Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Lean In Congress–It’s Time to Show Leadership and Support the IMF

by Heidi Crebo-Rediker
March 12, 2014


Today we are please to have the following guest post written by Heidi Crebo-Rediker, a CFR Senior Fellow. Prior to joining CFR, Heidi served as the State Department’s first chief economist. 

The urgent situation we now face to counter Russian aggression in Ukraine is a moment of truth for the United States. This where economic statecraft meets the cold hard power grab borne of an era we thought had passed. The world is looking for the United States to lead, to respond, and to take action. Russia clearly made the bet that the United States would not step up to this task.

There are many tools in the economic toolbox that the United States and partners can employ to make this exercise in power a more painful one for Russia and a less painful one for Ukraine. All of these are on the table. Some are bilateral, other multilateral.  The United States, both Congress and the administration, has been remarkably impressive in its swift determination to come together and lead in this crisis, and to lead with economic tools.

But there is one big gap in our leadership at an institution sitting at the center of Ukraine’s lifeline to an economic future: The IMF.

A support package for Ukraine under consideration in the Senate includes funds for loan guarantees, support for stolen asset recovery, technical assistance, support for enhanced security cooperation assistance in the region, and allowance for additional sanctions. It also includes language necessary to pass IMF quota reforms agreed in 2010 that guarantee the Fund has the resources and governance structure necessary to support Ukraine and other economic crises that can threaten United States national security.

The strategic case to support IMF reform has not been adequately articulated by the foreign policy and national security community. But it is of critical importance to both those communities. Passing IMF quota reform is more than re-configuring shares and chairs or the transferring of funds from one account to another.  Supporting this multilateral institution, an institution of our making for the purpose of being able to step up in situations just like this, is, in fact, strategic.  It would demonstrate that the U.S. Congress understands this responsibility to lead at a time when many of our friends and allies are questioning our leadership in the world.

World leaders do not understand why the U.S. Congress does not “get it”–that international economic power matters–and the institutions that sit at the center of international economic policy need to be robust, representative and legitimate. The proposed reforms are ones that the United States pushed for and negotiated, specifically to address these three perceived inadequacies to ensure we have a strong IMF in the 21st century. Excuses, such as the IMF has “no constituency” in Congress or can be traded for another political priority, ring hollow abroad and feed fears that the United States does not understand its role in the world.

Leadership comes, and is expected, in many forms. The IMF is our core multilateral institution to support member countries in times of economic stress. Ukraine is now the poster child for this need. The United States remains the largest shareholder and retains the right of veto on the most important decisions, but this does not equal leadership. It’s time to lean in and get this done.

Post a Comment 4 Comments

  • Posted by J-M

    While US citizens are suffering through a deliberately managed poverty for all economy and the US government is BROKE and borrowing money hadn over fist, it is WRONG to advocate for a further financial drain on the American citizens. This whole IMF including the so-called “reform” (which never bodes well for the US taxpayer) is nothing but a wealth distribution scheme. BORROWING money to give away is a very bad plan, no matter how much we want to help. You are going to bankrupt American citizens trying to pay for global welfare.

  • Posted by Alexis de Pleshcoy

    It is difficult to understand how a quintessentially European problem can in anyway threaten United States national security. Quite the opposite, precisely like a hundred years ago, this could escalate in a nuclear war. It could also solidify a China-Russia alliance, exactly the opposite of the US policy for many years (see the rise of China).
    NATO, at its creation in 1948, naturally relied on the US, as the underlying economic fabric of Europe was devastated by the wars of 1914-1945. It was an Europe which received the benefits of the Marshall plan, plan which saved France and Italy from profound, usually irreversible societal changes, and of course others.
    Almost 70 years later, the EU is probably the wealthiest entity in human history, with approx. 500 million people, with an acceptable Gini coefficient, and with an envied social mobility. Their common currency has appreciated from .80 to 1.4 US $; the members who didn’t join the euro are usually anchored to the euro, hence their currencies also appreciated to the US $.
    The EU and NATO have failed miserably to contain the collapse of Jugoslavia, but in those events affected Serbia, the country for which Russia went to war in 1914 (in a public display of enthusiasm); it was not forgotten.
    Isn’t it time just for the EU NATO countries to handle the present crisis? We don’t have even remotely the intellectual expertise to deal with conflicts which are centuries old (if anybody has that, it is a different discussion), in distant lands, where they still teach geography and history. Isn’t it time for the EU to finally pay for NATO defense of its borders, even in the form of military technology manufactured in the US? I can point easily to trillion plus dollars in sovereign funds for EU countries, and what better spending that participate in the collective defense, plus an excellent Keynesian stimulus?!
    How can the US pivot towards Asia and protect the Eastern borders at the same time? Europe used to work together for defense, remember Austerlitz and Waterloo; they still have no excuse for the collapse of the post WWI collective security frameworks (just browse through old FA magazines, accessible at this web site), but it is time to work together again.
    An inspection of the economic data shows that it is mostly Europe benefiting from the economic ties with a 40 million plus people country. So before involving the IMF the EU should invest tens of billions of dollars in Ukraine, as well as provide economic assistance of the kind enumerated in the article.
    On a separate note what is preferable is to be able to see the geopolitical situation through the eyes of Russia, major European ally in many wars, determinant factor in WWI and WWII, not to mention they all might be speaking French without Kutuzov. It is not about moral equivalency, but cooperation is always better than the alternatives, especially when the alternative is total nuclear war. Even if we all agree with “let me stress that NATO has not at any point been a threat towards Russia” it is Russia making the determination from her perspective.

  • Posted by Sean Jennings (UK citizen)

    What a depressing response to what to me is a “spot-on” article. All nations and communities have their share of blinkered and short-sighted people,my own included. However,I trust that the two above respondees are not typical of US opinion otherwise the future cohesion, stability and security of the “Free World” is on very shaky ground. If there is one clear lesson from history, it is that isolationism for the USA is not an option. Failure to act and lead decisively and sensibly in the beginning, usually means more discomfort, danger and costs later on.

  • Posted by Alexis de Pleshcoy

    Sir (Sean Jennings),
    It is with great concern and disappointment that I realize the failure of 96 years of efforts by the American people to finally empower the Europeans to take care of themselves; blood, treasure, whatever was sacrificed, there is never enough, more is always needed. If there is a clear lesson from history is that for some Europeans to acknowledge that Europe must solves its problems is never an option. If these shortcomings are criticized, we automatically become “blinkered and short-sighted people”. “The future cohesion, stability and security of the “Free World” is on very shaky ground” if other people are asked to share the burden.
    A hundred years ago (June 1914) all over Europe people were celebrating that they finally got to kill each other again. For millennia they did it with tooth and nails, stones and sticks, bow and arrow, stone and iron cannonballs, sword and gladius, Krupp and Schneider-Creusot guns. The apogee was reached during the war of 1914-1945 (which mistakenly is still considered two wars), which ended with close to a hundred million people dead, many injured, incalculable destruction, and marked the beginning of the end for the Western civilization; people now killed each other at an industrial scale, on land, in the air, at sea (and under).
    At Versailles, Europe signed a peace under the guidance of President Woodrow Wilson, which was supposed to end all wars (but behind his back other designs were happening), but it was just a brief armistice, which ended in September of 1939. After Versailles the British Empire reached its apex in terms of wealth and size, and was supposed to be the guarantor of world peace, in tandem with the French Republic, so the US can finally have its Gilded Age, Prohibition and The Great Gatsby. When the Wehrmacht attacked in the East (09/1939), busy fighting the heroic Poland, it should have been easy for the mass of French and British tanks to advance towards Berlin. It never happened and in 1940 both armies were destroyed in 10 days under the weight of armored and dive bomber combined attacks (a repeat of the Mongol tandem horseman/bow).
    After 1918, the US practically dismantled its Army and war industry after believing that they made Europe a peaceful continent. Within months it became the arsenal of democracy, and the rest is history. The titanic efforts of the Red Army on the Eastern Front should also never be forgotten.
    After the war France and Italy were leaning towards communism, so they got the Marshall Plan; Germany got the Berlin airlift and the Marshall Plan. The UK got the lion share of the help. All also got NATO and US troops stationed there (but paid by the US taxpayer), while they were transitioning to a form of democracy (France was an exception).
    Under the US protection (paid by the US taxpayer), the process to create the EU began with the treaty of Paris (1951) and in 2012 a 500 million plus people EU got the Nobel Peace Prize (the breakup of Yugoslavia, an EU failure, was pushed under the rug). The euro, the common currency, was setup in 2002 at $0.80 and is today $1.37 (the UK kept its pound).
    The EU has more than enough economic power to help Ukraine, or could guarantee any loans from IMF and anybody else; in the end the EU will benefit from the integration of this new market. Militarily, it is time for the EU countries to increase their military expenses, not reduce them.
    Leadership by the US doesn’t mean that again we have to bear all the burdens, just because traditionally nobody else would ever do it. The US should lead Europe in these efforts, Europe providing the resources, and that would mean true leadership. This would insure hopefully a thousand years of “Free World”.

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