Integrate -- not isolate -- communist nations

High on the agenda when Congress reconvenes next week will be the bill authorizing an increase of $8.4 billion in the United States quota in the International Monetary Fund. This is the US share of a larger package which was negotiated last February to increase the total resources of the fund by $43 billion.

If the international debt crisis can be managed at all - and some economists doubt it - it will only be because of the IMF. The fund is indispensable to the world's money, and higher quotas are indispensable to the fund.

Both the House and Senate passed the IMF bill before recessing last month for their summer vacation. In the House, this was done by the shaky vote of 217 to 211, and in the process two singularly ill-advised instructions were given to the American representative in the fund. The House-Senate conference committee which will write the final version ought to jettison both of these at the first opportunity.

One of them requires the US to vote against loans to any country practicing apartheid, meaning South Africa. The other requires votes against loans to ''communist dictatorships.'' Both of them offer almost irresistible platforms for demagoguery - which no doubt explains why they are in the House bill - and both of them are exceedingly bad public policy.

In the first place, they will not actually prevent fund loans to the targeted countries. The US contributes 19 percent of the fund's resources and therefore has 19 percent of the votes in making fund decisions. It will thus not be able to block loans to South Africa and communist countries. Neither will it be able to influence the terms and conditions under which they are made.

In the second place, these House provisions will make it more difficult to follow a sensible policy with respect both to South Africa and the communist bloc. What we ought to be trying to do is to integrate these countries more into the world economy, not further isolate them from it. The more ties they develop with the rest of the world, the more difficult they will find it to maintain the artificial rigidities of either apartheid or communism. Over a long period, this opens the prospects for slow, gradual change - the only kind of change likely to occur. (There is perhaps the possibility of revolution in South Africa sometime in the future, but not, realistically, in the Soviet Union.)

Only three communist countries are members of the IMF and eligible for its loans. They are Hungary, Romania, and Yugoslavia. The other members of the communist bloc have traditionally boycotted the fund because they are afraid of the consequences of membership. That is precisely why it would be in the national interest of the US to have them in the fund rather than outside it. The House version of the IMF bill would reduce the incentive for them to join.

Consider the case of Poland. Here is a country which owes $25 billion, most of it to Western governments and banks, with dismal prospects for repaying it. Poland desperately needs what the IMF does best, which goes beyond lending money for temporary balance of payments assistance to devising integrated economic stabilization programs.

These programs are tough applications of economic orthodoxy. They have put the IMF high on every third-world politician's list of things he dislikes most (right up there with Wall Street and multinational corporations). Many Western critics agree that IMF economic stabilization programs are too tough, that they demand the politically impossible in the form of wage controls, currency devaluation, and balanced budgets. The critics have a point, but in country after country IMF programs in fact have worked and laid the foundation for solid , as distinguished from inflationary, economic growth.

One of the good things about all this from the point of view of the US is that it is the IMF that takes the political heat for these programs and not Uncle Sam. The IMF is a big, abstract international institution in which Americans do not even play a dominant role. Its managing director is French, and it is largely run by European technocrats.

There is no use blinking the fact that IMF stabilization programs represent interference in some of the most sensitive areas of a country's sovereignty - and its money supply, budget, wage levels, and trade policies. The IMF has been able to get away with it only because its clients, by the time they reach that point, are truly desperate. This interference, of course, is the real reason that most communist states refuse to have anything to do with the fund. One of the communist members - Yugoslavia - broke away from the Kremlin more than 30 years ago. The other two - Hungary and Romania - are among the more independent. The three of them have what perhaps is communism's closest approach to Western economies.

Certainly this is a trend to be encouraged, not stultified. If Poland could be enticed into membership, that alone would carry far-reaching implications of change. The House should reconsider.

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.