John Taylor thinks that economics can work better than economics in securing the peace in Iraq.
My strong recommendation is: As soon as Gen. Petraeus and his coalition forces secure an area -- a neighborhood or a town -- we should immediately focus as best we can on the economic part of our mission. Help businesses reopen and hire people, especially young people who might otherwise join the enemy.
This is similar to Using Incentives to Solve the Israeli-Palestinian Conflict and in both cases it may be optimistic. As far as I know Prof. Taylor's approach has not been tried in Iraq. Given his track record, I say let him try.
The following is another rejected book review of John Taylor's Global Financial Warriors (I thought it was a gentler version of I,I,I:
“I was responsible for leading 350 finance experts and staff ... giving advice to finance ministers and central bank governors. I spent time on the ground in difficult areas like Afghanistan, Iraq, Liberia, and Haiti, and made a total of 120 visits to foreign countries, and attended over 400 meetings in the White House, experiences that afforded me a unique top to bottom perspective. I was responsible for coordinating U.S. financial policy internationally … I also had to coordinate policy internally with the State and Defense Departments…. I also gave over two hundred speeches and made another fifty trips to U.S. cities … I testified before committees of the Senate and House of Representatives twenty five times.”
Moreover, in reading the book we also find that Taylor, who once advocated the abolition of the International Monetary Fund, is an effective coordinator who was able to provide the leadership that was essential in a task oriented organizational structure to achieve the stated missions to which he was assigned.
The book covers the tumultuous years that Taylor was the Undersecretary of International Affairs at the U.S. Treasury from before 9/11 to 2005. Rather than tell the story chronologically, Taylor chose to divide the book into the missions that were undertaken. This has the advantage that each chapter is more or less self-contained. Unfortunately, it leaves the reader a little disoriented as events unfold such as the resignation of Paul O’Neill as Treasury Secretary. The book is almost structured like a résumé. He lists his achievements as follows:
1. Successfully coordinated internationally to freeze the assets of terrorists thereby effectively halting the flow of funds.
2. Planned, coordinated, supervised and implemented the financial reconstruction of Afghanistan, including acceleration of reconstruction funds and implementation of metrics to measure progress.
3. Prevented global financial contagion from the default by Argentina: Successfully utilized IMF’s augmentation of $8 billion to force debt renegotiation and to signal effectively to markets that no funds would be forthcoming thereby allowing the markets to anticipate and adjust to the news.
4. Successfully implemented “collective action clauses” in international bond issues thereby eliminating the need for the IMF to act as global bankruptcy court. The use of “collective action clauses” has prevented another international financial crisis.
5. Successfully negotiated for 100 percent cancellation of debt for developing countries. Shifted World Bank (IDA) loans to grants and implemented results measurement system.
6. Arranged and negotiated a financial package for Turkey in exchange for using Turkey to invade Iraq from the north.
7. Planned, coordinated, supervised and implemented the financial reconstruction of Iraq, including the reopening of the Central Bank, the delivery of tons of cash and the issue of new currency. Advised on monetary policy to that was used effectively to prevent inflation. Coordinated and negotiated for an 80 percent debt relief of Iraq loans.
8. Allowed massive Japanese intervention in the currency markets that resulted in a successful relation of the Japanese economy thereby ending Japan’s “Lost Decade”. Effectively signaled to the Japanese that once its economy was growing that it should stop its intervention in the currency markets and allow market forces to determine the exchange rate. This hands-off/hands-on approach achieved the desired result with Japan and subsequently, China which let the yuan float.
Taylor is an admirer of President Bush, often recounting how easily the President sets everyone at ease no matter how tense a situation is as well as how quickly the President can grasp economic issues that were presented. However, he does not say anything about the two Treasury Secretaries, Paul O’Neill and John Snow beyond describing his conversations. There are also interesting details about his interactions with Bono as well as with Anne Krueger, both while she was at the World Bank and at the IMF. He tells how the press, especially Paul Blustein at the Washington Post seemed to accentuate the differences he had with Ms. Krueger particularly in the debate as to whether the IMF should act as a global bankruptcy court. The story that he tells about how cash was flown into Iraq by military transport planes was also quite riveting.
The book is an interesting insight into how policy is formulated, sometimes by deliberately using press releases and speeches to gauge further reactions before making final recommendations. Sometimes the choice of where to have a meal and what to serve can be as important as the language in communiqué.
With everything that Taylor achieved while Undersecretary, it is hard to think how different things could be if he had been Defense Secretary.
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