Too many risks, too few rewards: Fresh thinking on the limits of free markets
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Too many risks, too few rewards: Fresh thinking on the limits of free markets

For a system that supposedly conquered the world in 1990, free-market capitalism doesn't look so good any more. After Mexico, Thailand, Korea, Indonesia, Russia, which of capitalism's self-appointed disciples will stumble next? And who is to blame? The track record has embarrassed all but hard-liners into thinking there might be a Third Way - between free capital flows with floating exchange rates and the dirigiste controls of the 1960s. Chile, China, James Tobin - they've all been held to ridicule for their batty market ideas. But today it's not just bleeding-hearts and socialists who are looking at their attempts more closely. Michelle Celarier reports.

Global capital turns nasty

Capitalism and serfdom

The spectre of intervention

Can the IMF play supercop?

Throwing good money after bad

A breathing space for the IMF

Imagine yourself in an economics class, handed a pop quiz on the fundamentals of international finance with the following true-false statement: "When capital is allowed to flow freely across borders, it goes to the most productive investments."

Dutifully remembering Adam Smith's The Wealth of Nations, you might be tempted to answer "true". You'd be in good company. A slew of International Monetary Fund officials, along with US treasury secretary Robert Rubin (and no doubt countless investment bankers) would probably agree with you. But then a more recent economics lesson springs to mind: the south-east Asian crisis. All that capital flowing into speculative real estate - that surely couldn't have been the most productive use of it, could it? As a post-modern student of the global capital markets, with their bigger and bloodier crashes, you know the answer has got to be "false".

Conventional wisdom doesn't change quickly, however, and over the past 18 years the mantra of free markets has become firmly entrenched in business, government and academia, from Washington to Moscow to Beijing.

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