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Lawrence Summers Calls for Increased Leadership at International Finance Institutions
April 29, 2014
WASHINGTON, D.C. – Former U.S. Treasury Secretary Lawrence Summers has urged stronger U.S. international leadership, in particular increased support for the international financial institutions, to ensure world peace in the post-Cold War era.
In a speech (video here) on U.S. leadership and the international financial institutions given at the Center for Global Development (CGD), Summers, CGD's new board chair, was critical of Congress for failing to approve a U.S. brokered agreement for the reform of the International Monetary Fund.
“Whether peace will stay after the Cold War depends more than anything on the capacity of the United States to provide continued global leadership and to underwrite a global system in which cooperation and constructive behavior is the rational choice for self-interested actors around the world,” said Summers.
Yet, according to Summers, such U.S. leadership has recently been deficient. He criticized the U.S. Congress for failing to commit $330 million to undergird several hundred billions of dollars of IMF lending to support financial stability around the world, including support for Ukraine 15 times greater than what Congress recently committed to the country. Further, he noted Congress has blocked a U.S. brokered arrangement to reconfigure the balance of power within the IMF, even though it has been approved by all other countries.
Summers spoke about three turning points in the 20th century showcasing the link between stronger U.S. leadership on the international financial stage and world peace: World War I, World War II, and the Cold War. The peace, Summers said, was lost after World War I, when the U.S. abandoned the League of Nations and economic frustrations led to nationalism. The peace was regained after World War II, with the United Nations, the Marshall Plan, and the Bretton Woods Agreement that established the World Bank and IMF. In today's post-Cold War era, Summers said he is uncertain about future prospects.
“I would confidently have said, five years ago, that the peace had been successfully won after the Cold War, that an international order of growing economic integration, great prosperity, the emergence of emerging markets, the absence of conflict between great powers had been established,” said Summers.
However, Summers was concerned that we are in a period of great challenge with revanchism in Central Europe, tumult in the Middle East and a very chilly peace in North Asia. At the same time, the industrial world faces the prospect of “secular stagnation.”
Ultimately, Summers concluded: “It is a lesson of 1914 that economic integration and trade do not assure peace, but it is a lesson of much more history that economic disintegration and failure drive nationalism and almost assure conflict. And that is why American leadership in underwriting this global system is so important if the peace is to stay won.”
Summers offered his remarks at event held at the Center on Friday, April 25, 2014. Prior to his speech, Summers congratulated and thanked his predecessor and CGD founding board chair, Edward Scott, Jr., for his transformative work and noted it will be a privilege as board chair to work with CGD president Nancy Birdsall. Following Summers’ remarks, host of NPR’s “Morning Edition” Steve Inskeep interviewed Summers, and moderated a discussion with questions from the audience. A video of the event can be viewed here.