financial, political, and ideological power. Japanese attempts at constructing a more benign international financial architecture for Asia, the centerpiece of which was a Japanese-funded Asia fund, were scotched. The markets moved on to score similar destabilizing attacks against Russia and Brazil.

There are now signs of recovery, but the costs in lost output and social instability have been severe. And when Clinton and Greenspan talked of the most serious threat to the world economy since the 1930s, they were deadly serious. Had Long-Term Capital Management been allowed to collapse, the knock-on consequences for the U.S. banking system would have been potentially calamitous. We should not run such risks again.

The Weakest Link

Economists John Eatwell and Lance Taylor make this point forcibly. The heart of their forthcoming book Global Finance atto the Labor Party and now master of Trinity College, Cambridge. Taylor teaches at the New School in New York and works frequently with the UN Development Program. They take care not to paint themselves as isolated academics crying wolf, citing both Alan Greenspan and the Economic Report of the President as echoing their call for more effective regulation of world financial markets to protect both the markets and the real economy from the inherent and systemic risk of the current structure. New methods of international currency speculation now escape the purview of any one national regulator.

As a solution Eatwell and Taylor would build on the existing structure for regulation in the Bank for International Settlements and turn it into a full-fledged world financial authority tasked with ensuring