In This Review

The Next Globalization: How Disadvantaged Nations Can Harness Their Financial Systems to Get Rich
The Next Globalization: How Disadvantaged Nations Can Harness Their Financial Systems to Get Rich
By Frederic S. Mishkin
Princeton University Press, 2006, 320 pp
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The key message of this cogently argued book is that economic development requires a well-functioning financial market and that a well-functioning financial market requires extensive links to world capital markets. Not all developing countries need to import capital to foster growth, but all need competition and the demonstration of best practice to overcome local cliques or oligarchs that both foster and thrive on the exclusion of competition, which typically leads to serious misallocations of capital. In developing this central thesis, the Columbia University economist Mishkin addresses the need for regulatory reform in emerging markets, the measures required to avoid financial crises and to recover from them quickly when they occur, and the appropriate role for the international community, especially the International Monetary Fund. He provides excellent studies of the financial crises in Mexico (1994-95), South Korea (1997-98), and Argentina (2001-2), drawing lessons from both what was done badly and what was done well.