The outlook for economic progress for all people throughout the world has never been nearly as bright as it is today.

Now that the cold war is over, there can be worldwide relief from the cruel burden of military spending. For people of Eastern Europe -- including those who were formerly part of the Soviet Union - the miracle of Germany and Japan's economic recovery over the past 46 years offers an inspiring example.

For the people of Eastern Europe, however, another economic miracle is far from a sure thing. They face a long, painful struggle throughout this winter.

But as Communism loses its grip, the drive of vigorous international competition can bring a far better life. We now have a great chance to make this opportunity truly global.

As we have learned from developing countries in Latin American and Africa, their economies grow when they make it easier to trade among themselves.

When Barber Conable stepped down earlier this year after six years as President of the World Bank, he noted: "Free trade is twice as important for economic progress in developing nations nations as all the development aid in the world."

Since 1988, the World Bank has established the investment guarantee agency to help developing countries attract foreign investment.

The World Bank guarantee protects investors against losses that arises from the noncommercial risks of currency transfer, expropriation, and civil disturbance.

Here is exactly the kind of international investment guarantee that will make a practicality of the critical extension of efficient, competing financial services to developing countries.

Trade liberalizations, coupled with sound economic management, can make the cost and profit structures of these regions enormously attractive in the 1990s. If, for example, Mexican exports grow as much in the next 10 years Chile's have in the past 10 years, Mexico will be exporting $35 billion of goods and services - as much as Australia does today.

We must have global changes in financial services - some of them painful and very costly - to support the coming vast growth in free worldwide markets.

In the United States, there has been surprising change in competition among banking systems that may be just as important as changes in U.S. banking law.

Today, the fastest growing and most successful banks in America are not the biggest money-center banks, but regionals such as Banc One based in Columbus, Ohio, and NCNB in Charlotte, N.C.

These banking companies grow and thrive not by buying more branches or merging into summo-wrestling type mammoths. They grow through loose holding companies that maintain a separate board of directors and the presidents of the banks with which they affiliate.

Most important, they preserve the local community identity. During my days as a businessman, in a little town, I owned a printing company that employed only 20 people. Our banker made all the difference, because he was like a top-flight business consultant. We couldn't afford a separate consultant, but the banker met our needs.

In the United States, where the overwhelming majority of our people work for firms that employ less than 100 people, community bankers are very important.

The least successful banks are the biggest ones, with multi-billion-dollar assets: high leverage, razor-thin capital, and portfolios loaded with commercial real estate and junk bonds. Of course, some big banks in America are extremely successful - despite their size.

Huge mergers - like the pending wedding of Chemical Banking Corp. and Manufacturers Hanover Corp. - are more and more becoming part of the picture. Merger mania could build far bigger future banks, but just as prone to failure as they were before the merger.

The administration and Congress may be in the process of making a change in the law that will build bigger and fatter banks - like summo wrestlers. But, in banking, size will not necessarily bring increased strength.

Amost every merger brings a temporary opportunity to consolidate and eliminate duplicate branches. But that's not a long-term solution: The merged bank still has the same policies it had before, these policies continue to bring difficulties. A bigger bank will just make a bigger failure.

Legislation moving in both houses of Congress, and supported by the Bush administration, seems likely to provide full nationwide branching by early 1992. When this happens, though, it will only make a marginal difference.

Two-thirds of the states, with 80% of the national population, already permit nationwide banking. And most of the other states - with only two small exceptions - permit regional banking across state lines.

A far more serious effot to increase the number of mammoth American banks is the House Banking Committee's initiative that would allow our biggest private corporations to own banks. This was proposed by the administration, but rejected by the Senate Banking Committee.

I agree with the Senate's opposition. Most other countries do allow banks to own shares in nonbank firms. But rarely do industrial or commercial firms own banks.

Such a combination invites vast conflict of interest. Federally insured deposits will permit industrial firms to enjoy lower-than-market interest rates and to roll the dice - knowing that, if they win, it's all theirs; if they lose, the taxpayer is the fall guy.

The banking committees in both the House and the Senate would permit bank holding companies to own affiliates that provide full financial services, including underwriting and trading of securities.

This appears to be a constructive change. It provides a very wise, helpful provision: Only banks with capitalizations significantly above the minimum required levels would be eligible for security affiliation.

That's just one more incentive for banks, especially big banks, to increase capital.

Unfortunately, neither body of Congress provided the kind of decisive improvement that America urgently needs to secure the safety of our banks and savings and loan institutions. Savings and loan failures in the 1980s have already cost the American taxpayer an estimated $500 billion.

American commercial bank failures in the 1980s have virtually eliminated the Federal Deposit Insurance Corp.'s reserve. So commercial banks are likely to be next - and almost every failure of a big commercial bank is going to cost the taxpayer a great deal of money.

Banks, in aggregate, have three times as much deposits as S&Ls. So the potential for loss is very much a concern to all of us in America.

Europe and Japan

Economic cooperation among 12 European countries will come with the so-called "Europe '92." A prime objective of the European economic community was the creation of a single, internal banking market by the end of 1992, for implementation on Jan. 1, 1993.

Under this directive, a credit institution will be able to provide financial services throughout the European community - either through branches or across borders under homecountry rule. There will no need for authorization from the host country. The European directive, based on a universal banking model, includes but not insurance activities.

Any activity authorized in a bank's home country and permitted as a financial activity under the banking directive is automatically permitted in the host country. This liberalization is the case regardless of whether the host country allows its own banks to engage in such an activity.

The home-country banking license will be viewed as a passport to banks in all 12 nations.

Many analysts believe, and I agree, this will result in vigorous deregulation throughout The European community. After all, businesses could simply bypass countries with restrictive regulations. Foreign banks, too, would probably seek to establish themselves in countries with more liberal rules.

The European community will include measures to harmonize banking capital standards. In view of Europe's great international significance, this deregulation could easily and swiftly become global. So what happens in Europe will quickly have an impact on financial services in the United States.

Unless we follow the same path, they'll have a head start on competitiveness. Altogether, Europe '92 is likely to create bigger, more aggressive international financial institutions and financial service competitors.

Don't forget the strong likelihood that Eastern Europe and the former Soviet Union will become members. The 12 European countries are more likely to be 20, or even 30, in the next few years.

It's also true, of course, that the enormous capital needs of the Eastern European states will likely absorb most of the European community's resources for years to come.

Japan's Approach

Far and away, the biggest international change and global deregulating force, is unfolding in Japan. The U.S. point of view will come from the competitive challenge of Japan.

In the United States, not just internationally, Japan is by far the dominant competitor of U.S. banking.

From 1983 to 1988 - just five short years - the foreign assets of Japanese banks grew by $1.3 trillion, raising Japan's share of international assets to 38% from 20%.

By contrast, the share of international banking assets controlled by American banks fell to 15% from 27% in the same five years. By 1988, Japan dominated world banking.

The way I see it, this change is entire the fault of the United States: the federal government's monstrous deficit, coupled with our low savings rate in comparison with the Japanese.

Japanese investment in the later 1980s was absolutely essential to keep the American economy moving toward its highest level of prosperity.

You can't blame them. All 10 of the world's largest banks are now Japanese, as are 15 of the top 20. The United States has only one bank among the world's 30 largest.

Japanese banks have 14% of all banking booked in the United States. Looking at California, Japan holds a 25% share and is growing rapidly.

Just eight years ago, the U.S. market share in Japan was 3%. Now it is a pitiful 1%. Again, this is a product of the difference in the savings rate in the two countries and the collapse in the growth of productivity in America.

Americans should have a love affair with their bank book. We should rediscover the delightful magic of compound interest. We should put 10% - better still, 20% - of every paycheck into a savings account. And not touch it until the compound interest triples our savings.

We should make this level of saving available for investments in such productivity-enhancing measures as education, corporate research, and improved equipment. Becauser we're not doing these things, America's productivity growth is slowing to a stumble - and we are losing.

The President should do this best to stop the massive dissaving of our huge federal deficits. He should propose to Congress a balanced budget - primarily achieved through spending cuts, with tax increases providing a balance.

To show us he mean business, the President should sell the Air Force One and travel in coach on commercial flights. He should also sell off the limousines and direct all government officials to use public transportation - or walk!

He should cut White House staff by 50%. And advise Congress to do the same with its staff. He should sharply reduce his salary - and tell Congress to do the same.

These may seem like penny-ante, cheap kinds of proposals. But you have to do more than talk.

Having served 31 years in the U.S. Senate, I know for certain that Congress could get along very well on half the staff it currently employs. In fact, I turned down about half my cleark hire allowance every year, and other members can do the same thing.

Global Opportunity

Kevin Rafferty, the founding editor of Asia and Pacific Review, has written about what happened to one economic power since 1949, when we threw open our borders to a flood of poor, bedraggled refugees - mostly peasants from the Communist revolution in China.

"Hong Kong is a glittering testament to hard work, independent energy, ruthless, competition, and myriad brave entrepreneurial visions," Mr. Rafferty wrote.

"What was once a barren rock has been transformed into a 21st-century international metropolis. This is, thanks largely to a British colonial government: It was just unimaginative enough to let the once penniless refugee population alone to pursue millions of dreams of how to get rich quickly."

And rich they are. Adjusted for purchasing power, per capita income is $13,906; slightly below France and West Germany, but ahead of Japan and Great Britain.

Total domestic product has risen 25 times in 22 years to $63 billion in 1989. With only 6 million people, Hong Kong is the 11th largest trading power, with $85 billion of total exports of goods and services. That's more than India accomplishes with 540 million people or China, with 750 million people.

Hong Kong exports almost $15,000 worth of goods and services for each man, woman, and child: Five times the average of the United Kingdom, six times the average of Japan, and 10 times the average of the United States.

Hong Kong is the world's largest exporter of textiles, toys, and watches. Hong Kong has prospered precisely because the government has allowed people to make their own mistakes. It hasn't tried to protect them from the cold logic of the marketplace.

In Hong Kong, they like to boast, one can register a new business in the morning, open up in the afternoon, and be making a profit by night.

The Hong Kong story sends to the world a marvelous message of human economiic progress: A single city is making its progress on a barren rock, with no natural resources except smart, hard-working people whose government leaves them alone so they can work and trade and save and invest freely. Progressive, efficient financial institutions provide the critical services of converting savings into investment.

What a challenge this represents to those of us who live with such huge comparative advantages in Western Europe, Japan, and the United States. What a harbinger of hope for the tens of millions of refugees from Eastern Europe and the former Soviet Union, who have foresworn communism to embrace democracy and free markets.

This is why I maintain that the outlook for economic progress has never been nearly as bright as it is today for human beings throughout the world.

Since his retirement in 1988 from a long and distinguished career in the U.S. Senate, William Proxmire has been an international speaker and the writer of a syndicated column that appears in more than 30 newspapers across the United States.

Mr. Proxmire was chairman of the Senate Banking Committee. To recognize his success at holding down federal spending, the National Taxpayers Union rated him the best for several consecutive years.

He is the author of "Can Small Business Survive?" Mr. Proxmire's other published books include "Report from Wasteland: America's Military-Industrial Complex," "Uncle Sam, Last of the Big-Time Spenders," "You Can Do It!" and "The Fleecing of America."

Mr. Proxmire began his political career in 1950, as a member of the Wisconsin State Assembly. He rose to the U.S. Senate in 1957 in a special election to fill the seat left vacant by the death of Sen. Joseph McCarthy. He was reelected in 1964, 1970, 1976, and 1982.

He earned his undergraduate degree from Yale University in 1938, followed by master's degree in business administration cum laude and public administation from Harvard.

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