The good cop-bad cop drama between global lenders takes center stage this weekend as the World Bank and IMF hold Spring meetings in Washington. With both organizations engaged in the reformation of the global economy, the bad guys have become big governments with strong infrastructure and healthy market regulation, and the good guys are the free marketeers who reform, redesign and rebuild civilization at the World Economic Forum.
While the IMF predicts that sovereign debt burden will increase 35 percent by 2014 causing global recovery to remain sluggish, the World Bank in the past 18 months doled out $100 billion to bootstrap the developing world. In contrast, Washington spent $125 billion last year just to stabilize Iraq and Afghanistan, according to CBS News.
IMF chief Dominique Strauss-Kahn, who wouldn't mind being the next socialist president of France, is dealing with failing economies in Greece, Romania and Ukraine. And he's given Iran's economy a bad report card, adding muscle to Washington's sanctions. Iran estimates its economy will grow at eight percent this year, four times the IMF estimate.
But nowhere is the tilt toward Davos more evident than at the World Bank, traditionally Washington's bully pulpit in front of the multilateral lending community.
Bank boss Robert Zoellick, a Bush holdover and key member of Team Obama's Davos posse, has rolled out a makeover of the Bretton Woods global financial system that's a throwback to Wendell Willkie's "One World."
This new pax orbis flattens the first world and third world into one world in which a league of multipolar economic networks will eventually replace nation-states. Zoellick's speech launching the program entitled "The End of the Third World," is being buzzed up like Winston Churchill's "Iron Curtain" speech that jump started the Bretton Woods era and set the stage for the Cold War.
Bretton Woods took shape as the Allies turned the tide against Hitler in Europe and the United States was developing the atomic bomb. It provided the economic blueprint for nations to grow and reconstruct under capitalism and was largely indifferent to the socialist economic model that became the basis for Ronald Reagan's "evil empire." But its exchange rate and gold conversion mechanisms went south during the Vietnam era. By the time Henry Kissinger opened China trade for the Nixon White House treasury secretary John Connally unilaterally ended the conversion of U.S. dollars into gold, making the greenback the planet's only paper default reserve currency. The Euro, also a product of the Bretton Woods era, saw daylight with the collapse of the Soviet Union.
Zoellick's Bretton Woods reformation will create a civic religion devoted to generating wealth, mashing up the global work force into a pool of human capital in which the former "have" nations are forced to compete with the newly empowered former third world who carry the competitive advantage of working harder for less in cultures that never had the social contracts or a constitution that required them to finance the democratic American dream.
For those who never heard Ross Perot's giant sucking sound of jobs leaving America or any other high-wage nation, Zoellick just turned up the volume. And that's not going to play well with the Sarah Palin crowd or members of the resurgent Communist party in Russia who have little appreciation for multicultural economic models.
The political economy put in place by Bretton Woods enabled the U.S. and the Soviet Union to become superpowers and run their own good cop-bad cop as they divided up much of the world. The American idea man behind Bretton Woods, treasury official Harry Dexter White, was a U.S. Communist party member and a Soviet spy identified by the National Security Agency "Venona" project. His British counterpart, economist John Maynard Keynes, was a member of the Cambridge "Apostles" which included Soviet spies Kim Philby and Donald MacLean who helped steal U.S. atomic secrets, and FDR's pal, former New Republic publisher Michael Whitney Straight. British intelligence chief Sir Kenneth Strong, who watched it all happen on his watch, later reported that his papers on these matters were somehow destroyed.
Google's Eric Schmidt, one of the godfathers of globalism with a published net worth of $5 billion, said recently in a HuffPo article "Davos Confidential" that if there is a globalist conspiracy afoot, nobody has let him in on it. And back before the Internet and Mafia War Games were launched former FBI director J. Edgar Hoover steadfastly claimed there was no organized crime in America.
Carnegie Mellon professor Allan Meltzer, who has street cred with the Tea Party crowd, notes that Obama has been a fan of Keynesian strategies like government spending to grow out of the crisis. But with global growth posting its worst numbers since the start of the Bretton Woods era, no league of networks will be able to cover the sovereign debt that Team Obama is racking up.
Pragmatic Republican Mitt Romney, who could be Obama's opponent in the 2012 presidential race, thinks Obama's Keynesian-style stimulus plan was "an enormous mistake."
It took a trillion dollars in national debt for Ross Perot to get America to look under the hood in 1992, generating 19 million protest votes that made Bill Clinton a minority president with just 43 percent of the popular vote. And speaking of the popular vote, Zoellick was one of the managers of the Bush campaign team in South Florida that eventually swung the 2000 presidential election to Dubya.
The brave new multipolar world according to Zoellick, places more importance on free markets and the free movement of capital than on the social contracts between nation-states and their citizens. But right now nations with strong infrastructures and regulatory mechanisms are churning out the economic growth.
IMF senior economist Olivier Blanchard says China will grow 10 percent this year and that India's economy will expand 8.8 percent. JP Morgan forecasts that Brazil will grow seven percent, a figure more optimistic than the Brazilian central bank, which forecasts 5.6 percent expansion. Citing IMF statistics, the Washington Post says the U.S. economy will contract 2.6 percent this year.
The "End of The Third World" may offer a prophetic statement of the road ahead for some. But for the wretched of the earth who can't buy a dance card at Davos its a ticket right back to the future.