为避免下一次危机

So will it be business as usual in 1999? The recent dramatic volatility in financial markets is but a distant memory. The miseries of Russians and Indonesians seem far away. But the global financial system still has fundamental flaws. Unless these problems are addressed and we learn the lessons of the past year, the system is liable to collapse.

Booms and busts are endemic in financial markets. Instead of moving like a pendulum, markets can move like a wrecking ball, knocking over one economy after another. The swings cannot be avoided altogether, but they need to be brought under control. International financial institutions, notably the International Monetary Fund and the World Bank, were designed for a world devoid of large-scale capital flows. In the recent crisis, the IMF proved part of the problem rather than the solution.

The primary mission of the IMF is to preserve the international financial system. Its task is to ensure that a debtor country will be able to meet its international obligations, if not right away, then within the foreseeable future. The conditions it imposes on the debtor country include punitively high interest rates, which serve the dual purpose of stabilizing exchange rates and creating a trade surplus by precipitating a recession. Both developments indirectly benefit lenders because they facilitate the repayment of debts.

This method of operation has given rise to what is now recognised as a moral hazard. In case of trouble, lenders can count on the IMF to bail them out; this has supposedly encouraged sloppy lending practices. Actually, the moral hazard is better described as an asymmetry in the treatment of lenders and borrowers.

There is another asymmetry in the way the IMF currently operates. It can intervene only in times of crisis; it has no authority to prevent a crisis from developing. Yet experience shows busts can be prevented only by moderating the booms that precede them.

These two asymmetries, taken together, explain why the IMF has become part of the problem. In the most recent crisis, the IMF imposed punitive interest rates and the countries concerned were plunged into deep recession. But when the crisis threatened the US, the Federal Reserve lowered interest rates and the US economy escaped unscathed.

The IMF is now under severe attack. There are voices calling for its abolition. Others want to cripple it by imposing all kinds of conditions. I believe these attacks are misconceived. If global financial markets are inherently unstable we need a stronger regulatory framework rather than the dismantling of existing institutions. To be specific, we need to convert the IMF into something resembling an international central bank.

I do not have in mind an institution like the Federal Reserve or the European Central Bank. I am talking about empowering the IMF to act as lender of last resort with regard to a select group of countries that are eager to obtain such protection. The countries concerned would have to follow sound macro-economic policies; have a sound banking system, with appropriate supervision; provide adequate information both to the IMF and to the markets; maintain flexible, exchange rates with appropriate measures for the control of excessive capital flows; have proper corporate governance and bankruptcy laws; respect certain basic human rights and abide by the rule of law. In return, the IMF would stand by as a lender of last resort and provide an adequate supply of capital when financial markets were unwilling to do so.

Those countries that cannot or will not meet these conditions would continue to have access to the IMF on terms similar to those that are available currently with one important difference: in a crisis the IMF would impose conditions not only on the country concerned but also on the creditors. By putting would-be creditors on notice, the IMF would prevent excessive capital inflows from developing. If it still became necessary to impose a moratorium or a compulsory debt-to-equity conversion scheme, the international financial system would not be disrupted because it would be an isolated case. The threat of contagion, inherent in the current arrangements, would be eliminated.

Empowering the IMF to act as lender of last resort would radically change the mission of the IMF and the way it operates. It would eliminate the current imbalance in favor of creditors.

The new arrangement would also eliminate the imbalance between prevention and cure. The emphasis would be on prevention, where it properly belongs. Booms and busts would not be banished altogether; but the IMF, in its new incarnation, could also act as a kind of international central bank, regulating the environment for international capital flows in order to obviate the need to intervene as lender of last resort.

This is not an utopian ideal but an idea that could and should be implemented right now. It is implicit in a recent G7 communique, which proposed preventative actions and a contingency fund, and in the speeches of Bill Clinton, the US president, Gordon Brown, the UK Chancellor of the Exchequer, and other statesmen.

I would not like to pretend that it would be easy to establish the rules by which a reconstituted IMF would operate. An international regulator of credit and money supply would have to consider not only the countries at the periphery but also those at the center of the global capitalist system. It would be improper for either the US Federal Reserve or the European Central Bank to allow its autonomy to be infringed by an international body; but both institutions would be represented on the governing body of the reconstituted IMF, and, in that context, they would be better able to co-ordinate their global responsibilities.

Most global financial crises have been precipitated by a rise in interest rates. That was true in 1929, in 1982, and again in 1992 when the reunification of Germany destroyed the European Exchange Rate Mechanism. It was not the case in 1997-8, but it may well be the case in the next crisis. The ability to inject or restrict liquidity not only at the center but at the periphery would open up policy options not now available. Something resembling an international central bank could provide the cornerstone of the financial architecture around which a new Bretton Woods conference could be organized.

In the US, a task force of the Council on Foreign Relations and others are studying the subject; there ought to be similar initiatives in Europe. But it is even more important that the countries that could benefit from a lender of last resort—in South-east Asia, Latin America and the rest of the world—should address the issue. After all, if the new architecture is to correct the asymmetry between center and periphery, countries at the periphery should have an important say in its design.