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Paul O’Neill as Scrooge

Who will have more influence on U.S. Treasury Secretary Paul O’Neill, Bono — or Ebenezer Scrooge?

May 20, 2002

Who will have more influence on U.S. Treasury Secretary Paul O'Neill, Bono — or Ebenezer Scrooge?

For most of Dickens’ “A Christmas Carol,” Ebenezer Scrooge is one of English literature’s least likable characters. A mean businessman who mistreats his employees, he refuses to even recognize his poor relatives.

Since becoming U.S. Treasury Secretary in January 2001, Mr. O’Neill has put his Scrooge-like imprint on U.S. global economic policy. Highly critical of the World Bank and the International Monetary Fund’s support for struggling economies, he has lectured the rest of the world on the beneficial impact of unimpeded market forces.

Early in Mr. O’Neill’s tenure, the Treasury Department torpedoed international efforts to control offshore money laundering centers and tax havens — until the events of September 11 shone a cruel spotlight on their malignant effects. He also proposed the abolition of the U.S. corporate income tax.

Perhaps Mr. O’Neill would benefit from the same sort of ghostly lessons taught to Scrooge in Dickens’ classic short story. Imagine that the “Ghost of Christmas Past” appeared in the Treasury Secretary’s office. Just what would it show him? It just might take Mr. O’Neill back to 1994 — when the IMF, at the urging of the Clinton Administration, provided a $50 billion rescue package for Mexico.

Critics, including Mr. O’Neill, accused the IMF of playing Santa Claus for investors in Mexico’s financial markets. Yet, today Mexico is once again a solid economic partner — and largely untouched by the recent default and devaluation in Argentina

Or perhaps the “Ghost of Christmas Past” would take Mr. O’Neill to 1997 — and the bailout of South Korea that served as the engine for a broad-based Asian economic recovery. It’s true that similar packages for Indonesia and Russia were less successful — but this further reinforces how important it was to keep Mexico and South Korea from going bankrupt as well.

Serving turkey is another Christmas tradition, and we imagine that the “Ghost of Christmas Present” would show Mr. O’Neill a much happier nation — Turkey. That nation avoided a major default last year largely due to a prior commitment by the IMF to lend it some $10 billion in fresh loans during 2002.

Argentina might also show up with the “Ghost of Christmas Present.” Surely, Argentina’s past policies have been full of mistakes. But that country’s endgame was precipitated when the Bush Administration refused to lend Argentina any more money as its government was trying frantically to stave off default.

Mr. Scrooge grumbled that debtors’ prisons and workhouses are the proper institutions to take care of the poor.

This is precisely where Scrooge’s modern-day American counterpart, Mr. O’Neill, apparently wants to consign today’s poor countries. Yet, Argentina’s default will doubtless make it even more difficult for other emerging debtors to obtain fresh capital.

With these dire prospects on the horizon, the future that the “Ghost of Christmas Yet to Come” will show Mr. O’Neill may prove grim indeed. In fact, if the United States continues to maintain its hands-off attitude and let markets do their work, the entire global financial system may eventually come under threat.

Not a bad thing, claim some U.S.-based isolationists, who seem to think that the United States would do better on its own, instead of supporting “freeloaders” around the world.

This would be a serious mistake. The United States, as the world’s leading trader and investor, is the biggest beneficiary of the global economic system. Its prosperity is based on the continued stability and health of the world economy.

A major disruption in the world financial system would hit America’s living standards extremely hard. Under these circumstances, the tombstones that the “Ghost of Christmas Yet to Come” is bound to show Mr. O’Neill are certain to include America’s own prosperity.

Dickens’ “A Christmas Carol” does end on a happy note — as all Christmas tales should. The question is whether the policies of the U.S. Secretary of Treasury will have a similar happy ending. Seeing the need for economic aid in Sub-Sahara Africa may have no affect on Mr. O’Neill’s policy recommendations, but let us wish that he is not beyond hope — or, better yet, redemption.