Thank you. It is an honor to be here to discuss America's role in the new global economy with so many of those who will shape it.
These are remarkable times for the United States. In the last 300 years there has not been a protracted period when the country with the world's greatest GNP has had as high a ratio to the country with the world's second greatest GNP. There has not been a time in the last 300 years when the country with the strongest military forces had as large a ratio to the country with the second largest military forces. And there has not been a time in the last several hundred years when a country has been so powerful as an example around the world, from the English language, to Coca-Cola, to the Internet, as the United States is today.
Our success is not in question. What is today in question is our ability to invest it well. Trade has accounted for one third of the growth of our economy since 1992, yet the United States lacks fast track authority to open new markets and new opportunities overseas. The International Monetary Fund is working to uphold America's stake in stability and growth to Asia, yet we have failed to approve funding to ensure it is well prepared for the crises of tomorrow. The United Nations is today helping to keep the peace and promote our core interests and values around the world, yet we have not paid it what we owe and face the prospect of even losing our vote in the General Assembly.
I'd like to spend my time today talking about America's preeminent position in the global economy and the responsibilities which come with that position -- both in our international policies and in the policies we pursue at home.
I. A Remarkable Moment
The world looks very different than it did at the beginning of this decade, a time when America was said to be in decline. The right things -- employment, real wages, national savings and investment -- are all up. And inflation, crime, the welfare rolls and the budget deficit are all down, indeed, lower than they have been in a generation. It is now clear that America will grow faster in this decade than Japan and Europe. Their four-decade-long story of convergence has ended and America is pulling further ahead.
In short, we are reaping the rewards for sound macroeconomic policies and for working to promote a more open and stable global economy. But as the President has often said, we cannot allow the hum of our growing prosperity to lull us into complacency.
We should not forget that there has been another time in our nation's history when our companies were enjoying unprecedented success at home and abroad; when our elected leaders vowed to shrink government; and when, for all of economy's success, workers were fearful for their security and blamed their insecurity on immigrants and foreign competition. That time was 1927.
There followed a series of catastrophic economic and foreign policy errors that sent the world shuttling toward what were perhaps the darkest years in human history. History does not repeat itself. Any historical analogy between the world today and the world of the 1920s is surely imperfect. But the experience of the late 1920s offers important lessons about the importance of outward-looking international policies at a time of enormous change in global affairs.
Investing today's success in a safe and prosperous tomorrow will require leadership on many fronts. Today let me focus on the aspect that is most central to what we do at Treasury and has acquired such prominence in light of events in Asia -- the promotion of a safe and effective global financial market.
II. The Challenge of Stable World Finance
I am convinced that when historians write the history of the last quarter of the twentieth century, 200 years from now, the end of the Soviet Union and the Cold War will be the second story. The first story will be the rise of market institutions across those countries and across Asia. This has created a situation that is unprecedented in human history: where countries where more than 2 billion people live are growing at rates where standards of living doubled in less than a decade, something never seen in the economic history of the United States or any country in Europe.
There are many reasons for this remarkable progress but I would suggest to you that a very important part has been played by the annual one quarter of one trillion dollars in global capital that has flowed to the developing world -- capital that has been a source of growth in emerging economies as it has been a source of innovation and diversification in the industrialized world.
Our efforts at the international level must begin with this fundamental linkage between strong growth and strong capital flows around the world. Our goal must be to make the global capital market work more effectively as a source of opportunity -- and reduce its capacity to be a source of instability.
Let me say something that will not surprise you. I believe that Congress needs to support the IMF because a well-funded IMF is critical to promoting the interests of American workers and savers and every American's interest in the spread of market-based democracies around the world. I also believe that meeting our commitments to the IMF maximizes our ability to reform both the IMF and the international monetary system to be more effective at promoting growth and stability. Now let me explain why.
Economists and historians will debate the causes of the Asian financial crisis for a long time. What is clear is that the approach the IMF has taken on behalf of the international community -- conditioning financial support on strong domestic policy measures to restore confidence -- is the right one. If we can today talk more positively about most of the region than we would have thought likely even 1 month ago it is in no small part due to the success of this approach.
To be sure, important policy challenges remain: particularly in light of the uncertain policy environment in Indonesia. But without the support the IMF provides in these situations we would now in all likelihood be dealing with a great deal worse: possible debt moratoria in a number of countries, a generalized withdrawal of capital from the developing world and potentially large consequences for our export industries and our financial markets.
Insurance against the spread of the Asian financial crisis would be reason enough for the United States to support the IMF. But there are others:
- the IMF and sister World Bank programs, not just in Asia but worldwide have achieved more trade liberalization than our bilateral or multilateral negotiation have ever achieved.
- IMF finance and conditions have been the primary external mode of support for the dramatic changes in Russia's economy over the last 5 years, changes that have seen it move from a state dominated hyperinflating economy to an economy with stable money and a predominant of Europe;
- the IMF has further promoted US interests by supporting stabilization in Poland and Central Europe, preventing the spread of the Mexican financial crisis through strong support for Argentina and supporting economic reform in the Former Soviet Union.
Every dollar the United States puts into the IMF leverages four of five dollars from the rest of the world. Yet it is does not cost the taxpayer one cent. And it does not add to the federal deficit.
The IMF is indispensable and cheap at the price. That does not mean we should be entirely satisfied with the IMF as it is. But the IMF will not change, and it most certainly will not change in a way that best promotes our core interests and values, if the United States loses its credibility and voice within the institution by failing to make good on its commitments.
The IMF should be more transparent and accountable and more open in its reaching of agreements with countries. It should allow for external evaluation of its procedures and results. And it should work at ways of sharing the information it has with those in the markets.
The IMF should improve its surveillance techniques to focus more on capital flows and the health of key financial institutions. There is a need for better banking system regulation around the world and more effective attempts to intensify the dialogue with countries that -- like Mexico in 1994 or Thailand in 1997 -- are heading for serious difficulty. Without a strong IMF or something very much like it, it is hard to see how we could go about getting that need fulfilled.
Finally, we need to find mechanisms to bail in investors not bail them out -- so we can ensure that policy makers do not confront the choice between uncontrolled chaos and confusion on the one hand and large bailouts on the other -- which is too often the choice they confront today. Again, we do not have all the answers, but it is very difficult to see how such procedures could operate without an international institution with striking resemblance to the IMF.
The content of IMF programs will be a matter of continuing debate and evolution. But if the United States does not contribute to the IMF, we risk losing the opportunity to help shape its approach to economic policy around the world. In short, not to support the IMF today would be a little like canceling one's life insurance when one is already sick. Like any such decision, it might work out just fine. But at a time when markets in many countries are fragile and looking for confidence to the world's only superpower, it is a gamble we should not take.
III. The Broader Challenges of Integration
There is a lesson in these arguments for the other symbols of our international engagement that I mentioned at the beginning of these remarks.
Consider Fast Track. We have an immense amount to gain from the tide of global integration that has been unleashed in these latter years of the 20th century. But, you might say, we have to be in it to win it. If we want other nations to open their markets -- we must open our own. If we want sensitive regions to stabilize, we must allow them to enter the world trading system. That is why we have helped to complete 240 new trade agreements lowering barriers to American goods since 1993. And that is why we are working to achieve closer integration across the Pacific by reinvigorating APEC, and in our own hemisphere through a Free Trade Area for the Americas.
Without fast track these negotiations can proceed much as the early, critical stages of the negotiations for the Uruguay Round of the GATT proceeded. But there are limits to how long this can continue -- and there are costs.
Every year without "fast-track" we put at risk what might be called the Clinton Corollary to the Monroe Doctrine -- the idea that the United States should be the major trading partner of Latin America. Every year we are without it we raise serious questions about our commitment to leading global efforts to bring trade barriers down and nations together. And make no mistake: every year we are without it we reduce the prospect that the international trading regime would increasingly reflect the importance of labor rights and environmental values.
Or consider the UN. As National Security Advisor Berger said last week, what we achieve economically through the IMF and other IFIs we have been able to achieve on so many other fronts with the UN: everything from preventing the diversion of nuclear materials and the spread of disease to agreeing international standards to make the skies safer and protect our environment.
The world needs the UN. And the UN needs reform. By common agreement, we have achieved more substantial change at the UN these past five years than in the entire preceding 45 years. And in the bipartisan agreement negotiated last year we have a three-year plan to continue this reform and build a UN fit for the next century. When we put that agreement at risk -- as occurred last week -- we endanger not just the UN's future. We endanger our capacity to shape it in a way that will continue to promote our core interests and serve our deepest values.
I have concentrated here on our international strategy -- on the critical need for the United States to work actively to shape the arrangements and institutions that will, in turn shape the future 21st century global economy. But these efforts are not separable from what we do here at home.
Global capitalism is coming. No government is powerful enough to halt the flow of information and ideas on the Internet, the movement of millions of dollars across markets at the flick of a switch, or travel of millions of the world's people across borders each day.
The question is what kind of global capitalism we want to build. We do not want a global capitalism that puts capital before every other interest and engages every country in a race to the bottom: a bottom in which governments cannot support labor rights and fair taxes and cannot protect the environment.
For it to be the right kind of capitalism we build and the right kind of global economy we see emerging at the dawn of a new century, we need to work internationally to ensure that capital is not the only factor of production that gets a hearing.
That is why we are working with other countries to promote global cooperation against corporate and legal tax havens. That is why we are working actively in the OECD on the issue of tax competition. It is why we have worked, within the IMF and the other IFIs, and within the UN, to ensure that labor and environmental concerns are given due weight in devising reform programs and sustainable development strategies. And it is why fair labor and environmental standards have played a core role in our bilateral and multilateral trade initiatives.
But we will also have to ensure that this global economy works well for those at home. Just as the GI Bill of Rights was an integral part of the strategy behind the Marshall Plan, just as our interstate highway system was partly the result of an effort to marshal our Cold War defenses -- we must work to make both real and apparent the connection between our pursuit of stability and prosperity abroad and our pursuit of stability and prosperity for every American.
History teaches that internationalism cannot be a goal pursued by elites for its own sake. We must invest in a network of institutions that can realize the opportunities of this new global era and defeat its threats. And we must invest in policies that will give every American the possibility to prosper from the world thus created. Thank you.