Two challenges for the twenty-first century: Achieving financial discipline and putting the internationalization process in order

This article takes stock of the situation caused by the Asian financial crisis and analyses the various proposals made for dealing with it so as to avoid its repetition; it is concluded that financial globalization has destabilized the potentially favourable effects of the process of opening up to international trade and productive investment. It notes that while the 1997 financial crisis did not have the deflationary consequences of the 1929 crisis, thanks to the institutional changes made when policy-makers reacted to it, the generalization of export-led growth strategies tends to repeat situations of over-production, further aggravated by the volatility of international capital flows. There is now a feeling that the twenty-first century should mark a dual turning-point: on the one hand, a better balance should be sought between domestic growth and outward-looking policies, and on the other hand –and above all– a number of reforms designed to avoid further great financial crises should be put into effect. A debate is currently under way on the relative merits of various options in this respect: negotiation of a new international system; a Brady Plan for banks; stricter application of prudential regulations; greater transparency of short-term capital movements; the expansion of new options markets, or even the establishment of a Tobin Tax. It would be dangerous to make major structural changes in the productive and social organization of the world’s economies solely in response to the pressures of the international financial markets. Lastly, the formation of regional integration areas represents a middle way between internationalization in all directions and a protectionist withdrawal behind national frontiers. At all events, notable changes may be expected compared with the 1990s.