Mr. Chairman, President Clausen, the Managing Director, Mr. de Larosiere, Governors of the International Monetary and the World Bank group, and distinguished colleagues:
On behalf of the American people, I am delighted to welcome you to Washington for your 36th annual meeting. It seems that your deliberations take on added importance each year, and this year will be no exception.
I believe your meeting can strengthen the national resolve and international cooperation required for the global economic recovery and growth that we're all striving to achieve, and I'm very grateful for this opportunity to address your distinguished group.
It's customary to begin a speech before this annual meeting with a portrait of the serious problems and challenges we face in the world economy. Those problems and challenges are certainly there in force, and I will get back to them in a minute and review them. But first, let me just take a moment to salute the institutions that you represent. The IMF and the World Bank group have contributed enormously to the spread of hope of a better life throughout the world community. In the process, they have proved themselves capable of change, of adapting to new circumstances and the needs of new members.
Your institutions have worked tirelessly to preserve the framework for international economic cooperation and to generate confidence and competition in the world economy. They have been inspired by the ideal of a far better world in which economic growth and development would spread to all parts of the globe. For more than three decades, they have worked toward these goals and contributed to results that are now clearly visible to all.
This past decade in particular has tested the mettle and demonstrated the strength and merit of the World Bank and IMF. As the development report of the World Bank itself notes, "The 1970's witnessed international economic convulsions at least as serious as any that may be thought highly probable in the next 10 years. The world's economy, it's capacity to withstand shocks, has been severely tested, and the tests were not passed with entire success. But parts of the developing world have come through remarkably well."
We need to recognize our progress and talk about it more in our conversations with one another. This in no way denies the immense problems that we face. But without some sense of what we've achieved, without some encouragement to believe in our mission, we will succumb to defeatism or surrender to ill-advised solutions to problems that can never yield to grandiose schemes.
To look at the challenges before us, let us recall that vision we originally set out to reach through international cooperation. The Second World War had left us with the realization, born out of the suffering and the sacrifices of those years, that never again must human initiative and individual liberties be denied or suppressed.
The international political and economic institutions created after 1945 rested upon a belief that the key to national development and human progress is individual freedom-both political and economic. The Bretton Woods institutions and the GATT established generalized rules and procedures to facilitate individual enterprise and an open international trading and financial system. They recognized that economic incentives and increasing commercial opportunities would be essential to economic recovery and growth.
We who live in free market societies believe that growth, prosperity and, ultimately, human fulfillment are created from the bottom up, not the government down. Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success—only then can societies remain economically alive, dynamic, prosperous, progressive, and free.
Trust the people. This is the one irrefutable lesson of the entire post-war period, contradicting the notion that rigid government controls are essential to economic development. The societies which have achieved the most spectacular broad-based economic progress in the shortest period of time are not the most tightly controlled, not necessarily the biggest in size, or the wealthiest in natural resources. No, what unites them all is their willingness to believe in the magic of the marketplace.
Everyday life confirms the fundamentally human and democratic ideal that individual effort deserves economic reward. Nothing is more crushing to the spirit of working people and to the vision of development itself than the absence of reward for honest toil and legitimate risk. So let me speak plainly: We cannot have prosperity and successful development without economic freedom; nor can we preserve our personal and political freedoms without economic freedom. Governments that set out to regiment their people with the stated objective of providing security and liberty have ended up losing both. Those which put freedom as the first priority find they have also provided security and economic progress.
The United States is proud of its contributions to the goals and institutions of postwar development. You can count on us to continue to shoulder our responsibilities in the challenges that we face today. We see two of overriding importance: restoring the growth and vitality of the world economy and assuring that all countries, especially the poorest ones, participate fully in the process of growth and development. But let us remember, the most important contribution any country can make to world development is to pursue sound economic policies at home.
Regrettably, many industrial countries, including my own, have not made this contribution in the recent past. We've overspent, overtaxed, and overregulated, with the result being slow growth and soaring inflation. This "stagflation," as the IMF annual report notes, is one of the two basic problems we must quickly overcome. The United States has set its course to economic recovery. Our program is comprehensive, and as I reminded the American people last Thursday evening, it will require effort and patience, but the reward is worth working for.
By reducing the rate of government spending, honoring our commitment to balance the budget, reducing tax rates to encourage productive investment and personal savings, eliminating excessive government regulation, and maintaining a stable monetary policy, we are convinced that we will enter a new era of sustained, noninflationary growth and prosperity, the likes of which we haven't seen for many years. And as the world's largest single market, a prosperous, growing U.S. economy will mean increased trading opportunities for other nations.
America now receives half of all non-OPEC, developing country exports of manufactured goods to all the industrialized countries, even though we account for only one-third of the total gross national product of those industrialized countries. Lower U.S. inflation and interest rates will translate into increased availability of financial resources at affordable rates. Already, capital markets in the United States are more accessible to the developing countries than capital markets anywhere else in the world. No American contribution can do more for development than a growing, prosperous United States economy.
The domestic policies of developing countries are likewise the most critical contribution they can make to development. Unless a nation puts its own financial and economic house in order, no amount of aid will produce progress. Many countries are recognizing this fact and taking dramatic steps to get their economies back on a sound footing. And I know it's not easy—I have a few scars to prove that fact—but it must be done.
Only with a foundation of sound domestic policies can the international economic system continue to expand and improve. My own government is committed to policies of free trade, unrestricted investment, and open capital markets. The financial flows generated by trade investment and growth capital flows far exceed official development assistance funds provided to developing countries. At the same time, we're sensitive to the needs of the low-income countries. They can benefit from international trade and growth in the industrial countries because they export many raw materials and primary products the industrial world needs. But they also depend upon our aid to strengthen their economies, diversify their exports, and work toward self-sufficiency.
The United States recognizes this. Over three decades, we've provided more than $130 billion in concessional assistance. The American people have proven themselves to be as compassionate and caring as any on Earth, and we will remain so.
We strongly support the World Bank. And because of our strong support, we feel a special responsibility to provide constructive suggestions to make it more effective. We believe these suggestions will permit it to generate increased funds for development and to support the efforts developing countries are making to strengthen their economies.
Taking into account our budgetary constraints, we are committed to providing the Bank and IDA resources for them to continue and improve their contributions to development. We know that stimulating private investment is also critically important. The International Finance Corporation plays the leading role in the Bank family in support of such investment. Given the importance of this role, we hope it can be enhanced. We believe all facets of the Bank can play a more active role in generating private resources and stimulating individual initiative in the development effort.
The IMF also plays a critical role in establishing conditions to encourage private capital flows to deficit countries. By reaching agreements with the IMF on a sound, comprehensive stabilization program and by demonstrating its determination to implement that program, a borrowing country signals private markets of its intent to solve its own economic problems.
We're committed to a pragmatic search for solutions to produce lasting results. Let us put an end to the divisive rhetoric of "us versus them," "North versus South." Instead, let us decide what all of us, both developed and developing countries, can accomplish together.
Our plans for the Caribbean Basin are one example of how we would like to harness economic energies within a region to promote stronger growth. The design and success of this undertaking depends upon the cooperation of many developed and developing countries. My colleagues and I also look forward to the upcoming summit meeting at Cancun, Mexico. That occasion will provide us with fresh opportunities to address the serious problems we face and encourage each other in our common mission.
In conclusion, each of our societies has a destiny to pursue. We've chosen ours in light of our experience, our strength, and our faith. We, each, are ultimately responsible for our actions and the successes and failures that they bring. But while individually responsible, we're also mutually interdependent. By working together through such institutions as the IMF and World Bank, we can all seek to collaborate on joint problems, share our insights, and encourage the common good.
These institutions have reflected a shared vision of growth and development through political freedom and economic opportunity. A liberal and open trade and payment system would reconstruct a shattered world and lay the basis for prosperity to help avoid future conflicts. This vision has become reality for many of us. Let us pledge to continue working together to ensure that it becomes reality for all.
Thank you very much.