The Foreign Service Journal, December 2004

tive mandate. The case-based studies in the book are useful and thought-provok- ing for those of us grappling with today’s need to support U.S. compa- nies. Just as promising is the book’s potential to enhance readers’ under- standing of how effective commer- cial diplomacy can boost American prosperity. In so doing, Mr. Kopp’s book bolsters the case for adequate resources and attention to commer- cial diplomacy. E. Anthony Wayne is Assistant Secre- tary for Economic and Business Affairs in the State Department. Balancing the Private and Public Sectors In an Uncertain World: Tough Choices from Wall Street to Washington Robert E. Rubin with Jacob Weisberg, Random House, 2003, $16.95, paperback, 402 pages. R EVIEWED BY L ADD C ONNELL As the first director of the National Economic Council from 1993-1995, and as Secretary of the Treasury from 1995 to 1999, Robert Rubin had a prominent role not only in guiding America’s economy but in forging responses to international financial crises that threatened to upset the global economy throughout the late 1990s. While reflecting his low-key style, In an Uncertain World: Tough Choices from Wall Street to Washington makes clear that the (mostly) successful resolution of these crises was by no means a sure thing. Rubin came to Washington from New York, where he was co-CEO of Goldman Sachs, the investment bank. Though not a politician in any sense of the term, he was a quick learner. His independence, and a knack for appro- priately weighing risk and reward, enabled him to be an honest broker and lent credibility to his substantive input. His time inside the White House also gave him personal links to President Clinton and Clinton’s other core staff that enabled him to be an effective Treasury Secretary from day one. And with Mexico on the verge of financial meltdown just as he took office in January 1995, he needed to be. The Mexican “bailout” was criti- cized by some as welfare for wealthy investors. Rubin concedes that the support provided the Mexican govern- ment created a moral hazard of rewarding bondholders who should have weighed the risks when they bought the bonds. But he makes a good case that the consequences of allowing a Mexican default — a collapse in its currency and economy — would have been far more serious. Instead, the financing package put together by the U.S. and the International Monetary Fund allowed Mexico to restructure its debt from short-term to long-term while committing it to economic reforms and pledging oil export earnings to ensure repayment. Rubin notes common elements in the origins of the financial crisis in Mexico and those that followed, beginning in July 1997, in Thailand, South Korea, Indonesia, Russia and Brazil: fixed exchange rates, some pro- tectionism, too-close relationships between banks and corporate borrow- ers, a lack of financial transparency and, in some cases, more serious self- dealing and corruption. In recounting responses to these crises, Rubin draws four key lessons: First, increased international inter- dependence means that one country’s success can enrich others, but its mis- takes can put them at risk. Second, effective governance is a key complement to a market economy. Only government can create an ade- quate legal and regulatory framework, law enforcement, social safety nets, universal education and the like. Moreover, many multinational issues — terrorism, major environmental problems and contagious diseases among them — can only be effective- ly dealt with by governments. Third, when a crisis of confidence develops and capital starts to flee, nei- ther money nor policy reforms alone can turn the situation around. Both are required. Fourth, while the IMF and other international financial institutions responded well in these cases of finan- cial market turmoil, the “architecture” of the international system lags behind the markets and itself needs reform to become more nimble. While geared primarily for econo- mists, Rubin’s explanation of how he applied private-sector principles to government decision-making, utilizing a theory called “probabilistic decision- making,” is worth even the lay reader’s attention. This approach requires assigning positive or negative values to each of the possible outcomes for alternative courses of action and weighting the outcomes according to their probability. The discussion is occasionally dry, and a bit repetitive, but reflects a practical perspective and wisdom that are far too rare in today’s public policy debates. For anyone to whom these issues matter — and Rubin makes clear how important they are to every American — this memoir is a valu- able contribution. Ladd Connell, an FSO, is in universi- D E C E M B E R 2 0 0 4 / F O R E I G N S E R V I C E J O U R N A L 65 B O O K S