January 2007

Global Financial Warriors: The Untold Story of International Finance in the Post 9-11 World

In his new book, Global Financial Warriors: The Untold Story of International Finance in the Post-9/11 World (W. W. Norton, January 2007), John Taylor recounts his experiences on the financial frontlines as under secretary of the treasury for international affairs from 2001 to 2005. During his tenure at the Treasury, Taylor played a leading role in international finance and International Monetary Fund (IMF) reform efforts, the 100 percent debt-cancellation program at the World Bank, reconstruction and global economic development efforts such as the financial reconstruction of Afghanistan, and U.S. efforts to head off incipient financial crises in the global economy.

After opening remarks by Professor Taylor, Alastair McKechnie, World Bank Country Director of Afghanistan, and Faryar Shirzad, former deputy assistant to the president for international economic affairs, offered additional remarks. Visiting scholar Steven J. Davis moderated the forum on January 9, 2007, at AEI.

John Taylor
Stanford University

We need financial experts in this new world because the United States remains economically powerful. This war against terror will last, and the financial aspects will be very important.  The global financial warriors are the people in the Treasury, the IMF, the World Bank, and advisors who give expertise in seventy different countries, especially those who work to set up financial systems in Iraq and Afghanistan.

Financial warrior activity has become more important since 9/11. My world changed completely. We had to freeze terrorist assets and form an international coalition to do so.

The war is being fought on a variety of fronts and one of significance is the financial front.

There are five themes in the book. The first, the high marks theme, shows there are a lot of positive stories signifying why things worked well. We were able to disrupt terrorist financing, provide financial security to Iraq, and make important efforts to reform the World Bank with regards to lending to developing countries. The second theme was to challenge the conventional wisdom that diplomacy has failed in the United States. The opposite is true; after 9/11, diplomacy was used to get 172 countries to freeze assets and to raise $5 billion to rebuild Afghanistan. Thirdly, I tried to approach this work from the unique vantage point of first-hand ground experience, and fourthly I provided inspirational stories of people in public service. Lastly, there are real opportunities to use financial weapons in the current world. Success comes from a very clear mission and a skilled, autonomous, and accountable team dedicated to achieving financial stability.

Alastair McKechnie
World Bank Country Director of Afghanistan

It was important that the United States took the lead in Afghanistan. Taylor tells us as Afghans began to assert themselves with their finance ministry, the United States stood back to empower them from behind the scenes. There was success of mobilizing international resources due to good teamwork between John and his counterparts. John’s impact was great; his realism helped Afghanistan and his assistance was critical for economic stability.

We were successful in raising money for Afghanistan, but people claim they see little being done in their region. It takes time to build things; accelerating investment too much is not good. The challenge is unlike the reconstruction in WWII, where institutions existed, but instead is rebuilding the state, and building institutions--not simply construction but comprehensive development.

I agree that reforming the World Bank will get measures done. Better results management is now one of the bank’s priorities, as is measuring impacts of our finances. Measuring the output is straightforward, but measuring the impact and the benefit is more difficult. John Taylor pushed the results agenda, and we still have a lot to do to measure the impact of our interventions. 

Debt relief must be stable and must lead to reductions in poverty instead of adding to debt. Relief practices must be combined with fair trade rules. We see significant performance in one-third of African countries. Taylor adequately discusses the importance of loans versus grants and how a good balance must be found.

Faryar Shirzad
Goldman Sachs

This is an important book because it talks about the economic agenda that does not get enough attention. In the world that we are living in, there is an emergence of international finance as a core part of international diplomacy. The issue is not the challenge of coming up with clever ideas, but understanding how to measure, sustain, and implement an idea which requires a lot of work and management. 

There are a few broader messages I found within the book. The first is how national security and the economic agenda are fully integrated. The Bush administration was successful in anticipating this, as shown by the treasury secretary having a seat at the National Security Council. The second is the importance of collaboration; as we integrate it becomes impossible to enact economic policy without the help of the Departments State and Defense. Last is the importance of ideas. There is a core set of principles and provisions with a clear vision for a particular challenge. You have to make sure collaboration is appropriate so that the established vision is not obscured. The personal recollection within the book is important. It makes the story interesting and also tells the real challenges of effective policy making.

AEI intern Jenna Lally prepared this summary.