Lessons from the Global Economic Crisis

By Hill, Patrice | The World and I, November 1999 | Go to article overview

Lessons from the Global Economic Crisis


Hill, Patrice, The World and I


With the global economic crisis waning and even hard-hit countries like Russia on the mend, questions remain about what caused the "contagion" that spread from Thailand to a third of the world's economy in a matter of months, and what should be done to prevent a relapse.

Nearly everyone wants to avoid another chain reaction of collapsed economies from Asia to Latin America like the one that last year threatened to bring down even the U.S. economy when it caused a sudden 20 percent drop in the stock market. But not everyone agrees on why that happened and how to immunize the global economy from similar threats in the future.

Many Third World countries, with sympathy from some left-leaning groups and governments in the West, blame the problem on "speculators"--the managers of investment funds that make money by exploiting the swings in countries' currency and financial markets. No question, such speculators greedily poured money into the Asian and Latin markets when they were healthy and zooming upward early in the 1990s.

Third World countries complain that the speculators--typified by billionaire hedge fund mogul George Soros, who was highly visible at each stage of the crisis--abandoned their investments and pulled out in a stampede when problems developed in 1997 and '98, leaving millions of poor people even poorer in their wake.

Brazilian President Fernando Henrique Cardoso, whose country plunged into recession when the crisis hit Latin America early this year, was forced to accept harsh medicine doled out by the United States and the International Monetary Fund (IMF) to win $42 billion in assistance.

But he later led an effort at an international summit in Rio de Janiero to impose controls on the speculators who wreaked havoc on the Latin giant's economy.

"What is at stake is fundamental," Cardoso said. "It's the development of a shared prosperity. ... [Globalization] has to apply to all. It cannot be a gift for the rich and a hardship for the poor."

GOVERNMENT MISMANAGEMENT AT FAULT?

Cardoso won the backing of Europe's left-leaning governments at the Rio summit in June. Gerhard Schroeder, chancellor of Germany and president of the European Union, endorsed efforts to establish new rules for speculative money flows.

"Speculators can destroy economies" and even "destroy democracy," he said.

But the United States and the IMF, which provided nearly $160 billion in loans to rescue the foundering economies of Asia, Russia, and Brazil, insisted the problem largely was due to poor management of the crisis-struck economies, which invited the collapse.

The crisis was caused by the failure of emerging countries to adopt critical elements of the dual system of democracy and capitalism that have nurtured stability as well as wealth and abundance in the West, they said.

Few would disagree that the countries in crisis suffered from poorly regulated and unsound banking systems. Several countries, notably Indonesia and Russia, were replete with corruption and lacked systems of bankruptcy and other legal measures to fairly deal with economic problems.

"In the case of the Asian emerging economies, there was evidence of speculative excesses in financial and real estate markets" as well as "extraordinary risk-taking in the form of enormous leverage" by the country's borrowers, said Laurence Meyer, a Federal Reserve governor.

"Advanced capitalist economies have found ways to mitigate the risks of financial and banking crises" by establishing independent central banks, sound financial institutions, and effective laws governing business, he said.

The United States and the IMF challenged one common government practice that stands out in bold relief, since it was the immediate cause of the crisis in each country: The governments linked the value of their currencies to the U.S. dollar but later were forced to abandon those currency pegs. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • A full archive of books and articles related to this one
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Lessons from the Global Economic Crisis
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.