by Patrick J. Buchanan – August 28, 1998
Last June, in a piece titled “Let Russia Default,” this writer noted the obvious. Awash in debts, running a huge deficit, Russia should be allowed to default; and not one more U.S. tax dollar should be put at risk by the IMF trying to hide Russia’s bankruptcy.
Russia’s chief financial officer, Venianin Sokolov was quoted in that column as conceding that all the IMF billions pumped into his country had been lost, wasted, or stolen “at the highest levels” of what he called an “entirely corrupt regime.”
Yet the IMF handed Russia another $4.8 billion in July. What happened to it? According to Sergei Dubinin, Russian central bank governor, every last dime of that $4.8 billion was spent propping up the Russian ruble, which Moscow, last week, cut loose and let fall.
Within days, the ruble fell 30% against the dollar, 40% against the German mark. Again, Russia’s people have been robbed. Again, U.S. taxpayers will have to make good idiot loans of the IMF.
Friends, this is coming close to indictable criminal fraud.
Yet, according to the Financial Times of August 20, “the IMF is expected to disburse the second tranche of its $11.2 billion loan in September to replenish the central banks reserves and control the slide in the ruble.” If Congress allows this loan to go forward, and shovels out the $18 billion demanded by Clinton for the IMF, it must be considered a moral accomplice to the looting of America.
Russia has now admitted it cannot pay its foreign debts, and demanded that short-term bond holders accept long-term paper at 30% of face value. Panicked investors are fleeing Russia and every Third World market. Stocks are plummeting and billions of dollars of equity are being wiped out daily. Since mid-July, the U.S. market has probably given up a trillion dollars in value.
Who is responsible for the global disaster that began in Asia? Last week, on CNN’s “Moneyline,” Nobel Prize-winning economist Milton Friedman, nailed the villain. Said Dr. Friedman, the IMF “is largely responsible for the Asian crisis.”
Instead of letting Mexico default in 1994, and Goldman Sachs takes its hit, the IMF rushed in to bail out Mexico City and its New York creditors.
That bailout sent a message: The risks of investing billions in emerging markets are minimal. Huge sums poured into these markets. It is those investments that, today, are being wiped out. To stanch the blood-letting, the IMF, since last summer, has put taxpayers at risk for $130 billion in loans to Asia and Russia, most of which we will never see again.
Yet, as Friedman says, it is not the Mexican people, or Russian people, or Thai people, who are aided by the IMF. “We speak about the IMF bailing out…Thailand; the IMF isn’t bailing out Thailand. It isn’t bailing out the poor people in Thailand now suffering from the recession they’re in. It’s bailing out the bankers in New York and in London, and Berlin who made loans to Thailand.” Exactly.
It is time for a Congressional investigation that might well be titled: Who Lost Russia? Its focus should be on who got — and who stole — the scores of billions of dollars in Western loans sunk into Russia since 1991, because it surely was not the people of Russia who are destitute and far worse off than in 1991.
According to the Nation magazine (“The Harvard Boys Do Russia”) Russia’s disaster is the work of three elements. First are the so-called “reformers” like Anatoly Chubais whom the New York Times says “may be the most despised man in Russia.” Second is Harvard’s Institute for International Development which Clinton’s men put in charge of U.S. aid to Russia. Third is the U.S. Treasury.
The “privatization drive that was supposed to reap the fruits of the free market,” writes Janine Wedel in Nation, “helped to create a system of tycoon capitalism run for the benefit of a corrupt political oligarchy that has appropriated hundreds of millions of dollars of Western aid and Russia’s wealth.”
Moscow’s mayor recently “singled out Harvard for the harm inflicted on the economy by its advisers who encouraged Chubais’ misguided approach to privatization and monetarism.”
In 1991 Russia was pro-American and on the road to freedom. Today, this nation, with thousands of nuclear weapons, is a basket case seething with anti-Americanism and ripe for an explosion.
Meanwhile, Russia’s tycoon capitalists romp on the Riviera; and the geniuses at Harvard, Treasury and the IMF who presided over this debacle have never been called to account. This must be done; but first let’s take Friedman’s advice — and abolish the IMF.