Leaked At Last - The Bilderberg Group

15th June 1999

The Bilderberg Group is an annual gathering of top politicians, media owners and heads of corporations. They meet in secrecy at a different location each year to discuss the state of the world and how to forward the establishment of western capitalism across the globe. The meetings are recorded in minutes but up until 1999, no copy of these minutes had ever reached the public domain. In 1999, a copy of the minutes was leaked. What follows is a word for word copy of those leaked minutes.

Bilderberg Meetings

SINTRA
JUNE 3RD-6TH 1999
NOT FOR QUOTATION

Introduction

The forty-seventh Bilderberg Meeting was held at the Caesar Park Hotel Penha Longa, Sintra, Portugal, from June 3rd-6th 1999. There were 111 participants from 24 countries. The participants represented government, diplomacy, politics, business, law, education, journalism and institutes specialising in national and international studies. All participants spoke in a personal capacity, not as representatives of their national governments or employers. As is usual at Bilderberg Meetings, in order to permit frank and open discussion, no public reporting of the conference took place.

This booklet is an account of the 1999 Bilderberg Meeting and is distributed only to participants of this and past conferences and to prospective participants of future conferences. It represents a summary of the panellists' opening remarks for each session, and of the comments and interventions in the subsequent discussion.

Participants

HONORARY CHAIRMAN
Belgium
Etienne Davignon Chairman, Société Générale de Belgique HONORARY SECRETARY GENERAL
Netherlands
Victor Halberstadt Professor of Economics, Leiden University

GENERAL PARTICIPANTS:

Italy
Umberto Agnelli - Chairman, IFIL-Finanziaraia di Partecipazioni

Spain
Esperanza Aguirre y Gil de Biedma - President of the Spanish Senate

United States of America
Paul A. Allaire - Chairman, Xerox Corporation

Portugal
Joaquim F. do Amaral - Member of Parliament

Sweden
Anders Åslund - Senior Associate, Carnegie Endowment for International Peace

Portugal
Francisco Pinto Balsemão - Professor of Communication Science, New University, Lisbon; Chairman, IMPRESA

Sweden
Percy Barnevik - Chairman, Investor

United States of America
Evan Bayh - Senator (Democrat, Indiana)

Italy
Franco Bernabè - Managing Director and CEO, Telecom Italia

Sweden
Carl Bildt - Member of Parliament

Canada
Conrad M. Black - Chairman, Telegraph Group

United States of America
Charles G. Boyd - Executive Director, National Security Study Group

Canada
John A.D. de Chastelain - Chairman, Independent International Commission on Decommissioning

Great Britain
Kenneth Clarke - Member of Parliament

Norway
Kristin Clemet - Deputy Director General, Confederation of Business and Industry

France
Bertrand Collomb - Chairman and CEO, Lafarge

United States of America
Jon S. Corzine - Retired Senior Partner, Goldman Sachs & Co

Portugal
João Cardona G. Cravinho - Minister for Infrastructure, Planning and Territorial Administration

Greece
George A. David - Chairman of the Board, Hellenic Bottling Company

United States of America
Christopher J. Dodd - Senator (Democrat, Connecticut)

United States of America
Thomas E. Donilon - Attorney-at-Law, O'Melveney & Meyers

Turkey
Gazi Erçel - Governor, Central Bank of Turkey

Turkey
Sedat Ergin - Ankara Bureau Chief, Hürriyet

United States of America
Martin S. Feldstein - President and CEO, National Bureau of Economic Research

International
Stanley Fischer - First Deputy Managing Director, International Monetary Fund

Italy
Paolo Fresco - Chairman, Fiat v Italy
Francesco Giavazzi - Professor of Economics, Bocconi University, Milan

Canada
Peter Godsoe C. - Chairman and CEO, Bank of Nova Scotia

United States of America
Donald E. Graham - Publisher, The Washington Post

Netherlands
Frank H.G. de Grave - Minister of Defence

Portugal
Eduardo C. Marçal Grilo - Minister of Education

United States of America
Chuck Hagel - Senator (Republican, Nebraska)

Sweden
Tom C. Hedelius - Chairman, Svenska Handelsbanken

Norway
Per Egil Hegge - Editor, Aftenposten

Canada
Peter A. Herrndorf - Former Chairman and CEO, TV Ontario; Senior Visiting Fellow, University of Toronto

United States of America
Jim Hoagland - Associate Editor, The Washington Post

Norway
Westye Höegh - Chairman of the Board, Leif Höegh & Co.; Former President, Norwegian Shipowners' Association

United States of America
Richard C. Holbrooke - Ambassador to the UN designate

Belgium
Jan Huyghebaert - Chairman, Almanij N.V.

International
Otmar Issing - Member of the Executive Board, European Central Bank

United States of America
Vernon E. Jordan Jr. - Senior Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (Attorneys-at-Law)

Bulgaria
Nikolai Kamov - Member of Parliament

Turkey
Suna Kiraç - Vice-Chairman of the Board, Koç Holding

United States of America
Henry A. Kissinger - Chairman, Kissinger Associates

Germany
Hilmar Kopper - Chairman of the Supervisory Board, Deutsche Bank

Greece
Yannos Kranidiotis - Alternate Minister for Foreign Affairs

United States of America
Marie-Josée Kravis - Senior Fellow, Hudson Institute

United States of America
Jan Leschly - CEO, SmithKline Beecham

International
Erkki Liikanen - Member of the European Commission

Canada
Roy MacLaren - High Commissioner for Canada in Britain

Canada
Margaret O. MacMillan - Editor, International Journal

Great Britain
Peter Mandelson - Member of Parliament

United States of America
Jessica T. Mathews - President, Carnegie Endowment for International Peace

United States of America
William J. McDonough - President, Federal Reserve Bank of New York

United States of America
Richard A. McGinn - Chairman and CEO, Lucent Technologies

Portugal
Vasco de Mello Vice - Chairman and CEO, Grupo José de Mello

Ukraine
Ihor Mityukov - Minister of Finance

France
Dominique Moïsi - Deputy Director, IFRI

International
Mario Monti - Member of the European Commission

Portugal
Francisco Murteira Nabo - President and CEO, Portugal Telecom

Germany
Matthias Nass - Deputy Editor, Die Zeit

Netherlands
Her Majesty the Queen of the Netherlands

Iceland
David Oddsson - Prime Minister

Poland
Andrzej Olechowski - Chairman, Central Europe Trust

Finland
Jorma Ollila - Chairman of the Board and CEO, Nokia Corporation

International
Tommaso Padoa-Schioppa - Member of the Executive Board, European Central Bank

Germany
Werner A. Perger - Political Correspondent, Die Zeit

Great Britain
Jonathon Porritt - Programme Director, Forum for the Future

Italy
Alessandro Profumo - CEO, Credito Italiano

Switzerland
David de Pury - Chairman, de Pury Pictet Turrettini & Co.

Austria
Gerhard Randa - CEO and Chairman, Bank Austria

United States of America
Steven Rattner - Deputy Chief Executive, Lazard Freres & Co.

United States of America
Bill Richardson - Secretary of Energy

United States of America
David Rockefeller - Chairman, Chase Manhattan Bank International Advisory Committee

Spain
Matías Rodriguez lnciarte - Executive Vice Chairman, BSCH

Sweden
Mauricio Rojas - Associate Professor of Economic History, Lund University; Director of Timbro's Centre for Welfare Reform

Great Britain
Eric Roll - Senior Adviser, Warburg Dillon Read

Sweden
Björn Rosengren - Minister for Industry, Employment and Communication

Portugal
Ricardo E.S. Salgado - President and CEO, Grupo Espírito Santo

Portugal
Jorge Sampaio - President of Portugal

Portugal
Nicolau Santos - Editor-in-Chief, EXPRESSO

Netherlands
Ad J. Scheepbouwer - Chairman and CEO, TNT Post Group

Austria
Richard Schenz - CEO and Chairman of the Board, OMV

Austria
Rudolf Scholten - Member of the Board of Executive Directors, Oesterreichische Kontrollbank

Germany
Jürgen E. Schrempp - Chairman of the Board of Management, DaimlerChrysler

Denmark
Tøger Seidenfaden - Editor-in-Chief, Politiken

United States of America
Robert B. Shapiro - Chairman and CEO, Monsanto Company

Russia
Lilia Shevtsova - Carnegie Moscow Center

Portugal
Artur Santos Silva - President and CEO, BPI Group

Spain
Pedro Solbes Mira - Member of Parliament, Socialist Party

Hungary
György Surányi - President, National Bank of Hungary

Great Britain
J. Martin Taylor - Former Chief Executive, Barclays

United States of America
G. Richard Thoman - President and CEO, Xerox Corporation

United States of America
John L. Thornton - President and CO-COO, Goldman Sachs Group

Russia
Dmitri V. Trenin - Deputy Director, Carnegie Moscow Center

France
Jean-Claude Trichet - Governor, Banque de France

United States of America
Laura d'Andrea Tyson - Dean, Haas School of Business, University of California at Berkeley

Finland
Matti Vanhala - Chairman of the Board, Bank of Finland

Finland
Pentti Vartia - Managing Director, Research Institute of the Finnish Economy (ETLA)

Switzerland
Daniel L Vasella - Chairman and CEO, Novartis

Greece
Thanos M. Veremis - Professor of Political History, University of Athens; President of Eliamep

Austria
Franz Vranitzky - Former Federal Chancellor

Netherlands
Lodewijk J. de Waal - Chairman, Dutch Confederation of Trade Unions (FNV)

Great Britain
Martin Wolf - Associate Editor and Economics Commentator, The Financial Times

International/
United States of America
James D. Wolfensohn - President, The World Bank

Germany
Otto Wolff von Amerongen - Chairman and CEO of Otto Wolff GmbH

Turkey
Erkut Yücaoglu - Chairman, Tusiad

Czechoslovakia
Michael Zantovsk - Chairman of the Committee on Foreign Affairs, Defense and Security, Czech Senate

Austria
Norbert Zimmermann - Chairman, Berndorf

RAPPORTEURS:

Great Britain
John Micklethwait - New York Bureau Chief, The Economist

Great Britain
Adrian Wooldridge - Foreign Correspondent, The Economist

IN ATTENDANCE:

Netherlands
Maja Banck - Executive Secretary, Bilderberg Meetings

Portugal
João A. Estarreja Local Organiser 1999 Conference

United States of America
Michael J. Farren - Adviser, American Friends of Bilderberg, Inc.

Austria
Diemut Kastner - Local Organiser 2000 Conference

BILDERBERG MEETINGS
SINTRA
JUNE 3RD-6TH 1999

Agenda and minutes I: Kosovo

Moderator:Henry A. Kissinger
Speakers:
Carl Bildt
Charles G. Boyd
Dominique Moïsi
Michael Zantovsk

THIS meeting took place as Slobodan Milosevic prepared to surrender to NATO. Given these auspicious circumstances, the mood in the meeting was surprisingly subdued. Some participants declared the war a success. Some even called it the first "post-nationalist war" -- one that has solidified the European Union and reconfigured foreign policy on the basis of universal values rather than national interests. But most of the speakers concentrated on the downside of the conflict. Kosovo has left the Balkans devastated; it has strained relations with both Russia and China; and it has raised the possibility that Milosevic will be succeeded by somebody who is even worse.

FIRST PANELLIST
The fundamental fact about Kosovo is that we won and Milosevic lost. The victory was far from ideal, however. We went in the right direction for the right reason but with the wrong means. And it raises a troubling question: are there causes that are worth killing for but not worth dying for?

The war marks our entry into a new world in which national sovereignty is not the ultimate ratio of political life. It is highly significant that the war broke out on the same day in March that the House of Lords passed its verdict on General Pinochet. The war also gave a new meaning to the term Europe: much more so than the Euro which was launched three months before the conflict was started. Part of what it means to be a European is to refuse to accept ethnic cleansing.

The war raises questions about both the United States and Russia. What price is the United States willing to pay to remain the world's only hyper-power? The answer given by Kosovo is far from clear, with America willing to deploy its "soft power" but much more reluctant about its "hard power". America is strong in spite of what happens in Washington, not because of it. As for Russia, it is coming out of an age of interventionist imperialism at precisely the time when the rest of the world is entering a new age of interest in humanitarian causes. Russia is being told to exercise restraint at exactly the same time that the rest of the world is embracing intervention.

SECOND PANELLIST
Kosovo is a long-standing legacy of the Ottoman and Habsburg Empires and their failure to install a proper political system in the region. It will thus last for many years to come. In the nineteenth century the Great Powers devised the Concert of Europe to deal with the problem; now we have the Contact Group. A century ago people described it as a "powder keg"; now it has an awful tendency to explode.

The war was marred by three serious problems. NATO used force as a substitute for diplomacy rather than a support for it. It failed to understand the real nature of the conflict: this is not a matter of quick fixes but of long-term management and containment. And it used force in a way that minimised danger to itself but maximised danger to the people it was trying to protect.

Kosovo is now a wasteland, a humanitarian disaster comparable with Cambodia; the region around it has been profoundly destabilised; and Serbia is in danger of imploding. We cannot solve the Balkan problem without the help of Serbia, which overshadows the region in much the same way that Germany overshadows Europe. But Serbia's leaders have been indicted as war criminals, and the country is likely to be racked with social problems, fuelled by despair. We may be entering the twenty-first century in calendar terms. But in political terms we are much closer to the nineteenth.

THIRD PANELLIST
The war in Kosovo stems from the fact that the "solution" to the Bosnia problem was nothing of the sort. It failed to address the security concerns of the major players and left two of the three ethnic groups that make up the new country wishing they were somewhere else. If we remove troops from Bosnia, the conflict will reignite immediately.

In Kosovo, the West used NATO in a way that the rest of the world thought was illegitimate: it intervened in an area that was not its prime responsibility; and it did not bother to get the endorsement of the United Nations. From a military commander's point of view, legitimacy is crucial: if you are going to ask people to sacrifice their lives the operation has to be thoroughly legitimate from the top down.

In the Gulf War, the president clearly defined both the objective and the strategy, and then gave commanders great freedom in controlling operations. In Kosovo there were nineteen masters rather than one, and commanders were hamstrung over operational details (something that war colleges and military staff will be studying for years).

The problems with the peacekeeping operation will be huge. The war is far from over in the minds of the participants. Disarming the KLA could be impossible. The Serbs will respond to any acts of terrorism. Building institutions that can govern this area will be a nightmare. There will inevitably be a conflict between military forces that have access to resources but no enthusiasm for getting involved in civic reconstruction and civil authorities that are desperately short of resources.

FOURTH PANELLIST
The new Europe is not being born in Brussels or Washington but in Kosovo. Kosovo may mark the end of the United Nations' involvement in Europe so far as security issues are concerned. The differences in priorities and values between Europe and other states is just too great -- and there is really no reason why China should have a veto over Europe's involvement in Kosovo.

Kosovo is leading to a strengthening of Europe's identity at the expense of that of its sovereign states. Central and Eastern Europe were not prepared for this development. They thought they were buying an insurance policy by joining NATO -- but just twelve days after they joined NATO started the bombing. Only a few years after they regained their sovereignty with the end of Communism, these states are being obliged to give it up again.

International law is of little help in making sense of the post-Kosovo world. Three fundamental principles are in conflict. The principle of self-determination that was established by Versailles; the principle of national sovereignty that flourished after the Second World War; and the principle of universal human rights. At the Congress of Berlin somebody pointed out that the new dividing line in Europe ran through Bulgaria. Bismarck replied that we are here for the peace of Europe rather than the happiness of Bulgarians. A hundred-and-thirty years later "the happiness of the Bulgarians" is still crucial to the peace of Europe.

MODERATOR
There are two ways to conduct foreign policy. The first takes the view of the prophet, who believes in fighting crusades for absolute values; the second that of the statesman, who believes that objectives should be achieved in stages. More lives have been lost in crusades, with their excessive self-righteousness, than in statesman's wars. The notion of sovereignty was created in reaction to the Thirty Years War, which saw 30% of Europe's population killed with the most elementary weapons.

It was a mistake to let the war in Kosovo happen (though we had no choice but to win once war had been declared). We devastated the region that we were trying to save purely in order to avoid suffering casualties ourselves. We allowed the agenda to be set by domestic pressure groups, thus making it difficult to end the war. And we established a principle that the rest of the world does not accept. A war that leads to the destruction of the region that it was designed to save cannot be considered a triumph of diplomacy. It would have been better to build on last September's accord between the negotiators and Milosevic.

American politics fragmented on this issue. Kosovo could be this generation's equivalent of Vietnam -- a conflict that could split society and convulse us with self-righteousness. Meanwhile, the Balkans looks far from stable. Macedonia is combustible. The only thing that is preventing Bosnia from falling apart in our presence. NATO is in danger of replacing the Ottoman and Habsburg Empires in a series of permanent protectorates.

DISCUSSION
Several participants thought that the panel was too gloomy. A Dane pointed out that the operation was a major success by the Alliance's own criteria, and that it had also garnered considerable legitimacy in the eyes of the public. It seemed perverse to complain that its soldiers were not killed in sufficient quantities. A British politician also thought the victory was worth celebrating. It was right to take on people like Saddam Hussein and Milosevic in order to deter others. Kosovo involved questions of national interest as well as humanitarianism. And he insisted that getting rid of Milosevic should remain one of the clear aims of the alliance. The second panellist agreed with the idea of trying to force Milosevic to go to The Hague, but pointed out that other indicted war criminals from Bosnia remained at large.

Others thought that a little gloom was indeed in order. A Greek warned of the depopulation of the region. An Austrian urged the international community to step in to deal with the problem of refugees. More than two-thirds of the refugees were with host families in Albania. But a combination of "family fatigue" and lack of compensation could make this situation explosive. A Russian warned that, well meaning though it might have been, NATO's intervention would leave behind a huge number of long-term problems. These included resentment in Russia -- combined with a feeling that Russia now has a carte blanche to intervene in Chechyna -- and the possibility that the next regime in Serbia will be even worse. One panellist noted that, back in 1995, the American people had been promised that their troops would only stay in Bosnia for a year -- and they are still there five years later. They could easily be in Kosovo for a quarter of a century.

The cost of rebuilding Kosovo and Serbia worried several people. One of the panellists pointed out that 70% of the targets had been infrastructure: that meant that the cost of reconstruction would be gigantic. Another panellist doubted whether stability could be restored to the region without considerable investment -- perhaps as much as $50 billion. A British politician wondered whether the alliance could hang together after the end of the war. He warned that there would be little popular enthusiasm for putting lots of resources into solving the region's gigantic problems The idea that Kosovo had been the first "post-nationalist war" -- and one that gave a huge boost to the ideal of European unification -- came in for some heavy fire. A German argued that it was much too early to celebrate the birth of a new Europe: had the war gone on, the decision about whether to send in ground troops would have torn NATO apart. A Canadian pointed out that nothing would have been achieved without the United States. Is this a new sort of "soft left war", he wondered, one based neither on national interest nor on the safety of the people who are supposedly being saved? A Portuguese worried about "selective solidarity". There was little worry about outrages in East Timor, for example. A Russian argued that what we are witnessing is not so much the birth of the new world order as the collapse of the old one. What is emerging is a world without consistent standards. NATO will not bomb Moscow if Russia invades Chechnya.

The first panellist defended his position. He argued against the realpolitik school: that it is sometimes realistic to be moral and naive to be over-cynical. And he pointed out that, for all their complexities, the Balkans was an area of brutal simplicities. The moderator implied that this was an oversimplification. Everybody disapproved of massacres; the question was how to prevent them in the first place. The concept of strategic interest had been turned on its head when NATO was only prepared to bomb for three days in Iraq but 70 days in Kosovo. How did one persuade countries like China, Russia and India that NATO's new mandate was not just a new version of "the white man's burden" -- colonialism? There were, indeed, new dimensions to foreign policy but they had to be looked at in a traditional framework.

II: The US Political Scene
Moderator:
Jim Hoagland
Speakers:
Evan Bayh
Christopher J. Dodd
Chuck Hagel

IN HIS introduction, the moderator argued that the years since the end of the Cold War have disproved the idea that America would retreat back into its shell. On a succession of issues -- the Gulf war, NATO expansion, Kosovo -- America has shown a desire to take part. On the other hand, the notion of a new Pax Americana also plainly does not hold. America has only intervened in coalitions. Foreign policy, he argued, is likely to remain an ad hoc affair, often influenced by domestic concerns, with the main danger being an indifferent America, rather than an isolationist one. This seemed to depress most of the subsequent speakers, who argued that on a variety of issues from free trade to China and Kosovo, American foreign policy seemed to lack leadership. And they looked for ways in which American politicians might be able to sell international issues to their constituents.

FIRST PANELLIST
The election is very important, most obviously because the prizes on offer include the White House. But the stakes are also high elsewhere. Control of the House of Representatives may switch. And although the Democrats are unlikely to win the Senate, they could narrow the gap considerably. Even the races for the State legislatures are interesting, because of redistricting. In California alone, the Democrats could pick up six seats in the House just by getting the right to draw the map.

It will be a very close race. In the presidential race, the Republican base is 159 (the electoral college votes that Dole won in 1996). The Democrats start with 161 (which you get by adding California to the states Dukakis won in 1988). The election will be decided in 12-13 states, including New Jersey and Florida. Congress is also desperately close: the House of Representatives will be decided in around fifty races, the Senate in around thirteen. It will be a race where caution will be the watchword in both parties.

Inevitably, this implies that domestic issues, rather than foreign affairs, will be the main concern. Kosovo had seemed like a big potential negative for the Democrats: polls had been trending downwards on the issue. Now that fear seems to have disappeared. China could become an issue. And there will be protectionist pressures, particularly in the industrial states. The benefits of free trade are diffuse, but the losses are concentrated.

SECOND PANELLIST
On the face of it politics looks in pretty good shape. There is a small flotilla of presidential candidates, a lot of money is being raised and the media is already devoting a lot of space to the presidential race. If you go back to 1960, Kennedy did not even declare his candidacy until February of that year. This time, with eighteen months to go, the race is already in full swing. And things are even better if you are a Democrat because of the Republican Party's suicidal tendencies.

In fact American politics is in a pretty awful state. Voter turnout in 1998 was the lowest since 1942. Fewer people are linked to parties: only 29% claim to be Democrats, and 22% Republican. The American public is passive. The quality of people seeking political office has also declined.

The reasons for this have a lot to do with the way that politics consumes so much money and time. Twenty years ago, a congressional race cost $73,000; now $500,000 is the minimum. In 1976, a senate race might cost $550,000; now the figure is $3.3 million. Twenty years ago the first thing a candidate did was to look for good field managers. Now you need pollsters and media consultants. Four-fifths of the money goes on media spending -- often on negative campaigns Depressingly this virus is spreading. American campaigning has cropped up in countries like Israel and South Africa. Yet all the signs are that the standard of debates on international affairs within America has declined sharply. Compare the gap between the debate over the Gulf war and the muddle over Kosovo. Will it improve? Only if there is serious campaign-finance reform and the media changes the way it covers politics.

THIRD PANELLIST
Politics has always been a bizarre business. In 1991, George Bush's re-election was considered a formality. Seventeen months later, he was out of a job, having been comfortably beaten. At the moment few people expect foreign policy to play a strong role next year. They could be wrong.

The last time foreign policy seemed significant was in the 1980 race. But problems like Kosovo, the Middle East and the India-Pakistan squabble are not going to go away. And on the Republican side in particular the expertise of the candidate may be judged on foreign policy. George W. Bush and John McCain look the two strongest candidates.

There will come a moment when each candidate will be asked to define the national interest: to say what America's role in the world should be, and then to say how they will protect that interest. As long as the outside world is difficult and dangerous, it will affect domestic politics. Many Americans are beginning to realise that their livelihoods rely on events far away. Without markets for its grain, it is not just Nebraska's farmers that suffer but also its tax revenues -- and by extension its schools and public services.

DISCUSSION
Most of the participants seemed to agree with the first two panellists, rather than the third: they thought that foreign policy would play a relatively small role in the upcoming campaign. Instead the focus would be on domestic issues, such as education, healthcare, welfare and so on. The third panellist still defended his position. Politics, he said, is about relevance, and globalisation is relevant. He also thought that trade could be one of the areas that divides Gore from Bush/McCain. And he got some indirect support from another American participant, who warned that politics could change quickly -- and front runners had a habit of running into difficulty. Ed Muskie had "wept" his way out of the race; Michael pukakis had "tanked" away his lead. When Bill Clinton came to Bilderberg in 1991, few thought they were meeting the next president.

Several participants seemed particularly depressed about the relative unpopularity of free trade in American politics. One Canadian participant pointed to the failure to get fast track, and the lack of American leadership at the WTO. An American thought that something was missing from the debate. With low employment and rising wages, surely it should be easy to prove the argument for free trade. She thought that trade had got mixed up in other debates -- about labour rights for instance. A panellist sympathised: politicians had failed to show Americans where their long-term interests lay. Exports now support two out five manufacturing jobs and a third of those in agriculture. "We have allowed the demagogues to fill the vacuum", he complained, though he also stressed that politicians should do more to look after those who lost out because of free trade.

Although Russia did briefly enter the discussion (one panellist argued that history would judge America poorly in its treatment of its former adversary), the two places deemed most likely to impact American foreign policy were China and Kosovo. The former will be thrown into sharp relief by two coming debates in Congress -- one on China's MFN status, the other on its WTO membership. One panellist was particularly annoyed by the way that the Chinese government had allowed people to stone the American embassy (even worse than the spying in his book). But he still thought that China was a huge economic and political power -- a place that should be engaged rather than shunned. Another American was even more positive, pointing out that China had behaved pretty well over issues such as the transfer of power in Hong Kong and the Asian crisis.

Whatever the result of the war in Kosovo, argued one panellist, the struggle still represented something of a failure for American foreign policy. It had never been properly explained to the American people. America had been given a second chance with Kosovo. It should not waste it. Several participants brought up the question of reconstruction. There would be no great appetite to rebuild Serbia as long as Milosevic was in power, argued one panellist. Another pointed to the recent difficulty in raising money for the earthquake victims in the United States' backyard.

One Swiss participant suggested democratising foreign policy, by for instance having a parliamentary consultative committee for the WTO. This appealed to one of the panellists, though he pointed out that it is extremely difficult just to get people in Congress to meet their Mexican equivalents -- let alone their peers further overseas. All the panellists thought that Business should be a lot clearer about its priorities. It should stop supporting candidates who attached things like opposition to abortion to trade treaties.

A repeated theme was the need for some sort of leadership -- over China, over Kosovo, over trade. America, argued one panel-list, has isolationist tendencies and it tends to revert to them, whenever there is no leadership. This not only applies to the presidency, but also to Congress. For instance, unions account for only around 8% of the workforce (if you exclude public employees). It is possible to be a free trading Democrat senator: to make the case to workers about the dangers of protectionism. The unions' political influence would also wain with campaign finance reform.

The discussion ended about domestic politics. One Democrat argued that the Republican revolution is as good as finished. The argument that "we'll burn the village to save it" no longer carries weight: people are not as concerned about big government. Another countered that all three of the main Republican candidates -- McCain, Dole and Bush -- were moderates. The winner of the next election, argued the first panellist, would be the most moderate. The main issue would be values. People are happy economically but they are not happy socially.

III: Current Controversies: Genetics and the Life Sciences

Moderator:
Jan Leschly
Speakers:
Jonathon Porritt
Robert B. Shapiro

THE moderator began by explaining that the world is in the middle of a revolution in our understanding of how genes work. This revolution will produce dramatic changes in the practice of medicine in the next decade -- and raise all sorts of ethical issues. But for the moment, the political debate has focused not on such "red", human biotechnology, but on its "green", agricultural peer -- and particularly on genetically modified food. The first panellist argued that GM food has the power to improve agricultural productivity radically, producing healthier food into the bargain.

The second warned that GM food might disturb the ecological balance, widen inequalities and pose a risk to health. Some participants supported GM food, providing that labelling was clear and the regulatory bodies vigorous. But others were not so sure. Can you really separate modified from unmodified food? And are scientists really as objective as they claim?

FIRST PANELLIST
Ever since the discovery of DNA scientists have been exploring the fundamental structure of life -- at a molecular level and in the process creating a whole new set of tools to advance our mastery over nature. The practical application of this new science has been going on for at least the past twenty years, at an ever-accelerating pace.

Why does biotechnology create so much passion? Genomics is not just a matter of science. People have always worried that we lack the wisdom to intervene in the fundamental processes of life: remember the Tree in the Garden of Eden. All the same, there is plenty of strong evidence that GM food can produce huge benefits for humanity. It will improve agricultural productivity. The yield of the average hectare has more than doubled in the past forty years. By producing hardier crops, biotechnology offers the best chance of feeding the 1.5 billion people in the world who are seriously malnourished -- particularly as there is now so little unused land. And, it will produce better end-products -- such as foods that possess healthier cardiovascular properties or, potentially, polymers built around plants rather than petrochemicals.

But what about the risks? The fundamental safety questions are no different from those asked of previous forms of food technology. The United States is fortunate in that there is a lot of public confidence in regulatory agencies. In Europe that is not the case -- hence the mad cow scare and the current Belgian fracas about chickens. Another worry has to do with the industrialisation of agriculture. In fact, biotechnology is scale neutral: there is no reason why small farms should not gain as well as big ones. Other questions are more difficult to answer. It will not be easy to separate GM and non-GM foods, because they can easily get mixed up on the way to the table. There are also genuine environmental fears about how the new seeds will effect local ecosystems.

SECOND PANELLIST
The first speaker is right on some important things. The number of people on the planet is growing and the amount of additional land available to feed them is limited. He may even be right that many benefits will flow from GM food just as they have from GM healthcare. But those benefits are unlikely to flow without big changes in the behaviour of both companies and governments -- and an honest assessment of the risks.

There is no long-term safety test for foods in the way that there is for health. We need a tougher regulatory process. Companies should be the first to press for tighter regulations -- but instead they spend fortunes trying to persuade governments to impose the least demanding regulations. The second peril is environmental. Europeans put a much higher value on the agricultural environment than Americans: witness the gap between Gloucestershire and Iowa. The truth is that we do not know enough about the long-term impact of GM on the environment. GM 15 not merely a continuation of previous forms of selective breeding; it allows us to create combinations that could not possibly have occurred naturally.

Poor people are already worried that seeds will become more expensive. Of particular concern is the so-called "terminator gene". Perhaps 1.4 billion people depend on re-using seeds. The idea that GM food will help feed the poor is something of a canard. A hundred thousand children under the age often die in Brazil every year because of lack of food. But Brazil is the fifth largest agricultural exporter in the world. Safer things such as sustainable agriculture and multi-cropping should be tried first.

The knock-on effect of getting it wrong could be huge. It could hit the promising pharmaceuticals side of biotechnology. It could further undermine faith in the authority of science. And it could seriously damage trade. There are many people who think that the unnatural reordering of the gene pool constitutes a grave form of human hubris. GM will be the lightning rod of all sorts of anxieties about the industrial world and man's arrogance.

DISCUSSION
The discussion began with two reminders of how important the subject has become. The moderator pointed out that America now wants to put biotechnology on the G7 Agenda. And a Swede described a recent shareholder meeting of a drug company with GM products, where the chairman was physically attacked by two women who had brought shares simply to protest. He argued that the situation with GM food is very similar to that with nuclear power twenty-five years ago -- a battle business interests lost.

Some speakers argued that transparency is the best way to overcome the public's fears. A Swiss businessman argued that much of the solution lies in clear labelling. Provided labels clearly state the origin of food and consumers have a right to choose, then the issue will not be too explosive. In Switzerland's referendum on GM food, two-thirds of the population voted in favour. But the second panellist noted that up until a few years ago the food companies had fought hard against labelling. Labelling is also much harder than it sounds, he argued: GM and non-GM crops get mixed upon the way to market (because different farmers share the same grain elevators, for example) and even while they are growing (through cross-pollination).

Other speakers put their faith in science and regulation. A German businessman called for the creation of an objective panel, free from bias or vested interests, that would both calm the public's fears and make sure that science moves in the right direction. A Belgian supported the idea of a regulator, with the proviso that it should be as international and independent as possible. The first panellist thought there was some historical evidence to support this approach.

The end of the nineteenth century was characterised by similar fears about food, and the response was to create expert bodies based on science. There are now regulatory bodies based on science in all the major regions of the world. But the second panellist was more sceptical. There is no such thing as perfectly objective science, he argued, and there is no way of avoiding making political judgements. Governments need to make sure that scientists are truly independent from vested interests like the GM companies; and they need to listen carefully to consumers. In the end, if consumers think that the regulatory process is inadequate, then it is inadequate.

An American financier wondered about the justification for a "terminator gene", particularly given that one of the arguments in favour of GM foods is that they will help to feed the world's poor. The first panellist pointed out that "terminator" genes are still five years down the road. He argued that the justification for these products is the same as the justification for any protection of intellectual property rights. Nobody will invest the money and effort that it takes to make a new gene unless they can get a return on their investment.

Another American participant wondered whether the GM companies were being as sensitive to the property rights of the developing world: the bulk of the science may be done in the rich world, but 95% of the genes that they work on come from the developing world. She also worried that the GM revolution will increase inequality, just as the green revolution did, because it rewards people who can afford higher quality crops. The first panellist responded that the GM revolution is not as capital intensive as the green revolution: the only thing that changes is what is in the seed not the way that it is farmed. He pointed out that GM foods could hugely decrease inequality by stopping crops from being destroyed by pests and pestilence.

IV: Redesigning the International Financial Architecture

Moderator:
Kenneth Clarke
Speakers:
Martin S. Feldstein
Stanley Fischer
Otmar Issing
Jean-Claude Trichet

V: The Social and Political Impacts on Emerging Markets of Recent Economic Events

Moderator:
Marie-Josée Kravis
Speakers :
Stanley Fischer
William J. McDonough
James D. Wolfensohn

VI: NATO's Future

Moderator:
Henry A. Kissinger
Speakers:
Etienne Davignon
Richard C. Holbrooke
Yannos Kranidiotis
Peter Mandelson

VII: The Relationship between Information Technology and Economic Policy

Moderator:
Jorma Ollila
Speakers:
Richard A. McGinn
J. Martin Taylor
Laura d'Andrea Tyson

VIII: Current Events

Moderator:
Jürgen E. Schrempp
SpeakerS:
Bill Richardson

IX: Russia's Foreign Policy

Moderator:
Jessica T. Mathews
Speakers:
Lilia Shevtsova
Dmitri V. Trenin

X: How Durable is the Current Rosy Complexion of European Politics?

Moderator:
Etienne Davignon
Speakers:
Werner A. Perger
Mauricio Rojas
Martin Wolf

Redesigning the International Financial Architecture THERE was a general sense that the global capital markets have run a little ahead of their regulators. Nobody disputed the idea that the recent crises in emerging markets should be blamed primarily on the countries concerned. But many people thought that the recent series of dramatic upsets also seemed to highlight failings within the international financial system. The regulators present insisted that these failings were now being addressed. But many of the other participants remained sceptical.

FIRST PANELLIST
The recent crises were different from previous ones. Capital flows are both bigger and quicker than before. The current crises tend to involve the Capital Account rather than the Current Account. Such crises do not happen in more developed markets. The basic response has thus been built around two ideas: to strengthen domestic regulation in the countries concerned; and to improve the monitoring of emerging markets.

In practice, that means six steps. The first is to create standards of international behaviour for countries: in most cases (accounting is the obvious exception) these standards are easy to create, but they have been hard to implement. The second Step is the G7's Financial Stability Forum which brings together all the main regulators and international institutions: it has set up committees to look at short-term capital flows, hedge funds and offshore banking centres. The third push is for greater transparency: more of the IMF's dealings are now being made public. The fourth is an attempt to "bail in" the private sector. The fifth is the establishment of contingency credit lines.

The sixth is less a step than an observation: the spread of flexible exchange rate systems. Every crisis has involved a failed attempt to defend a pegged exchange rate. However, flexible countries have tended to do much better. Countries are now much more likely to let their exchange rates float freely -- though a few may follow Argentina down the road to extremely firm currency board systems. Either way, artificial pegs seem to be out of fashion.

SECOND PANELLIST
It is worth noting that this is the first Bilderberg meeting where the Euro is a fact rather than the topic of a discussion. The redesign of the financial system, which is now under way, also needs to be set in context. From 1944-73, there was a system of fixed exchange rates. Since then, there has been only piecemeal reform. In the 1970s there was good deal of talk about whether the IMF should exist at all; in fact it has increased and changed its role. But the basic trend has been very unsystematic. Each crisis has called for a "special facility" of one set or another.

Why do we need to change? The globalisation of capital markets has happened much more quickly than the globalisation of their regulatory systems. The advances in electronic data processing combined with financial liberalisation have made capital flows much swifter and also more uniform: all the big investors are following the same benchmarks and being judged on the same quarterly performance, so they tend to act in an even more herd-like than usual.

The IMF should look at these flows, but it should be aware of its limitations. It is very difficult to be right in a world where money moves so quickly. The IMF should set standards for transparency. But perhaps it should leave the job of assessing them to the private sector. If the IMF says that a country is in good shape, it gets into trouble if that country crashes. But if it says that it the country is unhealthy, it gets accused of starting the crash.

THIRD PANELLIST
There are grounds for being cynical about financial reform. Fear, greed and ignorance remain as ever the main motors of markets. A leading central banker has dismissed the attempts to rebuild the financial architecture as a little interior decoration. There have always been crises -- and by many standards the 1980 debt crisis was much worse than what we now face. But globalisation and the advance of information technology have upset the balance in financial markets. What is needed is not so much one massive redesign as a process of permanent adaptation.

Co-operation is the key. The world's regulators are coming together in more ways than most people realise. The Financial Stability Forum is a good example. Transparency is also important as a way of limiting the herd instinct of investors. What we need to do is to encourage best practices on the regulatory side as well.

None of these things will happen without courage. The IMF has actually exhibited quite a lot of bravery in telling governments what to do. But we must find ways to introduce the private sector. We cannot suppress risks, but we should make sure that the balance between those risks and rewards is clear.

FOURTH PANELLIST
Most of the steps outlined so far make sense. But it is important to realise the limits. Throughout history, people have imagined that they have found the magic solution. But each system from the gold standard to the ERM has run into trouble.

The existing system failed because it allowed enormous crises to take place in emerging markets; and also because the regulatory response to those crises was unsatisfactory. The main blame certainly lies with the emerging countries themselves. They adopted pegged exchange rate systems, they borrowed too much and they did not reform their financial systems. But the IMF also seems to have overstepped its responsibilities. It is not clear that financial decisions about lending money should be tied to causes like trying to reform corporate governance or trade union rules.

What should be the targets? First the IMF should not try to refashion economies. Its lending should be based on short-term, small packages, rather than big, long-term ones, tied to broad [Page 32] reform proposals. Next the emerging countries should bear the main responsibility for making their systems more transparent. And they should find a way of increasing their liquidity. Back-up lines of credit look good in theory; but may not pay out in practice. It is vital that the emerging world feels more secure; otherwise it will close off its markets.

DISCUSSION
The moderator began by throwing out a number of challenges that set the tone for much of the subsequent discussion. Given the IMF'S increased importance, is it a properly accountable body? What is the G7's role and is it the right shape? Given the introduction of the Euro, is it really necessary for so many European countries to attend G7 meetings? How can one begin to establish international regulators when there are such conspicuous rivalries between regulators within countries, especially America? And how do you design a system that bails in the private sector?

Several participants returned to the basic theme that the markets have globalised but the regulatory systems have not. Two European speakers thought the answer is to give a greater role to regional institutions, such as the European Union. One of the panellists was sure that if the Euro worked, more regional currencies would emerge. Others raised the question of dollarisation as a possible cure. One of the panellists disagreed. Argentina and Mexico both face a very difficult question. The only possible reason for surrendering control of your monetary policy to Washington (where nobody would ever make decisions on the basis of what mattered in Buenos Aires) is the fairly rotten financial records of the governments concerned. It would thus be a sign of defeat. Another American participant agreed. Mexico and Argentina both went through recessions just to hold onto their pegs. it is to be hoped that they can run their economies well enough themselves.

There was also a long discussion about how to give the private sector a greater role. One European panellist stressed that [Page 33] bail-outs should not just be based around public-sector money. An American participant said that there had been a clear progression between South Korea and Brazil. In the first instance, the private-sector banks had effectively been strong-armed in; but with Brazil, they had come more willingly. An American economist pushed this point a little harder: what about changing bond contracts and introducing collective action clauses for sovereign debt?

Several private-sector bankers rose to defend their profession. One American banker pointed out that creditors have often been extremely flexible, not least in the bail-out of Long Term Capital Management. The public sector is simply behind: witness the delays in changing the rules about investment banking in the United States. A British banker believed that trust is key. Bankers will "stay in" as along as they can be sure that their rivals have been persuaded to do the same. Another European banker said that banks simply do whatever makes it more likely to get their money back. That is the point, agreed one panellist: co-operation is the obvious way for everybody to gain.

Several people looked at the political side of international regulation. An American participant pointed to the crucial position of the big western economies in most negotiations. For instance the recent rounds of discussion about bank supervision included 136 countries, but most of them were really backbenchers. One panellist returned to the moderator's questions about the composition of G7 meetings. Europe, he stressed, is not a superstate. It is thus correct for countries like France and Germany to keep their individual seats at the table.

Nobody questioned the need for the IMF, but several people questioned its abilities. One participant wanted to give a greater role to ratings agencies. Another pointed out that the IMF has no independent directors. A Briton accepted that there is a good case for a lender of last resort, but only if it lends money at a penal rate. Several people objected to the way that financial reform has been put to the people. One Turkish participant [Page 34] pointed out that nobody explains to voters how, say, reforming social security and taming inflation might be related.

One panellist reiterated his view that the IMF should become a much narrower institution. Another wondered if it really is the lender of last resort and not the subsidiser of last resort -- though he added that the tough medicine handed out to some Asian countries had been justified. The third panellist wanted to see the IMF become a catalyst for change; if not, capital controls will be more likely. The first panellist admitted that the IMF has not always explained its case well. But he argued that the question of the power of a lender of last resort is tied into that of how to bail in the private sector. Until a way is found to keep the private sector involved, it will be very difficult to have an effective lender of last resort.

[Page 35] The Social and Political Impacts on Emerging Markets of Recent Economic Events AS THE moderator argued in her introduction, the backlash against globalisation in many developing countries has been from some perspectives surprisingly muted. All the same the panellists argued that it was impossible to understand either the cause or the cures of the Asian contagion without taking into account non-financial factors, such as the quality of the government, the integrity of the legal system and the prevalence of corruption. Some participants thought that the West needed to put more effort into tackling these things before lending money. Others thought the International Financial Institutions should stick to what they know about rather that engage in broad-ranging social engineering.

FIRST PANELLIST
There are plenty of important non-financial things that have contributed to the spread of the Asian crisis, and also must be part of any cure. These begin with the quality of government: a $57 billion aid package is unlikely to be successful if the government is incompetent and corrupt. Another challenge is the legal system. Countries with property rights and good bankruptcy systems have a much better chance of surviving the storm than those that do not. Many countries sell jobs as judges to the highest bidder: in the Caucuses, for example, many of the wealthiest people are all judges. Then there is the regulatory framework, and finally, the social safety net.

The people who suffer most from economic dislocation are almost always the poor. In Russia as many as 50 million people live on less than $4 a day. Two hundred thousand people have been thrown out of work in the coal mines, threatening social [Page 36] unrest. In South Korea, the poor are still suffering, and the biggest need there is for more structural reform. South Korea was enormously lucky that it elected a reforming president just before the financial system collapsed. Kim used his opportunities to push through structural reform and even set up a social safety net in Korea. Kim now faces an even more intractable problem: the fact that the economy has bounced back without the reform program being completed.

No reform program will be complete without the active participation of business. Seven years ago $30 billion a year flowed into emerging markets. Last year the figure was $300 billion. Engaging business is not just a matter for theoretical debate. It is crucial.

SECOND PANELLIST
The International Monetary Fund is controlled by 24 executive directors, eight from single countries, the rest from groups of countries. Countries vote in proportion to the number of shares they control in the organisation: the United States has 18% of the votes, the G7 has half, meaning that a united West cannot really lose a vote. Everything the IMF does is voted on. But contested votes are rare: decisions are by consensus, with the consensus usually put together outside the boardroom. The IMF's legitimacy results from the fact that it was established by international treaty with more or less universal membership. It sticks very close to its original articles of agreement.

Corruption is a huge problem in the Fund's work. In Kenya, for example, hundreds of millions of dollars worth of reserves have been paid out to businessmen and politicians. The IMF clearly cannot lend developing countries money if is likely to be stolen; but without IMF loans their economies are likely to decline still further. Before giving a large loan to Indonesia the Fund had to deal with corruption, particularly the forestation fund, which represented 2% of GDP but had never been properly accounted for in the budget and provided the president's family with monopolies. Was the Fund's decision to fight corruption [Page 37] destabilising? Perhaps. But the real cause of instability was the system itself.

The International Financial Institutions are facing increasing pressure to use their might to democratise countries. They should not just consult with the government, they are being told, but with interest groups of all descriptions. They are increasingly responding to this pressure. But is it really their job to get countries to accept values and standards that are not rooted in economics? Pushing for the implementation of the International Declaration of Human Rights, for example, is very far from the traditional role of financial institutions.

THIRD PANELLIST
The best way to solve the economic and social problems associated with crises maybe to prevent boom-bust cycles from happening. In America, where these cycles have successfully been resisted, high school dropouts are extraordinary successful at getting new jobs. Boom-bust cycles are particularly bad for emerging markets. The poor are hardest hit. There is no safety net to catch them when they fall. And the middle class is devastated. We were very lucky that a highly capable, democratic leader came to power in South Korea when he did.

The countries that went under in the financial crisis all have one thing in common: very weak banking systems. As Schumpeter pointed out, the only institution that is really essential to a capitalist economy is a bank: banks act as shock absorbers and workout specialists during recessions. But in Asia's command economy the government simply told bankers what to do. In a meeting of bankers in South Korea in April, 1998, it rapidly became clear that none of the bankers in the room had any idea what a "workout loan" was: they had never made a credit judgement and had no idea how to work with a troubled customer.

Banking is a very difficult business to learn. The best way to learn it is to let foreign banks come into you country. Argentina was perhaps the first country to do this. Argentine banking families now send their children to foreign banks so that they can learn the latest banking methodologies before they return to the local bank. The other thing that is crucial is the rule of law: you need to be able to collect on your loans. In the United States you can take ownership of collateral property in three months; in Mexico it can take a minimum of three-and-half years -- and in that time your investment has probably deteriorated hopelessly.

DISCUSSION
An early theme to the discussion was the fate of globalisation as an ideology. A Swiss participant pointed out that the Uruguay Round had ended up in a very different -- and very much more pro-market -- climate than it had begun; now, he warned, the climate seemed to be changing again, with right-wing governments losing power around the world. He wondered what could be done to co-opt emerging countries into the system. A panellist replied that the reason why countries find the transition to the market economy difficult is not usually ideological -- anti-market ideology is dying out in much of the world, and has almost completely disappeared in Latin America -- but lack of competence, particularly in putting together a financial and legal system that works.

For one Swedish participant, confidence was the key. In most countries, there is plenty of private capital available. But no one will invest their capital unless they have confidence in the institutional framework of the countries in which they are investing. Indeed, lack of confidence promotes capital flight: there is thirty times more Russian capital outside the country than inside the country.

Several other participants emphasised the importance of fighting corruption. An Italian pointed out that Europeans are often too shy about fighting corruption in their own backyards: in some European countries bribes are tax deductible. A Canadian thought it a little odd to make the International Financial Institutions the main vehicle for fighting corruption and imposing the rights of labour, when non-governmental organisations already have an [Page 39] impressive track record in fighting for these causes.

The problem of Russia aroused a good deal of comment. A French participant argued that the West bore a good deal of responsibility for Russia's situation. It had encouraged Russia to jump into a free-market system that it had taken forty years for Western Europe to embrace. Perhaps we should recognise that we do not need a perfect world in order to do business, he argued. But most participants were less sympathetic. A Swede pointed out that much of the money sent to Russia has been squandered. The state of the coal industry, for instance, is not primarily a social problem, he argued, but a problem of organised crime. An American asked whether there would ever come a point at which the West would decide to stop lending money to Russia. Yes, replied one of the panellists, the West has said enough is enough in August 1998; but the West has a continuing interest in tying Russia into the international financial system.

However, the main focus of the discussion was the degree to which outsiders -- particularly the international financial institutions -- could intervene in the non-financial affairs of borrowers. A Finnish banker pointed out that it has been standard practice in the academic community for years to take into account social and political factors. A Portuguese participant emphasised the importance of having a "social argument" with all the major partners in economic life.

But others were more sceptical. A Swedish banker pointed out that for his profession, the state of the legal system was simply part of credit risk. An American argued that it could be a huge mistake to interfere in political issues: the IMF should meddle only in areas where it [text cut off].