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Treasury Secretary Urges Strong
U.S. Role in Global Economy
September 27, 1999
The United States has "a strategic interest" to promote open global markets and free-market capitalism aggressively, U.S. Treasury Secretary Lawrence Summers said in a speech at the University on Wednesday.
Summers, the 44-year-old, ex-Harvard University economist who was sworn in as the nation's 71st treasury secretary in July, has emerged as a champion of a strong interventionist role for the United States in global economic matters. He used the podium at UConn to underscore his view that global capitalism can be a force for good, but free markets need controls and guidelines that they will only get if the United States leads the efforts to impose them.
"If we look over the last 20 years, this is the first time in human history when hundreds of millions of people have seen their standard of living double in less than a generation," said Summers during a speech in the Rome Hall Ballroom. "That change, that unprecedented surge in the global market economy, may rank with the Renaissance and the Industrial Revolution.
"Our challenge in the United States is to take advantage of the remarkable current global change taking place, change caused from widespread adoption of the free market system, and make it work for the United States," he told an audience of about 220 financial bankers, UConn students and faculty.
Summers specified four fundamental policies that he termed "the core of U.S. economic strategy." These include, he said, keeping the U.S. economy strong, maintaining open world trade, supporting the development of world capital markets, and working to assist all countries, no matter where they have been in the global economic system.
With the dollar now at its lowest level against the Japanese yen in three-and-a-half years, many financial analysts worry that the weaker dollar, which makes imports more expensive for consumers, could trigger inflation and prompt the Federal Reserve to impose another increase in interest rates.
Yet Summers displayed his well known reluctance to intervene in foreign exchange markets to boost the sagging dollar. "As long as we keep the fundamentals of our economy strong," he said, "with budget surpluses, low inflation and price stability, there may be periodic fluctuations ... but I think the dollar will do fine and, more importantly, I think the American economy will remain strong."
Recalling widespread concern 10 years ago that the U.S. economy was on the downturn, Summers maintained that a major reason for the nation's current economic strength is its pursuit of open trade with other nations. "Open trade produces prosperity," he insisted. "It can only continue if the rest of the world becomes more open."
In the developing world there is tremendous opportunity for rapid growth, Summers continued. But as one of the chief architects of the massive financial rescues in Mexico and Asia during his tenure as deputy treasury secretary, Summers stressed that the rules of international finance must be grounded on "respect for the principle of transparency," where in theory all investors have access to enough information to produce an informed and efficient financial marketplace.
Addressing U.S. economic aid policy to Russia, which is currently undergoing congressional scrutiny over allegations of Russian corruption, Summers warned that the United States would be damaging its own national interests if it abandoned Moscow while Russia was evolving from a Communist dictatorship to a free-market economy. Acknowledging that the process of Russian reforms "will take decades," Summers noted, however, that now "70 percent of Russia's work force is employed in the private sector."
Summers' was invited to speak at UConn as the second lecturer in a series of economic seminars sponsored by Greenwich Capital Markets, in collaboration with the Thomas J. Dodd Research Center and the University of Connecticut Libraries.
"The lecture series is designed to examine the most critical economic issues facing Connecticut and the nation," said President Philip E. Austin, while introducing Summers. "It's a special privilege to have someone of Secretary Summers stature with us in Storrs to address these concerns."
Endowed by Greenwich Capital Markets, the Economic Seminar Series brings a major national figure to campus each year. Federal Reserve Chairman Alan Greenspan was the series' inaugural speaker in 1997. Greenwich Capital Markets is a trading, finance and investment banking firm with headquarters in Greenwich, Conn. It is the U.S. arm of Greenwich NatWest, the global debt markets investment banking business of NatWest Group, one of the largest and most strongly capitalized financial services groups in the world.