How About a Gold Standard, Bono? Jude Wanniski May 29, 2002

Memo To: U2's Bono (And Paul O'Neill)
From: Jude Wanniski
Re: Helping Africa Grow

Maybe something good will come out of the junket to Africa you and O'Neill have been enjoying these last several days. But so far, it looks pretty pathetic, I'm afraid to say. You have been arguing for more foreign aid to African countries, pointing out that little children are not only not getting their daily portions of porridge, but are losing their mommies and daddies to AIDS. O'Neill seems to be saying the Africans should be making better use of the aid they get, and should be treating the suffering of AIDs victims before spending money on AIDs prevention. The amounts of money you fellows are talking about is inconsequential when compared to the desperate needs of the impoverished people of sub-Sahara Africa. It is an impoverishment that has flourished over the past half century in large part because of the "foreign-aid programs" of the West, which were sold to our taxpayers on humanitarian grounds, but which were designed to line the pockets of Western banks and industrial companies. I see you took your act to Ghana, which reminded me that it was in the 1950s that Ghana's president, Kwame Nkrumah, was the lucky recipient of a big bag of U.S. aid money, at low interest rates, that he got on the condition that he use it to build steel mills. Because Ghanians did not know how to build steel mills, Ghana had American contractors oversee the work and American labor to do it. Because Ghanians knew nothing about making steel, and no American steelworkers were willing to work in the jungle for the going rate of pay, the steel mills were soon swallowed up by the jungle. They may still be there, for all I know, and if you check, you may find that the easy loans with low-interest are still being paid off by the government.

This is true not only of African countries, but of the developing countries around the world. I have several times written memos to Bush administration people urging a project for Haiti, the poorest country in our hemisphere. I've made this argument year after year for more than 20 years, but nothing is ever done until Haitians are eating the bark off their trees and drowning in the seas in search of calories. Why is Haiti so poor when its island should be a paradise for tourists? Ask the International Monetary Fund and the World Bank. The kids don't get their porridge in Port au Prince and their mommies and daddies suffer from AIDs, but their government has to squeeze them to make payments to the IMF, for loans made so long ago that nobody remembers what they were supposed to pay for. It is shameful that the Treasury Secretary of the richest nation on earth has to spend his time debating nickels and dimes when, if he had any kind of imagination and a staff to back him up, he could be cleaning out the Augean stables at the IMF and sending Reaganauts around the globe to fix these broken countries, broken by Keynesians and Monetarists, the London School of Economics, and the Big Money guys who are still looking for contracts to build steel mills in the jungles.

A year ago, Paul, you will remember I told you as I sat in your office that the world was messed up because Nixon took us off the gold standard in 1971, with the stroke of his pen at Camp David, and that there is nothing President Bush could do to bring relief to the poor people around the world that would be easier than signing a piece of paper restoring a dollar/gold link. There is no interest among the Big Guys for a stable dollar because they know how to "game" the system, to play the currency swings and make money whichever way the paper dollar floats. It is the people at the bottom of the pile who get crushed in the process, and it is of little help for them to get a package in the mail every year from Uncle Sam with a bowl of porridge in it.

Mr. Bono, I want you to know I am seriously disappointed in O'Neill because he knows I am not a crackpot, that everything I told him last year about the state of the economy today has come to pass, and he has done nothing at all to fix the dollar, the world's most important standard of value. He could have had one of his assistants indicate enough interest to question me, but he has not. And he has not hired anyone on his staff that would feel uncomfortable at the IMF or World Bank. If I were he, I would either go for the gold, or resign as Treasury Secretary and go play golf. Maybe President Bush would fill the post with someone who would be more inquisitive and we might make some progress.

I'm not sure how I will get this memo to you, Mr. Bono, but as I know folks in your home country, Ireland, I'll pass it on to them. The Finance Minister of Ireland, Charles McCreevey, may be the very best in the world at the moment. We made him our "Man of the Year" two years ago, for his courage in fighting the eurocrats and putting Ireland on a fast supply-side growth track. How nice it would be for the world if President Bush would invite him to be our Treasury Secretary when O'Neill quits!!

P.S. Here is a chart of the dollar price of gold since Nixon "fixed" the dollar by taking it off gold: