Norman Russel: International Finance Agreements Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Norman Russel: International Finance Agreements Amendment Bill — First Reading 
[Sitting date: 08 May 2012. Volume:679;Page:2006. Text is incorporated into the Bound Volume.] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak on the International Finance Agreements Amendment Bill on behalf of the Green Party. This bill essentially does a couple of things. Firstly it implements some changes to the articles of the IMF which are votes and voting changes. They are very minor changes in voting proportions in the International Monetary Fund. Much more important it changes the way that future changes in the articles of the IMF are approved or not by the New Zealand Government. Previously any changes in the articles of the IMF had to be agreed by the legislature by this House before they could be fully implemented by the New Zealand Government. Even though the New Zealand Government might agree to them at the IMF they actually had to pass through and be legislated before they took full effect. This bill gives the executive—the Cabinet effectively—the power to implement changes to the IMF articles or rather to agree to changes to IMF articles without consulting the Parliament and without getting the approval of the Parliament.  
That is quite a significant change. That is the fundamental reason why we are not going to be supporting this bill. We think it is important that if the New Zealand Government is to agree to changes in voting rights at the IMF that should come back to the New Zealand Parliament. This is not a particularly onerous job. From what we could tell there have been half a dozen changes to the IMF articles that have needed approval from the New Zealand Parliament in the space of 40 or 50 years. So it is not like the Government of the day would have to be coming back to the Parliament every year even or every week but very infrequently in order to get changes approved that the New Zealand Government could agree to changes in the articles to the IMF. So we think it is important that the Parliament retains that right.  
This is part of a general trend in legislation that has been going on for some years now whereby there is delegated decision-making or secondary legislation or regulations—basically there is a lot of movement of rule-making or lawmaking into regulations and away from primary legislation. What we are seeing here with this bill is another part of that broader pattern of taking away the right of Parliament to make the rules or the law and Parliament through the Government’s majority delegating that to the Government of the day in the form of regulations and that is what is happening here.  
It is quite important because the IMF is pretty critical. In the post-war period there were three great institutions that were established or not established. The first of course was the International Monetary Fund the second was the International Bank for Reconstruction and Development or the World Bank and the third was what was then called the International Trade Organization. The third institution was never established of course because the US Congress refused to support the establishment of an international trade organisation and it was only much later in 1995 with the establishment of the World Trade Organization that the third global institution came into being.  
The IMF has played a constructive role over many years. However in the 1980s and 1990s it got taken over as did much of the English-speaking Western World by the new-right crazies. So the IMF started to introduce a series of ridiculous proposals which have been enormously destructive. It adopted the Washington consensus around deregulation and privatisation monetarism and all of the rest—the full catastrophe. That has been enormously destructive. The IMF became enormously unpopular internationally during that period. The former chief economist of the World Bank Joseph Stiglitz who was the vice-president of the World Bank was highly critical of the IMF and the role of the IMF particularly during the Asian financial crisis in 1997. The IMF played a particularly destructive role in making the Asian financial crisis much much worse. Not only Stiglitz but a series of very mainstream and important economists have been highly critical of the role of the IMF through the 1980s and 1990s. Neocolonialism was a term that was used quite a lot about the role of the IMF.  
For those reasons democratic reform of the IMF has been high on the agenda of progressives internationally and the Greens have been advocates for democratic reform of the voting rights in the IMF. As has been stated earlier the basic situation at the moment is the United States retains a veto over decision making at the IMF because it holds 16 percent of the voting rights and essentially you need more than 85 percent to get a decision through. So the United States has retained its veto rights.  
The voting reforms that are being proposed which date back to 2008—this is not a recent event; this Parliament has taken a long time to getting around to approving this—make very minor changes to the voting rights. About 6 percent of the voting rights are moving towards the big new developing economies. Of that about 2.5 percent is actually coming from other developed countries. So it is not like it is a big reform coming from the United States which obviously should be giving up some voting rights but rather it is a very minor reform some of which is actually at the expense of other developing countries. So while in terms of democratic reform one might say that it gives something it is a very minor reform.  
Of course the other thing that is interesting about these reforms is essentially they predate the global financial crisis. So what has happened post the global financial crisis is that of course the role of the United States as the world’s global superpower economically speaking has declined dramatically. Of course the debasement of the US dollar has been one of the most obvious examples of that through massive quantitative easing. But perhaps what is really apposite in this situation is that when the IMF asked for more funds most recently and asked New Zealand to contribute and asked other countries it was of course the United States—the biggest single vote share in the IMF—that refused to make a contribution to the global bail-out fund effectively which Christine Lagarde the head of the IMF was trying to build up in order to save the global economy if there was another crisis.  
So it is a paradox that this voting reform does not deal with the fact that it is the United States that effectively maintains veto within the IMF voting system but it was the United States that failed to come up with any money to help out with the global bail-out fund. For that reason if you were one of the big emerging economies you would be pretty annoyed by this very very tepid reform of the voting system at the IMF. Really it does not make the kinds of changes that we need to make.  
For those reasons we think that the democratic reform of the IMF has a long way to go and it still is in some ways enshrined in the post - World War II order and does not represent the modern world. So we would like the democratic reforms—that this bill implements and which are very very minor—to go much much further so that the IMF represents the world much better. Even if it were just to represent the economic world it would be progress. But it certainly does not represent the world populations in any respect whatsoever. So these are very minor reforms. We also think that if you are going to make these kinds of changes what is the problem with bringing it back to the Parliament? But anyway!  
The other thing I just wanted to say was that the IMF does a lot of useful work. For those of you who read the IMF website there are a lot of great research papers come out of the IMF. Of course David Parker talked earlier about the IMF being like every international institution in arguing that New Zealand should be adopting a capital gains tax in order to even up the tax system because our tax system currently gives great advantage to property investment. The IMF has been a very strong advocate for that. I think the latest IMF report on New Zealand which came out in April is quite interesting as well because the IMF basically agreed with the Government’s strategy and the Minister of Finance rightly said: “Look the IMF is agreeing with us.” but that was before the Government’s fiscal position really started to fall apart. So as the Government’s fiscal position has gotten worse it is actually going to make it harder. It will be very interesting to see what the IMF thinks of that position when it comes to have another look at New Zealand.  
What was interesting about what the IMF said was that it is the high currency—the New Zealand dollar—that is a real problem in rebalancing the New Zealand economy. The IMF is absolutely on the money on that question. It is in this context worth mentioning that the IMF’s report on Switzerland which was done about the same time whereby the Swiss were doing very unconventional monetary policy—that is they basically said they were capping the level of the Swiss franc and would print endless Swiss francs to stop the Swiss franc becoming too high which is a very very unconventional monetary policy. The IMF’s view was that that was an entirely appropriate response to deal with a currency that is becoming too high and is destroying the tradable sector in Switzerland. Now I think that New Zealand would want to read that report from the IMF and although it is very unconventional and I give you that it does suggest that we need to think a little bit outside the square in the way that we manage our currency in New Zealand. If we read reports from the IMF a little more closely we might think a little bit more outside the square. Anyway Mr Deputy Speaker is telling me to wind up so thank you very much.