[Congressional Record (Bound Edition), Volume 159 (2013), Part 11]
[House]
[Pages 16173-16175]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      MANAGING THE GLOBAL ECONOMY

  (Mr. AL GREEN of Texas asked and was given permission to address the

[[Page 16174]]

House for 1 minute and to revise and extend his remarks.)
  Mr. AL GREEN of Texas. Mr. Speaker, I had the preeminent privilege of 
talking to the Honorable Barney Frank just recently, the former 
chairperson of the Financial Services Committee. He called to my 
attention a speech made by the Honorable Maxine Waters, who is now the 
ranking member of the committee.
  This speech was a keynote speech at the launch of the Global 
Financial Governance and Impact Report. This is a very insightful 
message accorded by the Honorable Maxine Waters. It is, in fact, a 
critique of the World Bank, the IMF. She goes into the global sovereign 
debt restructuring issue, and she talks also about the problem of 
growing inequality.
  I would invite anyone who is interested in learning more about what I 
call the ``Waters Worldview,'' to peruse this document.
  Chairman Frank was eminently correct when he suggested that this 
might become a part of the Congressional Record, and I will place it in 
the Record tonight.

   Cong. Maxine Waters Keynote Speech at the Launch of the ``Global 
 Financial Governance and Impact Report'' by the New Rules for Global 
                          Financial Coalition


                              Introduction

       I'm very honored to be invited here today by the New Rules 
     for Global Finance coalition to talk about governance of the 
     international economy and the role of the world's major 
     economic institutions in helping to shape and manage the 
     global financial system.
       First, I'd like to say that I very much welcome this report 
     by the New Rules coalition and the contribution it makes in 
     calling attention to one of the most challenging issues we 
     face today--how do we manage the global economy and how do we 
     make our existing international institutions more effective 
     in helping to preserve global stability and promote 
     sustainable growth in a way that is broadly shared?
       In a world of sovereign states, the underlying challenge to 
     effective global economic governance originates from the 
     absence of a single global entity responsible for overseeing 
     the system and establishing the rules necessary for its 
     operation.
       The core infrastructure of the global economy will need to 
     be based--in my view--on effective national rules coupled 
     with increased international cooperation among nations, both 
     through informal channels and through established 
     multilateral institutions.


                      Global Economic Institutions

       Given the importance of our global economic institutions in 
     these efforts--and the fact that these institutions have no 
     system of direct democratic accountability--it is all the 
     more important that there be confidence in their governance--
     and that they be transparent and accountable.
       Particular attention should be paid to the effectiveness of 
     their policies and the impact they have on developing 
     countries.
       Any examination of these institutions should first 
     acknowledge how much progress they've made in many areas over 
     the past 20 years--in large part due to pressure from civil 
     society and individual governments. This is particularly the 
     case with regard to the Bretton Woods institutions. Whatever 
     deficiencies people might identify or perceive, one thing the 
     international financial institutions cannot be accused of is 
     being indifferent to pressure or impervious to change.
       Having said that, I believe the first set of governance 
     reforms we need at the Bretton Woods institutions is a more 
     effective voice for developing countries. These countries now 
     represent a much larger proportion of world economic activity 
     than when the World Bank and the IMF were created in 1944.
       Voice and representation reforms are imperative in order to 
     re-establish the credibility of the Bank and the Fund as 
     truly international institutions contributing to growth with 
     equity and stability for all countries.


                               World Bank

       I believe it is very much in our interest that the World 
     Bank--as the world's premier development institution--remains 
     strong, credible and effective.
       One of the important contributions the Bank has made to the 
     vitality of development efforts is its emphasis on good 
     governance--its commitment to democratic values and 
     inclusive, participatory decision-making.
     Inspection Panel
       In fact, twenty years ago the Bank became the standard-
     bearer for democratic accountability at the multilateral 
     development institutions by establishing the Inspection 
     Panel. This marked a very important advance in the governance 
     of international institutions.
       By creating an independent forum through which ordinary 
     citizens who felt disadvantaged by Bank projects could submit 
     their complaints and see them addressed--the Bank gave voice 
     and standing to affected people. For the first time, an 
     international organization provided a means through which 
     individual citizens could hold the Bank accountable to its 
     own standards.
       Today, the Inspection Panel continues to contribute in 
     important ways to project quality and improved development 
     outcomes.
     Racial Discrimination
       But the World Bank can only be effective in conveying a 
     message of good governance if it is seen as having good 
     governance itself. There must be a belief that its own 
     governance conforms to the standards that it demands of 
     others--including standards relating to the choice of 
     personnel and due process.
       One of the Bank's most important assets is its human 
     capital. It has created one of the most talented and 
     qualified bureaucracies around the world. But the Bank has 
     some serious work to do to ensure that its processes for 
     hiring, retaining and promoting staff are free from 
     discrimination. It must also ensure that staff have access to 
     a justice system that they can trust will be fair and 
     impartial. This is an issue that I will continue to follow 
     very closely.


                         Doing Business Report

       Another area where I'm optimistic we'll see permanent 
     change is in the World Bank's annual ``Doing Business'' 
     report, which ranks countries according to their 
     attractiveness to business.
       Several years ago, the Financial Services Committee learned 
     that the ``Doing Business'' report included a labor index--
     the ``Employing Workers Indicator''--which downgraded 
     countries in the rankings for any and all labor protections. 
     This included factors such as having a minimum wage, maximum 
     working hours, vacation days, or maternity leave. It was 
     clear this had to change.
       Another area of concern in the Report was its ``Paying 
     Taxes'' indicator--which gave countries a higher rating based 
     on how close to zero their corporate tax rates were. In 
     effect, this meant that the World Bank's guidance to 
     developing countries was to gut labor protections and shift 
     the funding of all government functions to workers and 
     households. Of course, this would make it more difficult to 
     fund social safety net programs, build a middle class, or 
     empower workers. This was odd advice for an organization 
     supposedly devoted to ending poverty.
       International labor groups such as the AFL-CIO, the 
     International Trade Union Confederation, and the ILO all 
     tried in vain to convince, shame, or bully the World Bank 
     into eliminating the ``Employing Workers'' index.
       After our Committee held a hearing on the subject several 
     years ago, we made it clear to the World Bank that its 
     funding could be very, very slow in moving forward through 
     the committee until this problem was resolved. The outcome 
     was that in 2009, the World Bank suspended the ``Employing 
     Workers Indicator'' from the ``Doing Business'' rankings--and 
     it created a working group to develop a new indicator to 
     measure countries' adherence to core labor standards.
       I'm confident that the anti-worker aspects of the Report 
     will soon be permanently abolished altogether. Not doing so 
     would greatly undermine the Bank's legitimacy and its 
     relevance in the fight against global poverty.

                      International Monetary Fund

       With regard to the IMF, I first want to thank Ms. LaGarde 
     for her willingness to engage with me directly on issues that 
     have been of particular importance to me. And I want to 
     commend her leadership in focusing as much time and energy as 
     she did on the country of Jamaica when the world was 
     otherwise so focused on the turmoil in Europe.
       I believe the IMF has a very legitimate and indispensable 
     function in the global economy--in monitoring the world's 
     economies and responding to countries facing balance-of-
     payment crises.
       One mark of the vitality of an institution, in my view, is 
     its ability to admit when it was wrong, to say that it had 
     misjudged some things and made mistakes. The IMF has done 
     that, and I think that adds to its legitimacy. For example, 
     after the East Asian financial crisis in the late '90s, the 
     IMF admitted that it was wrong in imposing too much 
     austerity, which exacerbated debt crises.
       Over the past decade, the IMF has tried to pay more 
     attention to the social aspects of its programs, including by 
     protecting social safety nets and vulnerable parts of 
     society.
       Last December, the IMF marked an end in the era of finance 
     by reversing its long-held opposition to capital controls. 
     The Fund announced a new official institutional view 
     acknowledging that controls on volatile flows of capital 
     around the globe can play an important role in helping to 
     preserve the stability of the international financial system.
       Moreover, when Congress authorized an IMF quota increase in 
     2009, which included a limited amount of gold sales, the IMF 
     agreed

[[Page 16175]]

     to use a portion of the proceeds to help the poorest 
     countries. This included the elimination of interest payments 
     on its loans to the poorest countries for five years.

                     Labor Market Issues at the IMF

       However, there are areas where I believe the IMF needs to 
     do a better job. First, it's clear that the Fund doesn't 
     always strike the right balance between austerity and growth, 
     which has had some very negative consequences. Second, I 
     believe the IMF should stick to what it knows best: 
     macroeconomic issues that bear most directly on balance-of-
     payment questions. For example, it's difficult to understand 
     why monetary economists at the IMF should intervene in a 
     country's labor market policies, particularly when they 
     encourage labor market flexibility measures. Labor market 
     flexibility is nothing more than a euphemism for measures 
     that make it easier for firms to fire workers and dilute the 
     power of unions to negotiate on behalf of workers. I 
     understand that the IMF has recently recommended a number of 
     these policies in Europe and elsewhere. The IMF should not be 
     re-writing the social compact in countries that recasts the 
     balance of power between labor and capital.

              Global Soverign Debt Restructuring Mechanism

       On a positive note, I'd like to add my very strong support 
     for recent work at the IMF, and elsewhere, to study and 
     encourage a more efficient approach to sovereign debt 
     restructuring.
       The issue of sovereign debt is back at the center of 
     economic policy debate. This is a result not only of the 
     global crisis, but also because of recent court rulings that 
     would give greater leverage to vulture funds, which could 
     undermine future debt restructuring efforts.
       I favor an approach that would establish a formal, 
     institutionalized, and politically recognized procedure for 
     restructuring the debt of bankrupt sovereigns. It would 
     extend legal protections to both the sovereigns and creditors 
     involved.
       Under certain conditions, an international sovereign debt 
     restructuring mechanism could allow for the orderly and swift 
     resolution of debt crises in ways that would not only make 
     crises less costly but would also encourage sovereign debtors 
     and creditors to act more responsibly in normal times.
       There are a couple of principles that I think should 
     underlie such a mechanism. For example, odious debt should be 
     written off. This would include, for example, the kind of 
     debt the Congo had as a result of Mobutu borrowing, or 
     Ethiopia, which was given loans that paid for arms that went 
     to Mengistu. Also, when loans were made with advice from 
     international lenders--advice that was wrong and led to 
     projects that were poorly designed--the lenders should bear 
     some of the risk for bad lending.
       In any event, the recent court rulings allowing vulture 
     funds to interfere with Argentina's ability to make payments 
     to creditors that had accepted a debt restructuring have 
     caused widespread concern. Both the World Bank and the IMF 
     have noted that this will encourage holdouts and discourage 
     creditor participation in future sovereign debt work-outs, 
     which could pose a very real threat to global financial 
     stability.


                   The Problem of Growing Inequality

       This brings me to what I think is one of the central 
     problems with the way we have approached international 
     economic policy, through our trade agreements and through the 
     policies of the international financial institutions.
       I believe our international economic policy has been too 
     one-sided--too focused on elevating the interests and 
     mobility of capital over all other considerations. This was 
     based on the misguided belief that unfettered markets would 
     not only create wealth and stability, but would also solve 
     almost all social problems through a trickle down of benefits 
     to others in society.
       But this isn't what has happened.
       Over the past 30 years, we have seen a growing increase in 
     inequality in the U.S. and in other advanced and some 
     emerging market countries. This was the case even during 
     periods of sustained growth. In fact, today the United States 
     has the highest level of inequality of any advanced 
     industrial country.
       Although some degree of inequality is necessary for the 
     function of a market economy, since it creates incentives to 
     work hard and take risks, here in America and elsewhere, we 
     have more much more inequality than is necessary for 
     efficiency.
       Left entirely to its own, the market system will produce 
     more inequality than is economically necessary. And excessive 
     inequality not only undermines social and political cohesion, 
     it has also been shown to have negative effects on growth.
       World Bank research has shown that growth alone is not 
     sufficient in reducing poverty. You also have to pay 
     attention to how the benefits of growth are distributed, so 
     that its benefits are broadly shared. Recent research at the 
     IMF has shown that inequality can also undermine growth, 
     because it weakens demand and depresses consumption.
       Now, I believe in capitalism. I recognize the power of 
     capitalism to create wealth, and I believe markets are the 
     main engines of wealth creation in our country and elsewhere.
       But in order to be truly supportive of the free market, I 
     believe you must also be supportive of government. This is 
     because we need to have an appropriate set of public policies 
     in place to reign in the excesses of the market, to help 
     maintain stability, and to ensure that the benefits of 
     capitalism are broadly shared.
       In fact, one of the most important lessons we have learned 
     from the recent financial crisis is that markets must be 
     deeply embedded in systems of governance. The idea that 
     markets are self-correcting has received a mortal blow. 
     Markets require other social and public institutions to 
     support them. They rely on courts, legal frameworks, and 
     regulators to set and enforce rules. They depend on the 
     stabilizing functions that central banks and countercyclical 
     fiscal policy provide. They also need the political buy-in 
     that redistributive taxation, safety nets, and social 
     insurance help generate.
       And all of this is true of global markets as well.
       What I'm saying is this: free markets and government are 
     not opposites, they are complements. And if you don't want to 
     believe me about the importance of government to the free 
     market system--well, maybe you will believe the markets.
       In Congress, one of the biggest supporters of the IMF and 
     the World Bank has been the US Chamber of Commerce. They 
     understand the need for effective public intervention when 
     countries are facing an economic crisis. Business has also 
     been the biggest supporter of the U.S. Export-Import Bank, 
     another government function. Finally, last week, after the 
     Republicans shut the government down, business deployed an 
     army of lobbyist to Capitol Hill to stress the importance of 
     getting the government back up and running again.


                               In Closing

       As I conclude my remarks, it occurs to me that perhaps this 
     might not have been the most appropriate audience to hear my 
     views on the importance of governance and the necessary and 
     mutually reinforcing roles of government and markets.
       I think perhaps the House Republicans in Congress would 
     have benefited more from this message than anyone else.
       Their insistence on shutting down the government--coupled 
     with their apparent willingness to allow our government to 
     default on its debt--reveal just how reckless and dangerously 
     dysfunctional the Republican Party has become.
       Their actions show not only a contempt for government, but 
     also an indifference to markets and the importance of 
     stability. Taken together, the Republicans have shown the 
     country just how profoundly misguided their understanding is 
     of the role and responsibilities of elected officials in a 
     representative Democracy.

                          ____________________