THE WHITE HOUSE
Office of the Press Secretary
| For Immediate Release | | October 6, 1998 |
REMARKS BY THE PRESIDENT
TO OPENING CEREMONY OF THE
1998 INTERNATIONAL MONETARY FUND/WORLD BANK
ANNUAL MEETING
Marriott Wardman Park Hotel
Washington, D.C.
10:52 A.M. EDT THE PRESIDENT: Thank you very much. Secretary Rubin; my friend,President Menem; Minister Fernandez; Managing Director Camdessus; President
Wolfensohn; Dr. Ruttenstorfer; ladies and gentlemen: Before I begin myremarks,I hope you will permit me to say a few words about another issue of realconcernto the international community, about which I have been working alreadythismorning -- the subject of Kosovo.
I have been on the phone with many of my counterparts, and I justwasspeaking with Prime Minister Blair, who is in China. We all agree thatKosovois a powder keg in the Balkans. If the violence continues, it could spilloverand threaten the peace and stability of Bosnia, of Albania, of Macedoniaandother countries in the region. What is already a humanitarian crisis could turninto a catastrophe.
Some 250,000 people have been forced to flee their homes. Of thatnumber, approximately 50,000 are actually homeless. As winter sets in they riskfreezing or starving to death.
President Milosevic is primarily responsible for this crisis. TheUnited Nations has made clear the steps we must take to end it -- declareanimmediate cease-fire, withdraw Serb security forces, give humanitarianreliefgroups full and immediate access to Kosovo, begin real negotiations withtheKosovar Albanians to find a peaceful and permanent solution to theirrightfuldemand for autonomy.
As we meet here, my Special Envoy, Dick Holbrooke, is meeting withPresident Milosevic to reiterate what he must do and to make clear thatNATO isprepared to act if President Milosevic fails to honor the United Nationsresolutions. The stakes are high. The time is now to end the violence inKosovo. I hope all of you will do whatever you can to that end.
Now to the matter at hand. A half century ago, a visionarygenerationof leaders gathered at Bretton Woods to build a new economy to serve thecitizens of every nation. In one of his last messages to Congress,PresidentFranklin Roosevelt said that the creation of the International MonetaryFund andthe World Bank -- and I quote -- "spelled the difference between a worldcaughtagain in the maelstrom of panic and economic warfare, or a world in whichnations strive for a better life through mutual trust, cooperation andassistance."
The Bretton Woods generation built a platform forprosperity that has lasted down to the present day. Economic freedomand political liberty has spread across the globe. Since 1945,global trade has grown 15-fold. Since 1970 alone, infant mortalityin the poorest countries is down by 40 percent. Access to safe
drinking water has tripled. Life expectancy has increaseddramatically. Even now, despite the difficulties of recent days, percapita incomes in Korea and Thailand are 60 percent higher than theywere a decade ago. A truly global market economy has lifted thelives of billions of people.
But as we are all acutely aware, today the world facesperhaps its most serious financial crisis in half a century. Thegains of global economic exchange have been real and dramatic -- butwhen tides of capital first flood emerging markets, then suddenlywithdraw; when bank failures and bankruptcies grip entire economies;when millions in Asia who have worked their way into the middle classsuddenly are plunged into poverty; when nations half a world apartface the same crisis at the same time; it is time for decisiveaction.
What has caused the current crisis? First, too manynations lack the financial, legal, and regulatory systems necessaryto maintain investor confidence in adversity. Second, newtechnologies and greater global integration have led to vastlyincreased, often highly leveraged flows of capital, withoutaccompanying mechanisms to limit the boom-bust cycle -- mechanismslike those with are integral to the success of advanced economies.
I am confident that if we act together we can end thepresent crisis. We must take urgent steps to help those who havebeen hurt by it, to limit the reach of it, and to restore growth andconfidence to the world economy. But even when the current crisissubsides, that will not be enough. The global economy simply cannotlive with the kinds of vast and systemic disruptions that haveoccurred over the past year.
The IMF and the World Bank have been vital to theprosperity of the world for the past half century. We must keep themvital to the prosperity of the world for the next half century.Therefore, we must modernize and reform the international financialsystem to make it ready for the 21st century.
The central economic challenge we face is to harness thepositive power of an open international economy while avoiding thecycle of boom and bust that diminishes hope and destroys wealth. Andthe central political challenge we face is to build a system thatstrengthens social protections and democratic institutions so thatpeople everywhere can actually reap the rewards of growth.
We must put a human face on the global economy. Aninternational market that fails to work for ordinary citizens willneither earn, nor deserve their confidence and support. We need bothan aggressive response to the immediate crisis and a thoughtful roadmap for the future. We must begin by meeting our most immediatechallenges.
Two weeks ago at the Council on Foreign Relations in NewYork, I outlined what we have done and what we must do. I amgratified that today the leading economies speak with one voice insaying, the balance of risks have now shifted from inflation to slowdown. The principal goal of policymakers must be to promote growth.Every nation must take responsibility for growth. The United Statesmust do its part. The most important thing we can do is to keep oureconomy growing and open to other's products and services, bymaintaining the fiscal responsibility that has led us to the firstbalanced budget and surplus in 29 years.
Winning this discipline was not easy and was not alwayspopular. But it was the right thing to do. That is why I have madeit clear to our Congress that I will veto any tax plan that threatensthat discipline.
Also, the United States must -- must -- meet ourobligations to the IMF. I have told Congress we can debate how toreform the operations of the fire department, but there is no excusefor refusing to supply the fire department with water while the fireis burning.
Europe must continue to press forward withgrowth-oriented economic policies and keep its markets open. AndJapan, the world's second largest economy and by far the largest inAsia, must do its part, as well. The United States values our strongpartnership with Japan -- our political, our security, our economicpartnership. But now the health of Asia and, indeed, the worlddepends upon Japan. Just as the United States had to eliminate itsdeficits and high interest rates which were taking money away fromthe rest of the world over the last six years, now Japan must takestrong steps to restart its economic growth, by addressing problemsin the banking system so that lending and investment can begin withrenewed energy; and by stimulating, deregulating and opening itseconomy.
For all of us there can be no substitute for action.And all of us must also act now to restart growth in the rest of Asiaby helping to restructure firms paralyzed by crushing debt andreplace debt with equity across entire economies. Through OPIC andthe Export-Import Bank, we are providing short-term credit andinvestment insurance to keep capital flowing into emerging economies.
I welcome Japan's announcement that it will contributeto the reconstruction effort. And I am gratified that the World Bankhas agreed to double its investment in the social safety net in Asiato help those who have been harmed by the economic crisis.
In all these ways, we can minimize the consequences ofthe current financial contagion. But the flash of this crisis throwsnew light on the need to do more -- to renew the institutions ofinternational finance so they reflect modern economic reality. Theinstitutions built at Bretton Woods must be updated for 24-hourglobal markets if they are to continue to achieve the goalsestablished by the Bretton Woods generation.
First, we must recognize that the free and open exchangeof ideas and capital and goods across the globe is the surest routeto prosperity for the largest number of people. But we must find away to temper the volatile swings of the international marketplace,just as we have learned to do in our own domestic economies.
What is troubling today is how quickly discouraging newsin one country can set off alarms in markets around the world. Andall too often, investors move as a herd, with sweeping consequencesfor emerging economies with weak and strong policies alike. We'veall read of families that worked hard for decades to become middleclass, families that owned homes and car suddenly forced to sell offtheir possessions just to buy food. We've read of doctors and nursesforced to live in the lobby of a closed hospital. With fuel and foodshortages in some countries, the onset of winter threatens massmisery. And in Asia, where the ethic of education is deeplyingrained and has led to the rise of tens of millions of people, andstrong schools are deprived of nations, we now see too many childrendropping out of school to help support their families.
Just as free nations found a way after the GreatDepression to tame the cycles of boom and bust in domestic economies,we must now find ways to tame the cycles of boom and bust that todayshake the world economy.
The most important step, of course, and the first step,is for governments to hold fast to policies that are sound andattuned to the realities of the international market place. Nonation can avoid the necessity of an open, transparent, properlyregulated financial system; an honest, effective tax system; and lawsthat protect investment. And no nation can for long purchaseprosperity on the cheap, with policies that buy a few months ofrelief at the price of disaster over the long run.
That is why I support the fundamental approach of theIMF. The international community cannot save any nation unwilling toreform its own economy. To do so would be to pour good money afterbad. But when nations are willing to act responsibly and take strongsteps, the international community must help them to do so.
Too often, what has appeared to be a thriving marketsystem, however, has masked an epidemic ofcorruption or cronyism. Investors and entrepreneurs, foreign anddomestic, will not keep their money in economies where prosperity isa facade. Bank balance sheets should mean the same thing in onecountry as another. Contracts should be awarded on merit.Corruption cannot be tolerated.
To this end, I applaud the Working Group reports thatcall for the IMF to examine and publicize countries' adherence tostrong international standards, as well as higher accounting and loanstandards for private institutions. The United States will continueto press for new ways the private sector can implement soundpractices -- for example, through an accreditation system fornational bank examiners.
But while strong policies and sound business practiceswithin each nation are essential, at times they simply will not beenough. For even the best functioning markets can succumb tovolatility, soaring in unrealistic expectations one minute, followedby a sudden crash when reality intervenes. Such miscalculations ofrisk are an inevitable fact of market psychology.
In our own domestic economies, we have learned to limitthese swings in the business cycle. In the United States, forexample, a strong Federal Reserve has ensured a stable money supply.The Securities and Exchange Commission promotes openness and makesthe market work. Rigorous bank regulation and deposit insurance havehelped to keep downturns in the business cycle from spinning out ofcontrol. Other nations have their own institutions performing thesesame functions.
Now, though we understand that the realities and thepossibilities in the international marketplace are different, some ofthe same functions clearly need to be performed. We must address notonly a run on a bank or a firm, but also a run on nations. If globalmarkets are to bring the benefits we believe they can, we simply mustfind a way to tame the pattern of boom-bust on an internationalscale. This task is one of the most complex we face. We must summonour most creative minds and carefully consider all options. In theend, we must fashion arrangements that serve the global economy asour domestic economies are served, enabling capital to flow freelywithout the crushing burdens the boom-bust cycle brings.
While we must not embrace false cures that will backfireand lead in the end to less liquidity and diminished confidence whenwe need more of both, we must -- we must -- keep working until wefind the right answers. And we don't have a moment to waste.
Meanwhile, we must find creative ways to protect thosecountries that right now have strong economic policies, yet stillface financial pressures not of their own making. This past weekend,Secretary Rubin and Chairman Greenspan have worked with their G-7counterparts to find new ways to strengthen our cooperation based onthe IMF to make precautionary lines of credit available to nationscommitted to strong economic policies, so that action can be quickand decisive if needed. This is a critical way to prevent thepresent crisis from reaching Latin America and other regions, whichare doing well. And I ask your support.
Strong government policies, sound business practices,new ways to limit the swings in the global market -- all these stepsare needed to ensure growth into the future. But let us alsoacknowledge that we face a political challenge. For the bestdesigned international economic system will fail if it does not givea stake and a voice to ordinary citizens. So I say again, today wesee a profound political challenge to the global economic order.
The financial crisis poses a stern test of whetherdemocracies are capable of producing the broad public supportnecessary for difficult policies that entail sacrifice today fortomorrow's growth. I believe strong democracy, fair and honestregulation, sound social policy are not enemies of the market. Ibelieve they are essential conditions for long-term success. Nationswith freely elected governments, where the broad mass of peoplebelieve the government represents them and acts in their interests,have been willing and able to act to ward off crisis. Korea andThailand, with elected leaders who have been willing to take verydifficult steps, have succeeded in weathering the worst of theeconomic storm when so many others have not. Countries in CentralEurope have done remarkably well.
But even among the strongest nations, as we have foundhere in our own, broad change is often difficult. Unless thecitizens of each nation feel they have a stake in their economy theywill resist reforms necessary for recovery. Unless they feelempowered with the tools to master economic change, they will feelthe strong temptation to turn inward, to close off their economies tothe world.
Now, more than ever, that would be a grave mistake. Ata moment of financial crisis, a natural inclination is to closeborders and retreat behind walls of protectionism. But it isprecisely at moments like this we need to increase trade to spurgreater growth.
Again, we must never lose sight of what the fundamentalproblem is -- we need more liquidity, more growth in this worldtoday. Only by tearing down barriers and increasing trade will we beable to bring the nations of Asia, Latin America, and other parts ofthe world back on to the path of growth.
The world economy today needs more trade and moreactivity of all kinds, not less. That is why when the leaders ofAPEC meet next month, we must press forward to tear down barriers andliberalize trade among our countries; why next January when theUnited States Congress returns, we will seek a comprehensive effortto tear down barriers at home and around the world, including newnegotiating authority and legislation to expand trade with Africa.
But unless we give working people a strong stake in theoutcome, they will, naturally and understandably, erect obstacles tochange. The answer to these difficulties is not to retreat. It isto advance and to make certain every nation has a strong safety netproviding the security people need to embrace change.
At the very least, people who are suddenly without workmust have access to food and shelter and medical care. And overtime, all nations must develop effective unemployment and retirementsystems. We must find ways to keep schools open and strong duringtimes of economic downturn. We must make certain economicdevelopment does not come at the cost of new environmentaldegradation.
I am pleased that the World Bank will be redoubling itsefforts to building this strong safety net, especially in Asia. AndI urge all international financial institutions to do more toincorporate environmental issues into your operations, and tosignificantly increase direct lending for environmental and naturalresource projects.
Every time we seek to protect the environment,short-sighted critics warn that it will hurt the economy. But overthe last quarter century, we have seen time and again, in nationafter nation, that protecting the environment actually strengthens,not weakens, our economies.
International institutions themselves must reinforce thevalues we honor in our own economies. In Geneva last May, I askedthe World Trade Organization to bring its operations into thesunlight of public scrutiny, to give all sectors of society a voicein building trade policies that will work for all people in the newcentury. We must do the same for other multilateral institutions.
When the IMF agrees with a member country on policymeasures to restore stability, the people of that country andinvestors around the world should be told exactly what conditionshave been set. Therefore, I urge the WTO, the World Bank, and theIMF, working with the ILO, to give greater consideration to labor andenvironmental protections as a part of your daily business. Only byadvancing these protections will these organizations earn theconfidence and support of the people they were created to serve.
Finally, though we are seized with the crisis of themoment, we must not neglect those whom the capital flows have passedby in the first place. That is why it is critical to continue ourefforts to lighten debt burdens, to expand educational opportunities,to focus on basic human needs, as we work to bring the poorestcountries in Africa and elsewhere into the international community ofa thriving economy.
Creating a global, financial architecture for the 21stcentury; promoting national economic reform; making certain thatsocial protections are in place; encouraging democracy and democraticparticipation in international institutions -- these are ambitiousgoals. But as the links among our nations grow ever tighter we mustact together to address problems that will otherwise set back all ouraspirations. If we're going to have a truly global marketplace, withglobal flows of capital, we have no choice but to find ways to builda truly international financial architecture to support it -- asystem that is open, stable and prosperous.
To meet these challenges I have asked the financeministers and central bankers of the world's leading economies andthe world's most important emerging economies to recommend the nextsteps. There is no task more urgent for the future of our people.For at stake is more than the spread of free markets, more than theintegration of the global economy. The forces behind the globaleconomy are also those that deepen liberty, the free flow of ideasand information, open borders and easy travel, the rule of law, fairand even-handed enforcement, protection for consumers, a skilled andeducated work force. Each of these things matters not only to thewealth of nations, but to the health of nations.
If citizens tire of waiting for democracy and freemarkets to deliver a better life for themselves and their children,there is a risk that democracy and free markets, instead ofcontinuing to thrive together, will shrivel together.
This century has taught us many lessons. It has taughtus that when we act together we can lift people around the world andbind nations together in peace and reconciliation. It has also
taught us the dangers of complacency, of protection, of withdrawal.This crisis poses a challenge not to any one nation, but to everynation. None of us -- none of us -- will be unaffected if we fail toact.
On the day he died in 1945, as these institutions weretaking shape, President Roosevelt wrote in the last line of his lastspeech: "The only limit to our realization of tomorrow will be ourdoubts of today. Let us move forward with a strong and activefaith." At a time of testing, the generation that built the IMF andthe World Bank move forward with a strong and active faith.
Now we who have been blessed with so many advantagesmust, ourselves, act in the same manner. If we do, we will surmountthe difficulty of this moment. We will build a stronger world forour children. We will honor our forebears by what we do to constructthe first 50 years of the 21st century.
Thank you very much. (Applause.)
