Albright Urges Tough Asian Action To Avoid an Economic 'Meltdown'
International Herald Tribune
November 25, 1997
Brian Knowlton

Secretary of State Madeleine Albright issued a blunt call for action to Pacific Rim leaders here Monday, saying that to avoid an "Asia meltdown," the region will have to pursue sound economic policies no matter how "difficult or painful."

Her comments came as President Bill Clinton was preparing for a bilateral meeting with Prime Minister Ryutaro Hashimoto of Japan, whose country was jolted over the weekend by the collapse of Yamaichi Securities Co., the country's fourth-largest securities house.

Mrs. Albright, speaking to company executives at the Asia-Pacific Economic Cooperation summit meeting here, minced no words about the need for responsible action in dealing with the financial turmoil that has rocked the region.

"The world is asking: Will our partnerships fall apart, or will we pull together? Will we squander our energies in finger-pointing and blame-pinning, or will we focus on how to get back on track?"

Asian leaders also signaled their concern. The "turmoil cannot be waved away by brave talk," said President Fidel Ramos of the Philippines. Prime Minister Mahathir bin Mohamad of Malaysia delivered another lively attack on currency traders, calling on APEC to endorse regulations to trim their power to "bludgeon into submission" countries like Malaysia.

Mr. Hashimoto tried to distinguish between the problems Tokyo is facing at home and the problems of its neighbors, underlying that Japan is a creditor nation, not a debtor that has had to appeal for aid to the International Monetary Fund.

Mrs. Albright warned against "alleged panaceas that are quick, easy and wrong." She said that each affected country must implement sound policies and that the international community would then help those nations "that are doing their best to help themselves."

The undiplomatic reference to a "meltdown" was a striking departure from the cautious tone of consensus that has typified APEC meetings. But the summit, which was to have focused on less gripping topics like tariffs on toys, had its usual veneer stripped away by the crises breaking around it.

The night before, Mr. Mahathir, whose country was among the first to be hit by the Asian turmoil, issued a harsh critique not just of unrestricted currency trading but of the free-market approach itself.

The free market, he told company executives, suffered from the same delusions of "infallibility" as the Communist system had, and was equally guilty of bringing pain and misery to millions.

Mr. Mahathir, whose country's currency, the ringgit, has lost about half its value since midsummer, said that with the move by some command economies toward unfettered capitalism, "We seem to have jumped from the frying pan into the fire."

However, many analysts have said Malaysia's problems were caused partly by government excesses and poor financial management.

But Mr. Mahathir, comparing today's situation to earlier days of greater controls, said: "True, there were abuses There was corruption. There were quite a lot of scams. There was still poverty. But the sufferings now are far greater than before."

He said that markets, like governments, are corrupted by power. Mr. Mahathir called on APEC to tightly regulate currency trading and restrict market exposure to foreign-exchange trade. But his comments appeared to fly in the face of the much more broadly held view here that markets need to be freer, not less so.

That point was made by a top financial leader of South Korea, who was asked whether the financial woes that drove his country Friday to seek a $20 billion loan from the IMF would boost protectionist spirits in his country.

"The world benefits from a freer flow of finances," said the official, speaking on background, "and if the financial wheels of the economy turn fast, you should allow the wheels to turn fast."

In the face of the bad news, Japanese and Korean officials here did their best to portray a calm sense of determined optimism.

Mr. Hashimoto said that Japan would "take every step" to support regional stability.

Korean officials said that their country's economic fundamentals were good, and that IMF-imposed austerity was not expected to cause a sharp rise in unemployment or to provoke undue labor tensions.

President Jiang Zemin of China did not directly address the Asian turmoil in a keynote speech Sunday, but said China's "prudent" management of its economy would protect it. "The situation in China is excellent," he said.

Mr. Clinton's own effort to project a reassuring tone caused some momentary confusion when it appeared he was minimizing the situation. A top U.S. official was asked about the president's characterization of the Asian troubles as "glitches in the road."

He said Mr. Clinton was trying to make the point that "there are some good underlying economic fundamentals."

Mr. Clinton was expected to discuss with Mr. Hashimoto how the two countries, and the rest of APEC, could best help Korea in support of the IMF. Japan pledged a total of $9 billion to help Thailand and Indonesia work their way out of crisis, but its own brewing financial problems escalated sharply with the Yamaichi announcement.

Copyright © 2006 the International Herald Tribune