Limiting Risks and Sharing Losses in the Globalized Capital Market

In this text, the author seeks to draw lessons from recent international financial crises - Mexico in 1994-5 and Asia in 1997, affecting Thailand, Indonesia, Korea and Japan. Some lessons concern local elements of the crises, such as the effects of hiding economic weaknesses from outsiders. Others concern international elements, such as the need to reduce the volatility of the almost incomprehensibly large and complex world of currency trading and capital movement. Hager shows that these financial crises relate to traditional foreign policy concerns, such as ensuring that the stresses of economic restructuring, which international institutions often demand as a condition of financial aid, do not weaken young democracies or make the recipient country hostile to the United States and the international community.