Today, the International Monetary Policy and Trade of the House Financial Services Committee held a hearing entitled “Implications of the G-20 Leaders Summit for Low Income Countries and the Global Economy,” to discuss how the decisions made at the G-20 Leaders Summit will be given effect. Testifying before the Subcommittee were:
- Amar Bhattacharya, Director, Intergovernmental Group of Twenty Four
- Nancy Birdsall, Founding President, Center for Global Development
- Simon Johnson, Professor, Sloan School of Management, Massachusetts Institute of Technology
- Timothy D. Adams, Managing Director, The Lindsey Group
In his opening remarks, Subcommittee Chairman Gregory Meeks (D-NY) emphasized the importance of supporting responsible economic policies in developing countries. He noted that much progress has been made over the course of the last decade in terms of economic soundness in emerging economies, and that it is vital that this trend continue, since “terrorism respects no national border” and “poverty breeds the unrest that allows dictators and extremists to thrive.”
Chairman Meeks’ sentiments were echoed by all of the panelists, with Mr. Bhattacharya stating that social stability and peace in fragile, poor countries is good for the world, and that investments in this area are in the best economic interest of the United States. Mr. Adams and Ms. Birdsall focused on the importance of rewarding good performers in the global economy and signaling to countries taking political risks to implement sound economic policies that their efforts will be supported.
Mr. Johnson, who was Economic Counselor and Director of the Research Department at the IMF from March 2007 until August 2008, expressed concerns about social stability and the dangerous nature of the current global situation, and the importance of fully supporting sound economic policies and markets in emerging and developing countries. He went on to discuss three specific issues relating to the implementation of decisions reached at the G-20 Summit.
- First, he stated that the process for selecting the next managing director of the IMF must be open and transparent. Also, he proposed that the next managing director of the IMF should not be a European, as he believes that the selection of another European managing director would undermine the credibility of the IMF.
- Second, he explained that the budget cuts to the IMF which have occurred over the past two years must be reversed, and IMF staff levels should be increased.
- Finally, he emphasized the importance of exchange rate surveillance. He said that the IMF has “dropped the ball” on this issue, and that failures in exchange rate management are “how the flow of goods across borders stops, and how the flow of soldiers across borders begins.”
In contrast to the witnesses’ enthusiastic encouragement of United States support of proposed IMF spending, Representative Jeb Hensarling (R-TX) urged members of the Subcommittee to be cautious. Rep. Hensarling noted that the United States is currently borrowing 46 cents for every dollar that the government spends, and that the national debt will triple over the course of the next ten years. He asked the members of the Subcommittee if there was “any limit to the liability exposure we’re willing to place on the American taxpayer.”