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It is a pleasure to speak to you today. The firstpublic speech I gave after President Clinton appointed me asTreasury Secretary two and a half years ago was before theBretton Woods Committee. At the time, I spoke about how theeconomic well being of the United States is integrally linked tothe rest of the world; and how U.S. leadership with respect toissues in the global economy is increasingly important. Everyexperience I’ve had since then has only reinforced theimportance these principles. My experience has also given megreat concern of how little that view is understood among theAmerican people with all the implications that has for publicpolicy.
With millions of Americans benefiting in theirjobs directly or indirectly from trade, and all Americansbenefiting as consumers, our economic success is a function of ahealthy global economy. But our integration with the rest of theworld goes beyond economics. We are affected by and must respondto an array of other problems that cross borders such as regionalpolitical instability, environmental degradation or even thespread of infectious diseases in distant parts of the globe. Thatis why President Clinton has pursued a coordinated strategy toadvance U.S. economic and national security interests bypromoting global economic growth, and maintaining U.S. leadershipin the world.
Today, I would like to speak to you about two keymethods we have to advance this strategy. The first is throughthe work we pursue in the Group of Seven industrialized nations.The second is through our work to promote economic reform andgrowth in the developing nations through the Bretton Woodsinstitutions -- the World Bank, the International Monetary Fund,and the regional development banks -- which, as you are wellaware, are vital to our economic prospects.
Let me start with the G-7. Next weekend, themajor industrialized nations -- with Russia playing a moreimportant role than ever before, furthering the integration ofRussia into the international community -- will meet in Denverfor their annual summit.
The United States is hosting this Summit atDenver from a position of enviable strength. At summits in thelate 1980s and early 1990s, the other industrialized nationslined up to criticize the United States about its need to get itseconomic house in order. After years of large budget deficits,and with slippage in the competitiveness of our private sector inmany industries, we were viewed by many as yesterday’seconomy.
Today the United States is once again the mostrespected economy in the world; a country that has put itseconomic house in order. In the public sector, in large measuredo to the deficit reduction program of 1993, and the economicgrowth that that program generated, the deficit has fallen fromclose to five percent of GDP to an estimate of roughly onepercent of GDP for 1997. That deficit reduction was key toreducing interest rates and increasing confidence, which, inturn, drove our recovery. Today, unemployment is at 4.8 percent,inflation is low, and the economy has generated over 12 millionnew jobs. The private sector, for its part, has regained itsfooting, and has become competitive again across a broad array ofindustries. These are the best sustained economic conditions inthis country in many decades, and the best in the industrializedworld. At the same time, there has been a fundamental change ineconomic views. I remember when I was majoring in Economics incollege there was a real debate about the relative merits ofcentral planning versus market based economics. Today, the debateis largely over and there is almost universal consensus in thedeveloped and the developing world around sound macroeconomicpolicy, the centrality of private sector activity, free marketsand trade liberalization, as the model for economic growth forthe rest of the world. Now when we go to meetings of the G-7 wespeak from a position of credibility about the keys to growth,job creation and competitiveness.
But we should not let the progress that we havemade mask the significant economic challenges that we still face.A key question in the G-7 is how to harness the opportunities ofthe global economy to benefit the least skilled in our owncountries, and the least well off in the global economy. In theUnited States, for example, there are still areas in thiscountry, such as many inner cities, that have not fully benefitedfrom our recent economic progress. We must work to bring peopleinto the economic mainstream and improve education to betterprepare our nation for the future. The G-7 meetings play animportant role in addressing questions of how to make economicgrowth benefit all, both in industrialized countries and thedeveloping world.
The United States is pursuing three majoreconomic objectives at the Denver Summit: one promoting growth inthe G-7; two promoting global financial stability; and finally,promoting growth and reform in developing and transitionaleconomies. I would like to briefly discuss each of these.
Our first objective is to promote growth in theG-7. While the economic performance of in the United States, as Isaid, has been strong, and there is solid growth in many emergingmarkets, for other countries the prospects are not as strong.Japan is just now starting to emerge from five years of sluggisheconomic performance associated with the collapse of the assetprice bubble of the late 1980s, and it faces the challenge ofdealing with fundamental structural problems. Japan and the restof the world have a strong stake in seeing Prime MinisterHashimoto achieve his objective of a strong domestic demand ledrecovery and avoiding an increase in Japanese external surplus ona scale that could hurt global growth and fuel protectionism. Andwe have a major stake in seeing Japan achieve a successfulderegulation program that will open Japan’s markets furtherand promote financial liberalization.
The G-7 will discuss prospects for Europeangrowth and the challenges they face strengthening growth,reducing fiscal deficits, implementing structural reforms toreduce unemployment, and dealing with the issues surrounding asingle currency. The Administration believes the key questionthroughout Europe is how to balance social needs with theeconomic flexibility necessary to compete globally and generatemore jobs.
We will also engage our G-7 partners in adiscussion about the economic and fiscal impact of agingpopulations, an issue that will become increasingly important toall of us. In 1995, in the United States, for example, there were5.2 workers for every retiree. In 2030, there will be only 2.7.There are similar figures throughout the G-7. In Japan, therewere 4.9 workers for every retiree in 1995; in 2030, there willbe 2.2. In Germany, 4.5 in 1995; 2.0 in 2030.
Our second objective at Denver with our G-7partners is to promote global financial stability. As the Mexicanpeso crisis clearly showed, while global integration creates newopportunities, it also creates new risks.
We will advance our plan to reduce risks inglobal financial markets, a process President Clinton began atthe Halifax Summit in 1995. At this summit, we will focus onincreased regulatory cooperation with respect to internationalglobal financial institutions, and establishing and implementingsound supervision for emerging market financial systems.
Our final objective is to promote growth andeconomic reform in developing and transitional countries.Developing countries account for 42 percent of U.S. exports andthose exports are increasing at twice the rate of exports todeveloped countries.
At Denver, we will work toward bringing into theglobal economy a region that stands in stark contrast to globaltrends of economic integration and rising standards of living:Sub-Saharan Africa. An Africa successful in a commitment todemocracy, economic reform, and sustainable development willprovide higher standards of living for its people and be morestable politically and socially. That, in turn, will benefitbusinesses and workers in all countries and our own nationalsecurity. Tomorrow, President Clinton will announce theAdministration’s proposals for promoting growth inSub-Saharan Africa. These are in response to the changes thathave begun in a growing number of countries in the region. Whilethere is no doubt that there are serious problems in manycountries in Africa, there are also many countries making realprogress. Uganda, for example, has emerged from years ofdictatorship, begun to institute free market reforms, and forseveral years has been growing eight to ten percent a year. Ourinitiative will help countries that are helping themselves bymoving from the post-colonial relationship based primarily onbilateral aid to a partnership based on open trade, solidmacroeconomic conditions, and other economic reforms designed toestablish conditions for foreign investment and private sectorgrowth.
At Denver, we will also urge our G-7 partners totake an important step forward on an issue that is critical tothe process of promoting economic reform and greater globalintegration; and that is to work to limit corruption. Our basicview is that all G-7 countries should implement the OECD’sproposals to eliminate the tax deductibility of bribes of foreignofficials and to criminalize such bribery. The IMF and theMultilateral Development Banks should also expand the scope oftheir anti-corruption activities.
Much of what we have been discussing today willbe accomplished by the Bretton Woods Institutions. They play acrucial role in complementing the objectives we are pursuingthrough the G-7.
For the last fifty years, these institutions havehelped developing countries and transitional economies lay thefoundation for market-based economies and open markets, promotinggrowth and integration into the global economy. They have beeninstrumental in the economic renewal of Asia, Latin America, andcentral and eastern Europe, helping foster economic reform anddemocracy which has turned these regions into dynamic emergingmarkets. More specifically, the IMF has played a critical role instabilizing economies around the world, while the World Bank andthe Multilateral Development Banks have helped countriesrestructure their economies, privatize their industries, producea stable and reliable legal system, and invest in education,health, and basic infrastructure -- all key to attracting theflow of private capital in today’s global capital markets,which, in turn, is critical to global growth.
The IFIs have also clearly benefited U.S.businesses and workers. U.S. firms exported more than $25 billionworth of goods and services to the 79 very poor countrieseligible for International Development Agency funds in 1995 androughly $60 billion worth to IDA graduates. Of course, the MDBsalso benefit American businesses and workers directly through theprojects they finance.
These institutions are our most cost-effectivetool to affect economic growth in developing countries. For anannual commitment of $1.2 billion, in addition to our arrears,they lend $46 billion, over which we have enormous influence, andthus the opportunity to shape global growth and economic reform.I only wish that every member of the US Congress could see whatour money buys and how much leverage we gain. Yet, as you know,we are now behind in our payments to them by nearly one billiondollars. We are the world’s largest and richest economy yetwe account for the lion’s share of arrears to themultilateral development banks. There are problems in theseinstitutions, as there are in all institutions. But we have madeprogress in reforming them. By not paying what we owe, we risklosing our leverage in promoting further reforms, as well as ourleverage in how these institutions invest their money.
We helped create these institutions, they haveserved us well for fifty years and now we threaten their health.Where once we led, now we lag behind. That, in turn, threatensour ability to shape these institutions so that they advance ourinterests. I urge members of both parties to work together toobtain the necessary funding to support these criticalinstitutions.
To move forward successfully on all of the issuesI have discussed today -- fostering growth in the G-7, enhancingfinancial stability, promoting growth and economic reform indeveloping and transitional economies -- will require that we besuccessful in the objective I mentioned at the start. We mustbuild a shared understanding among the public and our leaders ofthe importance to our economic well-being and national securityof U.S. international engagement and the policies that flow fromthat engagement. Recently, the nation commemorated the fiftiethanniversary of the introduction of the Marshall Plan. The initialskepticism that met the Marshall Plan is not often rememberedtoday. It took a concerted public education campaign by GeorgeMarshall, President Truman, Senator Arthur Vandenberg and membersof both parties to educate the public about the plan and buildsupport for it. Eventually, the plan passed by a wide majority.We need a similar campaign today.
You certainly understand this. You have puttogether a coalition to increase awareness of the importance ofthe Bretton Woods Institutions to our economy. It is preciselythe type of effort that is necessary to build support for fundingthese institutions. With Congress about to make its decision onfunding for these organizations, all of us -- the Administration,the business community, the labor community and others whounderstand their importance -- should be energized aroundbuilding a better understanding of their contribution and greatersupport for their funding. They are critical to our leadership ina changing and dynamic world.
We have too much at stake to sit on the sidelinesand allow the Bretton Woods Institutions to falter -- or allowour leadership in the world to diminish. Instead, let us fullyfund these institutions, and shape them for the next fifty years.That, in turn, will help promote future global growth, and fostergreater prosperity here at home. Thank you very much.