HM Treasury News Release
150/98 16 September 1998
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THE WORLD ECONOMY AND THE ROLE FOR GLOBAL POLICY MAKERS
Attached is the text of the Chancellor, Gordon Brown's speech
to the Federation of Bankers Association in Tokyo, Japan
today.
'The World Economy and the Role for Global Policy Makers'
Speech by the Chancellor of the Exchequer to the Federation of
Bankers Association, Tokyo, 16th September 1998
1. Introduction
I want to begin by thanking you for the invitation to speak to
this distinguished audience at this decisive time for the world
economy. I am pleased to have the opportunity to share with you
our analysis of the serious challenges we face, which we must
urgently address both individually and collectively. We have
experienced the opportunities that flow from the new age of
globalization. We have benefited from the accelerating
integration of the international economy. Now we must manage it
though more difficult times.
And I welcome this dialogue with key policy makers in Tokyo -
because Japan has a key role to play not only in ensuring
recovery from present difficulties, but in constructing permanent
structures for stable long term global prosperity.
Japan is a highly valued economic partner across the world. In
Asia, it is of course the largest economic force, accounting for
61 per cent of Asian GDP. In Europe too, we value highly the
strong and successful trade, foreign direct investment and
financial relationships that have grown so rapidly in recent
decades to our mutual benefit. And Britain, in particular, has
very good reason to value our strong relationship with Japan.
Last year, Japanese direct investment in the UK stood at #2.6bn,
nearly 40% of total Japanese investment in the EU.
My visit today, representing the British Government, the current
chair of the G7, reaffirms the partnership between the G7
countries as an indisputable foundation for international
stability and prosperity. Our shared commitment to open trade
and orderly progress among the G7 has been a driving force for
growth - - even in countries that not so long before seemed
likely to be permanently left behind.
Now the trend is stalled, and in some places even reversed - but
I believe that is a temporary setback, not a permanent condition.
I believe that the essential answer to the problems of the moment
is not less globalization - - not new national structures to
separate and isolate economies, but stronger international
structures to make globalization work in harder times as well as
easy ones. Our urgent need is closer co-operation, continuing
dialogue, and an unwavering commitment to open commerce. We must
not let temporary instability put global progress at risk.
As the economic weather turns, as a storm in one region threatens
to spread, there are easy but dangerous shelters - a return to
protectionism, the breakdown of co-operation, the rise of beggar
thy neighbour policies. But this can only yield further
deterioration, not renewed growth.
Protectionism anywhere is a threat to prosperity everywhere.
Closing off national economies only increases national and
international instability. And in Asia and across the world, it
is the poorest, the most vulnerable members of society who suffer
the most from financial crisis and stagnation.
So I come here today to affirm our common resolve to pursue a
strategy of international stability and renewed growth. All
countries must actively work together to sustain domestic demand
and maintain open markets for investment and trade upon which our
shared prosperity depends. What is necessary is closer
international co-operation to achieve stability and sustained
growth, open trade and strengthened financial systems.
That is a point upon which all G7 finance ministers have been
agreed in our dialogue in recent weeks. And I am pleased to be
here to discuss these issues in person with my colleague, Kiichi
Miyazawa, as I will be in the coming weeks with other finance
minister colleagues.
Recent events, coming after the onset of instability in Asia last
year, also emphasise the importance of the work that is being
done in the G7, the IMF and World Bank and other international
groups to consider how to promote sound domestic policy-making
and strengthen the international financial system. The
globalization of the economy and the expansion - and recent
instability - of world capital markets present new challenges for
both emerging markets economies and industrialised countries
alike. The challenge of devising procedures and institutions
which establish internationally agreed rules of the game,
recognising the proper role of government in delivering greater
stability, prosperity and opportunity for all citizens within an
open global economy, is the key challenge which faces us.
So today, I will explain what governments must do now to address
the instability we currently face. And I will set out some of the
key issues that need to be addressed at the annual meetings of
the IMF and World Bank in Washington next month.
2. The world economic situation
Our starting point must be to recognise the strengths which
explain developments in the world economy during the 1990s, but
also the weaknesses in national and international policy-making
that have been exposed by recent events. The two driving forces
for change have been technological change which made possible a
global marketplace and the lowering of barriers to trade and
capital flows as more and more countries wanted to be part of
this global marketplace.
Since the establishment of the GATT in 1947 average industrial
tariffs of developed countries have fallen from nearly 40% to
less than 5% through eight rounds of multilateral trade
liberalisation. The most recent of these - the Uruguay Round -
promises to increase world incomes by some $500bn per year by the
year 2005. The Uruguay Round marked a major reduction in (non-
tariff) trade barriers: agriculture and services were included
in the GATT for the first time. Since then we have seen
Agreements to liberalise markets in Financial Services and
Information Technology. At Birmingham, the G8 pledged to resist
protectionist pressures. At the fiftieth anniversary
celebrations of the GATT in May, world leaders renewed their
commitment to open markets in trade and investment.
At the same time, we witnessed global capital flows on an
unprecedented scale as investors perceived new investment
opportunities in markets which were previously not open to them
or too risky to contemplate. The Asian financial crisis was
preceded by a period characterised by record private capital
inflows into emerging markets and a substantial compression of
spreads across a wide range of emerging market credit
instruments. Net capital flows to developing countries roughly
tripled over the last decade to more than $150 billion a year.
The terms of new bond issues by developing countries improved
significantly in the early 1990s - the average spread at launch
for US dollar denominated issues declined, in retrospect
excessively, from over 400 basis points in 1991 to a low of less
than 200 basis points by 1994 .
This irreversible global economic integration in capital and now
also product markets has been accompanied by impressive growth
in the world economy. During the 1990s, global output has
expanded by on average of over 3 per cent each year, with
developing countries growing at an average of 6% and countries
in Asia by an average of 8%.
But in the last year, the trends which accompanied strong growth
rates in emerging markets have been reversed. The end of last
year saw a collapse in private capital inflows to emerging
markets, leading to dramatic falls in Asian exchange rates and
stock markets - of as much as 80 per cent in some cases.The Asian
crisis countries themselves witnessed a turnaround of $70 billion
in bank lending with net inflows of $40 billion in 1996 turning
to net outflows of over $30 billion in 1997. And unlike in the
case of the Mexico crisis, the reduction in capital flows to the
crisis countries was not offset by a reallocation of flows to
emerging markets in other regions.
The growth performance of these countries has also gone sharply
into reverse - on a scale unprecedented in contemporary economic
history. After strong growth in previous years in Asian
economies, the economic crisis has been a particularly jarring
experience for the citizens of these countries as well as
international policy-makers and investors. And with the growing
realisation that recovery is taking longer to occur than had been
hoped, there has been a significant reassessment of risks to
international lending in emerging markets.
It is right for policy makers to admit that the causes of these
complex events are not yet fully understood and will require
continued analysis. Moreover, the factors explaining the onset
of economic difficulties and loss of investor confidence in each
of the countries affected are different, and it would be wrong
to engage in misleading generalisations.
In Thailand, for example, the first country to be affected, the
immediate cause of the economic downturn was an unsustainable
asset price boom, compounded by macroeconomic policy errors,
which exacerbated the situation, rather than helping to solve it.
In Indonesia and South Korea by contrast, macroeconomic policy
errors were not to blame for the loss of investor confidence,
while recent events in Russia represent a particular combination
of economic and political instability, leading to a loss of
investor confidence and, in turn, macroeconomic breakdown.
However, some common themes do emerge in all affected countries
in Asia. Excessive short--term foreign currency borrowing
occurred because of the perception of an absence of currency risk
due to exchange rate pegs, implicit and explicit government
guarantees and directed lending practices which compounded the
inefficient allocation of capital, as well as weak supervision
and prudential standards.
Borrowing was in many cases used to finance investment in
economically unsound projects and governance in the corporate and
financial sectors was often weak. In some cases, currencies
became uncompetitive, resulting in large current account
deficits. Moreover, when the financial crisis hit, fiscal policy
was, in retrospect, kept too tight. However underlying all these
factors and at their root, was a lack of transparency in economic
statistics and policy making which led to confusion and dented
market confidence.
In Asia, a period of adjustment was inevitable. What is striking
is, first, that the scale of this adjustment should be so severe
- as evidenced by the falls in equity and currency markets and
in output in many Asian economies. Secondly, these financial
pressures have spread across emerging markets from Asia - to
Eastern Europe and recently Latin America.
In hindsight it is clear that investors were not making fully
prudent assessments of the risk associated with their lending
decisions. Last year we witnessed the first decline in private
capital flows to emerging markets this decade, and a general
reassessment of risk. The widening of spreads in emerging markets
has continued following the Russia crisis, rising from around 600
basis points to 1600 basis points.
Recently we have seen a general flight to quality and safe-haven
buying by increasingly risk-averse global investors.
While some sharpening of risk management may bring benefits in
the medium term, it is concerning that even some of the best
performers amongst emerging markets are now being been caught up
in the fray. Even those with sound macro-economic fundamentals,
such as Hong Kong, have not been immune from short-term
speculative attacks.
These developments illustrate why it is so important that we take
extremely seriously the sort of correction we are currently
witnessing. Industrialised economies have felt the impact of
falling demand in emerging markets. The general increase in
investor risk-aversion has also led to volatility in the major
world markets. In the US and Europe, stock markets have fallen
significantly, while bond prices have been pushed higher. With
inflation low or falling in many parts of the world and with the
slowdown in demand in a number of economies, especially emerging
markets, the balance of risk in the world economy has shifted,
as the statement by G7 countries and central bank governors
earlier this week made clear .
3. Stability in the world economy
My primary concern today is how international co-operation can
help to deliver sustainable growth, open trade and the proper
functioning of banking systems.
Economic stability
The first priority for Asia is to restore a platform of economic
stability on which growth depends. The economic situation in
much of Asia remains difficult, as the slowdown is turning out
to be greater than expected. But progress has been made in
restoring economic stability in some of the countries directly
affected by the crisis, through full and timely implementation
of the necessary reforms, in conjunction with the IMF. In both
Thailand and Korea, we have seen significant currency
appreciation this year, and this has allowed interest rates to
be reduced to below pre-crisis levels. Moreover, the latest
trade data show that export volumes grew rapidly in the first
quarter. I also want to mention the vital contribution which
China is making to global financial stability. Its policy of
maintaining a stable exchange rate is an important and
responsible one in difficult times.
With the continued pursuit of transparent and credible
policies, we can see further signs of recovery. Macroeconomic
policy should now be focussed, on creating the right conditions
to support domestic demand and export-led growth. Structural
reforms, particularly in the financial sector, must also
continue alongside action to put in place adequate social safety
nets. Since the beginning of the crisis, I have argued strongly
that more emphasis needs to be placed on social spending to
limit the impact on the most vulnerable in society.
As our recent statement made clear, G7 countries, as well as the
IMF and the World Bank, stand ready to support countries in all
emerging markets, which are prepared to embark on a course of
strong and sound policy action. Of course, for the IMF to do
this and be ready to help in times of crisis, it needs adequate
resources now. I am glad to say that the British Government has
taken action to play its part in doing this, and I urge others
to do the same as a matter of urgency.
In Russia, economic progress can only be secured if there is
political stability and a genuine commitment to both
stabilisation and structural reform. As the G7 officials
discussed at their meeting in London earlier this week, the
international community remains ready to cooperate further with
Russia in support of sustained efforts towards stabilisation and
reform.
Inevitably, trade flows will change as the world adjusts to the
recent swings in capital flows. In the Asian crisis countries,
we have seen significant improvements in trade balances, with a
combined annualised surplus of $80 billion in the first five
months of 1998, compared with a deficit of around $40 billion
annualised in the same period last year.
But the necessary shift from trade deficit to surplus in
emerging markets can either be achieved by domestic stagnation
or export-led growth. It is in our shared interests to achieve
the latter, but this is only possible if the industrialised
world provides the engine for that growth by sustaining demand
in the world economy. All industrialised countries - in Europe
and Japan as well as North America- must bear their fair share
of the adjustment. No one country can either escape its
responsibility to play its part in sustaining global demand or
be required to bear the whole burden and thereby encourage
protectionist sentiment.
We must demonstrate both that we have learned the lessons of
history, and that we have adapted our approach to the modern
global economy of the late 1990s. We are not going to bury our
heads in the sand in the face of instability as policy-makers
have done before. Equally, we must guard against repeating the
precipitate policy mistakes which, for example, the UK made
following the 1987 stock market episode when policy was kept too
loose despite domestic inflationary pressures.
This is a crucially important task, in particular for monetary
policy makers. I know from my conversations with Eddie George,
the Governor of the Bank of England that central bank Governors
in the industrialised world are fully focussed, as Monday's
statement by G7 Finance Ministers and Central Bank Governors
demonstrated, on the need to maintain demand growth in the
current global environment.
In the UK, as result of the decisive action the Government has
taken over the past year in monetary and fiscal policy, the UK
macroeconomic fundamentals are now sound and Britain is now back
on track to achieve a return to stability as the platform for
sustained growth. Recent evidence of reductions in inflation and
earnings growth is encouraging. But further progress is
essential, if we are to maintain an economy which combines
sustainable growth and low inflation.
Prospects for sustainable growth with low inflation continue to
depend on responsible wage behaviour in both the private and
public sectors, where pay must be related to what the economy
can afford. It would be the worst of short-termism to pay
ourselves more today at the cost of higher interest rates
tomorrow and the missed growth and job opportunities that would
inevitably follow.
It is vital also that measures are taken to put the Japanese
economy back on the path of sustainable growth. Japan has a
particularly important role to play as the second largest
economy in the world, by far the largest economy in the Asia
region, and a key export market for the crisis economies. Japan
is clearly not responsible for the Asia crisis. But Japan can
be part of the solution. That means using macroeconomic policy
tools to boost domestic demand and restore business and consumer
confidence. The G7 has welcomed the efforts you have been
making and the fiscal package you announced in August. The world
economy needs an early return to growth in Japan and decisive
action to that end.
Trade policy
Vigilance is required not just in domestic macroeconomic policy
but also in trade policy. We must guard against the risk that
worries over cheap imports from Asia will encourage misguided
calls for a retreat into protectionism.
The world that made this protectionist mistake earlier in the
twentieth century, in the decades before the Bretton Woods
institutions were created, must not make it again, on the eve of
the twenty first century.
It is therefore critical that we resist these pressures and
stand by the pledges we have made at Birmingham, ASEM2 and the
OECD and WTO Ministerial meetings to maintain the liberalisation
of international trade and investment.
The successful completion of the WTO financial services
negotiations in December of last year was a tribute to all the
participants. We must not allow current market difficulties to
stand in the way of further trade liberalisation and
opportunities for growth.
I want to give you three further examples of how the G7 and the
UK can signal its commitment to promoting free trade and
resisting protection.
First, we need to move quickly to a new round of trade talks
that will take multilateral liberalisation forward, not
backwards. We are therefore fully committed to European
Commission proposals for an early start to the Millennium Round
of trade negotiations with a fully comprehensive liberalising
agenda covering Agriculture, Services, Competition and
Investment. It is in the interests of everyone to work hard to
make sure these talks deliver. These talks should start in the
year 2000. I propose that we work with the WTO to ensure that
preparations for negotiations start now to ensure a prompt start
to the Round. We should also consider whether there is any case
for bringing that date forward.
Second, anti-dumping. Arguably the misuse of anti-dumping
measures as a way of protecting domestic markets is the biggest
current threat to international competition. We need to be more
watchful than ever in current circumstances. Recently, the UK
has strongly opposed the imposition of measures against amongst
others China and Indonesia in the case of unbleached cotton. And
we will continue to do so in similar cases.
Third, we shall be looking critically at our own rules and
measures. For example, The Voluntary Restraint Agreement on
Japanese cars exports to the UK expire at the latest at the end
of 1999. The UK is and will remain firmly committed to the
liberalisation of the UK and EU car markets.
Financial stability
The third area where vigilance is essential is in banking and
other financial supervision and regulation. The G7 can take the
lead in maintaining the momentum of global domestic demand, and
safeguarding the openness of the global trading system. But if
we are rapidly to restore investor confidence, and emerge from
the current turbulent period stronger than we entered, it is
essential that countries facing financial pressures take the
urgent and necessary steps to strengthen their own national
financial systems, in co-operation with the private sector and
the international community. This will involve difficult
decisions to tackle corporate and financial sector weaknesses,
and to develop better systems of supervision and regulation.
Of course it is not just emerging market economies that need to
be vigilant when it comes to financial stability. An equal
responsibility lies with the G7 countries. In London, the home
of the world's largest international financial centre, we take
our responsibility to ensure open, transparent, orderly markets
very seriously. I know the governments and regulators of other
major international financial centres do so too.
In London, market participants have absorbed the impact of
recent instability without serious difficulty. Of course we are
not complacent. The Financial Services Authority - the new
universal regulator of banks, securities and insurance - is
monitoring the situation closely.
Here in Japan, the restoration of financial stability is a top
priority in order to ensure that efforts to stimulate the
economy can be effective. I hope financial reform legislation
can be passed quickly and look forward to the implementation of
these measures in a speedy and decisive manner.
It is vital that a solution is found and that confidence is
restored. This is essential to put the economy on a sound
footing. Continuing financial sector instability will make
Japan's economic recovery much more difficult by hampering
efforts to stimulate domestic demand. A transparent, well-
regulated and reinvigorated financial sector will play a large
role in putting the Japanese economy back on its upwards
trajectory. The same applies throughout Asia.
The UK fully supports the efforts which you are making, and
recognises the importance of co-operation amongst supervisory
authorities. For many years there were close links between
banking supervisors in the Bank of England and their colleagues
in the Japanese Ministry of Finance and the Bank of Japan. Both
in Japan and in the UK, this year has seen the establishment of
new universal financial regulators: the Japanese Financial
Supervisory Agency and the UK Financial Services Authority. In
the months since our two FSAs were created they have already
built up strong links, reflected in day to day contact on
individual issues.
But I believe we can and should do more to enhance mutual
understanding and co-operation. One of the best ways of doing
this is for supervisors from one organisation to spend time at
the other. As a first step, I can announce that next month
supervisors from the Japanese FSA will go to the UK FSA for an
intensive exposure to the way that UK undertakes supervision.
And we are planning a similar visit to Japan by UK supervisors
as well as longer secondments in both directions.
We also need enhanced and targeted surveillance of financial
sector stability by the IMF and the World Bank working in close
co-operation. And greater co-operation between the IFIs and
the international regulatory organisations (Basle, IOSCO, IAIS)
is also important. The Basle liaison committee, which combines
representatives of developed and emerging markets and of the IMF
and World Bank, is a good example of this sort of co-operation.
The G7 is also considering with the IMF and World Bank how to
improve co-operation between the two institutions in the areas
of financial stability and surveillance including transparency
in both public and private sectors, and will come forward with
proposals.
4. Strengthening the financial architecture
I have set out the action which the G7 together must take to
counter the threat to prosperity and jobs posed by this short-
term instability. But this instability should not prevent
consideration of the long-term implications of the recent crisis
for both domestic policy-making and the institutions of the
global economic system - sometimes referred to as the financial
architecture.
We start by recognising that the global economy has changed the
environment for domestic policy making. In the global market
place national governments, dependent for investment funds on
the day to day confidence of international investors, must
pursue consistent and credible policies that guarantee
stability. Rewards for doing well have been substantial. But
punishment for those countries who perform badly is now more
instantaneous and more severe than in the past, with the risk of
contagion as investors become more risk averse.
This can be seen from the way in which the Asian crisis, and now
the Russian crisis, came unexpectedly - the speed with which the
capital markets have moved, with sentiment swinging from
excessive optimism about prospects to a deep pessimism, the
accompanying volatility of exchange rates and the way in which
deep-seated flaws in financial systems in emerging markets have
been exposed.
Despite these changes, we are still operating with essentially
the same institutional structure that was set up over 50 years
ago when the world was facing a very different set of problems.
The Bretton Woods twins, the IMF and the World Bank, were
designed to help the world recover from a devastating World War.
The World Bank was given the task of reconstruction and
development, the IMF was to look after payments imbalances, and
particularly prevent the beggar-my-neighbour devaluations.
Later the Bank for International Settlements was formed and
developed a limited role in bringing together the Central Banks
of different parts of the world.
We need to examine how we can reform this architecture to
improve the workings of the global economy and facilitate both
trade and capital flows. We must learn from what we have done
right over the last 50 years but also from the problems that
have emerged most recently in the current crisis. So let me
start by setting out the key issues that need to be on the
agenda of the meetings in Washington early in October.
There are those who argue that instability is the inevitable
result of free capital movements across national boundaries,
while others blame speculators who exploit capital mobility for
short-term profit. What is clear is that short-term capital
flows can be destabilising and can disrupt markets when
investors are insufficiently informed and educated and
institutions lack credibility.
So one part of the answer to the uncertainty and
unpredictability of ever more rapid financial flows is to
introduce new disciplines in economic policymaking: clear long-
term policy objectives, the certainty and predictability of
well-understood procedural rules for monetary and fiscal policy,
and an openness that keeps markets properly informed and ensures
that objectives and institutions are seen to be credible.
Greater openness in procedures as well as in the dissemination
of information will provide markets with a better understanding
of fiscal and monetary policy, reduce the likelihood of market
corrections by revealing potential weaknesses at an early stage,
and encourage governments to develop more open policy making
processes and internationally recognized yardsticks for
assessing fiscal policy.
I welcome the progress made in agreeing the Code of Good
Practice on fiscal transparency that the UK originally proposed
a year ago in Hong Kong. The Fiscal code has now been agreed.
The IMF already plans to issue a manual to provide more guidance
on how to construct and present fiscal policies.
The issue now is how the Code should be used in practice. I
believe that it should be disseminated widely to extend good
fiscal practice throughout the world, and that countries should
be required to report on how they are applying it. The IMF
should report on its implementation as part of Article IV
consultations and that it should become a key component of
programme conditionality.
But the fact that, in some Asian countries the difficulties
began not in macroeconomic policy but in inadequate financial
regulation shows why it is right for us to extend the principle
of transparency and new discipline in policy making from fiscal
policy into monetary and financial information and procedures
and corporate governance. That is why I have proposed that we
supplement the code on fiscal transparency by asking the IMF to
prepare a code of good practice on financial and monetary
policy, in consultation with the world bank and the BIS and
asking the OECD to draw up a Code of Good practice in corporate
governance.
The monetary and financial code will need to ensure that
countries provide a complete picture of usable central bank
reserves, including any forward liabilities, foreign currency
liabilities of the commercial banks and indicators of the health
of the financial sectors. We must also find ways of improving
and speeding up publication of data on international banking
flows.
These Codes of Conduct, policed by the IMF, can help private
sector lenders and investors when they make country risk
assessments, enable them to make sound lending decisions country
by country and so reduce the tendency to brand all emerging
economies in the same way. We also need to do more to encourage
- or even require - prompt publication of IMF Press information
notices and the conclusions of Article IV missions.
Sound macroeconomic policy, open and credible institutions and
procedures and a healthy financial sector are essential pre-
conditions for orderly capital account liberalisation. The
recent turbulence in global financial markets has demonstrated
the importance of ensuring that all the necessary pre-conditions
have been met, sequenced in the appropriate way.
I continue to favour an approach to capital account
liberalisation which is bold in concept, but cautious in
implementation. Bold in concept because open capital markets
allow efficient use of capital and the transfer of technology
and expertise, and have brought substantial benefits to
industrial and developing economies alike in recent decades.
But the need for caution in implementation is now clearer, and
more important, than ever. Orderly liberalisation will require
sound banking and financial systems and appropriate
macroeconomic policies. Without these important pre-conditions
being in place, countries will remain vulnerable to capital
market volatility. I believe that this work must also be
extended, working with the IMF, to deepen our understanding of
the pre-conditions for a successful capital market
liberalisation by emerging market economies. We need to make
clear the risks of moving too fast if these pre-conditions are
not in place. Equally, countries that seize upon unilateral
actions as a substitute for necessary reform and co-operation
damage the prospects for their own economies and the world
system.
Finally, given the key role that IMF plays and continues to
play, we must now find ways to improve the IMF's own
accountability to ensure that it performs its responsibilities
in an open and transparent way that enhances public confidence.
We need a systematic approach to internal and external
evaluation of the Fund's own activities, including a new full-
time evaluation unit, inside the IMF but reporting directly to
the IMF's shareholders, and in public, on its performance.
We will return to these and other long-term issues of crisis
prevention and alleviation in Washington in three weeks time.
5. Conclusion
Let me say in conclusion that in the new global economy, neither
the United Kingdom, Japan nor any other country can afford the
easy illusion of isolationism. We are all part and ultimately
product of events happening in our global economy. Never in all
of economic history have so many depended so much on genuine
economic co-operation among the leading industrialized nations.
We must never forget that the path of open trade and open
capital markets that we have travelled in the last 30 or 40
years has brought unprecedented growth, greater opportunity and
a better life for people across the world. No sensible policy-
maker wants to turn the clock back to protectionism and
insularity. But to move forward, we need active governments,
acting together through reformed international institutions.
The questions are sophisticated and technical. But we must
never forget that they are also human questions. They involve
the living standards of people as well as the level of
finanacial transactions. They involve not only the value of
capital or trade or investment, but the deepest values of our
societies.
We must make markets work - - in tough times as well as easy
ones. That is the burden and honour of all of us who lead in
the era of globalization. I believe we can meet the authentic
problems of our times with a vision, an intelligence, and an
energy which will make the world economy stronger, more stable,
and more prosperous - - ultimately more open not just to the
free flow of goods, but to the rising tide of people's
aspirations everywhere.
# = pounds sterling