THE WHITE HOUSE
Office of the Press Secretary
(New York, New York)
| For Immediate Release | | September 14,1998 |
REMARKS BY THE PRESIDENT
TO THE COUNCIL ON FOREIGN RELATIONS
Council on Foreign Relations Building
New York, New York
12:00 P.M. EDT THE PRESIDENT: Thank you very much, Pete. Hillary and Iaredelighted to be here with you and Joan, and I'm glad to be joined bySecretaryRubin and Jim Harmon, Gene Sperling, other members of our team. I'm gladtosee Dick Holbrooke over here. I hope, if we can overcome the inertia ofCongress, he will soon be a member of the team again. (Applause.) And Ithank David Rockefeller and Les Gelb and others who welcomed us here today.
The subject that I want to discuss -- let me just say onething in advance -- I'm going to give you my best thoughts. We have beenworking on this for three years at some level of intensity or another,goingback to the Naples G-7 meeting in the aftermath of the Mexican financialcrisis. I have done everything I could do personally to reach out acrossthecountry, and indeed across the world, for any new ideas from any source.I'mgoing to give you my best thinking today about what we can do, but I wantyouto know that I'm here, and if I had my druthers, this would be about athree-hour session where I'd give this talk and then I would listen for therest of the time.
So I want to encourage you, if you think we're right, tosupport us. But if you have any ideas, for goodness sake, share them,becauseI agree with what Pete said: this is the biggest financial challenge facingthe world in a half-century. And the United States has an absolutelyinescapable obligation to lead, and to lead in a way that's consistent withour values and our obligation to see that what we're doing helps lift thelives of ordinary people here at home and all around the world.
The Council on Foreign Relations has always stood forpolitical and economic freedom, since right after World War I. And I thinkone of the things that has impacted all of us, and it was implicit in whatPete said, is that for the last decade the growth of freedom around theworld,with more than half the people in the world living under governments oftheirown choosing, more than half the villages, the one million villages inChinanow, even electing their own governments, and this sweeping replacement ofcommand and control economies by market economies. I think it seems tohavehappened so easily, so effortlessly, so inexorably, that I think we thinkthetrend is inevitable and irreversible.
But if you consider today's economic difficulties,disruptions, and the plain old, deep, personal disappointments of now tensofmillions of people around the world, it is clear to me that there is now astark challenge not only to economic freedom, but, if unaddressed, achallengethat could stem the rising tide of political liberty as well.
Obviously we have profound interests here. It is agreat irony that we are at a moment of unsurpassed economicstrength at a time of such turmoil in the world economy. We, Ithink all of us in this room, know that our future prosperitydepends upon whether we can work with others to restoreconfidence, manage change, stabilize the financial system, andspur robust global growth.
For most of the last 30 years, the United States andthe rest of the world has been preoccupied by inflation, forreasons that all of you here know all too well -- and it was agood thing to be preoccupied with. Today the low and stableinflation we enjoy has been critical to our economic health, andlow inflation has also contributed to that of many other nationsas well. But clearly the balance of risks has now shifted, witha full quarter of the world's population living in countries withdeclining economic growth or negative economic growth.
Therefore, I believe the industrial world's chiefpriority today, plainly, is to spur growth. It seems to me thereare six immediate steps we should take to help contain thecurrent financial turmoil around the world, and then twolonger-term projects in which we must be involved.
To take the immediate first, we must work withJapan, Europe, and other nations to spur growth. Second, we willexpand our efforts to enable viable businesses in Asia to emergefrom crippling debt burdens so they can once again contribute togrowth and job creation. Third, we've asked the World Bank todouble its support for the social safety net in Asia to helppeople who are innocent victims of financial turmoil. Fourth,we'll urge the major industrial economies to stand ready to usethe $15 billion in IMF emergency funds to help stop the financialcontagion from spreading to Latin America and elsewhere. Fifth,our Ex-Im Bank, under the leadership of Jim Harmon, willintensify its efforts to generate economic activity in thedeveloping world immediately, in the next three months. Andsixth, Congress must live up to its responsibility for continuedprosperity by meeting our obligations to the InternationalMonetary Fund.
Secretary Rubin has been working with hiscounterparts in the G-7 to get cooperative support for several ofthese measures. I understand Chairman Greenspan is alsoconsulting with his counterparts on these items as well.
As we take these immediate steps, we also mustintensify our efforts to reform our trade and financialinstitutions so that they can respond better to the challenges wenow face and those we are likely to face in the future. We mustbuild a stronger and more accountable global trading system,pressing forward with market-opening initiatives, but alsoadvancing the protection of labor and environmental interests,and doing more to ensure that trade helps the lives of ordinarycitizens across the globe.
Above all, we must accelerate our efforts to reformthe international financial system. Today I have asked SecretaryRubin and Federal Reserve Board Chairman Greenspan to convene amajor meeting of their counterparts within the next 30 days torecommend ways to adapt the international financial architectureto the 21st century.
Over the past six years, our strategy at home offiscal discipline, investment in the skills of our people, andopen trade has worked for all Americans. Unemployment at a28-year low, inflation a 32-year low, wages rising at twice therate of inflation after decades of stagnation. And on October1st we'll have the first balanced budget in 29 years.
But the global economy brought a lot of thatprosperity to us, and now fast-moving currents have brought oraggravated problems in Russia and Asia. They threaten emergingeconomies from Latin America to South Africa. With a quarter ofthe world's population in declining growth, we must recognizewhat Chairman Greenspan said the other day: we cannot forever bean oasis of prosperity. Growth at home depends upon growthabroad. A full 30 percent of our growth, just since I becamePresident, has been due to our expanding positive involvement inthe global economy.
That's why ordinary Americans should care if Asia orRussia or South America is on solid economic footing. Thesepeople are our customers. With one-third of the growth of oureconomy coming from exports, much of it from emerging markets, weknow that those markets will falter as their economies flatten.When the problem is widespread and perceived to be moving in thewrong direction, we have seen that our stock market can react,having a direct and immediate impact on the wealth of theAmerican people.
These nations are also our competitors. And underconditions of decent equilibrium that is a very good thing,indeed. But when their currencies drop precipitously, the pricesof their goods fall, they could undercut the sales of our owngoods here at home that are otherwise profitable, dramaticallyincreasing our trade deficit under circumstances that could causethe American people to turn away from open trade towardprotectionism in a way that has terrific negative consequenceslong-term for our global growth objectives.
Finally, these nations are our friends, our alliesand our security partners. Where economic turmoil plungesmillions into sudden poverty and disrupts and disorients thelives of ordinary people, the risks of political and socialinstability and of a turn from democracy clearly rise. Just lookat Russia. Russia is facing an economic crisis that threatensthe extraordinary progress the Russian people have made in justseven years, building a new society from the ground up. Theruble and the stock market have plummeted, banks are weak, taxcollections have slowed, the government has trouble paying itsdebts and its salaries.
Some Russians have become wealthy, but many, manymore are struggling to provide for their families. I talked tosome of them when I was in Russia just a few days ago.
Amid such political uncertainty and economicdifficulty, some now talk of abandoning the path of reform andreturning to policies of the past, even policies that havealready failed. At worst, adversity in Russia could affect notonly the Russian economy and prospects for our economiccooperation -- at worst, it could have an impact on ourcooperation with Russia on nuclear disarmament, on fightingterrorism and the spread of weapons of mass destruction, onstanding together for peace, from the Balkans to the Middle East.
Now Russia has a new Prime Minister, Mr. Primakov,who's been in office a grand total of four days. He andPresident Yeltsin face one of the great challenges of their time.Never has there been a more important moment to set a cleardirection for the future, to affirm the commitment of Russia todemocracy and to free markets, and to take decisive steps tostabilize the economy and restore investor confidence.
But if Russia is willing to take these steps, wemust do everything we can to provide support to them. Becauseagain I say, as long as ordinary people don't feel any benefitsfrom this, in the end it's going to be difficult to sustain thedirection we think the world should take.
On the other hand, we need to be honest with Russiaand everyone else. No nation, rich or poor, democratic orauthoritarian, can escape the fundamental economic imperatives ofthe global market. No nation can escape its discipline. Nonation can avoid its responsibility to do its part.
But since all economies are increasinglyinterdependent, fear and uncertainty about the economy of onecountry can prompt investors to pull money out of other countriesthousands of miles away. Markets work best when they are drivenneither by excessive inflows or outflows of capital based onindiscriminate optimism or pessimism.
Regardless of what changes in policies orinstitutions may be warranted, we have to say we'll only be ableto help those countries who are willing to help themselves. If anation chooses to print money indiscriminately, to wink atcronyism or corruption, to hide bad loans and protect corrupt orinefficient banks, then investors, foreign and domestic, sooneror later, will withdraw their investments, with consequences bothswift and severe.
That is why we support the fundamental approach ofthe International Monetary Fund to extend assistance only whennations have taken responsibility, strengthening their bankingsystems, introducing honest accounting and open markets, awardingcredit on merit instead of connections.
Still, what has been done is clearly not enough toreverse the decline in particular countries, to douse the flamesof the international financial crisis, to support steady andsustainable growth in the future. In the face of this newchallenge, America can and must continue to act and to lead totake the urgent steps needed today to calm the financial crisis,restart the engine of growth in Asia, and minimize the impact offinancial turmoil on other nations, and to make certain that fortomorrow the institutions and rules of international finance andinternational trade are prepared to support steady andsustainable growth over the long term.
First and foremost, the leading economic nationsmust act together to spur global growth. Our strong and growingeconomy here has made a major contribution to global growth, justas our weak economy was holding the world back six years ago whenI attended my first G-7 meeting in Tokyo and every other countrysaid, the first thing they needed was for America to put itseconomic house in order. We did that.
Now I believe strongly we must maintain our fiscaldiscipline. It has led to lower interest rates and a hugeinvestment and job growth. Maintaining economic growth is thebest thing we can do right now, not only for the United Statesbut for the global economy.
I would also remember that back in 1993 we had ageneral agreement that what was needed was America should get ridof its deficit, Europe should lower its interest rates, and Japanshould open its markets. There was this general agreement thatif we did all those things, we would have a remarkable resumptionof growth.
Europe did moderate its interest rates and the thenprime minister -- now the finance minister -- Mr. Miyazawa,oversaw a significant market opening trade agreement between theUnited States and Japan, which also benefited others, not justus. And of course we got rid of our deficit. The results werequite satisfactory for several years for us.
Now Europe has to continue to pursue policies thatwill spur growth and keep their markets open because they, too,must be able to provide markets for Asian goods as those nationsseek to find their footing. But the key here is Japan, for thesecond largest economy in the world, by far the biggest economyin Asia, has now gone several years without any economic growth.Thank goodness, a lot of their ordinary citizens have been ableto maintain a decent life because of the wealth of their countryand probably because of the enormous personal savings rate theyhave enjoyed for many, many years now.
But it is difficult to see how any actions of theworld community can be successful in restoring growth in Asia inthe absence of the restoration of growth in Japan, which wouldenable Japan to lead the region out of its present condition.Therefore, we must support Japan and do everything we can to helpcreate the conditions in which, together, we can all lead again,just as we did in 1993.
Their challenges are quite formidable. They have tospur domestic demand, revive a banking system, restoreconfidence, deregulate the economy, and open markets. And we allknow all the forces that seem to be working against thesedevelopments in Japan. But I would remind you that this is avery strong, sophisticated nation full of people of knowledge andenormous achievement. It is fully capable of playing its worldleadership role. I believe its business leaders right now knowwhat needs to be done and would support it.
Next week I'm going to meet with Prime MinisterObuchi here in New York to discuss how America can supportJapan's efforts to restore economic growth and investorconfidence. And I will do everything I can to try to make surethat as we go forward, we have America, Europe, and Japan alldoing our part to get beyond this present moment, just as we didback in 1993.
The second step we should take is to intensify ourefforts to speed economic recovery in Asia. When countries likeSouth Korea and Thailand have taken strong and responsible steps,the freefall has ended, progress is being made. But the humancost of Asia's collapse is only now being fully felt. Recentpress reports have described an entire generation working its wayinto the middle class over 25 years, then being plummeted intopoverty within a matter of months. The stories are heartbreaking-- doctors and nurses forced to live in the lobby of a closedhospital; middle class families who own their own homes, senttheir children to college, traveled abroad, now living by sellingtheir possessions.
It is in our interest to help these nations andthese people recover. They will become once again our greatmarkets and our great partners. It is also the right thing todo. We've worked with international lenders, like the IMF, tohelp these nations to adopt pro-growth budget, tax, and monetarypolicies, but clearly we're going to have to do more to restoreAsian growth. We must work to lift the weight of private sectordebt that has frozen the Asian economies.
Today, I'm asking Secretary Rubin to work with otherfinancial authorities and international economic institutions toenhance efforts to explore comprehensive plans to help Asiancorporations emerge from massive debt where individual firms havebeen swept under by systemic, national economic problems, ratherthan their own errors. We need to get credit flowing again. Weneed to get business back to making products, producing services,creating jobs.
Third, Asian businesses need assistance, but so domillions of Asian families. We must do more to establish anadequate social safety net in recovering nations. Wrenchingeconomic transition without an adequate social safety net cansacrifice lives in the name of economic theory, and, I might add,can generate thereby so much resistance that reform grinds to ahalt. If we want these countries to do tough things, we have toprotect the most defenseless people in the society and we have toprotect people who get hurt when they didn't do anything wrong.I think that is terribly important.
With our support, the World Bank and the AsianDevelopment Bank have started to deal with these challenges, butthey have to expand their efforts. There is simply not enoughbeing done. I asked them to double their aid through an expandedsocial compact initiative focusing on job assistance, basic needsand economic transition, on children and the elderly, on groupsmost vulnerable to economic change. And I want to commend JimWolfensohn for his efforts and his willingness to lead thisexpanded initiative. We have to be ready to respond immediatelywith financial force if necessary, to the currency crisis, if itspreads, especially if it threatens the economies of LatinAmerica, where nations have struggled to make progress to do theright thing, only to find themselves buffeted by economic stormsoutside their control.
Therefore, the major economies should stand ready toactivate the $15 billion now in the emergency funds of the IMF,the general agreement to borrow, to ensure that the IMF continuesto support reform and fight economic contagion.
Fifth, our Export-Import Bank will increase itscommitments to specific economic development projects over thenext three years -- three months -- projects which will haveconcrete benefits for ordinary citizens in other countries,projects which will increase our own exports and thereby help oureconomy, and ones which can help to restore confidence incountries that they are not alone and that actual, specific,positive developments can occur.
Sixth, for the effort of the international communityto succeed, America simply must meet its own obligations to theInternational Monetary Fund. After a year of financialfirefighting, the IMF's resources are badly strained. Every daywe don't act, we undermine the confidence the world badly needsthat we are trying to restore. Congress simply must assume itsresponsibility for our leadership in the economy.
In my State of the Union address, I said it wasbetter to prepare for a storm when the skies were clear than whenthe clouds were overhead. Well, eight months later, the cloudsare closer, and you can nearly hear the thunder. Now, theSenate, by an overwhelming bipartisan majority, has, thankfully,approved our obligation to fund our part of the InternationalMonetary Fund. But with only five weeks left in thiscongressional session, there is still no action from the House ofRepresentatives.
Let me put this as plainly as I can: failure by thisCongress to pay our dues to the IMF will put our own prosperityat risk. Failure to act will send a sharp signal that at a timeof economic challenge, our lawmakers were unwilling to protectour workers, our businesses, our farmers from the risks of globaleconomic change, and unwilling to maintain our leadership inbuilding a global economy system that has benefited us more thanany other nation.
Concerted action to spur growth, helping Asiathrough private sector debt restructuring, and a strengthenedsocial safety net, helping to protect the rest of the worldthrough the use of the IMF's emergency fund, increasing theactivity of the Ex-Im Bank, and meeting our own obligations tothe IMF -- these are the six immediate steps we want to take.
But we must also be willing to take action for thelong run -- to modify the financial and trading institutions ofthe world to match the realities of the new economy they serve.By creating the WTO, the World Trading Organization, in 1994, webegan to build a modern trading system. We must redouble ourefforts to tear down barriers around the world. But as I said inGeneva last May, we must do more to ensure that spirited economiccompetition among nations never becomes a race to the bottom --in environmental protection, consumer protection, or laborstandards.
We are working to open the procedures of the WTO toparticipation by the public and the full range of affectedinterests, so that people will know and see and be able to do forthemselves things which will ensure that the trading system makesthe world better for all the people in all the countries.
We've already completed 260 trade agreements,opening markets in areas from autos to telecommunications. Nextyear we will host the meeting of the world's trade ministers toset the agenda for expanded trade in the first decade in the newcentury.
History teaches us that at a time of worldwidedifficulty, it would be folly to retreat into a protectionistshell. We must keep trade flowing among nations, but I will sayagain, if we want to do that, we have got to give ordinarycitizens and the groups that represent them in countries all overthe world the sense that it is going to be done in a fair way,consistent with nations' obligations to advance the interests oftheir working people and protect not only their national, but theglobal environment.
This November, when I meet with the leaders of theAsian economies at the APEC meeting, we will move forward tofurther open markets in Asia. And when Congress returns nextyear, I will work to pass legislation to open markets further--from trade negotiating powers to the African Trade Initiative.I will do so in a way that I believe will win broad support froma majority of both parties.
From the G-7 meeting in Halifax in 1995 in the wakeof the Mexican financial crisis, to the Birmingham meeting thisyear, we have been working, also, with our major economicpartners to plan for new financial architecture for the 21stcentury.
For the first time, this year we included keyemerging markets in the process in a new Group of 22, recognizingtheir important stake in the global economy. This group has beenworking together for nearly a year now to improve the globalfinancial assistance with a special focus on improving financialsectors, on transparency, and on private sector burden sharing.
I just want to emphasize again that even as werespond to the urgent alarms of the moment, we must speed thepace of this systemic work as well. That is why I have askedSecretary Rubin and Chairman Greenspan to convene the financeministers and central bankers of the G-7 and key emergingeconomies in Washington within 30 days to develop a preliminaryreport to the heads of state by the beginning of next year onstrengthening the world financial system.
We must develop policies so that countries can reapthe benefits of free-flowing capital in a way that is safe andsustainable. We must adapt the IMF so that it can moreeffectively confront the new types of financial crises,minimizing their frequency, severity, and human cost. We need toconsider ways to extend emergency financing when countries arebattling crises of confidence due to world financial distress asdistinct from their own errors in policy. We must find ways totap the energy of global markets without sentencing the world toa cycle of continued extreme crises.
For half a century now in our national economy, wehave learned not to eliminate but to tame and limit the swings ofboom and bust. In the 21st century, we have to find a way to dothat in the global economy as well.
I've discussed this in recent days with PrimeMinister Blair of Great Britain, who is now the Chair of the G-7.He shares my belief that this is an urgent task. It is criticalto the mission that he and I and Prime Minister Prodi of Italywill be discussing next week at the New York University LawSchool in a very interesting meeting that the First Lady andothers in our administration helped to organize on how to extendthe benefits of the world economy to all and how to strengthendemocracy in a time of such sweeping economic change.
Now, let me just say it all again very briefly: inshort, we must improve our ability to address the currentfinancial emergency, and we must build a system to prevent suchfuture emergencies, whenever possible, and to blunt their impactwhen they do occur. There is no mission more critical to our ownstrength and security.
And let me say this again, what is at stake is morethan the spread of free markets and their integration into theglobal economy. The forces behind the global economy are alsothose that deepen democratic liberties: the free flow of ideasand information, open borders and easy travel, the rule of law,fair and even-handed enforcement, protection for consumers, askilled and educated work force.
Each of these things matters not only to the wealthof nations but to the health of freedom. If citizens tire ofwaiting for democracy and free markets to deliver a better lifefor them, there is a real risk that democracy and free markets,instead of continuing to thrive together, will begin to shriveltogether. This would pose great risks not only for our economicinterests but for our security.
We see around the world the internationalaggressors, the harborers of terrorists, the drug lords. Who arethese countries? They're authoritarian nations without democracyand without open markets. Nations that give their people freedomare good neighbors; when nations turn away from freedom, theyturn inward toward tension, hatred, and hostility.
We now have a chance to create opportunity on aworldwide scale. The difficulties of the moment should notobscure us to the advances of the last several years. We clearlyhave it within our means, if we do the right things, to liftbillions and billions of people around the world into a globalmiddle class and into participation in global democracy andgenuine efforts toward peace and reconciliation. That is apossibility, but recent events show it is not a certainty.
At this moment, therefore, the United States iscalled upon once again to lead -- to organize the forces of acommitted world; to channel the unruly energies of the globaleconomy into positive avenues; to advance our interests,reinforce our values, enhance our security.
In this room, I think it is not too simple to say weknow what to do. The World War II generation did it for us 50years ago. Now, it is time for us to rise to our responsibility,as America has called upon to do so often so many times in thepast. We can, if we do that, redeem the promise of the globaleconomy and strengthen our own nation for a new century.
Thank you very much. (Applause.)
