Clinton turns attention to world economy

By Gamal Nkrumah

This apparent statement of support for US President Bill Clinton, and not the ramifications of his domestic problems, might prove to be the determining factor in stopping the president from stepping down.

Wall Street's buoyant mood was infectious and soon markets all over the world were posting strong rebounds. Higher stock markets in Asia and Europe, in turn, pushed up the Dow Jones index.

Facing a possible congressional impeachment inquiry, Clinton on Monday escaped Washington for New York in a desperate bid to focus public attention on the American economy, the world financial crises, and terrorism. The embattled president appealed to the world's richest countries to pool their resources and fight the global financial challenge. It appears Clinton has now staked his career on the success of his leadership in arresting the international economic slide and salvaging global financial structures.

Clinton called for a meeting of finance ministers and central bank heads of the world's major economic players to be convened in the next 30 days in Washington. "In face of this challenge, America can and must continue to act and to lead, to take the urgent steps needed today to calm the financial crisis, restart the engine of growth in Asia and minimise the impact of financial turmoil on other nations," he said.

No lame duck president can lead such a fight, which begs the question: can the world take Clinton seriously?

Hardly any foreign government has indulged in the sexual McCarthyism that has gripped America. Traders the world over are no sexual McCarthyists either. One presumes that traders in Tokyo, London and New York take it for granted that older men of power have furtive extra-marital affairs, and Monicagate has raised few eyebrows. In fact the traders' eyes were set on whether Clinton would signal the green light for a cut in interest rates, a rather conventional remedy for a sliding market. This week he did just that. Wall Street was buoyed by the news that Clinton was considering urging the US Federal Reserve Bank to permit interest rates to drop.

As Wall Street traders discounted the negative impact of Clinton's sex-and-lies scandal, so did their European and Asian counterparts. Recent European stocks surges and upswings in both Asia and Latin America promise a better financial situation. And Western stock markets, which had been in the doldrums as a result of the downturn in Russia and the Asian financial turmoil, had a change in fortune as Asia rebounded.

The two most widely acknowledged living inspirations for the current international share price rise are US Treasury Secretary Robert Rubin and Federal Reserve Chairman Alan Greenspan. The two men loom as colossal giants over US equity markets.

Rubin assured the American public that notwithstanding Monicagate, the end of the dollar slump was in sight. The light at the end of the tunnel was the dollar rise on higher stock prices on Wall Street.

Greenspan for his part signaled that the Federal Reserve was ready to lower interest rates to keep the American economy buoyant. Greenspan's words were enough to power Wall Street to its biggest one-day point gain in history last Tuesday -- a 380-point rise.

But the fly in the ointment remains the international financial turmoil that has plunged a third of the world's economies into a deep recession. Greenspan recently warned that countries such as Japan and Russia must make clear-cut political decisions in order to restore investor confidence.

Clinton has pinned his hopes for political survival on his ability to rally world leaders to tackle head on the international economic and financial crises. Wall Street hopes for a swift end to his tribulations at home precisely because strong American leadership is needed in the international arena.

Clinton is highly regarded on Wall Street as an exceptionally resourceful pro-business president. He is credited for fostering free trade and balancing the budget.

Foreign leaders, too, have invariably expressed hopes of a strong American leadership in face of the world financial crisis. They view with growing trepidation possible stock market volatility in the wake of a Clinton impeachment. "Our future prosperity depends upon whether we can work together with others to restore confidence, manage change, stabilise the financial system and spur robust global growth," Clinton said on Monday in a speech he delivered at the Council on Foreign Relations in New York. "Everyday we don't act, we undermine the confidence the world badly needs, and that we are trying to restore. Congress must simply assume its responsibility for our leadership in the economy."

Clinton noted that 30 per cent of American economic growth since he took office has been generated by overseas trade. "That's why ordinary Americans should care if Asia, Russia or South America are on solid economic footing," he said. "These people are our customers."

Clinton came up with a six-point plan for world recovery: an American, European and Japanese cooperative effort to spur economic growth; easing the debt burden on crippled Asian economies; doubling World Bank support for "social security nets" in Asia; using the $15 billion in IMF emergency funds to prevent the crisis from spreading to Latin America; increasing activity by the US Export-Import Bank to support projects in developing countries; and Congressional approval for the additional $18 million.

Meanwhile, it seems the Asians are getting their act together. This week, the governments of Japan and China made a show of acting together to fight Asia's financial turmoil. In an unprecedented development, representatives of the two countries held bilateral talks on the Asian economic crisis in the Chinese capital Beijing.

"It is difficult to see how any actions of the world community can be successful in restoring growth in Asia in the absence of the restoration of growth in Japan," Clinton told the Council on Foreign Relations.

Asian tigers depend on Japan as their major export market. Exports to Japan account for 12 per cent of Malaysia's GDP, and five to seven per cent of the economies of Indonesia, South Korea, Thailand and Taiwan. As long as Japan is embroiled in a deep recession, the Asian tigers cannot export their way out of the recession.

The Americans and Europeans have traditionally lambasted Japanese leaders as ditherers and accused them of allowing boils to fester and grow rather than lancing them swiftly. The Chinese, too, prefer bold bids to nip problems in the bud and joined in the chorus of world criticism of the Japanese leaders' weak attempts at tackling the country's increasingly alarming recession. China is about to reform its massive state sector and will lay off millions of workers in the process. An eight per cent growth rate is needed if China is to handle the social impact of the reforms. The big question is: can the Communist Party cope with an army of millions of angry unemployed Chinese?

The twin flagships of Asia's global economic importance are presently Japanese economic might and potential Chinese economic prowess. Substantial drops in Japanese investments in China and in Japanese imports from the People's Republic have aroused genuine Chinese concerns about Japanese economic instability.

The two countries are trying to work together on the question of boosting domestic demand to stimulate their inextricably intertwined economies. Still, apart from the decision to meet again in Tokyo as soon possible, no special policies resulted from the high-level Sino-Japanese meeting. This, after all, is the first time that both countries are collaborating closely to resolve the Asian economic crisis.