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■ What Should Be Done About GlobalFinancial Crises?Before we ask what should be done about global financial crises, it’s worthasking what has been done. In the Latin American debt crisis, Tequila crisis,and Asian flu, the response of conventional economists such as thoseat the IMF was to impose tight fiscal and monetary policies on the affectedcountries, then to let affected banks fail or survive on their own. Economistssaw this as imposing discipline on those economies. However, theeffect of such policies is to plunge economies even further into recession.In response to the sub-prime mortgage crisis, which affected the wealthiesteconomies, economists (sometimes the very same economists!) calledfor exactly the opposite approach, favoring extremely loose fiscal andmonetary policy, tax breaks, and massive bailouts for the financial sector.In response to the crises of the 1990s, The IMF also pursued furtherderegulation of international finance. In an official communiqué issued bythe IMF Interim Committee in April 1998, the IMF declared that it wouldamend its articles to “[make] the liberalization of capital movements oneof the purposes of the Fund and [extend], as needed, the Fund’s jurisdictionfor this purpose.” 22 This in spite of the fact that Michel Camdessus,then president of the IMF, predicted that “a number of developing countriesmay come under speculative attacks after opening their capital account”as a result of their unsound macroeconomic policies. 23 Thisapproach ignores the possibility of self-fulfilling panics and contradictsthe original IMF charter to protect the stability of national economies. Aswe have seen, advocacy of capital mobility also contradicts the IMF’s advocacyof comparative advantage-based free trade, although they do notacknowledge it.How should we respond to a current financial crisis and prevent futureones? The answers are not clear and are contingent on many factors, butwe can be guided by some basic rules for adaptive change in complex systems.First, we need to begin from an appropriate paradigm, one definedby what is biophysically possible. Then, we need to pursue appropriategoals, defined by what is socially, psychologically, and ethically desirable.Finally, we need to develop policies that severely dampen positive feedbackloops, strengthen negative ones, and increase information flows. 24Chapter 20 Financial Globalization • 40522 International Monetary Fund, Communiqué of the Interim Committee of the Board of Governorsof the International Monetary Fund, press release no. 98/14, Washington, D.C., April 16,1998. Online: http://www.imf.org/external/np/sec/pr/1997/PR9744.HTM.23 Communiqué of the IMF Interim Committee, Hong Kong, September 21, 1997. Cited in M.Chossudovsky, Financial Warfare. Online: http://www.corpwatch.org/trac/globalization/financial/warfare.html.