The economic difficulties faced by Asia— along with the reforms initiated by Asian countries and recommended by the International Monetary Fund— provided the backdrop for Cato's 16th Annual Monetary Conference, cosponsored with The Economist. Lawrence H. Summers, deputy secretary of the Treasury, spoke out against countries that deny their citizens the right to convert the domestic currency and invest abroad. "Such measures represent substantial intrusions on freedom. They make unsustainable policy errors more tempting. They repel new capital inflows."
At the October 22 conference, titled "Money in the New Millennium: The Global Financial Architecture," Summers argued that the growth of communications systems such as the Internet makes currency controls unlikely to be successful. Summers did say, however, that countries need to "calibrate their efforts to seek capital to the capacity of their domestic financial systems."
The ability of the U.S. economy to avoid getting swept up in the Asian economic storm was a major point of discussion. William Poole, president of the Federal Reserve Bank of St. Louis, said that he is "optimistic" that the United States will work through the current global economic difficulties "with no significant damage to the U.S. economy."
The IMF's role in the Asian economic crisis put Michael Mussa, IMF chief economist, and Hubert Neiss, director of the IMF's Asia Department, on the hot seat. Both defended the IMF's record. Neiss said that, despite good progress made by Asian countries, "it is a matter of considerable concern that broader economic recovery is not yet at hand. Growth in Asian countries could resume next year. So much depends on the external environment."
They received little support from the audience or the other speakers. Cato chairman William Niskanen, who testified in May before the Joint Economic Committee about the IMF, called for the IMF's abolition. "My views on this issue have evolved from no more funding without IMF reform—to no more funding, period—to no more IMF. The IMF has not proved to be generally effective in promoting the type of economic policies that are necessary to avoid a financial crisis."
More than 260 people attended the conference, organized and directed by James A. Dorn, Cato's vice president for academic affairs and held in the Cato Institute's F. A. Hayek Auditorium. The event was broadcast live on the World Wide Web for the second consecutive year. Videotapes of the conference and other Cato programs can be found online at www.cato.org/realaudio/ audiopages.html.
This article originally appeared in the January/February 1999 edition of Cato Policy Report.