Commentary

Wanted: Free-Market Internationalists

By Daniel Griswold
This article appeared on Cato.org on March 15, 1998.

House Minority Leader Richard Gephardt tried in a recent speech to shed the isolationist tag that dogs him by declaring his support for sending another $18 billion in taxpayers’ money to the International Monetary Fund.

Insisting he is really a “progressive internationalist,” Gephardt said he supports IMF funding for the same reasons he rejected fast-track trade authority last fall: “To improve the structure of the new global economy, to develop a more compatible and open world trading system, end crony capitalism, and ultimately, to improve the living standards of American workers and people across the globe.”

Gephardt’s speech was a direct challenge to all free traders who oppose President Clinton’s request for IMF funding. It’s a challenge that should be met with vigor and without apology.

The minority leader argues that his positions on fast track and IMF funding are perfectly consistent. The common thread, however, is not support for the global economy, but support for government intervention. Underlying Gephardt’s stand on trade and the IMF is a belief that government intervention is required to counter the inherent flaws of a global market economy.

The nearby matrix locates Gephardt at his true philosophical position in the debate. It divides the debate participants according to their positions on additional IMF funding and last fall’s near-vote on renewing fast-track trade authority.

Although it’s not a perfect indicator, the fast-track issue roughly separates those who believe that free trade is inherently beneficial from those, like Gephardt, who believe free trade is harmful unless wrapped in a protective layer of labor and environmental agreements. The IMF question further separates those who believe private capital markets are sufficient to power the world economy from those who believe it needs a centralized, state-directed lender to ensure economic stability.

President Clinton and most of the Washington establishment clearly fall in the internationalist camp. The president supports free trade, as a general rule, and he desperately wants Congress to raise the nation’s stake in the IMF. The guiding philosophy of the internationalists seems to be to engage in the global economy through every means available, whether through voluntary trade or through coerced tax-dollar deposits in the IMF. At the opposite corner is columnist and presidential pretender Pat Buchanan, a rabid nationalist who opposes American involvement in the global economy, whether through voluntary commercial interaction or through government spending.

Gephardt’s position, far from being a reasonable middle ground, is the least defensible position of all. He wants the worst of both worlds: to deny Americans the full fruits of free trade with other nations, while forcing us to send our tax dollars abroad through an international agency that overrides the voluntary judgments of private international investors. Gephardt, it appears, has no objection to Americans sending $18 billion abroad, as long as we receive nothing tangible and immediate in return such as cars from Japan or shirts and shoes from less-developed countries.

Opposite Gephardt in the global economic debate are not the Buchanan nationalists (who joined him in opposing fast track) or the Clinton internationalists (who welcome his support for IMF funding), but those who are philosophically committed to free markets, limited government and individual liberty.

Call them global free-marketers. They embrace the freedom to trade and invest across international borders without government interference. They understand that free trade and free markets are the best hope for raising living standards in all nations, advanced and less developed alike. They know that holding free trade ransom to side agreements that demand more restrictive labor and environmental regulations will only slow the improvement in living standards that free trade bestows.

Global free-marketers oppose spending for the IMF because it is, at best, a redundant institution, its resources dwarfed by today’s private global capital flows. At worst, the IMF dispenses harmful advice while undercutting the discipline that private investors impose on governments to reform and liberalize. The IMF is not part of the architecture of a new global economy, but only an anachronism from the old world of capital controls and fixed exchange rates.

Republican leaders in Congress should stop their dithering on IMF funding and put aside their irrational fear that they will be out-internationalized by Richard Gephardt. Today’s debate on the future of the global economy desperately needs leaders who will plant their flag squarely in the upper right quadrant, in favor of free markets, free trade and less government.

Daniel Griswold is the director of the Center for Trade Policy Studies at the Cato Institute.