The Multinational Monitor

July/August 1989 - VOLUME 10 - NUMBERS 7 AND 8


The US and the UN: The Heritage Foundation Point of View

An Interview with Mark Franz

Mark Franz is the Policy Analyst for the Heritage Foundation's United Nations Assessment Project. He has written several articles on the U.N. including, "The U.N.: Still a Long Way to Go," published in The World and I.

The UN has been one of the main causes of poverty in the Third World...

MULTINATIONAL MONITOR: What are the origins of the Heritage Foundation United Nations Assessment Project?

MARK FRANZ: The United Nation's project of the Heritage Foundation [was] started in 1982 ... in response to the general perception in the United States that ...[the UN] was not very conducive to promoting U.S. interests.

MM: What role would you like to see the United States play in the UN?

FRANZ: [I] don't see ever a very useful role for the United States to play in the General Assembly. It's largely an advisory group, that might lead to the question, well if it's just advisory what harm does it do? Over the past 15 to 20 years they have been encroaching on the power given by the charter [to] the Security Council. [W]hen the UN was founded, the Security Council was given all the power of the organization to act. As well it should, you have the veto by the five major powers and it reflects the realities of the world. Where[as] the General Assembly has no semblance of reality. Now, I see a continued strong role for the United States in the Security Council. I would have not probably [disagreed] with the United States pulling out of the General Assembly all together. It does us no good and it costs us a fortune.

MM: Is the UN something we should use solely to promote U.S. interests?

FRANZ: I don't see any other reason for foreign policy of any type, be it multilateral or bilateral, [other] than advancing the interest of the sovereign country which you represent. That is the definition of foreign policy and if it is multilateral, granted there are trade-offs in foreign relations, but it should be no different from a bi-lateral relationship. [In] a multi- lateral [relationship] you should get more in return than you give or you should not participate.

MM: How do you rate the UN on development issues?

FRANZ: They're dreadful. The UN has been one of the main causes of poverty in the Third World ... [In] a lot of Third World countries, . .. all the expertise they get is what the UN sends them and the UN Industrial Development Organization (UNIDO), the UN Conference on Trade and Development (UNCTAD), the ILO [International Labor Organization] the whole litany of them have just really sown bad advice.

MM: Should workers in the developing countries have the same rights as workers in the United States?

FRANZ: A lot of that depends upon the individual country; that is basically still a domestic issue. Of course you can make recommendations and the UN should do that, but it should make good recommendations .... [N]ationalizing industry and insisting on a minimum wage equivalent to a wage in a developed country is not going to do that country any good; it is not going to help it develop, it is going to run it into the ground and make it worse. Too often, it is just assumed that you can leap-frog a developed country into the policies that we have developed over 200 years.

MM: Isn't the right criticized for promoting privatization in the Third World?

FRANZ: No, we developed that way through free market principles. Only since this time we have been able to provide a certain minimum level of the safety net, we didn't have a safety net before 1929. But that helped us in our ability to develop. Also, [on] the privatization issue, if you look at most of these Third World countries, what you have is a lot of poorly run nationalized industries which are costing the government money, just a fortune in subsidies. [P]rivatize those, let them run within the market and that will free up money to use on things that are necessary: education, maybe some social services which are necessary for the very poor, so the people are not starving.

MM: Can the UN play a constructive role here?

FRANZ: Sure, they can promote privatization, they can say 'Look if you sell this lousy steel mill that you own, that is costing you almost $400 million a year, if you sell your railroad and you will free up another $2 billion. You can spend that money elsewhere on education, on things that will help you in the long term.' That is the kind of advice that should be given, rather than 'No, you should nationalize industry X because of whatever reason.'

MM: Can the UN mitigate some of the negative impact that multinational corporations (MNCs) have on the developing world?

FRANZ:I don't think that the UN is [an] equipped and unbiased entity that can do that right now. Maybe in some other form an international organization could do so.

MM: What about the UNEP?

FRANZ: I think ... it has been politicized too much.... Politicized [means it extends] outside of the organization or the specialized agency's technical mandate ... If it extends beyond that and passes a resolution that has a clause that condemns Israel and South Africa, that distracts from its purpose and effectiveness.

MM: What about an organization like the ILO which has a mission of protecting and advancing worker rights? You could give that one definition in the Third World and another in the industrialized country.

FRANZ: There you get to what U.S. policy should be toward that organization. If we think that any particular organization is ... giving bad advice, then I don't think we have an obligation to support that organization. Especially, when there is nothing we can do to change it.

MM: With the internationalization of capital is there a need for an ILO to promote international worker rights?

FRANZ: I really don't think so. I think that each country has a different labor market, a different sectorial breakdown of ... labor. You ... have to work that out on a national basis, between the government and workers.

MM: Is it proper to impose free market dictates on other countries?

FRANZ: Well, I think once you free up the market, then you have some basis on which to judge what you should be producing. Until you do that you have no way of knowing that, and you can say we need whatever Belgian endive, for our population, but how do you know that unless that is exactly what the people want to spend their money on and it should be their decision.

MM: I'm talking about staple products.

FRANZ: How can you determine what is going to best lead that country into self-sustaining growth without a market, without a mechanism for determining what would bring the best return and can be the best distributor? I just have seen so many . .. agricultural pricing boards trying to determine what should be produced from this bureaucratic office building in the capitol, and you can't do that, it has got to be done on a level where you and I can determine what is of value to each of us.

MM: But if a country is so indebted that the main goal is to increase the GNP and the export earnings to repay debt, is that a free market principle?

FRANZ: Why are you in debt? You have to ask yourself that question. The reason you are in debt is because you have practiced poor economic policies in the past, you have to [be] responsible for those past mistakes.

MM: How free a range should MNCs have in the Third World?

FRANZ: You want to try and not stifle any positive aspects because even now that the CTC is acknowledging that multinationals play a very positive role in providing investment capital and some infrastructure and some jobs to these countries. You want to walk a fine line, you don't want to force these companies out of business in a particular country. But then again you do have a certain amount of responsibility that the corporation should show for just common sense [and] safety...

MM: What is your view of MNC responsibility?

FRANZ: I don't know. Perhaps there is some way of establishing a general code by which there would be a minimum by which multinationals would have to operate. I am not convinced that the UN or the Center for Transnationals is the way to go about doing much because of the past politicalization. Right there is no way ... that a multinational corporation could take a dispute to any UN agency. They know ... the outcome is going to be against the multinational, regardless.

MM: Do you think Nestle coercively marketed its infant formula?

FRANZ: You can't call a strong marketing agenda coercion. That is basically the point that is being made, that these people are being coerced into buying.

MM: Nestle provides equipment to hospitals that push their infant formula. Is that a proper marketing technique?

FRANZ: It is.

MM: Even if it harms babies?

FRANZ: I don't believe that is the case. This was a little bit before my time, [in terms of] being involved with international organizations. But [from] all that I have read on the whole Nestle case and some of the same things are happening with pharmaceuticals right now, I don't believe that was the case of malice on their part or just corporate greed to do that. I think it was a perfectly legitimate marketing technique and it provided a product.

MM: Do you see the problems the United States is having with the UN as a reflection of the problems the United States is having more generally in the world?

FRANZ: No, I see it just the opposite. I see the UN as kind of [an] archaic left over from the 1970s, the very radical days of New International Economic Order and the notion that ... the Third World was poor because the developed world was rich. That is not at all the case. I think that the rest of the world is coming around ... look at the developments in the Soviet Union, until recently the political crackdown, but economically in China and some of the less developed countries and Southeast Asia, and Latin America, especially Chile. The realities are not being transferred over into the UN.

MM: An American corporation did have undue influence on the domestic policies of Chile. How upstanding an example is that for bilateral relations?

FRANZ: The Chilean economy has improved over the past two years, going from an inflation rate of over 100 percent going down to 10 percent; unemployment is down substantially; the currency has stabilized; and it looks like the political situation is turning up. It looks like Pinochet is going to relinquish power and that ... is a bilateral success story. It was in spite of advice of international organizations.

MM: But Pinochet would not have been in power except for U.S. intervention.

FRANZ: True, I am not arguing for U.S. installation of dictators because you have some real losers. Somoza created a lousy economy in Nicaragua and then the ultimate result was even worse with the Sandinistas. Well, you have had that kind of history, a worse kind of history with U.S. intervention than not.... [W]hile granted Pinochet did turn the economy around, I don't think it was due to the fact that he was installed by the United States.

MM: Where do you stand on prior informed consent as far as a hazardous waste treaty is concerned?

FRANZ: I think that is perfectly legitimate.

MM: What about banning the export of those wastes that our own regulatory agencies have decided are too dangerous for human life not just American life?

FRANZ: Well, I think, as a guideline, [it's fine]. This is typical of what the UN does. It doesn't prescribe a law for less developed countries. It publishes reports and recommendations and they can incorporate that in their domestic law. I think as far as that goes, anything is perfectly acceptable.

MM: An American company was caught bribing the president of Sierra Leone for $25 million to accept hazardous waste. Is it wrong to offer such vast sums of money to people who are so poor to accept these things which are so dangerous?

FRANZ: I would say it is morally wrong.

MM: Well if it's morally wrong what do you do to rectify it if that is the free market?

FRANZ: The problem I have is in establishing just a flat ban on something, say a U.S. ban on certain activities by a multinational which may involve certain mitigating circumstances; there may be a very safe way of disposing of [waste] in that country.

MM: The UN is proposing a treaty on the trade in hazardous wastes. Should the United States be leading the way?

FRANZ: Not knowing the specifics of the treaty, I can't say specifically, but I think, in principle, yes.

MM: Does that go against your argument in other areas? It could be construed as being anti-U.S. interests if an American company cannot sell these wastes.

FRANZ: No, I would argue that a treaty agreement, which would be taken although under UN auspices, is much like any of our other treaty obligations on a limit on certain activities, but broader U.S. interest could take precedence over specific multinational ... interest.

MM: Has the Heritage Foundation come out against bilateral aid as well as multilateral aid?

FRANZ: [The] problem with a lot of the bilateral aid, [is] it goes from government to government; people don't see this money. It is scraped off the top by the foreign minister, then the cultural minister takes his cut and then it goes on down the line. It never makes it down to the people.

MM: Would private volunteer organizations make it a more efficient process?

FRANZ: Yes, the problem that you run into there is incentives for increasing private voluntary participation.... [T]he current foreign aid bill is running $17 billion or so. You take that $17 billion and turn it into tax credits, if people would do certain things on a private sector basis, it could help a community build an irrigation system and give them a tax credit that is equivalent to what kind of aid would have been spent on that.

MM: You want to focus bilateral aid to achieve self-sufficiency. Is the UN a forum to define self-sufficiency?

FRANZ: That is the policy that the United States should be pursuing in the UN, to push for a definition of what is development, what would constitute development. It is not giving somebody money until the next year, when you have to give them twice as much more. That's not development.

MM: Is it instituting an economic system where all agricultural products are geared toward export?

FRANZ: No, I think not. We saw the disastrous effect of an import substitution policy. Where you have ... a country which is [a] relative small internal market and they ... [establish] a huge tariff where you can't import necessary products of an industrial society, manufactured goods and you subsidized the industries and it just doesn't work. Tanzania practiced that for years and that is one of the main reasons that it is in the trouble it is in. A lot of sub-Saharan Africa is that way and in debt also. They borrowed for these projects that are ... doomed not to work. You have to look at the realities of trade and figure where does the country have the comparative advantage and if it can benefit most from producing coffee, then produce coffee.

MM: Is that self-sufficiency?

FRANZ: I think it can become self-sufficient if prudent policies are pursued by the country. When times are good, when agricultural prices are high and you are in a surplus in payments account, you don't do blow that. You invest it in something that might expand your base out of coffee.

MM: How do you expand when any surplus you are going to have in a good year has to go to the International Monetary Fund (IMF) or American banks to pay the interest on the debt?

FRANZ: I think a lot of the rescheduling and I would argue that right now American banks could write-off probably all of the holdings down there. I have a huge gripe about Citicorp, Chase Manhattan, the banks screaming bloody murder right now, saying 'Oh no, we have got to hold these countries for all they are worth,' and they can write it off right now, but the market value of most of these loans is about 20 percent of the book value, you have got to write them down. I sure as hell don't want to subsidize these damn banks. I ... believe that the U.S. government should tell the banks that 'You are on your own, we are not going to bail you out, the World Bank is not going to bail you out and the IMF is not going to bail you out.' If that was ever made clear to American banks they would look at their books [in] purely fiduciary terms and say 'Hey, these loans are worth [about] 20 cents on the dollar. Write them down; that is what they are worth.' That is what you do with any bad asset. But what is keeping them afloat and what is keeping these loans going is the United States alluding to, by way of the Baker Plan or the Brady Plan or whatever it may have been, 'Yeah in the end we are going to pay up,' so they had no incentive to write these loans off. Then the World Bank is going to bail them out of it.

MM: Would you like to see as an outcome of devaluing these debts a new infusion of money through the IMF or private banks to instigate your call for self-sufficiency?

FRANZ: You couldn't do it on the same basis that you did it ... the first time around.... The banks had a bunch of Arab money that was being made on the price of oil and they had to do something with it and they gave it to countries indiscriminately and that is the same as a loan and that is just [a] bad investment. This comes into a problem of domestic insurance in the U.S. on bank deposits. There is a certain amount of security there and all the S&Ls and most of these guys are going scot free, just like criminals and bad managers at best. They are not paying the price. You and I are, the taxpayer. We are going to pay $50 billion on the damn savings and loan fiasco. I think that is utterly wrong.... The same thing with the [debt] situation, the U.S. government, World Bank [and] the IMF cannot provide the incentive to make more bad loans. You have to completely restructure that whole system.

MM: What about the Brady plan?

FRANZ: The Brady Plan is a disaster. It is horrible.

MM: Will the UN be around in 20 years and, if so, will the United States still be a part of it?

FRANZ: I think so, but I think it will be a much changed UN. I have seen the first signs of a trend away from the bad years of the UN which is basically from the 70s to the present.

I would argue that right now American banks could write-off probably all of the holdinigs down in [in Latin America].
The Brady Plan is a disaster. It is horrible.

Table of Contents