Summary Proceedings of the Forty Fourth Annual Meeting of the Board of Governors 1989

Address by the President of the United States 1

International Monetary Fund. Secretary's Department
Published Date:
November 1989
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George Bush

We in the United States are keenly aware of the importance of these annual gatherings, which drive the work of all of us in maintaining a strong international economic and financial system.

This is my first opportunity to speak to you as President. But I have followed the activities of the International Monetary Fund and the World Bank throughout my years of public service. I have visited many of your homelands, and seen firsthand the problems created by inadequate growth and development—problems that your two distinguished institutions are working to solve.

We have witnessed a dramatic shift over the past few years in the debate over how to achieve sustained growth and development.

All across the world, there has been an almost simultaneous rediscovery of the power created when individuals are given the freedom to act in their own best interests.

True, we’re here today mainly to discuss economic freedom. But make no mistake. In the end, both economic freedom—and political freedom—are essential and inseparable companions on the road to national prosperity.

The jury is no longer out. Look at the two economic systems and see who has prospered and who has struggled. Let’s put an end to this economic experiment. Because history has decided.

It is not climate, natural resources, or cultural traditions that make the difference. I said it in my inaugural address: “We know what works: freedom works. We know how to secure a more just and prosperous life for man on earth: through free markets, free speech, free elections, and the exercise of free will unhampered by the state.”

In Latin America, Africa, and Mexico, courageous leaders are turning away from state control of their economies. Economic restructuring and deregulation are opening the door to private initiative. And already they are seeing results.

Even more stunning is the transformation in thinking in the communist countries—in both the Soviet Union and in Eastern Europe.

During our recent travels in Poland and Hungary, we were impressed by the people. But we were also impressed by the almost universal acceptance of the free market as the best hope—indeed, the only hope—for reversing the economic fortunes of these two proud countries.

And we welcome the efforts of the Soviet Union to liberalize and decentralize their economy. I have said many times that I want to see perestroika succeed. A more open and humane Soviet Union can only be in the interest of the West. And as we see the evidence of that reform, we can match it with steps of our own.

The rediscovery of these basic truths in the East has been matched by a recommitment to them in the West. Today the members of the European Community are dedicated to eliminating internal barriers to economic activity by the end of 1992. And, Europe’s leaders assure me that this will not be at the cost of new external barriers to trade with the EC.

The Peruvian economist, Hernando de Soto, has helped us understand a worldwide economic phenomenon. By walking the streets of Lima, not analyzing official statistics, he found that the poor of Latin America—who have never read Jefferson or Adam Smith—ran their affairs democratically, outside the formal economy, organizing their private, parallel economy in a free and unregulated manner.

De Soto’s great contribution has been to point out what, in retrospect, may seem obvious: people everywhere want the same things. And when left alone by government, people everywhere organize their lives in remarkably similar ways.

De Soto’s prescription offers a clear and promising alternative to economic stagnation in Latin America and other parts of the world. Governments must bring the “informal” workers into the regular economy—and then get out of the way, and let individual enterprise flourish.

We each must do our part. The industrial countries have a special responsibility. We must coordinate economic policies to help provide sustained growth with low inflation, reduced trade imbalances, and greater stability in exchange markets.

We in the United States are working especially hard to reduce the federal budget deficit, and to increase our national savings rate.

All our nations have a responsibility to ensure a fair and open trading system. We have a tremendous opportunity to advance that cause now, by making a success of the all-important Uruguay Round of trade negotiations.

Making the political commitments necessary to ensure a success will not be easy, but we must strengthen the GATT, and allow our markets to open in a mutual, step-by-step fashion.

As we seek to extend and expand growth in the world economy, the debt problems faced by developing countries are central to the agendas of the IMF and the World Bank. Over the past year, the international community’s strengthened approach to these problems has provided new hope for debtor nations.

The U.S. Secretary of the Treasury, Nick Brady, has helped direct the focus on debt reduction as a complement to continued new lending—bringing developing nations and commercial banks back to where they belong: the negotiating table.

Quick action by both the IMF and the World Bank has given this new strategy vital support. By making clear the terms under which they will support the reduction of debt burdens—and by working with countries to develop the necessary economic reform programs—these institutions have made it possible to reduce debt burdens and provide a solid foundation for growth.

Thanks to these initiatives, Mexico reached an agreement with its creditor banks enabling Mexico to make enormous progress in reducing its debt burden. It also helped restore almost instantly confidence in the Mexican economy which has already resulted in a return of capital and new foreign investment.

This agreement underscores the benefits other debtor countries stand to realize from this approach. Mexico’s savings from this package will free resources for productive use in the economy, leading to increased investment and improved growth.

What Mexico has done is not a miracle. It is a product of hard work and sustained commitment.

The strengthened debt strategy is flexible enough to address the unique needs of each country. But the strategy will not work without sound economic policies in debtor countries.

Inefficient, unrealistic, and growth-stifling policies must go. Benefits are available to a broad range of other countries that pursue economic reforms. Several are now actively engaged with the IMF and the World Bank, and with the banking community.

Commercial banks have a special role in making this process work and must follow through on efforts made with Mexico and the Philippines, and broaden their efforts with other countries.

We encourage these steps not as self-sacrifice—but as self-interest. True, success not only will help the debtor nations, but it will also strengthen the banks, by putting their portfolios on a sounder footing.

One of the lessons of the 1980s, especially the debt crisis, is that we’re all in this together. And when we cooperate, we all come out winners.

The IMF and the World Bank are at the crossroads of our cooperative efforts. The IMF must continue to foster the sound economic policies necessary for sustained growth. As part of that responsibility, the Fund has assumed an important and welcome role in the strengthened debt strategy.

The United States recognizes that the IMF must have adequate resources to fulfill its critical role. We will continue to work with other members in the hope of reaching a decision on quotas by the end of the year. The United States has always supported the IMF and will continue to do so.

We all look to the World Bank to help build the foundation for a future global prosperity that reaches all peoples. Its efforts to promote structural reform and development are crucial to resolving debt problems. The Bank’s decisions to take on new responsibilities on the debt front are welcome.

Also, to address the significant problems of the poorest countries, the International Development Association was established and will continue to have the support of the United States.

We have also learned, as I emphasized on Monday at the UN, and last summer at the Paris summit, that environmental destruction knows no borders. To make growth truly sustainable, we must weigh environmental considerations more heavily as we make economic decisions. We must also find ways to strengthen our environmental and developmental efforts, through innovative thinking such as “debt for nature transactions.”

Over the years—as we’ve come to understand the effect of environmental destruction on the long-term growth of developing countries—the World Bank has increased the priority it assigns to environmental concerns. We applaud those efforts. But there is more to be done. We need to work more cooperatively to develop constructive solutions to global warming, including measures to promote energy efficiency and conservation and greater protection of forest resources.

In addressing the challenges of the 1980s, we have come to a deeper understanding of the importance of cooperating as a community of nations to address common problems. I can think of no better current example than the need to work together to deal with international drug trafficking and money laundering. It is a worldwide problem. Drug money undermines honest businesses, corrupts political institutions, and even threatens the security of nations. To conceal their obscene profits, drug barons must wash their money by cycling it through financial institutions and illegitimate shell corporations.

The United States renews its call upon all countries to ratify the United Nations Vienna Convention, and make money laundering a criminal and extraditable offense. We need tough measures to track down and confiscate the profits of drug-related crime. I am encouraged by the G-7 democracies’ interest in a coordinated response to the money laundering menace. I urge everyone to join with us to explore new ways to stop money laundering in its tracks.

And there may be no greater opportunity before us all today than the challenge of Poland and, on a broader landscape, the entire Eastern Europe—where countries are in the throes of dramatic political and economic change.

The United States and its international partners have already undertaken new initiatives toward Poland. But now, in light of clearly growing needs, the recent accession of a Solidarity-led government, and our self-evident stake in its success, we must do more. We understand the Polish Government has under consideration a bold plan for economic recovery.

I call on the IMF and the World Bank to work rapidly with Poland to develop such a program and ensure its successful implementation. For its part, the United States intends to be out in front of this effort, to take advantage of this historic development and to ensure its success.

Today our mutual efforts to improve global growth, to ease the burdens of developing country indebtedness, and to open up markets for trade have demonstrated anew that progress is best achieved by facing pressing issues together.

This is a lesson we must carry with us into the 1990s if we are to pass on to future generations a global economy that is strong and resilient and able to provide for the aspirations of the citizens of all our countries.

Thank you very much for your hard work, thank you for your service, thank you for your commitment. God bless you and the nations that you represent.

Delivered at the Third Joint Session, September 27, 1989.

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