http://www.washingtonpost.com/wp-dyn/content/article/2008/11/13/AR2008111300254.html
President Defends U.S. Capitalism Before Financial Summit
By Dan Eggen and William Branigin
Washington Post Staff Writers
Thursday, November 13, 2008; 2:22 PM
NEW YORK, Nov. 13--President Bush, attempting to boost major economies
ahead of a global financial summit this weekend, offered a vigorous
defense of Western capitalism Thursday while deflecting blame from the
United States for the current crisis.
In remarks at a financial forum here in the afternoon, Bush also warned
nations against exerting too much government control over free markets
and promised that the United States will "help show the way back to
economic growth and prosperity."
"This crisis did not develop overnight, and it will not be solved
overnight, but our actions are having an impact," Bush said. " . . . It
will require more time for these improvements to fully take hold, and
there will be more difficult days ahead. But the United States and our
partners are taking the right steps to get through the crisis, and they
are working."
Bush argued that "the crisis was not a failure of the free market
system" and that leaders should "not try to reinvent that system."
Rather, he said, global leaders need to "fix the problems we face, make
the reforms we need, and move forward with the free-market principles
that have delivered prosperity and hope to people around the world."
The speech, delivered at a forum hosted by the Manhattan Institute for
Policy Research, came before a Saturday summit in Washington of the
leaders of the Group of 20, a bloc of developing and industrialized
nations that focuses on economic growth and the stability of the world
financial system. Bush noted that its members account for nearly 90
percent of the world economy.
The speech also came as the administration continues to struggle with
how to implement a faltering $700 billion bailout package, while fending
off calls from President-elect Barack Obama and other Democrats for
additional stimulus measures. Treasury Secretary Henry Paulson Jr. on
Wednesday acknowledged that the administration had abandoned its initial
plan to buy up distressed mortgage securities, focusing instead on
offering aid to banks and other lenders to shore up credit markets.
Some world leaders, including French President Nicolas Sarkozy, are
calling for aggressive and sweeping interventions into global financial
markets, including stronger regulation of exotic financial instruments
and other measures.
Bush agreed that "broader reforms" and greater transparency are needed
to strengthen the global economy over the long term, and world leaders
this weekend will establish principles for doing so, Bush said. He
advocated for reforming institutions such as the International Monetary
Fund and the World Bank.
"At the same time, we must recognize that government intervention is not
a cure-all," Bush said. "For example, some blame the crisis on
insufficient regulation of the American mortgage market. But many
European countries had much more extensive regulations and still
experienced problems almost identical to our own."
He added: "History has shown that the greater threat to economic
prosperity is not too little government involvement in the market -- but
too much. . . . Our aim should not be more government -- it should be
smarter government."
According to Bush, "the long-term solution to today's problems is
sustained economic growth, and the surest path to that growth is free
markets and free people."
Bush laid out a familiar list of suspected causes in the current crisis,
reiterating his view that a "massive inflow of foreign capital" into the
United States led to easy credit in the housing market and the packaging
of questionable loans into complex mortgage-backed securities. The
decline of the booming U.S. housing market then ignited the crisis,
exposing "outdated regulatory structures and poor risk management
practices" in financial institutions in the United States and Europe, he
said.
But with the steps taken by the United States and other nations, Bush
asserted, "a measure of stability is returning to financial systems
around the world."
While acknowledging that "capitalism is not perfect" and "can be subject
to excesses and abuse," Bush hailed it as "by far the most efficient and
just way of structuring an economy." It is also "far more than an
economic theory," he said. "It is the engine of social mobility -- the
highway to the American Dream."
"The triumph of free market capitalism has been proven across time,
geography, culture and faith," Bush says. "And it would a terrible
mistake to allow a few months of crisis to undermine 60 years of success."
In a news briefing aboard Air Force One en route to New York, White
House deputy press secretary Gordon Johndroe said Bush's speech was
meant to convey the message that "we should fix the problems we have
rather than dismantle a system that has improved the lives of hundreds
of millions of people around the world."
Asked if anybody is suggesting that the free-market system be
dismantled, Johndroe did not identify any proponent of that view. "I
think it's just a matter of making clear that free-market capitalism has
led to incredible growth and prosperity and has helped lift people in
the developing world over many years," he said.
The Group of 20, whose leaders will convene Saturday at the National
Building Museum in Washington after a Friday night dinner at the White
House, includes 19 nations and the European Union. The G-20 member
nations are Argentina, Australia, Brazil, Canada, China, France,
Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia,
South Africa, South Korea, Turkey, the United Kingdom and the United
States. Leaders of the IMF, the World Bank and the United Nations also
will attend the summit.
In his remarks today, Bush also stressed the importance of keeping
markets open to trade and investment, saying that a protectionist law
passed by Congress after the 1929 stock market crash failed to bring
security and instead caused "economic ruin." He said, "Leaders around
the world must keep this example in mind and reject the temptation of
isolationism."
Pledging to maintain American leadership, Bush says: "The United States
is determined to help show the way back to economic growth and
prosperity. I know some may question whether America's leadership in the
global economy will continue. The world can be confident that it will,
because our markets are flexible and can rebound quickly from setbacks."
U.S. resilience has been demonstrated repeatedly over the last century,
and "the world will see the resilience of America once again," Bush says.
Branigin reported from Washington
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