close to the people and dependent on global markets, such as the National Family Farm Coalition, oppose any new money for the IMF. We are taxing our producers here to subsidize foreign competitors–high technology and steel producers in South Korea are prime examples. IMF bailout countries have higher import tariffs on average than other countries, according to a Heritage Foundation study. This moral hazard hurts our exports.
We must not succumb to the fatal conceit that a few central planners have better information, knowledge and expertise than the sum total of all other individuals, in short, the marketplace. Boris Fyodorov, until recently acting Russian deputy prime minister, explains to the IMF, “If you really want reforms, don’t give me money up front.” That is also good advice for us as we consider additional funding for an unreformed IMF.
In conclusion, as Republicans on the House Committee on Banking and Financial Services, we join every former Republican secretary of the Treasury urging you to provide free market-based leadership and demand real IMF reforms before any quota increase. We should follow the advice of former secretaries of the Treasury George Shultz and William Simon, former Citicorp Chairman Walter Wriston and others and not give up the effort to abolish the IMF. Net U.S. membership in the IMF cost taxpayers billions, according to the Congressional Research Service. In short, we agree with former secretary of State Henry Kissinger that “Congress should use the need for IMF replenishment to impose changes” and oppose more funding before verifying reforms.