Speeches and Articles
“Living in Interesting Times”
American-Hellenic Chamber of Commerce
The Intercontinental Hotel
November 25, 2008
(As prepared)
President Grammatidis, Ministers, ladies and gentlemen, I am pleased to be here with you today in the presence of such an influential group of governmental and business officials. Every year at this time the American-Hellenic Chamber’s “Greek Economy” conference provides a perfect opportunity to take a thorough look at the global economy, where it has been during the year to date, and where we think it will be going in the year to come.
I am certain that you have heard the saying: “May you live in interesting times,” which is uniquely powerful in being both a blessing and a curse. I have news for you: we are living in interesting times with far-reaching political and economic changes. I know that these changes can be daunting, but I would argue that, above all, they represent opportunities to create a better and more secure future, provided we make intelligent decisions. After all, it really is up to us – up to our decisions -- as how historians will characterize these times.
So let me start with the political – the election on November 4 of Senator Barack Obama to the Presidency of the United States. This was a momentous election for us in many ways. The voter enthusiasm was quite extraordinary. I can assure you that many Embassy staff arrived for work quite bleary eyed after having stayed up all night to watch the returns. I was one of them.
Voters across America demonstrated the promise and power of the democratic process as they waited for the opportunity to participate in a historical decision by casting their vote. We watched them prove that famous phrase in our Constitution: “Government of the people, by the people and for the people” lives on in the United States. This spirit was perfectly summed up by President-elect Obama when he said "the true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals: democracy, liberty, opportunity, and unyielding hope." Senator McCain’s call for unity and support for our new leader was also reflective of this spirit.
I am sharing my thoughts about our election because shared democratic ideals are the bedrock of the strong friendship between our two countries, and the democracy that I’m so proud of was a gift from the people of Greece.
Now that the election is over, however, comes the hard part. In his acceptance speech, President-elect Obama referred to the challenges the United States and the world face including: a global financial and economic crisis, multiple conflicts, and a planet in peril. Today, I want to speak to you about the first challenge – the global financial and economic crisis. I want to start by acknowledging , as did the recent G-20 Summit, the failures that led to the crisis, including inconsistent and insufficiently coordinated macroeconomic policies, deficient regulations, inadequate structural reforms, all of which led to unsustainable global macroeconomic outcomes. I would nonetheless argue that, contrary to calls by some today, history has shown that the greater threat to economic prosperity is not too little government involvement in the market, it is too much government intervention in the market. While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth. And the surest path to that growth is free markets.
This is a decisive moment for the global economy. The last few months have seen unprecedented changes in the global financial landscape. Following a decade of strong, worldwide growth, the past several months have seen high-profile failures of key financial institutions in America and Europe, economic contractions and widespread anxiety -- all of which have contributed to growing unemployment and hardship for families. From the U.S. to the EU, in China, in Japan, governments have taken urgent and exceptional – historic even -- measures to support the global economy and stabilize financial markets.
In the wake of the crisis, there are those who would equate the free enterprise system with greed and exploitation and failure. It's true this crisis included failures -- by lenders and borrowers and by financial firms and by governments and independent regulators. But the crisis was not a failure of the free market system, and the answer is not to try to reinvent it. It is to address the deficiencies of that system, to try to adapt the global financial architecture to the realities of the 21st century and move forward with the free market principles that have delivered prosperity and hope to people all across the globe. The challenge before us all today – the challenge that we MUST all rise to – is how to we establish good regulatory structures without destroying the incentive to innovate, without destroying the marketplace – the very things that will enable continued long-term growth. That is the message of the just-completed G-20 Summit on Financial Markets.
What did the summit find? The joint Declaration issued at the end of the Summit specifies that the root causes of the recent instability lie in a number of factors. These include a period of strong economic growth coupled with historically low interest rates resulting from low inflation and relative economic stability. These factors, in turn, led to large levels of savings and massive international capital flows driven by investors searching for higher and higher yields but without an adequate appreciation of the risks. Combined with inadequate underwriting standards and risk management, more complex and opaque financial products and consequent massive leverage, these flows created major vulnerabilities in the international financial system.
It’s important to talk about these causes, because in them we can search for ways to prevent a global crisis such as this one from occurring again. The G-20 found that efforts to continue to stabilize financial markets and support the global economy must continue. More importantly, the group found that it is critical to lay the foundation for reform – a foundation underpinned by a shared belief that market principles, open trade and investment regimes, and effectively regulated and transparent financial markets foster the dynamism, innovation and entrepreneurship that are essential for economic growth, employment and poverty reduction.
I want to take a moment and focus on the common principles for reform the G-20 agreed to: strengthening transparency and accountability, enhancing sound regulation, promoting integrity in financial markets, reinforcing international cooperation, and reforming the Bretton Woods financial institutions. In essence, the G-20 found that the free market can only serve the common well if it is properly regulated and coordinated, and if people have accurate information.
What the G-20 emphatically did not agree to is dismantling our economic system or introducing protectionist measures. That is because the free market system is far more than economic theory. It is the engine of social mobility. It's what makes it possible for individuals to start their own business, open a restaurant, or even to start over and build a better life.
Ultimately, the best evidence for the free market system is its performance compared to other economic systems, the standard of living it produced for even the least advantaged member of society. Just take a look around the world: Free markets allowed Germany, an economy that was utterly devastated at the end of World War II, to recover from war and grow into the world's fifth-largest economy. Free markets allowed South Korea to make itself into one of the most technologically advanced societies in the world. And the growth in these countries and elsewhere raised the standards of living for people.
Witness your own region: Until the 1990s, communism stunted the development of all of Eastern Europe and the Balkans, while Greece grew rapidly. The result of these two different systems was immediately obvious at the end of the Cold War in the vastly different levels of economic development in Greece compared to any of its northern neighbors. While communist regimes claimed to advantage the much-vaunted proletariat or the workers, the average family in free-market Greece grew wealthier faster. Indeed, look what happened immediately after the replacement of the ruling communist regimes with pro-business, democratically-elected governments: the region rapidly expanded economically. These are just some examples of why the G-20 made its support for the free-market system clear.
Let me turn to one area highlighted by the G-20, where we really must all work together. That is on the issue of trade, an issue where the U.S. and the European Union play a particularly important role. Just as important as maintaining a free market within countries is maintaining the free movement of goods and services between countries. When nations open their markets to trade and investment, their businesses and farmers and workers find new buyers for their products. Consumers benefit from more choices and better prices. Entrepreneurs can get their ideas off the ground with funding from anywhere in the world. Thanks in large part to open markets the volume of global trade today is nearly 30 times greater than it was six decades ago.
That is why it is so important to keep markets open to trade and investment. This openness is especially urgent during times of economic strain. Shortly after the stock market crash in 1929, our Congress passed a special tariff, the Smoot-Hawley tariff , which was a protectionist measure designed to wall off America's economy from global competition. This led to similar measures in other countries. The result was not economic security. Instead, these measures reinforced the economic slowdown in the world’s major economies. That was why the world leaders at the G-20 Summit made a historic pledge underscoring the critical importance of rejecting protectionism and promising over the next 12 months not to raise new barriers to investment or to trade in goods and services.
Let me now turn to economic developments in Greece. After all, the title of this conference is “The Greek Economy,” so I would be remiss not to speak about it. In doing so, I want to emphasize that the financial crisis is hitting each country differently, depending on each one’s unique stage and characteristics of economic development. While the United States, whose financial markets are characterized by an extremely high level of complexity and depth, is looking at the proper balance of economic freedom and market regulation, the situation in Greece is fundamentally different. I am heartened that Greece and its banks have not been hit hard by the financial crisis because for the most part they did not engage in the financial tools at the center of the storm. But beware those who would say Greece should draw the lesson of increased regulation and delayed reforms from the crisis; this would be wrong.
The financial crisis should not throw Greece off track. Greece has a good track record of economic reforms. In recent years, the government has managed to bring the level of public debt down to just over 90 percent from well over 100, it has implemented the beginning stages of taxation and pension reform, and it has begun to privatize state-owned enterprises. But we are all beginning to see the impact of the frozen credit markets on the real economy in the world, and that is true in Greece as well. While Greece is still projected to have stronger growth than in the rest of the EU this year, the slowdown in the markets has begun to expose some vulnerabilities in Greece, including the highest current account deficit in the Eurozone. While a current account deficit is not a bad thing in and of itself, according to many international analyses, Greece’s is a result of low competitiveness -- specifically, a lack of structural reforms to make its labor and production markets more competitive.
To those who would argue that the proper response to the current economic situation is to scale back Greece’s economic reform program, I would argue – specifically in view of Greece’s challenges in the realm of competitiveness, as measured by recognized international organizations – that the proper response is just the opposite. These reforms need to move forward now more than ever. The Greek Government needs to continue its efforts to unleash the power of the individual entrepreneur, to reduce bureaucracy, to improve the educational system. The fact is, Greece requires these reforms if it is to continue to have strong economic growth in the future: In the 2008-09 World Economic Forum Global Competitive Report, Greece ranked No. 67 -- a 2-spot decline from its 2007-08 ranking, and still behind most European countries. Of particular concern, the WEF ranked Greece 122th out of 134 in terms of the amount of red tape there is to establish a business. No country and its people can truly benefit from and achieve sustainable growth without improving the economy’s competitiveness. Once the crisis eases, and whatever reforms are implemented globally, investment will continue to be a strong engine of growth for countries. But we should all expect that discerning investors will be ever more vigilant of where they put their money.
I understand Greeks’ concern about issues of equality, about making certain that the reaction to today’s economic crisis does not exacerbate social inequality. There is, after all, a similar debate occurring in the U.S. and throughout Europe. But we need to be careful that our understandable and laudable efforts to promote social cohesion do not have the unintended consequence of restricting individual initiative and actually reducing economic growth. While wise governmental action can do much good, actions that lead merely to a larger and overweening government can actually do more harm..
This brings me back to where I began: We live in interesting times, but it is up to each one of us to make the decisions that will determine whether these times will be seen as a blessing or as a curse. Whether it is participation in the democratic process, or support for economic reform, or belief in an open and fair trading system – the positions we take matter, now more than ever. Americans, voting in numbers not seen in one-hundred years, took a historic decision with the election of Senator Obama as President. Leaders around the world came together during the G-20 Summit to investigate the causes of the recent economic and financial turmoil and did not hesitate to issue far-reaching recommendations for the future. I urge us all to take these examples of empowerment and do what we can, both individually and as a group, to help lead ourselves, our families’ communities and nations, towards a better and more secure future.
Thank you.