Maintaining Perspective
on the Modest Roles of International Institutions

In the United States, as the world has observed, there is a tension between isolationism and internationalism; between the willingness to play a role in global affairs and, at the same time, a predilection to go it alone. The irony is that if one assumes that we have moved from a world dominated by international politics to one dominated by international economics, as many observers suggest, the U.S., despite misgivings, reluctance, and rhetoric, may be more internationalist today than it has been at any time since World War II. After all, open U.S. markets are more important than American political harrumphing. It may be true that too many in the Congress harrumph about the UN and the IMF and the World Bank, and that many around the world harrumph about our harrumphing. But we’re doing more than a little to stabilize international politics by keeping our markets relatively open. This is not to say that it isn’t an embarrassment to be in arrearage at the UN; I consider it very much one. It’s not to say that we shouldn’t support the IMF and World Bank; indeed I wrote the law that replenished the IMF. But we would make a mistake to give too much attention to international institutions, and thereby too little to the two “T”s—trade and transparency—and the one dilemma—corruption.

On trade and transparency issues, as Chairman of the House Committee with jurisdiction over banking, I would just like to make three quick points. (1) Everyone notes the issue of protectionism in trade and most people have concluded it’s rather counterproductive for most societies. But there has been far too little attention to the issue of protectionism in finance. Any country that protects its financial system from foreign competition is in my judgment operating in the most singularly counterproductive way. (2) I would suggest that one of the great lessons in the United States that Americans haven’t followed, and that virtually no foreigner knows, is that while the big are getting bigger in finance through mergers, in community after community in America, market share is being won by smaller locally controlled institutions. The role of the small in finance has been underestimated; and I think in countries such as Russia, the case for smaller institutions is rather large. (3) Finally, Stanley Fischer talked about the obvious dilemma in deciding whether or not to distribute any money to a divided and weak government. Interestingly, one could argue that is the United States today. On the other hand, the United States has extraordinarily strong institutions. Intriguingly, leadership has been unbelievably strong in countries like Mexico, but institutions strike me as weak. Likewise, a number of the Russian leaders are more than a bit impressive, but the institutions are colossally weak. So the issue is not just leadership, it’s the institutions that go with them. What does that mean for the IMF? I think there is a case in countries like Russia for the IMF, if it can’t distribute monies through governments that reach the people, to contract with institutions like the World Bank to try to distribute money in more helpful ways—or to distribute money in a colossally different way than has ever been considered before, that is to avoid central governments and perhaps move to provinces, for example, areas on the other side of the Urals.

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In conclusion, let me just say that from an international perspective it’s indisputable that government money is of declining significance relative to other resources. Nevertheless, it’s key not to deny the role of government money, but to use our wits in how it’s used. And here the IMF and World Bank in my judgment deserve to be supported, but we also have to be very careful in realizing that their roles have to be kept in a fairly modest perspective.