January 11, 2007
The road to hell, they say, is paved with good intentions. Frequently, so is the road to government waste. Three years ago, President Bush announced a $15 billion initiative to fight AIDS in developing nations. Our government has spent freely since, but it's unclear how many people we've helped. The program, says a recent Associated Press report, "pushed so hard for fast results that basic record keeping and accountability often went by the wayside, making it hard to judge the true success."
John B. Taylor could have predicted this. In his new book, Global Financial Warriors, the former Treasury undersecretary for international affairs writes that, when it comes to government aid programs, "What gets measured gets done." And he found the opposite is true: When there's no system in place to gauge results, there are seldom (if ever) any results to gauge.
During his four years at Treasury, Taylor got results -- in areas he'd planned to and in areas he couldn't have imagined when he was confirmed in 2001.
"I had come into government with lots of ideas and hell-bent for reform," he writes. Reforming the International Monetary Fund "was perhaps my highest priority." In his book, he explains how he accomplished that -- and helped improve global bond markets by doing so.
One problem plaguing international lenders is that it's impossible for them to compel countries to repay money. During the 1990s, for example, Russia defaulted, sending shock waves through the bond markets.
Taylor wisely recognized that because international bonds exist beyond the reach of any government, there couldn't be a governmental solution to this problem (even though that's what the IMF wanted). Instead, he pressed lenders and borrowers alike to agree to "collective action clauses," measures written into contracts that would reduce the likelihood of default by giving both parties ways to renegotiate debt if a country's economy sours.
Thanks to Taylor's policies, the international economy is turning away from IMF bailouts. Instead, developing nations are focusing on long-term, pro-growth policies, such as maintaining a strong currency. This is helping to reduce the threat of global contagion -- the domino effect where one country's default causes interest rates to rise for other countries. "Our strategy of moving gradually and trying to signal intentions, which we hoped would let markets adjust over time to control the global contagion, had worked," he notes.
In addition to carrying out his planned agenda, Taylor also helped fight the war against terrorism. As the 9/11 Commission wrote in its "Monograph on Terrorist Financing," in the months after the attack, "The U.S. government focused, for the first time, on terrorist financing and devoted considerable energy and resources to the problem."
Taylor describes our government's successful effort to freeze terrorist financing, build a coalition of countries willing to support the freeze and create an effective monitoring system to ensure countries were keeping their promises.
He also details Treasury's efforts to win the peace in Afghanistan and Iraq. By the fall of 2001, the United States had persuaded donors to provide $4.5 billion to Afghanistan. We then helped get the country's new government running. In Iraq, Taylor helped persuade our allies to forgive some 80 percent of the country's pre-war debt.
Government success, Taylor concludes, flows from clear, understandable principles. "Principles provide an anchor or a guide, which is especially useful when you can be thrown off track by pressures," he says. "The more confidence you have in the principles, the better."
During his time at Treasury, Taylor certainly had confidence in his principles. That's how he got so much done. Anyone who wants to know how government can work when it's well handled should read Taylor's book -- and follow Taylor's example.
First appeared in the Chicago Sun-Times