After the Rev. Martin Luther King Jr.'s assassination, I was elected to Congress, where I served on the House Banking Committee and the International Trade and Finance subcommittees. I was there not knowing what was going on or what I was doing. But nobody else there understood what was going on or knew what they were doing either.
I remember distinctly, Paul Volcker, Arthur Burns and George Shultz coming to the Banking Committee and saying that it was time to end the Bretton Woods agreements. Now we’re celebrating 50 years of Bretton Woods--agreements that were broken up 20 years ago. Before then, we had 3% to 6% economic growth in Europe, America and all over the world. We had stable currencies. We had free trade. We had low interest rates. The world progressed. Everybody moved together.
However, after the 1972 election, President Richard M. Nixon was determined to break up those agreements, thereby abandoning the leadership role of the United States of America in the free world economy. Burns, Shultz and Volcker were not convinced what they were doing on behalf of the Administration was right for the country, but that was what the White House wanted.
Then Watergate broke. And while we got upset over it, the thing that was really screwing the country and screwing the world was what was happening on the Banking Committee. And nobody paid attention. Within months, OPEC was formed, the world price of oil went from about $3.50 a barrel up to $50 a barrel. And we’ve been on an economic roller coaster ever since.
The banks began to recycle debt. In the 1980s, developed nations contributed $927 billion to poor nations. For that debt, poor nations paid back $1.34 trillion. Instead of aid flowing from rich to poor, aid was flowing from poor to rich.
That’s one of the reasons why you have Yugoslavia pulling apart, why they can’t keep a government in Nigeria, why Colombia is dealing in drugs, why we’re having all this rain and flooding, is the consequences of a debt burden having created a boomerang. That boomerang is affecting everything we do.
The World Bank and the International Monetary Fund insist on certain rescheduling, certain conditionality, which cuts down the size of government and creates unemployment. People have to earn a living, so they go out in the woods and grow cocaine instead of coffee and sugar. They export the cocaine back here and we’ve got a crime problem. They cut down the trees for export to meet their balance-of-payments needs. They destroy the rain forest. We have global warming.
Unless we have a sense of economic order, we’re not going to have peace or prosperity anywhere on this planet. We’re courting environmental disasters every day that we allow the present conditions to continue.
I’m basically a supporter of the World Bank and the International Monetary Fund because the development strategy which they are advocating is exactly what developed the southeastern part of the United States. It’s exactly what developed Europe and Japan, with one exception: the interest rate.
When the United States loaned money during the Marshall Plan, England got it at 2%. Mexico had to pay 18-20% for their interest. That’s why they have crisis in Mexico and why it’s hard for the government to be stable. The Caribbean has been raped by high interest rates. Africa right now is a basket case because it’s almost impossible to have any political order because there’s no economic order.
George Bush used the term New World Order, but he didn’t have a clue as to how to define it. I think it’s our challenge to define it.