    [Weekly Compilation of Presidential Documents Volume 35, Number 47 (Monday, November 29, 1999)]
    [Pages 2431-2433]
    [Online from the Government Publishing Office, www.gpo.gov]

    <R04>
    Remarks at Afternoon Session One of the Conference on Progressive
    Governance for the 21st Century in Florence

    November 21, 1999

        So many wise things have been said, I feel ill equipped to compete
    with lunch. But I would like to very briefly, and in summary fashion,
    address two subjects which we have discussed: first, how we are dealing
    with this new economy among ourselves. I agree with what Lionel Jospin
    said. We are here because we affirm the importance of the nation-state
    as necessary to provide the conditions of community and humanity in this
    very different world. The question is what Tony Blair always says--we
    have to do to what works. We have to do something that enables us to
    fulfill our traditional mission in a very different world.
        Now, let me just make a couple of very specific suggestions for
    where our work might go. I don't think we have studied enough what each
    other has done and how it might relate to our own experience. For
    example, in the countries here represented, taking Brazil to the side a
    moment--just let's take the EU and the U.S. and Canada. We all take
    somewhere between 30 percent and 45 percent of national income for
    government purposes. But we spend this money in very different ways.
        Now, we know that if you look at France and Germany, you can achieve
    quite a high level of growth with GP expenditures in the public sector
    above 40 percent. You can still have high growth. But we haven't looked
    enough--the right will say, ``Well, the more you spend, the worse it
    is.'' What we should do is analyze how this money is spent. I would like
    to know, for example, more than I know about how the unemployment
    support system in Germany differs from the unemployment support system
    in France or Britain. I think these things would help us a lot.
        We're sitting here in this wonderful medieval building, built in the
    late 13th, early 14th century. I would like to know why northern Italy
    has the highest per capita income in Europe and whether it has anything
    to do with the combination of creativity and cooperation in business
    that is rooted in the medieval guilds that flourished in Florence
    hundreds of years ago and that are replicated now in many of the
    business practices here.
        We don't know enough about what is actually going on in our own
    countries and how it compares with other countries to make the best
    decisions about what the way forward is. And I think we ought to make
    sure that when we leave here, we have a strategy of finding that out.
        Now, let's go to the global issues and the issues represented here
    by Brazil. And I would like to talk very briefly about, one,
    international institutions; two, what the emerging economies,
    themselves, have to do; and three, what the rich countries ought to be
    doing.
        First, on the international institutions, I completely agree that
    the IMF, the World Bank, the multilateral development banks were
    inadequate to the financial crisis of the 1990's, and particularly the
    Asian financial crisis--which collapsed Russia as well--and which have
    terrible effects on totally innocent bystanders, especially in Latin
    America and particularly Brazil.
        Now, what caused this? Number one, as Tony Blair pointed out, you
    can't run a modern economy without a global financial system that moves
    money around--a lot of money in a hurry. The volume of currency trades
    every day is roughly 15 times the volume of trade and goods and
    services--over $1 trillion every day. We have to do that. The system
    won't work without it.
        Now, what caused the problem? A lot of loans were made which should
    not have been made because there was not an honest system of risk
    assessment. And then, when those loans went bad, two things happened.
    One, market panic--so it's like the old phenomenon of, once a cat gets
    burned sitting on a hot stove, it won't sit on a cold stove, either. So
    if we lost money in a developing economy in Russia, or in Asia, then we
    better take our money out of central Europe and Latin America.
        The second thing that happened, which has been less analyzed, is
    that a lot of these loans were highly leveraged, through derivatives and
    other mechanisms, so that people who lost their money in Russia, let's
    say, had

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    to cover their losses, when they had only put up 10 percent of their
    losses. So they were very often liquidating their investments in Latin
    America through no fault of Latin America, but because they had to have
    cash to pay off their debts.
        Now, in the last 2 years the truth is that all of our nations have
    worked very hard to deal with this. The IMF and the World Bank, we have
    made some substantial changes in policy--not everything we need to do,
    but I think that a lot of reforms have been made.
        Now, the question is, can domestic economies--can Henrique do things
    that would help this? Chile had a capital control system that worked
    pretty well, to try to regulate radical movements of money in and out of
    the country. But the only reason it worked well is, Chile had a system
    that was recognized as having integrity and effectiveness, so that
    people still wanted to put their money there even if there was some
    control on how rapidly it could move in and out. The same with Malaysia
    in the Asian financial crisis--people thought you could make money in
    Malaysia, so they would put up with the capital controls. On the other
    hand, if when the Russians tried to control money--even the Russians
    were sending money out of Russia, in record amounts, because they didn't
    believe at the moment that the system would work.
        So should we continue to reform the IMF and the World Bank and the
    multilateral development banks? Absolutely. But we should not minimize
    the fact that you've got to move a lot of money around every day.
        Second thing: domestic systems matter. Governments have to have
    good, honest financial systems, because you can't make people put their
    money in a place they don't want to spend it, and you can't make people
    keep their money in a place they no longer have confidence in. And
    governments have to have greater capacity; this is something the old--
    the so-called old left and the new left ought to agree on. The truth is,
    in most developing countries, governments are too weak, not too strong.
        Why is Uganda the only country in Africa that can drive the AIDS
    rate down? How can--why shouldn't we be out there promoting a system
    where once a country in a developing area of the world solves a problem
    we more speedily make sure that is done everywhere else, and we help
    people do that. This is crazy. I mean, just--AIDS is just one example,
    but, I mean, it's convulsing African countries--but here's Uganda
    proving that you can get the rate down, and, oh, by the way, they have
    economic growth at 5 percent or 6 percent a year. So national policies
    matter.
        The third thing is, what are we going to do to help? Very quickly.
    One, we ought to support everybody, from the Pope to Bono, who's
    recommending debt relief for the poorest countries in the world. It's
    insane to keep these poor countries spending all their money making
    interest payments--they can't even pay off the principal. They'll never
    be able to grow, and they have no money to buy our products. So the G-8
    initiative on debt relief is right. We should do that. Two, we ought to
    vigorously support economic empowerment initiatives that work in
    developing nations. I have been in Sao Paulo and Rio, two of the largest
    cities in the world, two of the most wonderful places on Earth. But
    there are millions of children there that will have no future unless
    their families can make a decent living.
        Now, the United States, this year, funded 2 million microenterprise
    loans, mostly to poor urban and rural village women. We know what works
    in poor developing economies. I wish we were funding 20 million loans. I
    think the rich countries should be funding literally 2 or 3 hundred
    million microenterprise loans a year. If you wanted to do something
    useful at an average of $50 or $100 apiece in Europe--I mean, in the
    poor countries of Latin America and Asia and Africa, and even the
    poorest countries of Europe, that would make a huge difference.
        Three, we ought to do everything we can to get more cell phones and
    computer hookups out there. The people in Africa are no different from
    the people in America. If you give people access to technology, a lot of
    smart people will figure out how to make a lot of money. And the more
    you can make dense the availability of cell phones and computers in poor
    countries, the bigger difference it would make.

    [[Page 2433]]

        Four, we ought to all ratify the Child Labor Convention and do more
    to protect the interest of women and young girls. Get the girls in
    school, end child labor, put women in the work force. Example: in
    Pakistan--we worked with Pakistan to put thousands of their children
    back in school who were making soccer balls. And they discovered that,
    when they got the kids back in school, they made thousands of jobs for
    poor village women who were dying to go to work, and began to sustain
    their families. The rich countries of the world ought to ratify the
    Child Labor Convention and do more to help women and to get little girls
    in school.
        And finally, I think the WTO coming up ought to lead to more open
    markets. We ought to buy products from these countries. If we--you know,
    it's politically sensitive, but if you want to help these poor
    countries, they have to make a living. We've got to buy more of their
    stuff.
        And--last point before we go to lunch. Gerhard Schroeder said
    something that I want to reemphasize. The liberal left parties in the
    rich countries should be the parties of fiscal discipline. It is a
    liberal, progressive thing to balance the budget and run surpluses if
    you're in a rich country today. Why? Unless you have total deflation
    like Japan, you should always be running a balanced budget.
        Why? Because it keeps interest rates down for your own people, which
    creates jobs and lowers costs. The average American has saved $2,000 in
    home mortgages, $200 in car payments, and $200 in college loan payments
    since we cut the deficit.
        Two--this is the most important point for Henrique--if all the rich
    countries in the world were running a surplus in times of growth--just
    when we're growing--then we not only would lower the cost of capital for
    our own business communities, we would make it so much cheaper for
    Henrique to get money in Brazil. It's the number one thing we could do
    to get money to poor countries at affordable rates is to start running
    surpluses.
        I am trying to convince both parties in my country, before I leave
    office, to make a common commitment to pay off the public debt of
    America over the next 15 years for the first time since 1835. This is
    now a liberal thing to do--it helps poor people, it helps working
    families, it helps the poor countries of the world. If we could embrace
    that goal, I think it would be a very good thing to do.
        Thank you very much.

    Note: The President spoke at 12:23 p.m. in the Room of Five Hundred at
    the Palazzo Vecchio. In his remarks, he referred to Prime Minister
    Massimo D'Alema of Italy; Prime Minister Lionel Jospin of France; Prime
    Minister Tony Blair of the United Kingdom; President Fernando Henrique
    Cardoso of Brazil; Pope John Paul II; Irish musician and peace activist
    Bono; and Chancellor Gerhard Schroeder of Germany. A tape was not
    available for verification of the content of these remarks.