1998-10-06 Remarks by the President to 1998 World Bank -IMF (fwd)

[Robert Weissman <rob@essential.org>]

                            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 my remarks, I hope you will permit me to say a few words about
another issue of real concern to the international community, about
which I have been working already this morning -- the subject of Kosovo.
 
 I have been on the phone with many of my counterparts, and I just was
speaking with Prime Minister Blair, who is in China.  We all agree that
Kosovo is a powder keg in the Balkans.  If the violence continues, it
could spill over and threaten the peace and stability of Bosnia, of
Albania, of Macedonia and other countries in the region.  What is
already a humanitarian crisis could turn into a catastrophe.
 
 Some 250,000 people have been forced to flee their homes.  Of that
number, approximately 50,000 are actually homeless.  As winter sets in
they risk freezing or starving to death.
 
 President Milosevic is primarily responsible for this crisis.  The
United Nations has made clear the steps we must take to end it --
declare an immediate cease-fire, withdraw Serb security forces, give
humanitarian relief groups full and immediate access to Kosovo, begin
real negotiations with the Kosovar Albanians to find a peaceful and
permanent solution to their rightful demand for autonomy.
 
 As we meet here, my Special Envoy, Dick Holbrooke, is meeting with
President Milosevic to reiterate what he must do and to make clear that
NATO is prepared to act if President Milosevic fails to honor the United
Nations resolutions.  The stakes are high.  The time is now to end the
violence in Kosovo.  I hope all of you will do whatever you can to that
end.
 
 Now to the matter at hand.  A half century ago, a visionary generation
of leaders gathered at Bretton Woods to build a new economy to serve the
citizens of every nation.  In one of his last messages to Congress,
President Franklin Roosevelt said that the creation of the International
Monetary Fund and the World Bank -- and I quote -- "spelled the
difference between a world caught again in the maelstrom of panic and
economic warfare, or a world in which nations strive for a better life
through mutual trust, cooperation and assistance."
      
      The Bretton Woods generation built a platform for prosperity that
has lasted down to the present day.  Economic freedom and political
liberty has spread across the globe.  Since 1945, global trade has grown
15-fold.  Since 1970 alone, infant mortality in the poorest countries is
down by 40 percent.  Access to safe drinking water has tripled.  Life
expectancy has increased dramatically.  Even now, despite the
difficulties of recent days, per capita incomes in Korea and Thailand
are 60 percent higher than they were a decade ago.  A truly global
market economy has lifted the lives of billions of people.
      
      But as we are all acutely aware, today the world faces perhaps its
most serious financial crisis in half a century.  The gains of global
economic exchange have been real and dramatic -- but when tides of
capital first flood emerging markets, then suddenly withdraw; when bank
failures and bankruptcies grip entire economies; when millions in Asia
who have worked their way into the middle class suddenly are plunged
into poverty; when nations half a world apart face the same crisis at
the same time; it is time for decisive action.

      What has caused the current crisis?  First, too many nations lack
the financial, legal, and regulatory systems necessary to maintain
investor confidence in adversity.  Second, new technologies and greater
global integration have led to vastly increased, often highly leveraged
flows of capital, without accompanying mechanisms to limit the boom-bust
cycle -- mechanisms like those with are integral to the success of
advanced economies.

      I am confident that if we act together we can end the present
crisis.  We must take urgent steps to help those who have been hurt by
it, to limit the reach of it, and to restore growth and confidence to
the world economy.  But even when the current crisis subsides, that will
not be enough.  The global economy simply cannot live with the kinds of
vast and systemic disruptions that have occurred over the past year.

      The IMF and the World Bank have been vital to the prosperity of
the world for the past half century.  We must keep them vital to the
prosperity of the world for the next half century.  Therefore, we must
modernize and reform the international financial system to make it ready
for the 21st century.

      The central economic challenge we face is to harness the positive
power of an open international economy while avoiding the cycle of boom
and bust that diminishes hope and destroys wealth.  And the central
political challenge we face is to build a system that strengthens social
protections and democratic institutions so that people everywhere can
actually reap the rewards of growth.
      
      We must put a human face on the global economy.  An international
market that fails to work for ordinary citizens will neither earn, nor
deserve their confidence and support.  We need both an aggressive
response to the immediate crisis and a thoughtful road map for the
future.  We must begin by meeting our most immediate challenges.
      
      Two weeks ago at the Council on Foreign Relations in New York, I
outlined what we have done and what we must do.  I am gratified that
today the leading economies speak with one voice in saying, the balance
of risks have now shifted from inflation to slow down.  The principal
goal of policymakers must be to promote growth.  Every nation must take
responsibility for growth.  The United States must do its part.  The
most important thing we can do is to keep our economy growing and open
to other's products and services, by maintaining the fiscal
responsibility that has led us to the first balanced budget and surplus
in 29 years.
      
      Winning this discipline was not easy and was not always popular.
But it was the right thing to do.  That is why I have made it clear to
our Congress that I will veto any tax plan that threatens that
discipline.
      
      Also, the United States must -- must -- meet our obligations to
the IMF.  I have told Congress we can debate how to reform the
operations of the fire department, but there is no excuse for refusing
to supply the fire department with water while the fire is burning.
      
      Europe must continue to press forward with growth-oriented
economic policies and keep its markets open.  And Japan, the world's
second largest economy and by far the largest in Asia, must do its part,
as well.  The United States values our strong partnership with Japan --
our political, our security, our economic partnership.  But now the
health of Asia and, indeed, the world depends upon Japan.  Just as the
United States had to eliminate its deficits and high interest rates
which were taking money away from the rest of the world over the last
six years, now Japan must take strong steps to restart its economic
growth, by addressing problems in the banking system so that lending and
investment can begin with renewed energy; and by stimulating,
deregulating and opening its economy.
      
      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 Asia by helping to
restructure firms paralyzed by crushing debt and replace debt with
equity across entire economies.  Through OPIC and the Export-Import
Bank, we are providing short-term credit and investment insurance to
keep capital flowing into emerging economies.

      I welcome Japan's announcement that it will contribute to the
reconstruction effort.  And I am gratified that the World Bank has
agreed to double its investment in the social safety net in Asia to help
those who have been harmed by the economic crisis.

      In all these ways, we can minimize the consequences of the current
financial contagion.  But the flash of this crisis throws new light on
the need to do more -- to renew the institutions of international
finance so they reflect modern economic reality.  The institutions built
at Bretton Woods must be updated for 24-hour global markets if they are
to continue to achieve the goals established by the Bretton Woods
generation.

      First, we must recognize that the free and open exchange of ideas
and capital and goods across the globe is the surest route to prosperity
for the largest number of people.  But we must find a way 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 news in one
country can set off alarms in markets around the world.  And all too
often, investors move as a herd, with sweeping consequences for emerging
economies with weak and strong policies alike.  We've all read of
families that worked hard for decades to become middle class, families
that owned homes and car suddenly forced to sell off their possessions
just to buy food.  We've read of doctors and nurses forced to live in
the lobby of a closed hospital.  With fuel and food shortages in some
countries, the onset of winter threatens mass misery.  And in Asia,
where the ethic of education is deeply ingrained and has led to the rise
of tens of millions of people, and strong schools are deprived of
nations, we now see too many children dropping out of school to help
support their families.
      
      Just as free nations found a way after the Great Depression 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 today shake the world
economy.
      
      The most important step, of course, and the first step, is for
governments to hold fast to policies that are sound and attuned to the
realities of the international market place.  No nation can avoid the
necessity of an open, transparent, properly regulated financial system;
an honest, effective tax system; and laws that protect investment.  And
no nation can for long purchase prosperity on the cheap, with policies
that buy a few months of relief at the price of disaster over the long
run.
      
      That is why I support the fundamental approach of the IMF.  The
international community cannot save any nation unwilling to reform its
own economy.  To do so would be to pour good money after bad.  But when
nations are willing to act responsibly and take strong steps, the
international community must help them to do so.
      
      Too often, what has appeared to be a thriving market system,
however, has masked an epidemic of corruption or cronyism.  Investors
and entrepreneurs, foreign and domestic, will not keep their money in
economies where prosperity is a facade.  Bank balance sheets should mean
the same thing in one country as another.  Contracts should be awarded
on merit.  Corruption cannot be tolerated.

      To this end, I applaud the Working Group reports that call for the
IMF to examine and publicize countries' adherence to strong
international standards, as well as higher accounting and loan standards
for private institutions.  The United States will continue to press for
new ways the private sector can implement sound practices -- for
example, through an accreditation system for national bank examiners.

      But while strong policies and sound business practices within each
nation are essential, at times they simply will not be enough.  For even
the best functioning markets can succumb to volatility, soaring in
unrealistic expectations one minute, followed by a sudden crash when
reality intervenes.  Such miscalculations of risk are an inevitable fact
of market psychology.
      
      In our own domestic economies, we have learned to limit these
swings in the business cycle.  In the United States, for example, a
strong Federal Reserve has ensured a stable money supply.  The
Securities and Exchange Commission promotes openness and makes the
market work.  Rigorous bank regulation and deposit insurance have helped
to keep downturns in the business cycle from spinning out of control.
Other nations have their own institutions performing these same
functions.

      Now, though we understand that the realities and the possibilities
in the international marketplace are different, some of the same
functions clearly need to be performed.  We must address not only a run
on a bank or a firm, but also a run on nations.  If global markets are
to bring the benefits we believe they can, we simply must find a way to
tame the pattern of boom-bust on an international scale.  This task is
one of the most complex we face.  We must summon our most creative minds
and carefully consider all options.  In the end, we must fashion
arrangements that serve the global economy as our domestic economies are
served, enabling capital to flow freely without the crushing burdens the
boom-bust cycle brings.
      
      While we must not embrace false cures that will backfire and lead
in the end to less liquidity and diminished confidence when we need more
of both, we must -- we must -- keep working until we find the right
answers.  And we don't have a moment to waste.
      
      Meanwhile, we must find creative ways to protect those countries
that right now have strong economic policies, yet still face financial
pressures not of their own making.  This past weekend, Secretary Rubin
and Chairman Greenspan have worked with their G-7 counterparts to find
new ways to strengthen our cooperation based on the IMF to make
precautionary lines of credit available to nations committed to strong
economic policies, so that action can be quick and decisive if needed.
This is a critical way to prevent the present crisis from reaching Latin
America and other regions, which are 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 steps are needed to
ensure growth into the future.  But let us also acknowledge that we face
a political challenge.  For the best designed international economic
system will fail if it does not give a stake and a voice to ordinary
citizens.  So I say again, today we see a profound political challenge
to the global economic order.
      
      The financial crisis poses a stern test of whether democracies are
capable of producing the broad public support necessary for difficult
policies that entail sacrifice today for tomorrow's growth.  I believe
strong democracy, fair and honest regulation, sound social policy are
not enemies of the market.  I believe they are essential conditions for
long-term success.  Nations with freely elected governments, where the
broad mass of people believe the government represents them and acts in
their interests, have been willing and able to act to ward off crisis.
Korea and Thailand, with elected leaders who have been willing to take
very difficult steps, have succeeded in weathering the worst of the
economic storm when so many others have not.  Countries in Central
Europe have done remarkably well.
      
      But even among the strongest nations, as we have found here in our
own, broad change is often difficult.  Unless the citizens of each
nation feel they have a stake in their economy they will resist reforms
necessary for recovery.  Unless they feel empowered with the tools to
master economic change, they will feel the strong temptation to turn
inward, to close off their economies to the world.
      
      Now, more than ever, that would be a grave mistake.  At a moment
of financial crisis, a natural inclination is to close borders and
retreat behind walls of protectionism.  But it is precisely at moments
like this we need to increase trade to spur greater growth.

      Again, we must never lose sight of what the fundamental problem is
-- we need more liquidity, more growth in this world today.  Only by
tearing down barriers and increasing trade will we be able to bring the
nations of Asia, Latin America, and other parts of the world back on to
the path of growth.
      
      The world economy today needs more trade and more activity of all
kinds, not less.  That is why when the leaders of APEC meet next month,
we must press forward to tear down barriers and liberalize trade among
our countries; why next January when the United States Congress returns,
we will seek a comprehensive effort to tear down barriers at home and
around the world, including new negotiating authority and legislation to
expand trade with Africa.

      But unless we give working people a strong stake in the outcome,
they will, naturally and understandably, erect obstacles to change.  The
answer to these difficulties is not to retreat.  It is to advance and to
make certain every nation has a strong safety net providing the security
people need to embrace change.
      
      At the very least, people who are suddenly without work must have
access to food and shelter and medical care.  And over time, all nations
must develop effective unemployment and retirement systems.  We must
find ways to keep schools open and strong during times of economic
downturn.  We must make certain economic development does not come at
the cost of new environmental degradation.
      
      I am pleased that the World Bank will be redoubling its efforts to
building this strong safety net, especially in Asia.  And I urge all
international financial institutions to do more to incorporate
environmental issues into your operations, and to significantly increase
direct lending for environmental and natural resource projects.

      Every time we seek to protect the environment, short-sighted
critics warn that it will hurt the economy.  But over the last quarter
century, we have seen time and again, in nation after nation, that
protecting the environment actually strengthens, not weakens, our
economies.

      International institutions themselves must reinforce the values we
honor in our own economies.  In Geneva last May, I asked the World Trade
Organization to bring its operations into the sunlight of public
scrutiny, to give all sectors of society a voice in building trade
policies that will work for all people in the new century.  We must do
the same for other multilateral institutions.
      
      When the IMF agrees with a member country on policy measures to
restore stability, the people of that country and investors around the
world should be told exactly what conditions have been set.  Therefore,
I urge the WTO, the World Bank, and the IMF, working with the ILO, to
give greater consideration to labor and environmental protections as a
part of your daily business.  Only by advancing these protections will
these organizations earn the confidence and support of the people they
were created to serve.
      
      Finally, though we are seized with the crisis of the moment, we
must not neglect those whom the capital flows have passed by in the
first place.  That is why it is critical to continue our efforts to
lighten debt burdens, to expand educational opportunities, to focus on
basic human needs, as we work to bring the poorest countries in Africa
and elsewhere into the international community of a thriving economy.
      
      Creating a global, financial architecture for the 21st century;
promoting national economic reform; making certain that social
protections are in place; encouraging democracy and democratic
participation in international institutions -- these are ambitious
goals.  But as the links among our nations grow ever tighter we must act
together to address problems that will otherwise set back all our
aspirations.  If we're going to have a truly global marketplace, with
global flows of capital, we have no choice but to find ways to build a
truly international financial architecture to support it -- a system
that is open, stable and prosperous.
      
      To meet these challenges I have asked the finance ministers and
central bankers of the world's leading economies and the world's most
important emerging economies to recommend the next steps.  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 the integration of the global
economy.  The forces behind the global economy are also those that
deepen liberty, the free flow of ideas and information, open borders and
easy travel, the rule of law, fair and even-handed enforcement,
protection for consumers, a skilled and educated work force.  Each of
these things matters not only to the wealth of nations, but to the
health of nations.

      If citizens tire of waiting for democracy and free markets to
deliver a better life for themselves and their children, there is a risk
that democracy and free markets, instead of continuing to thrive
together, will shrivel together.

      This century has taught us many lessons.  It has taught us that
when we act together we can lift people around the world and bind
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 every nation.  None of us --
none of us -- will be unaffected if we fail to act.

      On the day he died in 1945, as these institutions were taking
shape, President Roosevelt wrote in the last line of his last speech:
"The only limit to our realization of tomorrow will be our doubts of
today.  Let us move forward with a strong and active faith."  At a time
of testing, the generation that built the IMF and the World Bank move
forward with a strong and active faith.

      Now we who have been blessed with so many advantages must,
ourselves, act in the same manner.  If we do, we will surmount the
difficulty of this moment.  We will build a stronger world for our
children.  We will honor our forebears by what we do to construct the
first 50 years of the 21st century.

      Thank you very much.  (Applause.)

             END                          11:20 A.M. EDT