[Weekly Compilation of Presidential Documents Volume 34, Number 38 (Monday, September 21, 1998)]
[Pages 1774-1781]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks to the Council on Foreign Relations in New York City

September 14, 1998

    Thank you very much, Pete. Hillary and I are delighted to be here 
with you and Joan, and I'm glad to be joined by Secretary Rubin and Jim 
Harmon, Gene Sperling, other members of our team. I'm glad to see Dick 
Holbrooke over here. I hope, if we can overcome the inertia of Congress, 
he will soon be a member of the team again. And I thank David 
Rockefeller and Les Gelb and others who welcomed us here today.
    The subject that I want to discuss--let me just say one thing in 
advance--I'm going to give you my best thoughts. We have been working on 
this for 3 years at some level of intensity or another, going back to 
the Naples G-7 meeting in the aftermath of the Mexican financial crisis. 
I have done everything I could do personally to reach out across the 
country, and indeed across the world, for any new ideas from any source. 
I'm going to give you my best thinking today about what we can do, but I 
want you to know that I'm here, and if I had my druthers, this would be 
about

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a 3-hour session where I'd give this talk and then I would listen for 
the rest of the time.
    So I want to encourage you, if you think we're right, to support us. 
But if you have any ideas, for goodness sake, share them, because I 
agree with what Pete said. This is the biggest financial challenge 
facing the world in a half century. And the United States has an 
absolutely inescapable obligation to lead, and to lead in a way that's 
consistent with our values and our obligation to see that what we're 
doing helps lift the lives of ordinary people here at home and all 
around the world.
    The Council on Foreign Relations has always stood for political and 
economic freedom, since right after World War I. And I think one of the 
things that has impacted all of us, and it was implicit in what Pete 
said, is that for the last decade the growth of freedom around the 
world--with more than half the people in the world living under 
governments of their own choosing, more than half the villages, the one 
million villages in China now, even electing their own governments, and 
this sweeping replacement of command and control economies by market 
economies--I think it seems to have happened so easily, so effortlessly, 
so inexorably, that I think we think the trend is inevitable and 
irreversible. But if you consider today's economic difficulties, 
disruptions, and the plain old, deep, personal disappointments of now 
tens of millions of people around the world, it is clear to me that 
there is now a stark challenge not only to economic freedom, but, if 
unaddressed, a challenge that could stem the rising tide of political 
liberty as well.
    Obviously, we have profound interests here. It is a great irony that 
we are at a moment of unsurpassed economic strength at a time of such 
turmoil in the world economy. We, I think all of us in this room, know 
that our future prosperity depends upon whether we can work with others 
to restore confidence, manage change, stabilize the financial system, 
and spur robust global growth.
    For most of the last 30 years, the United States and the rest of the 
world has been preoccupied by inflation, for reasons that all of you 
here know all too well. And it was a good thing to be preoccupied with. 
Today, the low and stable inflation we enjoy has been critical to our 
economic health, and low inflation has also contributed to that of many 
other nations as well. But clearly, the balance of risks has now 
shifted, with a full quarter of the world's population living in 
countries with declining economic growth or negative economic growth.
    Therefore, I believe the industrial world's chief priority today, 
plainly, is to spur growth. It seems to me there are six immediate steps 
we should take to help contain the current financial turmoil around the 
world, and then two longer-term projects in which we must be involved.
    To take the immediate first, we must work with Japan, Europe, and 
other nations to spur growth. Second, we will expand our efforts to 
enable viable businesses in Asia to emerge from crippling debt burdens 
so they can once again contribute to growth and job creation. Third, 
we've asked the World Bank to double its support for the social safety 
net in Asia to help people who are innocent victims of financial 
turmoil. Fourth, we'll urge the major industrial economies to stand 
ready to use the $15 billion in IMF emergency funds to help stop the 
financial contagion from spreading to Latin America and elsewhere. 
Fifth, our Ex-Im Bank, under the leadership of Jim Harmon, will 
intensify its efforts to generate economic activity in the developing 
world immediately, in the next 3 months. And sixth, Congress must live 
up to its responsibility for continued prosperity by meeting our 
obligations to the International Monetary Fund.
    Secretary Rubin has been working with his counterparts in the G-7 to 
get cooperative support for several of these measures. I understand 
Chairman Greenspan is also consulting with his counterparts on these 
items as well.
    As we take these immediate steps, we also must intensify our efforts 
to reform our trade and financial institutions so that they can respond 
better to the challenges we now face and those we are likely to face in 
the future. We must build a stronger and more accountable global trading 
system, pressing forward with market-opening initiatives, but also 
advancing the protection of labor and environmental interests, and doing 
more to ensure

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that trade helps the lives of ordinary citizens across the globe.
    Above all, we must accelerate our efforts to reform the 
international financial system. Today I have asked Secretary Rubin and 
Federal Reserve Board Chairman Greenspan to convene a major meeting of 
their counterparts within the next 30 days to recommend ways to adapt 
the international financial architecture to the 21st century.
    Over the past 6 years, our strategy at home of fiscal discipline, 
investment in the skills of our people, and open trade has worked for 
all Americans: unemployment at a 28-year low, inflation a 32-year low, 
wages rising at twice the rate of inflation after decades of stagnation. 
And on October 1st we'll have the first balanced budget in 29 years.
    But the global economy brought a lot of that prosperity to us, and 
now fast-moving currents have brought or aggravated problems in Russia 
and Asia. They threaten emerging economies from Latin America to South 
Africa. With a quarter of the world's population in declining growth, we 
must recognize what Chairman Greenspan said the other day: We cannot 
forever be an oasis of prosperity. Growth at home depends upon growth 
abroad. A full 30 percent of our growth, just since I became President, 
has been due to our expanding positive involvement in the global 
economy.
    That's why ordinary Americans should care if Asia or Russia or South 
America is on solid economic footing. These people are our customers. 
With one-third of the growth of our economy coming from exports, much of 
it from emerging markets, we know that those markets will falter as 
their economies flatten. When the problem is widespread and perceived to 
be moving in the wrong direction, we have seen that our stock market can 
react, having a direct and immediate impact on the wealth of the 
American people.
    These nations are also our competitors. And under conditions of 
decent equilibrium, that is a very good thing, indeed. But when their 
currencies drop precipitiously, the prices of their goods fall, they 
could undercut the sales of our own goods here at home that are 
otherwise profitable, dramatically increasing our trade deficit under 
circumstances that could cause the American people to turn away from 
open trade toward protectionism in a way that has terrific negative 
consequences long-term for our global growth objectives.
    Finally, these nations are our friends, our allies, and our security 
partners. Where economic turmoil plunges millions into sudden poverty 
and disrupts and disorients the lives of ordinary people, the risks of 
political and social instability and of a turn from democracy clearly 
rise. Just look at Russia. Russia is facing an economic crisis that 
threatens the extraordinary progress the Russian people have made in 
just 7 years, building a new society from the ground up. The ruble and 
the stock market have plummeted, banks are weak, tax collections have 
slowed, the government has trouble paying its debts and its salaries. 
Some Russians have become wealthy, but many, many more are struggling to 
provide for their families. I talked to some of them when I was in 
Russia just a few days ago.
    Amid such political uncertainty and economic difficulty, some now 
talk of abandoning the path of reform and returning to policies of the 
past, even policies that have already failed. At worst, adversity in 
Russia could affect not only the Russian economy and prospects for our 
economic cooperation--at worst, it could have an impact on our 
cooperation with Russia on nuclear disarmament, on fighting terrorism 
and the spread of weapons of mass destruction, on standing 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 4 days. He and President Yeltsin face one of the 
great challenges of their time. Never has there been a more important 
moment to set a clear direction for the future, to affirm the commitment 
of Russia to democracy and to free markets, and to take decisive steps 
to stabilize the economy and restore investor confidence.
    But if Russia is willing to take these steps, we must do everything 
we can to provide support to them. Because again I say, as long as 
ordinary people don't feel any benefits from this, in the end it's going 
to be difficult to sustain the direction we think the world should take.

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    On the other hand, we need to be honest with Russia and everyone 
else. No nation, rich or poor, democratic or authoritarian, can escape 
the fundamental economic imperatives of the global market. No nation can 
escape its discipline. No nation can avoid its responsibility to do its 
part.
    But since all economies are increasingly interdependent, fear and 
uncertainty about the economy of one country can prompt investors to 
pull money out of other countries thousands of miles away. Markets work 
best when they are driven neither by excessive inflows or outflows of 
capital based on indiscriminate optimism or pessimism.
    Regardless of what changes in policies or institutions may be 
warranted, we have to say we'll only be able to help those countries who 
are willing to help themselves. If a nation chooses to print money 
indiscriminately, to wink at cronyism or corruption, to hide bad loans 
and protect corrupt or inefficient banks, then investors, foreign and 
domestic, sooner or later, will withdraw their investments, with 
consequences both swift and severe.
    That is why we support the fundamental approach of the International 
Monetary Fund to extend assistance only when nations have taken 
responsibility, strengthening their banking systems, introducing honest 
accounting and open markets, awarding credit on merit instead of 
connections.
    Still, what has been done is clearly not enough to reverse the 
decline in particular countries, to douse the flames of the 
international financial crisis, to support steady and sustainable growth 
in the future. In the face of this new challenge, America can and must 
continue to act and to lead to take the urgent steps needed today to 
calm the financial crisis, restart the engine of growth in Asia, and 
minimize the impact of financial turmoil on other nations, and to make 
certain that for tomorrow the institutions and rules of international 
finance and international trade are prepared to support steady and 
sustainable growth over the long term.
    First and foremost, the leading economic nations must act together 
to spur global growth. Our strong and growing economy here has made a 
major contribution to global growth, just as our weak economy was 
holding the world back 6 years ago when I attended my first G-7 meeting 
in Tokyo and every other country said the first thing they needed was 
for America to put its economic house in order. We did that.
    Now I believe strongly we must maintain our fiscal discipline. It 
has led to lower interest rates and a huge investment and job growth. 
Maintaining economic growth is the best thing we can do right now, not 
only for the United States but for the global economy.
    I would also remember that back in 1993 we had a general agreement 
that what was needed was America should get rid of its deficit, Europe 
should lower its interest rates, and Japan should open its markets. 
There was this general agreement that if we did all those things, we 
would have a remarkable resumption of growth.
    Europe did moderate its interest rates and the then Prime Minister--
now the Finance Minister--Mr. Miyazawa, oversaw a significant market-
opening trade agreement between the United States and Japan, which also 
benefited others, not just us. And of course, we got rid of our deficit. 
The results were quite satisfactory for several years for us.
    Now Europe has to continue to pursue policies that will spur growth 
and keep their markets open because they, too, must be able to provide 
markets for Asian goods as those nations seek to find their footing. But 
the key here is Japan. For, the second largest economy in the world, by 
far the biggest economy in Asia, has now gone several years without any 
economic growth. Thank goodness, a lot of their ordinary citizens have 
been able to maintain a decent life because of the wealth of their 
country and probably because of the enormous personal savings rate they 
have enjoyed for many, many years now.
    But it is difficult to see how any actions of the world community 
can be successful in restoring growth in Asia in the absence of the 
restoration of growth in Japan, which would enable Japan to lead the 
region out of its present condition. Therefore, we must support Japan 
and do everything we can to help create the conditions in which, 
together, we can all lead again, just as we did in 1993.
    Their challenges are quite formidable. They have to spur domestic 
demand, revive

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a banking system, restore confidence, deregulate the economy, and open 
markets. And we all know all the forces that seem to be working against 
these developments in Japan. But I would remind you that this is a very 
strong, sophisticated nation full of people of knowledge and enormous 
achievement. It is fully capable of playing its world leadership role. I 
believe its business leaders right now know what needs to be done and 
would support it.
    Next week I'm going to meet with Prime Minister Obuchi here in New 
York to discuss how America can support Japan's efforts to restore 
economic growth and investor confidence. And I will do everything I can 
to try to make sure that, as we go forward, we have America, Europe, and 
Japan all doing our part to get beyond this present moment, just as we 
did back in 1993.
    The second step we should take is to intensify our efforts to speed 
economic recovery in Asia. When countries like South Korea and Thailand 
have taken strong and responsible steps, the freefall has ended, 
progress is being made. But the human cost of Asia's collapse is only 
now being fully felt. Recent press reports have described an entire 
generation working its way into the middle class over 25 years, then 
being plummeted into poverty within a matter of months. The stories are 
heartbreaking: doctors and nurses forced to live in the lobby of a 
closed hospital; middle class families who owned their own homes, sent 
their children to college, traveled abroad, now living by selling their 
possessions.
    It is in our interest to help these nations and these people 
recover. They will become once again our great markets and our great 
partners. It is also the right thing to do. We've worked with 
international lenders, like the IMF, to help these nations to adopt pro-
growth budget, tax, and monetary policies, but clearly we're going to 
have to do more to restore Asian growth. We must work to lift the weight 
of private sector debt that has frozen the Asian economies.
    Today, I'm asking Secretary Rubin to work with other financial 
authorities and international economic institutions to enhance efforts 
to explore comprehensive plans to help Asian corporations emerge from 
massive debt where individual firms have been swept under by systemic, 
national economic problems, rather than their own errors. We need to get 
credit flowing again. We need to get business back to making products, 
producing services, creating jobs.
    Third, Asian businesses need assistance, but so do millions of Asian 
families. We must do more to establish an adequate social safety net in 
recovering nations. Wrenching economic transition without an adequate 
social safety net can sacrifice lives in the name of economic theory 
and, I might add, can generate thereby so much resistance that reform 
grinds to a halt. If we want these countries to do tough things, we have 
to protect the most defenseless people in the society, and we have to 
protect 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 Asian Development Bank have 
started to deal with these challenges, but they have to expand their 
efforts. There is simply not enough being done. I asked them to double 
their aid through an expanded social compact initiative focusing on job 
assistance, basic needs, and economic transition, on children and the 
elderly, on groups most vulnerable to economic change. And I want to 
commend Jim Wolfensohn for his efforts and his willingness to lead this 
expanded initiative.
    Fourth, we have to be ready to respond immediately, and with 
financial force if necessary, to the currency crisis, if it spreads, 
especially if it threatens the economies of Latin America, where nations 
have struggled to make progress to do the right thing only to find 
themselves buffeted by economic storms outside their control. Therefore, 
the major economies should stand ready to activate the $15 billion now 
in the emergency funds of the IMF, the general agreement to borrow, to 
ensure that the IMF continues to support reform and fight economic 
contagion.
    Fifth, our Export-Import Bank will increase its commitments to 
specific economic development projects over the next 3 years--3 months--
projects which will have concrete benefits for ordinary citizens in 
other countries, projects which will increase our own exports and 
thereby help our economy, and

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ones which can help to restore confidence in countries that they are not 
alone and that actual, specific, positive developments can occur.
    Sixth, for the effort of the international community to succeed, 
America simply must meet its own obligations to the International 
Monetary Fund. After a year of financial firefighting, the IMF's 
resources are badly strained. Every day we don't act, we undermine the 
confidence the world badly needs that we are trying to restore. Congress 
simply must assume its responsibility for our leadership in the economy.
    In my State of the Union Address, I said it was better to prepare 
for a storm when the skies were clear than when the clouds were 
overhead. Well, 8 months later, the clouds are closer, and you can 
nearly hear the thunder. Now, the Senate, by an overwhelming bipartisan 
majority, has, thankfully, approved our obligation to fund our part of 
the International Monetary Fund. But with only 5 weeks left in this 
congressional session, there is still no action from the House of 
Representatives.
    Let me put this as plainly as I can. Failure by this Congress to pay 
our dues to the IMF will put our own prosperity at risk. Failure to act 
will send a sharp signal that at a time of economic challenge, our 
lawmakers were unwilling to protect our workers, our businesses, our 
farmers from the risk of global economic change and unwilling to 
maintain our leadership in building a global economic system that has 
benefited us more than any other nation.
    Concerted action to spur growth, helping Asia through private sector 
debt restructuring, and a strengthened social safety net, helping to 
protect the rest of the world through the use of the IMF's emergency 
fund, increasing the activity of the Ex-Im Bank, and meeting our own 
obligations to the IMF, these are the six immediate steps we want to 
take.
    But we must also be willing to take action for the long run to 
modify the financial and trading institutions of the world to match the 
realities of the new economy they serve. By creating the WTO, the World 
Trade Organization, in 1994, we began to build a modern trading system. 
We must redouble our efforts to tear down barriers around the world. But 
as I said in Geneva last May, we must do more to ensure that spirited 
economic competition among nations never becomes a race to the bottom--
in environmental protection, consumer protection, or labor standards.
    We are working to open the procedures of the WTO to participation by 
the public and the full range of affected interests so that people will 
know and see and be able to do for themselves things which will ensure 
that the trading system makes the 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. Next year we will host the 
meeting of the world's trade ministers to set the agenda for expanded 
trade in the first decade in the new century.
    History teaches us that at a time of worldwide difficulty, it would 
be folly to retreat into a protectionist shell. We must keep trade 
flowing among nations, but I will say again, if we want to do that, we 
have got to give ordinary citizens and the groups that represent them in 
countries all over the world the sense that it is going to be done in a 
fair way, consistent with nations' obligations to advance the interests 
of their working people and protect not only their national but the 
global environment.
    This November, when I meet with the leaders of the Asian economies 
at the APEC meeting, we will move forward to further open markets in 
Asia. And when Congress returns next year, 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 from a majority of both parties.
    From the G-7 meeting in Halifax in 1995, in the wake of the Mexican 
financial crisis, to the Birmingham meeting this year, we have been 
working, also, with our major economic partners to plan for new 
financial architecture for the 21st century.
    For the first time, this year we included key emerging markets in 
the process in a new Group of 22, recognizing their important stake in 
the global economy. This group has been working together for nearly a 
year now to improve the global financial assistance

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with a special focus on improving financial sectors, on transparency, 
and on private sector burden sharing.
    I just want to emphasize again that even as we respond to the urgent 
alarms of the moment, we must speed the pace of this systemic work as 
well. That is why I have asked Secretary Rubin and Chairman Greenspan to 
convene the finance ministers and central bankers of the G-7 and key 
emerging economies in Washington within 30 days to develop a preliminary 
report to the heads of state by the beginning of next year on 
strengthening the world financial system.
    We must develop policies so that countries can reap the benefits of 
free-flowing capital in a way that is safe and sustainable. We must 
adapt the IMF so that it can more effectively confront the new types of 
financial crises, minimizing their frequency, severity, and human cost. 
We need to consider ways to extend emergency financing when countries 
are battling crises of confidence due to world financial distress as 
distinct from their own errors in policy. We must find ways to tap the 
energy of global markets without sentencing the world to a cycle of 
continued extreme crises.
    For half a century now in our national economy, we have learned not 
to eliminate but to tame and limit the swings of boom and bust. In the 
21st century, we have to find a way to do that in the global economy as 
well.
    I've discussed this in recent days with Prime Minister 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 critical to the mission that he and I and 
Prime Minister Prodi of Italy will be discussing next week at the New 
York University Law School in a very interesting meeting that the First 
Lady and others in our administration helped to organize on how to 
extend the benefits of the world economy to all and how to strengthen 
democracy in a time of such sweeping economic change.
    Now, let me just say it all again very briefly. In short, we must 
improve our ability to address the current financial emergency, and we 
must build a system to prevent such future emergencies, whenever 
possible, and to blunt their impact when they do occur. There is no 
mission more critical to our own strength and security.
    And let me say this again, what is at stake is more than the spread 
of free markets and their integration into the global economy. The 
forces behind the global economy are also those that deepen democratic 
liberties: 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 freedom. If citizens tire of waiting for democracy and 
free markets to deliver a better life for them, there is a real risk 
that democracy and free markets, instead of continuing to thrive 
together, will begin to shrivel together. This would pose great risks 
not only for our economic interests but for our security.
    We see around the world the international aggressors, the harborers 
of terrorists, the druglords. Who are these countries? They're 
authoritarian nations without democracy and without open markets. 
Nations that give their people freedom are good neighbors; when nations 
turn away from freedom, they turn inward toward tension, hatred, and 
hostility.
    We now have a chance to create opportunity on a worldwide scale. The 
difficulties of the moment should not obscure us to the advances of the 
last several years. We clearly have it within our means, if we do the 
right things, to lift billions and billions of people around the world 
into a global middle class and into participation in global democracy 
and genuine efforts toward peace and reconciliation. That is a 
possibility, but recent events show it is not a certainty.
    At this moment, therefore, the United States is called upon once 
again to lead, to organize the forces of a committed world, to channel 
the unruly energies of the global economy 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 we know what to 
do. The World War II generation did it for us 50 years ago. Now it is 
time for us to rise to our responsibility, as America has been called 
upon to do so often so many times in the past. We can, if

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we do that, redeem the promise of the global economy and strengthen our 
own Nation for a new century.
    Thank you very much.

Note: The President spoke at 12 p.m. in the David Rockefeller Room at 
the Council on Foreign Relations Building. In his remarks, he referred 
to Peter G. Peterson, chairman of the board, Council on Foreign 
Relations, and his wife, Joan Ganz-Cooney; Richard C. Holbrooke, U.S. 
Ambassador-designate to the United Nations; David Rockefeller, honorary 
chairman, and Leslie H. Gelb, president, Council on Foreign Relations; 
Prime Minister Yevgeniy Primakov and President Boris Yeltsin of Russia; 
Minister of Finance Kiichi Miyazawa and Prime Minister Keizo Obuchi of 
Japan; James D. Wolfensohn, president, World Bank; Prime Minister Tony 
Blair of the United Kingdom; and Prime Minister Romano Prodi of Italy.