Managing Director's Closing Address: Global Response to Global Crisis-Elements of New Architecture Are Endorsed

• Pages: 327-328

Page 327

Over these past days, I have heard a common sense of disquiet about the global economic situation and the near-term prospects. This has given rise to a sober and substantive assessment of the causes of the crisis and of its global effects. We have undoubtedly moved a long way forward in identifying the steps needed to establish a more durable global economic system and in addressing the crisis.

It is clear that we face a systemic crisis. But Governors were determined to maintain a sense of perspective, recognizing that the globalized economy has brought enormous benefits and that this crisis, if properly addressed, could be seen in a longer-term perspective as just a temporary setback. President Clinton reminded us that "a truly global market economy has lifted the lives of billions of people." Of course, serious flaws have been revealed in the system and prompt decisive action is called for. But there is no desire to turn the clock back. Instead you demonstrated that you are ready to join forces to seek ways of making the global system more secure.

Some of our discussion has sought lessons from experience. You have observed that programs work only if governments want them to work. I was greatly encouraged therefore by the courageous statements by the Governors for Indonesia, Korea, and Thailand. I salute the valor of these countries that have borne the brunt of this crisis, and who are showing other countries that there is indeed a way out of crisis toward a future of more secure, higher-quality growth-growth which could lead, as the eloquent presentation of President Menem of Argentina demonstrated, also to a more equitable distribution of income.

Other legitimate questions have been raised by Governors about the size of the support, the policy content of the programs, their social and political effects, and moral hazard. We shall continue to assess these issues very carefully in the work that lies ahead. Many problems, as some of you have observed, stemmed from the approach of "managed development"-too close a link between banks, corporations, and the state. This has been a new demonstration that in a globalized economy, destabilizing factors can be generated quite outside the macroeco-nomic sphere and develop for some time before their negative effects can be recognized and denounced.

Governors were unanimous: a global crisis requires a global...