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By Robert Rubin

Robert Rubin, former U.S. Treasury secretary, is now chairman of the executive committee of Citigroup, Inc.

-- The economic environment of the 1990s was greatly affected by forces of change that had been at work for some time but reached new levels during this period. Among them were increased integration of trade and capital markets across the world, new technologies and advances in applying existing technologies, the spread of market-based economics throughout the globe and real economic progress in many emerging-market
and developing economies.

These enormous forces of change on balance brought much economic benefit, although it was unevenly distributed. The beneficiaries included many emerging-market countries, for example, in Asia.

The forces of change still provide the potential for favorable long-term economic conditions for the United States and the global economy if, and this is a big if, the challenges to realizing that potential are met in economic policy, geopolitics, environmental protection and much else. The real progress in growth stemming from the great forces of change has been accompanied by serious costs: economic and social dislocation for some, adverse environmental impacts, a sense of uncertainty and insecurity even among many who were doing well, and two financial crises that undermined tens of millions of lives -- Mexico in 1995 and the one that started in Asia and became global in 1997 and 1998.
Moreover, far too little progress has been made in combating global poverty and increasing the broad-based sharing of growth.
Half of the world's population still lives on less than $2 a day.

The pendulum swung powerfully toward the forces of change in the 1990s. Now there is a backlash, also very powerful. There is a real danger for the future economic well-being of the globe that the pendulum may swing back to restraints on trade and capital market integration, labor market rigidities, greater regulation and the like. The realities (which most people don't want to acknowledge) are that change is key to growth, that restraining change restrains growth, and that change inevitably creates winners, losers and dislocations. That hard set of realities underlies the policy decisions around globalization and market-based economics.

As president of the United States, Bill Clinton gave great thought to this central dilemma of our economic era. He brought the two perspectives together into the best path forward -- continued trade liberalization and movement toward market-based economics, reduction of rigidities and the embrace of change -- to best promote growth.

But this is combined with an equally important parallel agenda of combating poverty, broad-based public education, programs to help those dislocated by change, appropriate social safety nets, environmental protection and much else, to respond to the concerns underlying the backlash.

Making this parallel agenda work globally would require greatly increased assistance from the industrial countries for the developing world. The political support for such aid is exceedingly difficult to garner. It requires increased awareness among the citizens of industrial nations, especially in America, of their imperative self-interest in such assistance. Moving forward with change, the backlash against change, a parallel agenda and foreign aid will be at the center of the political and policy debate throughout the world for many years. The longer term economic potential of the global economy is great, but so are the challenges to realizing that potential.

A major danger now is that global economic uncertainty could lead to counterproductive policy: protectionist trade decisions, more restrictive labor measures or other movement away from the growth-maximizing regime of embracing change.

(c) 2002, Global Economic Viewpoint. Distributed by Los Angeles Times Syndicate International, a division of Tribune Media Services.
For immediate release (Distributed 8/14/02)

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