FINANCIAL GLOBALIZATION AND THE EMERGING ECONOMIES Editors José Antonio Ocampo Stefano Zamagni Ricardo Ffrench-Davis Carlo Pietrobelli ECONOMICCOMMISSIONFOR Santiago,Chile,2000 INTERNATIONALJACQUES LATINAMERICAANDTHECARIBBEAN MARITAININSTITUTE LC/G.2097-P May2000 ThisdocumenthasbeenpreparedandpublishedjointlybytheEconomicCommission forLatinAmericaandtheCaribbean(ECLAC)andtheInternationalJacquesMaritain Institute.ItscontentswereeditedbyJoséAntonioOcampo,ExecutiveSecretaryofthe Economic Commission for Latin America and the Caribbean (ECLAC); Stefano Zamagni,ProfessorofEconomicsattheUniversityofBologna;RicardoFfrench-Davis, Principal Regional Adviser of ECLAC; and Carlo Pietrobelli, Professor of DevelopmentEconomicsattheUniversityofMolise,Campobasso. Thisbookhasbeenpublishedwithaspecialgrantfrom: CompagniadiSanPaolo(Turin,Italy) andwiththecontributionsof: CoopérationetSolidarité(Brussels),EndesaGroup(Madrid),FondazioneMondo Unito (Vatican City), Ministry for University and Scientific Research of Italy, Ministry of Finance of Chile, Ministry of Foreign Affairs of Italy, Sanpaolo IMI (Turin),SwissFederalOfficeforForeignEconomicAffairs. Applicationsfortherighttoreproducethisworkarewelcomedandshouldbesentto theSecretaryofthePublicationsBoard,UnitedNationsHeadquarters,NewYork,N.Y. 10017,U.S.A.MemberStatesandtheirgovernmentalinstitutionsmayreproducethis workwithoutpriorauthorization,butarerequestedtomentionthesourceandinform theUnitedNationsofsuchreproduction. UNITED NATIONS PUBLICATION Sales No. E.00.II.G.39 ISBN 92-1-121265-0 Copyright©UnitedNationsandInternationalJacquesMaritainInstitute,2000 Allrightsreserved PrintedinChile ECLAC 5 CONTENTS (cid:1) Page Foreword ............................................... 7 AbouttheEditors............................................ 9 INTRODUCTION .......................................... 11 1 InternationalFinance:FactorofPeaceorofConflict?, RobertoPapini............................................ 13 2 WheredoweStand?,JoséAntonioOcampo................... 19 3 GlobalizationasanEconomicandSocialForce:Opportunities andRisksfromaHumanisticPerspective,EduardoAninat...... 25 4 FinancialMarketsandGlobalization:ThePerspectiveof EmergingEconomies,EduardoFreiRuiz-Tagle................ 31 I INTERNATIONALFINANCIALREFORM ................ 39 5 ABroadAgendaforInternationalFinancialReform, JoséAntonioOcampo ...................................... 41 6 InternationalFinancialArchitecture:Foundationsand Framework,GavinBingham................................ 63 7 TheNewGlobalFinancialLandscapeUnderStress, HansBlommestein......................................... 77 8 TowardsaNewFinancialArchitecture:TheManagement ofCrises,StephanyGriffith-Jones ............................ 103 9 BeyondBrettonWoods:WhatInternationalMonetaryand FinancialSystemfortheTwenty-FirstCentury?, AlexanderK.Swoboda...................................... 123 10 TaxationandtheArchitectureoftheInternational EconomicSystem,VitoTanzi............................... 139 6 FINANCIALGLOBALIZATIONANDTHEEMERGINGECONOMIES Page II NATIONALPOLICIESTOFACEVULNERABILITY........ 151 11 StabilizingCapitalSurgesinEmergingEconomies, RicardoFfrench-Davis ..................................... 153 12 AnAsianPerspectiveontheDesirableInternationalFinancial Architecture,KoichiHamada............................... 175 13 TheImpactofFinancialGlobalizationonTransitionEconomies, BernardSnoy............................................. 193 14 CrisisandContagion:SomeNewandOldIdeas, JoséLuisMachinea........................................ 211 15 CapitalFlowsinChile:ChangesandPoliciesinthe1990s, CarlosMassad............................................ 219 16 EconomicPolicyOptionsandFinancialGlobalization: Mexico,1988–99,RocíoRamosdeVillarrealandRenéVillarreal... 233 III STATEMENTS:THESOCIALACTORSINTHEFACEOF VULNERABILITY....................................... 253 17 TheResponsibilityofFinancialActors,AngeloCaloia.......... 255 18 InternationalFinancialFlows:ALabourPointofView, LuisAnderson ............................................ 267 19 WhyCommonGoodMatters,Jean-LoupDherse .............. 273 20 EthicsandtheFinancialCommunity,AndrewHilton........... 279 21 AChallengetoGlobalizationTheory,WilliamPfaff............ 287 22 Dealingwith‘TheGlobalGovernance’and‘TheDual Constituency’SyndromesinEmergingCountries, LouisSabourin............................................ 293 23 GoingwiththeFlowoftheMarket,JustinWelby.............. 303 CONCLUSIONS............................................ 311 24 TheEmergingEconomiesintheGlobalFinancialMarket:Some ConcludingRemarks,CarloPietrobelliandStefanoZamagni..... 313 ECLAC 7 FOREWORD (cid:1) F inancial globalization has been a most dynamic component of the continued globalization experienced by the world in recent years. Capital flowstoalargenumberofemergingeconomiesexpandedrapidlyduringthe 1990s. Such capital surges were often followed by financial crisis affecting severalemergingeconomiesofAsiaandLatinAmericainthe1990s. Thereisabroadrecognitionthatfinancialinstabilityisdeeplyrootedin thepresentoperationofmarkets,whichhasbroughtconsensusontheneedto examinetheissueindepth,inordertourgentlyfindbettersolutionsforcrises preventionandcrisesmanagement.ThemeetingsofInternationalFinancial Institutions, G-7 and various groupings of developing economies have directedtheirattentiontothisissue. This collection of essays results from an international conference convenedbyECLACandtheInternationalJacquesMaritainInstituteofRome inSantiagodeChilein1999.Thisconferencebroughttogetherpolicy-makers, academics, members of international institutions (BIS, EBRD, IMF, OECD), andsocialactors(massmedia,labourunions,churchesandfinancialactivity). The book includes four parts. The Introduction collects the opening statements in the conference. Part I contains a discussion of the issues and proposals on how to reform the international financial structure. Part II discusses the national policies to face financial instability, and their role in stabilizingcapitalflows.PartIIIincludesstatementsbydifferentsocialactors ontheirviewsonfinancialglobalizationandtheirmessagestopolicy-makers. Santiago,Chile,January2000 8 FINANCIALGLOBALIZATIONANDTHEEMERGINGECONOMIES ECLAC 9 ABOUTTHEEDITORS (cid:1) Ricardo Ffrench-Davis, Ph.D. in Economics, University of Chicago (1971). PrincipalRegionalAdviser,ECLAC,SantiagodeChile. DirectorofResearch (1990-92)oftheCentralBankofChile. Co-founderof CenterforEconomic ResearchonLatinAmerica(CIEPLAN),SantiagodeChile(1976-89).Professor ofEconomicsatUniversidaddeChile;visitingprofessoratOxfordandBoston Universities. Author or editor of thirteen books and about one hundred articles on international economics, development strategies, foreign financing,andLatinAmericaneconomies.Hismostrecentpublicationsare Reforming the reforms in Latin America: macroeconomics, trade, finance, 1999 (MacmillanandStMartin’sPressinEnglishandMcGraw-HillinSpanish)and BetweenneoliberalismandgrowthwithequityinChile,1999(DolmenEdiciones, inSpanish). JoséAntonioOcampo,Ph.D.inEconomicsfromYaleUniversity.Executive SecretaryoftheEconomicCommissionforLatinAmericaandtheCaribbean. Former Minister of Finance and Public Credit, Director of the National PlanningDepartment,MinisterofAgricultureandDirectoroftheFoundation forHigherEducationandDevelopmentofColombia.ProfessorofEconomics atUniversidaddelosAndesandUniversidadNacionaldeColombia;visiting ProfessoratYaleandOxfordUniversities.Heisauthorofnumerousbooks and articles on macroeconomic policy and theory, economic development, international trade and economic history. His more recent publication are Foreign Capital in Latin America (co-edited with Roberto Steiner), 1994 (Inter-American Development Bank) and La Reforma del Sistema Financiero Internacional:UnDebateenMarcha,1999(FondodeCultura Económica). 10 FINANCIALGLOBALIZATIONANDTHEEMERGINGECONOMIES Carlo Pietrobelli, Ph. D. in Economics, Oxford University. Professor of EconomicsattheUniversityofMolise,Campobasso,andattheUniversityof Rome3.HehasbeenaconsultanttotheEuropeanUnion,theWorldBank,the IADB, UNCTAD, UNIDO, ECLAC. He has published extensively in specialisedinternationaljournalsandhislastbookIndustry,Competitiveness andTechnologicalCapabilitieswaspublishedbyMacmillanin1999. Stefano Zamagni, Professor of Economics at the University of Bologna; adjunct professor at Johns Hopkins University, Bologna Center; visiting professoratBocconiUniversity,Milan.MemberoftheExecutiveCommittee of the International Economic Association (1989-99). President of ICMC (International Catholic Migration Commission, Geneva). Author of Microeconomic Theory, 1987 (Blackwell); History of Economic Thought, 1993 (Oxford University Press); The Economics of Altruism, 1995 (E. Elgar); The EconomicsofOrganizedCrimeandIllegalMarkets,1999(E.Elgar). ECLAC 11 INTRODUCTION 12 FINANCIALGLOBALIZATIONANDTHEEMERGINGECONOMIES