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Western Press Review: The World's Troubled Economy

  • Joel Blocker

Prague, 6 October 1998 (RFE/RL) -- After the Group of Seven (G-7) leading industrial countries' consultations over the past weekend, Washington today hosts the opening of the annual meetings of both the International Monetary Fund (IMF) and the World Bank. Western press commentators continue to focus largely on what many see as the parlous state of the world's economy.

GLOBE AND MAIL: These are the best times to think about rewriting orthodoxy

Canada's Globe and Mail newspaper today says bluntly: "This is a global financial emergency. We are staring at the prospect of a worldwide depression -- but only," the paper adds, "if we get things very, very wrong."

The G&M editorial says: "For central bankers, these are days of fright and fear. Asia's former Tigers are declawed, turned into scrawny tabbies. Russia is on the carpet. Brazil's foreign investors are making for the exits, mugging one more economy. Last month, the world's most unsinkable hedge fund, Long-Term Capital Markets L.P., started taking on water, nearly pulling the rest of the banking system down with it."

The paper favors as a partial solution the granting by the IMF of long-term capital loans to protect banks from going under. It writes: "Domestically, every Western economy has regulations to deal with threats to its banking system....Like domestic laws which allow for stops in stock trading, or patient workouts with creditors, or orderly wind-ups of ailing banks, international emergencies might benefit from the IMF being able to temporarily slow outflows of capital. These are desperate times, the best times to think about rewriting orthodoxy."

WASHINGTON POST: The sense of urgency seems appropriate

In the Washington Post today, the paper's international economics correspondent, Paul Blustein, writes a commentary about what he calls "the IMF mess." Blustein says: "A fine mess it is, posing an unprecedented threat to the IMF and to the world of freewheeling capitalism it has been trying to build. The financial crisis that began in Thailand two summers ago has leapt across oceans and continental divides, laying waste to emerging-market economies and menacing others all over the globe."

He continues: "The IMF's dollar rescue packages have failed to halt economic collapse in countries of vast size and importance, notably Russia and Indonesia. Critics of every persuasion are beating the drums for a radical change in direction for the IMF -- and even for outright elimination."

After discussing various proposals for reforming the IMF, Blustein concludes: "The world is running out of time. The mess could become a lot messier. (British Prime Minister Tony) Blair has urged his fellow policy-makers to 'think radically and fundamentally' -- and, given the stakes, that sense of urgency seems appropriate."

SUEDDEUTSCHE ZEITUNG: There is little or no coordination in the battle against the current international financial crisis

In Germany's Sueddeutsche Zeitung today, a commentary from Washington by Peter De Thier asks: "Can the G-7 and the IMF sell their annual meetings as successes?" De Thier doesn't think so, writing: "Panic has broken out in Washington. There is little or no coordination in the battle against the current international financial crisis, and the weekend meeting of finance ministers and the heads of central banks from the G-7 group of industrial nations did almost nothing to improve the situation." The commentary continues: "At a moment when comprehensive international cooperation is required, everyone is going their own way instead....The IMF has lost a lot of its international standing and needs to pass reforms to improve its own performance....And there are, of course, problems within the G-7. Clinton has his hands full with the Lewinsky scandal and (U.S. Treasury Secretary Robert) Rubin has clearly run out of steam. It will be interesting, as the weeks proceed, to hear G-7 and IMF spin doctors try to sell their meetings as successes."

WALL STREET JOURNAL: Maybe a sense of reality is being restored

In the Wall Street Journal Europe today, columnist George Melloan says that "high anxiety would be a good description of the mood of the world's bankers and finance ministers (attending the) meetings of the IMF and World Bank in Washington. Their worry is justified," he continues. "The matters that trouble them are far more important and difficult than the question that has obsessed Americans for nine months: will Bill Clinton topple?"

Melloan writes further: "The problem we all face is simple: The world has fallen victim to mismanagement of money on a vast scale, with both public and private institutions culpable. The result has been a huge loss of wealth and liquidity that threatens global deflation and recession...." He writes "there is a danger that the (Asian) contagion will spread to Europe and North America. How to head that off is the urgent question in Washington this week."

Melloan concludes: "In the absence of any true international leadership, national leaders will have to work out things for themselves. But then the idea of an international 'economic order' was mostly a myth. So maybe a sense of reality is being restored."

FINANCIAL TIMES: There is not much sign of global leadership

Britain's Financial Times carries a commentary by Stephen Fidler that begins by saying, "No one is in any doubt about what a mess the world economy is in....But," Fidler goes on, "what no one can agree on is what, in practice, should be done about it."

The commentary goes on: "There is not much sign of global leadership, complain many in Washington, that can decisively push some proposals through and quash others...The undermining of U.S. authority is symbolized by the Administration's long delay in securing the approval of Congress for a capital increase (for) the IMF."

Fidler writes further: "As for thorough-going reform of the international monetary institutions, such as the IMF, more pressure for change can be expected. But the official view from most of the big countries is likely to be skeptical. Thus," he concludes, "in practical terms, there is a big gap opening up between the serious ills of the international financial system and the current proposals to deal with them....Indeed, the new financial architecture may turn out to be a rather grand name for what will probably turn out to be, at most, a small extension to the house."

NEWSWEEK: What is needed is a restored sense of balance, moderation and humanity

Newsweek's current European edition runs a commentary entitled "Free-Market Failures" by Sadruddin Aga Khan, former United Nations High Commissioner for Refugees. He writes: "Many economists, politicians, social scientists and environmentalists saw...dangers coming. But in the last decade their voices have been drowned out by fundamentalists of free trade who, claiming the defeat of communism, abandoned common sense as well. What is needed now, and for the future, is a restored sense of balance, moderation and humanity."

The commentary continues: "Utterly unregulated markets, so the zealots told us, would achieve the most efficient allocation of scarce resources and thereby maximize the size of the 'pie' to be shared by the world's people....(But the result has been not only) inequalities among nation-states....Income inequality within countries has increased as well. (Microsoft head) Bill Gates' fortune is equal to the combined net worth of the 106 million poorest Americans."

The Aga Khan concludes: "Providing a better system requires three things: We must slow down the rate at which we cede sovereignty to the global market place; we must build checks and balances into existing international economic institutions, with greater public participation and investor responsibility, and we must strengthen the parallel system of checks and balances found in the UN system of institutions and agreements."