[Public Papers of the Presidents of the United States: William J. Clinton (1998, Book II)]
[October 6, 1998]
[Pages 1742-1747]
[From the U.S. Government Publishing Office www.gpo.gov]

Remarks at the International Monetary Fund/World Bank Annual Meeting
October 6, 1998


    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 

International Monetary Fund/World Bank

    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 
fifteenfold. 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.

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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 which 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 slowdown. 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 others' 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 6 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.

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    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 
    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 cars, 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 the pride 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 marketplace. 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 
    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

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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 
    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 own 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 onto 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 
build 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,

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shortsighted 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 worlds' 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 evenhanded 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 moved 
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.

Note: The President spoke at 10:52 a.m. in the ballroom at the Marriott 
Wardman Park Hotel. In his remarks, he referred to President Carlos 
Menem and Minister of Economy, Public Works, and Services Roque 
Fernandez of Argentina; Michel Camdessus, Managing Director and Chairman 
of the Executive Board, International Monetary Fund (IMF); James D. 
Wolfensohn, President, International Bank for Reconstruction and 
Development (World Bank); State Secretary in the Austrian Finance 
Ministry Wolfgang

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Ruttenstorfer, Chairman of the Board of Governors, IMF; Prime Minister 
Tony Blair of the United Kingdom; President Slobodan Milosevic of the 
Federal Republic of Yugoslavia (Serbia and Montenegro); and Special 
Envoy Richard C. Holbrooke, the President's nominee to be U.S. 
Ambassador to the United Nations. The President also referred to the 
International Labor Organization (ILO) and the Overseas Private 
Investment Corporation (OPIC).