Lost Leaders

JOHANNA MCGEARYWhat a telling picture the Moscow summit made. Bill Clintonlooking weary and spent, his head sunk in his hands, his lipstight in a glum line as reporters badgered him about Monica.Boris Yeltsin next to him, befuddled and disoriented as hestruggled to link answers coherently to questions. When ajournalist asked whether the Russian President would acceptsomeone other than Viktor Chernomyrdin as nominee for PrimeMinister, Yeltsin paused for a moment that grew painfully long.Well, he finally said, I must say, we will witness quite afew events for us to be able to achieve these results. That'sall.Huh? The scene crystallized fears that the world's top rulershave lost their direction at a time when leadership isdesperately needed to pull the global economy out of itstailspin. If confidence lies at the heart of finance, Russiastands as a metaphor for how much of it has been lost. Instead ofpropping each other up at this most surreal of summits, the twokey Presidents seemed to be dragging each other down. Clinton'slackluster public performance only seemed to emphasize the feeblecondition of his host country. Yeltsin's failing faculties andcrumbling power base reflected badly on the strong backing theU.S. has given him. At one level, Clinton's tough-love advice toplay by the rules of free-market democracy is sound advice, butit may well be ignored. To citizens around the world anxiouslyweighing the turbulent course of events, the summit looked likePotemkin leadership.The ill-timed meeting spotlighted how much the financial crisisrippling around the world is not simply an economic breakdown buta political one as well. Russia was exposed as a country with nogovernment and no plan for recovery. The massive dislocations incountry after country lay in the mismanagement or malfeasance oftop political and business figures, and the difficulty the worldis having in repairing the damage owes much to a set of leaderswho are weak, venal or tarnished.The sweep of the political breakdown is astonishing. InThailand, where the disintegration of the baht one year ago setoff the tidal wave, the Prime Minister presided over aspectacularly corrupt regime. General Chavalit Yongchaiyudh, aformer army chief turned politician, wasted billions propping upailing finance companies owned by political cronies. When thecurrency crumbled under the pressure, he chose to throw goodmoney after bad in a futile attempt to avoid a humiliatingdevaluation.Malaysia's cantankerous, 72-year-old Premier Mahathir Mohamad,strongman for 17 years, ran a one-man show with total controlover the country's economic machinery. In his obsessive searchfor respect from the West, he spent lavishly to build the biggestand the tallest--the world's tallest skyscraper, the highestflagpole, the tallest control tower--wasting the foreigninvestment that streamed eagerly in.When the country's currency and stock market came crashing downof its own weight, Mahathir blamed outsiders--a cabal ofspeculators, Jews and enemies of the developing world. Toreplenish the treasury, he asked the rich to pawn their jewelryoverseas and bring the money back to Malaysia. To cut a hugeforeign bill for food, he asked people to plant vegetables intheir front yards. Last week Mahathir took the bold step backwardof withdrawing Malaysia from the global economy, sealing off itscurrency from outside trade and sacking the pro-market FinanceMinister. Absurdly, he also found time to attempt a world recordby leading 1,998 Malaysian-made cars in the world's longestconvoy.PAGE 1|Indonesia too continued to receive billions in foreign cashdespite years of the most egregious corruption and nepotismsanctioned by President Suharto. Apologists argued that funnelingcontracts to his children did not matter too much since theprojects--new roads, factories, airports--did get built. If theycost more than they should have, the projects still contributedto annual economic growth of more than 6.5% for 25 years. Whenthe corruption surcharge helped destroy the rupiah andemergency austerity measures threatened to starve a populationwhere almost 50% are now on or below the poverty line, riotsdrove Suharto from office. In his place came the eccentric B.J.Habibie, who may have good intentions but probably lacks thepopular support to translate them into reforms. Indonesia, saysMiranda Goeltom, a director of the central bank, is no longerruled by one man who can determine everything.These leaders were guilty as well of believing there wassomething unique about Asia's economic growth: that it wouldcontinue unabated regardless of leadership or official policy.That myth was perfected in Japan, where the entire ruling systemwas set up to avoid the necessity of any single person's takingresponsibility for anything. The country's clan politics workedwell enough when there were sufficient spoils to spread around.But when trouble loomed, there was no mechanism to produce aleader capable of making difficult decisions in the nationalinterest.Japan's crisis, perhaps the root cause of today's economicturmoil, occurred in slow motion, giving plenty of time for itsleaders to step in with the hard but manageable changes requiredto forestall full-scale recession. Over eight years, land pricescrashed and then stock prices, and then the entire bankingsystem threatened to cave in. But the country's politicians andbureaucrats repeatedly buried their heads in vain hopes that theproblems would just go away. Having let its own ailments festerfor years, Japan was in no position, despite its wealth, to helpwhen its neighbors began to crumble.At a minimum, Asians expected Japan to contribute by setting itsown economic house in order. So far, it hasn't. Japan's leadersstill show no stomach for revamping their financial system andslashing regulations that coddle business. No one has shown theinterest or strength to break the money links between inefficientindustries and the ruling party. Party politics and bureaucraticinertia ground down the reformist plans of the last PrimeMinister, and he has been replaced by a cookie-cutter party manwith what a Tokyo commentator called all the pizazz of coldpizza.It is hardly surprising that Russia should be hardest hit of all.Its leaders have been in place for only seven years, but in thattime they have failed utterly to create viable institutions ofpower. Under Yeltsin, Russia acquired the trappings of acivilized state: an office of the President, a federalparliament, private banks. But they only looked authentic. Thepresidency resembled the throne of the Czar, upon which theentire welfare of the nation rested. But the erratic Yeltsin isphysically and politically out of touch, having lost control ofhis Cabinet, the parliament and the people. The Duma, supposedlya representative legislature, is hardly that at all. Except forthe Communists, Russia has no real political parties, so most ofthe Deputies vie for power rather than enacting the laws Russianeeds. The banks have served all too often as the privatepreserves of robber barons.The more the sick nations grasp the failures of their ownleaders, the more they long for some outsider to set thingsright. Fairly or not, the burden of leadership ultimately fallson the U.S. Clinton ought to be the reassurer of last resort, buthe is distracted by the Lewinsky scandal, and many are concernedthat his personal stature and moral authority are seeping away.His attention to foreign affairs has always been intermittent butsurely diminishes the more time he must spend with his lawyers.Clinton has been a good student of international economics,grasping the inexorable forces that are changing the shape of theworld day by day. Some critics fault him for settling for acountry-by-country approach instead of trying to build a newworld economic architecture. In any case, that policy isfoundering as weak governments fail to give the markets what theydemand.More ominously, the much heralded march of market economies anddemocratization is stalling. Russia is tempted to return to acommand economy and strongman rule. The authoritarian impulsesof leaders like Malaysia's Mahathir are showing the ugly side ofthe Asian values that were touted as a ticket to prosperityand order. Instead of standing tall, the world's leaders seemhunkered down, adopting timid defensive measures rather than theforceful steps each nation needs. In every country there arevery difficult domestic politics that confine leaders, andglobalization surely makes life more difficult forstatesmanship. To some extent there is an inescapable logicbuilt into the phenomenon: you cannot have both laissez-faireand command-control; you cannot say leaders should get out ofthe way of the economy, then whistle them back to fix thingswhen there's trouble. Yet in the end, trust and confidence canbe at least as important as monetary policy or banking reforms,and those, surely, are well within the job definition of aleader.|PAGE 2