Developing countries, meanwhile, will find themselves in a new straitjacket, probably harsher than the present one, if the right's agenda prevails. The Meltzer-Sachs commission's majority insists, for instance, that the IMF lend only to "prequalified" nations that pass certain tests of soundness--that is, adopt conservative economic policies and deregulate domestic financial systems so that foreign banks and brokerages are free to enter and dominate them. Thus the US financial industry might accomplish through this back door what it has long sought in formal trade negotiations, like the controversial Multilateral Agreement on Investment, which was stymied only by vigorous grassroots opposition from many nations. The Meltzer-Sachs proposals contain other neocolonial features that are most unfriendly to the poor.

The political plans of the right may also threaten--even derail--the energetic global campaign under way to win debt relief for the very poorest nations. Senator Gramm and allies intend to attach the Meltzer-Sachs prescriptions to upcoming legislation needed to approve debt relief. If they succeed, Jubilee 2000 could be held hostage, even stalemated, by Congressional right-wingers insisting on their version of reform.

The global financial marketplace resembles a Wild West territory where bankers and big ranchers try to establish law and order among the populace while exempting themselves (since they write the laws in the first place). In this metaphor, the IMF plays sheriff and hanging judge, dispensing commandments and punishment on behalf of wealthy patrons while absorbing the wrath of angry citizens. Reforming the IFIs, including attempts to insert labor and environmental rights into their lending conditions, may be a noble project, but it will almost surely fail unless this underlying contradiction is confronted and altered. What this territory needs is new laws that regulate the behavior of the powerful, that extend due process and equal protection to the weak as well as the mighty.

The great fiction promoted by the free-market gurus--that national governments are powerless to assert themselves in this new world--has always been nonsense but widely believed. The myth is now being refuted, concretely, by legislation introduced by a respected establishment Republican. Representative Jim Leach, the moderately conservative chairman of the House banking committee, has proposed a measure to assert the influence of US banking regulation over the galaxy of offshore banking centers--the secretive, unregulated outposts where "dirty money" from drugs and crime mingles with respectable capital from hedge funds, major banks and wealthy investors. Leach's proposal is the most meaningful step toward genuine reform that I've observed (actually the only one) and ought to inspire reform activists to explore the broader implications.

Last year Leach was powerfully offended by the scandalous money traffic through the Cayman Islands and other offshore havens that allowed Russian oligarchs to spirit away many billions and deposit the loot in the Bank of New York (possibly the same billions the IMF had lent to the Russian government, though that's not yet proved). Leach discovered that in one year some $70 billion was transferred from Russian accounts through a tiny island in the Pacific Ocean called Nauru, population 11,000. Last fall Leach drafted regulatory legislation that could put a stop to these financial games, or at least force them into the daylight. The so-called brass-plate banks, typically existing only as computers set up in obscure locations, are more than an arcane gimmick, because they channel huge volumes of global capital, especially from the major speculators, outside official scrutiny from any government.

Banks in the United States, Leach asserted, should be prohibited from accepting any of these blind transfers from money shops if they cannot establish that the money originated from a truly regulated institution that is, in fact, a real bank (the Clinton Administration introduced a competing version after the financial industry complained about Leach's). The issue exposes a central hypocrisy of international finance--a system that demands "transparency" and "due diligence" from banks in developing nations while all the best names in international finance use these irregular outposts. The offshore money, whether clean or dirty, enjoys the same benefits: avoidance of national laws and regulation as well as avoidance of taxes (global tax-avoidance schemes may cost hundreds of billions in lost revenues; no one really knows).

Despite the complexities of global finance, the operating cortex is relatively small and easily accessible to government regulators--five dozen or so international banks that handle the foreign-exchange transfers for everyone else. Nearly all are based in the wealthiest economies, supervised and regulated by their national governments. The politics is straightforward: Write tough new rules for these leading banks and everyone else must observe them (unless they choose not to do any banking with the world's principal centers of financial wealth).

• « Previous
• 1
• 2
• 3
• 4
• 5
• Next »

• Get The Nation at home (and online!) for 75 cents a week!
• If you like this article, consider making a donation to The Nation.