Harvard professor Jeffrey Sachs was furious. The Warsaw telephone system was overloaded and he couldn’t set up Paul Volcker’s next appointment with Polish government officials. It was no wonder he couldn’t get through: Keynesian Sachs and ex-Fed chairman Volcker are just two of the gurus now swarming over Eastern Europe like locusts on a wheatfield.
Because they disdain capitalism and national sovereignty, global agencies like the International Monetary Fund (IMF) and the World Bank sponsor experts like this, who seek to replace Leninism with the welfare state.
Poor Eastern Europe. Oppressed by the Nazis, tyrannized by the Soviets, and now, with its first chance at freedom and prosperity in more than 50 years, fooled by central bankers and Harvard economists.
Unfortunately, Poland’s Solidarity Movement was schooled in economics by the AFL-CIO, courtesy of the U.S. National Endowment for Democracy (and the American taxpayer). So misguided Warsaw politicians want to replace communism with Western-style big government.
The international bureaucrats have talked the Poles into imposing “austerity” through much higher food, housing, and fuel prices. (Why, by the way, is austerity never imposed on the government?) But are these new prices – which have caused great popular unrest – the correct ones? IMF computers are no better at this than Soviet central planners. True prices can only be established with private property and a free market, as Ludwig von Mises demonstrated 70 years ago.
But instead of a free market and private property, these agencies want continued, if decentralized, government planning. They also call for credit rationing to hold down “aggregate demand” and raise government revenue, a discredited Keynesian tactic that discriminates against new businesses.
The international agencies want a Polish central bank (part of the reason for Volcker’s visit) and “more efficient tax collection” (just in case the Poles miss the KGB). They have also talked the Poles into enacting regulations that hamper new businesses and promote unionization.
When Mises’s student Ludwig Erhard freed the war-sacked West German economy – over the opposition of Harry Truman’s bureaucrats – an economic miracle took place. The international agencies, which hunger for a world state, want no such example for Eastern Europe. In a world of freedom, they would be out of a job.
The international bureaucrats say the Pole? first priority is to pay off all loans to big Western banks. But why? It is hardly moral or economic to tax the down-and-out Polish people to repay Communist loans. The money was stolen, wasted, or used to oppress them. Why should the Polish people reward the bankers who financed their tyrants? Let the bankers learn a lesson about subsidizing evil. (Such a repudiation would also make it almost impossible for the Polish government to borrow in the future-another benefit to the Polish people.)
Poland needs, above all, a real-life documentary coed: “Honey, I Shrunk the State.” That means tossing out not just the Soviets, but also Sachs, Volcker, the IMF, the World Bank, and every other advocate of big government.
The IMF and the World Bank are creatures of John Maynard Keynes. Established at the post-World War II Bretton Woods conference, they were to “stabilize” the global monetary and economic system through government power – an ambiguous, unachievable, and undesirable goal. It was for Keynes, however, a milestone on the road to world government, another of his delusions.
The institutions were also to promote “socialized investment” (Keynes’s term) that would make the world safe for state-favored bankers and corporations. This means, wrote Henry Hazlitt at the time, that private investors “would not have to exercise any care or discrimination on their own account.” In case of trouble, the U.S. taxpayer would pick up the check.
The Establishment, particularly the Rockefeller family, was in control from the outset. The World Bank’s first president was Eugene Meyer, one time Wall Street financier, former Federal Reserve official, and controlling stockholder in The Washington Post. After a dispute, he was replaced by John J. McCloy, former wartime official and lawyer to the Rockefeller family and Chase National Bank. McCloy was also a board member of the Rockefeller Foundation. Today the Bank president is Barber Conable, a long-time associate of David Rockefeller’s, who has just promised to loan $350 million to Poland so it can pay off its debts to Chase Manhattan and other big banks.
Is this a conspiratorial observation? No, merely the recognition that government institutions are today set up to advance the self-interest of those who control them, at a high price to the rest of us. Along with exacerbating world inflation, the World Bank and the IMF have subsidized tyranny, poverty, and mass murder, as Jim Bovard and Doug Bandow point out elsewhere in this issue.
The fight is far from over in Poland, of course. After so many years of oppression, most people want liberty, not a “guided economy” courtesy of Western liberals. Our job is to support them, which the Mises Institute does. And in Czechoslovakia, the new free-market finance minister Vaclav Klaus says that Austrian economics “may be dead in Vienna, but it is alive in Prague.”
If the freedom fighters of former socialist countries succeed in beating the IMF and the World Bank, not to speak of the Communists, maybe we can ask for their help I wonder if they can spare any free-market missionaries for Washington, D.C.?
