Soft on the IMF

Just a few months ago, liberals and labor scored one of their biggest triumphs of the Clinton years when Congress denied the administration enough votes to approve the "fast track" bill, which would have increased the president's ability to negotiate "free trade" agreements. Bolstered by that victory, critics of corporate rule were hopeful that the Clinton administration's plan to increase the U.S. contribution to the International Monetary Fund (IMF) would have to overcome opposition from the coalition that stopped fast track. It appeared that the forces of darkness, if not on the run, had at least been temporarily checked.

That was then. Today, it seems likely that Congress will approve a bill sponsored by Representative Jim Leach of Iowa that gives the IMF $18 billion in new money from the United States. Responsibility for this debacle rests in significant part with organized labor, "progressive" intellectuals such as Robert Borosage and Robert Reich and liberal Democrats such as Richard Gephardt. Indeed, every Democrat on the House Banking Committee voted for the Leach bill. The only dissent came from eight right-wing Republicans and Representative Bernie Sanders of Vermont.

Unlike the case with fast track, the administration pressed hard and effectively for the IMF. Treasury Secretary Robert Rubin was dispatched to terrify lawmakers with doomsday scenarios of a global economic crisis erupting if Congress didn't cough up the desired cash. Federal Reserve chairman Alan Greenspan was also deployed. He persuaded Representative John Kasich, a key Republican who loudly opposes "corporate welfare," to tone down his criticism of the IMF.

Still, the IMF replenishment faced serious obstacles. Perhaps the largest share of the blame for the collapse of anti-IMF forces lies with organized labor (with the notable exception of the United Auto Workers). Earlier this year, the AFL-CIO issued a pathetic statement saying that it would support members of Congress who tried to condition additional funding to the IMF on protection for workers rights and the environment. This, despite the fact that such provisions have proven utterly meaningless in the past [see "Reining in the IMF: The Case for Denying the IMF New Funding and Power," Multinational Monitor, January/February 1998].

Many Democrats took the AFL-CIO's statement as a signal that they could vote for IMF expansion without paying a political price, say congressional staffers. Since Democrats on the Banking Committee depend on Wall Street money for their campaigns, this gave them a perfect opportunity to jump ship.

Why did the labor federation cave on the IMF in the first place? Many insiders believe the AFL-CIO did not want to oppose President Clinton on the issue because it feared he would retaliate by refusing to help labor on issues of more immediate importance (such as the uses of union dues).

Many liberal Democrats had run up the white flag of surrender even before the AFL-CIO made clear it would be sitting on the sidelines. Democratic Representatives Barney Frank and Joe Kennedy of Massachiusetts indicated at a very early date that they would support the Leach bill. In December, Gephardt wrote Robert Rubin to say that he favored IMF expansion and would work for the cause. Jesse Jackson Jr. -- an original co-sponsor of the IMF bill -- accompanied Leach on a junket to Asia last fall and came back an apparent believer in the virtues of free trade.

Liberal intellectuals like Borosage criticized the IMF while at the same time offering up assorted rationalizations for sell-out. In January, Borosage and William Greider released a joint statement titled "The Global Crisis: A Progressive Response." The two made no mention of blocking more money for the fund -- the position of a coalition led by Friends of the Earth -- and suggested that criticizing the fund was a "conservative" position.

Instead, Borosage and Greider proposed that Congress require that the speculators and bankers who would benefit from replenishment of the fund "bear some of the cost of their own folly." Meanwhile, George Schultz and Walter Wriston, the former head of Citibank, opposed any new money for the IMF and said that the speculators should bear all the costs of their follies.

Former labor secretary Robert Reich offered more explicit support for the forces of darkness. Along with 80 corporate executives and government mandarins such as Henry Kissinger, Jimmy Carter and Paul Volcker, he signed a pro-IMF ad in the New York Times. Reich explained in a note to Walker Todd, a former official at the Federal Reserve Bank of Cleveland and populist Republican who opposes the IMF expansion, that he signed because "We need to maintain a strong coalition in favor of open markets and global institutions. I'm not at all happy with the specific decisions which the IMF is making these days, and if I had any direct say I'd change the structure of the IMF entirely."

Todd's reply: "The IMF has become nothing more than a debt collector for the international banks. Keynes would be the first to denounce what his own creation has become. It's not enough to 'reform' the IMF or even to hope that it would work better if only 'good men and women' were running it. It would consume and spit out good men like yourself even if you were running it."

As the cowardliness of progressives grew, so did conservative opposition to the Fund. Some of that opposition appeared a principled response to IMF policies, including especially the Fund's propensity to bail out private foreign investors when country currencies collapse. Some of it clearly has partisan motivation.

In a bitterly ironic situation, the greatest hope of a victory against IMF globalization now rests not with the progressive-led coalition that defeated fast track, but with Republicans.

-- Ken Silverstein