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Up for Debate: Contagion

The Asian financial crisis, which erupted in 1997 in Thailand, awoke the world to "contagion," a new peril inherent to highly interconnected financial markets. Spreading quickly within and outside the region, the crisis brought the world's 11th largest economy, Korea, to the brink of bankruptcy and led to the defaults by Russia and Brazil.

Was the international response to this crisis sufficient? And have the right lessons been learned for future crisis management -- or, better, prevention?

Participants

Lawrence Summers
President of Harvard University; U.S. Secretary of the Treasury, 1999-2001

Assistant secretary of the U.S. Treasury during the Asian crisis, Larry Summers felt that unless vigorously checked, the "virulence" and "global and pervasive nature" of the crisis could be a permanent threat to the globalized world.

Robert Rubin
U.S. Secretary of the Treasury, 1995-1999

Looking back at Korea's near bankruptcy in December 1997, Robert Rubin, then U.S. Treasury secretary, believed that had Korea been allowed to default, the global effects would have been catastrophic.

Eisuke Sakakibara
Professor, Keio University; Minister of Finance for International Affairs of Japan, 1997-1999

Eisuke Sakakibara led Japan's international economic policy between 1997 and 1999. He drew from the crisis was the lesson that global capitalism was "inherently unstable."

Stanley Fischer
First Deputy Managing Director, International Monetary Fund, 1994-2001

The former second-ranking official of the IMF, Stanley Fischer believed that the global financial contagion of 1997-1998 was unlikely to repeat, but that other crises were inevitable.

William McDonough
President, Federal Reserve Bank of New York

As president of the Federal Reserve Bank of New York, William McDonough was the central bank's link to private lenders to East Asia. He reflected on the psychology of investors during the crisis.

Laura Tyson
Chair of the U.S. National Economic Council, 1993-1995

Senior economic advisor to U.S. President Clinton in 1995, Laura Tyson confronted the risk of contagion firsthand with the Mexican peso crisis. But Thailand, at first, seemed different.

Moises Naim
Editor, Foreign Policy Magazine; Minster of Industry and Trade of Venezuela, 1989-1990

Editor of Foreign Policy magazine, Moises Naim believed that the financial crises of the 1990s at least showed the need for better rules and institutions.

Dr. Mahathir bin Mohamad
Prime Minister of Malaysia

For Malaysia's prime minister Mahathir, a sound economy with good "fundamentals" was little comfort against the financial crisis.

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