Washington, 9 October 1998 (RFE/RL) -- International Monetary Fund (IMF) Managing Director Michel Camdessus says the one thing the annual meetings of the fund and World Bank didn't explain was the striking contrast between the unanimity and sense of purpose of the world's finance officials working on the global financial situation, and the "panicky atmosphere" among commentators and stock markets.
He mused at a final press conference at the end of the meetings in Washington yesterday that perhaps for the press and commentators, it was like discovering they'd gone to the wrong theater and instead of seeing the expected "Titantic," they ended up seeing "Great Expectations" or "The Great Escape."
The comment brought a roar of laughter because the headlines in the last two weeks -- and the reactions of the world's stock market traders -- seemed to reverse the metaphor. The commentators and markets had started with an expectation that some quick and easy magic solution to all the crises would flash on the screen. When it didn't materialize, they were sure the ship had hit an iceberg.
One major newspaper said all the meetings of the world's finance ministers and central bank governors had achieved nothing approaching a grand strategy to cure the crises. Another suggested this might even spell the end of western-style free market economies.
Camdessus and others scoff at those ideas. Camdessus said there is agreement as to how the world can emerge from the crisis. He told the final session of the Washington meetings that it is clear there is a systemic crisis. But he said that if a sense of perspective is maintained and leaders properly address the problems, in the long run this will be remembered as just a temporary setback.
The problem the officials have had to deal with is that there is no magic bullet that will cure all the world's financial ills in one shot. Nor is it something that can be summed up in a headline.
IMF, World Bank and the officials from around the world attending the meetings seemed stunned on Monday when stock markets took a dramatic fall in prices. Commentators blamed the fall on disappointment in the markets that the G-7 group of major industrial nations finance ministers and central bank governors, meeting for six hours on Saturday, had not produced a magic solution to all the world's ills.
The solution, they've all said, is a series of steps and measures to deal with flaws and weak spots that have been exposed by this crisis and come up with reforms of the system's structure to reduce the number and severity of future shocks.
From the speeches of dozens of international financial leaders, it is clear that there is broad agreement on five key elements of the reforms needed: transparency, in both private and public financial transactions; sound national financial systems; full involvement of the private sector; orderly liberalization of capital movements; and internationally accepted standards and codes of money practice.
Camdessus says these are all elements of good governance and should apply both globally and locally. That is really the key, he said.
The major industrial nations like the U.S., which still have strong growth, need to keep it strong because they are the engines powering the global economy for now. The others, especially Japan, must get their houses in order and restart growth too.
Of course there will need to be assistance from the IMF and the World Bank to help smaller countries which are being hit by the crisis, even though they are following good policies.
Camdessus compares the whole situation to preparing for a hurricane. He said, "You batten down the windows and the hatches, because whatever may be the good will of your friends from abroad or outside, if you haven't nailed down your own windows and your own doors, you're going to be struck by the hurricane."
Those who have gone through some of the hardest reforms were also the least forgiving of those who haven't focused first on what they do at home.
Poland's Deputy Prime and Finance Minister Leszek Balcerowicz said economic turmoil often leads to what he called "intellectual confusion and false diagnoses." He said blaming the sudden outflows of short-term capital, as happened in Russia and a number of Asian countries, ignores that it was deficiencies in economic policy making that caused the problem in the first place.
"Globalization should not be the whipping boy in the debate about the current crisis," the architect of the Polish transformation told the meetings. "Globalization rewards those with responsible economic policies but carries risk for countries which avoid or delay reforms and disregard basic requirements of macroeconomic discipline."