[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

[[Page 2432]]

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.