Economic IntelligenceProminent keynote speakers weigh in on the state of the nation,

the global economy … and what is likely to come.

by Cort Smith

he writer and satirist Ambrose Bierce called the future "that period of time in which our affairs prosper, our friends are true, and our happiness assured." Today's uncertainties threaten to put the very hopes and aspirations that he makes light of, out of our reach. But appearances can be deceptive. Is the present economy, viewed in global and his-

torical perspective, really as execrable as it seems? Will President Bush's economic proposals, as many believe, hasten its recovery? Will war with Iraq free our nation from the miasma of economic gloom and leave the world one less tyrant? Is a

currency crisis looming? Is the market undervalued or overvalued? Other considerations affect our future as well. Should America be involved in the building of nations other than its own? What does it mean to be a global superpower? What about that sleeping-

giant of world economy, China? And will the implications of terrorism bring the federal government into all aspects of our economy and lives?

TFor answers to these and other questions, it behooves us to seek guidance from persons of exceptional experience and wisdom.

Gathered at Partnership 2003 in Los Angeles were persons of that caliber—Caspar Weinberger, Jeffrey Garten, Vernon Smith, and Arthur Laffer. In their roles as keynote speakers on February 6 and February 7, these visionaries engaged a packed, attentive audi -ence in the conference center's ballroom by offering provocative, often disparate, but always intelligent opinions on a variety of top-ics of immediate concern to independent financial advisors, in both their private lives and business practices. Laffer's closing com-ment as final speaker summed up optimistically what the conference seemed to impart in its totality—that despite the obstacles set before us, "the best is yet to come."

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A Time of Uncertainty—Caspar WeinbergerUncertainty as a theme for discussion, while shared by all speakers, was especially pertinent to Weinberger's dignified, and oft-times amusing, address. ("I'm delighted to be here," he said. "At my age, I'm delighted to be anywhere.") Current chairman of Forbes, Caspar Weinberger was born in San Francisco in 1917. He graduated Harvard College in 1938, and Harvard Law School in 1941. In 1980 he was nominated by President Ronald Reagan to be Secretary of Defense, and served in that position until his resignation in 1987. It is no surprise, then, that Weinberger was keen on armed confrontation with Iraq. "You may detect a note or two of prejudices or biases in my presentation," he said. "If you do you'll be absolutely correct." But he good-naturedly assured the audience of his tolerance for differing opinion.

He made clear that his reasons for attacking Iraq reached beyond the oil issue, of "going to war for business." Rather, he saw the "removal of uncertainty" as being of paramount importance. "The one thing business cannot do," he said, "is deal with uncertainties." Removing uncertainty meant removing the present Iraqi regime, and that, he believed, would have a "salutary effect" upon business, the nation, and its economy. In the wake of the United Nations' inspections of Iraq and Secretary of State Colin Powell's February 5 presentation to members of the U.N. Security Council (which he characterized as "very masterful"), Weinberger declared unequivocally in his keynote address at Partnership 2003 the following day that military action against Iraq was the only viable option the U.S. had. He said he hoped the U.S. would be supported by as many allies and willing coalition partners as will join— "and we shouldn't be misled into feeling that we have none." He did not see a "smoking gun" as being a necessary prerequisite to U.S. military action. "A gun only smokes when fired," he said, adding: "Is that what we're waiting for?" Nor did he believe that a connection must be established between the al-Qaeda terrorist network and Saddam Hussein (though he maintains we already have). "They're both terrorists. We must go after both," he said, adding that Saddam Hussein "pays subsidies" to the families of 9/11 terrorists. "That's a pretty good connection right there."

The possible war with Iraq is not, of course, without historical precedent, and it is to history we must look to understand our current situation, said Weinberger, to appreciate that war in this region is linked to but not dependent upon ownership of oil. He noted that in 1990, when Saddam Hussein invaded his smaller, weaker neighbor Kuwait, his plan was to then move through Saudi Arabia and the Gulf states with the hope of eventually controlling some 80% to 85% of the world's known oil reserves. "Oil happens to have an extraordinary effect upon our economy," said Weinberger. "If you put all those known reserves in the hands of someone like Saddam Hussein, you're taking quite a chance with the future." But the main reason George Bush senior launched the Gulf War, he maintained, was for the purpose of demonstrating that unprovoked aggression against a small and weaker neighbor would not be

allowed to succeed; the U.S. could nol stand by and "see naked aggression win" without anyone doing anything about it, "for the obvious reason that it encourages all kinds of subsequent aggression and invasions because people so minded would find there was no deterrent, no punishment to acting in that way." The problem, he said, was that although victory was swift—in less than 100 hours the war was over—"we stopped too soon. We should have finished the job, gone in and put Saddam Hussein in a jail cell, perhaps next to Noriega, and taken care of occupying Baghdad and moving on."

We didn't, he said, in part because democracies do not like anything to do with the military or with war or fighting; they prefer diplomatic solutions. We trusted that Saddam would hold fast to his promises. Being a "serial liar," as Weinberger described him, he instead increased his aggressive behavior. Weinberger warned that this feeling of "a revulsion" against the military, as evidenced by many U.S. citizens, can have the effect of so weakening the military that the nation cannot remain a democracy. Other countries have taken issue with our possible intent to attack Iraq as well. When asked how long the sentiment of "anti-Americanism" would last, Weinberger replied: "about 15 minutes after those countries might be invaded."

Near the end of his address, an advisor in the audience asked Weinberger how our government and business can repair American confidence in our capital markets. He replied, "By our actions." He said he thought if we made it clear that the U.S. has "an administration that favors profits, thinks profits are a good thing, and thinks that capital should be free to invest and should be rewarded for its willingness to take risks through tax legislation and other legislation, I think it will become quite evident, and I think inflow of capital will follow that. I think it's happening now."

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