My life

On August 28, the thirty-fifth anniversary of Martin Luther King Jr.’s famous “I have a dream” speech, I went to a commemorative service at Union Chapel in Oak Bluffs, which had been a vacation mecca for African-Americans for more than a century. I shared the platform with Congressman John Lewis, who had worked with Dr. King and was one of the most powerful moral forces in American politics. He and I had been friends for a long time, going back well before 1992. He was one of my earliest supporters and had every right to condemn me. Instead, when he rose to speak, John said that I was his friend and brother, that he had stood with me when I was up and would not leave me when I was down, that I had been a good President, and that if it were up to him, I would continue to be. John Lewis will never know how much he lifted my spirits that day.

We returned to Washington at the end of the month to face another tremendous problem. The Asian financial crisis had spread and was now threatening to destabilize the entire global economy. The crisis had begun in Thailand in 1997, then infected Indonesia and South Korea, and now it had spread to Russia. In mid-August, Russia had defaulted on its foreign debt, and by the end of the month the Russian collapse had caused large drops in stock markets across the world. On August 31, the Dow Jones industrial average dropped 512 points, following a drop of 357 just four days earlier; all the gains of 1998 were wiped out.

Bob Rubin and his international economics team had been working on the financial crisis since Thailand’s trouble began. Although the details of each nation’s problem were somewhat different, there were some common elements: flawed banking systems, bad loans, crony capitalism, and a general loss of confidence. The situation was aggravated by the lack of economic growth in Japan over the past five years. With no inflation and a 20 percent savings rate, the Japanese could stand it, but the absence of growth in Asia’s largest economy increased the adverse consequences of bad policies elsewhere. Even the Japanese were getting restless; the stagnant economy had contributed to the election losses that had led to the recent resignation of my friend Ryutaro Hashimoto as prime minister. China, with the region’s fastest-growing economy, had kept the crisis from growing even worse by refusing to devalue its currency.

The general formula for recovery in the 1990s was the extension of sizable loans from the International Monetary Fund and wealthy countries in return for necessary reforms in the affected nations. The reforms were invariably politically difficult. They always forced change on entrenched interests and often required fiscal austerity that made things harder on ordinary citizens in the short run, though it brought a quicker recovery and more stability in the long run.

The United States had supported the IMF efforts in Thailand, Indonesia, and South Korea, and had made contributions in the last two cases. The Treasury Department decided not to put money into Thailand because the $17 billion already available was sufficient and because the Exchange Stabilization Fund, which we had used to help Mexico, had some new, albeit temporary, restrictions imposed on it by Congress. The restrictions had expired by the time the other nations needed help, but I regretted not making at least a modest contribution to the Thai package. State, Defense, and the NSC all wanted to do it because Thailand was our oldest ally in Southeast Asia. So did I, but we let Treasury make the call. On the economics and in terms of domestic politics it was the correct decision, but it sent the wrong message to Thais and across Asia. Bob Rubin and I didn’t make too many policy errors; I believe this was one of them.