SECRETARY-GENERAL CALLS UNITED NATIONS TAILOR-MADE FORUM FOR COLLECTIVE EFFORT TO ADDRESS GLOBAL FINANCIAL CRISIS

19 October 1998

Press Release
SG/SM/6759

SECRETARY-GENERAL CALLS UNITED NATIONS TAILOR-MADE FORUM FOR COLLECTIVE EFFORT TO ADDRESS GLOBAL FINANCIAL CRISIS

19981019 Speaking in Orlando, Florida, Kofi Annan Says Current Crisis Rooted in Deep Social and Political Imbalances

Following is the text of a speech delivered today by Secretary-General Kofi Annan to the Annual Convention of the American Association of Magazine Publishers and Editors in Orlando, Florida:

It is a great pleasure to be with you this morning. Like you -- like everybody who lives in New York, I think -- I always enjoy coming to Florida. This time I am getting the full treatment: yesterday my wife and I visited Epcot, and today here I am with you at the Yacht and Beach Club Resort.

It's just too bad that I cannot spend any time yachting, or on the beach, because tonight I have to be in Japan. That is, when I arrive in Japan it will still be the middle of the night here, but it will already be late tomorrow afternoon there.

A typical day, you understand, in the life of a modern Secretary-General. And probably not untypical for some of you, either. Nowadays, we are all part of the same global economy, and I suppose all of us in this room belong to that quite large slice of humanity for whom intercontinental travel has become almost an everyday chore.

Yet, this is something which has come about only within my lifetime.

It's strange to think that in 1943, when I was already five years old, the then United States Secretary of State, Cordell Hull, boarded an airplane for the first time in his life, to go to the Teheran Conference between Roosevelt, Stalin and Churchill. Compare that with the number of flights Madeleine Albright must take every month, or indeed every week.

Who knows? In another 55 years the frenetic air travel of the 1990s may seem no less bizarre to our grandchildren than it would have done to Cordell Hull.

Already, we are instantly in touch with each other, across thousands of miles -- by telephone, by e-mail, by fax, by video-conference, and so on. To move ourselves bodily from one side of the world to the other is a slow and cumbersome process by comparison, even if we fly Concorde. Perhaps, soon it will come to seem an old-fashioned eccentricity, rather like using a typewriter instead of a computer.

What is clear is that the world is constantly shrinking, while its human population continues to grow at an almost exponential rate. That is an explosive combination.

The emergence of a global economy -- or "globalization", as we have come to call it -- has, on the whole, been welcomed in this country. After all, America's success has historically been built on a continent-wide domestic market. Why should you not welcome a chance for the whole world to benefit from similar economies of scale, bringing ever greater improvements in quality and productivity?

If some Americans have sought to resist globalization, it is because they believed these benefits were being gained by others at their expense, as people in other countries with lower standards of living were offering goods and services at prices the United States could not match.

But this simplistic, zero-sum economics was rightly resisted by the majority. Most Americans understood that their country was actually one of the main beneficiaries of globalization.

The real dangers of globalization lie elsewhere. By far the most serious, in my judgement, is the widely divergent impact it has had on different groups of people.

This is true to a certain extent on the level of countries. Some developing countries, notably in East Asia, appeared until last year to be doing very well out of globalization, while others, mainly in Africa, seemed to benefit little or not at all.

On the other hand, one could say that at least some developing countries appeared to be developing, and catching up with the industrialized world.

The crisis of the last year or so has partially reversed that. By and large, the East Asian countries that were developing fastest have been the hardest hit. But the effect on the developing world as a whole has been very severe. The contrast between its fate and that of North America and Europe has been striking. The gap between rich and poor countries in the world, which had begun to narrow, is now widening again.

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The disparity between countries is important. But no less so are the strains and inequalities within them. Even in countries whose economies, taken as a whole, have clearly benefitted from globalization, there are many, many people who have had no share in those benefits. And many others feel their lives are being disrupted, even destroyed, by global economic forces they can neither understand nor control.

In this respect, the current crisis, so far from correcting the strains and imbalances of globalization, has undoubtedly made them worse.

Perhaps there is a rough justice in the financial ruin that has befallen a few so-called "crony capitalists". But, for every one of them, there are millions of humbler people who are in no way responsible for the crisis, but who have none the less seen their hopes dashed and their families thrown into terrible hardship, even destitution.

There is one statistic that I keep repeating, because I still cannot come to terms with its implications: this year, in Indonesia, an average of 15,000 workers are losing their jobs every day. When you think about that for a minute, you are not surprised that the former ruler of Indonesia has been forced from office by a movement of mass protests.

Nor can you really be surprised, though you should certainly be distressed, by the fact that in many parts of the country there has been looting and violence directed against shopkeepers and other members of the ethnic Chinese community.

If anything, it is the gradual and relatively peaceful character of political change in Indonesia -- so far, at least -- that should surprise us. Indonesians both in Government and in opposition clearly have a strong sense of the danger that threatens their country, and are determined to avoid it if they can.

What is more, they clearly understand that neither political nor economic stability can be restored by coercion or repression.

They understand that the roots of the crisis are political as well as economic.

They understand that human rights and "good governance" are not mere slogans, trotted out by self-righteous ideologues sitting comfortably at home in prosperous countries.

They know -- because they have learnt by bitter experience -- that human rights and democracy are not rewards or prizes to be given only to those who complete the obstacle course of economic growth.

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On the contrary, people need human rights and democracy, and poor people need them most of all. They need them to protect themselves against exploitation, and to insist on a model of development which is not based on crude numbers, but takes account of life as it is actually lived by ordinary people.

This is the dimension which was missing from so much economic analysis earlier in the decade. I regret to say -- because it sounds a bit like saying "I told you so" -- that not enough attention was paid to what we at the United Nations were saying and doing.

Every year, since 1990, we have published a Human Development Report, which tries to track and analyse development in precisely these terms -- measuring it by such yardsticks as literacy and life expectation, as well as gross national product. This report, with its eye-catching "human development index", was the brainchild of the brilliant Pakistani economist Mahbub ul Haq, who, sadly, died this July.

Another economist who has been closely involved in it is Amartya Sen, from India, whose work has now been justly recognized with the award of this year's Nobel Prize. I am proud to say that he has made a major contribution to United Nations economic thinking.

Professor Sen's work has shown, among other things, that serious famine -- I mean, real famine, when millions of people actually die of starvation -- only happens in conditions of war, or under regimes which suppress the truth and are not accountable to their people. That happened in the Soviet Union in the 1930s, in India under British rule during the Second World War, in China in the 1950s and 60s. It is very close to happening in Sudan now.

But where there is peace and freedom -- where the hungry can agitate and the authorities can be held to account -- remedial action is always taken before things get to that stage. In India, since independence, there has been terrible poverty and malnutrition, but no famines. A free press and a democratic system -- however chaotic and corrupt it may often seem -- ensure that the authorities intervene in time to avert the ultimate catastrophe.

Amartya Sen has also studied the population problem. He has shown that birth rates are not determined by religion or ideology, or by crude measures of wealth such as gross national product per capita. Far more important factors are the level of women's education and the extent to which women have working lives outside the home.

Please do not misunderstand me. I am not saying, and no one at the United Nations is saying, that we can do without markets, or that economic problems can be solved by government intervention. Even most of those who did

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once espouse that sort of thinking have now long since abandoned it. And economists like Mahbub ul Haq and Amartya Sen never believed in it.

What they are saying, and what we are saying, is something different. It is that markets never exist in a political and social vacuum, still less a moral one. Perhaps Amartya Sen's greatest achievement has been to reconnect economics with ethics. He has reminded us that markets must serve a broader purpose which can be defined by reference to universal values -- those very values that are enshrined in the Charter of the United Nations.

Even the most orthodox classical economists do not deny that, at a minimum, you need a clear framework of law and regulation to ensure that everyone in the market is competing on equal terms.

But I would go a bit further. Purely formal equality before the law is not enough. Everyone needs basic education, shelter, clean water, and an adequate diet during their childhood. Everyone who aspires to compete in the market needs access to a network of transport and communications connecting them to their potential suppliers and customers, or employers. Everyone needs protection from war and arbitrary violence.

These things are denied to hundreds of millions of people in our global economy as it exists today. We cannot ask them to wait for the market to function, because they are not players in the market.

Maybe over decades, the market will gradually expand, embracing a larger and larger proportion of humankind. But millions who are alive now will be dead before that process touches them.

That is not only a terrible tragedy. It is a terrible waste of human talent and resources. Just think how many people are going to live and die without being given a chance to make their unique contribution to human progress.

It is not a thought that any of us should be comfortable with. But, perhaps, in these pleasant surroundings of the Yacht and Beach Club Resort, we may be tempted to brush it aside.

I humbly suggest to you that to do so would not only be immoral, it would be imprudent. Because not all those people are going to wait patiently for death, or for the benefits of the market to reach them.

Their plight will provide arguments, and they themselves may provide recruits, to those who urge abandoning political and economic freedom in favour of alternative paths to salvation.

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Twenty years ago I might have tried to frighten you with the spectre of communism. Now I could mention other "-isms": populism, fanaticism, nationalism, ethnic chauvinism, terrorism. All of those are stalking the world today, pointing to the apparent crisis of capitalism. They are enlisting the frustrated and deprived as recruits to their cause.

But I like to think that fear is not my most persuasive argument, especially when I speak to an audience of American journalists and opinion leaders such as I see in this room. I prefer to appeal to two other qualities, which I have never found wanting in my American friends.

One of those qualities is indignation at the spectacle of human misery and waste.

The other is self-confidence. The famous "can do" spirit. The spirit which enabled America, three times this century, to lead the world in a struggle against tyranny and aggression. The spirit which enabled you to overcome the great depression of the 1930s, and in the 1940s to design the architecture of the postwar world, with the United Nations as its centrepiece.

I must say I am disappointed, and indeed disturbed, in the light of that record and those achievements, that today the United States is failing to keep faith with the other 184 Member States by honouring its legal obligation and paying what it owes.

I suggest to you that the state of the world, as we approach a new millennium, offers you a challenge to which you should rise, as you did to those earlier ones. The current financial crisis is rooted in deep social and political distortions and imbalances. Those problems have to be addressed, both within countries and at the global level.

I believe we have a natural forum -- no, a tailor-made forum -- for a collective, multilateral effort to meet the global aspects of this challenge, and to provide help and guidance to individual countries tackling it at national level. That forum is the United Nations.

Well, I would say that, wouldn't I. But I also believe that we can meet the challenge only if the United States plays its due part in the effort, and provides, once again, the leadership we saw in the days when the United Nations was founded.

I believe it is very much in America's national interest to act now to secure its future prosperity, by ensuring that markets remain open and that the negative effects of globalization are offset. And I believe you, ladies and gentlemen, as opinion leaders in this great country, are uniquely well placed to convince and galvanize the American public. I hope we can work together.

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