When Russia invaded Georgia in 2008, there was little Washington could do but watch.
A military response was out of the question. But Georgia’s American-educated prime minister, Lado Gurgendize, thought the United States might help him guard against a bank run by topping up the central bank’s reserves.
It was a reasonable assumption. It wouldn’t cost the US treasury much. Georgia’s gross domestic product is about half of that of Vermont, America’s smallest state by GDP. And, President George W. Bush fashioned himself a champion of fledgling democracies around the world. But the United States was on the verge of the worst financial meltdown since the Great Depression. Any money the United States had to spare would be spent on itself.
The man who had to explain this to Georgia’s prime minister was Clay Lowery, an official at the Treasury Department who was charged with supervising international matters. Lowery and Gurgendize talked for a few hours. Lowery explained that the US government would be unable add to the Georgian central bank’s reserves.
But maybe there was another way?
“The U.S. was very supportive of Georgia during that time, but we were in the midst of our own financial crisis and providing emergency liquidity support to another country is difficult for the U.S. to do even during stable times,” Lowery said in congressional testimony this week. “Instead, we worked with the IMF which stepped up very quickly to provide the financing Georgia needed to preserve confidence in the banking system.”
Pity Lowery no longer is at the Treasury.
He went to Capitol Hill to urge lawmakers to end their hold on changes that would enhance the role of big emerging markets at the IMF at no cost to the United States. Like so much else in Washington in recent years, a routine vote has been turned into a matter of principle by a relatively small group of Republican lawmakers. Too little effort has been made to show them that their position is confused. American influence in the world is suffering as a result of their intransigence.
Ah, but Treasury Secretary Jacob Lew has said as much on many occasions, friends of the Obama administration will say. Not in the right way, at least not in public, I would counter.
Lew’s advocacy of the 2010 reforms has tended to be dismissive of the other side, based on abstract warnings about how the United States will suffer in a changing world unless Republicans get over themselves. That’s probably true, but not at all persuasive, especially coming from Barack Obama’s treasury secretary. What Republicans actually see is the IMF in the middle of the Greek bailout fiasco. If that is what influence at the IMF gets you, lawmakers inclined to limited government and isolationism will tell themselves that America is better off without it.
Lowery made an effort to show skeptics that there is much more to the IMF than Greece.
The fund and the US government have a history of working in concert, whether it is Latin America in the 1980s; saving South Korea from economic ruin in the 1990s; stabilizing Pakistan and Afghanistan after 9-11; or, more recently, supporting Ukraine. He was supported at the hearing attempt by Meg Lundsager, a former executive director at the IMF, who also emphasized the IMF’s past support for US “security priorities,” adding Tunisia, Jordan, and the Ebola outbreak in West Africa.
“In my last months at the IMF it became increasingly clear that other countries had little enthusiasm for US proposals, such as extending the zero percent interest on low income country loans,” Lundsager told lawmakers in her testimony to a subpanel of the House Financial Services Committee. “And privately many of my IMF counterparts lamented a weakened United States, recognizing that over the years our many ideas had helped promote global growth and economic development.”
These interventions are important for several reasons. It helps that Lowery worked for a Republican president, of course. But both he and Lundsager speak objectively, drawing on contemporary experience. Academics can speak theoretically about America’s place in the world; Lundsager, who left the IMF in 2014 after seven years as US executive director, watched it diminish with her own eyes as she made her rounds at the fund.
It wasn’t looking good for IMF reform a couple of months ago. The IMF’s steering committee said in April that it was done waiting on the United States and would come up with a Plan B. The relationship between the White House and Republican leadership was as bad as ever.
The backdrop has changed. I argued last month that the Group of 20 should lead an 11th-hour push to salvage the 2010 reform package, noting that there was little consensus on which to form a credible backup plan. Last week, the IMF’s executive board conceded as much by postponing its decision for three months. If U.S. allies are seriously worried about Washington’s leadership at the IMF and in global economic affairs, they should intervene between Congress and the White House as honest brokers. It wouldn’t necessarily be a futile effort, as Republican leaders have banded together to advance Obama’s trade agenda over Democratic opposition.
Never thought you’d see the day? It was the responsible thing for the majority party in Congress to do. With a little persuading, Republicans could do the same on the IMF. They just need a convincing explanation about why they should.
