Norman Russel: International Finance Agreements Amendment Bill — Third Reading 
Text is incorporated into the Bound Volume 
Norman Russel: International Finance Agreements Amendment Bill — Third Reading 
[Sitting date: 21 February 2013. Volume:687;Page:8129. Text is incorporated into the Bound Volume.] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak on the International Finance Agreements Amendment Bill. Essentially what this bill does is bring New Zealand legislation into line with the Articles of Agreement of the International Monetary Fund. The articles of agreement are essentially the agreement as to who gets how many votes at the IMF. From time to time there are changes in the allocation of votes at the IMF though the United States always retains a veto effectively. So this piece of legislation is to bring essentially New Zealand legislation into line with those changes in votes in the Articles of Agreement of the International Monetary Fund. 
However it does something else and it is a “something else” that the Greens disagree with. The something else that it does is that it means that future changes can be done by regulation rather than by legislation. That is the fundamental change in this piece of law. These changes in relative votes in the Articles of Agreement of the International Monetary Fund do not happen very often. We think that it is a good principle to uphold that wherever possible Parliament should be the one to change the law rather than the executive. 
This bill as it is in front of us now will enable the executive to make secondary law or regulations. That essentially means that Parliament has derogated its decision making to the executive in terms of signing up to the changes in the Articles of Agreement of the International Monetary Fund. But those articles do not change very often so it seems to us that there is no need to derogate responsibility from Parliament to the executive. 
This was a position that the Labour Party argued quite strongly but the Labour Party has decided—which is fair enough—that although it has concerns about this aspect of the bill it will support the bill overall because it supports the broader purpose. It was then with some sadness that I heard the ridiculous attacks from the Labour Party on the Green Party because we take a principled position whereby we understand the bill but we disagree with one section of it and have decided to vote against the bill for that reason. 
The Labour Party—and I respect its decision—has said that it disagrees with this particular section of the bill but has decided to support the bill as a whole. I think that is a perfectly rational decision. People of good mind and of similar beliefs can disagree about things. That is just the nature of politics and so it should be. 
In terms of the IMF I am probably one of those people who have been critical of the International Monetary Fund over many years. Those of you who know your history will know that after the Bretton Woods agreements we had the three major financial institutions that were set up: the International Bank for Reconstruction and Development or the World Bank; the International Monetary Fund; and the International Trade Organization. Of course the International Trade Organization never appeared because it was vetoed by the US Congress so we were left with two. It was not until 1995 with the establishment of the World Trade Organization that the third part of the international structure was established. 
The thing about the IMF and the World Bank or the International Bank for Reconstruction and Development is that essentially they became captured by what became known as the Washington Consensus. That was a hard right consensus about a series of policies that should be implemented. Those policies were heavily discredited during the 1997 Asian financial crisis—or rather just the Asian crisis I guess—where particularly a number of South-east Asian countries got into real trouble. The International Monetary Fund came in and applied the usual Washington Consensus formula which caused those economies to get into more trouble. Many people who were associated with that—and who have since spoken out against it very directly—have said that the application of the Washington Consensus model in the case of the East Asian crisis in 1997 was a catastrophe for those countries. One of the most famous of course is Joseph Stiglitz who was the chief economist at the World Bank who then became a dissenter.  
What has happened in terms of the evolution of thinking in the IMF and of course at the World Bank in particular is that there has been a radical move away from the Washington Consensus which I think is a great thing. For someone like me who has been highly critical of the International Monetary Fund and what it has done to developing countries over many years and the terrible poverty and dislocation that the IMF and the World Bank have caused I for one have celebrated the change in direction of the IMF. So now I find myself quoting often from IMF documents because the IMF has become much more progressive and interesting particularly on monetary policy.  
Those of you who read IMF documents will know that there is of course a very famous one at the moment by Michael Kumhof who is one of the IMF researchers called  
The Chicago Plan Revisited 
 which is all about looking at monetary policy. It offers quite a radical proposal around reforming fractional reserve banking—essentially eliminating fractional reserve banking. It is quite a radical proposal that has come out of some of the researchers of the IMF. It is not actually an IMF paper in the sense that it is fully endorsed by the IMF but these researchers—and Michael Kumhof in particular—have been going around promoting alternative ways to deal with the current global financial crisis that involve putting a lot more constraints on banks’ ability to print money.  
The other thing that comes out of I think the IMF that surprises a lot of people is when the IMF says things like most of the money that is generated is generated by the private banks. Most of us I think—and I was certainly one of these people until reading IMF papers—always assume that the Government created the money. That is just because I actually did not follow it closely enough whereas the IMF is very clear that it is the private banks that create most of the money. What the IMF—or at least some of the researchers within the IMF—is now saying is that the Government should use its ability to create money so that there is some publicly created money as well as the privately created money most of which is created by the private banks. 
 This of course is a pretty radical proposition and the IMF in putting forward this proposition has certainly been shaking the policy debates around monetary policy all over the world except in New Zealand of course where we are kind of locked into some weird backwater where the Government does not want to have a debate around any of this kind of stuff. But if you read the international literature it is pretty good. 
Lord Turner—the head of the United Kingdom Financial Services Authority the regulator of the banks in the United Kingdom—has been proposing very similar things to the IMF in many respects. He has been talking about using the public creation of money to fund Budget deficits. It is quite a radical proposition. It is very similar to the proposition that was put forward by Milton Friedman when he talked about helicopter money. 
So there is a very lively international debate which the IMF is in many respects leading around what we should be doing about monetary policy and should we leave the entire creation of the money supply in the control of the private banks. The IMF has been leading this debate and I think it is a good debate for us to have particularly in light of the global financial crisis. What we saw with the global financial crisis was that the private banks created vast quantities of money—or credit; call it what you like—and we are now trying to deal with the hangover from that if you like. This vast amount of debt in money was created which we are now trying to get rid of. 
So the challenge for all of us is that having seen the private sector do that when it was deregulated and it was allowed to create as much money as it wanted how do we put the genie back in the bottle for the private sector? Then the question is what the role for publicly created credit is. I think the IMF has been leading the debate around what is the role for publicly created credit. All credit to the IMF that it has led that debate. 
The other debate I think the IMF has been very instrumental in has been around green economics. It has kind of been doing it in combination with the OECD and the World Bank and the United Nations I guess. All the international institutions are very engaged in the green economics debate. What they have been asking is how we make the transition towards sustainability while still maintaining prosperity. That is the kind of global debate we have. We are trying to make this transition to sustainability which is quite a radical change in our economy at the same time as we are dealing with essentially a financial crisis which has become a crisis of the real economy as well because of the impacts of the financial system. 
So in the midst of this financially created crisis we are also trying to deal with the ecological crisis if you like. So we have got these two parallel problems. The IMF has been leading some of the work on how we can deal with the environmental crisis by trying to build the green economy and make sure that we make the transition to sustainability but also deal with the crisis in the real economy by making sure we have jobs in sustainable industries and making sure that people have sustainable work. Getting both of those things right is I think the great challenge of our epoch. I have certainly appreciated the IMF’s contribution on that so I look forward to further rational debate on these issues in our Parliament.