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Los Angeles
Times
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February 2, 2000, Wednesday, Home Edition
SECTION: Business; Part C; Page 1; Financial Desk
LENGTH: 1066 words
HEADLINE:
JAMES FLANIGAN;
U.S. OUTLINES BOLD NEW GLOBAL ECONOMIC POLICY
BYLINE: JAMES FLANIGAN
DATELINE: DAVOS,Switzerland
BODY:
A large American delegation, led by President
Clinton, signaled a more assertive U.S. international economic policy at the
World Economic Forum that wrapped up here Tuesday.
By getting directly
involved in their economies, the United States proposes to help the poorest
countries win access to global investment capital by working on programs to
forgive their current debts, tending to the health and education of their
children and pushing harder for higher labor and environmental standards.
The policy implicitly declares that free markets alone are inadequate to
raise up the world's poor. It is aimed at forestalling another collapse of the
poorest developing economies and at lessening opposition in the U.S to global
trade and economic initiatives.
The president, Secretary of State
Madeleine Albright, Treasury Secretary Lawrence Summers and other administration
officials all sounded similar themes in speeches and meetings here over the last
five days:
The gap between rich and poor nations is widening as
economies in the industrialized and some areas of the developing world
accelerate on the wings of new technology, while the poorest nations--in Africa,
Latin America and parts of Asia--remain trapped in poverty, disease and
illiteracy for vast numbers of their people.
The U.S. response to such
afflictions is to be far more aggressive than in the past. Clinton called for
U.S. tax credits for pharmaceutical and other companies to
provide vaccines against killer diseases such as AIDS, malaria
and tuberculosis.
Vaccines could save millions of lives. But the benefit
would also be economically powerful because the billions of dollars now spent to
care for the sick, or simply not available because ailing human beings cannot
work and produce, would be freed up to build lives and societies, Clinton told
2,000 heads of state and business, government and labor officials assembled in
this Alpine ski resort.
The vaccine effort was launched immediately with
a $ 750-million pledge from the charitable foundation of Microsoft Corp.'s Bill
and Melinda Gates.
The United States will be assertive in other ways,
too, Treasury Secretary Summers told the forum in an address on Sunday.
Developing economies will get debt relief so that money now going to interest
payments can be devoted to development. But the U.S. government will see to it
that savings from debt relief are channeled into human development.
"Along with their bank balances, we will look as well at the lives their
children are leading, because social stability is a prerequisite for financial
assistance," Summers said.
"Markets alone won't do the job, so we have
to employ nonmarket methods in education, health," explained Robert Hormats,
vice chairman of Goldman Sachs and a former assistant secretary of State.
The new policy is not a foreign aid program. Rather, a main thrust is
for government to act in support of private investment--the annual flows of
hundreds of billions of dollars steered by investment bankers from the pension
and mutual funds of rich countries to companies and projects in emerging
markets.
"We will find new roles as supporters of large flows of
investment capital for the International Monetary Fund, the World Bank and the
World Trade Organization," Summers said.
The World Bank already sees its
role as supporting private investment, which in recent years has replaced
governmental foreign aid as the chief source of development capital around the
world.
Ten years ago, only $ 30 billion of private investment went to
developing countries, along with $ 60 billion in World Bank funds. But the
latest official figures, for 1997, "show $ 300 billion of private investment to
only $ 45 billion in World Bank financing," said James D. Wolfensohn, World Bank
president, at a conference session here Monday night.
The flow of
investment has changed the World Bank's role. The institution, which once
concentrated on building dams and other huge projects, now works to support
local businesses. Wolfensohn, a former investment banker, also has involved the
bank in building social infrastructures of "decent legal systems, honest judges
and government officials."
The new U.S. focus, with its greater emphasis
on health, education and honest public finance, is similarly focused on helping
poor societies develop their own institutions.
"It's a new pattern of
work targeted to each country's needs, rather than broad trade agreements," said
Jeffrey Garten, dean of the Yale School of Management.
Garten, a former
undersecretary of Commerce, believes that the proposed new round of global trade
negotiations will be delayed because such broad endeavors "arouse so many
opponents."
The Clinton administration, asked here about its support for
a new global round of trade talks, responded tentatively. "The president is not
opposed to a new trade round," said White House economic aide Gene Sperling, but
"moving forward needs to be based on consensus."
The shadow of last
November's trade talks debacle in Seattle, as well as the heart attack the Asian
crisis gave the global economy in the late 1990s, formed a backdrop for the
policies outlined by officials here.
The administration reiterated its
support for examining labor and environmental standards in working groups of the
WTO, as part of a general push to win backing from organized labor and the
American public for international trade. Two U.S. trade agreements, one to
promote investment in Africa and a free-trade agreement for countries of the
Caribbean Basin, are now stalled in Congress.
The administration and
backers of global trade and investment on the Republican side are planning a
nationwide push to rally support for what Albright, in a speech here, called "an
internationalist role for the United States."
Despite the fact that the
Clinton administration has less than a year left in office, its new policy is
likely to endure because whichever party succeeds it in the White House will
need a similar emphasis to deal with global economic problems.
In the
early years of this new century, Summers warned, "99% of the labor force growth
will be in the developing economies, but all of the world's savings, seeking
investments to finance retirement, will be in the developed countries."
*
James Flanigan can be reached at
jim.flanigan@latimes.com.
LOAD-DATE: February 2, 2000
