COAXING CONGRESS to pass the money for foreign economic policy is going to be very hard work this year. Hardest of all will doubtless be the appropriation for the International Monetary Fund. That's unfortunate, because a lot of American jobs depend on that money.
Paul Volcker, the chairman of the Federal Reserve Board, spent several hours the other day trying to persuade the House Banking Committee to support the IMF appropriation. The congressmen wanted to know why they should spend money on foreigners, when unemployment is so high here in the United States.
The case of Mexico is one good answer. Until it got into financial trouble last year, Mexico was buying $18 billion worth of American goods a year. That made it, after Canada and Japan, one of this country's three strongest foreign markets. For a short time, last August, it looked as though the Mexican peso might collapse. A hastily organized international rescue operation helped the Mexican government to prevent it--which, in turn, enabled Mexico to avoid defaulting on its foreign loans. One essential part of the rescue came from the IMF, and the dollars that it put up had high leverage. Because they were used in a series of packages that kept commercial banks open to the Mexicans, they generated amounts of credit far larger than the IMF's investment. If Mexico had been forced into default, all trade across the Mexican border would have stopped except for a trickle of barter. Without the normal lines of commercial credit and exchange, billions of dollars' worth of American sales to Mexico would have evaporated. When sales are lost, jobs are lost.
Even with the rescue, Mexico's imports from this country dropped sharply over the summer. That was one reason, and not a minor one, why this country did not come out of its recession in the middle of last year as most forecasters had expected. The rescue should make possible a gradual revival of the Mexican economy this year, even if oil prices decline. That, in turn, would mean a revival of demand for American products.
Some of the congressmen said that they'd rather put the money into a jobs program than into the IMF. If they look again, they will see that the IMF is--among many other things--a jobs program, lending crucial support to the American economy by helping its customers abroad.