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Public Papers - 1990 - September

Remarks at the Annual Meeting of the Boards of Governors of the International Monetary Fund and World Bank Group

1990-09-25

Thank you very much, and my special thanks to my good friend, our Secretary of the Treasury, Nick Brady, for those kind words and for the outstanding job that he's doing as our Secretary. To Chairman Saitoti and Mr. Camdessus and my old friend and former seatmate on the Ways and Means Committee, Barber Conable, it really is a pleasure to be back with you this year to welcome you all to Washington for this very important work. And it's a particular pleasure today to welcome the new members here from Bulgaria, the Czech and Slovak Republic, and Namibia, and of course, the special invitees from the Soviet Union. Your presence here reminds us all of how events of the past year are producing a new partnership of nations -- a fundamental, indeed, inspiring change in the world's political and economic order.

The movement toward democratic rule, already strong throughout the 1980's, accelerated during what I call the Revolution of '89. The rights of the individual have been reaffirmed with greater adherence to the rule of law. The freedom to choose political leaders, and even political systems, has triumphed in countries that only a year ago were ruled by single-party regimes. And hand in hand, new economic freedom has begun to emerge as well. Today leaders around the world are turning to market forces to meet the needs of their people, and of course -- and I understand this -- change has not come easily. But as I said last year at this same meeting, the jury is no longer out -- history has decided.

And today the results of that global experiment are unmistakable. Today the consensus is this: Governments by themselves cannot deliver prosperity. Rather, the key to economic growth is setting individuals free -- free to take risks, free to make choices, free to use their initiative and their abilities in the marketplace. We are seeing this, for example, in the restoration of private ownership in countries where the state once controlled every single aspect of economic life. And for efficient production, private ownership is still the most powerful incentive known to man.

Matched by the rejuvenation of markets, the ability to make individual economic choices is the fastest, most effective way to achieve and sustain broad-based economic growth. And that is why leaders everywhere are undertaking difficult economic reforms; building stronger, more versatile private sectors; improving efficiency; and making government decisionmaking much more rational.

That process takes time. Economic adjustment is often difficult. And in recent months, a new challenge has arisen which could hinder this process of change, and of course, I'm talking about Iraq's illegal and unprovoked aggression against the sovereign nation of Kuwait. Clearly, the greatest harm is to Kuwait and its people. When the Saudi border was opened, Kuwait's newest refugees brought fresh tales of cruelty and horror inflicted on the Kuwaiti people and foreign nationals as well by the occupying forces of Saddam Hussein.

And today other countries, already facing painful economic and political transformations, must now deal with additional hardships. Serious challenges have emerged for countries rocked by unpredictable tides in the flow of oil, trade, displaced workers, and -- God bless them -- the refugees. This staggering burden, which is pressing upon these most seriously affected countries, calls for a generous response from the world community. Toward that end, we have already begun to mobilize financial resources for the frontline states to ensure responsible sharing among creditors.

The initial response to that effort has been impressive. Now, in order to transform commitments into concrete contributions, I am pleased to announce the formation of a Gulf crisis financial coordination group under the chairmanship of Secretary Nicholas Brady, our Secretary of the Treasury, with the aim of achieving effective, timely, and sustained financial support to these most seriously affected countries.

But let us not forget an even larger group of countries represented here will suffer from higher oil prices and other economic dislocations. While world attention has rightly focused on those countries closest to the situation and bearing the heaviest economic burden, I can tell you that the rest of the world is certainly not forgotten and never will be.

This gathering here of world financial leaders gives us an opportunity to discuss how we can work together to address the special financial burden of this crisis, and do so in a way that will sustain the dramatic worldwide transition to free markets. The IMF and World Bank, given their central role in the world economy, are key to helping all of us through this situation by providing a combination of policy advice and financial assistance. The political leadership of the U.N. must be matched by the economic leadership of the IMF and the World Bank.

Secretary Brady will be making some specific suggestions in his remarks for possible means of utilizing current IMF and World Bank programs more effectively. But let me say it again: We are determined not to allow the brutal behavior of one aggressor to undermine the historic process of democratic change or to derail the movement towards market-oriented economic systems.

Let me continue more broadly with a vision of the role of the United States and of a world economy we can all share.

First, we believe that the United States should contribute to economic stability and growth. And perhaps the greatest contribution that the United States can make to the health of the international economy is to get our own house in order. Our budget deficit must be brought under control and reduced.

And second, the United States is strongly committed to promoting development and growth in the newly emerging democracies of Latin America, Central and Eastern Europe, Africa, and Asia. We're working in all four regions to ease debt burdens under the Brady plan. In this hemisphere, where debt overhang holds back progress -- impedes progress -- we announced the Enterprise for the Americas Initiative to promote economic growth by expanding trade and investment, to reduce debt owed to the United States Government, and to provide funds for needed local environmental projects. In Eastern Europe, where massive restructuring is needed, we are working with other nations to provide billions of dollars in assistance to the newly emerging democracies. And in Africa, where undevelopment hangs on so stubbornly, many of the lowest income countries have already benefited from reductions in debt owed to the United States.

Third, the United States is committed to the central role of the IMF and World Bank in helping bring about economic reforms. Reform efforts can only be successful if countries carry through on their responsibilities; and that means regulatory reform and privatization, sound macroeconomic and structural policies, and open borders for trade and investment.

This is why your work here in Washington this week is so important. For more than 40 years, the Fund and the Bank have quietly been enlisting the talents and the energies of the developed and developing world in a global struggle against poverty. And today, in a world where ideology no longer confronts and big-power blocs no longer divide, the Bank and the Fund have become paradigms of international cooperation. Indeed, we especially appreciate your efforts in carrying out a study of the Soviet economy that is unprecedented in its scope. This study will produce recommendations for economic, financial, and structural reform.

As the coming week unfolds, part of your task will also be to plan for the future of your two great institutions. And I pledge the continued support of the United States for a World Bank and IMF which so clearly advance our common struggle to improve the quality of life for all people everywhere. For this reason, we strongly support the IMF quota increase and the strengthening of the IMF arrears policy. And we would also like to challenge both institutions to intensify their focus on building dynamic private sectors in member countries, one of the most important stimulants for energizing these new market economies.

And we would also ask the World Bank to place a high priority in three other issues vital to sustain growth. First is protecting the environment. As I said here last year, environmental destruction knows no borders. Second, eradicating poverty must continue to be a central mission of the Bank. And third, we strongly support greater efforts to integrate women into the development process.

Finally, as we plan for the future, we must work together for success in another important international economic institution: the GATT. As we meet today, less than 70 days remain in the 4-year Uruguay round of global trade talks. Lasting reform is essential for developed and developing countries alike, and it's the key to a successful round which establishes new rules and opportunities for all countries. These negotiations are one of the world's greatest economic opportunities of the decade, but much remains to be done.

The round is not just a trade issue: it is a growth issue. And it's not just an exercise for bureaucrats in Geneva. The trade talks are the last train leaving the station, and countries throughout the world must jump aboard. It can be the engine of economic growth that carries us into the 21st century.

The round promises to remove barriers in four crucial areas, areas untouched in previous rounds: services, investment, intellectual property, and agriculture. As a matter of fact, agriculture reform remains a major stumbling block. Indeed, it threatens to bring down the rest of the round. We must let farmers compete with farmers, instead of farmers competing with the deep pockets of government treasuries. We need a successful resolution of the agricultural issues if we are to have an agreement.

If countries around the globe don't muster the political courage to face these tough issues in the time remaining, we will forfeit new markets for our businesses, impose higher prices on our consumers, and forgo new jobs and higher incomes for workers in all countries. Worst of all, we will endanger a vital, proven framework of international cooperation. A collapse of the round will inevitably encourage increased protectionist pressure and political instability; and that, frankly, is something that we can ill afford as we forge a new partnership of nations against aggression in the Persian Gulf.

I urge you to work actively within your governments to ensure success, and I urge my counterparts around the world -- as we did at the Houston economic summit -- to instruct your negotiators to bring all the components of the Uruguay round to a successful conclusion by December.

In all these efforts, there is so much at stake. Almost 35 years ago, President Eisenhower first appeared at an IMF-World Bank meeting, and he spoke of the lessons that he learned while waging a war that brought together so many different soldiers from so many different lands. Ike noted, as I do now, that there were people in the audience who were our allies in that grand effort. And he said: ``We early found one thing. Without the heart, without the enthusiasm for the cause in which we were working, no cooperation was possible. With that enthusiasm, subordinating all else to the advancement of the cause, cooperation was easy.''

As the unity of the nations has demonstrated in the past 2 months, the worldwide enthusiasm for today's noble cause, the cause I've described as a new partnership of nations, is not only unprecedented but truly remarkable. And I urge you to seize that enthusiasm in your meetings this week, to forge the new levels of cooperation needed to succeed.

Thank you very much for coming to Washington, DC. I hope you feel welcome, because you are. Good luck this week in the meetings ahead, and God speed you in your travels home. Thank you all very, very much.

Note: President Bush spoke at 3:06 p.m. in the ballroom of the Sheraton Washington Hotel. In his remarks, he referred to George Saitoti, Chairman of the International Monetary Fund and the World Bank Group; Michel Camdessus, Managing Director and Chairman of the Executive Board of the International Monetary Fund; Barber B. Conable, President of the World Bank Group; and President Saddam Hussein of Iraq.

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