Hoover fellow Michael McFaul, who has the president’s ear on Russia, argues that promoting freedom is both moral and wise.
In July 1944, delegates from forty-four nations gathered in Bretton Woods, New Hampshire, to design a postwar international monetary system that would promote world trade, investment, and economic growth. The framers created the International Monetary Fund (IMF or fund) to supervise the new "Bretton Woods monetary regime" that sought to keep national currencies convertible at stable exchange rates and to provide temporary, low-cost financing of balance-of-payments deficits resulting from misaligned exchange rates.
In reality, the framers of the Bretton Woods regime created an international price-fixing arrangement enforced by the IMF. After joining the fund, each member country declared a value for its currency relative to the U.S. dollar. The U.S. Treasury, in turn, tied the dollar to gold by agreeing to buy and sell gold to other governments at $35 an ounce; the inflation of the 1960s, however, made the U.S. commitment to sell gold at that price unsustainable. To preserve U.S. gold reserves, President Richard Nixon closed the gold window in August 1971, effectively uncoupling the dollar from gold and ending the fund's original mission of supervising a system of pegged exchange rates. Looking for a new mission, the IMF quickly evolved into a financial medic for developing countries. Beginning in the early 1970s, the IMF skillfully used a series of global economic crises to increase its capital base and financing activities.
Has the expansion of IMF financing activities alleviated the balance-of-payments problems of member countries and encouraged prudent, progrowth economic policies? The evidence, much of it supplied by the IMF, demonstrates that the fund does more harm than good. Historical studies as well as recent initiatives in Mexico, East Asia, and Russia reveal that IMF financing programs, which rarely prescribe appropriate economic policies or sufficient institutional reforms, are at best ineffective and at worst incentives for imprudent investment and public policy decisions that reduce economic growth, encourage long-term IMF dependency, and create global financial chaos.
It is time to scrap the IMF and strengthen market-based alternatives that would promote an orderly and efficient international monetary system. Key reforms include floating exchange rates, internationally accepted accounting and disclosure practices, unfettered private financial markets, and fundamental legal, political, and constitutional rules that would allow free markets to emerge and countries to achieve self-sustaining economic growth and development.
Self-government needs the nation-state
China has come to Africa. Can U.S. policy makers find ways to mesh, not clash, with Beijing’s interests? By Christopher C. Starling.
When the Soviet Union collapsed, Poland, the Czech Republic, and Hungary made quick transitions to democracy and free markets. Yet Russia itself failed to do so. Why? Hoover fellow Robert Conquest explains, drawing on eight centuries of Russian history and his own lifetime of study.
The Second World War, the Cold War, and now the war on terrorism—all can be seen as part of a single, epochal struggle. Clark S. Judge on the new hundred years’ war.
Pope Benedict’s Critique of Islam
Hoping for change isn't enough.
Libya at last seems to be emerging, if fitfully, from a long sleep of unreason. A travelogue from a formerly lunatic land. By Victor Davis Hanson.
A city in a constant state of becoming
How—and why—did Slobodan Milosevic finally fall from power? Hoover fellow Timothy Garton Ash offers an eyewitness report.
The Scheinman collection brings to life the story of how two friends, a white American and a black Kenyan, helped African democracy bloom. By Tom Shachtman.
The future of globalization
What has been keeping Pyongyang afloat?
For almost three decades the U.S. embargo of Cuba was part of America's cold war strategy against the Soviet bloc. It should have been lifted after that ‘‘war’’ ended since Castro ceased to threaten the United States and its neighbors and adopted the standard rules of international behavior. But inertia, a powerful Cuban American lobby, and misguided politicians set new demands: democracy, improved human rights, and economic reform. When Castro demurred we tightened the sanctions in 1992 and again in 1996 with the Helms-Burton Law. The United States has never committed the resources necessary to overthrow Castro, however, and the pressures we have applied have utterly failed to advance the three objectives. Worse yet, in the post–cold war world the policy and political outlook that sustain it have become a strategic liability. They promote conflict, both within Cuba—where a crisis might draw in the U.S. military—and abroad, as occurred in 1999–2000 after the arrival in Florida of the rafter boy, Elián González. They allow pressure groups to stand in the way of the policy-making process of the U.S. government. For example, the lobby manipulated wishy-washy politicians in 1998–1999 and got the president to turn down a widely supported proposal for a bipartisan commission to conduct the first comprehensive evaluation of the policy in four decades. Finally, the imperialistic Helms-Burton Law alienates allies worldwide and will poison relations between the United States and Cuba for decades to come. Castro will benefit no matter what we do, but on balance he gains more if we maintain the sanctions because they provide a scapegoat for his own repression and economic failures even as they enable him to maintain his cherished global image as the ‘‘scourge of U.S. imperialism.’’ Castro can wage a worldwide campaign against the embargo to bolster his image knowing Washington is too inflexible to change it. Indeed, whenever Washington has lightened up, Castro has tightened up and effectively prevented further improvement. Lifting sanctions need not mean establishing friendly relations with Castro—which he would reject in any event—or supporting his efforts to get international aid without meeting standard requirements. The ultimate responsibility for maintaining this antiquated and potentially dangerous policy falls on politicians who either do not understand the need for, or for political reasons are afraid to support, a new policy to benefit both Americans and Cubans in the post–cold war world.